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Separate Account II of AGL, et al. – ‘485BPOS’ on 6/22/06

On: Thursday, 6/22/06, at 4:01pm ET · Effective: 6/22/06 · Accession #: 1193125-6-134044 · File #s: 333-34199, 811-04867

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/22/06  Separate Account II of AGL        485BPOS     6/22/06    3:216K                                   RR Donnelley/FA
          → Variable Account II of Agl of Delaware ⇒ AGL of Delaware Executive Advantage VUL (333-34199 Form N-6) Policy No. 11GVULU997

Post-Effective Amendment
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 485BPOS     485B (Form N-6) Pea 18 Aig Life Executive             96    384K 
                          Advantage Vul                                          
 2: EX-99.(N).(1)  Pricewaterhousecoopers LLP Consent                  1      6K 
 3: EX-99.(R).(2)  Power of Attorney                                   2±    11K

485BPOS — 485B (Form N-6) Pea 18 Aig Life Executive Advantage Vul
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Directors and Officers of the Depositor Exhibits Fee Representation Indemnification Location of Accounts and Records Management Services Inapplicable Notes to Statutory Basis Financial Statements Persons Controlled by or Under Common Control with the Depositor or the Registrant Principal Underwriters Report of Independent Auditors Statements of Admitted Assets Statements of Cash Flow Statements of Income and Changes in Capital and Surplus Statements of Liabilities, Capital and Surplus
1	1st Page - Filing Submission
9	Report of Independent Auditors
10	Statements of Admitted Assets
11	Statements of Liabilities, Capital and Surplus
12	Statements of Income and Changes in Capital and Surplus
13	Statements of Cash Flow
14	Notes to Statutory Basis Financial Statements
59	Item 26. Exhibits
67	Item 27. Directors and Officers of the Depositor
79	Item 28. Persons Controlled by or Under Common Control with the Depositor or the Registrant
85	Item 29. Indemnification
87	Item 30. Principal Underwriters
88	Item 31. Location of Accounts and Records
89	Item 32. Management Services Inapplicable
"	Item 33. Fee Representation

485BPOS 1st Page of 96 TOC ↑Top Previous Next ↓Bottom Just 1st
Registration Nos. 333-34199
811-04867

As filed with the Securities and Exchange Commission on June 22, 2006

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-6

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-effective Amendment No. [_]
Post-Effective Amendment No. [18]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. [10] [X]

VARIABLE ACCOUNT II OF AIG LIFE INSURANCE COMPANY
(Exact Name of Registrant)

AIG LIFE INSURANCE COMPANY
(Name of Depositor)

One ALICO Plaza
600 King Street
Wilmington, Delaware 19801
(Address of Depositor's Principal Executive Offices) (Zip Code)

(713) 831-8470
(Depositor's Telephone Number, including Area Code)

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
(Name of Guarantor)
70 Pine Street
New York, New York 10270

(212) 770-7000
(Guarantor's Telephone Number, including Area Code)

Lauren W. Jones, Esq.
Deputy General Counsel
American General Life Companies, LLC
2929 Allen Parkway
Houston, Texas 77019-2191
(Name and Address of Agent for Service for Depositor, Registrant and Guarantor)

485BPOS 2nd Page of 96 TOC 1st Previous Next ↓Bottom Just 2nd
Approximate Date of Proposed Public Offering: Continuous.

It is proposed that this filing will become effective

[X] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(l)
[_] on (date) pursuant to paragraph (a)(l) of Rule 485.

If appropriate, check the following box:

[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

485BPOS 3rd Page of 96 TOC 1st Previous Next ↓Bottom Just 3rd
NOTE

Registrant is filing this Post-Effective Amendment to the Registration
Statement for the purposes of incorporating by reference the Annual Report on
Form 10-K/A for the fiscal year ended December 31, 2005 of American
International Group, Inc. into the Statement of Additional Information and
making certain corrections to Notes 3 and 8 to the financial statements of
National Union Fire Insurance Company of Pittsburgh, Pa.

485BPOS 4th Page of 96 TOC 1st Previous Next ↓Bottom Just 4th
PART A

The Prospectus, dated May 1, 2006, is incorporated into Part A of this
Post-Effective Amendment No. 18 by reference to the Registrant's Post-Effective
Amendment No. 17, as filed on May 1, 2006 (File No. 333-34199).

485BPOS 5th Page of 96 TOC 1st Previous Next ↓Bottom Just 5th
PART B

The Statement of Additional Information, dated May 1, 2006, is incorporated
into Part B of this Post-Effective Amendment No. 18 by reference to the
Registrant's Post-Effective Amendment No. 17, as filed on May 1, 2006. (File
No. 333-34199).

A supplement dated June 22, 2006 to the Statement of Additional Information is
included in Part B of this Post-Effective Amendment No. 18.

485BPOS 6th Page of 96 TOC 1st Previous Next ↓Bottom Just 6th
AIG LIFE INSURANCE COMPANY
VARIABLE ACCOUNT II
EXECUTIVE ADVANTAGE/SM/
GROUP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
SUPPLEMENT DATED JUNE 22, 2006
TO STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2006

Effective June 22, 2006, AIG Life Insurance Company ("AIG Life") is amending
the Statement of Additional Information ("SAI") for the purposes of
(1) incorporating by reference the Annual Report on Form 10-K/A for the fiscal
year ended December 31, 2005 of American International Group, Inc. ("AIG"), the
parent company of AIG Life, into the SAI and (2) making certain corrections to
Notes 3 and 8 to the financial statements of National Union Fire Insurance
Company of Pittsburgh, Pa. ("National Union"), the guarantor of insurance
obligations under policies issued by AIG Life and an affiliate of AIG Life. The
financial statements of AIG Life and Variable Account II, included with the SAI
filed on May 1, 2006, are hereby incorporated by reference into this
Registration Statement.

First, on page 9 of the SAI, delete the entire paragraph of the subsection
titled "Incorporation of AIG Financial Information" and replace it with the
following new paragraph:

We incorporate by reference the consolidated financial statements (including
notes and financial statement schedules thereto) and management's assessment of
the effectiveness of internal control over financial reporting (which is
included in Management's Report on Internal Control Over Financial Reporting)
of AIG included in AIG's Annual Report on Form 10-K/A for the year ended
December 31, 2005, File No. 001-08787, filed on June 19, 2006, in reliance on
the report (which contains an adverse opinion on the effectiveness of internal
control over financial reporting) of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of said firm as
experts in auditing and accounting.

Second, the corrected National Union financial statements are filed as a
part of this SAI supplement. There are no changes to the Index to Financial
Statements on page 9 of the SAI.

- 1 -

485BPOS 7th Page of 96 TOC 1st Previous Next ↓Bottom Just 7th
National Union Fire Insurance Company
of Pittsburgh, PA.

NAIC Code: 19445

Statutory Basis Financial Statements

December 31, 2005 and 2004

485BPOS 8th Page of 96 TOC 1st Previous Next ↓Bottom Just 8th
National Union Fire Insurance Company
of Pittsburgh, PA.

Statutory Basis Financial Statements

December 31, 2005 and 2004

Table of Contents

Report of Independent Auditors .......................................... 2

Statements of Admitted Assets............................................ 3

Statements of Liabilities, Capital and Surplus........................... 4

Statements of Income and Changes in Capital and Surplus.................. 5

Statements of Cash Flow.................................................. 6

Notes to Statutory Basis Financial Statements............................ 7

485BPOS 9th Page of 96 TOC 1st Previous Next ↓Bottom Just 9th
Report of Independent Auditors

To the Board of Directors and Shareholder of National Union
Fire Insurance Company of Pittsburgh, PA.

We have audited the accompanying statutory statements of admitted assets and
liabilities, capital and surplus of National Union Fire Insurance Company of
Pittsburgh, PA. (the "Company") as of December 31, 2005 and 2004, and the
related statutory statements of income and changes in capital and surplus, and
of cash flow, for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As described in Note 1 to the financial statements, the Company prepared these
financial statements using accounting practices prescribed or permitted by the
Insurance Department of the Commonwealth of Pennsylvania, which practices
differ from accounting principles generally accepted in the United States of
America. The effects on the financial statements of the variances between the
statutory basis of accounting and accounting principles generally accepted in
the United States of America, although not reasonably determinable, are
presumed to be material.

In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with accounting principles generally accepted in the United States
of America, the financial position of the Company as of December 31, 2005 and
2004, or the results of its operations or its cash flow for the years then
ended.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities and surplus of the
Company as of December 31, 2005 and 2004, and the results of its operations and
its cash flows for the years then ended, on the basis of accounting described
in Notes 1 and 2 to the financial statements.

PricewaterhouseCoopers LLP
New York, NY
APRIL 27, 2006

485BPOS 10th Page of 96 TOC 1st Previous Next ↓Bottom Just 10th
National Union Fire Insurance Company of Pittsburgh, PA.

Statements of Admitted Assets
Statutory Basis
As of December 31, 2005 and 2004
(000's Omitted)

As of December 31, 2005 2004
------------------ ----------- -----------
Cash and Invested Assets:
Bonds, principally at amortized cost (NAIC
market value: 2005 - $11,028,298;
2004 - $9,570,573)............................... $10,806,319 $ 9,305,455
Stocks:
Common stocks, at NAIC market value (Cost:
2005 - $2,760,035; 2004 - $2,736,085)........ 6,445,976 5,869,968
Non-redeemable preferred stocks, at NAIC
market value (Cost: 2005 - $2,110,012;
2004 - $2,259,718)........................... 2,110,150 2,259,870
Other invested assets, primarily at equity
(Cost: 2005 - $978,354; 2004 - $778,680)......... 1,425,397 1,051,860
Short-term investments, at amortized cost
(approximates NAIC market value)................. 168,815 109,446
Securities lending collateral...................... 83,903 43,883
Cash............................................... 50,752 115,855
Receivable for securities.......................... -- 20,336
----------- -----------
Total Cash and Invested Assets.............. 21,091,312 18,776,673
----------- -----------
Investment income due and accrued..................... 193,851 132,033
Agents' balances or uncollected premiums:
Premiums in course of collection................... 705,461 637,680
Premiums and installments booked but deferred
and not yet due.................................. 1,460,490 1,216,506
Accrued retrospective premiums..................... 29,300 8,146
Amounts billed and receivable from high
deductible policies................................. 333,315 387,572
Reinsurance recoverable on loss payments.............. 419,911 258,992
Funds held by or deposited with reinsurers............ 25,026 170,139
Deposit accounting assets............................. 1,410,584 1,729,756
Deposit accounting assets - funds held................ 457,042 448,279
Federal and foreign income taxes recoverable from
parent.............................................. 763,168 630,958
Net deferred tax assets............................... 385,906 379,832
Receivable from parent, subsidiaries and
affiliates.......................................... 826,889 571,351
Equities in underwriting pools and associations....... 609,772 526,124
Other admitted assets................................. 133,600 356,466
----------- -----------
Total Admitted Assets....................... $28,845,627 $26,230,507
=========== ===========

See Notes to Statutory Basis Financial Statements

485BPOS 11th Page of 96 TOC 1st Previous Next ↓Bottom Just 11th
National Union Fire Insurance Company of Pittsburgh, PA.

Statements of Liabilities, Capital and Surplus
Statutory Basis
As of December 31, 2005 and 2004
(000's Omitted Except Share Information)

As of December 31, 2005 2004
------------------ ----------- -----------
Liabilities

Reserves for losses and loss adjustment expenses..... $11,786,300 $ 9,811,368
Unearned premium reserves............................ 4,291,224 4,142,837
Commissions, premium taxes, and other expenses
payable............................................ 278,031 289,329
Reinsurance payable on paid loss and loss adjustment
expenses........................................... 153,630 273,785
Funds held by company under reinsurance treaties..... 267,740 275,189
Provision for reinsurance............................ 201,761 334,696
Ceded reinsurance premiums payable, net of ceding
commissions........................................ 429,327 66,516
Retroactive reinsurance reserves - assumed........... 34,720 11,270
Retroactive reinsurance reserves - ceded............. (68,657) (86,065)
Deposit accounting liabilities....................... 513,961 691,335
Deposit accounting liabilities - funds held.......... 1,062,338 1,149,918
Securities lending payable........................... 83,903 43,883
Collateral deposit liability......................... 533,851 484,435
Payable to parent, subsidiaries and affiliates....... 886,989 1,190,865
Other liabilities.................................... 270,346 174,325
----------- -----------
Total Liabilities................................. 20,725,464 18,853,686
----------- -----------
Capital and Surplus

Common capital stock, $5.00 par value, 1,000,000
shares authorized;
895,750 shares issued and outstanding............. 4,479 4,479
Capital in excess of par value....................... 2,694,092 2,494,262
Unassigned surplus................................... 5,349,702 4,791,970
Special surplus funds from retroactive reinsurance... 71,890 86,110
----------- -----------
Total Capital and Surplus......................... 8,120,163 7,376,821
----------- -----------
Total Liabilities, Capital, and Surplus........... $28,845,627 $26,230,507
=========== ===========

See Notes to Statutory Basis Financial Statements

485BPOS 12th Page of 96 TOC 1st Previous Next ↓Bottom Just 12th
National Union Fire Insurance Company of Pittsburgh, PA.

Statements of Income and Changes in Capital and Surplus
Statutory Basis
For the Years Ended December 31, 2005 and 2004
(000's Omitted)

For the Years Ended December 31, 2005 2004
-------------------------------- ---------- ----------
Statements of Income

Underwriting Income:
Premiums earned..................................... $7,035,963 $6,592,662
---------- ----------
Underwriting Deductions:
Losses incurred..................................... 5,207,675 4,943,210
Loss adjustment expenses incurred................... 1,138,284 755,384
Other underwriting expenses incurred................ 1,401,165 1,369,229
---------- ----------
Total Underwriting Deductions.......................... 7,747,124 7,067,823
---------- ----------
Net Underwriting Loss.................................. (711,161) (475,161)
---------- ----------
Investment Income:
Net investment income earned........................ 747,551 826,487
Net realized capital gains (net of capital gains
taxes: 2005 - $24,064; 2004 - $24,340)............ 44,691 45,202
---------- ----------
Net Investment Gain 792,242 871,689
---------- ----------
Net loss from agents' or premium balances charged-off.. (153,838) (45,160)
Other gain............................................. 96,755 76,169
---------- ----------
Net Income after Capital Gains Taxes and Before
Federal Income Taxes................................. 23,998 427,537
Federal income tax expense (benefit)................... (107,916) 101,147
---------- ----------
Net Income...................................... $ 131,914 $ 326,390
========== ==========
Changes in Capital and Surplus

Capital and Surplus, as of December 31, Previous Year.. $7,376,821 $6,899,256
Adjustment to beginning surplus..................... (205,585) (545,684)
---------- ----------
Capital and Surplus, as of January 1, 7,171,236 6,353,572
---------- ----------
Changes in capital and surplus:
Net income.......................................... 131,914 326,390
Change in net unrealized capital gains [net of
capital gains taxes: 2005 - $(18,068);
2004 -$43,543].................................... 697,684 529,835
Change in net deferred income taxes................. 46,237 298,938
Change in non-admitted assets....................... (88,388) (91,499)
Change in provision for reinsurance................. 132,935 42,397
Paid in surplus..................................... 199,830 143,782
Cash dividends to stockholder....................... (97,750) (207,199)
Other surplus adjustments........................... -- (39,660)
Foreign exchange translation........................ (73,535) 20,265
---------- ----------
Total Changes in Capital and Surplus............ 948,927 1,023,249
---------- ----------
Capital and Surplus, as of December 31, $8,120,163 $7,376,821
========== ==========

See Notes to Statutory Basis Financial Statements

485BPOS 13th Page of 96 TOC 1st Previous Next ↓Bottom Just 13th
National Union Fire Insurance Company of Pittsburgh, PA.

Statements of Cash Flow
Statutory Basis
For the Years Ended December 31, 2005 and 2004
(000's Omitted)

For the Years Ended December 31, 2005 2004
-------------------------------- ----------- -----------
Cash From Operations

Premiums collected, net of reinsurance............... $ 7,217,780 $ 7,010,374
Net investment income................................ 720,255 831,974
Miscellaneous income (expense)....................... (57,062) 31,571
----------- -----------
Sub-total......................................... 7,880,973 7,873,919
----------- -----------
Benefit and loss related payments.................... 3,931,978 (65,276)
Commission and other expense paid.................... 2,113,308 1,864,377
Dividends paid to policyholders...................... 927 634
Change in federal income taxes....................... 47,537 675,868
----------- -----------
Net Cash from Operations.......................... 1,787,223 5,398,316
----------- -----------
Cash From Investments

Proceeds from investments sold, matured, or repaid
Bonds............................................. 2,374,908 2,314,128
Stocks............................................ 677,784 550,433
Other............................................. 3,296,328 4,193,343
----------- -----------
Total Proceeds from Investments Sold, Matured, or
Repaid.......................................... 6,349,020 7,057,904
----------- -----------
Cost of Investments Acquired
Bonds............................................. 3,915,482 5,009,144
Stocks............................................ 521,240 459,758
Other............................................. 3,256,822 4,240,241
----------- -----------
Total Cost of Investments Acquired................ 7,693,544 9,709,143
----------- -----------
Net Cash (Used in) Investing Activities........... (1,344,524) (2,651,240)
----------- -----------
Cash From Financing and Miscellaneous Sources

Capital and Surplus paid-in, less treasury stock..... -- 143,782
Dividends to stockholder............................. (146,977) (206,320)
Net deposit on deposit-type contracts and other
insurance.......................................... 45,455 (677,632)
Other................................................ (346,911) (2,021,066)
----------- -----------
Net Cash (Used in) Financing and Miscellaneous
Activities...................................... (448,433) (2,761,236)
----------- -----------
Net Change in Cash and Short-term Investments..... (5,734) (14,160)

Cash and short-term Investments:
Beginning of year................................. 225,301 239,461
----------- -----------
End of Year....................................... $ 219,567 $ 225,301
=========== ===========

See Notes to Statutory Basis Financial Statements

485BPOS 14th Page of 96 TOC 1st Previous Next ↓Bottom Just 14th
National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Note 1 - Organization and Summary of Significant Statutory Basis Accounting
Policies

A. Organization

The National Union Fire Insurance Company of Pittsburgh, PA. (the
"Company") is a direct wholly-owned subsidiary of the American
International Group, Inc. (the "Parent" or "AIG").

The Company writes substantially all lines of property and casualty
insurance with an emphasis on U.S. commercial business. In addition to
writing substantially all classes of business insurance, including large
commercial or industrial property insurance, excess liability, inland
marine, environmental, workers' compensation and excess and umbrella
coverages, the Company offers many specialized forms of insurance such as
aviation, accident and health, equipment breakdown, directors and officers
liability (D&O), difference in conditions, kidnap-ransom, export credit and
political risk, and various types of errors and omissions coverages.
Through AIG's risk management operation, the Company provides insurance and
risk management programs to large corporate customers, while through AIG's
risk finance operation the Company is a leading provider in customized
structured products.

The Company accepts business mainly from insurance brokers, enabling
selection of specialized markets and retention of underwriting control. Any
licensed insurance broker is able to submit business to the Company, but
such broker usually has no authority to commit the Company to accept the
risk. In addition, the Company utilizes certain managing general agents and
third party administrators for policy issuance and administration,
underwriting, and claims adjustment services.

The Company has significant transactions with the Parent and affiliates. In
addition, the Company participates in an inter-company pooling agreement
with certain affiliated companies (see Note 5).

B. Summary of Significant Statutory Basis Accounting Policies

Prescribed or Permitted Statutory Accounting Practices:

The accompanying financial statements of the Company have been prepared in
conformity with accounting practices prescribed or permitted by the
Insurance Department of the Commonwealth of Pennsylvania.

The Insurance Department of the Commonwealth of Pennsylvania recognizes
only statutory accounting practices prescribed or permitted by the
Commonwealth of Pennsylvania for determining and reporting the financial
position and results of operations of an insurance company and for the
purpose of determining its solvency under the Pennsylvania Insurance Law.
The National Association of Insurance Commissioners Accounting Practices
and Procedures Manual ("NAIC SAP") has been adopted as a component of
prescribed practices by the Commonwealth of Pennsylvania. The Commissioner
of Insurance has the right to permit other specific practices that deviate
from prescribed practices.

Page 7

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The Insurance Department of the Commonwealth of Pennsylvania has adopted
the following accounting practices that differ from those found in NAIC
SAP. Specifically, the prescribed practice of discounting of workers
compensation reserves on a non-tabular basis (in NAIC SAP, discounting of
reserves is not permitted on a non tabular basis) and the permitted
practice that Schedule F is prepared on a New York basis, including New
York Regulation 20 reinsurance credits for calculating the provision for
unauthorized reinsurance (in NAIC SAP, New York Regulation 20 reinsurance
credits are not permitted).

A reconciliation of the Company's net income and capital and surplus
between NAIC SAP and practices prescribed and permitted by the Commonwealth
of Pennsylvania is shown below:

December 31, 2005 2004
------------ ---------- ----------
Net Income, Pennsylvania Insurance Department.. $ 131,914 $ 326,390

State Practices - (Deduction) Income:
Non-Tabular Discounting..................... (403,719) (46,613)
---------- ----------
Net (Loss) Income, NAIC SAP.................... $ (271,805) $ 279,777
========== ==========
Statutory Surplus, Pennsylvania Insurance
Department................................... $8,120,163 $7,376,821
State Practices - (Charge) Credit

Non-Tabular Discounting..................... (594,958) (191,239)
Reinsurance Credits......................... (212,192) (201,318)
---------- ----------
Statutory Surplus, NAIC SAP.................... $7,313,013 $6,984,264
========== ==========

In addition to the aforementioned matters, the Commissioner has permitted
the Company to utilize the independent audit of the Company's Parent (the
consolidated upstream holding company) to support the requirement for
audited U.S. GAAP equity of the investments in non insurance and foreign
insurance entities. The Commissioner has also permitted the Company to
utilize audited financial statements prepared on a basis of accounting
other than U.S. GAAP to value investments in joint ventures, limited
partnerships and hedge funds.

Statutory Accounting Practices and Generally Accepted Accounting Principles:

NAIC SAP is a comprehensive basis of accounting other than accounting
principles generally accepted in the United States of America ("GAAP").
NAIC SAP varies in certain respects from GAAP. A description of these
accounting differences is set forth below:

Under GAAP:

a. Costs incidental to acquiring business related to premiums written and
costs allowed by assuming reinsurers related to premiums ceded are
deferred and amortized over the periods covered by the underlying
policies or reinsurance agreements;

b. Statutory basis reserves, such as non-admitted assets and unauthorized
reinsurance are restored to surplus;

c. The equity in earnings of affiliates with ownership between 20.0% and
50.0% is included in net income, and investments in subsidiaries with
greater than 50.0% ownership are consolidated;

d. Estimated undeclared dividends to policyholders are accrued;

Page 8

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

e. The reserves for losses and loss adjustment expense (LAE) and unearned
premium reserves are presented gross of ceded reinsurance by
establishing a reinsurance asset;

f. Debt and equity securities deemed to be available for sale or trading
are reported at fair value. The difference between the cost and the
fair value for securities available for sale is reflected net of
related deferred income tax, as a separate component of accumulated
other comprehensive income in shareholder's equity. For trading
securities, the difference between cost and fair value is included in
income, while securities held to maturity are valued at amortized cost;

g. Direct written premium contracts that do not have sufficient risk
transfer are treated as deposit accounting liabilities;

h. Insurance and reinsurance contracts recorded as retroactive retain
insurance accounting treatment if they pass the risk transfer test. If
risk transfer is not met, no insurance accounting treatment is
permitted. All income is then recognized based upon either the interest
or recovery method; and

i. Deferred federal income taxes are provided for temporary differences
for the expected future tax consequences of events that have been
recognized in the Company's financial statements. The provision for
deferred income taxes is reported in the income statement.

Under NAIC SAP:

a. Costs incidental to acquiring business related to premiums written and
costs allowed by assuming reinsurers related to premiums ceded are
immediately expensed;

b. Statutory basis reserves, such as non-admitted assets and unauthorized
reinsurance are charged directly to surplus;

c. Subsidiaries are not consolidated. The equity in earnings of affiliates
is included in unrealized appreciation/(depreciation) of investments,
which is reported directly in surplus. Dividends are reported as
investment income;

d. Declared dividends to policyholders are accrued;

e. The reserve for losses and LAE and unearned premium reserves are
presented net of ceded reinsurance;

f. NAIC investment grade debt securities are reported at amortized cost,
while NAIC non-investment grade debt securities (NAIC rated 4-6) are
reported at lower of cost or market;

g. Direct written premium contracts are reported as insurance as long as
policies are issued in accordance with insurance requirements;

h. Insurance and reinsurance contracts deemed to be retroactive receive
special accounting treatment. Gains or losses are recognized in the
income statement and surplus is segregated by the ceding entity to the
extent of gains realized; and

i. Deferred federal income taxes are provided for temporary differences
for the expected future tax consequences of events that have been
recognized in the Company's financial statements. Changes in deferred
income taxes are charged directly to surplus and have no impact on
statutory earnings. The admissibility of deferred tax assets is limited
by statutory guidance.

The effects on the financial statements of the variances between the
statutory basis of accounting and accounting principles generally accepted
in the United States of America, although not reasonably determinable, are
presumed to be material.

Page 9

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Significant Statutory Accounting Practices:

A summary of the Company's significant statutory accounting practices are
as follows:

Use of Estimates: The preparation of financial statements in conformity
with accounting practices prescribed or permitted by the Commonwealth of
Pennsylvania requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities. On an ongoing basis,
the Company evaluates all of its estimates and assumptions. It also
requires disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the period. Actual results could differ from management's estimates.

Invested Assets: The Company's invested assets are accounted for as follows:

. Short-term Investments: The Company considers all highly liquid debt
securities with maturities of greater than three months but less than
twelve months from the date of purchase to be short-term investments.
Short-term investments are carried at amortized cost which approximates
NAIC market value (as designated by the NAIC Securities Valuation
Office).

. Bonds: Bonds with an NAIC designation of 1 to 3 are carried at
amortized cost using the scientific method. Bonds with an NAIC
designation of 4 to 6 are carried at the lower of amortized cost or the
NAIC-designated market value. Bonds that are determined to have an
other-than-temporary decline in value are written down to fair value as
the new cost basis, with the corresponding charge to Net Realized
Capital Gains as a realized loss.

Mortgage-backed securities are carried at amortized cost and generally
are more likely to be prepaid than other fixed maturities. As of
December 31, 2005 and 2004, the NAIC market value of the Company's
mortgage-backed securities approximated $238,400 and $237,683,
respectively. Mortgage-backed securities include prepayment assumptions
used at the purchase date and valuation changes caused by changes in
estimated cash flows, and are valued using the retrospective method.
Prepayment assumptions were obtained from broker surveys.

. Common and Preferred Stocks: Unaffiliated common stocks are carried
principally at market value. Perpetual preferred stocks with an NAIC
rating of P1 or P2 are carried at market value. Redeemable preferred
stocks with an NAIC rating of RP1 or RP2 that are subject to a 100.0%
mandatory sinking fund are carried at amortized cost. All below
investment grade preferred stocks are carried at the lower of amortized
cost or NAIC designated market values.

Investments in affiliates for which the Company's ownership interest
(including ownership interest of the Parent and its subsidiaries) is
less than 85.0%, and whose securities are traded on one of the three
major U.S. exchanges, are included in common stock at the quoted market
value less a discount as prescribed by NAIC SAP. The discount rate is
approximately 23.0%. Other investments in affiliates are included in
common stocks based on the net worth of the entity.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

. Other Invested Assets: Other invested assets consist primarily of
investments in joint ventures and partnerships. Joint ventures and
partnership investments are accounted for under the equity method,
based on the most recent financial statements of the entity. Changes in
value are recorded as unrealized gains or losses. Investments in joint
ventures and partnerships that are determined to have an
other-than-temporary decline in value are written down to fair value as
the new cost basis, with the corresponding charge to Net Realized
Capital Gains as a realized loss. The intermediate bond mutual fund,
owned by AIG, is carried principally at the NAIC market value and the
unrealized gain or loss reported as unassigned surplus.

. Derivatives: Foreign exchange forward contracts are derivatives whereby
the Company agrees to exchange a specific amount of one currency for a
specific amount of another currency at a date in the future. Foreign
exchange contracts are entered into in order to manage exposure to
changes in the foreign exchange rates related to long-term foreign
denominated bonds held by the Company. The contracts are usually one to
three months in duration and are marked to market every month using
publicly obtained foreign exchange rates. When the contract expires,
realized gains and losses are recorded in investment income.

Options purchased are included in Other Invested Assets on the
Company's Statements of Admitted Assets. Options are carried at market
value. Options written are reported in Other Liabilities on the
Statements of Liabilities, Capital and Surplus. Realized gains or
losses on the disposition of options are determined on the basis of
specific identification and are included in income.

Futures are exchange contracts whereby the Company agrees to buy a
specific amount of an underlying security (usually an equity index) at
a specific price in the future. Through out the term of the contract,
the change in the underlying security's price in the future is
calculated each business day, and the gain or loss is transferred in
cash to or from the counterparty. When the future position is closed
out or expires, a final payment is made. The daily mark-to-market
payments are accounted for as realized gains or losses.

Any change in unrealized gains or losses on derivatives purchased or
written are credited or charged to unassigned surplus. The Company does
not use hedge accounting for its derivatives.

. Net Investment Gains (Losses): Net investment gains (losses) consist of
net investment income earned and realized gains or losses from the
disposition of investments. Net investment income earned includes
accrued interest, accrued dividends and distributions from partnerships
and joint ventures. Investment income is recorded as earned. Realized
gains or losses on the disposition of investments are determined on the
basis of specific identification.

. Unrealized Gains (Losses): Unrealized gains (losses) on all stocks,
bonds carried at NAIC designated values, joint ventures, partnerships,
derivatives and foreign currency translation are credited or charged to
unassigned surplus.

Revenue Recognition: Direct written premium contracts are primarily earned
on a pro-rata basis over the terms of the policies to which they relate.
Accordingly, unearned premiums represent the portion of premiums written
which is applicable to the unexpired terms of policies in force. Ceded
premiums are amortized into income over the contract period in proportion
to the protection received.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Premium estimates for retrospectively rated policies are recognized within
the periods in which the related losses are incurred. In accordance with
NAIC Statement on Statutory Accounting Practices (SSAP) No. 66 entitled
Retrospectively Rated Contracts, the Company estimates accrued
retrospectively rated premium adjustments by using the application of
historical ratios of retrospective rated premium development. The Company
records accrued retrospectively rated premiums as an adjustment to earned
premiums. In connection therewith, as of December 31, 2005 and 2004,
accrued premiums related to the Company's retrospectively rated contracts
amounted to $29,300 and $8,146, respectively, net of non-admitted premium
balances of $3,256 and $905, respectively.

Adjustments to premiums for changes in the level of exposure to insurance
risk are generally determined based upon audits conducted after the policy
expiration date. In accordance with SSAP No. 53, entitled Property and
Casualty Contracts--Premiums, the Company records these estimates [commonly
known as Earned But Unbilled (EBUB) Premiums] as an adjustment to written
premium, and earns these premiums immediately. For premium adjustments that
result in a return of premium to the policyholder, the Company immediately
reduces earned premiums. When the EBUB premium exceeds the amount of
collateral held, a non-admitted asset (equivalent to 10.0% of this excess
amount) is recorded.

In accordance with SSAP No. 53, the Company reviews its ultimate losses in
respect to its premium reserves. A liability is established if the premium
reserves are not sufficient to cover the ultimate loss projections and
associated acquisition expenses. Investment income is not considered in the
calculation.

For certain lines of business for which the insurance policy is issued on a
claims-made basis, the Company offers to the Insured the option to purchase
an extended reporting endorsement (commonly referred to as Tail Coverage),
which permits the extended reporting of insured events after the
termination of the claims made contract. Extended reporting endorsements
modify the exposure period of the underlying contract and can be for a
defined period (e.g., six months, one year, five years) or an indefinite
period. For defined reporting periods, premiums are earned over the term of
the fixed period. For indefinite reporting periods, premiums are fully
earned and loss and LAE liabilities associated with the unreported claims
are recognized immediately.

Reinsurance: Ceded premiums, commissions, expense reimbursements and
reserves related to ceded business are accounted for on a basis consistent
with that used in accounting for the original contracts issued and the
terms of the reinsurance contract. Ceded premiums have been reported as a
reduction of premium earned. Amounts applicable to ceded reinsurance for
unearned premium reserves, and reserves for losses and LAE have been
reported as a reduction of these items, and expense allowances received in
connection with ceded reinsurance are accounted for as a reduction of the
related acquisition cost.

Retroactive Reinsurance: Retroactive reinsurance reserves are shown
separately in the balance sheet. Gains or losses are recognized in the
income statement. Surplus gains are reported as segregated unassigned funds
(surplus) until the actual retroactive reinsurance recovered exceeds the
consideration paid.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

As agreed with the Company's domiciliary state, the Company analyzed the
status of all reinsurance treaties entered into on or after January 1, 1994
for which ceded reserves as of December 31, 2004 (including IBNR) exceeded
$100 for compliance with the nine month rule as prescribed in SSAP No. 62,
entitled Property and Casualty Reinsurance. Any such treaties for which the
documentation required by SSAP No. 62 did not exist were reclassified as
retroactive, with appropriate adjustments to underwriting accounts and
unassigned surplus. Treaties entered into prior to January 1, 2005 for
which such documentation is contained in the Company's files retained
prospective treatment, irrespective of whether such documentation was
executed within nine months of the treaty's effective date in accordance
with agreements reached with the Domiciliary Insurance Department.

Deposit Accounting: All assumed and ceded reinsurance contracts which the
Company determines do not transfer a sufficient amount of insurance risk
are recorded as deposit accounting transactions in accordance with SSAP
No. 62 and SSAP No. 75 entitled Reinsurance Deposit Accounting - An
Amendment to SSAP No. 62, Property and Casualty Reinsurance.

As agreed with the Company's domiciliary state, direct insurance
transactions whereby the Company determines there was insufficient risk
transfer, other than those where a policy was issued (a) in respect of the
insured's requirement for evidence of coverage pursuant to applicable
statutes (insurance statutes or otherwise), contractual terms or normal
business practices, (b) in respect of an excess insurer's requirement for
an underlying primary insurance policy in lieu of self insurance, or (c) in
compliance with filed forms, rates and/or rating plans, are recorded as
deposit accounting arrangements.

Foreign Property Casualty Business: As agreed with the Company's
domiciliary state, the Company will continue to follow the current
presentation practices relating to its foreign branches and participation
in the business of the American International Underwriters Overseas
Association (AIUOA). See Note 5 for a description of AIUOA pooling
arrangement and related financial statement presentation.

Commissions and Underwriting Expenses: Commissions, premium taxes, and
certain other underwriting expenses related to premiums written are charged
to income at the time the premiums are written and are included in Other
Underwriting Expenses Incurred. In accordance with SSAP No. 62, the Company
records a liability for reinsurance ceding commissions recorded in excess
of acquisition costs. The liability is earned over the terms of the
underlying policies.

Reserves for Losses and LAE: The reserves for losses and LAE, including
incurred but not reported (IBNR) losses, are determined on the basis of
actuarial specialists' evaluations and other estimates, including
historical loss experience. The methods of making such estimates and for
establishing the resulting reserves are continually reviewed and updated,
and any resulting adjustments are recorded in the current period.
Accordingly, losses and LAE are charged to income as incurred. Amounts
recoverable from reinsurers are estimated in a manner consistent with the
claim liability associated with the reinsured policy.

The Company discounts its loss reserves on workers' compensation claims.

The calculation of the Company's tabular discount is based upon the 1979-81
Decennial Mortality Table, and applying a 3.5% interest rate. At
December 31,

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

2005 and 2004, the reserves for losses (net of reinsurance) subject to
tabular discounting were $2,135,010 and $1,423,684, respectively. As of
December 31, 2005 and 2004, the Company's tabular discount amounted to
$194,527 and $151,671, respectively, all of which were applied to the
Company's case reserves.

As prescribed by the Pennsylvania Insurance statutes, the calculation of
the Company's non-tabular discount is determined as follows:

. For accident years 2001 and prior - based upon the industry payout
pattern and a 6.0% interest rate.

. For accident years 2002 and subsequent - based upon the yield of U.S.
Treasury securities between one and twenty years and the Company's own
payout pattern.

At December 31, 2005 and 2004, the reserves for losses (net of reinsurance)
subject to non-tabular discounting were $3,420,746 and $1,272,013,
respectively. As of December 31, 2005, the Company's non-tabular discount
amounted to $594,958, of which $224,416 and $370,542 was applied to case
reserves and IBNR, respectively. As of December 31, 2004, the Company's
non-tabular discount amounted to $191,239, all of which was applied to the
Company's case reserves.

Foreign Exchange: Assets and liabilities denominated in foreign currencies
are translated at the rate of exchange in effect at the close of the
reporting period. Unrealized gains and losses from translating balances
from foreign currency into United States currency are recorded as
adjustments to surplus. Gains and losses resulting from foreign currency
transactions are included in income.

Statutory Basis Reserves: Certain required statutory basis reserves,
principally the provision for reinsurance, are charged to surplus and
reflected as a liability of the Company.

Policyholders' Dividends: Dividends to policyholders are charged to income
as declared.

Capital and Surplus: Common capital stock and capital in excess of par
value represent amounts received by the Company in exchange for shares
issued. The common capital stock represents the number of shares issued
multiplied by par value per share. Capital in excess of par value
represents the value received by the Company in excess of the par value per
share.

Non-Admitted Assets: Certain assets, principally electronic data processing
(EDP) equipment, software, leasehold improvements, certain overdue agents'
balances, prepaid expenses and certain deferred taxes that exceed statutory
guidance are designated as Non-admitted Assets and are directly charged to
unassigned surplus. EDP equipment is depreciated over five years using the
straight line method. Leasehold improvements are amortized over the lesser
of the remaining lease term or the estimated useful life of the leasehold
improvement. In connection therewith, for the years ended December 31, 2005
and 2004, depreciation and amortization expense amounted to $25,983 and
$18,008, respectively.

Reclassifications: Certain balances contained in the 2004 financial
statements have been reclassified to conform with the current year's
presentation.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Note 2 - Accounting Adjustments to Statutory Basis Financial Statements

A. Accounting Adjustments to 2005 Statutory Basis Financial Statements

During 2005, the Company dedicated significant effort to the resolution of
previously identified weaknesses in internal controls over balance sheet
reconciliations. As a result of these remediation efforts, management
concluded that certain adjustments should be made to the assets,
liabilities, net income and unassigned surplus as reported in the Company's
2004 amended Annual Statement. The adjustments resulted in an after tax
statutory charge of $205,585. In accordance with SSAP No. 3, entitled
Accounting Changes and Correction of Errors, the Company reported the
impact to its 2004 and prior unassigned surplus as an adjustment to
unassigned surplus as of January 1, 2005.

Capital and Surplus, as of December 31, 2004.................. $7,376,821

Adjustments to Beginning Capital and Surplus:

1. Asset realization....................................... (242,195)
2. Revenue recognition..................................... (68,690)
----------
Total Adjustments to Beginning Capital and
Surplus, Before Federal Income Taxes.............. (310,885)

Federal Income Taxes:

Current federal income taxes........................... 23,551
Deferred income taxes.................................. 81,749
----------
Total Adjustments to Beginning Capital and
Surplus, After Federal Income Taxes............... (205,585)
----------
Capital and Surplus, as of January 1, 2005 $7,171,236
==========

An explanation for each of the adjustments for prior period corrections is
described below:

1. Asset Realization: As a result of the remediation of the internal
control weaknesses related to the balance sheet reconciliations, a
further review was performed of the Company's allowance for doubtful
accounts and other accruals. Based on this review, the Company
determined that the allowances related to certain premium receivable,
reinsurance recoverable and other asset accounts were not sufficient.
The adjustment has established additional allowances for these items.

2. Revenue Recognition: As a result of the remediation of the internal
control weaknesses related to the Company's revenue recognition
policies, a further review was performed by the Company that resulted
in revisions to revenues that were recognized in prior periods related
to certain long duration environmental insurance contracts.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

B. Accounting Adjustments to 2004 Statutory Basis Financial Statements

As a result of regulatory inquiries into certain transactions, AIG
conducted an internal review of information and certain transactions from
January 2000 to May 2005. As part of the internal review, the Company
reviewed the statutory accounting treatment for matters identified during
the internal review and concluded that certain transactions required
adjustment.

An agreement was reached with the Company's domiciliary state to re-file
its 2004 annual statement using the methodology prescribed under SSAP
No. 3. In applying this methodology, the Company has reflected the impact
(in the amount of $545,684) to its 2003 and prior unassigned surplus as an
adjustment to unassigned surplus as of January 1, 2004.

A reconciliation of the Company's unassigned surplus balance from
December 31, 2003 to January 1, 2004, taking into consideration these prior
period adjustments, is outlined in the table below:

Capital and Surplus, as of December 31, 2003................ $6,899,256

Adjustments to beginning capital and surplus:

1. Risk Transfer (Union Excess, Richmond and other)......... (455,383)
2. Coventry................................................. (16,817)
3. In-Substance Defeasance.................................. 19,500
4. Loss Reserves............................................ (79,040)
5. DBG Analysis............................................. (56,278)
6. Other Adjustments........................................ 42,334
----------
Total Adjustments to Beginning Capital and Surplus (545,684)
----------
Capital and Surplus, as of January 1, 2004 $6,353,572
==========

The above reconciliation of the Company's unassigned surplus at January 1,
2004 is presented net of income taxes. The Company has evaluated any
deferred income taxes arising from these adjustments for admissibility in
accordance with NAIC SAP.

An explanation of each of the accounting adjustments included in the
reconciliation above are discussed below:

1. Risk Transfer (Union Excess, Richmond and other): Reinsurance ceded to
Union Excess Reinsurance Company, Ltd. (Union Excess), a
Barbados-domiciled reinsurer, Richmond Insurance Company, Ltd.
(Richmond), a Bermuda-based reinsurance holding company, and some other
insurance and reinsurance transactions were adjusted to deposit
accounting due to insufficient risk transfer in accordance with SSAP
No. 62 and SSAP No. 75.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

2. Coventry: Life settlements are designed to assist life insurance
policyholders to monetize the existing value of life insurance
policies. The Company determined, in light of new information not
available at the time the initial accounting determination was made,
that the accounting for these transactions as insurance and reinsurance
was a misapplication of statutory accounting and such transactions have
been reversed in the Company's financial statements.

3. In-Substance Defeasance: The Company entered into a funding agreement
and related interest rate swap. These contracts were intended to be
entered into by American International Specialty Lines Insurance
Company (AISLIC) to economically hedge a corresponding AISLIC contract.
The Company has since assigned the intercompany funding agreement and
novated the interest rate swap to AISLIC as if in each case the
contracts had been entered into by AISLIC at inception.

4. Loss Reserves: The Company determined that the unsupported changes in
reserves independently from the actuarial process constituted errors
which have been adjusted accordingly.

5. Domestic Brokerage Group (DBG) Analysis: The Company has determined
that allowances related to certain premium receivable, reinsurance
recoverable and other assets were not sufficient. The adjustment has
established additional allowances for these items.

6. Other Adjustments: The Company has summarized other miscellaneous
adjustments that individually did not have a significant impact on the
adjustment of its statutory financial statements.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Note 3 - Investments

The amortized cost and NAIC market values* of the Company's bond investments at
December 31, 2005 and 2004 are outlined in the table below:

[Enlarge/Download Table]

Gross Gross NAIC *
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- -----------

As of December 31, 2005

U.S. governments............................... $ 29,928 $ 960 $ 39 $ 30,849
All other governments.......................... 649,321 10,352 8,611 651,062
States, territories and possessions............ 1,835,166 44,713 4,654 1,875,225
Political subdivisions of states, territories
and possessions.............................. 2,643,663 60,523 2,539 2,701,647
Special revenue and special assessment
obligations and all non-guaranteed
obligations of agencies and authorities and
their political subdivisions................. 5,212,354 119,179 7,282 5,324,251
Public utilities............................... 54,429 954 633 54,750
Industrial and miscellaneous................... 381,458 18,070 9,014 390,514
----------- -------- ------- -----------
Total Bonds, As of December 31, 2005....... $10,806,319 $254,751 $32,772 $11,028,298
=========== ======== ======= ===========
As of December 31, 2004

U.S. governments............................... $ 45,062 $ 1,117 $ 144 $ 46,035
All other governments.......................... 465,565 17,831 260 483,136
States, territories and possessions............ 2,097,759 58,903 4,204 2,152,458
Political subdivisions of states, territories
and possessions.............................. 1,933,929 56,880 555 1,990,254
Special revenue and special assessment
obligation and all non-guaranteed
obligations of agencies and authorities and
their political subdivisions................. 4,300,455 131,102 2,836 4,428,721
Public utilities............................... 10,515 1,205 -- 11,720
Industrial and miscellaneous................... 452,170 6,795 716 458,249
----------- -------- ------- -----------
Total Bonds, As of December 31, 2004....... $ 9,305,455 $273,833 $ 8,715 $ 9,570,573
=========== ======== ======= ===========

As of December 31, 2005 and 2004, the actual fair market value, principally
priced by Interactive Data Corporation, a third party rating source, for the
above listed securities amounted to $11,030,435 and $9,673,296, respectively.

--------
* The NAIC market value was used where available. When not available, market
values were obtained from third party pricing sources.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The amortized cost and NAIC market values* of bonds at December 31, 2005 and
2004, by contractual maturity, are shown below. Actual maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay certain obligations with or without call or prepayment penalties.

[Enlarge/Download Table]

As of December 31, 2005 2004
------------------ ------------------------ -----------------------
Amortized NAIC * Amortized NAIC *
Cost Market Value Cost Market Value
----------- ------------ ---------- ------------

Due in one year or less...................... $ 86,639 $ 87,166 $ 29,408 $ 37,302
Due after one year through five years........ 546,495 565,421 507,375 519,338
Due after five years through ten years....... 8,122,058 8,259,989 1,447,668 1,482,452
Due after ten years.......................... 1,813,491 1,877,322 7,083,325 7,293,798
Mortgaged-backed securities.................. 237,636 238,400 237,679 237,683
----------- ----------- ---------- ----------
Total Bonds............................... $10,806,319 $11,028,298 $9,305,455 $9,570,573
=========== =========== ========== ==========

During 2005 and 2004, proceeds from the sale of the Company's bonds were
$2,114,173 and $2,126,400, respectively. During 2005 and 2004, the Company
realized gross gains of $52,643 and $18,767, respectively and gross losses of
$21,356 and $19,712, respectively, related to these sales.

During 2005 and 2004, proceeds from the sale of the Company's equity
investments amounted to $585,696 and $501,264, respectively. Gross gains of
$43,085 and $57,845 and gross losses of $8,592 and $7,161 were realized on
those sales in 2005 and 2004, respectively.

--------
* The NAIC market value was used where available. When not available, market
values were obtained from third party pricing sources.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The amortized cost and market values of the Company's common and preferred
stocks at December 31, 2005 and 2004 are set forth in the table below:

[Enlarge/Download Table]

December 31, 2005 December 31, 2004
------------------------------------------- -------------------------------------------
Gross Gross NAIC * Gross Gross NAIC *
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

Common Stocks:

Affiliated.......... $2,168,153 $3,730,014 $127,265 $5,770,902 $2,133,267 $3,137,924 $179,416 $5,091,775
Non-affiliated...... 591,892 101,725 18,543 675,074 602,818 188,730 13,355 778,193
---------- ---------- -------- ---------- ---------- ---------- -------- ----------
Total........... $2,760,045 $3,831,739 $145,808 $6,445,976 $2,736,085 $3,326,654 $192,771 $5,869,968
========== ========== ======== ========== ========== ========== ======== ==========

Preferred Stocks:

Affiliated.......... $2,100,000 $ -- $ -- $2,100,000 $2,250,000 $ -- $ -- $2,250,000
Non-affiliated...... 10,012 386 248 10,150 9,718 311 $ 159 9,870
---------- ---------- -------- ---------- ---------- ---------- -------- ----------
Total........... $2,110,012 $ 386 $ 248 $2,110,150 $2,259,718 $ 311 $ 159 $2,259,870
========== ========== ======== ========== ========== ========== ======== ==========

The NAIC market value column for preferred stocks in the above table does not
agree to the carrying amount in the Company's Statements of Admitted Assets due
to the Company's redeemable preferred stocks being carried at amortized, while
the Company's perpetual preferred stocks being carried at market value.

As of December 31, 2005 and 2004, the Company held derivative investments of
$(44,341) and $(729), respectively.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The fair market value together with the aging of the pre-tax unrealized losses
with respect to the Company's bonds and stocks as of December 31, 2005 and 2004
is set forth in the table below:

[Enlarge/Download Table]

Greater than 12
12 Months or Less Months Total
--------------------- --------------------- ---------------------
Unrealized Unrealized Unrealized
Description of Securities Fair Value Losses Fair Value Losses Fair Value Losses
------------------------- ---------- ---------- ---------- ---------- ---------- ----------

As of December 31, 2005:

U. S. Governments.............................. $ 5,333 $ 39 $ -- $ -- $ 5,333 $ 39
All Other Governments.......................... 268,895 4,240 124,919 4,371 393,814 8,611
States, territories and possessions............ 378,022 3,069 31,115 1,585 409,137 4,654
Political subdivisions of states, territories
and possessions.............................. 387,574 2,539 -- -- 387,574 2,539
Special revenue................................ 812,359 6,842 12,251 440 824,610 7,282
Public utilities............................... 47,746 633 -- -- 47,746 633
Industrial and miscellaneous................... 113,404 4,603 5,753 4,411 119,157 9,014
---------- -------- -------- -------- ---------- --------
Total Bonds.................................... 2,013,333 21,965 174,038 10,807 2,187,371 32,772
---------- -------- -------- -------- ---------- --------
Common Stock................................... 287,947 20,822 366,178 124,986 654,125 145,808
Preferred Stock................................ -- -- 751 248 751 248
---------- -------- -------- -------- ---------- --------
Total Stocks................................... 287,947 20,822 366,929 125,234 654,876 146,056
---------- -------- -------- -------- ---------- --------
Total Bonds and Stocks......................... $2,301,280 $ 42,787 $540,967 $136,041 $2,842,247 $178,828
========== ======== ======== ======== ========== ========
As of December 31, 2004:

U. S. Governments.............................. $ 2,400 $ 144 $ -- $ -- $ 2,400 $ 144
All Other Governments.......................... 121,010 260 -- -- 121,010 260
States, territories and possessions............ 170,120 982 285,409 3,222 455,529 4,204
Political subdivisions of states, territories
and possessions.............................. 174,418 555 -- -- 174,418 555
Special revenue................................ 365,583 2,110 22,410 726 387,993 2,836
Public utilities............................... -- -- -- -- -- --
Industrial and miscellaneous................... 72,522 601 10,524 115 83,046 716
---------- -------- -------- -------- ---------- --------
Total Bonds.................................... 906,053 4,652 318,343 4,063 1,224,396 8,715
---------- -------- -------- -------- ---------- --------
Common Stock................................... 331,234 192,771 -- -- 331,234 192,771
Preferred Stock................................ -- -- 811 159 811 159
---------- -------- -------- -------- ---------- --------
Total Stocks................................... 331,234 192,771 811 159 332,045 192,930
---------- -------- -------- -------- ---------- --------
Total Bonds and Stocks......................... $1,237,287 $197,423 $319,154 $ 4,222 $1,556,441 $201,645
========== ======== ======== ======== ========== ========

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

In general, a security is considered a candidate for other-than-temporary
impairments if it meets any of the following criteria:

a. Trading at a significant (25 percent or more) discount to par or amortized
cost (if lower) for an extended period of time (nine months or longer);

b. The occurrence of a discrete credit event resulting in (i) the issuer
defaulting on a material outstanding obligation; or (ii) the issuer seeking
protection from creditors under the bankruptcy laws or any similar laws
intended for the court supervised reorganization of insolvent enterprises;
or (iii) the issuer proposing a voluntary reorganization pursuant to which
creditors are asked to exchange their claims for cash or securities having
a fair value substantially lower than par value of their claims; or

c. In the opinion of the Company's management, it is probable that AIG may not
realize a full recovery on its investment, irrespective of the occurrence
of one of the foregoing events.

As of December 31, 2005, the Company has both the ability and intent to hold
these investments to recovery.

During 2005 and 2004, the Company reported write-downs on its common and
preferred stock investments due to an other-than-temporary decline in fair
value of $2,652 and $702, respectively, and reported write-downs on its bond
investments due to an other-than-temporary decline in fair value of $0 and
$7,726, respectively.

During 2005 and 2004, the Company reported the following write-downs on its
joint venture and partnership investments due to an other-than-temporary
decline in fair value:

For the Years Ended December 31, 2005 2004
-------------------------------- ------- -------
Marlwood..................................... $ -- $ 8,877
Odyssey Invest............................... -- 1,914
Advance Technology Venture................... -- 1,045
DLJ Merchant Banking Partners................ 2,923 --
Castleriggs Partners......................... 2,412 --
Healthcare Partners III...................... 1,491 --
Sandler Capital IV........................... 1,353 --
RCBA Strategic Partners...................... 1,242 --
Polyventures II.............................. 1,184 --
Items less than $1.0 million................. 661 754
------- -------
Total..................................... $11,266 $12,590
======= =======

As of December 31, 2005 and 2004, securities with a market value of $81,453 and
$41,888, respectively, were on loan. The Company receives as collateral 102.0%
of the market value of domestic transactions and 105.0% for cross-border
transactions. Securities lent, under the Securities Lending Agreement, are
under exclusive control of the Company. Pursuant to the Securities Agency
Lending Agreement, AIG Global Securities Lending Corporation, a Delaware
registered company, maintains responsibility for the investment and control of
such collateral.

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485BPOS 30th Page of 96 TOC 1st Previous Next ↓Bottom Just 30th
National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Securities carried at amortized cost of $1,499,498 and $1,248,472 were
deposited with regulatory authorities as required by law at December 31, 2005
and 2004, respectively.

During 2005 and 2004, included in Net investment income earned were investment
expenses of $6,226 and $6,053, respectively, and interest expense of $88,991
and $61,398, respectively.

Note 4 - Reserves for Losses and LAE

A reconciliation of the Company's reserves for losses and LAE as of
December 31, 2005 and 2004 is set forth in the table below:

2005 2004
----------- -----------
Reserves for Losses and LAE, as of Beginning of the
Period............................................ $ 9,811,368 $ 6,686,734

Adjustments for prior period corrections............ (174,946) 908,324
Incurred losses and LAE related to:
Current accident year............................ 5,005,099 4,808,892
Prior accident years............................. 1,340,860 889,702
----------- -----------
Total Incurred Losses and LAE................ 6,345,959 5,698,594
----------- -----------
Paid losses and LAE related to:
Current accident year............................ (1,274,795) (930,546)
Prior accident years............................. (2,921,286) (2,551,738)
----------- -----------
Total Paid Losses and LAE.................... (4,196,081) (3,482,284)
----------- -----------
Reserves for Losses and LAE, as of December 31, $11,786,300 $ 9,811,368
=========== ===========

During the 2005 and 2004 calendar years, estimated ultimate incurred losses and
LAE attributable to insured events of prior years increased by $1,340,860 and
$889,702, respectively. The Company experienced adverse loss and LAE reserve
development primarily related to claims from accident years 2002 and prior. The
classes of business accounting for the majority of this adverse development
were directors & officers' liability and related management liability classes
of business, excess casualty, and excess workers' compensation. In addition,
the Company significantly increased its reserves for asbestos based on a ground
up review of its asbestos claims exposures at year-end 2005 (see Note 12.B for
further information concerning the Company's asbestos and environmental
reserves).

As of December 31, 2005 and 2004, the Company's reserves for losses and LAE
have been reduced by anticipated salvage and subrogation of $198,497 and
$170,076, respectively.

As of December 31, 2005 and 2004, the Company's reserves for losses and LAE
have been reduced by credits for reinsurance recoverable of $7,743,937 and
$6,341,900, respectively (exclusive of intercompany pooling).

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Note 5 - Related Party Transactions

A. National Union Intercompany Pooling Agreement

The Company, as well as certain other insurance company subsidiaries of the
Parent, is a party to an inter-company reinsurance pooling agreement. In
accordance with the terms and conditions of this agreement, the member
companies cede all direct and assumed business except business from foreign
branches (excluding Canada) to the Company (the lead pooling participant).
In turn, each pooling participant receives from the Company their
percentage share of the pooled business.

In connection therewith, the Company's share of the pool is 38.0%.
Accordingly, premiums earned, losses and LAE incurred, and other
underwriting expenses, as well as related assets and liabilities, in the
accompanying financial statements emanate from the Company's percentage
participation in the pool.

A list of all pooling participants and their respective participation
percentages is set forth in the table below:

NAIC Co. Participation
Member Company Code Percent
-------------- -------- -------------
National Union Fire Insurance Company of
Pittsburgh, PA............................. 19445 38.0%
American Home Assurance Company.............. 19380 36.0%
Commerce and Industry Insurance Company...... 19410 10.0%
New Hampshire Insurance Company.............. 23481 5.0%
The Insurance Company of the State of
Pennsylvania............................... 19429 5.0%
Birmingham Fire Insurance Company of
Pennsylvania............................... 19402 5.0%
AIU Insurance Company........................ 19399 1.0%
American International Pacific Insurance
Company.................................... 23795 0.0%
American International South Insurance
Company.................................... 40258 0.0%
Granite State Insurance Company.............. 23809 0.0%
Illinois National Insurance Company.......... 23817 0.0%

B. American International Underwriters Overseas Association Pooling Arrangement

AIG formed American International Underwriters Overseas Association
(AIUOA), a Bermuda unincorporated association, in 1976, as the pooling
mechanism for AIG's international general insurance operations.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

A list of all members in the AIUOA and their respective participation
percentages is set forth in the table below:

[Download Table]

NAIC Co. Participation
Member Company Code Percent
-------------- -------- -------------

American International Underwriters
Overseas, Limited.......................... -- 67.0%
New Hampshire Insurance Company (NHIC)....... 23481 12.0%
National Union Fire Insurance Company of
Pittsburgh, PA............................. 19445 11.0%
American Home Assurance Company (AHAC)....... 19380 10.0%

In exchange for membership in AIUOA at the assigned participation, the
members contributed capital in the form of cash and other assets, including
rights to future business written by international operations owned by the
members. The legal ownership and insurance licenses of these international
branches remain in the name of NHIC, AHAC, and the Company.

At the time of forming the AIUOA, the member companies entered into an
open-ended reinsurance agreement, cancelable with six months written notice
by any member. The reinsurance agreement governs the insurance business
pooled in the AIUOA. As discussed in Note 1, the Company continues to
follow the current practices relating to its foreign branches and
participation in the business of AIUOA by recording: (a) its net (after
pooling) liability on such business as direct writings in its statutory
financial statements, rather than recording gross direct writings with
reinsurance cessions to the other pool members; (b) its corresponding
balance sheet position, excluding loss reserves and unearned premium
reserves, as a net equity interest in Equities in Underwriting Pools and
Associations; and (c) loss reserves and unearned premium reserves are
recorded on a gross basis. As of December 31, 2005 and 2004, the Company's
interest in AIUOA amounted to $613,711 and $530,063, respectively, gross of
$957,256 and $623,392, respectively, in loss reserves and unearned premium
reserves, after consideration of the National Union intercompany pooling
agreement.

Additionally, the Company holds 16.9% of the issued share capital of AIG
Europe S.A. for the beneficial interest of the AIUOA. As of December 31,
2005, the Company's interest in AIG Europe S.A. amounted to $241,997.

C. Guarantee Arrangements

The Company has issued guarantees whereby the Company unconditionally and
irrevocably guarantees all present and future obligations and liabilities
of any kind arising from the policies of insurance issued by the guaranteed
companies in exchange for an annual guarantee fee.

The guarantees are not expected to have a material effect upon the
Company's surplus as guaranteed companies have admitted assets in excess of
policyholder liabilities. The Company believes that the likelihood of a
payment under the guarantee is remote. These guarantees are provided to
maintain the guaranteed company's rating status issued by certain rating
agencies. In the event of termination of a guarantee, obligations in effect
or contracted for on the date of termination would remain covered until
extinguished.

The Company is party to an agreement with AIG whereby AIG has agreed to
make any payments due under the guarantees in the place and stead of the
Company.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

A list of the guarantees that were in effect at December 31, 2005 is outlined
in the table below:

As of December 31, 2005

[Enlarge/Download Table]

Guarantee Policyholder Invested Estimated Policyholders'
Guaranteed Company Issued Obligations Assets Loss Surplus
------------------ ---------- ------------ ----------- --------- --------------

New Hampshire Indemnity Company, Inc................ 12/15/1997 $ 156,315 $ 279,068 $ -- $ 99,675
Audubon Insurance Company........................... 11/5/1997 171,796 66,379 -- 62,051
Landmark Insurance Company (California)............. 3/2/1998 81,202 222,233 -- 98,347
Starr Excess Liability Insurance Company, Ltd....... 7/29/1998 320,268 2,250,828 -- 714,201
Starr Excess Liability Insurance International
Limited........................................... 5/28/1998 2,060,866 454,066 -- 203,015*
American International Insurance Company of PR...... 11/5/1997 265,170 179,584 -- 122,858*
AHICO First American-Hungarian Insurance Company.... 9/15/1998 9,475 16,902 -- 3,458,736*
AIG Europe (Ireland) Ltd............................ 12/15/1997 531,701 367,461 -- 154,614*
AIG Global Trade and Political Risk................. 11/5/1997 615 417,860 -- 162,650*
AIG Poland Insurance Company........................ 9/15/1998 24,906 30,296 -- 26,689*
AIG Russia Insurance Company ZAO.................... 9/15/1998 n/a n/a -- n/a
AIG Slovakia Insurance Company A. S................. 12/23/1998 5,116 3,832 -- 3,359*
First American Czech Insurance Company, Rt.......... 9/15/1998 n/a n/a -- n/a
La Meridional Compania Argentina de Seguros S.A..... 1/6/1998 88,497 62,962 -- 64,961*
AIG Romania Insurance Company (w/d 2/13/03)......... 12/23/1998 13,705 19,345 -- 5,285*
AIG Ukraine Insurance Company (w/d 2/13/03)......... 10/1/2000 1,941 9,075 -- 798*
AIG Bulgaria Ins and Reinsurance Co (w/d 2/13/03)... 12/31/1998 4,633 7,647 -- 4,291*
AIG Life Insurance Company(+)....................... 7/13/1998 8,469,700 9,247,410 -- 702,511**
American International Assurance Co (Bermuda) Ltd... 8/23/1999 7,466,172 9,552,342 -- 1,346,926
American International Life Assurance Company of N
Y(+).............................................. 7/13/1998 7,219,889 7,915,072 -- 696,304
----------- ----------- --------- --------------
Total Guarantees.................................... $26,891,967 $31,102,362 $ -- $ 7,927,271
=========== =========== ========= ==============

--------
(+) The guaranteed company is backed by a support agreeement issued by AIG.
(*) Policyholders' surplus is based on local GAAP financial statements.
(**) Policyholders' surplus for life companies is increased by the asset
valuation reserve (AVR).
(n/a)Not Available

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

D. Investments in Affiliates

As of December 31, 2005, the Company's preferred and common stock
investments with its affiliates together with the related change in
unrealized appreciation were as follows:

[Enlarge/Download Table]

Equity at
Ownership Cost December 31, Change in
Affiliated Investment Percent 2005 2005 Equity 2005
--------------------- --------- ---------- ------------ -----------

Preferred Stocks:

AIG Life Insurance Company......................... 100.0% $ 100,000 $ 100,000 $ --
AIG Capital Corporation............................ 100.0% 2,000,000 2,000,000 --
---------- ---------- --------
Total Preferred Stocks - Affiliates............. 2,100,000 2,100,000 --
---------- ---------- --------
Common stocks:

International Lease Finance Corporation............ 32.8% 793,240 2,000,248 65,177
Lexington Insurance Company........................ 70.0% 257,973 1,795,395 228,474
United Guaranty Corporation........................ 45.9% 74,893 272,619 (91)
AIU Insurance Company.............................. 32.0% 40,000 348,853 159,879
American International Specialty Lines Insurance
Company.......................................... 70.0% 109,497 268,454 (12,344)
Starr Excess Liability Insurance Company Ltd....... 100.0% 385,454 714,201 133,184
Pine Street Real Estate Holding Corp............... 22.1% 3,139 14,964 3
21st Century Insurance Group....................... 33.1% 467,720 346,106 55,189
American International Realty, Inc................. 22.1% 20,736 17,769 (1,355)
Eastgreen, Inc..................................... 9.4% 8,976 9,768 249
AIG Lodging Opportunities, Inc..................... 100.0% 3,026 342 (2,779)
National Union Fire Ins. Company of Vt............. 100.0% 1,000 18,522 18,522
National Union Fire Ins. Company of La............. 100.0% 2,500 6,054 135
---------- ---------- --------
Total Common Stocks - Affiliates................ 2,168,154 5,813,295 644,243
---------- ---------- --------
Total Common and Preferred Stock - Affiliates...... $4,268,154 $7,913,295 $644,243
========== ========== ========

The Company has ownership interests in certain affiliated real estate
holding companies.

The remaining equity interest in these investments, except for 21/st/
Century Insurance Group, is owned by other affiliated companies, which are
wholly owned by the Parent.

From time to time, the Company may own investments in partnerships across
various other AIG affiliated entities with a combined percentage greater
than 10.0%. As of December 31, 2005, the Company's total investments in
partnerships with affiliated entities where AIG interest was greater than
10.0% amounted to $548,880.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

E. Other Related Party Transactions

The following table summarizes all transactions (excluding reinsurance and
cost allocation transactions) that occurred during 2005 and 2004 between
the Company and any affiliated companies* that exceeded half of one percent
of the Company's admitted assets as of December 31, 2005 and 2004:

[Enlarge/Download Table]

Assets Received by Assets Transferred by
the Company the Company
--------------------- ---------------------
Explantion of Name of Statement Statement
Date of Transaction Transaction Affiliate * Value Description Value Description
------------------- ------------- ----------- --------- ----------- --------- -----------

Year Ended December 31, 2005

3/3/2005................. Dividend AIG $ -- -- $ 49,227 Cash
6/3/2005................. Dividend AIG $ -- -- $ 59,870 Cash
9/3/2005................. Dividend AIG $ -- -- $ 37,880 Cash
3/3/2005................. Dividend ILFC /AIGCC $ 28,867 Cash $ -- --
6/3/2005................. Dividend ILFC /AIGCC $ 28,164 Cash $ -- --
9/3/2005................. Dividend ILFC /AIGCC $ 28,164 Cash $ -- --
12/3/2005................ Dividend ILFC /AIGCC $ 29,949 Cash $ -- --

Year Ended December 31, 2004

3/3/2004................. Dividend AIG $ -- -- $ 48,348 Cash
6/3/2004................. Dividend AIG $ -- -- $ 59,519 Cash
9/3/2004................. Dividend AIG $ -- -- $ 48,875 Cash
12/3/2004................ Dividend AIG $ -- -- $ 49,578 Cash
12/17/2004............... Purch Bonds UGC $284,635 Bonds $284,635 Cash
3/3/2004................. Dividend ILFC /AIGCC $ 27,636 Cash $ -- --
6/3/2004................. Dividend ILFC /AIGCC $ 27,812 Cash $ -- --
9/3/2004................. Dividend ILFC /AIGCC $ 27,812 Cash $ -- --
12/3/2004................ Dividend ILFC /AIGCC $ 28,867 Cash $ -- --

--------
* International Lease Finance Corporation (ILFC); AIG Capital Corporation
(AIGCC); United Guaranty Corporation (UGC).

The Company also reinsures risks and assumes reinsurance from other
affiliates. As agreed upon with the Insurance Department of the
Commonwealth of Pennsylvania, transactions with Union Excess and Richmond
are treated as affiliated.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The Company did not change its methods of establishing terms regarding any
affiliate transaction during the years ended December 31, 2005 and 2004.

In the ordinary course of business, the Company utilizes certain affiliated
companies for data center systems, investment services, salvage and
subrogation, and claims management. These companies are AIG Technology,
Inc., AIG Global Investment Corp. and AIG Global Trust Services, Limited,
AI Recovery, Inc., and AIG Domestic Claims, Inc., respectively. In
connection with these services, the fees paid by the Company to these
affiliates during 2005 and 2004 are outlined in the table below:

For the Years Ended December 31, 2005 2004
-------------------------------- -------- --------
AIG Technology, Inc.(+)............................... $ 28,183 $ 25,778
AIG Global Investment Corporation..................... 5,188 4,241
AIG Global Trust Services, Limited.................... 143 229
AI Recovery, Inc...................................... 3,772 3,274
AIG Domestic Claims, Inc.............................. 112,960 120,687
-------- --------
Total $150,246 $154,209
======== ========
--------
(+) Formerly AIG Data Center, Inc.

As of December 31, 2005 and 2004, short-term investments included amounts
invested in the AIG Managed Money Market Fund of $19,369 and $109,446,
respectively.

Federal and foreign income taxes recoverable from the Parent as of
December 31, 2005 and 2004 amounted to $763,168 and $630,958, respectively.

During 2005 and 2004, the Company sold $202,251 and $227,539, respectively,
of premium receivables without recourse to AI Credit Corporation, and
recorded losses of $3,627 and $2,992, respectively, related to these
transactions.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

As of December 31, 2005 and 2004, the Company had the following balances
payable/receivable to/from its affiliates (excluding reinsurance
transactions):

As of December 31, 2005 2004
------------------ -------- ----------
Balances with pool member companies................. $403,833 $ 709,843
Balances with less than 0.5% of admitted assets..... 483,156 481,022
-------- ----------
Payable to Parent, Subsidiaries and Affiliates...... $886,989 $1,190,865
======== ==========
AIG................................................. $199,830 $ --
American Home Canada................................ 156,575 156,575
Balances with pool member companies................. 236,379 112,507
Balances with less than 0.5% of admitted assets..... 234,105 302,269
-------- ----------
Receivable from Parent, Subsidiaries
and Affiliates..................................... $826,889 $ 571,351
======== ==========

Note 6 -Reinsurance

In the ordinary course of business, the Company reinsures certain risks with
affiliates and other companies. Such arrangements serve to limit the Company's
maximum loss on catastrophes, large and unusually hazardous risks. To the
extent that any reinsuring company might be unable to meet its obligations, the
Company would be liable for its respective participation in such defaulted
amounts. The Company purchased catastrophe excess of loss reinsurance covers
protecting its net exposures from an excessive loss arising from property
insurance losses and excessive losses in the event of a catastrophe under
workers' compensation contracts issued without limit of loss.

During 2005 and 2004, the Company's net premiums written and net premiums
earned were comprised of the following:

2005 2004
For the Years Ended ----------------------- -----------------------
December 31, Written Earned Written Earned
------------------- ----------- ----------- ----------- -----------
Direct Premiums............... $ 5,588,284 $ 5,838,904 $ 6,361,956 $ 6,291,282
Reinsurance premiums assumed:
Affiliates................. 22,153,164 21,595,324 21,103,816 19,703,510
Non-affiliates............. 494,482 548,499 502,326 533,280
----------- ----------- ----------- -----------
Gross Premiums 28,235,930 27,982,727 27,968,098 26,528,072

Reinsurance premiums ceded:
Affiliates................. 19,860,111 19,676,550 19,544,479 18,386,791
Non-affiliates............. 1,288,840 1,270,214 1,394,320 1,548,619
----------- ----------- ----------- -----------
Net Premiums............... $ 7,086,979 $ 7,035,963 $ 7,029,299 $ 6,592,662
=========== =========== =========== ===========

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The maximum amount of return commissions which would have been due reinsurers
if all of the Company's reinsurance had been cancelled as of December 31, 2005
and 2004 with the return of the unearned premium reserve is as follows:

[Enlarge/Download Table]

Assumed Reinsurance Ceded Reinsurance Net
---------------------- --------------------- ---------------------
Unearned Unearned
Premium Commission Premium Commission Premium Commission
Reserves Equity Reserves Equity Reserves Equity
----------- ---------- ---------- ---------- ---------- ----------

December 31, 2005

Affiliated....... $10,662,670 $1,218,460 $9,437,660 $1,100,419 $1,225,010 $118,041
Non Affiliated... 891,932 101,924 507,060 59,123 $ 384,872 $ 42,801
----------- ---------- ---------- ---------- ---------- --------
Totals........... $11,554,602 $1,320,384 $9,944,720 $1,159,542 $1,609,882 $160,842
=========== ========== ========== ========== ========== ========
December 31, 2004

Affiliated....... $ 9,810,548 $1,168,029 $9,095,231 $1,058,103 $ 715,317 $109,926
Non Affiliated... 945,951 112,624 488,434 56,823 457,517 55,801
----------- ---------- ---------- ---------- ---------- --------
Totals........... $10,756,499 $1,280,653 $9,583,665 $1,114,926 $1,172,834 $165,727
=========== ========== ========== ========== ========== ========

As of December 31, 2005 and 2004, and for the years then ended, the Company's
unearned premium reserves, paid losses and LAE, and reserves for losses and LAE
(including IBNR), have been reduced for reinsurance ceded as follows:

Unearned Paid Losses Reserves for
Premium and Losses and
Reserves LAE LAE
---------- ----------- ------------
December 31, 2005

Affiliates................. $9,437,660 $ 97,076 $36,164,744
Non-Affiliates............. 507,060 322,835 3,728,454
---------- -------- -----------
Total...................... $9,944,720 $419,911 $39,893,198
========== ======== ===========
December 31, 2004

Affiliates................. $9,095,231 $ (5,225) $29,697,663
Non-Affiliates............. 488,434 264,218 2,999,793
---------- -------- -----------
Total...................... $9,583,665 $258,993 $32,697,456
========== ======== ===========

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The Company's unsecured reinsurance recoverables as of December 31, 2005 in
excess of 3.0% of its capital and surplus is set forth in the table below:

[Download Table]

As of December 31, 2005
-----------------------
NAIC Co.
Reinsurer Code Amount
--------- -------- -----------

Affilliates:
American Home Assurance Company...................... 19380 $24,242,369
Commerce and Industry Insurance Company.............. 19410 6,618,032
Insurance Company of the State of Pennsylvania....... 19429 3,366,695
New Hampshire Insurance Company...................... 23841 3,350,984
Birmingham Fire Insurance Company of Pennsylvania.... 19402 3,318,439
AIU Insurance Company................................ 19399 812,461
American International Insurance Company............. 32220 512,797
Transatlantic Reinsurance Company.................... 19453 288,819
National Union Fire Company of Pittsburgh,
Pennsylvania....................................... 19445 266,849
American International Underwriters Overseas, Ltd.... -- 222,538
New Hampshire Indemnity Company...................... 23833 153,724
AIG Global Trade And Political Risk Ins Company...... 10651 133,127
United Guaranty Insurance Company.................... 11715 49,313
Transatlantic Reinsurance Company.................... -- 27,276
Landmark Insurance Company........................... 35637 9,688
Audubon Insurance Company............................ 19933 6,111
Starr Excess Liability Insurance Company, Ltd........ 10932 4,779
Hartford Steam Boiler Inspection And Insurance Co.... 11452 4,290
Euroguard Insurance Company, Limited................. -- 3,807
Illinois National Insurance Company.................. 23817 3,667
National Union Fire Ins Company of Vermont........... -- 3,216
AIU Insurance Company (Japan)........................ -- 2,917
American International Life Assurance Co. of NY (US). 60607 2,709
Granite State Insurance Company...................... 23809 2,547
Ascot Syndicate Lloyds 1414.......................... -- 2,230
American General Life Ins Co......................... 60488 2,091
Arabian American Insurance Co. Ltd................... -- 1,059
First American Polish Ins Co......................... -- 1,040
Other affiliates less than $1.0 million.............. -- 35,535
-----------
Total Affiliates................................. 43,449,109
-----------
Non-Affilliates:
Lloyd's Syndicates................................... -- 387,270
-----------
Total Non Affiliates............................. 387,270
-----------
Total Affiliates and Non Affiliates..................... $43,836,379
===========

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

During 2005 and 2004, the Company reported in its Statements of Income $45,537
and $65,363, respectively, of statutory underwriting losses, which were
comprised of premiums earned of ($1,805) and ($8,777), respectively, less
losses incurred of $43,732 and $56,586, respectively, as a result of
commutations with the following reinsurers:

Company 2005 2004
------- ------- -------
SCOR Reinsurance Company............... $44,800 $22,458
General Re Corp........................ -- 16,984
Converium Reins........................ -- 7,947
AXA Albingia........................... -- 6,161
CX Reinsurance......................... -- 4,511
AXA Corporate Solutions................ -- 3,668
National Indemnity Co.................. -- 2,819
Other reinsurers less than $1.0 million 737 815
------- -------
Total.................................. $45,537 $65,363
======= =======

As of December 31, 2005 and 2004, the Company had reinsurance recoverables on
paid losses in dispute of $149,456 and $80,435, respectively.

During 2005, the Company had written off reinsurance recoverable balances of
$68,909.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Note 7 - Retroactive Reinsurance

As of December 31, 2005, the Company reported the following activity and
balances with respect to its retroactive reinsurance arrangements:

[Download Table]

Assumed Ceded
--------- --------

Reserves Transferred:
Initial Reserves............................... $ 228,366 $478,934
Adjustments - prior year(s).................... (187,916) (23,011)
Adjustments - current year..................... 7,160 (12,417)
--------- --------
Balance as of December 31, 2005................ 47,610 $443,506
--------- --------
Paid Losses Recovered:
Prior year(s).................................. 3,391 344,068
Current year................................... 9,499 30,781
--------- --------
Total Recovered as of December 31, 2005........ 12,890 $374,849
--------- --------
Carried Reserves as of December 31, 2005....... $ 34,720 $ 68,657
========= ========
Consideration Paid or Received:
Initial Reserves............................... $ 212,797 $291,794
Adjustments - prior year(s).................... (190,000) (19,040)
Adjustments - current year..................... -- (876)
--------- --------
Total Paid as of December 31, 2005............. $ 22,797 $271,878
========= ========
Special Surplus from Retroactive Reinsurance:
Initial surplus gain or loss realized.......... $ -- $ 50,201
Adjustments - prior year(s).................... -- 35,909
Adjustments - current year..................... -- (14,220)
--------- --------
Balance as of December 31, 2005................ $ -- $ 71,890
========= ========
Cumulative Funds Transferred to Unassigned
Surplus as of December 31, 2005................. $ -- $ 6,628
========= ========

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The Company's retroactive reinsurance balances (by reinsurer) as of
December 31, 2005, is set forth in the table below:

As of December 31, 2005
-----------------------
Reinsurer Assumed Ceded
--------- ------- -------
American International Reins. Co................. $ -- $60,516
American International Specialty
Lines Insurance Company........................ 16,760 --
Guideone Mutual Ins Co........................... 9,648 --
Commerce and Industry Insurance Company of Canada 7,280 --
PEG Reinsurance Co............................... -- 1,473
Upinsco Inc...................................... -- 1,143
Swiss Re America Corp............................ -- 1,138
All other reinsurers less than $1.0 million...... 1,074 4,387
------- -------
Total............................................ $34,762 $68,657
======= =======

Note 8 - Deposit Accounting Assets and Liabilities

Certain of the products offered by the Company include funding components or
have been structured in a manner such that little or no insurance risk is
actually transferred. In addition, the Company has entered into several
reinsurance arrangements, both treaty and facultative, which were determined to
be deposit agreements. Funds received in connection with these arrangements are
recorded as deposit liabilities, rather than premiums and incurred losses.
Conversely, funds paid in connection with these arrangements are recorded as
deposit assets, rather than as ceded premiums and ceded incurred losses.

As of December 31, 2005 and 2004, the Company's deposit assets and liabilities
were comprised of the following:

2005 2004
---------------------- ----------------------
Deposit Deposit Deposit Deposit
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------
Direct........................... $ -- $ 59,922 $ -- $ 34,823
Assumed.......................... -- 454,039 -- 656,512
Ceded............................ 1,410,584 -- 1,729,756 --
---------- -------- ---------- --------
Balance as of December 31,.... $1,410,584 $513,961 $1,729,756 $691,335
========== ======== ========== ========

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

A reconciliation of the Company's deposit assets and deposit liabilities as of
December 31, 2005 and 2004/1/ is set forth in the table below:

[Enlarge/Download Table]

2005 2004
---------------------- ----------------------
Deposit Deposit Deposit Deposit
Assets Liabilities Assets Liabilities
---------- ----------- ---------- -----------

Balance as of Beginning of Period..... $1,729,756 $ 691,335 $2,216,987 $789,132
Deposit activity, including loss
recoveries....................... (471,268) (212,605) (459,259) (88,858)
Interest income or expense, net of
amortization of margin........... 95,951 35,231 112,880 (8,939)
Change in non-admitted asset
portion.......................... 56,145 -- (140,852) --
---------- --------- ---------- --------
Balance as of December 31,............ $1,410,584 $ 513,961 $1,729,756 $691,335
========== ========= ========== ========

During 2005 the Company received consideration of $79,279 resulting from the
commutations of its reinsurance deposit accounting arrangement with the
Richmond Insurance Company, Ltd.

As of December 31, 2005, the deposit assets with related parties, mostly
reinsurance transaction with Union Excess, amounted to $ 1,258,466. During
2005, the Company commuted $272,387 of the deposit assets with Union Excess and
Richmond resulting in a $3,944 loss.

Note 9 - Federal Income Taxes

The Company files a consolidated U.S. federal income tax return with the Parent
and its domestic subsidiaries pursuant to a tax sharing agreement. The
agreement provides that the Parent will not charge the Company a greater
portion of the consolidated tax liability than would have been paid by the
Company if it had filed a separate federal income tax return. In addition, the
agreement provides that the Company will be reimbursed by the Parent for tax
benefits relating to any net losses or any tax credits of the Company utilized
in filing the consolidated return. The federal income tax recoverables in the
accompanying Statements of Admitted Assets are due from the Parent. As of
December 31, 2005 and 2004, the U.S. federal income tax rate applicable to
ordinary income was 35.0%.

--------
/1/ The beginning of period for the 2004 year represents the deposit asset and
liability balances at the inception date of the underlying agreements.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The components of the Company's net deferred tax assets / liabilities at
December 31, 2005 and 2004 are as follows:

As of December 31, 2005 2004
------------------ ---------- ---------
Gross deferred tax assets.................... $1,044,743 $ 870,158
Gross deferred tax liabilities............... (484,906) (425,130)
Non-admitted deferred tax assets in
accordance with SSAP No.10 entitled Income
Taxes...................................... (173,931) (65,196)
---------- ---------
Net Deferred Tax Assets Admitted............. $ 385,906 $ 379,842
========== =========
Change in Deferred Tax Assets Non-admitted... $ (108,735) $ 65,196
========== =========

During 2005 and 2004, the Company's current federal income tax expense
(benefit) was comprised of the following:

For the Years Ended December 31, 2005 2004
-------------------------------- --------- --------
Income tax expense (benefit) on net
underwriting and net investment income.. $(106,539) $ 65,519
Federal income tax adjustment - prior
years................................... (1,377) 35,628
--------- --------
Current Income Tax Expense (Benefit)...... $(107,916) $101,147
========= ========

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The composition of the Company's net deferred tax assets at December 31, 2005
and 2004, along with the changes in deferred income taxes for 2004, is set
forth in the table below:

As of December 31, 2005 2004 Change
------------------ ---------- --------- ---------
Deferred Tax Assets

Loss reserve discount................ $ 506,988 $ 422,379 $ 84,608
Non-admitted assets.................. 157,505 157,780 (275)
Unearned premium reserve............. 300,386 289,999 10,387
Other temporary difference........... 79,865 -- 79,865
---------- --------- ---------
Gross Deferred Tax Assets........ 1,044,743 870,158 174,585
Non-admitted deferred tax assets..... (173,931) (65,196) (108,735)
---------- --------- ---------
Admitted Deferred Tax Assets..... 870,812 804,962 65,850
---------- --------- ---------
Deferred Tax Liabilities

Unrealized capital gains............. (185,655) (167,587) (18,068)
Other temporary differences.......... (299,251) (257,543) (41,708)
---------- --------- ---------
Gross Deferred Tax Liabilities....... (484,906) (425,130) (59,776)
---------- --------- ---------
Net Admitted Deferred Tax
Assets......................... $ 385,906 $ 379,832 $ 6,074
========== ========= =========
Gross deferred tax assets............ $1,044,743 $ 870,158 $ 174,585
Gross deferred tax liabilities....... (484,906) (425,131) (59,775)
---------- --------- ---------
Net Deferred Tax Assets.............. $ 559,837 $ 445,027 114,810
========== =========
Income Tax effect of unrealized
capital gains/(losses)............. 18,068
---------
Change in Deferred Income Taxes...... $ 132,877
=========

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The actual tax expense (benefit) on income from operations differs from the tax
expense (benefit) calculated at the statutory tax rate. A reconciliation of the
Company's income tax expense (benefit) together with the significant book to
tax adjustments for 2005 is set forth below:

Amount Tax Effect
--------- ----------
Net income before federal income taxes........... $ 48,062 $ 16,822
Book to tax adjustments:
Tax exempt income and dividends received
deduction................................... (358,917) (125,621)
Intercompany dividends........................ (149,147) (52,202)
Federal income tax adjustment - prior year.... -- (1,377)
Remediation adjustments....................... -- (41,254)
Foreign tax credits........................... -- (15,200)
Other......................................... 6,005 2,102
--------- ---------
Total Book to Tax Adjustments............. (502,059) (233,552)
--------- ---------
Total Federal Taxable Loss and Tax Benefit....... $(453,997) $(216,730)
========= =========
Current federal income tax (benefit)............. $(107,916)
Income tax on net realized capital gains......... 24,064
Change in net deferred income taxes.............. (132,878)
---------
Total Federal Income Tax (Benefit)............... $(216,730)
=========

The amount of federal income tax incurred and available for recoupment in the
event of future net operating losses for tax purposes is set forth in the table
below:

Current year.................. $ --
First preceding year.......... $89,858

The Company did not have any unused net operating loss carry forwards or tax
credits available to offset against future taxable income as of December 31,
2005.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Note 10 - Pension Plans and Deferred Compensation Arrangements

A. General

Employees of AIG, the ultimate holding company, its subsidiaries and
certain affiliated companies, including employees in foreign countries,
are generally covered under various funded and insured pension plans.
Eligibility for participation in the various plans is based on either
completion of a specified period of continuous service or date of hire,
subject to age limitation.

AIG's U.S. retirement plan is a qualified, non-contributory defined
benefit retirement plan which is subject to the provisions of the Employee
Retirement Income Security Act of 1974. All employees of AIG and most of
its subsidiaries and affiliates who are regularly employed in the United
States, including certain U.S. citizens employed abroad on a U.S. dollar
payroll, and who have attained age 21 and completed twelve months of
continuous service are eligible to participate in this plan. An employee
with five or more years of service is entitled to pension benefits
beginning at normal retirement at age 65. Benefits are based upon a
percentage of average final compensation multiplied by years of credited
service limited to 44 years of credited service. The average final
compensation is subject to certain limitations. The employees may elect
certain options with respect to their receipt of their pension benefits
including a joint and survivor annuity. An employee with ten or more years
of service may retire early from age 55 to 64. An early retirement factor
is applied resulting in a reduced benefit. If an employee terminates with
less than five years of service, such employees forfeit their right to
receive any pension benefits accumulated thus far.

Annual funding requirements are determined based on the Projected Unit
Credit Cost Method which attributes a pro rata portion of the total
projected benefit payable at normal retirement to each year of credited
service.

The Company's share of net expense for the qualified pension plan amounted
to $6,900 and $10,400 for 2005 and 2004, respectively.

B. Deferred Compensation Plan

Some of the Company's officers and key employees are participants in AIG's
stock option plans of 1991 and 1999. Details of these plans are published
in AIG's 2005 Annual Report on Form 10-K. During 2005, the Parent
allocated $2,298 of the total cost of these stock options and certain
other deferred compensation programs to the Company.

C. Postretirement Benefit Plans

AIG's US postretirement medical and life insurance benefits are based upon
the employee electing immediate retirement and having a minimum of ten
years of service. Retirees and their dependents who were 65 by May 1, 1989
participate in the medical plan at no cost. Employees who retired after
May 1, 1989 or prior to January 1, 1993 pay the active employee premium if
under age 65 and 50% of the active employee premium if over age 65.
Retiree contributions are subject to adjustment annually. Other cost
sharing features of the medical plan include deductibles, coinsurance and
Medicare coordination and a lifetime maximum benefit of $2,000. The
maximum life insurance benefit prior to age 70 is $32, with a maximum $25
thereafter.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Effective January 1, 1993, both plans' provisions were amended. Employees
who retire after January 1, 1993 are required to pay the actual cost of
the medical insurance benefit premium reduced by a credit which is based
upon years of service at retirement. The life insurance benefit varies by
age at retirement from $5 for retirement at ages 55 through 59 and $10 for
retirement at ages 60 through 64 and $15 from retirement at ages 65 and
over.

The postretirement benefit obligations and amounts recognized in AIG's
consolidated balance sheet as of December 31, 2005 and 2004 were $140,100
and $179,100, respectively. These obligations are not funded currently.
The Company's share of other postretirement benefit plans was $200 and
$100 for 2005 and 2004, respectively.

AIG is the Plan Sponsor of the pension and post retirement and benefit
plans and is ultimately responsible for the conduct of the plans. The
Company is only obligated to the extent of their allocation of expenses
from these plans.

The Company's weighted average assumptions that were used to determine its
pension benefit obligations as of December 31, 2005 and 2004 are set forth
in the table below:

As of December 31, 2005 2004
------------------ --------- ---------
Discount rate........................ 5.50% 5.75%
Rate of compensation increase
(average).......................... 4.25% 4.25%
Measurement date..................... 12/31/2005 12/31/2004
Medical cost trend rate.............. N/A N/A

D. Post-employment Benefits and Compensated Absences

AIG provides certain benefits provided to inactive employees who are not
retirees. Certain of these benefits are insured and expensed currently;
other expenses are provided for currently. Such expenses include medical
and life insurance continuation and COBRA medical subsidies.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

Note 11 - Capital and Surplus and Dividend Restrictions

A. Capital and Surplus

The issued capital and surplus position of the Company at December 31,
2005 and 2004 was as follows:

2005 2004
---------- ----------
Common stock, par value...................... $ 4,479 $ 4,479
Common stock in excess of par value.......... 2,694,092 2,494,262
---------- ----------
Total Capital............................. 2,698,571 2,498,741
---------- ----------
Unassigned surplus........................... 5,349,702 4,791,970
Special surplus from retroactive reinsurance
arrangements............................... 71,890 86,110
---------- ----------
Total Surplus............................. 5,421,592 4,878,080
---------- ----------
Total Capital and Surplus............. $8,120,163 $7,376,821
========== ==========

The portion of unassigned funds (surplus) at December 31, 2005 and 2004
represented or reduced by each item below is as follows:

2005 2004
---------- ----------
Unrealized gains and losses.................. $4,083,298 $3,367,546
Non-admitted asset values.................... $ (648,626) $ (560,238)
Provision for reinsurance.................... $ (201,761) $ (334,696)

B. Risk-Based Capital Requirements

The NAIC has adopted a Risk-based Capital ("RBC") formula to be applied to
all property and casualty insurance companies. RBC is a method of
establishing the minimum amount of capital appropriate for an insurance
company to support its overall business operations in consideration of its
size and risk profile. A company's RBC is calculated by applying different
factors to various asset classes, net premiums written and loss and LAE
reserves. A company's result from the RBC formula is then compared to
certain established minimum capital benchmarks. To the extent a company's
RBC result does not either reach or exceed these established benchmarks,
certain regulatory actions may be taken in order for the insurer to meet
the statutorily-imposed minimum capital and surplus requirements.

In connection therewith, the Company has satisfied the capital and surplus
requirements of RBC for the 2005 reporting period.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

C. Dividend Restrictions

Under Pennsylvania law, the Company may pay cash dividends only from
earned surplus determined on a statutory basis. Further, the Company is
restricted [on the basis of the greater of 10.0% of the Company's
statutory surplus, (excluding approximately $1,900,000 from an investment
in an affiliate for which proper approval from the Insurance Department of
the Commonwealth of Pennsylvania has been received) as of December 31,
2005, or 100.0% of the Company's net income for the year then ended] as to
the amount of dividends it may declare or pay in any twelve-month period
without the prior approval of the Insurance Department of the Commonwealth
of Pennsylvania. In connection therewith, at December 31, 2005, the
maximum dividend payments, which may be made without prior approval during
2006, is approximately $622,016.

Within the limitations noted above, there are no restrictions placed on
the portion of Company profits that may be paid as ordinary dividends to
stockholders. There were no restrictions placed on the Company's surplus
including for whom the surplus is being held. There is no stock held by
the Company for any special purpose.

Note 12 - Contingencies

A. Legal Proceedings

The Company is involved in various legal proceedings incident to the
operation of its business. Such proceedings include claims litigation in
the normal course of business involving disputed interpretations of policy
coverage. Other proceedings in the normal course of business include
allegations of underwriting errors or omissions, bad faith in the handling
of insurance claims, employment claims, regulatory activity, and disputes
relating to the Company's business ventures and investments.

Other legal proceedings include the following:

AIG, National Union Fire Insurance Company of Pittsburgh, Pa. (National
Union), and American International Specialty Lines Insurance Company
(AISLIC) have been named defendants (the AIG Defendants) in two putative
class actions in state court in Alabama that arise out of the 1999
settlement of class and derivative litigation involving Caremark Rx, Inc.
(Caremark). An excess policy issued by a subsidiary of AIG with respect to
the 1999 litigation was expressly stated to be without limit of liability.
In the current actions, plaintiffs allege that the judge approving the
1999 settlement was misled as to the extent of available insurance
coverage and would not have approved the settlement had he known of the
existence and/or unlimited nature of the excess policy. They further
allege that the AIG Defendants and Caremark are liable for fraud and
suppression for misrepresenting and/or concealing the nature and extent of
coverage. In their complaint, plaintiffs request compensatory damages for
the 1999 class in the amount of $3,200,000, plus punitive damages. The AIG
Defendants deny the allegations of fraud and suppression and have
asserted, inter alia, that information concerning the excess policy was
publicly disclosed months prior to the approval of the settlement. The AIG
Defendants further assert that the current claims are barred by the
statute of limitations and that plaintiffs' assertions that the statute
was tolled cannot stand against the public disclosure of the excess
coverage. Plaintiffs, in turn, have asserted that the disclosure was
insufficient to inform them of the nature of the coverage and did not
start the running of the statute of limitations. On January 28, 2005, the
Alabama trial court determined that one of the current actions may proceed
as a class action on behalf of the 1999 classes that were allegedly
defrauded by the settlement.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The AIG Defendants and Caremark are seeking appellate relief from the
Alabama Supreme Court. The AIG Defendants cannot now estimate either the
likelihood of its prevailing in these actions or the potential damages in
the event liability is determined.

On September 2, 2005, AIG sued Robert Plan Corporation, the agency which
services personal auto assigned risk business alleging the
misappropriation of funds and other violations of contractual
arrangements. On September 27, 2005, Robert Plan Corporation countersued
AIG for $370,000 in disgorged profits and $500,000 of punitive damages.
Subsequently, American Home Assurance Company (American Home) was named as
a counterclaim defendant in this case. American Home believes that the
countersuit is without merit and intends to defend it vigorously.

Effective February 9, 2006, AIG reached a resolution of claims and matters
under investigation with the United States Department of Justice (the
DOJ), the United States Securities and Exchange Commission (the SEC), the
Office of the Attorney General of the State of New York (the NYAG) and the
New York Insurance Department (the NYDOI). The settlements resolve
outstanding litigation and allegations by such agencies against AIG in
connection with the accounting, financial reporting and insurance
brokerage practices of AIG and its subsidiaries, as well as claims
relating to the underpayment of certain workers compensation premium taxes
and other assessments. As a result of these settlements, AIG will make
payments totaling approximately $1,640,000, including (i) $375,000 to be
paid into a fund under the supervision of the NYAG and NYDOI to be
available principally to pay certain AIG insurance company subsidiary
policyholders who purchased excess casualty policies through Marsh &
McLennan Companies, Inc. and Marsh Inc. and (ii) $343,000 to be paid into
a fund under the supervision of the NYAG and the NYDOI to be used to
compensate various states in connection with the underpayment of certain
workers compensation premium taxes and other assessments. No amounts to be
paid under the related settlement agreements will be charged to the
Company, although the Company and certain affiliates will be required to
adopt various business reforms.

Various federal and state regulatory agencies are reviewing certain other
transactions and practices of AIG and its subsidiaries, including the
Company, in connection with certain industry-wide and other inquiries
including, but not limited to, insurance brokerage practices relating to
contingent commissions. It is possible that additional civil or regulatory
proceedings will be filed. Additionally, various actions have been brought
against AIG arising out of the liability of certain AIG subsidiaries,
including the Company, for taxes, assessments, and surcharges for policies
of workers compensation insurance. As of December 31, 2005, the Company
recorded a provision of $57,494 to cover any contingent liabilities
arising from the potential underpayment of these premium taxes and
assessments.

Since October 19, 2004, AIG and certain subsidiaries have been named as
defendants in numerous complaints that were filed in federal court and in
state court (Massachusetts and Florida) and removed to federal court.
These cases generally allege that AIG and its subsidiaries violated
federal and various state antitrust and anti-racketeering laws, various
state deceptive and unfair practice laws and certain state laws governing
fiduciary duties. The alleged basis of these claims is that there was a
conspiracy between insurance companies and insurance brokers with regard
to the bidding practices for insurance coverage in certain sectors of the
insurance industry. The Judicial Panel on Multidistrict Litigation entered
an order consolidating most of these cases and transferring them to the
United States District Court for the District of New Jersey. The remainder
of these cases have been transferred to the District of New Jersey.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

On August 15, 2005, the plaintiffs in the multidistrict litigation filed a
Corrected First Consolidated Amended Commercial Class Action Complaint
which names AIG and the following additional AIG subsidiaries as
defendants: AIU Insurance Company, American Home, National Union, AISLIC,
American International Insurance Company, Birmingham Fire Insurance
Company of Pennsylvania, Commerce and Industry Insurance Company,
Lexington Insurance Company, National Union Fire Insurance Company of
Louisiana, New Hampshire Insurance Company, The Hartford Steam Boiler
Inspection and Insurance Company, and The Insurance Company of the State
of Pennsylvania. Also on August 15, 2005, AIG, American Home, and AIG Life
Insurance Company were named as defendants in a Corrected First
Consolidated Amended Employee Benefits Complaint filed in the District of
New Jersey that adds claims under ERISA. The AIG defendants, along with
other insurer defendants and the broker defendants filed motions to
dismiss both the Commercial and Employee Benefits Complaints. Plaintiffs'
have filed a Motion for Class Certification in the consolidated action,
which defendants will oppose. Both the motion to dismiss and the class
certification motions are pending.

On January 18, 2006, American International Aviation Agency, Inc. (AIAA)
and Redholm Underwriting Agents Limited (Redholm) commenced two separate
arbitration proceedings against New Hampshire Insurance Company (NHIC) in
the United States and United Kingdom, respectively, seeking to prevent
NHIC from terminating and/or breaching certain agreements with AIAA,
Redholm and their affiliates. On the same date, AIAA filed an action in
Georgia state court against NHIC, and sought an injunction barring NHIC
from terminating and/or breaching these agreements pending the outcome of
the arbitration. AIAA and Redholm were, at the time, managing general
agents for certain insurance company subsidiaries of AIG, and are wholly
owned by C.V. Starr & Co., Inc. (C.V. Starr), a company that is controlled
by certain former senior executives of AIG. AIG and its affiliates
thereafter terminated their managing general agency relationship with
AIAA. They had previously terminated their agency relationship with
Redholm.

Subsequent to the commencement of these arbitration proceedings, two other
managing general agencies owned by C.V. Starr - American International
Marine Agency, Inc. (AIMA), and C.V. Starr & Co. (Starr California) -
commenced two additional arbitration proceedings against AIG and certain
of its affiliates, and Starr Technical Risks Agency, Inc. (Starr Tech), a
third C.V. Starr agency (together with AIAA, AIMA and Starr California,
the C.V. Starr Agencies), asserted claims in an arbitration that had been
commenced by certain AIG subsidiaries. The AIG insurance companies named
in claims asserted by the C.V. Starr Agencies are: The Insurance Company
of the State of Pennsylvania, Illinois National Insurance Co., American
International South Insurance Company, Granite State Insurance Company,
AISLIC, National Union, Birmingham Fire Insurance Company of Pennsylvania,
American Home, Commerce and Industry Insurance Company, and AIU Insurance
Company (the AIG Insurance Company Defendants). The claims asserted by the
C.V. Starr Agencies allege that AIG and the AIG Insurance Company
Defendants are irreparably harming the C.V. Starr Agencies by, among other
things, misappropriating their business relationships and proprietary
information, predatorily hiring their employees, and restricting their
access to offices, computer systems, documents and other information. They
seek damages and injunctive relief: (i) permitting the C.V. Starr Agencies
to operate independently from AIG, and to produce business for other
companies, and (ii) restraining AIG and its affiliates from competing with
the C.V. Starr Agencies for certain business and from using the C.V. Starr
Agencies' proprietary information.

AIG and certain of the AIG Insurance Company Defendants have also
instituted arbitration and litigation in New York and litigation in
Georgia seeking damages, equitable and injunctive relief: (i) preventing
the C.V. Starr Agencies from denying AIG access to its documents and
information; (ii) enjoining the C.V. Starr Agencies from engaging in
certain insurance and reinsurance transactions with non-AIG companies;
(iii) requiring the C.V. Starr Agencies to relinquish control of certain
premium trust funds; and (iv) seeking damages resulting from any

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

improper or illegal conduct of the C.V. Starr Agencies. AIG and its
affiliates have also terminated or provided notice of termination of their
managing general agency relationships with Starr Tech and Starr California.

On March 20, 2006, C.V. Starr filed a lawsuit in the United States
District Court for the Southern District of New York against AIG, alleging
that the use by certain AIG affiliates of the name "Starr" in commerce
infringes trademarks held by C.V. Starr. The Complaint alleges claims for
federal trademark infringement, common law unfair competition, service
mark infringement and dilution pursuant to New York law. C.V. Starr also
alleges that AIG's continued ownership of certain Internet domain names
that include the "Starr" name, violates federal law and constitutes
conversion of C.V. Starr property. C.V. Starr seeks to enjoin AIG from
using the name Starr, to turn over its rights in certain trademark and
domain name rights, and also seeks damages as a result of these violations.

AIG and its affiliates involved in the arbitration and litigation
proceedings with the C.V. Starr Agencies cannot now estimate either the
likelihood of their prevailing in these actions or any potential damages
in the event liability is determined.

AIG is also subject to various legal proceedings which have been disclosed
in AIG's periodic filings under the Securities Exchange Act of 1934, as
amended, in which the Company is not named as a party, but whose outcome
may nonetheless adversely affect the Company's financial position or
results of operation.

Except for the provisions the Company recorded related to the contingent
liabilities arising out of the potential underpayment of premium taxes and
assessments described in the preceding paragraphs, the Company cannot
predict the outcome of the matters described above, estimate the potential
costs related to these matters, or determine whether other AIG
subsidiaries, including the Company, would have exposure to proceedings in
which they are not named parties by virtue of their participation in an
inter-company pooling arrangement and, accordingly, no reserve is being
established in the Company's financial statements at December 31, 2005. In
the opinion of management, the Company's ultimate liability for the
matters referred to above is not likely to have a material adverse effect
on the Company's financial position, although it is possible that the
effect would be material to the Company's results of operations for an
individual reporting period.

B. Asbestos and Environmental Reserves

The Company continues to receive indemnity claims asserting injuries from
toxic waste, hazardous substances, asbestos and other environmental
pollutants and alleged damages to cover the clean-up costs of hazardous
waste dump sites (environmental claims). Estimation of environmental claim
loss reserves is a difficult process, as these claims, which emanate from
policies written in 1984 and prior years, cannot be estimated by
conventional reserving techniques. Environmental claim development is
affected by factors such as inconsistent court resolutions, the broadening
of the intent of policies and scope of coverage and increasing number of
new claims. The Company and other industry members have and will continue
to litigate the broadening judicial interpretation of policy coverage and
the liability issues. If the courts continue in the future to expand the
intent of the policies and the scope of the coverage, as they have in the
past, additional liabilities would emerge for amounts in excess of
reserves held. This emergence cannot now be reasonably estimated, but
could have a material impact on the Company's future operating results or
financial position.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

The Company's environmental exposure arises from the sale of general
liability, product liability or commercial multi peril liability
insurance, or by assumption of reinsurance within these lines of business.

The Company tries to estimate the full impact of the asbestos and
environmental exposure by establishing full case basis reserves on all
known losses and establishes bulk reserves for IBNR losses and LAE based
on management's judgment after reviewing all the available loss, exposure,
and other information.

A reconciliation of the Company's asbestos and environmental related loss
and LAE reserves (including case & IBNR reserves) as of December 31, 2005
and 2004, gross and net of reinsurance credits, is set forth below:

Asbestos Losses Environmental Losses
-------------------- --------------------
2005 2004 2005 2004
---------- -------- -------- --------
Direct :

Loss and LAE reserves, beginning
of period........................ $ 731,546 $272,012 $271,161 $196,300
Incurred losses and LAE......... 517,176 535,892 66,554 117,838
Calendar year paid losses and
LAE........................... (100,673) (76,358) (33,001) (42,977)
---------- -------- -------- --------
Loss and LAE reserves, As of
December 31,..................... $1,148,049 $731,546 $304,714 $271,161
========== ======== ======== ========
Assumed:

Loss and LAE reserves, beginning
of period........................ $ 95,171 $ 34,601 $ 6,994 $ 8,522
Incurred losses and LAE......... 15,540 66,069 876 (587)
Calendar year paid losses and
LAE........................... (7,901) (5,499) (944) (941)
---------- -------- -------- --------
Loss and LAE reserves, as of
December 31,..................... $ 102,810 $ 95,171 $ 6,926 $ 6,994
========== ======== ======== ========
Net of Reinsurance:

Loss and LAE reserves, beginning
of period........................ $ 367,609 $108,999 $149,915 $ 85,324
Incurred losses and LAE......... 220,900 291,003 17,322 87,348
Calendar year paid losses and
LAE........................... (41,472) (32,393) (24,761) (22,757)
---------- -------- -------- --------
Loss and LAE Reserves, as of
December 31,..................... $ 547,037 $367,609 $142,476 $149,915
========== ======== ======== ========

Management believes that the reserves carried for the asbestos and
environmental claims at December 31, 2005 are adequate as they are based
on known facts and current law. AIG continues to receive claims asserting
injuries from toxic waste, hazardous substances, and other environmental
pollutants and alleged damages to cover the cleanup costs of hazardous
waste dump sites (hereinafter collectively referred to as environmental
claims) and indemnity claims asserting injuries from asbestos. Estimation
of asbestos and environmental claims loss reserves is a difficult process,
as these claims, which emanate from policies written in 1984 and prior
years, cannot be estimated by conventional reserving techniques.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

C. Other Contingencies

In the ordinary course of business, the Company enters into structured
settlements to settle certain claims. Structured settlements involve the
purchase of an annuity to fund future claim obligations. In the event the
life insurers providing the annuity, on certain structured settlements,
are not able to meet their obligations, the Company would be liable for
the payments of benefits.

As of December 31, 2005, the Company has not incurred a loss and there has
been no default by any of the life insurers included in the transactions.
Management believes that based on the financial strength of the life
insurers involved in these structured settlements, the likelihood of a
loss is remote.

In connection therewith, as of December 31, 2005 the Company's loss
reserves eliminated by annuities and unrecorded loss contingencies
amounted to $764,800 and $745,100, respectively.

The Company has entered into a credit agreement with its Parent, whereby
the Company may loan, subject to contractually agreed interest rates, up
to a maximum of $410,000. As of December 31, 2005, the Company had no
outstanding loan balances due from its Parent related to this credit
arrangement.

As part of its private equity portfolio investment, as of December 31,
2005, the Company may be called upon for an additional capital investment
of up to $422,500. The Company expects only a small portion of this
additional capital will be called during 2006.

The Company has committed to provide (Pounds)50,000 ($86,000) in capital
to a Lloyd's Syndicate. The Company believes that the likelihood of a
payment during 2006 is remote.

As fully disclosed in Note 5, the Company has guaranteed the policyholder
obligations of certain affiliated insurance companies. Each of the
guaranteed affiliates has admitted assets in excess of policyholder
liabilities. The Company believes that the likelihood of a payment under
any of these guarantees is remote.

Note 13 - Other Significant Matters

A. September 11, 2001 Events

As of December 31, 2005 and 2004, the Company's ultimate losses and LAE as
a result of the September 11th events gross, ceded and net of reinsurance,
is set forth in the table below:

As of December 31, 2005 2004
------------------ --------- ---------
Gross of reinsurance............... $ 473,083 $ 473,083
Ceded reinsurance.................. (408,188) (408,188)
--------- ---------
Net of Reinsurance.............. $ 64,895 $ 64,895
========= =========

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

All contingencies and unpaid claims or losses resulting from the
September 11th events have been recognized in the financial statements.
The Company does not expect any unrecognized contingencies or unpaid
claims or losses to impact the financial statements in the near term.

B. Property Catastrophe Losses

During 2005, the Company incurred significant losses related to certain
hurricane events. In connection therewith, the Company's estimate of its
potential pre-tax loss exposure, including the cost of reinstatement
premiums, related to these events is set forth in the table below:

[Enlarge/Download Table]

Loss Occurrence Pre-tax Loss
Hurricane Period Category Area / Region Exposure
--------- --------------- -------- ---------------------------------- ------------

Katrina.................. August 2005 4 Louisiana / Central Gulf Coast $193,522
Rita..................... September 2005 3 Southwestern Louisiana and Texas 50,551
Wilma.................... October 2005 3 Southern Florida 65,967
--------
Total................. $310,040
========

C. Other

The Company underwrites a significant concentration of its direct business
with brokers.

As of December 31, 2005 and 2004, the amount of reserve credits recorded
for high deductibles on unpaid claims amounted to $3,900,000 and
$3,369,400, respectively. As of December 31, 2005 and 2004, the amount
billed and recoverable on paid claims was $350,900 and $387,600,
respectively, of which $17,600 and $22,300, respectively, were
non-admitted.

The Company's direct percentage of policyholder dividend participating
policies is 0.05 percent. Policyholder dividends are accounted for on an
incurred basis. In connection therewith, during 2005 and 2004,
policyholder dividends amounted to $20 and $562, respectively, and were
reported as Other Gains in the accompanying Statements of Income.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

As of December 31, 2005 and 2004, other admitted assets as reported in the
accompanying Statements of Admitted Assets were comprised of the following
balances:

As of December 31, 2005 2004
------------------ --------- ---------
Guaranty funds receivable or on deposit........ $ 21,216 $ 19,745
Loss funds on deposit.......................... 65,974 79,741
Outstanding loss drafts - suspense accounts.... 537,881 293,066
Accrued recoverables........................... 7,157 6,294
Other assets................................... (27,064) 67,240
Allowance for Doubtful Accounts................ (471,565) (109,621)
--------- ---------
Total Other Admitted Assets................. $ 133,599 $ 356,465
========= =========

Guaranty fund receivables represent payments to various state insolvency
funds which are recoupable against future premium tax payment in the
respective states. Various states allow insurance companies to recoup
assessments over a period of five to ten years.

The Company routinely assesses the collectibility of its receivable
balances for potentially uncollectible premiums receivable due from agents
and reinsurance recoverable balances. In connection therewith, As of
December 31, 2005 and 2004, the Company established an allowance for
doubtful accounts of $471,565 and $109,621, respectively, which was
reported as a contra asset within Other Admitted Assets in the
accompanying Statements of Admitted Assets.

During 2005, the Company recorded $153,838 of the increase in the
allowance for doubtful accounts to Net Loss from Agents' Balances
Charged-off in the accompanying 2005 Statement of Income, and recorded the
remaining increase of $208,106 as an adjustment for prior period
corrections to the Company's Capital and Surplus balance at January 1,
2005.

Note 14 - Subsequent Events

In February 2006, the Company entered into a Capital Maintenance Agreement
(CMA) with its Parent. The CMA provides that in the event that the Company's
Total Adjusted Capital falls below 200.0% of the Company's Authorized Control
Level RBC, as reported in the Company's 2005 Annual Statement, together with
any adjustments or modifications required by the Company's domiciliary
regulator, the Parent will provide a capital contribution to the Company in an
amount equal to the difference between the Company's Total Adjusted Capital and
200.0% of the Company's Authorized Control Level RBC. In lieu of making any
capital contribution, with the approval of the domiciliary department, AIG may
provide a letter of credit naming the Company as beneficiary.

Effective upon the date of filing of the Company's 2005 Annual Statement with
its domiciliary regulator, this CMA superseded and replaced a similar agreement
that was effective October 15, 2005 related to the Company's December 31, 2004
surplus position.

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National Union Fire Insurance Company of Pittsburgh, PA.

Notes to Statutory Basis Financial Statements
December 31, 2005 and 2004
(000's Omitted)

During 2005, the board of directors of the Parent, authorized a resolution
where it committed to replenish any surplus lost as a result of the effects of
the restatements of the Company's December 31, 2004 financial statements as
well as any additional loss and LAE reserve strengthening as a result of the
reserve review conducted by an independent actuarial consultant. In accordance
with that resolution, on February 15, 2006, the Parent contributed $199,830 in
cash to the Company. In connection therewith, at December 31, 2005, the Company
reported a receivable of $199,830 with its Parent and increased its Capital in
Excess of Par Value accordingly. The recognition of this surplus contribution
has been approved by the Pennsylvania Insurance Department.

In addition, with approval of the Company's domiciliary regulator, AIG provided
the Company with a letter of credit for unauthorized reinsurance recoverables,
at December 31, 2005, authorizing the withdrawal of up to $380,000. In
addition, the calculation of the provision for reinsurance reflects the affects
of cash collections from affiliates subsequent to December 31, 2005.

Note 15 - Policyholders' Surplus and Net Income Reconciliation

A reconciliation of policyholder's surplus as of December 31, 2005 and net
income for the year ended, as previously reported in the Company's annual
statements filed with regulatory authorities, and the amounts, as adjusted,
reported in the accompanying statutory basis financial statements, is presented
in the following table:

Policyholders' Net
Surplus Income
-------------- --------
As Reported in the 2005 Annual Statement Previously
Filed................................................ $8,046,993 $ 58,744
Adjustment to accruals and provisions, net of
federal income tax................................ 73,170 73,170
---------- --------
As Reported in the Accompanying Statutory Basis
Financial Statements................................. $8,120,163 $131,914
========== ========

Certain expense accruals and provisions are calculated differently for GAAP
basis financials and NAIC SAP basis financials. During the preparation of the
annual statement, the Company did not properly eliminate or adjust the GAAP
basis accruals and provisions when the NAIC SAP basis accruals and provisions
were recorded. As a result, certain expenses were recorded twice.

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PART C: OTHER INFORMATION

Item 26. Exhibits

(a) Board of Directors Resolution.

(1) Certificate of Resolution for AIG Life Insurance Company pursuant to
the Board of Directors' meeting dated June 5, 1986, authorizing the
establishment of separate accounts for the issuance and sale of
variable life insurance contracts, as well as for variable and fixed
annuity contracts. (1)

(2) Certificate of Resolution for AIG Life Insurance Company pursuant to
the Board of Directors' meeting dated September 12, 1995, amending in
its entirety the resolution previously passed by the Board of
Directors on June 5, 1986, authorizing the establishment of separate
accounts for the issuance and sale of variable life insurance
contracts, as well as for variable and fixed annuity contracts. (5)

(b) Custodian Agreements. Inapplicable

(1) Distribution Agreement between AIG Life Insurance Company and American
General Equity Services Corporation, effective May 1, 2003. (7)

(2) Form of Selling Group Agreement. (9)

(d) Contracts.

(1) Form of Group Flexible Premium Variable Life Insurance Policy -
Non-Participating, Form No. 11GVULD997. (2)

(2) Form of Group Flexible Premium Variable Life Insurance Certificate,
Form No. 16GVULD997. (2)

(e) Applications.

(1) Form of Application for Group Flexible Premium Variable Life Insurance
Policy, Form No. 14COLI400. (7)

(2) Form of Supplemental Application for Life Insurance, Form
No. 14GVSUP997. (13)

(3) Form of Subaccount Transfer Request Form, 04/06. (13)

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(4) Form of Premium Allocation Form, 04/06. (13)

(5) Form of Loan/Surrender Request Form, 0406. (13)

(6) Form of Dollar Cost Averaging Request Form. (13)

(7) Form of Change Request Form. (7)

(8) Form of Reallocation and Rebalancing Request Form, 04/06. (13)

(9) Form of Automatic Rebalancing Request, 04/06. (13)

(f) Depositor's Certificate of Incorporation and By-Laws.

(1) By-Laws of AIG Life Insurance Company, restated as of April 27, 2005.
(4)

(2) Certificate of Incorporation of AIG Life Insurance Company, dated
December 6, 1991. (1)

(3) Restated Certificate of Incorporation of AIG Life Insurance Company,
dated December 6, 1991. (1)

(4) Certificate of Amendment of Certificate of Incorporation of AIG Life
Insurance Company, dated December 3, 2001. (7)

(5) Certificate of Change of Location of Registered Office and of
Registered Agent, AIG Life Insurance Company, dated July 24, 2002. (9)

(g) Reinsurance Contracts. Inapplicable

(h) Participation Agreements.

(1)(a) Form of Participation Agreement among Alliance Variable Products
Series Fund, Inc., Alliance Fund Distributors, Inc. and AIG Life
Insurance Company. (7)

(1)(b) Form of Amendment to Participation Agreement among Alliance
Variable Products Series Fund, Inc. and AIG Life Insurance Company.
(7)

(2)(a) Form of Shareholder Services Agreement by and between American
Century Investment Services, Inc. and AIG Life Insurance Company.
(8)

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(2)(b) Form of Amendment No. 1 to Shareholder Services Agreement by and
between American Century Investment Services, Inc. and AIG Life
Insurance Company, effective January 1, 2001. (8)

(3)(a) Form of Participation Agreement by and among Credit Suisse Warburg
Pincus Trust, Credit Suisse Asset Management, LLC, Credit Suisse
Asset Management Securities, Inc. and AIG Life Insurance Company.
(8)

(4)(a) Form of Participation Agreement by and among Variable Insurance
Products Fund, Fidelity Distributors Corporation and AIG Life
Insurance Company. (8)

(4)(b) Form of Amendment to Participation Agreement by and among Variable
Insurance Products Fund, Fidelity Distributors Corporation and AIG
Life Insurance Company, dated July 23, 1999. (8)

(4)(c) Form of Fifth Amendment to Participation Agreement by and among
Variable Insurance Products Fund, Fidelity Distributors Corporation
and AIG Life Insurance Company, dated January 2, 2001. (8)

(5)(a) Form of Participation Agreement by and among Variable Insurance
Products Fund II, Fidelity Distributors Corporation and AIG Life
Insurance Company. (8)

(5)(b) Form of Amendment to Participation Agreement by and among Variable
Insurance Products Fund II, Fidelity Distributors Corporation and
AIG Life Insurance Company, dated July 23, 1999. (8)

(5)(c) Form of Fifth Amendment to Participation Agreement by and among
Variable Insurance Products Fund II, Fidelity Distributors
Corporation and AIG Life Insurance Company, dated January 2, 2001.
(8)

(6)(a) Form of Participation Agreement by and among Variable Insurance
Products Fund III, Fidelity Distributors Corporation and AIG Life
Insurance Company. (8)

(7)(a) Form of Participation Agreement by and between Franklin Templeton
Products Trust, Franklin Templeton Distributors, Inc. and AIG Life
Insurance Company. (8)

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(7)(b) Form of Amendment to Participation Agreement by and between
Franklin Templeton Products Trust, Franklin Templeton Distributors,
Inc. and AIG Life Insurance Company, effective May 1, 2001. (8)

(7)(c) Form of Amendment to Participation Agreement by and between
Franklin Templeton Products Trust, Franklin Templeton Distributors,
Inc. and AIG Life Insurance Company, effective May 3, 2004. (10)

(7)(d) Form of Amendment No. 3 to Participation Agreement as of March 31,
2006 by and between Franklin Templeton Products Trust, Franklin
Templeton Distributors, Inc. and AIG Life Insurance Company. (13)

(8)(a) Form of Participation Agreement by and among Goldman Sachs Variable
Insurance Trust, Goldman, Sachs & Co., and AIG Life Insurance
Company. (10)

(9)(a) Form of Fund Participation Agreement by and between J.P. Morgan
Series Trust II and AIG Life Insurance Company. (8)

(9)(b) Form of Amendment No. 1 to Fund Participation Agreement by and
between J.P. Morgan Series Trust II and AIG Life Insurance Company,
dated June 16, 2003. (10)

(10)(a) Form of Participation Agreement by and among Merrill Lynch Variable
Series Funds, Inc., FAM Distributors, Inc. and AIG Life Insurance
Company. (8)

(11)(a) Form of Participation Agreement among Morgan Stanley Universal
Funds, Inc., Morgan Stanley Asset Management Inc., Miller
Anderson & Sherrerd, LLP and AIG Life Insurance Company. (6)

(11)(b) Form of Amendment to Participation Agreement among The Universal
Institutional Funds, Inc. (formerly Morgan Stanley Universal Funds,
Inc.), Morgan Stanley Investment Management Inc. (formerly Morgan
Stanley Asset Management Inc.), Morgan Stanley Investments LP
(formerly Miller Anderson & Sherrerd, LLP) and AIG Life Insurance
Company, dated October 1, 2001. (7)

(12)(a) Form of Fund Participation Agreement by and among Neuberger &
Berman Advisers Management Trust, Advisers Managers Trust,
Neuberger & Berman Management Incorporated and AIG Life Insurance
Company. (10)

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(12)(b) Form of Amendment to Fund Participation Agreement by and among
Neuberger & Berman Advisers Management Trust, Advisers Managers
Trust, Neuberger & Berman Management Incorporated and AIG Life
Insurance Company. (10)

(13)(a) Form of Participation Agreement by and among PIMCO Variable
Insurance Trust, PIMCO Funds Distributors LLC and AIG Life
Insurance Company. (8)

(14)(a) Form of Participation Agreement by and between VALIC Company I, The
Variable Annuity Life Insurance Company and AIG Life Insurance
Company. (7)

(14)(b) Form of Amendment No. 1 to Participation Agreement by and between
VALIC Company I, The Variable Annuity Life Insurance Company and
AIG Life Insurance Company. (7)

(15)(a) Form of Participation Agreement by and among Vanguard Variable
Insurance Fund, The Vanguard Group, Inc., Vanguard Marketing
Corporation and AIG Life Insurance Company. (8)

(16)(a) Form of Administrative Services Agreement by and among Credit
Suisse Asset Management, LLC and AIG Life Insurance Company. (8)

(i) Administrative Contracts.

(1) Form of Service and Expense Agreement dated February 1, 1974, between
American International Group, Inc. and various affiliate subsidiaries,
including AIG Life Insurance Company. (7)

(2) Form of Addendum No. 1 to Service and Expense Agreement dated
February 1, 1974, between American International Group, Inc. and
various affiliate subsidiaries, including AIG Life Insurance Company,
dated May 21, 1975. (7)

(3) Form of Addendum No. 2 to Service and Expense Agreement dated
February 1, 1974, between American International Group, Inc. and
various affiliate subsidiaries, including AIG Life Insurance Company,
dated September 23, 1975. (7)

(4) Form of Addendum No. 24 to Service and Expense Agreement dated
February 1, 1974, between American International Group, Inc. and
various affiliate subsidiaries, including AIG Life Insurance Company,
dated December 30, 1998. (7)

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(5) Form of Addendum No. 28 to Service and Expense Agreement dated
February 1, 1974, among American International Group, Inc. and various
affiliate subsidiaries, including AIG Life Insurance Company and
American General Life Companies, effective January 1, 2002. (7)

(6) Form of Addendum No. 30 to Service and Expense Agreement dated
February 1, 1974, among American International Group, Inc. and various
affiliate subsidiaries, including AIG Life Insurance Company and
American General Life Companies, LLC, effective January 1, 2002. (9)

(7) Form of Addendum No. 32 to Service and Expense Agreement dated
February 1, 1974, among American International Group, Inc. and various
affiliate subsidiaries, including AIG Life Insurance Company and
American General Life Companies, LLC, effective May 1, 2004. (10)

(j) Other Material Contracts.

(1) General Guarantee Agreement from National Union Fire Insurance Company
of Pittsburgh, Pa. on behalf of AIG Life Insurance Company. (4)

(2) AIG Support Agreement between AIG Life Insurance Company and American
International Group, Inc. (4)

(k) Legal Opinions.

(1) Opinion and Consent of Kenneth D. Walma, Vice President and Counsel,
AIG Life Insurance Company. (3)

(2) Opinion and Consent of Saul Ewing LLP, Counsel to National Union Fire
Insurance Company of Pittsburgh, Pa. (11)

(3) Opinion and Consent of Sullivan & Cromwell LLP, Counsel to National
Union Fire Insurance Company of Pittsburgh, Pa. (11)

(l) Actuarial Opinions.

(1) Opinion and Consent of AIG Life Insurance Company's actuary. (3)

(2) Opinion and Consent of AIG Life Insurance Company's actuary. (7)

(m) Calculation. None

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(n) Other Opinions.

(1) Consent of Independent Registered Public Accounting Firm,
PricewaterhouseCoopers LLP. (Filed herewith)

(o) Omitted Financial Statements. None

(p) Initial Capital Agreements. None

(q) Redeemability Exemption.

(1) Memorandum Regarding Procedures including Issuance, Transfer and
Redemption Procedures for Variable Universal Life Insurance Policies
Pursuant to Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act
of 1940. (10)

(r) Powers of Attorney.

(1) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the directors and, where applicable,
officers of National Union Fire Insurance Company of Pittsburgh, Pa.
(12)

(2) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by John Quinlan Doyle, Director and
President, and Neil Anthony Faulkner, Director, and David Neil Fields,
Director, of National Union Fire Insurance Company of Pittsburgh, Pa.
(Filed herewith)

--------
(1) Incorporated by reference to Post-Effective Amendment No. 4 to Form S-6
Registration Statement (File No. 033-90684) of Variable Account II of AIG
Life Insurance Company filed on October 27, 1998.
(2) Incorporated by reference to Post-Effective Amendment No. 1 to Form S-6
Registration Statement (File No. 333-34199) of Variable Account II of AIG
Life Insurance Company filed on March 13, 1998.
(3) Incorporated by reference to Post-Effective Amendment No. 8 to Form S-6
Registration Statement (File No. 333-34199) of Variable Account II of AIG
Life Insurance Company filed on May 1, 2002.

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(4) Incorporated by reference to Post-Effective Amendment No. 14 to Form N-6
Registration Statement (File No. 333-34199) of Variable Account II of AIG
Life Insurance Company filed on August 12, 2005.
(5) Incorporated by reference to Post-Effective Amendment No. 9 to Form N-6
Registration Statement (File No. 333-34199) of Variable Account II of AIG
Life Insurance Company filed on February 7, 2003.
(6) Incorporated by reference to Post-Effective Amendment No. 2 to Form N-4
Registration Statement (File No. 333-36260) of Variable Account I of AIG
Life Insurance Company filed on December 28, 2001.
(7) Incorporated by reference to Post-Effective Amendment No. 10 to Form N-6
Registration Statement (File No. 333-34199) of Variable Account II of AIG
Life Insurance Company filed on April 25, 2003.
(8) Incorporated by reference to Post-Effective Amendment No. 11 to Form N-6
Registration Statement (File No. 333-34199) of Variable Account II of AIG
Life Insurance Company filed on June 16, 2003.
(9) Incorporated by reference to Post-Effective Amendment No. 9 to Form N-4
Registration Statement (File No. 333-36260) of Variable Account I of AIG
Life Insurance Company filed on April 27, 2004.
(10)Incorporated by reference to Post-Effective Amendment No. 13 to Form N-6
Registration Statement (File No. 333-34199) of Variable Account II of AIG
Life Insurance Company filed on May 2, 2005.
(11)Incorporated by reference to Post-Effective Amendment No. 15 to Form N-6
Registration Statement (File No. 333-34199) of Variable Account II of AIG
Life Insurance Company filed on October 24, 2005.
(12)Incorporated by reference to Post-Effective Amendment No. 16 to Form N-6
Registration Statement (File No. 333-34199) of Variable Account II of AIG
Life Insurance Company filed on March 24, 2006.
(13)Incorporated by reference to Post-Effective Amendment No. 17 to Form N-6
Registration Statement (File No. 333-34199) of Variable Account II of AIG
Life Insurance Company filed on May 1, 2006.

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Item 27. Directors and Officers of the Depositor

[Enlarge/Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ --------------------------------------------------------------

Rodney O. Martin, Jr. Director and Chairman of the Board of Directors
2929 Allen Parkway
Houston, TX 77019

M. Bernard Aidinoff Director
Sullivan and Cromwell
125 Broad Street
New York, NY 10004

David J. Dietz Director, Chairman-Global High Net Worth, Corporate Markets
830 Third Avenue & Domestic Institutional Profit Center, and Chief Executive
New York, NY 10022 Officer-Global High Net Worth, Corporate Markets & Domestic
Institutional Profit Center

Mary Jane B. Fortin Director, Executive Vice President and Chief Financial Officer
2929 Allen Parkway
Houston, TX 77019

David L. Herzog Director
70 Pine Street
New York, NY 10270

Richard A. Hollar Director, Chairman-Independent Distribution Profit Center &
750 West Virginia Street Chief Executive Officer-Independent Distribution Profit Center
Milwaukee, WI 53204

Royce G. Imhoff, II Director, President-Independent Distribution Profit Center
2929 Allen Parkway
Houston, TX 77019

Gary D. Reddick Director, Executive Vice President and Chief Administrative
2929 Allen Parkway Officer
Houston, TX 77019

Christopher J. Swift Director
2929 Allen Parkway
Houston, TX 77019

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[Enlarge/Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ -------------------------------------------------------------

James W. Weakley Director, President-AIG Benefit Solutions Profit Center and
2929 Allen Parkway Chief Executive Officer-AIG Benefit Solutions Profit Center
Houston, TX 77019

Matthew Winter Director, President and Chief Executive Officer
2929 Allen Parkway
Houston, TX 77019

Thomas L. Booker President-Annuity Profit Center
2727 Allen Parkway
Houston, TX 77019

Lawrence J. O'Brien Senior Vice President and Chief Marketing Officer-
2727 Allen Parkway Independent Agency Group
Houston, TX 77019

Richard C. Schuettner President-AIG Life Brokerage Profit Center
750 West Virginia Street
Milwaukee, WI 53204

James P. Steele President-Structured Settlements
205 E. 10th Street
Amarillo, TX 79101

David R. Armstrong Executive Vice President-AIG Benefit Solutions & AIG
3600 Route 66 Financial Institution Solutions Profit Center
Neptune, NJ 07754

Chris T. Calos Executive Vice President-AIG Benefit Solutions Profit Center
3600 Route 66
Neptune, NJ 07754

Rebecca G. Campbell Executive Vice President-Human Resources
2929 Allen Parkway
Houston, TX 77019

Dan E. Trudan Executive Vice President-Operations, Independent Distribution
750 West Virginia St. Profit Center
Milwaukee, WI 53204

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[Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ ------------------------------------------------------------

Steven D. Anderson Senior Vice President-Independent Distribution Profit Center
2727 Allen Parkway and Chief Financial Officer-Independent Distribution Profit
Houston, TX 77019 Center

Erik A. Baden Senior Vice President-Independent Distribution Profit Center
2727 Allen Parkway
Houston, TX 77019

Wayne A. Barnard Senior Vice President and Illustration Actuary
2929 Allen Parkway
Houston, TX 77019

Robert M. Beuerlein Senior Vice President and Chief and Appointed Actuary
2727-A Allen Parkway
Houston, TX 77019

Patricia A. Bosi Senior Vice President
3600 Route 66
Neptune, NJ 07754-1580

Jeffrey H. Carlson Senior Vice President and Chief Information Officer
2727 Allen Parkway
Houston, TX 77019

James A. Galli Senior Vice President and Chief Business Development Officer
830 Third Avenue
New York, NY 10022

Robert M. Goldbloom Senior Vice President-Terminal Funding Annuities
70 Pine Street
New York, NY 10270

William F. Guterding Senior Vice President
830 Third Avenue
New York, NY 10022

Robert F. Herbert, Jr. Senior Vice President, Treasurer and Controller
2727-A Allen Parkway
Houston, TX 77019

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[Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ -----------------------------------------

S. Douglas Israel Senior Vice President
2929 Allen Parkway
Houston, TX 77019

Kyle L. Jennings Senior Vice President and General Counsel
2929 Allen Parkway
Houston, TX 77019

Althea R. Johnson Senior Vice President
2929 Allen Parkway
Houston, TX 77019

Glen D. Keller Senior Vice President
2727 Allen Parkway
Houston, TX 77019

Simon J. Leech Senior Vice President
2727-A Allen Parkway
Houston, TX 77019

Kent D. Major Senior Vice President
2727-A Allen Parkway
Houston, TX 77019

Mark R. McGuire Senior Vice President
2727-A Allen Parkway
Houston, TX 77019

Laura W. Milazzo Senior Vice President
2727 Allen Parkway
Houston, TX 77019

Harry R. Miller Senior Vice President
2727 Allen Parkway
Houston, TX 77019

Barry Pelleterri Senior Vice President
3600 Route 66
Neptune, NJ 07754

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[Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ -----------------------------------------------------

Dennis H. Roberts Senior Vice President and Chief Distribution Officer-
2727 Allen Parkway Independent Agency Group
Houston, TX 77019

Robert E. Steele Senior Vice President
205 E. 10th Street
Amarillo, TX 79101

Michael W. Witwer Senior Vice President
3600 Route 66
Neptune, NJ 07754

Frederic R. Yopps Senior Vice President
750 West Virginia St.
Milwaukee, WI 53204

Steven E. Zimmerman Senior Vice President and Medical Director
2727 Allen Parkway
Houston, TX 77019

Edward F. Bacon Vice President
2727-A Allen Parkway
Houston, TX 77019

Joan M. Bartel Vice President
2727 Allen Parkway
Houston, TX 77019

Walter E. Bednarski Vice President
3600 Route 66
Neptune, NJ 07754-1580

Paul Bell, III Vice President and Medical Director
Walnut Glen Tower
8144 Walnut Hill Lane
Dallas, TX 75231

Michael B. Boesen Vice President
2727-A Allen Parkway
Houston, TX 77019

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[Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ ------------------------------------

David R. Brady Vice President
70 Pine Street
New York, NY 10270

Stephen J. Brenneman Vice President
1 Alico Plaza
600 King Street
Wilmington, DE 19801

James B. Brown Vice President
2727 Allen Parkway
Houston, TX 77019

David W. Butterfield Vice President
3600 Route 66
Neptune, NJ 07754

Robert W. Chesner Vice President
2929 Allen Parkway
Houston, TX 77019

Valerie A. Childrey Vice President and Medical Director
750 West Virginia Street
Milwaukee, WI 53204

Mark E. Childs Vice President
2727 Allen Parkway
Houston, TX 77019

Robert M. Cicchi Vice President
2727 Allen Parkway
Houston, TX 77019

Steven A. Dmytrack Vice President
2929 Allen Parkway
Houston, TX 77019

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[Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ --------------------------------------

Douglas M. Donnenfield Vice President
750 West Virginia Street
Milwaukee, WI 53204

Timothy M. Donovan Vice President
2727 Allen Parkway
Houston, TX 77019

Donna F. Fahey Vice President
3600 Route 66
Neptune, NJ 07754-1580

Farideh N. Farrokhi Vice President and Assistant Secretary
2727-A Allen Parkway
Houston, TX 77019

John T. Fieler Vice President and Medical Director
2727-A Allen Parkway
Houston, TX 77019

Patrick S. Froze Vice President
750 West Virginia Street
Milwaukee, WI 53204

Frederick J. Garland, Jr. Vice President
2727 Allen Parkway
Houston, TX 77019

Richard L. Gravette Vice President and Assistant Treasurer
2727-A Allen Parkway
Houston, TX 77019

Kenneth J. Griesemer Vice President
6363 Forest Park Road
Dallas, TX 75235

Daniel J. Gutenberger Vice President and Medical Director
70 Pine Street
New York, NY 10270

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[Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ -------------------------------------------------

Joel H. Hammer Vice President
1 Chase Manhattan Plaza
New York, NY 10005

Craig H. Harrel Vice President
2929 Allen Parkway
Houston, TX 77019

D. Leigh Harrington Vice President
2727 Allen Parkway
Houston, TX 77019

Neal C. Hasty Vice President
6363 Forest Park Road
Dallas, TX 75235

Keith C. Honig Vice President
1 SunAmerica Center
Los Angeles, CA 90067

Walter P. Irby Vice President
2727 Allen Parkway
Houston, TX 77019

Karen M. Isaacs Vice President
3600 Route 66
Neptune, NJ 07754

David S. Jorgensen Vice President
2727-A Allen Parkway
Houston, TX 77019

Stephen C. Kennedy Vice President
750 West Virginia Street
Milwaukee, WI 53204

Gary J. Kleinman Vice President and Real Estate Investment Officer
1 Chase Manhattan Plaza
New York, NY 10005

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[Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ ------------------------------------------------------------

Frank A. Kophamel Vice President
3600 Route 66
Neptune, NJ 07754

Charles L. Levy Vice President and Medical Director
2727 Allen Parkway
Houston, TX 77019

Linda Lewis Vice President
6363 Forest Park Road
Dallas, TX 75235

Robert J. Ley Vice President
70 Pine Street
New York, NY 10270

Jerry L. Livers Vice President
2727 Allen Parkway
Houston, TX 77019

Gwendolyn J. Mallett Vice President
2727 Allen Parkway
Houston, TX 77019

Randy J. Marash Vice President
3600 Route 66
Neptune, NJ 07754

David S. Martin Vice President
2929 Allen Parkway
Houston, TX 77019

W. Larry Mask Vice President, Real Estate Investment Officer and Assistant
2727 Allen Parkway Secretary
Houston, TX 77019

Gordon S. Massie Vice President
2929 Allen Parkway
Houston, TX 77019

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[Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ -------------------------------------------

Melvin C. McFall Vice President
2727 Allen Parkway
Houston, TX 77019

Richard D. McFarland Vice President
2727 Allen Parkway
Houston, TX 77019

Richard A. Mercante Vice President
175 Water Street
New York, NY 10038

Beverly A. Meyer Vice President
750 West Virginia Street
Milwaukee, WI 53204

Candace A. Michael Vice President
2727 Allen Parkway
Houston, TX 77019

Anne K. Milio Vice President
2727 Allen Parkway
Houston, TX 77019

Sylvia A. Miller Vice President
#1 Franklin Square
Springfield, IL 62713

Michael R. Murphy Vice President
750 West Virginia Street
Milwaukee, WI 53204

Carl T. Nichols Vice President and Medical Director
205 E. 10th Street
Amarillo, TX 79101

Deanna D. Osmonson Vice President and Chief Compliance Officer
2727 Allen Parkway
Houston, TX 77019

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Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ ------------------------------------------------------------

Rembert R. Owen, Jr. Vice President, Real Estate Investment Officer and Assistant
2929 Allen Parkway Secretary
Houston, TX 77019

Lori J. Payne Vice President
2727 Allen Parkway
Houston, TX 77019

Kirsten M. Pedersen Vice President
2929 Allen Parkway
Houston, TX 77019

Cathy A. Percival Vice President and Medical Director
2727 Allen Parkway
Houston, TX 77019

Rodney E. Rishel Vice President
American General Center
2000 American General Way
Brentwood, TN 37027

Terri Robbins Vice President
175 Water Street
New York, NY 10038

Walter J. Rucecki, Jr. Vice President
2929 Allen Parkway
Houston, TX 77019

Dale W. Sachtleben Vice President
#1 Franklin Square
Springfield, IL 62713

Kristin Sather Vice President
1 Chase Manhattan Plaza
New York, NY 10005

Richard W. Scott Vice President and Chief Investment Officer
70 Pine Street
New York, NY 10270

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[Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ ------------------------------------

Tom L. Scott Vice President and General Auditor
2929 Allen Parkway
Houston, TX 77019

T. Clay Spires Vice President and Tax Officer
2929 Allen Parkway
Houston, TX 77019

Gregory R. Thornton Vice President
#1 Franklin Square
Springfield, IL 62713

Veronica Torralba Vice President
2929 Allen Parkway
Houston, TX 77019

Paul Turner Vice President
2929 Allen Parkway
Houston, TX 77019

Richard P. Vegh Vice President
3600 Route 66
Neptune, NJ 07754

Curt Vondrasek Vice President
1000 E. Woodfield Road
Schaumburg, IL 60173

Christian D. Weiss Vice President
#1 Franklin Square
Springfield, IL 62713

Ronald J. Williams Vice President
3600 Route 66
Neptune, NJ 07754

Elizabeth M. Tuck Secretary
70 Pine Street
New York, NY 10270

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[Download Table]

Name and Principal Positions and Offices with Depositor
Business Address AIG Life Insurance Company
------------------ ------------------------------------

Lauren W. Jones Assistant Secretary
2929 Allen Parkway
Houston, TX 77019

Item 28. Persons Controlled by or Under Common Control with the Depositor or
the Registrant

The Depositor is an indirect wholly-owned subsidiary of American International
Group, Inc. ("AIG"). See footnotes to table below at end of Item 28. Table of
subsidiaries of AIG can be found as Exhibit 21 in Form 10-K/A, SEC file number
001-08787, accession number 0000950123-06-007835, filed June 19, 2006.

SUBSIDIARIES OF AIG

[Enlarge/Download Table]

Percentage
of Voting
Securities
Jurisdiction of Owned by its
Incorporation Immediate
or Organization Parent/(2)/
--------------- ------------

American International Group, Inc./(1)/........................... Delaware /(3)/
AIG Aviation, Inc.............................................. Georgia 100
AIG Bulgaria Insurance and Reinsurance Company EAD............. Bulgaria 100
AIG Capital Corporation........................................ Delaware 100
AIG Consumer Finance Group, Inc.............................. Delaware 100
AIG Bank Polska S.A........................................ Poland 99.92
AIG Credit S.A............................................. Poland 100
Compania Financiera Argentina S.A.......................... Argentina 100
AIG Equipment Finance Holdings, Inc.......................... Delaware 100
AIG Commercial Equipment Finance, Inc...................... Delaware 100
AIG Commercial Equipment Finance Company, Canada........ Canada 100
AIG Finance Holdings, Inc.................................... New York 100
AIG Finance (Hong Kong) Limited............................ Hong Kong 100
AIG Global Asset Management Holdings Corp.................... Delaware 100
AIG Asset Management Services, Inc......................... Delaware 100
Brazos Capital Management, L.P.......................... Delaware 92
AIG Capital Partners, Inc.................................. Delaware 100
AIG Equity Sales Corp...................................... New York 100
AIG Global Investment Corp................................. New Jersey 100
AIG Global Securities Lending Corp......................... Delaware 100
International Lease Finance Corporation...................... California 67.23 /(4)/
AIG Global Real Estate Investment Corp....................... Delaware 100
AIG Credit Corp................................................ Delaware 100
A.I. Credit Consumer discount Corp........................... Pennsylvania 100
A.I. Credit Corp............................................. New Hampshire 100
AICCO, Inc................................................... Delaware 100

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SUBSIDIARIES OF AIG

[Enlarge/Download Table]

Percentage
of Voting
Securities
Jurisdiction of Owned by its
Incorporation Immediate
or Organization Parent/(2)/
--------------- ------------

AICCO, Inc........................................................... California 100
AIG Credit Corp. of Canada........................................... Canada 100
Imperial Premium Funding Inc......................................... Delaware 100
AIG Egypt Insurance Company, S.A.E...................................... Egypt 89.98
AIG Federal Savings Bank................................................ U.S.A. 100
AIG Financial Advisor Services, Inc..................................... Delaware 100
AIG Financial Advisor Services (Europe), S.A......................... Luxembourg 100
AIG Financial Products Corp............................................. Delaware 100
AIG Matched Funding Corp............................................. Delaware 100
Banque AIG........................................................... France 90 /(5)/
AIG Funding, Inc........................................................ Delaware 100
AIG Global Trade & Political Risk Insurance Company..................... New Jersey 100
A.I.G. Golden Insurance Ltd............................................. Israel 50.01
AIG Life Holdings (International) LLC................................... Delaware 100
American International Reinsurance Company, Ltd...................... Bermuda 100
AIG Edison Life Insurance Company................................ Japan 90 /(6)/
American International Assurance Company, Limited................ Hong Kong 100
American International Assurance Company (Australia) Limited..... Australia 100
American International Assurance Company (Bermuda) Limited....... Bermuda 100
American International Assurance Co. (Vietnam) Limited........ Vietnam 100
Tata AIG Life Insurance Company Limited....................... India 26
Nan Shan Life Insurance Company, Ltd............................. Taiwan 95
AIG Life Insurance Company.............................................. Delaware 79 /(7)/
AIG Life Insurance Company of Puerto Rico............................... Puerto Rico 100
AIG Liquidity Corp...................................................... Delaware 100
AIG Marketing, Inc...................................................... Delaware 100
AIG Private Bank Ltd.................................................... Switzerland 100
AIG Retirement Services, Inc............................................ Delaware 100 /(8)/
SunAmerica Life Insurance Company.................................... Arizona 100
SunAmerica Investments, Inc...................................... Georgia 70 /(9)/
AIG Advisor Group, Inc........................................ Maryland 100
Advantage Capital Corporation............................... New York 100
FSC Securities Corporation.................................. Delaware 100
Royal Alliance Associates, Inc.............................. Delaware 100
Sentra Securities Corporation............................... California 100
Spelman & Co., Inc.......................................... California 100
SunAmerica Securities, Inc.................................. Delaware 100
AIG SunAmerica Life Assurance Company......................... Arizona 100/(10)/
AIG SunAmerica Asset Management Corp........................ Delaware 100
AIG SunAmerica Capital Services. Inc...................... Delaware 100
First SunAmerica Life Insurance Company....................... New York 100
AIG Risk Management, Inc................................................ New York 100
AIG Technologies, Inc................................................... New Hampshire 100
AIGTI, Inc.............................................................. Delaware 100
AIG Trading Group Inc................................................... Delaware 100
AIG International, Inc............................................... Delaware 100
AIU Holdings, LLC....................................................... Delaware 100

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SUBSIDIARIES OF AIG

[Enlarge/Download Table]

Percentage
of Voting
Securities
Jurisdiction of Owned by its
Incorporation Immediate
or Organization Parent/(2)/
--------------- ------------

AIG Central Europe & CIS Insurance Holdings Corporation.............. Delaware 100
AIG Bulgaria Insurance and Reinsurance Company EAD................. Bulgaria 100
AIG Czech Republic pojistovna, as.................................. Czech Republic 100
AIG Kazakhstan Insurance Company, S.A.............................. Kzakhstan 88.87
AIU Africa Holdings, Inc............................................. Delaware 100
AIG Kenya Insurance Company, Limited............................... Kenya 100
AIG Memsa, Inc....................................................... Delaware 100
AIG Iraq........................................................... Delaware 100
AIG Lebanon, S.A.L................................................. Lebanon 100
AIG Libya, Inc..................................................... Delaware 100
AIG Hayleys Investment Holdings (Private) Ltd...................... Sri Lanka 80
Hayleys AIG Insurance Company, Ltd............................... Sri Lanka 100
AIG Sigorta A.S.................................................... Turkey 100
Tata AIG General Insurance Company Limited......................... India 26
AIU Insurance Company................................................... New York 52 /(11)/
AIU North America, Inc.................................................. New York 100
American General Corporation............................................ Texas 100
American General Bancassurance Services, Inc......................... Illinois 100
AGC Life Insurance Company........................................... Missouri 100
AIG Life Holdings (Canada), ULC.................................. Canada 100
AIG Assurance Canada............................................. Canada 100
AIG Life Insurance Company of Canada............................... Canada 100
AIG Life of Bermuda, Ltd........................................... Bermuda 100
American General Life and Accident Insurance Company............... Tennessee 100
American General Life Insurance Company.......................... Texas 100
American General Annuity Service Corporation..................... Texas 100
AIG Enterprise Services, LLC..................................... Delaware 100
American General Equity Services Corporation..................... Delaware 100
American General Life Companies, LLC............................. Delaware 100
The Variable Annuity Life Insurance Company...................... Texas 100
VALIC Retirement Services Company............................. Texas 100
VALIC Trust Company........................................... Texas 100
American General Property Insurance Company........................ Tennessee 51.85 /(12)/
American General Property Insurance Company of Florida........... Florida 100
AIG Annuity Insurance Company...................................... Texas 100
The United States Life Insurance Company in the City of New York... New York 100
American General Finance, Inc........................................ Indiana 100
American General Auto Finance, Inc................................. Delaware 100
American General Finance Corporation............................... Indiana 100
MorEquity, Inc................................................... Nevada 100
Wilmington Finance, Inc....................................... Delaware 100
Merit Life Insurance Co.......................................... Indiana 100
Yosemite Insurance Company....................................... Indiana 100
CommoLoCo, Inc................................................ Puerto Rico 100
American General Financial Services of Alabama, Inc................ Delaware 100
American General Investment Management Corporation................... Delaware 100
American General Realty Investment Corporation....................... Texas 100

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SUBSIDIARIES OF AIG

[Enlarge/Download Table]

Percentage
of Voting
Securities
Jurisdiction of Owned by its
Incorporation Immediate
or Organization Parent/(2)/
--------------- ------------

American General Assurance Company................................. Illinois 100
American General Indemnity Company............................... Illinois 100
Knickerbocker Corporation.......................................... Texas 100
American Home Assurance Company....................................... New York 100
AIG Domestic Claims, Inc........................................... Delaware 50 /(13)/
AIG Hawaii Insurance Company, Inc.................................. Hawaii 100
American Pacific Insurance Company, Inc.......................... Hawaii 100
American International Insurance Company........................... New York 100
American International Insurance Company of California, Inc...... California 100
American International Insurance Company of New Jersey........... New Jersey 100
Minnesota Insurance Company...................................... Minnesota 100
American International Realty Corp................................. Delaware 31.5 /(14)/
Pine Street Real Estate Holdings Corp.............................. New Hampshire 31.47 /(14)/
Transatlantic Holdings, Inc........................................ Delaware 33.41 /(15)/
Transatlantic Reinsurance Company................................ New York 100
Putnam Reinsurance Company..................................... New York 100
Trans Re Zurich................................................ Switzerland 100
American International Insurance Company of Delaware.................. Delaware 100
American International Life Assurance Company of New York............. New York 77.52 /(16)/
American International Reinsurance Company, Ltd....................... Bermuda 100
American International Underwriters Corporation....................... New York 100
American International Underwriters Overseas, Ltd..................... Bermuda 100
AIG Europe (Ireland) Limited....................................... Ireland 100
AIG Europe (U.K.) Limited.......................................... England 100
AIG Brasil Companhia de Seguros.................................... Brazil 50
AIG General Insurance (Vietnam) Company Limited.................... Vietnam 100
Universal Insurance Co., Ltd....................................... Thailand 100
La Seguridad de Centroamerica, Compania de Seguros S.A............. Guatemala 100
La Meridional Compania Argentina de Seguros........................ Argentina 100
American International Insurance Company of Puerto Rico............ Puerto Rico 100
A.I.G. Colombia Seguros Generales S.A.............................. Colombia 100
American International Underwriters GmBH........................... Germany 100
Richmond Insurance Company Limited................................. Bermuda 100
Underwriters Adjustment Company, Inc............................... Panama 100
American Life Insurance Company....................................... Delaware 100
AIG Life (Bulgaria) Z.D. A.D....................................... Bulgaria 100
ALICO, S.A......................................................... France 100
First American Polish Life Insurance and Reinsurance Company, S.A.. Poland 100
Inversiones Interamericana S.A. (Chile)............................ Chile 100
Pharaonic American Life Insurance Company.......................... Egypt 71.63
Unibanco AIG Seguros S.A........................................... Brazil 47.81 /(17)/
AIG Life Insurance Company (Switzerland) Ltd ......................... Switzerland 100
American Security Life Insurance Company, Ltd......................... Lichtenstein 100
Birmingham Fire Insurance Company of Pennsylvania..................... Pennsylvania 100
China America Insurance Company, Ltd.................................. Delaware 50
Commerce and Industry Insurance Company............................... New York 100
Commerce and Industry Insurance Company of Canada..................... Ontario 100

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SUBSIDIARIES OF AIG

[Enlarge/Download Table]

Percentage
of Voting
Securities
Jurisdiction of Owned by its
Incorporation Immediate
or Organization Parent/(2)/
--------------- ------------

Delaware American Life Insurance Company......................................... Delaware 100
Hawaii Insurance Consultants, Ltd................................................ Hawaii 100
HSB Group, Inc................................................................... Delaware 100
The Hartford Steam Boiler Inspection and Insurance Company.................... Connecticut 100
The Hartford Steam Boiler Inspection and Insurance Company of Connecticut... Connecticut 100
HSB Engineering Insurance Limited........................................... England 100
The Boiler Inspection and Insurance Company of Canada..................... Canada 100
The Insurance Company of the State of Pennsylvania............................... Pennsylvania 100
Landmark Insurance Company....................................................... California 100
Mt. Mansfield Company, Inc....................................................... Vermont 100
National Union Fire Insurance Company of Pittsburgh, Pa.......................... Pennsylvania 100
American International Specialty Lines Insurance Company...................... Alaska 70 /(18)/
Lexington Insurance Company................................................... Delaware 70 /(18)/
AIG Centennial Insurance Company............................................ Pennsylvania 100
AIG Premier Insurance Company............................................. Pennsylvania 100
AIG Indemnity Insurance Company........................................ Pennsylvania 100
AIG Preferred Insurance Company........................................... Pennsylvania 100
AIG Auto Insurance Company of New Jersey.................................. New Jersey 100
JI Accident & Fire Insurance Co. Ltd........................................ Japan 50
National Union Fire Insurance Company of Louisiana............................ Louisiana 100
National Union Fire Insurance Company of Vermont.............................. Vermont 100
21st Century Insurance Group.................................................. California 33.03 /(19)/
21st Century Insurance Company.............................................. California 100
21st Century Casualty Company............................................... California 100
21st Century Insurance Company of the Southwest............................. Texas 100
Starr Excess Liability Insurance Company, Ltd................................. Delaware 100
Starr Excess Liability Insurance International Ltd.......................... Ireland 100
NHIG Holding Corp................................................................ Delaware 100
Audubon Insurance Company..................................................... Louisiana 100
Audubon Indemnity Company................................................... Mississippi 100
Agency Management Corporation............................................... Louisiana 100
The Gulf Agency, Inc...................................................... Alabama 100
New Hampshire Insurance Company............................................... Pennsylvania 100
AIG Europe, S.A............................................................. France 70.48 /(20)/
AI Network Corporation...................................................... Delaware 100
American International Pacific Insurance Company............................ Colorado 100
American International South Insurance Company.............................. Pennsylvania 100
Granite State Insurance Company............................................. Pennsylvania 100
New Hampshire Indemnity Company, Inc........................................ Pennsylvania 100
AIG National Insurance Company, Inc....................................... New York 100
Illinois National Insurance Co.............................................. Illinois 100
New Hampshire Insurance Services, Inc....................................... New Hampshire 100
AIG Star Life Insurance Co., Ltd.............................................. Japan 100
The Philippine American Life and General Insurance Company....................... Philippines 99.78
Pacific Union Assurance Company............................................... California 100
Philam Equitable Life Assurance Company, Inc.................................. Philippines 95.31
Philam Insurance Company, Inc................................................. Philippines 100

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SUBSIDIARIES OF AIG

[Enlarge/Download Table]

Percentage
of Voting
Securities
Jurisdiction of Owned by its
Incorporation Immediate
or Organization Parent/(2)/
--------------- ------------

Risk Specialist Companies, Inc........................................ Delaware 100
United Guaranty Corporation........................................... North Carolina 36.3l /(21)/
A.I.G. Mortgage Holdings Israel, Ltd............................... Israel 82.12
E.M.I.-Ezer Mortgage Insurance Company, Limited.................. Israel 100
AIG United Guaranty Agenzia DI Assicurazione S.R.L................. Italy 100
AIG United Guaranty Insurance (Asia) Limited....................... Hong Kong 100
AIG United Guaranty Re, Ltd........................................ Ireland 100
United Guaranty Insurance Company.................................. North Carolina 100
United Guaranty Mortgage Insurance Company......................... North Carolina 100
United Guaranty Mortgage Insurance Company of North Carolina....... North Carolina 100
United Guaranty Partners Insurance Company......................... Vermont 80
United Guaranty Residential Insurance Company of North Carolina.... North Carolina 100
United Guaranty Residential Insurance Company...................... North Carolina 75.03 /(22)/
United Guaranty Commercial Insurance Company of North Carolina... North Carolina 100
United Guaranty Mortgage Indemnity Company....................... North Carolina 100
United Guaranty Credit Insurance Company......................... North Carolina 100
United Guaranty Services, Inc...................................... North Carolina 100

--------
(1) All subsidiaries listed are consolidated in the financial statements of AIG
as filed in its Form 10-K/A on June 19, 2006. Certain subsidiaries have
been omitted from the tabulation. The omitted subsidiaries, when considered
in the aggregate as a single subsidiary, do not constitute a significant
subsidiary.
(2) Percentages include directors' qualifying shares.
(3) The common stock is owned approximately 12.0 percent by Starr International
Company, Inc., 1.8 percent by C.V. Starr & Co., Inc. and 2.0 percent by The
Starr Foundation.
(4) Also owned 35.15 percent by National Union Fire Insurance Company of
Pittsburgh, Pa.
(5) Also owned 10 percent by AIG Matched Funding Corp.
(6) Also owned 21 percent by Commerce and Industry Insurance Company.
(7) Indirect wholly-owned subsidiary.
(8) Formerly known as AIG SunAmerica Inc.
(9) Also owned 30 percent by AIG Retirement Services, Inc.
(10)Formerly known as Anchor National Life Insurance Company.
(11)Also owned eight percent by The Insurance Company of the State of
Pennsylvania, 32 percent by National Union Fire Insurance Company of
Pittsburgh, Pa. and eight percent by Birmingham Fire Insurance Company of
Pennsylvania.
(12)Also owned 48.15 percent by American General Life and Accident Insurance
Company.
(13)Also owned 50 percent by The Insurance Company of the State of Pennsylvania.
(14)Also owned by 11 other AIG subsidiaries.
(15)Also owned 25.95 percent by AIG.
(16)Also owned 22.48 percent by American Home Assurance Company.
(17)Also owned ten percent by a subsidiary of American Life Insurance Company.
(18)Also owned 1.7 percent by American International Underwriters Overseas,
Ltd. and .48 percent by American Home Assurance Company.
(19)Also owned 20 percent by The Insurance Company of the State of Pennsylvania
and ten percent by Birmingham Fire Insurance Company of Pennsylvania.
(20)Also owned 16.85 percent by American Home Assurance Company, 6.34 percent
by Commerce and Industry Insurance Company and 6.34 percent by New
Hampshire Insurance Company.
(21)100 percent to be held with other AIG companies.

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(22)Also owned 45.88 percent by National Union Fire Insurance Company of
Pittsburgh, Pa., 16.95 percent by New Hampshire Insurance Company and 0.86
percent by The Insurance Company of the State of Pennsylvania.
(23)Also owned 24.97 percent by United Guaranty Residential Insurance Company
of North Carolina.

The Registrant is a separate account of AIG Life Insurance Company (Depositor).

Item 29. Indemnification

Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

AIG Life Insurance Company

Except as otherwise required by applicable law:

(a) The company shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or on behalf of the company) by
reason of the fact that he is or was director, officer, or employee or agent of
the company, or is or was serving at the request of the company as director,
officer, employee or agent of another company or enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding; provided that he (1) acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
company; and, (2) with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, by itself, create a
presumption that the person did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was lawful.

(b) The company shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or on behalf of the company to procure
a judgement in the company's favor, by reason of the fact that he is or was a
director, officer, employee or agent of the company, or is or was serving at
the request of the company as a director, officer, employee or agent of another
company or enterprise, against expenses (including attorney's fees), judgments
and amounts paid in settlement actually and reasonably incurred by him in
connection with the defense or settlement of such action, suit or proceeding;
provided that he acted in good faith and in a manner he reasonably believed to
be in or not opposed

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to the best interests of the company, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the company unless and only to the extent that the court in
which such action, suit or proceeding was brought or any other court of
competent jurisdiction shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity.

(c) To the extent that a director, officer, or employee or agent of the company
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in paragraphs (a) and (b) above, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection therewith.

(d) Any indemnification under paragraphs (a) and (b) above (unless ordered by a
court or made pursuant to a determination by a court as hereinafter provided)
shall be made by the company upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances and he has
met the applicable standard of conduct set forth in paragraphs (a) and (b).
Such determination shall be made (1) by the Board by a majority of a quorum
consisting of directors who were not parties to such action, suit or proceeding
(disinterested), or (2) by a committee of disinterested directors designated by
majority vote of disinterested directors, even though less than a quorum, or
(3) by independent legal counsel in a written opinion, and such legal counsel
was selected by a majority vote of a quorum of the disinterested directors, or
(4) by the stockholders. In the absence of a determination that indemnification
is proper, the director, officer or employee may apply to the court conducting
the proceeding or another court of competent jurisdiction which shall determine
whether the director, officer, employee or agent has met the applicable
standard of conduct set forth in paragraphs (a) and (b). If the court shall so
determine, indemnification shall be made under paragraph (a) or (b) as the case
may be.

(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the company in advance of the final disposition of
such action, suit or proceeding as authorized by the Board in the manner
provided in paragraph (d) upon receipt of a written instrument acceptable to
the Board by or on behalf of the director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the company as authorized in this section.

(f) The indemnification provided by these By-Laws shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled
under any agreement, or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit or the heirs, executors and administrators
of such a person.

(g) The company shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the company, or is or was serving at the request of the company as a director,
officer, employee or agent of another company, or enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the company would have the
power to indemnify him against such liability under the provisions of these
By-Laws.

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Item 30. Principal Underwriters

(a) Other Activity. Registrant's principal underwriter, American General Equity
Services Corporation, also acts as principal underwriter for Variable Account I
of AIG Life Insurance Company, which offers interests in variable annuities.
American General Equity Services Corporation also acts as principal underwriter
for certain other separate accounts of AIG Life Insurance Company affiliates.

(b) Management.

[Download Table]

Name and Principal Positions and Offices with Underwriter
Business Address American General Equity Services Corporation
------------------ --------------------------------------------------

Rodney O. Martin, Jr. Director and Chairman of the Board of Directors
2929 Allen Parkway
Houston, TX 77019

Mark R. McGuire Director and Senior Vice President
2727 Allen Parkway
Houston, TX 77019

Gary D. Reddick Director
2929 Allen Parkway
Houston, TX 77019

Royce G. Imhoff, II President and Chief Executive Officer
2929 Allen Parkway
Houston, TX 77019

Robert F. Herbert, Jr. Vice President
2727-A Allen Parkway
Houston, TX 77019

Rhonda Washington Treasurer and Controller
2727 Allen Parkway
Houston, TX 77019

Deanna D. Osmonson Vice President, Chief Compliance Officer and Anti-
2727 Allen Parkway Money Laundering Compliance Officer
Houston, TX 77019

T. Clay Spires Tax Officer
2727-A Allen Parkway
Houston, TX 77019

Elizabeth M. Tuck Secretary
70 Pine Street
New York, NY 10270

C-29

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[Download Table]

Name and Principal Positions and Offices with Underwriter
Business Address American General Equity Services Corporation
------------------ --------------------------------------------

Sarah Hosker Assistant Secretary
70 Pine Street
New York, NY 10270

Lauren W. Jones Assistant Secretary
2929 Allen Parkway
Houston, TX 77019

David M. Robinson Assistant Secretary
2929 Allen Parkway
Houston, TX 77019

John D. Fleming Assistant Treasurer
2929 Allen Parkway
Houston, TX 77019

Barbara J. Moore Assistant Tax Officer
2919 Allen Parkway
Houston, TX 77019

[Download Table]

Net Compensation on
Underwriting Events Occasioning the
Name of Principal Discounts and Deduction of a Brokerage Other
Underwriter Commissions Deferred Sales Load Commissions Compensation
----------------- ------------- ---------------------- ----------- ------------

American General 0 0 0 0
Equity Services
Corporation

Item 31. Location of Accounts and Records

All records referenced under Section 31(a) of the 1940 Act, and Rules 31a-1
through 31a-3 thereunder, are maintained and in the custody of AIG Life
Insurance Company at its principal executive office located at 70 Pine Street,
New York, New York 10270 or at its offices located at 2727-A Allen Parkway,
Houston, Texas 77019-2191 or One ALICO Plaza, 600 King Street, Wilmington,
Delaware 19801.

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Item 32. Management Services Inapplicable

Item 33. Fee Representation

AIG Life Insurance Company hereby represents that the fees and charges deducted
under the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and risks assumed by AIG Life
Insurance Company.

Undertakings of the Depositor

During any time there are insurance obligations outstanding and covered by the
guarantee issued by the National Union Fire Insurance Company of Pittsburgh,
Pa. ("National Union Guarantee Period"), filed as an exhibit to this
Registration Statement (the "National Union Guarantee"), the Depositor hereby
undertakes to provide notice to policy owners covered by the National Union
Guarantee promptly after the happening of significant events related to the
National Union Guarantee.

These significant events include: (i) termination of the National Union
Guarantee that has a material adverse effect on the policy owner's rights under
the National Union Guarantee; (ii) a default under the National Union Guarantee
that has a material adverse effect on the policy owner's rights under the
National Union Guarantee; or (iii) the insolvency of National Union Fire
Insurance Company of Pittsburgh, Pa. ("National Union").

Depositor hereby undertakes during the National Union Guarantee Period to cause
Registrant to file post-effective amendments to this Registration Statement as
frequently as is necessary to ensure that the current annual audited statutory
financial statements of National Union in the Registration Statement are
updated to be as of a date not more than 16 months prior to the effective date
of this Registration Statement, and to cause Registrant to include as an
exhibit to this Registration Statement the consent of the independent
registered public accounting firm of National Union regarding such financial
statements.

During the National Union Guarantee Period, the Depositor hereby undertakes to
include in the prospectus to policy owners, an offer to supply the Statement of
Additional Information which shall contain the annual audited statutory
financial statements of National Union, free of charge upon a policy owner's
request.

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POWERS OF ATTORNEY

Each person whose signature appears below hereby appoints Robert F. Herbert,
Jr., Gary D. Reddick and Kyle L. Jennings and each of them, any one of whom may
act without the joinder of the others, as his/her attorney-in-fact to sign on
his/her behalf and in the capacity stated below and to file all amendments to
this Registration Statement, which amendment or amendments may make such
changes and additions to this Registration Statement as such attorney-in-fact
may deem necessary or appropriate.

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Variable Account II of AIG Life Insurance Company,
certifies that it meets the requirements of the Securities Act of 1933 Rule
485(b) for effectiveness of this amended Registration Statement and has caused
this amended Registration Statement to be signed on its behalf, in the City of
Houston, and State of Texas on this 21st day of June, 2006.

VARIABLE ACCOUNT II OF AIG LIFE
INSURANCE COMPANY
(Registrant)

BY: AIG LIFE INSURANCE COMPANY
(On behalf of the Registrant and itself)

BY: ROBERT F. HERBERT, JR.
-----------------------------------
ROBERT F. HERBERT, JR.
SENIOR VICE PRESIDENT, TREASURER AND
COMPTROLLER

AIGL-1

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As required by the Securities Act of 1933, this amended Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.

[Download Table]

Signature Title Date
--------- ----- ----

RODNEY O. MARTIN, JR. Director and Chairman June 21, 2006
----------------------------- of the Board of Directors
RODNEY O. MARTIN, JR.

MARY JANE FORTIN Director, Chief Financial June 21, 2006
----------------------------- Officer and Executive Vice
MARY JANE FORTIN President

M. BERNARD AIDINOFF Director June 21, 2006
-----------------------------
M. BERNARD AIDINOFF

DAVID J. DIETZ Director June 21, 2006
-----------------------------
DAVID J. DIETZ

DAVID L. HERZOG Director June 21, 2006
-----------------------------
DAVID L. HERZOG

RICHARD A. HOLLAR Director June 21, 2006
-----------------------------
RICHARD A. HOLLAR

ROYCE G. IMHOFF II Director June 21, 2006
-----------------------------
ROYCE G. IMHOFF II

AIGL-2

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Signature Title Date
--------- ----- ----

GARY D. REDDICK Director June 21, 2006
-----------------------------
GARY D. REDDICK

CHRISTOPHER J. SWIFT Director June 21, 2006
-----------------------------
CHRISTOPHER J. SWIFT

JAMES W. WEAKLEY Director June 21, 2006
-----------------------------
JAMES W. WEAKLEY

MATTHEW WINTER Director, President and June 21, 2006
----------------------------- Chief Executive Officer
MATTHEW WINTER

AIGL-3

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333-34199
811-04867

SIGNATURES

National Union Fire Insurance Company of Pittsburgh, Pa. has caused this
amended Registration Statement to be signed on its behalf by the undersigned,
duly authorized, in the City of New York, and State of New York on the 21st day
of June, 2006.

NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA.

BY: ROBERT S. SCHIMEK
-----------------------------
ROBERT S. SCHIMEK
SENIOR VICE PRESIDENT
AND TREASURER

NU-1

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This amended Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

[Download Table]

Signature Title Date
--------- ----- ----

*KRISTIAN P. MOOR Director and Chairman June 21, 2006
----------------------
KRISTIAN P. MOOR

*JOHN Q. DOYLE Director and President June 21, 2006
----------------------
JOHN Q. DOYLE

*ROBERT S. SCHIMEK Director, Senior Vice June 21, 2006
---------------------- President and Treasurer
ROBERT S. SCHIMEK

*M. BERNARD AIDINOFF Director June 21, 2006
----------------------
M. BERNARD AIDINOFF

*CHARLES H. DANGELO Director June 21, 2006
----------------------
CHARLES H. DANGELO

*NEIL ANTHONY FAULKNER Director June 21, 2006
----------------------
NEIL ANTHONY FAULKNER

*DAVID NEIL FIELDS Director June 21, 2006
----------------------
DAVID NEIL FIELDS

NU-2

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[Download Table]

Signature Title Date
--------- ----- ----

*DAVID L. HERZOG Director June 21, 2006
-----------------------------
DAVID L. HERZOG

*ROBERT E. LEWIS Director June 21, 2006
-----------------------------
ROBERT E. LEWIS

*WIN J. NEUGER Director June 21, 2006
-----------------------------
WIN J. NEUGER

*NICHOLAS S. TYLER Director June 21, 2006
-----------------------------
NICHOLAS S. TYLER

*NICHOLAS C. WALSH Director June 21, 2006
-----------------------------
NICHOLAS C. WALSH

*BY: ROBERT S. SCHIMEK
-------------------------
ROBERT S. SCHIMEK
ATTORNEY-IN-FACT
(Exhibit (r)(2) to the
Registration Statement)

NU-3

485BPOS Last Page of 96 TOC 1st Previous Next ↓Bottom Just 96th
EXHIBIT INDEX
Item 26. Exhibits

(n)(1) Consent of Independent Registered Public Accounting Firm,
PricewaterhouseCoopers LLP.

(r)(2) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by John Quinlan Doyle, Director and
President, and Neil Anthony Faulkner, Director, and David Neil Fields,
Director, of National Union Fire Insurance Company of Pittsburgh, Pa.

E-1

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘485BPOS’ Filing	Date	First	Last	Other Filings

Filed on / Effective on:	6/22/06	1	6
	6/21/06	91	95
	6/19/06	6	84
	5/1/06	4	66	485BPOS
	4/27/06	9
	3/31/06	62
	3/24/06	66		485APOS
	3/20/06	53
	2/15/06	58
	2/9/06	51
	1/18/06	52
	12/31/05	3	58	24F-2NT, NSAR-U
	10/24/05	66		485BPOS
	10/15/05	57
	9/27/05	51
	9/2/05	51
	8/15/05	52
	8/12/05	66		485BPOS
	5/2/05	66		485BPOS
	4/27/05	60
	1/28/05	50
	1/1/05	20	57
	12/31/04	7	58	24F-2NT, NSAR-U
	10/19/04	51
	5/3/04	62
	5/1/04	64
	4/27/04	66		485BPOS
	1/1/04	23
	12/31/03	23		24F-2NT, NSAR-U
	6/16/03	62	66	485BPOS
	5/1/03	59
	4/25/03	66		485BPOS
	2/7/03	66		485APOS
	7/24/02	60
	5/1/02	65		485BPOS
	1/1/02	64
	12/28/01	66
	12/3/01	60
	10/1/01	62
	9/11/01	55
	5/1/01	62		485BPOS
	1/2/01	61
	1/1/01	61
	7/23/99	61
	12/30/98	63
	10/27/98	65		485BPOS
	3/13/98	65		485APOS
	9/12/95	59
	1/1/94	20
	1/1/93	47	48
				List all Filings

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Filing Submission 0001193125-06-134044 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Separate Account II of AGL, et al. – ‘485BPOS’ on 6/22/06

On: Thursday, 6/22/06, at 4:01pm ET · Effective: 6/22/06 · Accession #: 1193125-6-134044 · File #s: 333-34199, 811-04867

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Post-Effective AmendmentFiling Table of Contents

485BPOS — 485B (Form N-6) Pea 18 Aig Life Executive Advantage VulDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Post-Effective Amendment
Filing Table of Contents

485BPOS — 485B (Form N-6) Pea 18 Aig Life Executive Advantage Vul
Document Table of Contents