AIG Update

CHICAGO, September 16, 2008 4:30 PM

Given the unprecedented turmoil in our industries, we want to help our clients digest the information that's currently being reported.

For our investment clients, we do not operate in the businesses that have caused the credit crisis and other turmoil in the financial markets. Although we do have some inventory position exposure to Lehman Brothers, we have selectively eliminated positions and marked remaining positions appropriately. We believe our remaining exposure to be immaterial.

For our insurance clients, we know that many of you are customers of AIG and are waiting to hear how they will weather their current challenges. We are currently monitoring the situation and are receiving regular communications from AIG, so that we can keep you up to date on the situation.

In the best scenario, AIG will get the funding they need to resolve their short term liquidity issues. If that happens we will continue to monitor their performance and advise our clients of any areas of concern.

If AIG does not get the funding, it is possible that they may need to file for bankruptcy. Mesirow Financial has been through this sort of situation with other carriers and we will work with you to restructure your program as needed.

AIG's AM Best rating was downgraded to A with a negative outlook. This is still a rating level that is generally acceptable in the insurance industry and above our minimum threshold of A-7. AIG's S&P rating was also downgraded to A-. If you have requirements by lenders of greater than A-, you may have to consider replacement of AIG or negotiating more relaxed standards with your lender.

We encourage you to contact your Mesirow Financial representative if you have concerns.

Following are some talking points provided to us by AIG Commercial Insurance today:

Our parent company, AIG, continues to work with regulators, the federal government and the financial markets to resolve its short term liquidity issues. AIG Commercial Insurance's (AIGCI) capital position has not diminished as a result of its parent's financial position.

AIGCI has not loaned money or pledged assets to its parent.

AIGCI's capital position will remain intact and available to underwrite policies and pay policyholder claims even if its parent files for bankruptcy.

AIGCI's ratings have declined as a result of its parent's financial position, but still remain excellent and higher than many commercial insurance companies.

AIGCI companies, which include the Lexington Insurance Company, National Union and American Home Assurance Company, remains well-capitalized with statutory surplus of $26.7 billion and invested assets exceeding $70 billion.

AIGCI's capital is protected by regulators, ensuring that policyholders' interests are paramount.

AIGCI has ample resources to underwrite business and to pay the claims of our policyholders. We continue to pay $73 million in claims every single day.

AIGCI's statutory surplus has grown over 50% since 2005 to $26.7 billion, exceeding the total shareholders' equity of all domestic commercial insurance holding companies.

AIGCI's Net Written Premium to Surplus Ratio, a key indicator of the amount of leverage of a property casualty organization is <1.0 with total NWP of $12.7 billion in the first half of 2008 compared to policy holder surplus of $26.7 billion.

 

The Mesirow Financial name and logo are registered service marks of Mesirow Financial Holdings, Inc., © 2007, Mesirow Financial Holdings, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. Any opinions expressed are subject to change without notice. It should not be assumed that any recommendations incorporated herein will be profitable or will equal past performance. Nothing contained herein constitutes an offer to sell or a solicitation of an offer to buy an interest in any Mesirow Financial investment vehicle(s).

Securities offered through Mesirow Financial, Inc. member NYSE, SIPC. Insurance services provided through Mesirow Insurance Services, Inc.