New Vanguard Lifetime Income Program Offers Solutions to Managing Income During Retirement;...

Business Editors

VALLEY FORGE, Pa.--(BUSINESS WIRE)--May 27, 2003

The three-year bear market has raised additional concerns for retirees--and those preparing to enter retirement-- about capital preservation and the possibility of outliving their retirement savings.

To help address these concerns, The Vanguard Group and AIG Life Insurance Company, and in New York state, American International Life Assurance Company of New York, both member companies of American International Group, Inc. ("AIG"), are developing an immediate annuity - the new Vanguard Lifetime Income Program(TM).

"The market downturn has challenged the way people have traditionally planned for and spent assets during their retirement years. It is now painfully clear that a few years of market losses at the beginning of your retirement can significantly impact whether you have enough income to meet living expenses," said James Gately, Managing Director, Vanguard Investment Programs and Services. "Using a portion of your retirement savings to purchase an immediate annuity can generate income to help meet basic living expenses and provide peace of mind that you will not outlive your assets."

An immediate annuity can provide a monthly income stream guaranteed for life, as well as options under which additional payments can be made to a spouse or other beneficiary after the annuitant's death.

Vanguard's Lifetime Income Program will offer a fixed or variable payment option. Typically, individuals who select fixed monthly payouts will receive identical payments each month based on the amount of their initial purchase, the annuity option selected, the frequency of annuity payments and their life expectancy. An option will also be available to increase the fixed payment annually by a specified percentage (to keep up with inflation or rising expenses, for example).

Individuals who select variable payments may allocate their lump-sum purchase among many low-cost, diversified Vanguard investment offerings, and will receive payments based on the performance of their investment options. For example, some investment alternatives available (for annuities purchased with qualified premium dollars only) include Vanguard(R) Inflation Protected Securities Fund, the Vanguard(R) GNMA Fund, and Vanguard(R) LifeStrategy(TM) Funds. Although variable payments offer potential for growth, which can help to keep pace with inflation, they also carry potential for loss.

The Vanguard Lifetime Income Program, which is expected to be available in the fall 2003, expands Vanguard's lineup of low-cost, high quality insurance and annuity offerings. Accordingly, Vanguard is pleased to work with AIG Life Insurance Company and American International Life Assurance Company of New York, which have achieved the highest ratings for financial strength. Vanguard's annuity and insurance services include the $5 billion Vanguard Variable Annuity, the Vanguard Single-5 Fixed Annuity, and Vanguard Term Life Insurance.

About AIG

American International Group, Inc. (AIG) is the world's leading international insurance and financial services organization, with operations in approximately 130 countries and jurisdictions. AIG member companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In the United States, AIG companies are the largest underwriters of commercial and industrial insurance and AIG American General is a top-ranked life insurer. AIG's global businesses also include financial services, retirement savings and asset management. AIG's financial services businesses include aircraft leasing, financial products, trading and market making. AIG's growing global consumer finance business is led in the United States by American General Finance. AIG also has one of the largest U.S. retirement savings businesses through AIG SunAmerica and AIG VALIC, and is a leader in asset management for the individual and institutional markets, with specialized investment management capabilities in equities, fixed income, alternative investments and real estate. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.

About Vanguard

The Vanguard Group, headquartered in Valley Forge, Pennsylvania, is the nation's second largest mutual fund firm and a leading provider of company sponsored retirement plan services. Vanguard serves some 17 million shareholder accounts and manages nearly $585 billion in U.S. assets, including more than $180 billion in employer-sponsored retirement plans. Vanguard offers 112 funds to U.S. investors and 35 additional funds in foreign markets.

Vanguard Lifetime Income Program will only be offered by a then-effective prospectus.

Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. The Statement of Additional Information does not constitute a prospectus.

The Vanguard(R) Variable Annuity is offered only by prospectus, a document that contains more complete information on risks, advisory fees, distribution charges, and other expenses. Prospectuses for the Vanguard Variable Annuity can be obtained by calling 1-800-522-5555. Read the prospectus carefully before you invest or send money.