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CORRESP
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CORRESP

September 10, 2008

Mr. Jim B. Rosenberg

Senior Assistant Chief Accountant

United States

Securities and Exchange Commission

Division of Corporation Finance

100 F Street, NE

Mail Stop 6010

Washington, D. C. 20549

    Re:

    American International Group, Inc.

Form 10-K for the Year Ended December 31, 2007

Form 10-Q for the Quarter Ended June 30, 2008

File No. 1-8787

Dear Mr. Rosenberg:

We are in receipt of your letter dated September 5, 2008 and thank you for your comments concerning
American International Group, Inc.’s (AIG) captioned filings. We are pleased to respond to your
questions and to have the opportunity to work with the Staff of the Commission to further enhance
the overall presentation and disclosure in our filings.

As more fully described below, we intend to expand certain of our disclosures in our Form 10-Q for
the quarter ended September 30, 2008. Our responses and those disclosures are provided below. If
further clarification or information is required, please let us know at your earliest convenience.

AIG acknowledges that the adequacy and accuracy of the disclosure in AIG’s filings is the
responsibility of AIG, that Staff comments or changes to disclosure in response to Staff comments
do not foreclose the Commission from taking any action with respect to the filings and that Staff
comments may not be asserted by AIG as a defense in any proceeding initiated by the Commission or
any person under the Federal securities laws of the United States.

We have repeated your questions below to facilitate your review.

Form 10-Q for the Fiscal Quarter Ended June 30, 2008

Note 3-Fair Value Measurements, page 13

    1.

    Please refer to your tabular disclosure on page 17. Please explain the basis for the
counterparty netting adjustments shown in the table. Please tell us whether any portion
of the counterparty netting adjustments are related to your super senior credit default
swap portfolio, and explain how the adjustments are consistent with requirements of SFAS
157 or other applicable literature.

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    AIG Response:

    The counterparty netting adjustments in the table on page 17 of the June 30, 2008 Form 10-Q
were made in accordance with the provisions of paragraph 10 of FIN 39, as interpreted by
FSP FIN 39-1. FIN 39 sets forth guidelines for when it is appropriate to present certain
financial assets and liabilities on a net basis on the balance sheet. There are special
provisions for derivatives that are subject to master netting agreements, whereby
derivative balances with the same counterparty are to be reported net on the balance sheet,
as long as the following criteria have been met:

    1)

    Each of two parties owes the other determinable amounts

    2)

    The reporting party has the right to set off the amount owed with the amount
owed by the other party

    3)

    The right of setoff is enforceable at law

    Standard ISDA Master Netting Agreements used by AIG and throughout the over-the-counter
derivative industry meet these criteria. As described more fully in Note 1 to AIG’s June
30, 2008 financial statements, FSP FIN 39-1 provides an interpretation of FIN 39 that
requires cash collateral posted/received by AIG with respect to master netting agreements
to also be netted against the derivative balances with the same counterparty when applying
the netting provisions of paragraph 10.

    AIGFP’s super senior credit default swaps are subject to such Master Netting Agreements and
thus the counterparty netting adjustments in the tabular disclosure on page 17 include
adjustments to set off fair value amounts recognized and amounts recognized for the cash
collateral posted for super senior credit default swaps.

    The cash collateral posted and other derivative positions with a particular counterparty,
including the super senior credit default swaps, are incorporated into the determination of
the effect of AIG’s own credit risk on the fair value of the derivative liability.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Estimates

AIGFP’s Super Senior Credit Default Swap Portfolio, page 49

    2.

    You disclose that the unrealized market valuation losses on your super senior credit
default swap portfolio represents the amount you would need to pay a willing, able and
knowledgeable third-party to assume the obligations. Please revise your disclosure to
discuss how you determined the principal or most

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    advantageous market in accordance with SFAS 157, and disclose who you believe the market
participants would be.

    AIG Response:

    In response to the Staff’s comment, AIG intends to include additional disclosure in its
Form 10-Q for the quarterly period ended September 30, 2008 as follows (please refer to
Form 10-Q for the Quarter Ended June 30, 2008, page 15 and page 42):

The principal market was determined to be the market in which super senior credit
default swaps of this type and size would be transacted, or have been transacted,
with the greatest volume or level of activity. AIG has determined that the
principal market participants, where available, therefore, would consist of other
large financial institutions who participate in sophisticated over-the-counter
derivatives markets.

    3.

    You have provided extensive disclosure regarding the valuation of CDS relating to
multi-sector CDOs, but appear to have provided only limited disclosures regarding the
valuation of CDS relating to corporate debt/CLOs. Please revise to provide disclosure of
the contractual terms, methodology, inputs and assumptions regarding the valuation of your
CDS relating to corporate debt/CLOs.

    AIG Response:

    In response to the Staff’s comment, AIG intends to include additional disclosure in its
Form 10-Q for the quarterly period ended September 30, 2008 as follows (please refer to
Form 10-Q for the Quarter Ended June 30, 2008, page 15 and page 49):

The valuation of credit default swaps written on portfolios of investment-grade
corporate debt and collateralized loan obligations (CLOs) is less complex than the
valuation of super senior multi-sector CDO credit default swaps and the valuation
inputs are more transparent and readily available.

In the case of credit default swaps written on portfolios of investment-grade
corporate debt, AIGFP estimates the fair value of its obligations by comparing the
contractual premium of each contract to the current market levels of the senior
tranches of comparable credit indices, the iTraxx index for European corporate
issuances and the CDX index for U.S. corporate issuances. These indices are
considered to be reasonable proxies for the referenced portfolios.

AIGFP estimates the fair value of its obligations resulting from credit default swaps
written on CLOs to be equivalent to the par value less the current market value of
the referenced obligation. Accordingly, the value is

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determined by obtaining third-party quotes on the underlying super senior tranches
referenced under the credit default swap contract.

    4.

    You disclose that your modified version of the Binomial Expansion Technique (BET)
model to value your credit default swap portfolio written on super senior tranches of CDOs
of asset-backed securities. Please clarify how the output of the modified BET model
translates into the amount that you would need to pay to a willing, able and knowledgeable
third-party to assume the obligations.

    AIG Response:

    The underlying assumption of the valuation methodology is that, in order to be willing to
assume the obligations under a credit default swap, a market participant would require
payment of the full difference between the cash price of the underlying tranches of the
referenced securities portfolio and the notional amount specified in the credit default
swap.

    The BET model uses assumptions with respect to market prices, weighted average lives and
recovery rates for each underlying security of each CDO, the diversity score of each CDO
and discount rates. In the absence of observable market data for transfers of such
liabilities, AIG believes that the BET model provides a reasonable basis for estimating the
fair value of AIGFP’s credit default swap portfolio.

    5.

    Please revise to disclose how the BET model calculates the probabilistic measure of
expected loss for your credit default swaps. Explain each significant step in the
valuation process.

    AIG Response:

    In response to the Staff’s comment, AIG intends to include additional disclosure in its
Form 10-Q for the quarterly period ended September 30, 2008 as follows (please refer to
Form 10-Q for the Quarter Ended June 30, 2008, page 49):

AIGFP has adapted the BET model inputs so that the model utilizes the price for the
securities underlying the CDO as an input and converts the price to a credit spread
using parameters consistent with those used for valuation. This credit spread is
used to determine implied probabilities of default and expected losses on the
credit default swap. For each individual super senior tranche of the CDO in the
portfolio, the application of the modified BET model to determine the probabilistic
measure of expected loss involves the following steps:

    1)

    Calculation of the cash flow pattern that matches the
weighted average life for each underlying security of the CDO;

    2)

    Calculation of an implied credit spread for each security
from the price and conversion of the spread into the probability of default;

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    3)

    Generation of expected losses for the security using the
probability of default and recovery rate;

    4)

    Aggregation of the cash flows for all securities to create a
cash flow profile of the entire collateral pool within the CDO;

    5)

    Division of the collateral pool into a number of independent
identical securities (idealized securities) based on the CDO’s diversity
score;

    6)

    Simulation of the default behavior of the idealized
securities using a Monte Carlo simulation and aggregation of the results to
derive the effect of the expected losses on the cash flow pattern of the
super senior tranche taking into account the cash flow diversion mechanism of
the CDO;

    7)

    Discounting of the expected cash flows to estimate the value
of the super senior tranche of the CDO; and

    8)

    Adjusting of the model value for the super senior
multi-sector CDO credit default swap for the effect of the risk of
non-performance by AIG using the credit spreads of AIG available in the
marketplace.

    6.

    Please refer to prior comment two of our letter dated June 25, 2008. Please revise
your disclosure to provide a summary that quantifies the CDO pool pricing assumptions for
each period presented, and explains any significant changes between periods.

    AIG Response:

    In response to the Staff’s comment, AIG intends to include additional disclosure in its
Form 10-Q for the quarterly period ended September 30, 2008 as follows (please refer to
Form 10-Q for the Quarter Ended June 30, 2008, page 49):

    The most significant assumption used in the BET model is the pricing of the individual
securities within the CDO collateral pools. The following table summarizes the weighted
average price at June 30, 2008 and September 30, 2008, and the percentage of the total CDO
collateral pools at September 30, 2008, by ABS category.

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    Percentage of

    Weighted

    Total CDO

    Average Price

    Collateral Pools

    Weighted Average

    September 30,

    September 30,

ABS Category

    Price June 30, 2008

    2008

    2008

    Inner CDOs

    XX%

    XX%

    XX
    %

    CMBS

    XX%

    XX%

    XX
    %

    Prime

    XX%

    XX%

    XX
    %

    Alt-A

    XX%

    XX%

    XX
    %

    Subprime

    XX%

    XX%

    XX
    %

    Other

    XX%

    XX%

    XX
    %

    Total

    XX%

    XX%

    100.00
    %

    In addition to the table, AIG will include disclosure in its Form 10-Q for the quarterly
period ended September 30, 2008 for any significant changes between periods.

    7.

    You disclose that the most significant assumption in your CDS valuation is the
pricing of securities within the CDO collateral pools, which you state are “obtained in
most cases from the CDO collateral managers, to the extent available.” Please expand your
disclosure to include the following information:

    •

    Describe the relative significance and effect on the valuation of each pricing
methodology used. (A)

    •

    Describe more specifically the third party pricing services and in-house
valuation models used by collateral managers. (B)

    •

    Describe more specifically your analysis and testing that verifies the accuracy
and completeness of pricing information provided by collateral managers. (C)

    •

    Quantify the impact of the time lag in prices provided by the collateral
managers. Describe how and to what extent this time lag affects your fair value
estimate. (D)

    •

    Describe more specifically the methods and assumptions used to determine
pricing for individual securities when the collateral manager has been unable to
provide this information. (E)

    •

    Explain the relative significance of the Monte Carlo simulation process to the
overall valuation process. If the Monte Carlo simulation process has a material
effect on the valuation, describe the process in more detail. (F)

    AIG Response:

    For the convenience of the Staff, we have labeled the subparts of comment 7 and respond as
follows.

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    A.

    Relative significance and effect on the valuation of each pricing methodology
used

For the quarter ended June 30, 2008, CDO collateral managers provided market prices for
approximately 75 percent of the underlying securities. When a price for an individual
security is not provided by a CDO collateral manager, AIGFP derives the price through a
pricing matrix using prices from CDO collateral managers for similar securities.

    B.

    Third party pricing services and in-house valuation models used by collateral
managers

Based on due diligence, AIGFP determined that approximately 95 percent of the CDO
collateral managers who provide prices use dealer prices for all or part of the underlying
securities, in some cases supplemented by third party pricing services, primarily IDC. AIG
has evaluated IDC’s pricing model in connection with its use of the IDC pricing service for
a significant portion of its investments in similar securities. AIGFP’s due diligence
allowed it to understand how the CDO collateral managers were sourcing the market prices of
the underlying securities.

    C.

    Analysis and testing that verifies the accuracy and completeness of pricing
information provided by collateral managers

AIGFP reviews general trends in the pricing data for consistency with market observations.
The pricing information obtained from the CDO collateral managers is also indirectly
validated by comparing the BET model results to the prices collected from third parties for
the super senior tranches of the CDOs and to the prices inferred from collateral calls
received from AIGFP’s counterparties.

    D.

    Time lag

The time lag is approximately one month. AIGFP rolls forward these prices to the end of the
quarter using data provided by a third-party pricing service. Therefore, the inputs to the
model reflect the market information available as of the end of the quarter. Further, the
output of the valuation model is compared to current market information to ensure that it
reflects the current market conditions and thus the quarter-end pricing reflects fair value
as of that date.

    E.

    Methods and assumptions used to determine pricing for individual securities
when the collateral manager has been unable to provide this information

When a price for an individual security is not provide