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CORRESP
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CORRESP

[AIG Letterhead]

November 21, 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-Q for the Fiscal Quarter Ended June 30, 2008

File No. 1-8787

Dear Mr. Rosenberg:

We are in receipt of your letter dated October 2, 2008 and thank you for your comments concerning
American International Group, Inc.’s (AIG) captioned filings. This letter sets forth AIG’s
responses to each of the Staff’s comments contained in your letter. This letter and the attachment
also set forth AIG’s responses to the items discussed with various members of the Staff of the
Commission on Friday, November 7, 2008 regarding American
International Group, Inc.’s captioned filings.

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.

As disclosed in Note 11 to the Consolidated Financial Statements “Subsequent Events”, AIG and the
Federal Reserve Bank of New York (NY Fed) expect to establish a
facility in which a newly formed limited liability company (the CDO
LLC) will offer to purchase collateralized debt obligations (CDOs) from the counterparties, who will concurrently with such purchase
terminate the related credit default swaps. AIG Financial Products
Corp. and AIG Trading Group Inc. and their respective subsidiaries
(AIGFP) and the NY Fed have begun negotiating the
terminations; depending on the level of counterparty participation, on the closing date, the NY Fed
will advance up to $30 billion and AIG will advance $5 billion to the CDO LLC to fund the purchase price of such CDOs. Separately, AIG will pay the costs
associated with the unwind of the related credit default swaps (CDSs) and so will bear the risk of declines in the market
value of the CDOs through October 31, 2008. After the closing date, AIGFP will not be subject to
any further collateral calls related to the terminated CDSs.

Upon
closing this transaction will remove much of the uncertainty surrounding the super senior
credit default swap portfolio by limiting AIG’s exposure to the multi-sector credit default swap
portfolio. If this transaction closes as expected during the fourth
quarter,  AIG will reconsider its future disclosures
with respect to the super senior credit default swap portfolio  and may determine that certain of the disclosures are
unnecessary.

We have repeated your questions below to facilitate your review.

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

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

Critical Accounting Estimates

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

    1.

    Please revise your disclosure to address the points below for each asset class, or subset
of asset class, to the extent material. Our primary objective is to facilitate investors’
understanding of the risks inherent in your credit default swap portfolio, as well as the
effects that this portfolio has had and may be expected to have on the Company’s financial
position, liquidity and operating results. We believe that modifying the disclosure you
proposed in your September 16th letter to address these points

    may help to achieve these objectives. However, we recognize that the Company’s management is
in the best position to determine the disclosures necessary to achieve these objectives.
Therefore, we encourage you to consider and advise us whether different or incremental
disclosure would best achieve these objectives.

    •

    Describe more specifically the terms of all material defined credit events and
collateral posting requirements in your credit default swap contracts, as well as the
events and conditions that trigger them. (A)

    •

    For multi-sector CDOs, quantify the notional amounts and the nature and type of the
underlying securities as a percentage of the notional amounts, such as residential
mortgage backed securities (i.e. prime, sub-prime, and Alt-A), commercial mortgage backed
securities, corporate, and other CDO’s. Also, disclose information about credit ratings
and vintage. Please link this data to the derivative asset or liability recorded on the
balance sheet. (B)

    •

    For contracts where collateral obligations have been or are reasonably likely to be
triggered, present data quantifying and describing the collateral you have posted at the
balance sheet date, the reasonably likely amounts of collateral that you could be
required to post, and the maximum amount of collateral that you would be required to
post. For the reasonably likely additional amounts of collateral, please address why such
amounts are reasonably likely in the context of the contractual trigger that would
require additional collateral to be posted. Please link this data to the derivative asset
or liability recorded on the balance sheet. (C)

    •

    For contracts where a payment obligation has been or is reasonably likely to be
triggered, present data quantifying and describing the amounts due and the timing of
those amounts. For payment obligations that have been incurred, please state where the
payment obligations are recorded on the balance sheet. (D)

    •

    Present quantified data that helps facilitate an understanding of the amount of
additional defaults that would need to occur before you would be required to either make
payments or post collateral, and your analysis of the likelihood of such events
occurring. For example, consider presenting data depicting the original level of
subordination below the super senior risk layer, the current level of subordination, and
the effect and expected effects of any deterioration on your liquidity. Please link this
data to the derivative asset or liability recorded on the balance sheet. (E)

    AIG Response:

    For the convenience of the Staff, we have labeled the subparts of comment 1 and respond as
follows.

    A.

    Describe more specifically the terms of all material defined credit events and collateral
posting requirements in your credit default swap contracts, as well as the events and
conditions that trigger them.

    In response to the Staff’s comment, AIG has included additional disclosure on pages 114 to 120
of its Form 10-Q for the quarterly period ended September 30, 2008, to describe more
specifically the terms of all material defined credit events and collateral posting
requirements in AIGFP’s credit default swap contracts, as well as the events and conditions
that trigger them, as follows:

    General Contractual Terms

    AIGFP entered into credit default swap and other credit derivative transactions
(collectively, CDS) in the ordinary course of its business. In the majority of AIGFP’s
credit derivatives transactions, AIGFP sold credit protection on a designated portfolio of
loans or debt securities. Generally, AIGFP provides such credit protection on a “second
loss” basis, meaning that AIGFP will incur credit losses only after a shortfall of
principal and/or interest, or other credit events, in respect of the protected loans and
debt securities, exceed a specified threshold amount or level of “first loss.”

    Typically, the credit risk associated with a designated portfolio of loans or securities
has been tranched into different layers of risk, which are then analyzed and rated by the
credit rating agencies. At origination, there is usually an equity layer covering the first
credit losses in respect of the portfolio up to a specified percentage of the total
portfolio, and then successive layers ranging from generally a BBB-rated layer to one or
more AAA-rated layers. A significant majority of transactions that are rated by rating
agencies have risk layers or tranches that were rated AAA at origination and are
immediately junior to the threshold level above which AIGFP’s payment obligation would
generally arise. In transactions that were not rated, AIGFP applied equivalent risk
criteria for setting the threshold level for its payment obligations. Therefore, the risk
layer assumed by AIGFP with respect to the designated portfolio of loans or securities in
these

2

    transactions is often called the “super senior” risk layer, defined as a layer of credit
risk senior to one or more risk layers that have been rated AAA by the credit rating
agencies, or if the transaction is not rated, structured to the equivalent thereto.

    The following graphic represents a typical structure of a transaction including the super
senior risk layer:

    Regulatory Capital Portfolio

    Approximately $250 billion (consisting of corporate loans and prime residential mortgages)
of the $377 billion in net notional exposure of AIGFP’s super senior credit default swap
portfolio as of September 30, 2008 represented derivatives written for financial
institutions, principally in Europe, for the purpose of providing regulatory capital relief
rather than risk mitigation. In exchange for a periodic fee, the counterparties receive
credit protection with respect to diversified loan portfolios they own, thus improving
their regulatory capital position. These transactions generally provide for cash settlement
(see Triggers and Settlement Alternatives below); however, AIGFP does not expect to be
required to make payments under these contracts during their estimated life as these
transactions are generally expected to terminate at no additional cost to AIGFP when the
transactions no longer provide such regulatory capital benefit. See Regulatory Models and
Modeling — Regulatory Capital Portfolio.

    Arbitrage Portfolio

    Approximately $122 billion of the $377 billion in net notional exposure on AIGFP’s super
senior credit default swaps as of September 30, 2008 are arbitrage-motivated transactions
written on multi-sector CDOs or designated pools of investment grade corporate debt or
CLOs. While certain credit default swaps written on corporate debt and multi-sector CDOs
provide for cash settlement, the large majority of the AIGFP credit default swaps written
on multi-sector CDOs and CLOs require physical settlement (see Triggers and Settlement
Alternatives below).

    The most significant portfolio, in terms of unrealized market valuation losses, is the
super senior multi-sector CDO credit default swap portfolio.

    At September 30, 2008, the gross transaction notional amount of the multi-sector CDOs on
which AIGFP wrote protection on the super senior tranche, subordination below the super
senior risk layer and AIGFP net notional exposure were as follows:

    Fair Value

    Gross

    Subordination

    of Derivative

    Transaction

    Below Super

    Net

    Liability at

    Notional

    Senior

    Notional

    September 30,

    (in millions)

    Amount(a)

    Risk Layer

    Amount(b)

    2008

    High grade with sub-prime collateral

    $
    50,582

    $
    9,751

    $
    40,831

    $
    18,201

    High grade with no sub-prime collateral

    30,284

    14,581

    15,703

    4,195

    Total high grade(c)

    80,866

    24,332

    56,534

    22,396

    Mezzanine with sub-prime

    25,888

    11,575

    14,313

    7,487

    Mezzanine with no sub-prime

    1,698

    901

    797

    324

    Total mezzanine(d)

    27,586

    12,476

    15,110

    7,811

    Total

    $
    108,452

    $
    36,808

    $
    71,644

    $
    30,207

    (a)

    Total outstanding principal amount of securities held by a
CDO.

    (b)

    Notional size on which AIGFP wrote credit protection.

    (c)

    “High grade” refers to transactions in which the underlying collateral credit
ratings on a stand-alone basis were predominantly AA or higher at origination.

    (d)

    “Mezzanine” refers to transactions in which the underlying collateral credit
ratings on a stand-alone basis were predominantly A or lower at origination.

    At September 30, 2008, the gross notional amount, percentage of the total CDO collateral
pools, and ratings and vintage breakdown of collateral securities in the multi-sector CDOs,
by ABS category, were as follows:

3

    (dollars in millions)

    ABS

    Gross Transaction

    Percent

    RATINGS BREAKDOWN

    VINTAGE

    Category

    Notional Amount

    of Total

    AAA

    AA

    A

    BBB

    BB

    <BB

    NR

    2008

    2007

    2006

    2005

    2004+P

    RMBS PRIME

    $
    12,280

    11.33
    %

    8.13
    %

    0.97
    %

    0.88
    %

    0.68
    %

    0.17
    %

    0.49
    %

    0.01
    %

    0.08
    %

    2.39
    %

    2.37
    %

    3.36
    %

    3.13
    %

    RMBS ALT-A

    17,086

    15.75
    %

    6.99
    %

    2.48
    %

    1.87
    %

    1.34
    %

    0.78
    %

    2.29
    %

    0.00
    %

    0.16
    %

    1.40
    %

    3.41
    %

    7.92
    %

    2.86
    %

    RMBS SUBPRIME

    40,262

    37.12
    %

    2.07
    %

    8.11
    %

    5.56
    %

    5.05
    %

    3.44
    %

    12.89
    %

    0.00
    %

    0.01
    %

    2.48
    %

    2.61
    %

    20.55
    %

    11.47
    %

    CMBS

    23,271

    21.46
    %

    15.88
    %

    0.99
    %

    1.25
    %

    2.38
    %

    0.51
    %

    0.12
    %

    0.33
    %

    0.08
    %

    5.73
    %

    3.55
    %

    2.77
    %

    9.33
    %

    CDO

    10,196

    9.40
    %

    1.27
    %

    1.61
    %

    1.37
    %

    1.04
    %

    0.66
    %

    3.41
    %

    0.04
    %

    0.00
    %

    0.32
    %

    1.12
    %

    3.20
    %

    4.76
    %

    OTHER

    5,357

    4.94
    %

    1.18
    %

    1.06
    %

    1.38
    %

    1.23
    %

    0.02
    %

    0.06
    %

    0.01
    %

    0.12
    %

    0.24
    %

    0.86
    %

    1.46
    %

    2.26
    %

    Total

    $
    108,452

    100.00
    %

    35.52
    %

    15.22
    %

    12.31
    %

    11.72
    %

    5.58
    %

    19.26
    %

    0.39
    %

    0.45
    %

    12.56
    %

    13.92
    %

    39.26
    %

    33.81
    %

Triggers and Settlement Alternatives

CDS transactions entered into by counterparties for regulatory capital purposes, together
with a number of arbitrage transactions (comprising approximately $47 billion or 38.6
percent of the net notional amount for the arbitrage portfolio at September 30, 2008), have
cash-settled structures (see Cash Settlement below) in respect of a basket of reference
obligations, where AIGFP’s payment obligations may be triggered by payment shortfalls,
bankruptcy and certain other events such as write-downs of the value of underlying assets
as further described below. By contrast, under the large majority of CDS transactions in
respect of multi-sector CDOs (comprising approximately $57 billion or 46.5 percent of the
net notional amount for the arbitrage portfolio at September 30, 2008) AIGFP’s payment
obligations are triggered by the occurrence of a non-payment event under a single reference
CDO security, and performance is limited to a single payment by AIGFP in return for
physical delivery by the counterparty of the reference security. See Physical Settlement
below. A number of CDS transactions in respect of CLOs have similar settlement mechanisms.
In addition, the arbitrage portfolio includes transactions with a net notional amount of
$4.9 billion that allow holders to put securities to AIGFP at par in the event of a failed
remarketing of the referenced security. AIGFP cannot currently determine if and when it may
be