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CORRESP
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CORRESP

March 18, 2009

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 Fiscal Year Ended December 31, 2007

Form 10-Q for Fiscal Quarter Ended September 30, 2008

File No. 1-8787

Dear Mr. Rosenberg:

We are in receipt of your letter dated February 25, 2009 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.

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.

General

    1.

    Please refer to prior comment one. Your proposed disclosure primarily addresses your
accounting for the Maiden Lane III agreement under SFAS 159, and does not appear to address
the accounting for the Maiden Lane II agreement. Please revise your disclosure to explain how
each payment made or received by AIGFP under the Maiden Lane II and III agreements was
recorded, including whether any gain or loss was recognized. Please link this disclosure to
the related amounts that were previously recorded in your financial statements, including the
related derivative liabilities and any amounts of collateral posted and received.

    AIG Response:

    The accounting for and the payments made and received under the Maiden Lane II agreement are
disclosed on pages 250 and 251 of AIG’s Form 10-K for Fiscal Year Ended December 31, 2008 (2008
Form 10-K). This disclosure also links the related amounts to previously recorded amounts in
AIG’s financial statements. The Maiden Lane II transaction related to the sale of securities
previously included in AIG’s U.S. securities lending program. AIGFP was not involved in the
Maiden Lane II transaction; therefore payments made or received under the Maiden Lane II
agreement had no effect on AIGFP.

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    The payments made and received, including collateral amounts posted and received, under the
Maiden Lane III agreement, are described on pages 136, 137 and 251. This disclosure links the
related amounts to previously recorded amounts in AIG’s financial statements.

    AIG was exposed to changes in fair values of the underlying assets in the securities lending
program as of October 31, 2008. AIG was also exposed to the derivative liabilities in the credit
default swaps portfolio through October 31, 2008 after taking into account the provisions of the
shortfall agreement between AIG and ML III.
Accordingly, as disclosed in the first bullet point on page 64 of AIG’s 2008 Form 10-K, AIG
recognized $1.6 billion of realized capital losses, after tax, during the fourth quarter of
2008 on the assets in the U.S. securities lending program. In addition, AIGFP recognized $2.6
billion of unrealized market valuation losses, after tax, during the fourth quarter of 2008 on
the super senior credit default swaps related to the CDS terminated in connection with ML III.
This amount is included in the $4.5 billion of unrealized market valuation losses, after tax,
disclosed in the third bullet point on page 64.

10-Q for the Fiscal Quarter Ended September 30, 2008

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

Critical Accounting Estimates

AIGFP’s Super Senior Credit Default Swap Portfolio, page 113

    2.

    We acknowledge your revised disclosure in response to prior comment seven. We continue to
believe that you should provide additional quantified data conveying the nature and quality of
the underlying securities and a comparison of the subordination at transaction inception to
the subordination at the balance sheet date for your regulatory capital relief trades, similar
to that which you have agreed to provide for your multi-sector CDOs. While you disclose that
you do not expect to make payments pursuant to the contractual terms of the regulatory capital
relief trades, the disclosure on page eight of your response does not enable an investor to
quantify the potential exposure relating to each underlying transaction. Please revise your
disclosure accordingly.

    AIG Response:

    In response to the Staff’s comment, AIG will provide additional disclosure to present a
comparison of the subordination at transaction inception to the subordination at the balance
sheet date for the regulatory capital relief trades in its Form 10-Q for the quarterly period
ended March 31, 2009 (First Quarter 2009 Form 10-Q) as follows:

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The following table presents, for each of the regulatory capital CDS transactions, the net
notional amount at March 31, 2009, attachment points at inception and at March 31, 2009,
and inception to date realized losses through March 31, 2009:

(Dollars in millions)

    Net Notional

    Realized Losses

    Amount at

    Attachment Point

    Attachment Point

    through March 31,

    CDS

    Type

    March 31, 2009

    at Inception(a)

    at March 31,2009(a)

    2009(b)

    1

    2

    3

    ...

    Total

    (a)

    Expressed as a percentage of gross transaction notional amount of the referenced
obligations.

    (b)

    Represents realized losses incurred by the transaction (defaulted amounts less amounts
recovered) from inception through March 31, 2009 expressed as a percentage of the initial
gross transaction notional amount.

    AIG evaluated the data that is available to AIGFP in respect of these regulatory capital CDS
transactions and assessed which of the available data would be helpful to users of financial
information in understanding the credit quality of the assets (predominantly loans) underlying
these CDS transactions. Based on available data, AIG does not believe that it can provide
additional useful information as to the credit quality of the underlying assets. First, the
nature of the information provided to AIGFP by the trustees for each transaction is not
consistent across all transactions. For example, the vast majority of the assets underlying
these transactions are not rated by nationally recognized statistical rating organizations.
Thus, any rating information provided to AIG for these transactions represents internal ratings
of the counterparties and AIG is unable to assess the comparability of these ratings either to
those provided by nationally recognized statistical rating agencies or between counterparties.
Second, many of the regulatory capital CDS transactions relate to assets actually held by the
counterparties and, in a number of cases, AIG is precluded by confidentiality agreements from
disclosing information with respect to these assets, including the internal ratings.

    As a result of the limited data available to AIGFP, AIG does not believe that it can provide
accurate, comparable quantitative information with respect to the credit quality of the
underlying assets. However, AIG will provide information with respect to realized losses, as an
indication of the overall quality of the underlying assets.

    3.

    Please refer to the proposed disclosure on page 23 of your response. Please revise to provide
similar disaggregated information with respect to CLOs that would enable an investor to
evaluate the nature and quality of the assets underlying the insured obligations. Also, for
credit default swaps related to corporate debt and CLOs, please provide quantified information
depicting subordination at both transaction inception and at the balance sheet date. Given
that the derivative liabilities relating to the corporate debt/CLO portfolios have increased
significantly during the year ended December 31, 2008, please consider whether the corporate
debt and CLO portfolios should be separately disclosed in the table on page 16 of your
response and elsewhere, as appropriate.

    AIG Response:

    As indicated on page 139 of AIG’s 2008 Form 10-K, the net notional amount of the credit default
swaps written on super senior tranches of CLOs at December 31, 2008 was $1.5 billion. Given the
relatively small size of AIG’s exposure to these transactions, AIG believes that presenting
separate tables would not provide meaningful information to users of financial information.
However, AIG will include the CLO transactions with the corporate debt

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    transactions in the First Quarter 2009 Form 10-Q table that corresponds to the table on page
139 of 2008 Form 10-K. Further, AIG will provide additional disclosure to present a comparison
of the subordination at transaction inception to the subordination at the balance sheet date
for the CDS transactions related to corporate debt and CLOs in its First Quarter 2009 Form 10-Q
as follows:

The following table presents, for each of the corporate debt and CLO CDS transactions, the
net notional amount at March 31, 2009, attachment points at inception and at March 31,
2009, and inception to date defaults through March 31, 2009:

(Dollars in millions)

    CDS

    Type

    Net Notional
Amount at
March 31, 2009

    Attachment Point
at Inception(a)

    Attachment Point at
March 31, 2009(a)

    Defaults through
March 31, 2009(b)

    1

    2

    3

    ...

    Total

    (a)

    Expressed as a percentage of gross transaction notional amount of the referenced
obligations.

    (b)

    Represents defaults (assets that are technically defaulted but the losses have not yet
been realized) from inception through March 31, 2009 expressed as a percentage of the gross
transaction notional amount at March 31, 2009.

    4.

    Please refer to the proposed disclosure on page 16 of your response. Please revise your
proposed disclosure to clarify how the ML III transaction affects the information presented in
the table. For example, the reference in footnote (f) to realized gains appears to be
inconsistent with the tabular column heading depicting unrealized gains. Consider whether the
format of this disclosure should be revised such that realized losses are shown in a separate
column.

    AIG Response:

    AIG revised the proposed disclosure to clarify how the ML III transaction affects the
information presented in the table on page 131 of its 2008 Form 10-K.

    5.

    Please refer to prior comment nine. We acknowledge your statement that you are unable to
predict reasonably likely changes in the prices of the securities underlying a CDO. However,
we continue to believe that your disclosure should be revised to explain whether the range of
bond prices used in your sensitivity analysis is consistent with recent observed historical
activity. If this is not the case, please disclose why you selected a range of prices that
differs from recent historical activity, and why you believe the resulting analysis is
meaningful to an investor. For each material input to the BET model, disclose the factors you
used to determine the range used in your analysis.

    AIG Response:

    AIG revised the proposed disclosure to include the CDO price declines in 2008 on page 150 of
its 2008 Form 10-K. While AIG believes that the ranges used in the sensitivity analyses are
reasonable, given the current market conditions, AIG is unable to predict which of the
scenarios is most likely to occur. As recent experience demonstrates, actual results in any

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    period are likely to vary, perhaps materially, from the modeled scenarios, and there can be no
assurance that the unrealized market valuation losses related to the AIGFP super senior credit
default swap portfolio will be consistent with any of the sensitivity analyses. On average for
any quarterly period during 2008, prices for CDOs declined between 6.14 percent and 11.93
percent of the notional amount outstanding. Further, it is difficult to extrapolate future
experience based on current dislocated market conditions.

    The 5 point ranges used in the sensitivity analysis for the estimated price of the securities
within the CDO collateral pools represent 15 percent variances from the actual input used at
December 31, 2008. In future filings AIG will also quantify the percentage change of the
current inputs that 5 points represents. The one-year changes in the weighted average life
represent 20 percent variances from the actual input used. The weighted average life of the
underlying securities has historically been between 4 and 6 years. In future filings AIG will
note that the change in the weighted average life is consistent with AIGFP’s historical
experience.

    6.

    Please refer to Appendix 2 of your response. Please disclose the actual input used at the
balance sheet date in order to provide appropriate context for the sensitivities you are
quantifying. Please also provide quantified sensitivity for each of the three primary factors
effecting estimated future cash flows.

    AIG Response:

    Fair value estimates for AIG’s interests in Maiden Lane II and III are based on estimated
future cash flows from the collateral and relevant discount rates derived from the entire asset
pool. Under the terms of the arrangement through which AIG collects this data, non-disclosure
agreements limit the ability to provide the information requested. Because the Maiden Lane
Interests constituted less than one percent of total assets at December 31, 2008, AIG does not
conduct analysis on performance data of the underlying mortgage loan portfolios, and the
sensitivities. Therefore, AIG does not have or have ready access to quantitative data about the
impact of changes in other variables such as underlying prepayments, housing price
appreciation, or default assumptions. The sensitivities to changes in cash flows and the
applicable discount rates have been provided, and we believe these effectively demonstrate the
risk to adverse changes in the fair values in our Maiden Lane Interests.

    Very truly yours,

    /s/ Kathleen E. Shannon

Kathleen E. Shannon

    Senior Vice President, Secretary & Deputy General Counsel

    cc:

    Frank Wyman, Staff Accountant

Carl Tartar, Accounting Branch Chief

(Securities and Exchange Commission)

    David Herzog

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