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Consolidated Balance Sheet - USD ($) $ in Millions	6 Months Ended
Consolidated Balance Sheet - USD ($) $ in Millions	Jun. 30, 2009	Jun. 30, 2008	Dec. 31, 2008
Fixed Maturities Abstract
us-gaap:AvailableForSaleSecuritiesDebtSecurities	$ 353,708		$ 363,042
us-gaap:TradingSecuritiesDebt	31,359		37,248
us-gaap:SecuritiesReceivedAsCollateral	1,108		3,844
Equity Securities Abstract
us-gaap:AvailableForSaleSecuritiesEquitySecurities	9,289		8,808
us-gaap:TradingSecuritiesEquity	13,214		12,335
aig:MortgageAndOtherLoansReceivableNet	32,380		34,687
us-gaap:LoansAndLeasesReceivableNetReportedAmountConsumer	25,342		30,949
aig:FlightEquipmentNet	44,692		43,395
us-gaap:OtherInvestments	43,596		51,978
Securities purchased under agreements to resell, at fair value	4,481		3,960
us-gaap:OtherShortTermInvestments	59,336		46,666
Total investments	618,505		636,912
us-gaap:Cash	5,802	$ 2,229	8,642
us-gaap:AccruedInvestmentIncomeReceivable	5,530		5,999
us-gaap:PremiumsAndOtherReceivablesNet	17,382		17,330
us-gaap:ReinsuranceRecoverables	22,364		23,495
us-gaap:OtherReceivablesFromBrokerDealersAndClearingOrganizations	817		1,901
aig:CurrentAndDeferredIncomeTaxes	11,136		11,734
Deferred policy acquisition costs	44,176		45,782
us-gaap:PropertyPlantAndEquipmentNet	4,984		5,566
Unrealized gain on swaps, options and forward transactions, at fair value	11,239		13,773
us-gaap:Goodwill	6,439		6,952
Other assets, including prepaid commitment asset of $13,814 in 2009 and $15,458 in 2008 (portion measured at fair value: 2009 - $306; 2008 - $369)	28,570		31,190
us-gaap:SeparateAccountAssets	53,468		51,142
us-gaap:Assets	830,412		860,418
Liabilities:
Liability for unpaid claims and claims adjustment expense	82,088		89,258
us-gaap:UnearnedPremiums	23,371		25,735
aig:FuturePolicyBenefitsForLifeAndAccidentAndHealthInsuranceContracts	145,715		142,334
Policyholder contract deposits (portion measured at fair value: 2009 - $7,273; 2008 - $5,458)	218,433		226,700
us-gaap:OtherPolicyholderFunds	13,623		13,240
us-gaap:AccountsPayableCurrentAndNoncurrent	5,203		5,436
aig:InsuranceBalancesPayable	4,722		3,668
Funds held by companies under reinsurance treaties	2,106		2,133
us-gaap:SecuritiesSoldUnderAgreementsToRepurchase	3,191		5,262
us-gaap:PayablesToBrokerDealersAndClearingOrganizations	780		977
us-gaap:FinancialInstrumentsSoldNotYetPurchasedAtFairValue	1,242		2,693
us-gaap:DerivativeLiabilities	4,876		6,238
Trust deposits and deposits due to banks and other depositors (portion measured at fair value: 2009 - $26; 2008 - $30)	2,687		4,498
us-gaap:ShortTermBorrowings	197		613
aig:FrbnyCommercialPaperFundingFacility	11,152		15,105
aig:FrbnyCreditFacility	44,816		40,431
us-gaap:OtherLongTermDebt	123,528		137,054
us-gaap:ObligationToReturnSecuritiesReceivedAsCollateral	1,533		2,879
us-gaap:OtherLiabilities	24,476		22,296
us-gaap:SeparateAccountsLiability	53,468		51,142
Total liabilities	$ 767,207		797,692
us-gaap:CommitmentsAndContingencies2009
us-gaap:TemporaryEquityRedemptionValue	$ 1,072		1,921
Stockholders Equity Abstract
Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued: 2009 -147,377,020; 2008 - 147,401,900	368		368
us-gaap:TreasuryStockValue	(8,314)		(8,450)
Additional paid-in capital	80,259		79,468
us-gaap:RetainedEarningsAccumulatedDeficit	(3,073)		(12,368)
Accumulated other comprehensive loss	(11,286)		(6,328)
us-gaap:StockholdersEquity	57,958		52,710
Noncontrolling interest	4,175		8,095
us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest	62,133		60,805
Total liabilities and equity	830,412		860,418
Preferred Stock Series EMember
Stockholders Equity Abstract
us-gaap:PreferredStockValue	2		0
Preferred Stock Series FMember
Stockholders Equity Abstract
us-gaap:PreferredStockValue	1		0
Preferred Stock Series CMember
Stockholders Equity Abstract
us-gaap:PreferredStockValue	1		0
Preferred Stock Series DMember
Stockholders Equity Abstract
us-gaap:PreferredStockValue	$ 0		$ 20

Consolidated Statement of Shareholders Equity - USD ($)

3 Months Ended

6 Months Ended

Jun. 30, 2009

Mar. 31, 2009

Jun. 30, 2009

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

$ 60,805,000,000

us-gaap:ProfitLoss

$ 1,845,000,000

(3,288,000,000)

aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnFixedMaturityInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenBeforeTaxes

1,112,000,000

aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnFixedMaturityInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenTaxes

(450,000,000)

aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnAllInvestmentsOtherThanInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenBeforeTaxes

8,957,000,000

5,585,000,000

aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnAllInvestmentsOtherThanInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenTaxes

(3,863,000,000)

(2,471,000,000)

us-gaap:OtherComprehensiveIncomeForeignCurrencyTransactionAndTranslationAdjustmentBeforeTaxPeriodIncreaseDecrease

1,936,000,000

995,000,000

us-gaap:OtherComprehensiveIncomeForeignCurrencyTranslationAdjustmentTax

(618,000,000)

(409,000,000)

us-gaap:OtherComprehensiveIncomeDerivativesQualifyingAsHedgesBeforeTaxPeriodIncreaseDecrease

45,000,000

71,000,000

us-gaap:OtherComprehensiveIncomeDerivativesQualifyingAsHedgesTaxEffectPeriodIncreaseDecrease

(48,000,000)

(21,000,000)

us-gaap:OtherComprehensiveIncomeDefinedBenefitPlansTax

(12,000,000)

(30,000,000)

us-gaap:ProceedsFromMinorityShareholders

(463,000,000)

us-gaap:PaymentsToMinorityShareholders

(264,000,000)

us-gaap:OtherComprehensiveIncomeLossNetOfTaxPeriodIncreaseDecrease

7,092,000,000

4,473,000,000

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

62,133,000,000

Parent Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

57,958,000,000

Equity Component Preferred Stock Series EMember

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

us-gaap:StockIssuedDuringPeriodValueNewIssues

2,000,000

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

2,000,000

Equity Component Preferred Stock Series FMember

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

us-gaap:StockIssuedDuringPeriodValueNewIssues

1,000,000

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

1,000,000

Equity Component Preferred Stock Series CMember

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

us-gaap:StockIssuedDuringPeriodValueNewIssues

1,000,000

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

1,000,000

Equity Component Preferred Stock Series DMember

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

20,000,000

aig:ExchangeOfSeriesDPreferredStockForSeriesEPreferredStock

(20,000,000)

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

Common Stock Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

368,000,000

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

368,000,000

Treasury Stock Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(8,450,000,000)

us-gaap:StockIssuedDuringPeriodValueTreasuryStockReissued

136,000,000

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(8,314,000,000)

Additional Paid In Capital Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

79,468,000,000

us-gaap:StockIssuedDuringPeriodValueNewIssues

1,000,000,000

aig:AdjustmentToAdditionalPaidInCapitalReclassificationOfWarrantsUponAdoptionOfNewAccountingPrinciple

(91,000,000)

aig:ExcessOfCostOverProceedsOfCommonStockIssuedUnderStockPlans

(136,000,000)

aig:AdjustmentsToAdditionalPaidInCapitalOther

18,000,000

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

80,259,000,000

Retained Earnings Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(16,706,000,000)

us-gaap:ProfitLoss

1,822,000,000

(4,353,000,000)

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(3,073,000,000)

(16,706,000,000)

(3,073,000,000)

Retained Earnings Member | Scenario Previously Reported Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(12,368,000,000)

Retained Earnings Member | Scenario Adjustment Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(4,895,000,000)

(12,353,000,000)

us-gaap:CumulativeEffectOfInitialAdoptionOfNewAccountingPrinciple

15,000,000

aig:CumulativeEffectOfAdoptionOfAccountingPrincipleDuringInterimPeriod

11,811,000,000

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(4,895,000,000)

Accumulated Other Comprehensive Income Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(11,286,000,000)

Accumulated Net Unrealized Gain Loss Of Fixed Maturity Investments On Which Other Than Temporary Impairments Were Taken Net Of Tax Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(599,000,000)

aig:CumulativeEffectOfAdoptionOfAccountingPrincipleDuringInterimPeriod

(2,537,000,000)

aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnFixedMaturityInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenBeforeTaxes

1,111,000,000

aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnFixedMaturityInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenTaxes

(450,000,000)

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(2,475,000,000)

Accumulated Net Unrealized Gain Loss Of All Investments Other Than Investments On Which Temporary Impairments Were Taken Net Of Tax Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(3,853,000,000)

aig:CumulativeEffectOfAdoptionOfAccountingPrincipleDuringInterimPeriod

(6,811,000,000)

aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnAllInvestmentsOtherThanInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenBeforeTaxes

5,496,000,000

aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnAllInvestmentsOtherThanInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenTaxes

(2,471,000,000)

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(7,639,000,000)

Accumulated Translation Adjustment Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(187,000,000)

us-gaap:OtherComprehensiveIncomeForeignCurrencyTransactionAndTranslationAdjustmentBeforeTaxPeriodIncreaseDecrease

1,002,000,000

us-gaap:OtherComprehensiveIncomeForeignCurrencyTranslationAdjustmentTax

(409,000,000)

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

406,000,000

Accumulated Net Gain Loss From Designated Or Qualifying Cash Flow Hedges Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(191,000,000)

us-gaap:OtherComprehensiveIncomeDerivativesQualifyingAsHedgesBeforeTaxPeriodIncreaseDecrease

71,000,000

us-gaap:OtherComprehensiveIncomeDerivativesQualifyingAsHedgesTaxEffectPeriodIncreaseDecrease

(21,000,000)

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(141,000,000)

Accumulated Defined Benefit Plans Adjustment Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(1,498,000,000)

us-gaap:OtherComprehensiveIncomeReclassificationOfDefinedBenefitPlansNetGainLossRecognizedInNetPeriodicBenefitCostBeforeTax

97,000,000

us-gaap:OtherComprehensiveIncomeAmortizationOfDefinedBenefitPlanNetPriorServiceCostCreditRecognizedInNetPeriodicBenefitCostBeforeTax

(6,000,000)

us-gaap:OtherComprehensiveIncomeDefinedBenefitPlansTax

(30,000,000)

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

(1,437,000,000)

Noncontrolling Interest Member

Increase Decrease In Stockholders Equity Roll Forward

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

$ 8,095,000,000

8,095,000,000

us-gaap:ProfitLoss

^[1]

(935,000,000)

us-gaap:ProceedsFromMinorityShareholders

475,000,000

us-gaap:PaymentsToMinorityShareholders

(264,000,000)

aig:NoncontrollingInterestNetDecreaseDueToDeconsolidation

(3,306,000,000)

us-gaap:OtherComprehensiveIncomeLossNetOfTaxPeriodIncreaseDecrease

110,000,000

us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest

$ 4,175,000,000

[1]	A net gain of $178 million was recognized in the six-month period ended June 30, 2009 associated with redeemable noncontrolling interests (not reflected above).

Consolidated Statement of Cash Flows - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2008	Jun. 30, 2009	Jun. 30, 2008
Cash And Cash Equivalents Period Increase Decrease Abstract
Net cash provided by operating activities		$ 8,036	$ 16,128
us-gaap:NetCashProvidedByUsedInInvestingActivities		7,534	(22,140)
us-gaap:NetCashProvidedByUsedInFinancingActivities		(18,441)	5,912
Effect of exchange rate changes on cash		31	45
aig:CashPeriodIncreaseDecrease		(2,840)	(55)
us-gaap:Cash		8,642	2,284
us-gaap:Cash	$ 2,229	5,802	2,229
Cash flows from operating activities:
us-gaap:ProfitLoss	(5,399)	(3,288)	(13,126)
Adjustments Noncash Items To Reconcile Net Income Loss To Cash Provided By Used In Operating Activities Abstract
aig:GainLossOnUnrealizedMarketValuation		(184)	14,672
aig:GainLossOnSaleOfSecuritiesAvailableForSaleAndOtherAssetsNet		(868)	(494)
us-gaap:DisposalGroupNotDiscontinuedOperationGainLossOnDisposal		316
us-gaap:ForeignCurrencyTransactionGainLossUnrealized		413	857
aig:UnrealizedGainLossOnNonAigfpDerivativesAndOtherAssetsAndLiabilities		(4,452)	2,086
us-gaap:IncomeLossFromEquityMethodInvestmentsNetOfDividendsOrDistributions		1,912	(151)
Amortization of deferred policy acquisition costs		6,347	7,343
Depreciation and other amortization		1,454	1,799
us-gaap:ProvisionForLoanLeaseAndOtherLosses		1,526	578
Other-than-temporary impairments		4,970	12,370
us-gaap:RestructuringCostsAndAssetImpairmentCharges		867	97
aig:AmortizationFrnybCreditFacility		2,829
Changes in operating assets and liabilities:
aig:ChangeInGeneralAndLifeInsuranceReserves		2,027	9,748
aig:ChangeInPremiumsAndInsuranceBalancesReceivableAndPayableNet		320	(1,104)
us-gaap:IncreaseDecreaseInReinsuranceRecoverable		1,127	196
Capitalization of deferred policy acquisition costs		(6,406)	(9,160)
Investment income due and accrued		362	118
us-gaap:IncreaseDecreaseInFundsHeldUnderReinsuranceAgreements		(1)	(25)
us-gaap:IncreaseDecreaseInOtherPolicyholderFunds		320	851
aig:ChangeInIncomeTaxesReceivableAndPayableNet		(1,016)	(6,960)
Commissions, expenses and taxes payable		(165)	52
us-gaap:IncreaseDecreaseInOtherOperatingCapitalNet		813	1,426
us-gaap:IncreaseDecreaseInBrokerDealerRelatedReceivablesPayablesNet		888	(6,446)
Trading securities		(31)	930
Net unrealized (gains) losses on swaps, options and forward transactions (net of cash collateral)		1,473	(3,993)
Securities purchased under agreements to resell		(521)	4,353
Securities sold under agreements to repurchase		(2,106)	1,237
us-gaap:IncreaseDecreaseInFinancialInstrumentsSoldNotYetPurchased		(1,451)	(1,531)
aig:ChangeInFinanceReceivablesAndOtherLoansHeldForSaleOriginationsAndPurchases		(52)	(279)
aig:SaleOfFinanceReceivablesAndOtherLoansHeldForSale		49	477
us-gaap:AdjustmentsNoncashItemsToReconcileNetIncomeLossToCashProvidedByUsedInOperatingActivitiesOther		564	207
us-gaap:AdjustmentsToReconcileNetIncomeLossToCashProvidedByUsedInOperatingActivities		11,324	29,254
us-gaap:NetCashProvidedByUsedInOperatingActivities		8,036	16,128
Cash flows from investing activities:
us-gaap:ProceedsFromSaleOfAvailableForSaleSecuritiesDebt		29,408	31,608
us-gaap:ProceedsFromMaturitiesPrepaymentsAndCallsOfAvailableForSaleSecurities		10,110	10,418
us-gaap:ProceedsFromSaleOfAvailableForSaleSecuritiesEquity		2,767	4,861
us-gaap:ProceedsFromMaturitiesPrepaymentsAndCallsOfHeldToMaturitySecurities			33
aig:ProceedsFromSaleOfTradingSecuritiesInInvestingActivities		9,739	14,120
aig:SaleOfFlightEquipment		97	372
us-gaap:ProceedsFromSaleAndMaturityOfOtherInvestments		5,767	8,715
us-gaap:ProceedsFromDivestitureOfBusinessesNetOfCashDivested		2,855
aig:PaymentsReceivedOnMortgageAndOtherLoansReceivable		3,861	3,457
us-gaap:ProceedsFromSaleAndCollectionOfFinanceReceivables		6,908	6,757
us-gaap:PaymentsToAcquireAvailableForSaleSecuritiesDebt		(32,225)	(47,114)
us-gaap:PaymentsToAcquireAvailableForSaleSecuritiesEquity		(1,780)	(5,808)
us-gaap:PaymentsToAcquireHeldToMaturitySecurities			(88)
aig:PaymentsToAcquireTradingSecuritiesInInvestingActivities		(5,256)	(9,244)
aig:PurchasesOfFlightEquipment		(2,121)	(2,950)
us-gaap:PaymentsToAcquireOtherInvestments		(3,741)	(11,988)
aig:MortgageAndOtherLoansReceivableIssued		(2,614)	(3,340)
us-gaap:PaymentsToAcquireFinanceReceivables		(3,344)	(8,778)
us-gaap:IncreaseDecreaseInCashCollateralForLoanedSecurities		2,057	6,315
Net additions to real estate, fixed assets, and other assets		(252)	(663)
aig:IncreaseDecreaseInShortTermInvestmentsNet		(14,369)	(18,832)
aig:ChangeInNonAigfpDerivativeAssetsAndLiabilitiesNet		(304)	186
us-gaap:PaymentsForProceedsFromOtherInvestingActivities		(29)	(177)
Net cash provided by (used in) investing activities		7,534	(22,140)
Cash flows from financing activities:
Policyholder contract deposits		17,534	33,322
us-gaap:WithdrawalFromContractHoldersFunds		(26,369)	(27,926)
Change in other deposits		182	682
Change in commercial paper and oth er short-term debt		(414)	1,930
aig:ProceedsFromRepaymentsOfShortTermDebtFrbnyCpff		(4,118)
aig:ProceedsFromFrbnyCreditFacilityBorrowings		15,700
aig:RepaymentsOfFrbnyCreditFacilityBorrowings		(12,500)
us-gaap:ProceedsFromIssuanceOfOtherLongTermDebt		2,558	55,685
us-gaap:RepaymentsOfOtherLongTermDebt		(10,970)	(56,645)
aig:ChangeInSecuritiesLendingPayable		(1,377)	(6,919)
us-gaap:PaymentsToMinorityShareholders		(264)	(193)
us-gaap:ProceedsFromMinorityShareholders		463	543
aig:DrawdownOnDepartmentOfTreasuryCommitment		1,150
us-gaap:ProceedsFromIssuanceOfCommonStock			7,343
us-gaap:ProceedsFromSaleOfTreasuryStock			11
Payments advanced to purchase shares			(1,000)
us-gaap:PaymentsOfDividends			(1,036)
us-gaap:ProceedsFromPaymentsForOtherFinancingActivities		(16)	115
Net cash provided by (used in) financing activities		(18,441)	5,912
Cash Paid During Period For Abstract
Interest		3,265	3,493
Taxes		(746)	66
Non Cash Financing Investing Activities Abstract
aig:InterestCreditedToPolicyholderAccountsIncludedInFinancingActivities		7,244	3,815
aig:TreasuryStockAcquiredUsingPaymentsAdvancedToPurchaseShares			1,912
aig:PresentValueOfFutureContractAdjustmentPaymentsRelatedToIssuanceOfEquityUnits			431
aig:LongTermDebtReductionDueToDeconsolidations		$ 1,102
us-gaap:NoncashOrPartNoncashAcquisitionValueOfLiabilitiesAssumed	$ 153		$ 153

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2009

Notes To Consolidated Financials Abstract

aig:OrganizationConsolidationAndPresentationOfFinancialStatementsAndSignificantAccountingPoliciesDisclosureTextBlock

1.	Summary of Significant Accounting Policies

Basis of Presentation

These unaudited condensed consolidated financial statements do not include all disclosures required by accounting principles generally accepted in the United States (GAAP) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and the related notes included in the Form 8-K filed on June 29, 2009 (the 2008 Financial Statements).

In the opinion of management, these consolidated financial statements contain the normal recurring adjustments necessary for a fair statement of the results presented herein. AIG evaluated the need to disclose events that occurred subsequent to the balance sheet date through August 7, 2009, the date the financial statements were issued. All material intercompany accounts and transactions have been eliminated.

Going Concern Considerations

In the 2008 Financial Statements, management disclosed the conditions and events that led management to conclude that AIG would have adequate liquidity to finance and operate AIG’s businesses, execute its asset disposition plan and repay its obligations for at least the next twelve months. On March 2, 2009, the United States government issued the following statement referring to the March 2009 agreements in principle and other transactions they expected to be undertaken with AIG (many of which were subsequently taken) to strengthen AIG’s capital position, enhance its liquidity, reduce its borrowing costs and facilitate its asset disposition program.

“The steps announced today provide tangible evidence of the U.S. government’s commitment to the orderly restructuring of AIG over time in the face of continuing market dislocations and economic deterioration. Orderly restructuring is essential to AIG’s repayment of the support it has received from U.S. taxpayers and to preserving financial stability. The U.S. government is committed to continuing to work with AIG to maintain its ability to meet its obligations as they come due.”

Liquidity of Parent and Subsidiaries

AIG manages liquidity at both the parent and subsidiary levels. Since the fourth quarter of 2008, AIG has not had access to its traditional sources of long-term or short-term financing through the public debt markets. Further, in light of the performance of AIG’s common stock, AIG does not expect to be able to issue equity securities for cash in the public markets in the foreseeable future.

Historically, AIG depended on dividends, distributions, and other payments from subsidiaries to fund payments on its obligations. In light of AIG’s current financial situation, many of its regulated subsidiaries are restricted from making dividend payments, or advancing funds, to AIG. As a result, AIG has been dependent on the facility (the FRBNY Facility) provided by the Federal Reserve Bank of New York (FRBNY) under the Credit Agreement, dated as of September 22, 2008 (as amended, the FRBNY Credit Agreement), between AIG and the FRBNY, the FRBNY’s Commercial Paper Funding Facility (CPFF) and other transactions with the FRBNY and the United States Department of the Treasury (the Department of the Treasury) as its primary sources of liquidity. Primary uses of cash flow are for debt service and subsidiary funding.

Certain subsidiaries also have been dependent on the FRBNY and the Department of the Treasury to meet collateral posting requirements, to make debt repayments as amounts come due, and to meet capital or liquidity requirements at the insurance companies (primarily in the Life Insurance & Retirement Services segment) and financial services operations.

Progress on Management’s Plans for Stabilization of AIG and Repayment of AIG’s Obligations as They Come Due

In the first six months of 2009, AIG took a number of steps to execute its plans to provide stability to its businesses and provide for the timely repayment of the FRBNY Facility.

Transactions with the FRBNY

FRBNY Credit Agreement Amendment

On April 17, 2009, AIG and the FRBNY entered into an Amendment No. 3 to the FRBNY Credit Agreement. The FRBNY Credit Agreement was amended, among other things, to remove the minimum 3.5 percent LIBOR borrowing rate floor.

AIA Purchase Agreement

On June 25, 2009, AIG and American International Reinsurance Company, Limited (AIRCO) entered into a Purchase Agreement (the AIA Purchase Agreement) with the FRBNY pursuant to which, among other things, (1) AIRCO will transfer (or cause to be transferred) 100 percent of the common stock of American International Assurance Company, Limited (AIA) to a newly-formed Delaware limited liability company (AIA LLC), (2) AIRCO and AIG will retain 100 percent of the common interests of AIA LLC and (3) the FRBNY will receive 100 percent of the preferred interests of AIA LLC. As consideration for the preferred interests in AIA LLC to be received by the FRBNY, there will be a reduction of $16 billion in the outstanding balance of the FRBNY Facility and the maximum amount available to be borrowed thereunder (provided the maximum amount available under the FRBNY Facility will not be less than $25 billion as a result of such reduction).

The common interests will entitle AIG and AIRCO to 100 percent of the voting power of AIA LLC, including the right to appoint the entire board of directors of AIA LLC. The preferred interests will entitle the FRBNY to veto rights over certain significant actions by AIA LLC and its subsidiaries and the right, subject to certain restrictions, to compel AIA LLC to take certain actions, including an initial public offering of the company or a sale of the company. The preferred interests received by the FRBNY will have a liquidation preference of $16 billion and will accrue a return of 5 percent per annum until September 22, 2013 and thereafter 9 percent per annum. Upon a liquidation or sale of AIA LLC, after payment is made for the liquidation preference and accrued dividends on the preferred interests and the initial value relating to the common interests, AIG is entitled to 99 percent of the remaining proceeds and the FRBNY is entitled to 1 percent.

The transactions contemplated by the AIA Purchase Agreement are subject to certain conditions, including regulatory approvals, the closing of the transactions contemplated by the ALICO Purchase Agreement (described below) and certain other conditions.

ALICO Purchase Agreement

On June 25, 2009, AIG entered into a Purchase Agreement (the ALICO Purchase Agreement) with the FRBNY pursuant to which, among other things, (1) AIG will transfer (or cause to be transferred) 100 percent of the common stock of American Life Insurance Company (ALICO) to a newly-formed Delaware limited liability company, ALICO Holdings LLC (ALICO LLC), (2) AIG will retain 100 percent of the common interests of ALICO LLC and (3) the FRBNY will receive 100 percent of the preferred interests of ALICO LLC. As consideration for the preferred interests in ALICO LLC to be received by the FRBNY, there will be a reduction of $9 billion in the outstanding balance of the FRBNY Facility and the maximum amount available to be borrowed thereunder (provided the maximum amount available under the FRBNY Facility will not be less than $25 billion as a result of such reduction).

The common interests will entitle AIG to 100 percent of the voting power of ALICO LLC, including the right to appoint the entire board of directors of ALICO LLC. The preferred interests will entitle the FRBNY to veto rights over certain significant actions by ALICO LLC and its subsidiaries and the right, subject to certain restrictions, to compel ALICO LLC to take certain actions, including an initial public offering of the company or a sale of the company. The preferred interests received by the FRBNY will have a liquidation preference of $9 billion and will accrue a return of 5 percent per annum until September 22, 2013 and thereafter 9 percent per annum. Upon a liquidation or sale of ALICO LLC, after payment is made for the liquidation preference and accrued dividends on the preferred interests and the initial value of the common interests, AIG is entitled to 95 percent of the remaining proceeds and the FRBNY is entitled to 5 percent.

The transactions contemplated by the ALICO Purchase Agreement are subject to certain conditions, including regulatory approvals, the closing of the transactions contemplated by the AIA Purchase Agreement (described above) and certain other conditions.

Amortization of Prepaid Commitment Asset

Any permanent reduction in the FRBNY Facility will result in accelerated amortization of a portion of the prepaid commitment asset. Therefore, AIG anticipates that the consummation of each of the AIA Purchase Agreement and the ALICO Purchase Agreement will result in accelerated amortization of a portion of the prepaid commitment asset at the time that the senior interests are transferred to the FRBNY, currently expected to occur no earlier than the fourth quarter of 2009. Acceleration of the amortization will result in a pre-tax charge to earnings which could aggregate to approximately $5.0 billion.

Life Insurance Securitizations

On March 2, 2009, AIG and the Board of Governors of the Federal Reserve System announced their intent to enter into a transaction pursuant to which the FRBNY will purchase embedded value securitization notes issued by newly-formed special purpose vehicles to be repaid with the net cash flows from designated blocks of existing life insurance policies. The proceeds of the notes would be applied in settlement of a portion of the outstanding balance of the FRBNY Facility and would reduce the maximum amount to be borrowed thereunder (provided the maximum amount available under the FRBNY Facility will not be less than $25 billion as a result of such reduction). The amount of the FRBNY Facility reduction will be based on the proceeds received and will also result in accelerated amortization of a portion of the prepaid commitment asset. The special purpose vehicles are expected to be consolidated by AIG.

Sales of Businesses and Asset Dispositions

AIG has revised its asset disposition plans over the last nine months to take into account the deterioration of global market conditions. AIG’s current asset disposition plan is to maximize the value of its businesses over a longer time frame. AIG continually reassesses its disposition plans and may revise its disposition plans at any time and from time to time.

Dispositions of certain businesses will be subject to regulatory approval. Proceeds from these dispositions, to the extent they do not represent capital of AIG’s insurance subsidiaries required for regulatory or ratings purposes, are contractually required to be applied toward the repayment of the FRBNY Facility as mandatory prepayments.

During the first six months of 2009 and through July 31, 2009, AIG entered into agreements to sell or completed the sale of operations and assets, excluding AIGFP assets, that had aggregate assets and liabilities with carrying values of $31.2 billion and $23.8 billion, respectively, at June 30, 2009 or the date of sale or in the case of Transatlantic Holdings, Inc. (Transatlantic), deconsolidation. Aggregate net proceeds from these sale transactions, including proceeds applied to repay intercompany loan facilities, are expected to be approximately $8.0 billion. These transactions are expected to generate approximately $4.6 billion of aggregate net cash proceeds to repay outstanding borrowings and reduce the amount of FRBNY Facility, after taking into account taxes, transaction expenses and capital required to be retained for regulatory or ratings purposes. Gains and losses recorded in connection with the disposals of businesses include estimates that are subject to subsequent adjustment. Based on the transactions thus far, AIG does not believe that such adjustments will be material to future results of operations or cash flows.

Securitization Transaction

During the first six months of 2009, American General Finance, Inc. (AGF) received proceeds of $1.4 billion from real estate loan portfolio sales. In addition, on July 30, 2009, AGF issued mortgage-backed certificates in a private securitization transaction of certain AGF real estate loans and received initial cash proceeds of $967 million.

FAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (FAS 144) requires that certain criteria be met in order for AIG to classify a business as held for sale. At June 30, 2009, the held for sale criteria in FAS 144 were not met for AIG’s significant businesses included in the asset disposition plan. AIG continues to evaluate the status of its asset sales with respect to these criteria.

Management’s Assessment and Conclusion

In assessing AIG’s current financial position and developing operating plans for the future, management has made significant judgments and estimates with respect to the potential financial and liquidity effects of AIG’s risks and uncertainties, including but not limited to:


	•	the commitment of the FRBNY and the Department of the Treasury to the orderly restructuring of AIG and their commitment to continuing to work with AIG to maintain its ability to meet its obligations as they come due;

	•	the potential adverse effects on AIG’s businesses that could result if there are further downgrades by rating agencies, including in particular, the uncertainty of estimates relating to the derivative transactions of AIG Financial Products Corp. and AIG Trading Group Inc. and their respective subsidiaries (collectively, AIGFP), such as estimates of both the number of counterparties who may elect to terminate under contractual termination provisions and the amount that would be required to be paid in the event of a downgrade;

	•	the ability of AIG to complete the transactions contemplated by the AIA Purchase Agreement and the ALICO Purchase Agreement;

	•	the potential delays in asset dispositions and reduction in the anticipated proceeds therefrom;

	•	the potential for continued declines in bond and equity markets;

	•	the planned sales of significant subsidiaries;

	•	the potential effect on AIG if the capital levels of its regulated and unregulated subsidiaries prove inadequate to support current business plans;

	•	the effect on AIG’s businesses of continued compliance with the covenants of the FRBNY Credit Agreement and other agreements with the FRBNY and the Department of the Treasury;

	•	the effect of the provisions of the TARP Standards for Compensation and Corporate Governance on AIG’s ability to retain and motivate key employees;

	•	the potential loss of key personnel that could then reduce the value of AIG’s business and impair its ability to effect a successful asset disposition plan;

	•	the potential that AIG will be unable to complete the proposed life insurance securitizations and, even if completed, that this proposed transaction with the FRBNY does not achieve its desired objectives; and

	•	the potential regulatory actions in one or more countries, including possible actions resulting from the legal change in control as a result of the issuance of AIG’s Series C Perpetual, Convertible, Participating Preferred Stock (the AIG Series C Preferred Stock).

Based on the U.S. government’s continuing commitment, the recently completed transactions and the other expected transactions with the FRBNY, management’s plans to stabilize AIG’s businesses and dispose of certain noncore assets, and after consideration of the risks and uncertainties of such plans, management believes that it will have adequate liquidity to finance and operate AIG’s businesses, execute its asset disposition plan and repay its obligations for at least the next twelve months.

It is possible that the actual outcome of one or more of management’s plans could be materially different, or that one or more of management’s significant judgments or estimates about the potential effects of these risks and uncertainties could prove to be materially incorrect or that the proposed transactions with the FRBNY discussed above are not consummated or fail to achieve their desired objectives. If one or more of these possible outcomes is realized, AIG may need additional U.S. government support to meet its obligations as they come due.

AIG’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets nor relating to the amounts and classification of liabilities that may be necessary should AIG be unable to continue as a going concern.

Out of Period Adjustments

In the three months ended June 30, 2009, AIG recorded out of period adjustments which reduced pre-tax income by approximately $250 million and decreased net income by approximately $60 million. The more significant decreases to pre-tax income related to life insurance deferred acquisition costs and general insurance balance sheet reconciliation adjustments. Net adjustments to income taxes increased the income tax benefit by approximately $99 million.

Recent Accounting Standards

Accounting Changes

AIG adopted the following accounting standards during the first six months of 2009:

FAS 141(R)

In December 2007, the Financial Accounting Standards Board (FASB) issued FAS No. 141 (revised 2007), “Business Combinations” (FAS 141(R)). FAS 141(R) changes the accounting for business combinations in a number of ways, including broadening the transactions or events that are considered business combinations; requiring an acquirer to recognize 100 percent of the fair value of certain assets acquired, liabilities assumed, and noncontrolling (i.e., minority) interests; and recognizing contingent consideration arrangements at their acquisition-date fair values with subsequent changes in fair value generally reflected in income, among other changes.

AIG adopted FAS 141(R) for business combinations for which the acquisition date is on or after January 1, 2009. The adoption of FAS 141(R) did not have a material effect on AIG’s consolidated financial position, results of operations or cash flows at and for the three and six months ended June 30, 2009, but will affect the future accounting for business combinations, if any, as well as goodwill impairment assessments.

FAS 160

In December 2007, the FASB issued FAS No. 160, which requires noncontrolling (i.e., minority) interests in partially owned consolidated subsidiaries to be classified in the consolidated balance sheet as a separate component of equity, or in the mezzanine section of the balance sheet (between liabilities and equity), to the extent such interests do not qualify for “permanent equity” classification in accordance with Emerging Issues Task Force (EITF) Topic D-98, “Classification and Measurement of Redeemable Securities” (revised September 2008). FAS 160 also specifies the accounting for subsequent acquisitions and sales of noncontrolling interests and how noncontrolling interests should be presented in the consolidated statement of income (loss). The noncontrolling interests’ share of subsidiary income (loss) should be reported as a part of consolidated net income (loss) with disclosure of the attribution of consolidated net income (loss) to the controlling and noncontrolling interests on the face of the consolidated statement of income (loss).

AIG adopted FAS 160 on January 1, 2009. FAS 160 was adopted prospectively, except that the consolidated statement of income (loss) for the three and six months ended June 30, 2008 have been retrospectively recast to include net income (loss) attributable to both the controlling and noncontrolling interests. Of the $10.0 billion minority interest on the consolidated balance sheet at December 31, 2008, $1.9 billion was reclassified from minority interest liability to Redeemable noncontrolling interest in partially owned consolidated subsidiaries and $8.1 billion was reclassified to a separate component of total equity titled Noncontrolling interest. For the six months ended June 30, 2009, the noncontrolling interest balance declined by $1.4 billion related to the deconsolidation of Transatlantic in the second quarter of 2009 following the public offering of 29.9 million shares of Transatlantic common stock, after which AIG retained 13.9 percent of Transatlantic common stock outstanding. AIG also restructured certain relationships within the Institutional Asset Management business in the second quarter of 2009, resulting in a decline in goodwill of $476 million and noncontrolling interest of $1.9 billion due to deconsolidation of certain entities.

The following table provides a reconciliation of the beginning and ending balances of the components of total equity (excluding the effects of redeemable noncontrolling interests):


	Total AIG
	shareholders’			Noncontrolling
	equity			interest			Total equity
	(In millions)

Six Months Ended June 30, 2009
Balance, beginning of period	$	52,710		$	8,095		$	60,805
Cumulative effect of change in accounting principle, net of tax		2,478			—			2,478
Net income (loss)		(2,531	)		(935	)		(3,466	)
Contributions from noncontrolling interest		—			475			475
Distributions to noncontrolling interest		—			(264	)		(264	)
Net decrease due to deconsolidation		—			(3,306	)		(3,306	)
Accumulated other comprehensive income		4,390			110			4,500
Other		911			—			911

Balance, end of period	$	57,958		$	4,175		$	62,133

Six Months Ended June 30, 2008
Balance, beginning of period	$	95,801		$	8,472		$	104,273
Cumulative effect of change in accounting principle, net of tax		(1,108	)		—			(1,108	)
Net income (loss)		(13,162	)		133			(13,029	)
Contributions from noncontrolling interest		—			543			543
Distributions to noncontrolling interest		—			(193	)		(193	)
Accumulated other comprehensive income (loss)		(8,441	)		60			(8,381	)
Other		4,998			—			4,998

Balance, end of period	$	78,088		$	9,015		$	87,103

FAS 161

In March 2008, the FASB issued FAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133” (FAS 161). FAS 161 requires enhanced disclosures about (a) how and why AIG uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (FAS 133) and its related interpretations, and (c) how derivative instruments and related hedged items affect AIG’s consolidated financial condition, results of operations, and cash flows. AIG adopted FAS 161 on January 1, 2009. See Note 7 herein for related disclosures.

FAS 165

In May 2009, the FASB issued FAS No. 165, “Subsequent Events” (FAS 165). FAS 165 requires disclosure of the date through which a company evaluated the need to disclose events that occurred subsequent to the balance sheet date and whether that date represents the date the financial statements were issued or were available to be issued. AIG adopted FAS 165 for the period ended June 30, 2009. The adoption of FAS 165 did not affect AIG’s consolidated financial condition, results of operations or cash flows.

FSP FAS 140-3

In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions” (FSP FAS 140-3). FSP FAS 140-3 requires an initial transfer of a financial asset and a repurchase financing that was entered into contemporaneously with or in contemplation of the initial transfer to be evaluated as a linked transaction unless certain criteria are met. AIG adopted FSP FAS 140-3 on January 1, 2009 for new transactions entered into from that date forward. The adoption of FSP FAS 140-3 did not have a material effect on AIG’s consolidated financial condition, results of operations or cash flows.

EITF 07-5

In June 2008, the FASB ratified the consensus reached by the EITF on Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (EITF 07-5). Following the January 1, 2009 effective date, instruments that are not indexed to the issuer’s stock would not qualify for an exception from derivative accounting provided in FAS 133 (which requires that an instrument is both indexed to the issuer’s own stock, and that it is classified in equity). AIG adopted EITF 07-5 on January 1, 2009. The adoption of EITF 07-5 resulted in a $15 million cumulative effect adjustment to opening Accumulated deficit and a $91 million reduction in Additional paid-in capital.

FSP FAS 107-1 and APB 28-1

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (FSP FAS 107-1). FSP FAS 107-1 amends FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments,” (FAS 107) to require disclosures about fair value of financial instruments (including methods and significant assumptions used) for interim reporting periods of publicly traded companies as well as in annual financial statements. The FSP also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in summarized financial information for interim reporting periods. AIG adopted FSP FAS 107-1 on April 1, 2009. See Note 4, Fair Value Measurements for these disclosures.

FSP FAS 115-2 and FAS 124-2

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (FSP FAS 115-2). FSP FAS 115-2 requires a company to recognize the credit component of an other-than-temporary impairment of a fixed maturity security in income and the non-credit component in accumulated other comprehensive income when the company does not intend to sell the security or it is more likely than not that the company will not be required to sell the security prior to recovery. FSP FAS 115-2 also changes the threshold for determining when an other-than-temporary impairment has occurred on a fixed maturity security with respect to intent and ability to hold until recovery and requires additional disclosures in interim and annual reporting periods for fixed maturity and equity securities. FSP FAS 115-2 does not change the recognition of other-than-temporary impairment for equity securities. See Note 5, Investments for the expanded disclosures related to FSP FAS 115-2.

AIG adopted FSP FAS 115-2 on April 1, 2009 and recorded an after-tax cumulative effect adjustment to increase AIG shareholders’ equity by $2.5 billion as of April 1, 2009, consisting of a decrease in Accumulated deficit of $11.8 billion and an increase to Accumulated other comprehensive loss of $9.3 billion, net of tax. The net increase in AIG’s shareholders’ equity was due to a reversal of a portion of the deferred tax asset valuation allowance for certain previous non-credit impairment charges directly attributable to the change in accounting principle (see Note 12 herein). The cumulative effect adjustment resulted in an increase of approximately $16 billion in the amortized cost of fixed maturity securities, which has the effect of significantly reducing the accretion of investment income over the remaining life of the underlying securities, beginning in the second quarter of 2009. The effect of the reduced investment income will be offset, in part, by a decrease in the amortization of deferred policy acquisition costs (DAC) and sales inducements assets (SIA).

Beginning in the second quarter of 2009, the adoption of FSP FAS 115-2 is expected to reduce the level of other-than-temporary impairment charges recorded in earnings for fixed maturity securities due to the following required changes in AIG’s accounting policy for other-than-temporary impairments (see Note 5 for a more detailed discussion of the changes in policy):


	•	Impairment charges for non-credit (i.e., severity) losses are no longer recognized;

	•	The amortized cost basis of credit impaired securities will be written down through a charge to earnings to the present value of expected cash flows, rather than to fair value; and

	•	For fixed maturity securities that are not deemed to be credit-impaired. AIG is no longer required to assert that it has the intent and ability to hold such securities to recovery to avoid an other-than-temporary impairment charge. Instead, an impairment charge through earnings is required only in situations where AIG has the intent to sell the fixed maturity security or it is more likely than not that AIG will be required to sell the security prior to recovery.

The components of the change in AIG shareholders’ equity at April 1, 2009 due to the adoption of FSP FAS 115-2 were as follows:


	(Increase)						Net Increase
	Decrease to			(Increase) Decrease			in AIG
	Accumulated			to Accumulated Other			Shareholders’
	Deficit			Comprehensive Loss			Equity
	(In billions)

Net effect of the increase in amortized cost of available for sale fixed maturity securities	$	16.1		$	(16.1	)	$	—
Net effect of related DAC, SIA and other insurance balances		(1.8	)		1.8			—
Net effect on deferred income tax assets		(2.5	)		5.0			2.5

Net increase in AIG shareholders’ equity	$	11.8		$	(9.3	)	$	2.5

FSP FAS 157-4

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP FAS 157-4). FSP FAS 157-4 provides guidance for estimating fair value in accordance with FAS No. 157, “Fair Value Measurements” (FAS 157), when the volume and level of activity for an asset or liability have significantly decreased and for identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 also requires extensive additional fair value disclosures. The adoption of FSP FAS 157-4 on April 1, 2009, did not have a material effect on AIG’s consolidated financial condition, results of operations or cash flows. See Note 4, Fair Value Measurements for the disclosures related to FSP FAS 157-4.

Future Application of Accounting Standards

FSP FAS 132(R)-1

In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (FSP FAS 132(R)-1). FSP FAS 132(R)-1 amends FAS 132(R) to require more detailed disclosures about an employer’s plan assets, including the employer’s investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair values of plan assets. FSP FAS 132(R)-1 is effective for fiscal years ending after December 15, 2009. The adoption of FSP FAS 132(R)-1 will have no effect on AIG’s consolidated financial condition, results of operations or cash flows.

FAS 166

In June 2009, the FASB issued FAS 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140” (FAS 166). FAS 166 removes the concept of a qualifying special-purpose entity (QSPE) from FAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” and removes the exception from applying FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities”, (FIN 46(R)) to QSPEs. FAS 166 is effective for interim and annual periods beginning on January 1, 2010 for AIG. Earlier application is prohibited. AIG is assessing the effect adopting FAS 166 will have on its consolidated financial condition, results of operations and cash flows.

FAS 167

In June 2009, FASB issued FAS 167, “Amendments to FASB Interpretation No. 46(R)” (FAS 167). FAS 167 amends the consolidation analysis with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly affect the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity, and enhances financial reporting by enterprises involved with variable interest entities. FAS 167 is effective for interim and annual periods beginning on January 1, 2010 for AIG. Earlier application is prohibited. AIG is assessing the effect adopting FAS 167 will have on its consolidated financial condition, results of operations, and cash flows.

Fair Value Measurements

6 Months Ended

Jun. 30, 2009

Notes To Consolidated Financials Abstract

us-gaap:FairValueDisclosuresTextBlock

4.	Fair Value Measurements

Effective January 1, 2008, AIG adopted FAS 157 and FAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (FAS 159), which specify measurement and disclosure standards related to assets and liabilities measured at fair value.

Fair Value Measurements on a Recurring Basis

AIG measures at fair value on a recurring basis financial instruments in its trading and available for sale securities portfolios, certain mortgage and other loans receivable, certain spot commodities, derivative assets and liabilities, securities purchased/sold under agreements to resell/repurchase, securities lending invested collateral, non-traded equity investments and certain private limited partnerships and certain hedge funds included in other invested assets, certain short-term investments, separate and variable account assets, certain policyholder contract deposits, securities and spot commodities sold but not yet purchased, certain trust deposits and deposits due to banks and other depositors, certain CPFF and other commercial paper, certain long-term debt, and certain hybrid financial instruments included in other liabilities. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The degree of judgment used in measuring the fair value of financial instruments generally correlates with the level of pricing observability. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Conversely, financial instruments traded in other-than-active markets or that do not have quoted prices have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment. An active market is one in which transactions for the asset or liability being valued occur with sufficient frequency and volume to provide pricing information on an ongoing basis. An other-than-active market is one in which there are few transactions, the prices are not current, price quotations vary substantially either over time or among market makers, or in which little information is released publicly for the asset or liability being valued. Pricing observability is affected by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction and general market conditions.

Fair Value Hierarchy

Beginning January 1, 2008, assets and liabilities recorded at fair value in the consolidated balance sheet are measured and classified in a hierarchy for disclosure purposes consisting of three “levels” based on the observability of inputs available in the marketplace used to measure the fair values as discussed below:


	•	Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that AIG has the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. AIG does not adjust the quoted price for such instruments. Assets and liabilities measured at fair value on a recurring basis and classified as Level 1 include certain government and agency securities, actively traded listed common stocks and derivative contracts, most separate account assets and most mutual funds.

	•	Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Assets and liabilities measured at fair value on a recurring basis and classified as Level 2 generally include certain government securities, most investment-grade and high-yield corporate bonds, certain asset-backed securities (ABS), certain listed equities, state, municipal and provincial obligations, hybrid securities, mutual fund and hedge fund investments, derivative contracts, guaranteed investment agreements (GIAs) and commercial paper at AIGFP, other long-term debt and physical commodities.

	•	Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. These measurements include circumstances in which there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. AIG’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment. In making the assessment, AIG considers factors specific to the asset or liability. Assets and liabilities measured at fair value on a recurring basis and classified as Level 3 include certain distressed ABS, structured credit products, certain derivative contracts (including AIGFP’s super senior credit default swap portfolio), policyholder contract deposits carried at fair value, private equity and real estate fund investments, and direct private equity investments. AIG’s non-financial-instrument assets that are measured at fair value on a non-recurring basis generally are classified as Level 3.

The following is a description of the valuation methodologies used for instruments carried at fair value:

Incorporation of Credit Risk in Fair Value Measurements


	•	AIG’s Own Credit Risk. Fair value measurements for AIGFP’s debt, GIAs, structured note liabilities and freestanding derivatives incorporate AIG’s own credit risk by determining the explicit cost for each counterparty to protect against its net credit exposure to AIG at the balance sheet date by reference to observable AIG credit default swap spreads. A counterparty’s net credit exposure to AIG is determined based on master netting agreements, when applicable, which take into consideration all positions with AIG, as well as collateral posted by AIG with the counterparty at the balance sheet date.

Fair value measurements for embedded policy derivatives and policyholder contract deposits take into consideration that policyholder liabilities are senior in priority to general creditors of AIG and therefore are much less sensitive to changes in AIG credit default swap or cash issuance spreads.


	•	Counterparty Credit Risk. Fair value measurements for freestanding derivatives incorporate counterparty credit by determining the explicit cost for AIG to protect against its net credit exposure to each counterparty at the balance sheet date by reference to observable counterparty credit default swap spreads. AIG’s net credit exposure to a counterparty is determined based on master netting agreements, which take into consideration all derivative positions with the counterparty, as well as collateral posted by the counterparty at the balance sheet date.

The cost of credit protection is determined under a discounted present value approach considering the market levels for credit default swap (CDS) spreads, the mid market value of the net exposure (reflecting the amount of protection required) and the weighted average life of the net exposure. CDS spreads are provided to AIG by an independent third-party. AIG utilizes a LIBOR-based interest rate curve to derive its discount rates.

A CDS is a derivative contract that allows the transfer of third-party credit risk from one party to the other. The buyer of the CDS pays an upfront and/or annual premium to the seller. The seller’s payment obligation is triggered by the occurrence of a credit event under a specified reference security and is determined by the loss on that specified reference security. The present value of the amount of the annual and/or upfront premium therefore represents a market based expectation of the likelihood that the specified reference party will fail to perform on the reference obligation, a key market observable indicator of non-performance risk (the CDS spread).

While this approach does not explicitly consider all potential future behavior of the derivative transactions or potential future changes in valuation inputs, AIG believes this approach provides a reasonable estimate of the fair value of the derivate assets and liabilities, including consideration of the impact of non-performance risk.

Fair values for fixed maturity securities based on observable market prices for identical or similar instruments implicitly incorporate counterparty credit risk. Fair values for fixed maturity securities based on internal models incorporate counterparty credit risk by using discount rates that take into consideration cash issuance spreads for similar instruments or other observable information.

Fixed Maturity Securities — Trading and Available for Sale

AIG maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Whenever available, AIG obtains quoted prices in active markets for identical assets at the balance sheet date to measure at fair value fixed maturity securities in its trading and available for sale portfolios. Market price data generally is obtained from exchange or dealer markets.

AIG estimates the fair value of fixed maturity securities not traded in active markets, including securities purchased (sold) under agreements to resell (repurchase), and mortgage and other loans receivable for which AIG elected the fair value option, by referring to traded securities with similar attributes, using dealer quotations, a matrix pricing methodology, discounted cash flow analyses or internal valuation models. This methodology considers such factors as the issuer’s industry, the security’s rating and tenor, its coupon rate, its position in the capital structure of the issuer, yield curves, credit curves, prepayment rates and other relevant factors. For fixed maturity instruments that are not traded in active markets or that are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments generally are based on available market evidence. In the absence of such evidence, management’s best estimate is used.

ML II and ML III

At their inception, AIG’s economic interest in Maiden Lane II LLC (ML II) and equity interest in Maiden Lane III LLC (ML III) (together, Maiden Lane Interests), which are included in Bond trading securities, at fair value, on the consolidated balance sheet, were valued and recorded at the transaction prices of $1 billion and $5 billion, respectively. Subsequently, Maiden Lane Interests are valued using a discounted cash flow methodology that uses the estimated future cash flows of the assets to which the Maiden Lane Interests are entitled and the discount rates applicable to such interests as derived from the fair value of the entire asset pool. The implicit discount rates are calibrated to the changes in the estimated asset values for the underlying assets commensurate with AIG’s interests in the capital structure of the respective entities. Estimated cash flows and discount rates used in the valuations are validated, to the extent possible, using market observable information for securities with similar asset pools, structure and terms.

The fair value methodology used assumes that the underlying collateral in ML II and ML III will continue to be held and generate cash flows into the foreseeable future and does not assume a current liquidation of the assets of ML II and ML III. Other methodologies employed or assumptions made in determining fair value for these investments could result in amounts that differ significantly from the amounts reported.

Valuation Sensitivity: The fair values of the Maiden Lane Interests are most affected by changes in the discount rates and changes in the underlying estimated future collateral cash flow assumptions used in the valuation model.

The benchmark London Interbank Offered Rate (LIBOR) interest rate curve changes are determined by macroeconomic considerations and financial sector credit spreads. The spreads over LIBOR for the Maiden Lane Interests (including collateral-specific credit and liquidity spreads) can change as a result of changes in market expectations about the future performance of these investments as well as changes in the risk premium that market participants would demand at the time of the transactions.

Changes in estimated future cash flows would primarily be the result of changes in expectations for defaults, recoveries, and prepayments on underlying loans.

Increases in the discount rate or decreases in estimated future cash flows used in the valuation would decrease AIG’s estimate of the fair value of the Maiden Lane Interests as shown in the table below.


	Fair Value Change
Six Months Ended June 30, 2009	Maiden Lane II			Maiden Lane III
	(In millions)

Discount Rates
200 basis point increase	$	(52	)	$	(453	)
400 basis point increase		(97	)		(837	)

Estimated Future Cash Flows
10% decrease		(218	)		(660	)
20% decrease		(370	)		(1,323	)

AIG believes that the ranges of discount rates used in these analyses are reasonable based on implied spread volatilities of similar collateral securities and implied volatilities of LIBOR interest rates. The ranges of estimated future cash flows were determined based on variability in estimated future cash flows implied by cumulative loss estimates for similar instruments. The fair values of the Maiden Lane Interests are likely to vary, perhaps materially, from the amount estimated.

Equity Securities Traded in Active Markets — Trading and Available for Sale

AIG maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Whenever available, AIG obtains quoted prices in active markets for identical assets at the balance sheet date to measure at fair value marketable equity securities in its trading and available for sale portfolios. Market price data generally is obtained from exchange or dealer markets.

Non-Traded Equity Investments — Other Invested Assets

AIG initially estimates the fair value of equity instruments not traded in active markets by reference to the transaction price. This valuation is adjusted for changes in inputs and assumptions which are corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity capital markets, and changes in financial ratios or cash flows. For equity securities that are not traded in active markets or that are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability and such adjustments generally are based on available market evidence. In the absence of such evidence, management’s best estimate is used.

Private Limited Partnership and Hedge Fund Investments — Other Invested Assets

AIG initially estimates the fair value of investments in certain private limited partnerships and certain hedge funds by reference to the transaction price. Subsequently, AIG obtains the fair value of these investments generally from net asset value information provided by the general partner or manager of the investments, the financial statements of which are generally audited annually. AIG considers observable market data and performs diligence procedures in validating the appropriateness of using the net asset value as a fair value measurement.

Separate Account Assets

Separate account assets are composed primarily of registered and unregistered open-end mutual funds that generally trade daily and are measured at fair value in the manner discussed above for equity securities traded in active markets.

Freestanding Derivatives

Derivative assets and liabilities can be exchange-traded or traded over-the-counter (OTC). AIG generally values exchange-traded derivatives using quoted prices in active markets for identical derivatives at the balance sheet date.

OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market clearing transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. When models are used, the selection of a particular model to value an OTC derivative depends on the contractual terms of, and specific risks inherent in, the instrument as well as the availability of pricing information in the market. AIG generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices and rates, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs can generally be corroborated by observable market data by correlation or other means, and model selection does not involve significant management judgment.

Certain OTC derivatives trade in less liquid markets with limited pricing information, and the determination of fair value for these derivatives is inherently more difficult. When AIG does not have corroborating market evidence to support significant model inputs and cannot verify the model to market transactions, the transaction price is initially used as the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted so the model value at inception equals the transaction price. Subsequent to initial recognition, AIG updates valuation inputs when corroborated by evidence such as similar market transactions, third-party pricing services and/or broker or dealer quotations, or other empirical market data. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used.

Embedded Policy Derivatives

The fair value of embedded policy derivatives contained in certain variable annuity and equity-indexed annuity and life contracts is measured based on actuarial and capital market assumptions related to projected cash flows over the expected lives of the contracts. These cash flow estimates primarily include benefits and related fees assessed, when applicable, and incorporate expectations about policyholder behavior. Estimates of future policyholder behavior are subjective and based primarily on AIG’s historical experience. With respect to embedded policy derivatives in AIG’s variable annuity contracts, because of the dynamic and complex nature of the expected cash flows, risk neutral valuations are used. Estimating the underlying cash flows for these products involves many estimates and judgments, including those regarding expected market rates of return, market volatility, correlations of market index returns to funds, fund performance, discount rates and policyholder behavior. With respect to embedded policy derivatives in AIG’s equity-indexed annuity and life contracts, option pricing models are used to estimate fair value, taking into account assumptions for future equity index growth rates, volatility of the equity index, future interest rates, and determinations on adjusting the participation rate and the cap on equity indexed credited rates in light of market conditions and policyholder behavior assumptions. With the adoption of FAS 157, these methodologies were not changed, with the exception of incorporating an explicit risk margin to take into consideration market participant estimates of projected cash flows and policyholder behavior. The valuation technique used to measure the fair value of certain variable annuity guarantees was modified during 2008, primarily with respect to the development of long-dated equity volatility assumptions and the discount rates applied to certain projected benefit payments.

AIGFP’s Super Senior Credit Default Swap Portfolio

AIGFP values its CDS transactions written on the super senior risk layers of designated pools of debt securities or loans using internal valuation models, third-party price estimates and market indices. 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, therefore, would consist of other large financial institutions who participate in sophisticated over-the-counter derivatives markets. The specific valuation methodologies vary based on the nature of the referenced obligations and availability of market prices.

The valuation of the super senior credit derivatives continues to be challenging given the limitation on the availability of market observable information due to the lack of trading and price transparency in the structured finance market, particularly during and since the second half of 2007. These market conditions have increased the reliance on management estimates and judgments in arriving at an estimate of fair value for financial reporting purposes. Further, disparities in the valuation methodologies employed by market participants and the varying judgments reached by such participants when assessing volatile markets have increased the likelihood that the various parties to these instruments may arrive at significantly different estimates as to their fair values.

AIGFP’s valuation methodologies for the super senior credit default swap portfolio have evolved in response to the deteriorating market conditions and the lack of sufficient market observable information. AIG has sought to calibrate the methodologies to available market information and to review the assumptions of the methodologies on a regular basis.

Regulatory capital portfolio: In the case of credit default swaps written to facilitate regulatory capital relief, AIGFP estimates the fair value of these derivatives by considering observable market transactions. The transactions with the most observability are the early terminations of these transactions by counterparties. AIG expects that the counterparties in the remaining CDS transactions will terminate the vast majority of transactions with AIGFP within the next 9 months. AIGFP also considers other market data, to the extent relevant and available. See also Note 7 herein.

Multi-sector CDO portfolios: AIGFP uses a modified version of the Binomial Expansion Technique (BET) model to value its credit default swap portfolio written on super senior tranches of multi-sector collateralized debt obligations (CDOs) of ABS, including maturity-shortening puts that allow the holders of the securities issued by certain CDOs to treat the securities as short-term eligible 2a-7 investments under the Investment Company Act of 1940 (2a-7 Puts). The BET model was developed in 1996 by a major rating agency to generate expected loss estimates for CDO tranches and derive a credit rating for those tranches, and has been widely used ever since.

AIGFP has adapted the BET model to estimate the price of the super senior risk layer or tranche of the CDO. AIG modified the BET model to imply default probabilities from market prices for the underlying securities and not from rating agency assumptions. To generate the estimate, the model uses the price estimates for the securities comprising the portfolio of a CDO as an input and converts those estimates to credit spreads over current LIBOR-based interest rates. These credit spreads are used to determine implied probabilities of default and expected losses on the underlying securities. This data is then aggregated and used to estimate the expected cash flows of the super senior tranche of the CDO.

Prices for the individual securities held by a CDO are obtained in most cases from the CDO collateral managers, to the extent available. CDO collateral managers provided market prices for 59.0 percent of the underlying securities used in the valuation at June 30, 2009. 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. Matrix pricing is a mathematical technique used principally to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the relationship of the security to other benchmark quoted securities. Substantially all of the CDO collateral managers who provided prices used dealer prices for all or part of the underlying securities, in some cases supplemented by third-party pricing services.

The BET model also uses diversity scores, weighted average lives, recovery rates and discount rates.

AIGFP employs a Monte Carlo simulation to assist in quantifying the effect on the valuation of the CDO of the unique aspects of the CDO’s structure such as triggers that divert cash flows to the most senior part of the capital structure. The Monte Carlo simulation is used to determine whether an underlying security defaults in a given simulation scenario and, if it does, the security’s implied random default time and expected loss. This information is used to project cash flow streams and to determine the expected losses of the portfolio.

In addition to calculating an estimate of the fair value of the super senior CDO security referenced in the credit default swaps using its internal model, AIGFP also considers the price estimates for the super senior CDO securities provided by third parties, including counterparties to these transactions, to validate the results of the model and to determine the best available estimate of fair value. In determining the fair value of the super senior CDO security referenced in the credit default swaps, AIGFP uses a consistent process which considers all available pricing data points and eliminates the use of outlying data points. When pricing data points are within a reasonable range an averaging technique is applied.

Corporate debt/CLO portfolios: 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 reasonable proxies for the referenced portfolios. In addition, AIGFP compares these valuations to third-party prices and makes adjustments as necessary to determine the best available estimate of fair value.

AIGFP estimates the fair value of its obligations resulting from credit default swaps written on collateralized loan obligations (CLOs) to be equivalent to the par value less the current market value of the referenced obligation. Accordingly, the value is determined by obtaining third-party quotes on the underlying super senior tranches referenced under the credit default swap contract.

Policyholder Contract Deposits

Policyholder contract deposits accounted for at fair value are measured using an income approach by taking into consideration the following factors:


	•	Current policyholder account values and related surrender charges;

	•	The present value of estimated future cash inflows (policy fees) and outflows (benefits and maintenance expenses) associated with the product using risk neutral valuations, incorporating expectations about policyholder behavior, market returns and other factors; and

	•	A risk margin that market participants would require for a market return and the uncertainty inherent in the model inputs.

The change in fair value of these policyholder contract deposits is recorded as Policyholder benefits and claims incurred in the Consolidated Statement of Income (loss).

Spot commodities and Securities and spot commodities sold but not yet purchased

Fair values of spot commodities and spot commodities sold but not yet purchased are based on current market prices of reference spot futures contracts traded on exchanges. Fair values for securities sold but not yet purchased are based on current market prices.

Other long-term debt

When fair value accounting has been elected, the fair value of non-structured liabilities is generally determined by using market prices from exchange or dealer markets, when available, or discounting expected cash flows using the appropriate discount rate for the applicable maturity. The discount rate is based on an implicit rate determined with the use of observable CDS market spreads to determine the risk of non-performance for AIG. Such instruments are generally classified in Level 2 of the fair value hierarchy as all inputs are readily observable. AIG determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) and hybrid financial instruments (performance linked to risks other than interest rates, inflation or currency risks) using the appropriate derivative valuation methodology (described above) given the nature of the embedded risk profile. Such instruments are classified in Level 2 or Level 3 depending on the observability of significant inputs to the model. In addition, adjustments are made to the valuations of both non-structured and structured liabilities to reflect AIG’s own credit worthiness based on observable credit spreads of AIG.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the levels of the inputs used:


							Counterparty		Cash
	Level 1		Level 2		Level 3		Netting(a)		Collateral(b)		Total
	(In millions)

At June 30, 2009
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	388	$	4,044	$	2	$	—	$	—	$	4,434
Obligations of states, municipalities and political subdivisions		39		54,519		802		—		—		55,360
Non-U.S. governments		439		72,214		628		—		—		73,281
Corporate debt		74		170,074		6,022		—		—		176,170
Residential mortgage-backed securities (RMBS)		—		22,412		5,637		—		—		28,049
Commercial mortgage-backed securities (CMBS)		—		9,072		2,187		—		—		11,259
Collateralized Debt Obligations/Asset Backed Securities (CDO/ABS)		—		1,859		3,296		—		—		5,155

Total bonds available for sale	$	940	$	334,194	$	18,574	$	—	$	—	$	353,708


							Counterparty			Cash
	Level 1		Level 2		Level 3		Netting(a)			Collateral(b)			Total
	(In millions)

Bond trading securities:
U.S. government and government sponsored entities	$	770	$	7,545	$	11	$	—		$	—		$	8,326
Obligations of states, municipalities and political subdivisions		—		111		—		—			—			111
Non-U.S. governments		7		1,246		5		—			—			1,258
Corporate debt		—		6,713		214		—			—			6,927
RMBS		—		3,721		3		—			—			3,724
CMBS		—		1,825		37		—			—			1,862
CDO/ABS		—		4,160		4,991		—			—			9,151

Total bond trading securities	$	777	$	25,321	$	5,261	$	—		$	—		$	31,359

Securities lending invested collateral:(c)
Corporate debt	$	—	$	239	$	134	$	—		$	—		$	373
RMBS		—		292		22		—			—			314
CMBS		—		92		—		—			—			92
CDO/ABS		—		148		82		—			—			230

Total securities lending invested collateral	$	—	$	771	$	238	$	—		$	—		$	1,009

Equity securities available for sale:
Common stocks	$	6,750	$	455	$	33	$	—		$	—		$	7,238
Preferred stocks		—		774		48		—			—			822
Mutual funds		1,171		57		1		—			—			1,229

Total equity securities available for sale	$	7,921	$	1,286	$	82	$	—		$	—		$	9,289

Equity securities trading:
Common stocks	$	1,083	$	105	$	1	$	—		$	—		$	1,189
Mutual funds		11,310		699		16		—			—			12,025

Total equity securities trading	$	12,393	$	804	$	17	$	—		$	—		$	13,214

Mortgage and other loans receivable		—		99		—		—			—			99
Other invested assets(d)		2,222		5,099		8,418		—			—			15,739
Unrealized gain on swaps, options and forward transactions		100		44,994		2,193		(30,381	)		(5,667	)		11,239
Securities purchased under agreements to resell		—		4,481		—		—			—			4,481
Short-term investments		4,075		20,648		3		—			—			24,726
Separate account assets		50,550		2,002		916		—			—			53,468
Other assets		—		18		288		—			—			306

Total	$	78,978	$	439,717	$	35,990	$	(30,381	)	$	(5,667	)	$	518,637


							Counterparty			Cash
	Level 1		Level 2		Level 3		Netting(a)			Collateral(b)			Total
	(In millions)

Liabilities:
Policyholder contract deposits	$	—	$	—	$	7,273	$	—		$	—		$	7,273
Securities sold under agreements to repurchase		—		2,716		—		—			—			2,716
Securities and spot commodities sold but not yet purchased		321		921		—		—			—			1,242
Unrealized loss on swaps, options and forward transactions(e)		8		37,308		11,137		(30,381	)		(13,196	)		4,876
Trust deposits and deposits due to banks and other depositors		—		26		—		—			—			26
Federal Reserve Bank of New York Commercial Paper Funding Facility		—		6,233		—		—			—			6,233
Other long-term debt		—		15,486		667		—			—			16,153
Other liabilities		—		3,277		—		—			—			3,277

Total	$	329	$	65,967	$	19,077	$	(30,381	)	$	(13,196	)	$	41,796

At December 31, 2008
Assets:
Bonds available for sale	$	414	$	344,237	$	18,391	$	—		$	—		$	363,042
Bond trading securities		781		29,480		6,987		—			—			37,248
Securities lending invested collateral(c)		—		2,966		435		—			—			3,401
Common and preferred stock available for sale		7,282		1,415		111		—			—			8,808
Common and preferred stock trading		11,199		1,133		3		—			—			12,335
Mortgage and other loans receivable		—		131		—		—			—			131
Other invested assets(d)		1,853		6,175		11,168		—			—			19,196
Unrealized gain on swaps, options and forward transactions		223		90,998		3,865		(74,217	)		(7,096	)		13,773
Securities purchased under agreements to resell		—		3,960		—		—			—			3,960
Short-term investments		3,247		16,069		—		—			—			19,316
Separate account assets		47,902		2,410		830		—			—			51,142
Other assets		—		44		325		—			—			369

Total	$	72,901	$	499,018	$	42,115	$	(74,217	)	$	(7,096	)	$	532,721

Liabilities:
Policyholder contract deposits	$	—	$	—	$	5,458	$	—		$	—		$	5,458
Securities sold under agreements to repurchase		—		4,423		85		—			—			4,508
Securities and spot commodities sold but not yet purchased		1,124		1,569		—		—			—			2,693
Unrealized loss on swaps, options and forward transactions(e)		1		85,255		14,435		(74,217	)		(19,236	)		6,238
Trust deposits and deposits due to banks and other depositors		—		30		—		—			—			30
Federal Reserve Bank of New York Commercial Paper Funding Facility		—		6,802		—		—			—			6,802
Other long-term debt		—		15,448		1,147		—			—			16,595
Other liabilities		—		1,355		—		—			—			1,355

Total	$	1,125	$	114,882	$	21,125	$	(74,217	)	$	(19,236	)	$	43,679


(a)		Represents netting of derivative exposures covered by a qualifying master netting agreement in accordance with FASB Interpretation (FIN) 39, “Offsetting of Amounts Related to Certain Contracts.”

(b)		Represents cash collateral posted and received. Securities collateral posted that is reflected in Fixed maturity securities in the Consolidated Balance Sheet, and collateral received, not reflected in the Consolidated Balance Sheet, amounted to $6.4 billion and $609 million, respectively, at June 30, 2009 and $4.2 billion and $1.6 billion, respectively, at December 31, 2008.

(c)		Amounts exclude short-term investments that are carried at cost, which approximates fair value of $99 million and $442 million at June 30, 2009 and December 31, 2008, respectively.

(d)		Approximately 12 percent and 15 percent of the fair value of the assets recorded as Level 3 relates to various private equity, real estate, hedge fund and fund-of-funds investments that are consolidated by AIG at June 30, 2009 and December 31, 2008, respectively. AIG’s ownership in these funds represented 37.7 percent, or $1.6 billion, of the Level 3 amount at June 30, 2009 and 27.6 percent, or $1.7 billion, of the Level 3 amount at December 31, 2008.

(e)		Included in Level 3 is the fair value derivative liability of $6.5 billion and $9.0 billion at June 30, 2009 and December 31, 2008, respectively, on the AIGFP super senior credit default swap portfolio.

At June 30, 2009, Level 3 assets were 4.3 percent of total assets, and Level 3 liabilities were 2.5 percent of total liabilities. At December 31, 2008, Level 3 assets were 4.9 percent of total assets, and Level 3 liabilities were 2.6 percent of total liabilities.

The following tables present changes during the three- and six-month periods ended June 30, 2009 and 2008 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) recorded in the Consolidated Statement of Income (Loss), during the three- and six-month periods ended June 30, 2009 and 2008 related to the Level 3 assets and liabilities that remained on the Consolidated Balance Sheet at June 30, 2009 and 2008:


																	Changes in
			Net														Unrealized
			Realized and														Gains
			Unrealized			Accumulated			Purchases,								(Losses) on
	Balance		Gains (Losses)			Other			Sales,						Balance		Instruments
	Beginning		Included			Comprehensive			Issuances and			Transfer			End		Held at
	of Period(a)		in Income(b)			Loss			Settlements-Net			In (Out)			of Period		End of Period
	(In millions)

Three Months Ended June 30, 2009
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	2	$	—		$	—		$	(7	)	$	7		$	2	$	—
Obligations of states, municipalities and political subdivisions		630		2			(46	)		206			10			802		—
Non-U.S. governments		562		(2	)		37			32			(1	)		628		—
Corporate debt		5,619		(20	)		493			(281	)		211			6,022		—
RMBS		5,834		29			(19	)		(209	)		2			5,637		—
CMBS		1,562		28			(23	)		(60	)		680			2,187		—
CDO/ABS		3,246		25			153			(143	)		15			3,296		—

Total bonds available for sale		17,455		62			595			(462	)		924			18,574		—

Bond trading securities:
U.S. government and government sponsored entities		11		—			—			—			—			11		—
Non-U.S. governments		—		—			—			—			5			5		—
Corporate debt		214		—			—			—			—			214		—
RMBS		2		1			—			—			—			3		1
CMBS		36		2			—			(1	)		—			37		1
CDO/ABS		4,017		1,394			—			(420	)		—			4,991		453

Total bond trading securities		4,280		1,397			—			(421	)		5			5,261		455


																			Changes in
				Net															Unrealized
				Realized and															Gains
				Unrealized			Accumulated			Purchases,									(Losses) on
	Balance			Gains (Losses)			Other			Sales,						Balance			Instruments
	Beginning			Included			Comprehensive			Issuances and			Transfer			End			Held at
	of Period(a)			in Income(b)			Loss			Settlements-Net			In (Out)			of Period			End of Period
	(In millions)

Securities lending invested collateral:
Corporate debt		307			—			14			(107	)		(80	)		134			—
RMBS		—			—			23			(1	)		—			22			—
CDO/ABS		91			—			(9	)		—			—			82			—

Total securities lending invested collateral		398			—			28			(108	)		(80	)		238			—

Equity securities available for sale:
Common stocks		45			(21	)		11			—			(2	)		33			—
Preferred stocks		54			(4	)		(2	)		(1	)		1			48			—
Mutual funds		1			—			—			—			—			1			—

Total equity securities available for sale		100			(25	)		9			(1	)		(1	)		82			—

Equity securities trading:
Common stocks		1			—			—			—			—			1			—
Mutual funds		5			—			—			—			11			16			—

Total equity securities trading		6			—			—			—			11			17			—

Other invested assets		9,688			(393	)		(1,586	)		576			133			8,418			(860	)
Short-term investments		—			—			—			—			3			3			—
Other assets		311			(15	)		—			(8	)		—			288			(8	)
Separate account assets		797			134			—			(15	)		—			916			134

Total	$	33,035		$	1,160		$	(954	)	$	(439	)	$	995		$	33,797		$	(279	)

Liabilities:
Policyholder contract deposits	$	(5,557	)	$	(1,656	)	$	(45	)	$	(155	)	$	140		$	(7,273	)	$	1,335
Securities sold under agreements to repurchase		(47	)		1			—			46			—			—			—
Unrealized loss on swaps, options and forward transactions, net		(11,856	)		1,016			(4	)		2,341			(441	)		(8,944	)		3,678
Other long-term debt		(531	)		(189	)		—			12			41			(667	)		242

Total	$	(17,991	)	$	(828	)	$	(49	)	$	2,244		$	(260	)	$	(16,884	)	$	5,255

Six Months Ended June 30, 2009
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	2		$	—		$	—		$	—		$	—		$	2		$	—
Obligations of states, municipalities and political subdivisions		861			(13	)		(43	)		(12	)		9			802			—
Non-U.S. governments		601			(1	)		17			23			(12	)		628			—
Corporate debt		5,872			(45	)		712			(593	)		76			6,022			—
RMBS		6,108			(538	)		472			(266	)		(139	)		5,637			—
CMBS		1,663			172			(198	)		(212	)		762			2,187			—
CDO/ABS		3,284			(412	)		66			(299	)		657			3,296			—

Total bonds available for sale		18,391			(837	)		1,026			(1,359	)		1,353			18,574			—

Bond trading securities:
U.S. government and government sponsored entities		17			(6	)		—			—			—			11			4
Non-U.S. governments		—			—			—			—			5			5			—
Corporate debt		261			(31	)		—			(65	)		49			214			(3	)
RMBS		8			(5	)		—			—			—			3			(4	)
CMBS		45			(6	)		—			(2	)		—			37			(6	)
CDO/ABS		6,656			(1,114	)		—			(551	)		—			4,991			634

Total bond trading securities		6,987			(1,162	)		—			(618	)		54			5,261			625


																			Changes in
				Net															Unrealized
				Realized and															Gains
				Unrealized			Accumulated			Purchases,									(Losses) on
	Balance			Gains (Losses)			Other			Sales,						Balance			Instruments
	Beginning			Included			Comprehensive			Issuances and			Transfer			End			Held at
	of Period(a)			in Income(b)			Loss			Settlements-Net			In (Out)			of Period			End of Period
	(In millions)

Securities lending invested collateral:
Corporate debt		231			—			6			67			(170	)		134			—
RMBS		48			—			5			(31	)		—			22			—
CDO/ABS		156			—			(25	)		(10	)		(39	)		82			—

Total Securities lending invested collateral		435			—			(14	)		26			(209	)		238			—

Equity securities available for sale:
Common stocks		55			(21	)		7			—			(8	)		33			—
Preferred stocks		54			(6	)		(4	)		(1	)		5			48			—
Mutual funds		2			—			(1	)		—			—			1			—

Total equity securities available for sale		111			(27	)		2			(1	)		(3	)		82			—

Equity securities trading:
Common stocks		1			—			—			—			—			1			—
Mutual funds		2			—			—			—			14			16			—

Total equity securities trading		3			—			—			—			14			17			—

Other invested assets		11,168			(1,327	)		(2,339	)		892			24			8,418			(1,164	)
Short-term investments		—			—			—			—			3			3			—
Other assets		325			(9	)		—			(28	)		—			288			(8	)
Separate account assets		830			113			—			(27	)		—			916			114

Total	$	38,250		$	(3,249	)	$	(1,325	)	$	(1,115	)	$	1,236		$	33,797		$	(433	)

Liabilities:
Policyholder contract deposits	$	(5,458	)	$	(1,501	)	$	(183	)	$	(271	)	$	140		$	(7,273	)	$	1,563
Securities sold under agreements to repurchase		(85	)		4			—			81			—			—			—
Unrealized loss on swaps, options and forward transactions, net		(10,570	)		(307	)		4			2,622			(693	)		(8,944	)		3,185
Other long-term debt		(1,147	)		253			—			134			93			(667	)		(176	)

Total	$	(17,260	)	$	(1,551	)	$	(179	)	$	2,566		$	(460	)	$	(16,884	)	$	4,572

Three Months Ended June 30, 2008
Assets:
Bonds available for sale	$	17,492		$	(682	)	$	(56	)	$	43		$	2,055		$	18,852		$	—
Bond trading securities		3,535			(467	)		2			728			77			3,875			(354	)
Securities lending invested collateral		9,622			(1,346	)		908			(590	)		(105	)		8,489			—
Common and preferred stock available for sale		384			(6	)		5			(74	)		176			485			—
Common and preferred stock trading		25			(1	)		1			(13	)		(7	)		5			—
Mortgage and other loans receivable		—			—			—			—			4			4			—
Other invested assets		11,348			(153	)		70			533			70			11,868			166
Other assets		337			(6	)		—			3			—			334			(6	)
Separate account assets		1,065			(3	)		—			116			—			1,178			(4	)

Total	$	43,808		$	(2,664	)	$	930		$	746		$	2,270		$	45,090		$	(198	)

Liabilities:
Policyholder contract deposits	$	(4,118	)	$	129		$	13		$	(203	)	$	—		$	(4,179	)	$	62
Securities sold under agreements to repurchase		(220	)		(3	)		—			(39	)		222			(40	)		1
Unrealized loss on swaps, options and forward transactions, net		(20,860	)		(5,679	)		—			(240	)		105			(26,674	)		(5,496	)
Other long-term debt		(2,838	)		(25	)		—			182			(8	)		(2,689	)		(12	)
Other liabilities		(74	)		32			(1	)		17			1			(25	)		52

Total	$	(28,110	)	$	(5,546	)	$	12		$	(283	)	$	320		$	(33,607	)	$	(5,393	)


																			Changes in
				Net															Unrealized
				Realized and															Gains
				Unrealized			Accumulated			Purchases,									(Losses) on
	Balance			Gains (Losses)			Other			Sales,						Balance			Instruments
	Beginning			Included			Comprehensive			Issuances and			Transfer			End			Held at
	of Period(a)			in Income(b)			Loss			Settlements-Net			In (Out)			of Period			End of Period
	(In millions)

Six Months Ended June 30, 2008
Assets:
Bonds available for sale	$	19,071		$	(1,447	)	$	(542	)	$	(142	)	$	1,912		$	18,852		$	—
Bond trading securities		4,563			(1,453	)		2			717			46			3,875			(1,243	)
Securities lending invested collateral		11,353			(3,138	)		1,087			(818	)		5			8,489			—
Common and preferred stock available for sale		359			(7	)		6			(56	)		183			485			—
Common and preferred stock trading		30			(1	)		2			(19	)		(7	)		5			—
Mortgage and other loans receivable		—			—			—			—			4			4			—
Other invested assets		10,373			192			137			1,148			18			11,868			818
Other assets		141			—			—			193			—			334			—
Separate account assets		1,003			27			—			148			—			1,178			27

Total	$	46,893		$	(5,827	)	$	692		$	1,171		$	2,161		$	45,090		$	(398	)

Liabilities:
Policyholder contract deposits	$	(3,674	)	$	(57	)	$	(51	)	$	(397	)	$	—		$	(4,179	)	$	(221	)
Securities sold under agreements to repurchase		(208	)		(20	)		—			(34	)		222			(40	)		1
Unrealized loss on swaps, options and forward transactions, net		(11,718	)		(14,562	)		—			(429	)		35			(26,674	)		(14,693	)
Other long-term debt		(3,578	)		90			—			638			161			(2,689	)		—
Other liabilities		(503	)		(55	)		—			532			1			(25	)		28

Total	$	(19,681	)	$	(14,604	)	$	(51	)	$	310		$	419		$	(33,607	)	$	(14,885	)


(a)		Total Level 3 derivative exposures have been netted on these tables for presentation purposes only.

(b)		Net realized and unrealized gains and losses shown above are reported in the Consolidated Statement of Income (Loss) primarily as follows:


Major Category of Assets/Liabilities		Consolidated Statement of Income (Loss) Line Items

Bonds available for sale		• Net realized capital gains (losses)
Bond trading securities		• Net investment income
		• Other income
Other invested assets		• Net realized capital gains (losses)
		• Other income
Policyholder contract deposits		• Policyholder benefits and claims incurred
		• Net realized capital gains (losses)
Unrealized loss on swaps, options and forward transactions, net		• Unrealized market valuation gains (losses) on AIGFP super senior credit default swap portfolio
		• Net realized capital gains (losses)
		• Other income

Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at June 30, 2009 and 2008 may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable inputs (e.g., changes in unobservable long-dated volatilities).

AIG uses various hedging techniques to manage risks associated with certain positions, including those classified within Level 3. Such techniques may include the purchase or sale of financial instruments that are classified within Level 1 and/or Level 2. As a result, the realized and unrealized gains (losses) for assets and liabilities classified within Level 3 presented in the table above do not reflect the related realized or unrealized gains (losses) on hedging instruments that are classified within Level 1 and/or Level 2.

Changes in the fair value of separate and variable account assets are completely offset in the Consolidated Statement of Income (Loss) by changes in separate and variable account liabilities, which are not carried at fair value and therefore not included in the tables above.

Fair Value Measurements on a Non-Recurring Basis

AIG also measures the fair value of certain assets on a non-recurring basis, generally quarterly, annually, or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include cost and equity-method investments, life settlement contracts, flight equipment primarily under operating leases, collateral securing foreclosed loans and real estate and other fixed assets, goodwill, and other intangible assets. AIG uses a variety of techniques to measure the fair value of these assets when appropriate, as described below:


	•	Cost and Equity-Method Investments: When AIG determines that the carrying value of these assets may not be recoverable, AIG records the assets at fair value with the loss recognized in income. In such cases, AIG measures the fair value of these assets using the techniques discussed in Fair Value Measurements on a Recurring Basis — Fair Value Hierarchy, above, for fixed maturities and equity securities.

	•	Life Settlement Contracts: AIG measures the fair value of individual life settlement contracts (which are included in other invested assets) whenever the carrying value plus the undiscounted future costs that are expected to be incurred to keep the life settlement contract in force exceed the expected proceeds from the contract. In those situations, the fair value is determined on a discounted cash flow basis, incorporating current life expectancy assumptions. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life settlement contract and AIG’s estimate of the risk margin an investor in the contracts would require.

	•	Flight Equipment Primarily Under Operating Leases: When AIG determines the carrying value of its commercial aircraft may not be recoverable, AIG records the aircraft at fair value with the loss recognized in income. AIG measures the fair value of its commercial aircraft using an income approach based on the present value of all cash flows from existing and projected lease payments (based on historical experience and current expectations regarding market participants) including net contingent rentals for the period extending to the end of the aircraft’s economic life in its highest and best use configuration, plus its disposition value.

	•	Collateral Securing Foreclosed Loans and Real Estate and Other Fixed Assets: When AIG takes collateral in connection with foreclosed loans, AIG generally bases its estimate of fair value on the price that would be received in a current transaction to sell the asset by itself, by reference to observable transactions for similar assets.

	•	Goodwill: AIG tests goodwill annually for impairment or more frequently whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. When AIG determines goodwill may be impaired, AIG uses techniques including market-based earning multiples of peer companies, discounted expected future cash flows, appraisals, or, in the case of reporting units being considered for sale, third-party indications of fair value of the reporting unit, if available, to determine the amount of any impairment.

	•	Long-Lived Assets: AIG tests its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of a long-lived asset may not be recoverable. AIG measures the fair value of long-lived assets based on an in-use premise that considers the same factors used to estimate the fair value of its real estate and other fixed assets under an in-use premise discussed above.

	•	Finance Receivables Held for Sale:


	•	Originated as held for sale — AIG determines the fair value of finance receivables originated as held for sale by reference to available market indicators such as current investor yield requirements, outstanding forward sale commitments, or negotiations with prospective purchasers, if any.

	•	Originated as held for investment — AIG determines the fair value of finance receivables originated as held for investment based on negotiations with prospective purchasers, if any, or by using projected cash flows discounted at the weighted average interest rates offered in the marketplace for similar finance receivables. Cash flows are projected based on contractual payment terms, adjusted for delinquencies and estimates of prepayments and credit-related losses.

Assets measured at fair value on a non-recurring basis on which impairment charges were recorded, and the related impairment charges, were as follows:


									Impairment Charges
									Three Months				Six Months
	Assets at Fair Value								Ended				Ended
	Non-Recurring Basis								June 30,				June 30,
	Level 1		Level 2		Level 3		Total		2009		2008		2009		2008
	(In millions)

At June 30, 2009
Goodwill	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	45
Real estate owned		—		—		3,278		3,278		341		22		499		22
Finance receivables		—		—		754		754		79		15		79		15
Other investments		—		—		716		716		77		—		369		—
Aircraft		—		—		24		24		16		—		16		—
Other assets		—		108		187		295		39		13		111		13

Total	$	—	$	108	$	4,959	$	5,067	$	552	$	50	$	1,074	$	95

At December 31, 2008
Real estate owned	$	—	$	—	$	1,379	$	1,379
Other investments		15		—		3,122		3,137
Other assets		—		29		1,160		1,189

Total	$	15	$	29	$	5,661	$	5,705

During 2009, AIG recognized impairment charges primarily attributable to certain investment real estate and other long-lived assets, which were included in Other income.

Fair Value Option

FAS 159 permits a company to choose to measure at fair value many financial instruments and certain other assets and liabilities that are not required to be measured at fair value. Subsequent changes in fair value for designated items are required to be reported in income. Unrealized gains and losses on financial instruments in AIG’s insurance businesses and in AIGFP for which the fair value option was elected under FAS 159 are classified in Policyholder benefit and claims incurred and in Other income, respectively, in the Consolidated Statement of Income (Loss).

The following table presents the gains or losses recorded during the three- and six-month periods ended June 30, 2009 and 2008 related to the eligible instruments for which AIG elected the fair value option:


	Gain (Loss)						Gain (Loss)
	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
				(In millions)

Mortgage and other loans receivable	$	18		$	11		$	(29	)	$	79
Trading securities		1,402			(718	)		(269	)		(1,151	)
Trading — ML II and ML III		885			—			(1,316	)		—
Securities purchased under agreements to resell		7			307			(9	)		575
Other invested assets		(2	)		2			(24	)		12
Short-term investments		2			43			—			67

Policyholder contract deposits(a)		(543	)		3			(591	)		118
Securities sold under agreements to repurchase		(100	)		(120	)		21			(416	)
Securities and spot commodities sold but not yet purchased		(48	)		(34	)		(82	)		(13	)
Trust deposits and deposits due to banks and other depositors		(54	)		4			(43	)		(11	)
Debt		468			582			3,055			(391	)
Other liabilities		(251	)		(286	)		(113	)		(319	)

Total gain (loss)(b)	$	1,784		$	(206	)	$	600		$	(1,450	)


(a)		AIG elected to apply the fair value option to certain single premium variable life products in Japan and an investment-linked life insurance product sold principally in Asia, both classified within policyholder contract deposits in the Consolidated Balance Sheet. AIG elected the fair value option for these liabilities to more closely align its accounting with the economics of its transactions. For the investment-linked product sold principally in Asia, the election more effectively aligns changes in the fair value of assets with a commensurate change in the fair value of policyholders’ liabilities. For the single premium life products in Japan, the fair value option election allows AIG to economically hedge the inherent market risks associated with this business in an efficient and effective manner through the use of derivative instruments. The hedging program, which was completely implemented in the third quarter of 2008, results in an accounting presentation for this business that more closely reflects the underlying economics and the way the business is managed, with the change in the fair value of derivatives and underlying assets largely offsetting the change in fair value of the policy liabilities. AIG did not elect the fair value option for other liabilities classified in policyholder contract deposits because other contracts do not share the same contract features that created the disparity between the accounting presentation and the economic performance.

(b)		Not included in the table above were gains of $2.5 billion and losses of $6.3 billion for the three-month periods ended June 30, 2009 and 2008, respectively, and gains of $3.2 billion and losses of $14.5 billion for the six-month periods ended June 30, 2009 and 2008, respectively, that were primarily due to changes in the fair value of derivatives, trading securities and certain other invested assets for which the fair value option under FAS 159 was not elected. Included in these amounts were unrealized market valuation gains of $636 million and losses of $5.6 billion for the three-month periods ended June 30, 2009 and 2008, respectively, and gains of $184 million and losses of $14.7 billion for the six-month periods ended June 30, 2009 and 2008, respectively, related to AIGFP’s super senior credit default swap portfolio.

Interest income and expense and dividend income on assets and liabilities elected under the fair value option are recognized and classified in the Consolidated Statement of Income (Loss) depending on the nature of the instrument and related market conventions. For AIGFP related activity, interest, dividend income, and interest expense are included in other income. Otherwise, interest and dividend income are included in net investment income in the Consolidated Statement of Income (Loss). See Note 1(a) to the Consolidated Financial Statements in the 2008 Financial Statements for additional information about AIG’s policies for recognition, measurement, and disclosure of interest and dividend income and interest expense.

During the three- and six-month periods ended June 30, 2009, AIG recognized a loss of $576 million and a gain of $624 million, respectively, and during the three- and six-month periods ended June 30, 2008, AIG recognized a loss of $169 million and a gain of $1.3 billion, respectively, attributable to the observable effect of changes in credit spreads on AIG’s own liabilities for which the fair value option was elected. AIG calculates the effect of these credit spread changes using discounted cash flow techniques that incorporate current market interest rates, AIG’s observable credit spreads on these liabilities and other factors that mitigate the risk of nonperformance such as collateral posted.

The following table presents the difference between fair values and the aggregate contractual principal amounts of mortgage and other loans receivable and long-term borrowings, for which the fair value option was elected:


	At June 30, 2009							At December 31, 2008
			Outstanding							Outstanding
	Fair		Principal					Fair		Principal
	Value		Amount		Difference			Value		Amount		Difference
	(In millions)

Assets:
Mortgage and other loans receivable	$	99	$	248	$	(149	)	$	131	$	244	$	(113	)
Liabilities:
Long-term debt	$	14,623	$	13,584	$	1,039		$	21,285	$	16,827	$	4,458

At June 30, 2009 and December 31, 2008, there were no significant mortgage or other loans receivable for which the fair value option was elected that were 90 days or more past due and in non-accrual status.

Fair Value Information about Financial Instruments Not Measured at Fair Value

Commencing in the second quarter of 2009, FAS 107, as amended by FSP FAS 107-1, requires quarterly disclosure of fair value information about financial instruments for which it is practicable to estimate such fair value. FAS 107 excludes certain financial instruments, including those related to insurance contracts and lease contracts.

Information regarding the estimation of fair value for financial instruments not carried at fair value is discussed below:


	•	Mortgage and other loans receivable: Fair values of loans on real estate and collateral loans were estimated for disclosure purposes using discounted cash flow calculations based upon discount rates that AIG believes market participants would use in determining the price they would pay for such assets. For certain loans, AIG’s current incremental lending rates for similar type loans is used as the discount rate, as it is believed that this rate approximates the rates market participants would use. The fair values of policy loans were not estimated as AIG believes it would have to expend excessive costs for the benefits derived.

	•	Finance receivables: Fair values of net finance receivables, less allowance for finance receivable losses, were estimated for disclosure purposes using projected cash flows, computed by category of finance receivable, discounted at the weighted average interest rates offered in the marketplace for similar finance receivables. Cash flows were projected based on contractual payment terms adjusted for delinquencies and estimates of prepayments and credit-related losses. The fair value estimates do not reflect the underlying customer relationships or the related distribution systems.


	•	Securities lending payable: The contract values of securities lending payable approximate fair value as these obligations are short-term in nature.

	•	Cash, short-term investments, trade receivables, trade payables, securities purchased (sold) under agreements to resell (repurchase), and commercial paper and other short-term debt: The carrying values of these assets and liabilities approximate fair values because of the relatively short period of time between origination and expected realization.

	•	Policyholder contract deposits associated with investment-type contracts: Fair values for policyholder contract deposits associated with investment-type contracts not accounted for at fair value were estimated for disclosure purposes using discounted cash flow calculations based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. Where no similar contracts are being offered, the discount rate is the appropriate tenor swap rates (if available) or current risk-free interest rates consistent with the currency in which the cash flows are denominated.

	•	Trust deposits and deposits due to banks and other depositors: The fair values of certificates of deposit which mature in more than one year are estimated for disclosure purposes using discounted cash flow calculations based upon interest rates currently offered for deposits with similar maturities. For demand deposits and certificates of deposit which mature in less than one year, carrying values approximate fair value.

	•	Long-term debt: Fair values of these obligations were determined for disclosure purposes by reference to quoted market prices, where available and appropriate, or discounted cash flow calculations based upon AIG’s current market-observable implicit-credit-spread rates for similar types of borrowings with maturities consistent with those remaining for the debt being valued.

The following table presents the carrying value and estimated fair value of AIG’s financial instruments as required by FAS 107:

June 30, 2009

December 31, 2008

Carrying

Fair

Carrying

Fair

Value

(In millions)

Assets:

Fixed maturities

386,175

404,134

Equity securities

22,503

21,143

Mortgage and other loans receivable

32,380

30,300

34,687

35,056

Finance receivables, net of allowance

25,342

22,217

30,949

28,731

Other invested assets^*

42,048

42,681

50,381

52,094

Securities purchased under agreements to resell

4,481

3,960

Short-term investments

59,336

46,666

Cash

5,802

8,642

Trade receivables

817

1,901

Unrealized gain on swaps, options and forward transactions

11,239

13,773

Liabilities:

Policyholder contract deposits associated with investment-type contracts

172,688

174,238

179,478

176,783

Securities sold under agreements to repurchase

3,191

5,262

Trade payables

780

977

Securities and spot commodities sold but not yet purchased

1,242

2,693

Unrealized loss on swaps, options and forward transactions

4,876

6,238

Trust deposits and deposits due to banks and other depositors

2,687

4,498

4,469

Commercial paper and other short-term debt

197

613

Federal Reserve Bank of New York Commercial Paper Funding Facility

11,152

15,105

Federal Reserve Bank of New York credit facility

44,816

41,097

40,431

40,708

Other long-term debt

123,528

92,316

137,054

101,467

Securities lending payable

1,533

2,879


*		Excludes aircraft asset investments held by non-Financial Services subsidiaries.

Investments

6 Months Ended

Jun. 30, 2009

Notes To Consolidated Financials Abstract

aig:InvestmentsTextBlock

5.	Investments

The amortized cost or cost and fair value of AIG’s available for sale securities were as follows:


										Other-Than-
	Amortized		Gross		Gross					Temporary
	Cost or		Unrealized		Unrealized			Fair		Impairments
	Cost		Gains		Losses			Value		in AOCI(a)
	(In millions)

June 30, 2009
Bonds available for sale:
U.S. government and government sponsored entities	$	4,074	$	154	$	(199	)	$	4,029	$	—
Obligations of states, municipalities and political subdivisions		54,808		1,412		(968	)		55,252		—
Non-U.S. governments		69,735		4,766		(889	)		73,612		(6	)
Corporate debt		183,042		5,409		(11,721	)(b)		176,730		99
Mortgage-backed, asset-backed and collateralized:
RMBS		34,872		940		(7,054	)		28,758		(2,801	)
CMBS		19,002		66		(8,048	)		11,020		(827	)
CDO/ABS		8,182		141		(3,007	)		5,316		(339	)

Total bonds available for sale(c)		373,715		12,888		(31,886	)		354,717		(3,874	)
Equity securities available for sale:
Common stocks		5,067		2,268		(98	)		7,237		—
Preferred stocks		853		50		(81	)		822		—
Mutual funds		1,110		148		(28	)		1,230		—

Total equity securities available for sale		7,030		2,466		(207	)		9,289		—

Total	$	380,745	$	15,354	$	(32,093	)	$	364,006	$	(3,874	)

December 31, 2008
Bonds available for sale:
U.S. government and government sponsored entities	$	4,433	$	331	$	(59	)	$	4,705
Obligations of states, municipalities and political subdivisions		62,718		1,150		(2,611	)		61,257
Non-U.S. governments		62,176		6,560		(1,199	)		67,537
Corporate debt		194,481		4,661		(13,523	)(b)		185,619
Mortgage-backed, asset-backed and collateralized:
RMBS		32,092		645		(2,985	)		29,752
CMBS		14,205		126		(3,105	)		11,226
CDO/ABS		6,741		233		(843	)		6,131
AIGFP(d)		217		—		—			217

Total bonds available for sale(c)		377,063		13,706		(24,325	)		366,444
Equity securities available for sale:
Common stocks		5,545		1,035		(512	)		6,068
Preferred stocks		1,349		33		(138	)		1,244
Mutual funds		1,487		78		(69	)		1,496

Total equity securities available for sale		8,381		1,146		(719	)		8,808

Total	$	385,444	$	14,852	$	(25,044	)	$	375,252


(a)		Represents the amount of other-than-temporary impairment losses in Accumulated other comprehensive loss (AOCI), which, starting April 1, 2009, were not included in earnings under FSP FAS 115-2. Amount includes


		unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

(b)		Financial institutions represent approximately 53 percent and 57 percent of the total gross unrealized losses at June 30, 2009 and December 31, 2008, respectively.

(c)		At June 30, 2009 and December 31, 2008, bonds available for sale held by AIG that were below investment grade or not rated totaled $23.4 billion and $19.4 billion, respectively. At June 30, 2009 and December 31, 2008, fixed maturity securities reported on the Consolidated Balance Sheet include $99 million and $442 million, respectively, of short-term investments included in Securities lending invested collateral.

(d)		The amounts represent securities for which AIGFP has not elected the fair value option. At June 30, 2009, a total of $151 million in securities for AIGFP were included in the respective asset class categories. Historical amounts were not revised.

Unrealized losses

The following table summarizes the fair value and gross unrealized losses on AIG’s available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position:

12 Months or Less

More than 12 Months

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Losses

Value

Losses

Value

Losses

(In millions)

June 30, 2009

Bonds available for sale:

U.S. government and government sponsored entities

997

193

1,037

199

Obligations of states, municipalities and political subdivisions

9,218

243

10,248

725

19,466

968

Non-U.S. governments

13,223

598

2,657

291

15,880

889

Corporate debt

44,771

4,755

43,836

6,966

88,607

11,721

RMBS

7,284

5,350

6,158

1,704

13,442

7,054

CMBS

4,481

5,643

5,559

2,405

10,040

8,048

CDO/ABS

3,256

2,670

1,229

337

4,485

3,007

Total bonds available for sale

83,230

19,452

69,727

12,434

152,957

31,886

Equity securities available for sale:

Common stocks

1,111

—

1,111

Preferred stocks

359

—

359

Mutual funds

282

—

282

Total equity securities available for sale

1,752

207

—

1,752

207

Total

84,982

19,659

69,727

12,434

154,709

32,093


	12 Months or Less				More than 12 Months				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(In millions)

December 31, 2008
Bonds available for sale:
U.S. government and government sponsored entities	$	629	$	35	$	616	$	24	$	1,245	$	59
Obligations of states, municipalities and political subdivisions		5,416		2,310		2,111		301		7,527		2,611
Non-U.S. governments		26,914		309		4,812		890		31,726		1,199
Corporate debt		79,942		7,979		29,570		5,544		109,512		13,523
RMBS		7,928		1,790		4,745		1,195		12,673		2,985
CMBS		3,947		1,362		3,537		1,743		7,484		3,105
CDO/ABS		3,389		546		927		297		4,316		843

Total bonds available for sale		128,165		14,331		46,318		9,994		174,483		24,325
Equity securities available for sale:
Common stocks		1,951		512		—		—		1,951		512
Preferred stocks		747		138		—		—		747		138
Mutual funds		332		69		—		—		332		69

Total equity securities available for sale		3,030		719		—		—		3,030		719

Total	$	131,195	$	15,050	$	46,318	$	9,994	$	177,513	$	25,044

At June 30, 2009, AIG held 19,432 and 81,558 of individual fixed maturity and equity securities, respectively, that were in an unrealized loss position, of which 8,326 individual securities were in a continuous unrealized loss position for longer than 12 months.

AIG did not recognize in earnings the unrealized losses on these fixed maturity securities at June 30, 2009, because management neither intends to sell the securities nor does it believe that it is more likely than not that it will be required to sell these securities before recovery of their amortized cost basis. Furthermore, management expects to recover the entire amortized cost basis of these securities (that is, they are not credit impaired). In performing this evaluation, management considered the recovery periods for securities in previous periods of broad market declines. For fixed maturity securities with significant declines, management performed extended fundamental credit analysis on a security-by-security basis, which included consideration of credit enhancements, expected defaults on underlying collateral, review of relevant industry analyst reports and forecasts and other market available data.

At June 30, 2009 unrealized losses related to fixed maturity securities increased $7.6 billion ($4.9 billion after tax) reflecting the reversal of prior other-than-temporary impairments in connection with the adoption of FSP FAS 115-2, partially offset by an increase in fair value due to the narrowing of credit spreads and declines in risk-free interest rates.

The amortized cost and fair value of fixed maturity securities available for sale by contractual maturity were as follows:


	Total Fixed Maturity				Fixed Maturity
	Available for Sale Securities				Securities in a Loss Position
June 30, 2009	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In millions)

Due in one year or less	$	13,374	$	13,311	$	3,532	$	3,224
Due after one year through five years		79,536		79,601		29,054		26,373
Due after five years through ten years		97,089		96,508		46,230		41,791
Due after ten years		121,660		120,203		59,962		53,609
Mortgage-backed, asset-backed and collateralized		62,056		45,094		46,065		27,960

Total	$	373,715	$	354,717	$	184,843	$	152,957

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.

Net Investment Income

The components of net investment income were as follows:


	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
	(In millions)

Fixed maturities, including short-term investments	$	5,769		$	5,445		$	8,781		$	10,918
Equity securities		123			149			207			219
Interest on mortgage and other loans		381			397			784			775
Partnerships		(93	)		66			(779	)		172
Mutual funds		285			121			185			(24	)
Trading account gains (losses)		4			(133	)		(34	)		(221	)
Other investments		344			341			493			540

Total investment income before policyholder investment income and trading gains (losses)		6,813			6,386			9,637			12,379
Policyholder investment income and trading gains (losses)		2,135			617			1,828			(168	)

Total investment income		8,948			7,003			11,465			12,211
Investment expenses		163			275			397			529

Net investment income	$	8,785		$	6,728		$	11,068		$	11,682

Net Realized Capital Gains (Losses)

The components of net realized capital gains (losses) were as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
	(In millions)

Sales of fixed maturity securities	$	873		$	(29	)	$	793		$	(10	)
Sales of equity securities		170			240			136			320
Sales of real estate and other assets		(870	)		172			(910	)		325
Other-than-temporary impairments:
Total other-than-temporary impairments on available for sale securities		(1,190	)		(6,720	)		(5,051	)		(12,260	)
Portion of other-than-temporary impairments on available for sale fixed maturity securities recognized in Accumulated other comprehensive income (loss)		369			—			369			—

Net other-than-temporary impairments on available for sale securities recognized in net income (loss)		(821	)		(6,720	)		(4,682	)		(12,260	)
Other-than-temporary impairments on all other investments		(162	)		(57	)		(288	)		(110	)
Foreign exchange transactions		(1,302	)		(74	)		(1,017	)		(738	)
Derivative instruments		813			387			1,567			303

Total	$	(1,299	)	$	(6,081	)	$	(4,401	)	$	(12,170	)

The gross realized gains and gross realized losses from sales of AIG’s available for sale securities were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2009

2008

2009

2008

Gross

Realized

Gains

Losses

Gains

Losses

Gains

Losses

Gains

Losses

(In millions)

Fixed maturities

1,059

186

391

420

1,466

673

638

648

Equity securities

195

342

102

306

170

637

317

Total

1,254

211

733

522

1,772

843

1,275

965

For the three- and six-month periods ended June 30, 2009, the aggregate fair value of available for sale securities sold was 2.9 billion, (approximately 92 percent of cost or amortized cost) and $7.7 billion, (approximately 91 percent of cost or amortized cost), respectively. The average periods of time that securities sold at a loss during the six-month period ended June 30, 2009 were trading continuously at a price below cost or amortized cost was approximately 6 months.

Evaluating Investments for Other-Than-Temporary Impairments

AIG adopted the requirements of FSP FAS 115-2 on a prospective basis, as required, on April 1, 2009. These requirements have significantly altered AIG’s policies and procedures for determining impairment charges recognized through earnings. FSP FAS 115-2 requires a company to recognize the credit component (a credit impairment) of an other-than-temporary impairment of a fixed maturity security in income and the non-credit component in accumulated other comprehensive income when the company does not intend to sell the security or it is more likely than not that the company will not be required to sell the security prior to recovery. FSP FAS 115-2 also changes the threshold for determining when an other-than-temporary impairment has occurred on a fixed maturity security with respect to intent and ability to hold the security until recovery and requires additional disclosures. A credit impairment, which is recognized in earnings when it occurs, is the difference between the amortized cost of the fixed maturity security and the estimated present value of cash flows expected to be collected (recovery value), as determined by management. The difference between fair value and amortized cost that is not related to a credit impairment is recognized as a separate component of Accumulated other comprehensive income (loss). AIG refers to both credit impairments and impairments recognized as a result of intent to sell as “impairment charges.” The impairment model for equity securities was not affected by FSP FAS 115-2.

Impairment Policy — Effective April 1, 2009 and Thereafter

Fixed Maturity Securities

If AIG intends to sell a fixed maturity security or it is more likely than not that AIG will be required to sell a fixed maturity security before recovery of its amortized cost basis and the fair value of the security is below amortized cost, an other-than-temporary impairment has occurred and the amortized cost is written down to current fair value, with a corresponding charge to earnings.

For all other fixed maturity securities for which a credit impairment has occurred, the amortized cost is written down to the estimated recovery value with a corresponding charge to earnings. Additional fair value decline below recovery value, if any, is charged to unrealized appreciation (depreciation) of fixed maturity investments on which other-than-temporary credit impairments were taken (a component of accumulated other comprehensive income (loss)), because this is considered a non-credit impairment.

When assessing AIG’s intent to sell a fixed maturity security, or if it is more likely than not that AIG will be required to sell a fixed maturity security before recovery of its amortized cost basis, management evaluates relevant facts and circumstances including, but not limited to, decisions to reposition AIG’s investment portfolio, sale of securities to meet cash flow needs and sales of securities to capitalize on favorable pricing.

AIG considers severe price declines and the duration of such price declines in its assessment of potential credit impairments. AIG also modifies its modeled outputs for certain securities when it determines that price declines are indicative of factors not comprehended by the cash flow models.

In periods subsequent to the recognition of an other-than-temporary impairment charge for available for sale fixed maturity securities that is not foreign exchange related, AIG generally prospectively accretes into income the difference between the new amortized cost and the expected undiscounted recovery value over the remaining expected holding period of the security.

A rollforward of the credit impairments recognized in earnings for available for sale fixed maturity securities held by AIG is as follows:


	Three Months
	Ended
	June 30, 2009
	(In millions)

Balance, March 31, 2009	$	—
Increases due to:
Credit losses remaining in accumulated deficit related to the adoption of FSP FAS 115-2		7,182
Credit impairments on new securities subject to impairment losses		157
Additional credit impairments on previously impaired securities		268
Reductions due to:
Credit impaired securities fully disposed for which there was no prior intent or requirement to sell		(134	)
Foreign exchange effect		23

Balance, June 30, 2009	$	7,496

In assessing whether a credit impairment has occurred for a structured fixed maturity security, AIG performs evaluations of expected future cash flows, as required by FSP FAS 115-2. Certain critical assumptions are made with respect to the performance of the securities.

When estimating future cash flows for a structured fixed maturity security (e.g. RMBS, CMBS, CDO, ABS) management considers historical performance of underlying assets and available market information as well as bond-specific structural considerations, such as credit enhancement and priority of payment structure of the security. In addition, the process of estimating future cash flows includes, but is not limited to, the following critical inputs, which vary by asset class:


	•	Current delinquency rates;

	•	Expected default rates and timing of such defaults;

	•	Loss severity and timing of any such recovery;

	•	Expected prepayment speeds; and

	•	Ratings of securities underlying structured products.

For corporate, municipal and sovereign fixed maturity securities determined to be credit impaired, management considers the fair value as the recovery value when available information does not indicate that another value is more relevant or reliable. When management identifies information that supports a recovery value other than the fair value, the determination of a recovery value considers scenarios specific to the issuer and the security, and may be based upon estimates of outcomes of corporate restructurings, political and macro economic factors, stability and financial strength of the issuer, the value of any secondary sources of repayment and the disposition of assets.

Equity Securities

The impairment model for equity securities was not affected by the adoption of FSP FAS 115-2 in the second quarter of 2009. AIG continues to evaluate its available for sale equity securities, equity method and cost method investments for impairment by considering such securities candidates for other-than-temporary impairment if they meet any of the following criteria:


	•	The security has traded at a significant (25 percent or more) discount to cost for an extended period of time (nine consecutive months or longer);


	•	A discrete credit event has occurred resulting in (i) the issuer defaulting on a material outstanding obligation; (ii) the issuer seeking protection from creditors under the bankruptcy laws or any similar laws intended for court supervised reorganization of insolvent enterprises; or (iii) the issuer proposing a voluntary reorganization pursuant to which creditors are asked to exchange their claims for cash or securities having a fair value substantially lower than par value of their claims; or

	•	AIG has concluded that it may not realize a full recovery on its investment, regardless of the occurrence of one of the foregoing events.

The determination that an equity security is other-than-temporarily impaired requires the judgment of management and consideration of the fundamental condition of the issuer, its near-term prospects and all the relevant facts and circumstances. For securities other than those subject to FSP FAS 115-2, the above criteria also consider circumstances of a rapid and severe market valuation declines in which AIG could not reasonably assert that the impairment period would be temporary (severity losses).

Fixed Maturity Securities Impairment Policy — Prior to April 1, 2009

In all periods prior to the adoption of FSP FAS 115-2, AIG assessed its ability to hold any fixed maturity available for sale security in an unrealized loss position to its recovery at each balance sheet date. The decision to sell any such fixed maturity security classified as available for sale reflected the judgment of AIG’s management that the security sold was unlikely to provide, on a relative value basis, as attractive a return in the future as alternative securities entailing comparable risks. With respect to distressed securities, the sale decision reflected management’s judgment that the risk-adjusted ultimate recovery was less than the value achievable on sale.

In those periods, AIG evaluated its fixed maturity securities for other-than-temporary impairments with respect to valuation as well as credit.

After a fixed maturity security had been identified as other-than-temporarily impaired, the amount of such impairment was determined as the difference between fair value and amortized cost and the entire amount was recorded as a charge to earnings.

As a result of AIG’s periodic evaluation of its equity and fixed maturity securities for other-than-temporary impairments in value, AIG recorded impairment charges of $983 million and $6.8 billion in the three-month periods ended June 30, 2009 and 2008, respectively, and $5.0 billion and $12.4 billion in the six-month periods ended June 30, 2009 and 2008, respectively.

Derivatives and Hedge Accounting

6 Months Ended

Jun. 30, 2009

Notes To Consolidated Financials Abstract

us-gaap:DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock

7.	Derivatives and Hedge Accounting

AIG uses derivatives and other financial instruments as part of its financial risk management programs and as part of its investment operations. AIGFP has also transacted in derivatives as a dealer.

Derivatives, as defined in FAS 133, are financial arrangements among two or more parties with returns linked to or “derived” from some underlying equity, debt, commodity or other asset, liability, or foreign exchange rate or other index or the occurrence of a specified payment event. Derivative payments may be based on interest rates, exchange rates, prices of certain securities, commodities, or financial or commodity indices or other variables. Derivatives, with the exception of bifurcated embedded derivatives, are reflected at fair value on the Consolidated Balance Sheet in “Unrealized gain on swaps, options and forward transactions, at fair value” and “Unrealized loss on swaps, options and forward contracts, at fair value.” Bifurcated embedded derivatives are recorded with the host contract on the Consolidated Balance Sheet.

The following table presents the notional amounts and fair values of AIG’s derivative instruments:


	Derivative Assets				Derivative Liabilities
	Notional		Fair		Notional		Fair
At June 30, 2009	Amount(a)		Value(b)		Amount(a)		Value(b)
	(In millions)

Derivatives designated as hedging instruments:
Interest rate contracts(c)	$	10,612	$	1,832	$	3,956	$	387

Total derivatives designated as hedging instruments		10,612		1,832		3,956		387

Derivatives not designated as hedging instruments:
Interest rate contracts(c)		474,399		38,884		461,437		35,007
Foreign exchange contracts(c)		17,579		896		20,103		1,628
Equity contracts		9,435		2,217		11,226		2,014
Commodity contracts		17,313		2,142		16,264		1,011
Credit contracts		3,847		733		241,302		7,972
Other contracts		39,942		723		21,453		1,568

Total derivatives not designated as hedging instruments		562,515		45,595		771,785		49,200

Total derivatives	$	573,127	$	47,427	$	775,741	$	49,587


(a)		Notional amount represents a standard of measurement of the volume of swaps business of AIG. Notional amount is not a quantification of market risk or credit risk and is not recorded on the consolidated balance sheet. Notional amounts generally represent those amounts used to calculate contractual cash flows to be exchanged and are not paid or received, except for certain contracts such as currency swaps and certain credit contracts.

(b)		Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral in accordance with FIN 39.

(c)		During the second quarter of 2009, certain cross-currency interest rate swaps previously reported in Foreign exchange contracts were reclassified to Interest rate contracts.

The fair values of derivative assets and liabilities on the Consolidated Balance Sheet were as follows:


	Derivative			Derivative
At June 30, 2009	Assets(a)			Liabilities(b)
	(In millions)

AIGFP derivatives	$	44,716		$	47,122
Non-AIGFP derivatives		2,711			2,465

Total derivatives, gross		47,427			49,587

Counterparty netting(c)		(30,381	)		(30,381	)
Cash collateral(d)		(5,667	)		(13,196	)

Total derivatives, net	$	11,379		$	6,010


(a)		Included in non-AIGFP derivatives are $141 million of bifurcated embedded derivatives of which $138 million and $3 million, respectively, are recorded in Policyholder contract deposits and Bonds available for sale, at fair value.

(b)		Included in non-AIGFP derivatives are $1.1 billion of bifurcated embedded derivatives of which $1.1 billion, $1 million and $1 million are recorded in Policyholder contract deposits, Common and preferred stocks available for sale, at fair value, and Bonds available for sale, at fair value, respectively.

(c)		Represents netting of derivative exposures covered by a qualifying master netting agreement in accordance with FIN 39.

(d)		Represents cash collateral posted and received.

Hedge Accounting

AIG designated certain derivatives entered into by AIGFP with third parties as either fair value or cash flow hedges of certain debt issued by AIG Parent (including the Matched Investment Program (MIP)), International Lease Finance Corporation (ILFC) and AGF. The fair value hedges included (i) interest rate swaps that were designated as hedges of the change in the fair value of fixed rate debt attributable to changes in the benchmark interest rate and (ii) foreign currency swaps designated as hedges of the change in fair value of foreign currency denominated debt attributable to changes in foreign exchange rates and/or the benchmark interest rate. With respect to the cash flow hedges, (i) interest rate swaps were designated as hedges of the changes in cash flows on floating rate debt attributable to changes in the benchmark interest rate, and (ii) foreign currency swaps were designated as hedges of changes in cash flows on foreign currency denominated debt attributable to changes in the benchmark interest rate and foreign exchange rates.

Beginning in the first quarter of 2009, AIG began using debt instruments in net investment hedge relationships to mitigate the foreign exchange risk associated with AIG’s non-U.S. dollar functional currency foreign subsidiaries. AIG assesses the hedge effectiveness and measures the amount of ineffectiveness for these hedge relationships based on changes in spot exchange rates. AIG records the change in the carrying amount of these investments in the foreign currency translation adjustment within Accumulated other comprehensive loss. Simultaneously, the effective portion of the hedge of this exposure is also recorded in foreign currency translation adjustment and the ineffective portion, if any, is recorded in earnings. If (1) the notional amount of the hedging debt instrument matches the designated portion of the net investment and (2) the hedging debt instrument is denominated in the same currency as the functional currency of the hedged net investment, no ineffectiveness is recorded in earnings. In the three- and six-month periods ended June 30, 2009, AIG recognized losses of $106 million and $97 million, respectively, included in Foreign currency translation adjustment in Accumulated other comprehensive loss related to the net investment hedge relationships.

The following table presents the effect of AIG’s derivative instruments in fair value hedging relationships on the Consolidated Statement of Income (Loss):

Gain (Loss) Recognized

Gain (Loss)

in Earnings for

Recognized

Ineffective Portion and

in Earnings on

Amount Excluded from

Derivative

Hedged Item

Effectiveness Testing

Three

Six Months

Three

Six Months

Three

Six Months

Months Ended

Ended

Months Ended

Ended

Months Ended

Ended

June 30, 2009

Interest rate contracts(a)(b)(c)

(470

)

(93

)

568

(38

)


(a)		Gains and losses recognized in earnings on derivatives and hedged items are recorded in Interest expense. Gains and losses recognized in earnings on derivatives for the ineffective portion and amounts excluded from effectiveness testing are recorded in Net realized capital losses and Other income, respectively.

(b)		Includes $(28) million and $92 million, respectively, for the three- and six-month periods ended June 30, 2009 related to the ineffective portion and $(10) million and $(5) million, respectively, for the three- and six-month periods ended June 30, 2009 for amounts excluded from effectiveness testing.

(c)		During the second quarter of 2009, certain cross-currency interest rate swaps previously reported in Foreign exchange contracts were reclassified to Interest rate contracts.

The following table presents the effect of AIG’s derivative instruments in cash flow hedging relationships on the Consolidated Statement of Income (Loss):

Gains (Losses)

Recognized in OCI

Reclassified

Recognized in Earnings

on Derivatives

from Accumulated

on Derivatives for

and Hedged Items

OCI into Earnings(a)

Ineffective Portion

Three

Six

Three

Six

Three

Six

Months

Ended

June 30,

2009

(In millions)

Interest rate contracts(b)(c)

(28

)

—

)


(a)		The effective portion of the change in fair value of a derivative qualifying as a cash flow hedge is recorded in Accumulated other comprehensive loss until earnings are affected by the variability of cash flows in the hedged item. At June 30, 2009, $88 million of the deferred net loss in Accumulated other comprehensive loss is expected to be recognized in earnings during the next 12 months.

(b)		Gains and losses reclassified from Accumulated other comprehensive loss are recorded in Other income. Gains or losses recognized in earnings on derivatives for the ineffective portion are recorded in Net realized capital losses.

(c)		During the second quarter of 2009, certain cross-currency interest rate swaps previously reported in Foreign exchange contracts were reclassified to Interest rate contracts.

Derivatives Not Designated as Hedging Instruments

The following table presents the effect of AIG’s derivative instruments not designated as hedging instruments on the Consolidated Statement of Income (Loss):


	Gains (Losses) Recognized in Earnings(a)
	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2009			2009
	(In millions)

Interest rate contracts(b)	$	(87	)	$	1,339
Foreign exchange contracts(b)		(1,189	)		(1,136	)
Equity contracts		67			206
Commodity contracts		(73	)		72
Credit contracts		530			267
Other contracts		559			571

Total	$	(193	)	$	1,319


(a)		Represents gains of $638 million and $1,295 million, respectively, for the three- and six-month periods ended June 30, 2009 recorded in Net realized capital gains, and losses of $831 million and gains of $24 million, respectively, for the three- and six-month periods ended June 30, 2009, recorded in Other income.

(b)		During the second quarter of 2009, certain cross-currency interest rate swaps previously reported in Foreign exchange contracts were reclassified to Interest rate contracts.

AIGFP Derivatives

AIGFP enters into derivative transactions to mitigate risk in its exposures (interest rates, currencies, commodities, credit and equities) arising from its transactions. In most cases, AIGFP did not hedge its exposures related to the credit default swaps it had written. As a dealer, AIGFP structured and entered into derivative transactions to meet the needs of counterparties who may be seeking to hedge certain aspects of such counterparties’ operations or obtain a desired financial exposure.

AIGFP’s derivative transactions involving interest rate swap transactions generally involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying notional amounts. AIGFP typically became a principal in the exchange of interest payments between the parties and, therefore, is exposed to counterparty credit risk and may be exposed to loss, if counterparties default. Currency, commodity, and equity swaps are similar to interest rate swaps, but involve the exchange of specific currencies or cashflows based on the underlying commodity, equity securities or indices. Also, they may involve the exchange of notional amounts at the beginning and end of the transaction. Swaptions are options where the holder has the right but not the obligation to enter into a swap transaction or cancel an existing swap transaction.

AIGFP follows a policy of minimizing interest rate, currency, commodity, and equity risks associated with investment securities by entering into internal offsetting positions, on a security by security basis within its derivatives portfolio, thereby offsetting a significant portion of the unrealized appreciation and depreciation. In addition, to reduce its credit risk, AIGFP has entered into credit derivative transactions with respect to $579 million of securities to economically hedge its credit risk.

Futures and forward contracts are contracts that obligate the holder to sell or purchase foreign currencies, commodities or financial indices in which the seller/purchaser agrees to make/take delivery at a specified future date of a specified instrument, at a specified price or yield. Options are contracts that allow the holder of the option to purchase or sell the underlying commodity, currency or index at a specified price and within, or at, a specified period of time. As a writer of options, AIGFP generally receives an option premium and then manages the risk of any unfavorable change in the value of the underlying commodity, currency or index by entering into offsetting transactions with third-party market participants. Risks arise as a result of movements in current market prices from contracted prices, and the potential inability of the counterparties to meet their obligations under the contracts.

AIGFP Super Senior Credit Default Swaps

AIGFP entered into credit default swap transactions with the intention of earning revenue on credit exposure. In the majority of AIGFP’s credit default swap 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 would 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, exceeds a specified threshold amount or level of “first losses.”

Typically, the credit risk associated with a designated portfolio of loans or debt 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 generally from a BBB-rated layer to one or more AAA-rated layers. A significant majority of AIGFP transactions that were rated by rating agencies had risk layers or tranches 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 debt securities in these transactions is often called the “super senior” risk layer, defined as a layer of credit risk senior to one or more risk layers rated AAA by the credit rating agencies, or if the transaction is not rated, structured to the equivalent thereto.

The net notional amount, fair value of derivative liability and unrealized market valuation gain (loss) of the AIGFP super senior credit default swap portfolio, including credit default swaps written on mezzanine tranches of certain regulatory capital relief transactions, by asset class were as follows:


									Unrealized Market Valuation
					Fair Value				Gain (Loss)
					of Derivative				Three Months						Six Months
	Net Notional Amount				Liability at				Ended						Ended
	June 30,		December 31,		June 30,		December 31,		June 30,						June 30,
	2009(a)(b)		2008(a)		2009(b)(c)		2008(c)		2009(d)			2008(d)			2009(d)			2008(d)
	(In millions)

Regulatory Capital:
Corporate loans	$	83,301	$	125,628	$	—	$	—	$	—		$	—		$	—		$	—
Prime residential mortgages		92,130		107,246		—		—		—			—			—			—
Other(e)		2,042		1,575		47		379		23			(125	)		9			(125	)

Total		177,473		234,449		47		379		23			(125	)		9			(125	)

Arbitrage:
Multi-sector CDOs(f)(g)		9,151		12,556		5,271		5,906		(284	)		(5,569	)		(1,093	)		(13,606	)
Corporate debt/CLOs(h)		40,941		50,495		1,104		2,554		792			126			1,150			(770	)

Total		50,092		63,051		6,375		8,460		508			(5,443	)		57			(14,376	)

Mezzanine tranches(i)		3,501		4,701		77		195		105			3			118			(171	)

Total	$	231,066	$	302,201	$	6,499	$	9,034	$	636		$	(5,565	)	$	184		$	(14,672	)


(a)		Net notional amounts presented are net of all structural subordination below the covered tranches.

(b)		During the second quarter of 2009, AIGFP terminated certain CDS transactions with its counterparties with a net notional amount of $11.4 billion, comprised of $1.5 billion in Regulatory Capital — Other, $2.8 billion in Multi-sector CDOs and $7.1 billion in Corporate debt/CLOs. These transactions were terminated at approximately their fair value at the time of the termination. As a result, a $2.4 billion loss, which was previously included in the fair value derivative liability as an unrealized market valuation loss, was realized.
(c)		Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral in accordance with FIN 39.

(d)		Includes credit valuation adjustment loss of $17 million and gain of $44 million in the three-month periods ended June 30, 2009 and 2008, respectively, and credit valuation adjustment gains of $89 million and $109 million in the six-month periods ended June 30, 2009 and 2008, respectively, representing the effect of changes in AIG’s credit spreads on the valuation of the derivatives liabilities.

(e)		During the first six months of 2009, AIGFP reclassified one regulatory capital CDS transaction from Regulatory Capital — Corporate loans to Regulatory Capital — Other, given the higher likelihood that it will not be terminated when the regulatory capital benefit expires for the counterparty.

(f)		Includes $6.5 billion and $9.7 billion in net notional amount of credit default swaps written with cash settlement provisions at June 30, 2009 and December 31, 2008, respectively.

(g)		During the fourth quarter of 2008, AIGFP terminated the majority of the CDS transactions written on multi-sector CDOs in connection with the ML III transaction.

(h)		Includes $1.5 billion in net notional amount of credit default swaps written on the super senior tranches of CLOs as of both June 30, 2009 and December 31, 2008.

(i)		Net of offsetting purchased CDS of $1.7 billion and $2.0 billion in net notional amount at June 30, 2009 and December 31, 2008, respectively.

All outstanding CDS transactions for regulatory capital purposes and the majority of the arbitrage portfolio have cash-settled structures in respect of a basket of reference obligations, where AIGFP’s payment obligations, other than for posting collateral, may be triggered by payment shortfalls, bankruptcy and certain other events such as write-downs of the value of underlying assets. For the remainder of the CDS transactions in respect of the arbitrage portfolio, AIGFP’s payment obligations are triggered by the occurrence of a credit event under a single reference security, and performance is limited to a single payment by AIGFP in return for physical delivery by the counterparty of the reference security.

The expected weighted average maturity of AIGFP’s super senior credit derivative portfolios as of June 30, 2009 was 0.8 years for the regulatory capital corporate loan portfolio, 0.7 years for the regulatory capital prime residential mortgage portfolio, 6.3 years for the regulatory capital other portfolio, 5.6 years for the multi-sector CDO arbitrage portfolio and 3.2 years for the corporate debt/CLO portfolio.

Regulatory Capital Portfolio

A total of $177.5 billion in net notional amount of AIGFP’s super senior credit default swap portfolio as of June 30, 2009 represented derivatives written for financial institutions, principally in Europe, for the purpose of providing regulatory capital relief rather than for arbitrage purposes. In exchange for a periodic fee, the counterparties receive credit protection with respect to a portfolio of diversified loans they own, thus reducing their minimum capital requirements. These CDS transactions were structured with early termination rights for counterparties allowing them to terminate these transactions at no cost to AIGFP at a certain period of time or upon a regulatory event such as the implementation of the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee on Banking Supervision, or Basel II. During the six-month period ended June 30, 2009, $47.3 billion in net notional amount was terminated or matured. Through July 31, 2009, AIGFP has also received a formal termination notice for an additional $2.8 billion in net notional amount with an effective termination date in 2009.

The regulatory capital relief CDS transactions require cash settlement and, other than for collateral posting, AIGFP is required to make a payment in connection with a regulatory capital relief transaction only if realized credit losses in respect of the underlying portfolio exceed AIGFP’s attachment point.

All of the regulatory capital transactions directly or indirectly reference tranched pools of large numbers of whole loans that were originated by the financial institution (or its affiliates) receiving the credit protection, rather than structured securities containing loans originated by other third parties. In the vast majority of transactions, the loans are intended to be retained by the originating financial institution and in all cases the originating financial institution is the purchaser of the CDS, either directly or through an intermediary.

The super senior tranches of these CDS transactions continue to be supported by high levels of subordination, which, in most instances, have increased since origination. The weighted average subordination supporting the European residential mortgage and corporate loan referenced portfolios at June 30, 2009 was 13.57 percent and 18.63 percent, respectively. The highest level of realized losses to date in any single residential mortgage and corporate loan pool was 2.19 percent and 0.52 percent, respectively. The corporate loan transactions are each comprised of several hundred secured and unsecured loans diversified by industry and, in some instances, by country, and have per-issuer concentration limits. Both types of transactions generally allow some substitution and replenishment of loans, subject to defined constraints, as older loans mature or are prepaid. These replenishment rights generally mature within the first few years of the trade, after which the proceeds of any prepaid or maturing loans are applied first to the super senior tranche (sequentially), thereby increasing the relative level of subordination supporting the balance of AIGFP’s super senior CDS exposure.

Given the current performance of the underlying portfolios, the level of subordination and AIGFP’s own assessment of the credit quality of the underlying portfolio, as well as the risk mitigants inherent in the transaction structures, AIGFP does not expect that it will be required to make payments pursuant to the contractual terms of those transactions providing regulatory relief. Further, AIGFP expects that counterparties will terminate these transactions prior to their maturity.

Arbitrage Portfolio

A total of $50.1 billion and $63.1 billion in net notional amount on AIGFP’s super senior credit default swaps as of June 30, 2009 and December 31, 2008, respectively, are arbitrage-motivated transactions written on multi-sector CDOs or designated pools of investment grade senior unsecured corporate debt or CLOs.

The outstanding multi-sector CDO CDS portfolio at June 30, 2009 was written on CDO transactions that generally held a concentration of RMBS, CMBS and inner CDO securities. At June 30, 2009, approximately $4.2 billion net notional amount (fair value liability of $2.8 billion) of this portfolio was written on super senior multi-sector CDOs that contain some level of sub-prime RMBS collateral, with a concentration in the 2005 and earlier vintages of sub-prime RMBS. AIGFP’s portfolio also included both high grade and mezzanine CDOs.

The majority of multi-sector CDO CDS transactions require cash settlement and, other than for collateral posting, AIGFP is required to make a payment in connection with such transactions only if realized credit losses in respect of the underlying portfolio exceed AIGFP’s attachment point. In the remainder of the portfolio, AIGFP’s payment obligations are triggered by the occurrence of a credit event under a single reference security, and performance is limited to a single payment by AIGFP in return for physical delivery by the counterparty of the reference security.

Included in the multi-sector CDO portfolio are 2a-7 Puts. Holders of securities are required, in certain circumstances, to tender their securities to the issuer at par. If an issuer’s remarketing agent is unable to resell the securities so tendered, AIGFP must purchase the securities at par so long as the security has not experienced a payment default or certain bankruptcy events with respect to the issuer of such security have not occurred. At both June 30, 2009 and December 31, 2008, 2a-7 Puts with a net notional amount of $1.7 billion were outstanding.

Included in these amounts are $242 million in net notional amount subject to 2a-7 Puts that may be exercised in 2009. ML III has agreed for the remainder of 2009 to not sell any multi-sector CDOs in 2009 that are subject to a 2a-7 Put and to either not exercise its put option on such multi-sector CDOs or to simultaneously exercise its par put option with a par purchase of the multi-sector CDO securities. In exchange, AIG Financial Products Corp. agreed to pay to ML III the consideration that it received for providing the put protection. AIG Financial Products Corp. and ML III are working to find a long-term solution for the 2a-7 Put obligations.

The corporate arbitrage portfolio consists principally of CDS transactions written on portfolios of senior unsecured corporate obligations that were generally rated investment grade at inception of the CDS. These CDS transactions require cash settlement. Also, included in this portfolio are CDS transactions with a net notional of $1.5 billion written on the senior part of the capital structure of CLOs, which require physical settlement.

Certain of the super senior credit default swaps provide the counterparties with an additional termination right if AIG’s rating level falls to BBB or Baa2. At that level, counterparties to the CDS transactions with a net notional amount of $23.9 billion at June 30, 2009 have the right to terminate the transactions early. If counterparties exercise this right, the contracts provide for the counterparties to be compensated for the cost to replace the transactions, or an amount reasonably determined in good faith to estimate the losses the counterparties would incur as a result of the termination of the transactions.

Due to long-term maturities of the CDS in the arbitrage portfolio, AIG is unable to make reasonable estimates of the periods during which any payments would be made. However, the net notional amount represents the maximum exposure to loss on the super senior credit default swap portfolio.

Collateral

Most of AIGFP’s super senior credit default swaps are subject to collateral posting provisions, which typically are governed by International Swaps and Derivatives Association, Inc. (ISDA) Master Agreements (Master Agreements) and related Credit Support Annexes (CSA). These provisions differ among counterparties and asset classes. AIGFP has received collateral calls from counterparties in respect of certain super senior credit default swaps, of which a large majority relate to multi-sector CDOs. To a lesser extent, AIGFP has also received collateral calls in respect of certain super senior credit default swaps entered into by counterparties for regulatory capital relief purposes and in respect of corporate arbitrage.

The amount of future collateral posting requirements is a function of AIG’s credit ratings, the rating of the reference obligations and any further decline in the market value of the relevant reference obligations, with the latter being the most significant factor. While a high level of correlation exists between the amount of collateral posted and the valuation of these contracts in respect of the arbitrage portfolio, a similar relationship does not exist with respect to the regulatory capital portfolio given the nature of how the amount of collateral for these transactions is determined. Given the severe market disruption, lack of observable data and the uncertainty regarding the potential effects on market prices of measures recently undertaken by the federal government to address the credit market disruption, AIGFP is unable to reasonably estimate the amounts of collateral that it may be required to post in the future.

At June 30, 2009 and December 31, 2008, the amount of collateral postings with respect to AIGFP’s super senior credit default swap portfolio (prior to offsets for other transactions) was $6.3 billion and $8.8 billion, respectively.

AIGFP Written Single Name Credit Default Swaps

AIGFP has also entered into credit default swap contracts referencing single-name exposures written on corporate, index, and asset-backed credits, with the intention of earning spread income on credit exposure. Some of these transactions were entered into as part of a long short strategy allowing AIGFP to earn the net spread between CDS they wrote and ones they purchased. At June 30, 2009, the net notional amount of these written CDS contracts was $4.4 billion, with an average credit rating of BBB. AIGFP has hedged these exposures by purchasing offsetting CDS contracts of $1.4 billion in net notional amount with identical reference obligations. The net unhedged position of approximately $3.0 billion represents the maximum exposure to loss on these CDS contracts. The average maturity of the written CDS contracts is 4.8 years. At June 30, 2009, the fair value of derivative liability (which represents the carrying value) of the portfolio of CDS was $1.1 billion.

Upon a triggering event (e.g., a default) with respect to the underlying credit, AIGFP would normally have the option to settle the position through an auction process (cash settle) or pay the notional amount of the contract to the counterparty in exchange for a bond issued by the underlying credit obligor (physical settle).

AIGFP wrote these written CDS contracts under Master Agreements. The majority of these Master Agreements include Credit Support Annexes, which provide for collateral postings at various ratings and threshold levels. At June 30, 2009, AIGFP had posted $1.0 billion of collateral under these contracts.

Non-AIGFP Derivatives

AIG and its subsidiaries (other than AIGFP) also use derivatives and other instruments as part of their financial risk management programs. Interest rate derivatives (such as interest rate swaps) are used to manage interest rate risk associated with investments in fixed income securities, commercial paper issuances, medium- and long-term note offerings, and other interest rate sensitive assets and liabilities. In addition, foreign exchange derivatives (principally cross currency swaps, forwards and options) are used to economically mitigate risk associated with non-U.S. dollar denominated debt, net capital exposures and foreign exchange transactions. The derivatives are effective economic hedges of the exposures they are meant to offset.

In addition to hedging activities, AIG also uses derivative instruments with respect to investment operations, which include, among other things, credit default swaps, and purchasing investments with embedded derivatives, such as equity linked notes and convertible bonds.

Matched Investment Program Written Credit Default Swaps

The MIP has entered into CDS contracts as a writer of protection, with the intention of earning spread income on credit exposure in an unfunded form. The portfolio of CDS contracts were single-name exposures and, at inception, were predominantly high grade corporate credits.

The MIP invested in written CDS contracts through an affiliate which then transacts directly with unaffiliated third parties under ISDA agreements. As of June 30, 2009, the notional amount of written CDS contracts was $4.1 billion with an average credit rating of BBB+. The average maturity of the written CDS contracts is 2.9 years as of June 30, 2009. As of June 30, 2009, the fair value of the derivative liability (which represents the carrying value) of the MIP’s written CDS was $(127.8) million.

The majority of the ISDA agreements include credit support annex provisions, which provide for collateral postings at various ratings and threshold levels. At June 30, 2009, $55.3 million of collateral was posted for CDS contracts related to the MIP. The notional amount represents the maximum exposure to loss on the written CDS contracts. However, due to the average investment grade rating and expected default recovery rates, actual losses are expected to be less.

Upon a triggering event (e.g., a default) with respect to the underlying credit, the MIP would normally have the option to settle the position through an auction process (cash settlement) or pay the notional amount of the contract to the counterparty in exchange for a bond issued by the underlying credit (physical settlement).

Credit Risk-Related Contingent Features

AIG holds certain credit risk-related contingent features with various counterparties in relation to its derivative transactions that are in a net liability position at June 30, 2009. These features are predominantly limited to additional collateral posting requirements contingent upon downgrade of AIG’s credit rating. In addition, AIG attempts to reduce credit risk with certain counterparties by entering into agreements that enable collateral to be obtained from a counterparty on an upfront or contingent basis.

The aggregate fair value of AIG’s derivative instruments, including those of AIGFP, that contain credit risk-related contingent features that are in a net liability position at June 30, 2009 was approximately $16.7 billion. The aggregate fair value of assets posted as collateral at June 30, 2009, was $17.1 billion. See Note 4 to the Consolidated Financial Statements herein.

It is estimated that as of the close of business on June 30, 2009, based on AIG’s outstanding financial derivative transactions, including those of AIGFP at that date, a one-notch downgrade of AIG’s long-term senior debt ratings to Baa1 by Moody’s Investors Service (Moody’s) and BBB+ by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (S&P), would permit counterparties to make additional collateral calls and permit the counterparties to elect early termination of contracts, resulting in up to approximately $2.9 billion of corresponding collateral postings and termination payments, a two-notch downgrade to Baa2 by Moody’s and BBB by S&P would result in approximately $2.2 billion in additional collateral postings and termination payments, and a three-notch downgrade to Baa3 by Moody’s and BBB- by S&P would result in approximately $1.3 billion in additional collateral and termination payments. The actual termination payments could significantly differ from management’s estimates given the level of uncertainty in estimating both the number of counterparties who may elect to exercise their right to terminate and the payment that may be triggered in connection with any such exercise.

See Note 10 to the Consolidated Financial Statements in the 2008 Financial Statements for additional information on derivatives.

Commitments, Contingencies and Guarantees

6 Months Ended

Jun. 30, 2009

Notes To Consolidated Financials Abstract

Commitments, Contingencies and Guarantees

10.

Commitments, Contingencies and Guarantees


*(a)*	*Litigation and Investigations*

Litigation Arising from Operations. AIG and its subsidiaries, in common with the insurance and financial services industries in general, are subject to litigation, including claims for punitive damages, in the normal course of their business. In AIG’s insurance operations, litigation arising from claims settlement activities is generally considered in the establishment of AIG’s liability for unpaid claims and claims adjustment expense. However, the potential for increasing jury awards and settlements makes it difficult to assess the ultimate outcome of such litigation.

Various federal, state and foreign regulatory and governmental agencies are reviewing certain public disclosures, transactions and practices of AIG and its subsidiaries in connection with AIG’s liquidity problems and industry-wide and other inquiries including matters relating to compensation paid to AIGFP employees and payments made to AIGFP counterparties. These reviews include ongoing investigations by the U.S. Securities and Exchange Commission (SEC) and U.S. Department of Justice (DOJ) with respect to the valuation of AIGFP’s multi-sector CDO super senior credit default swap portfolio under fair value accounting rules and disclosures relating thereto, and by the U.K. Serious Fraud Office with respect to the U.K. operations of AIGFP. AIG has cooperated, and will continue to cooperate, in producing documents and other information in response to subpoenas and other requests.

In connection with certain SEC investigations, AIG understands that some of its employees have received Wells notices and it is possible that additional current and former employees could receive similar notices in the future. Under SEC procedures, a Wells notice is an indication that the SEC staff has made a preliminary decision to recommend enforcement action that provides recipients with an opportunity to respond to the SEC staff before a formal recommendation is finalized.

Although AIG cannot currently quantify its ultimate liability for the unresolved litigation and investigation matters referred to below, it is possible that such liability could have a material adverse effect on AIG’s consolidated financial condition, or its consolidated results of operations or consolidated cash flow for an individual reporting period.

Litigation Relating to AIG’s Subprime Exposure and AIGFP’s Employee Retention Plan

Securities Actions — Southern District of New York. Between May 21, 2008 and January 15, 2009, eight purported securities class action complaints were filed against AIG and certain of its current and former officers and directors, AIG’s outside auditors, and the underwriters of various securities offerings in the United States District Court for the Southern District of New York (the Southern District of New York), alleging claims under the Exchange Act or claims under the Securities Act of 1933 (the Securities Act). On March 20, 2009, the Court consolidated all eight of the purported securities class actions as In re American International Group, Inc. 2008 Securities Litigation (the Consolidated 2008 Securities Litigation) and appointed the State of Michigan Retirement Systems as lead plaintiff.

On May 19, 2009, lead plaintiff in the Consolidated 2008 Securities Litigation filed a consolidated complaint on behalf of purchasers of AIG stock during the alleged class period of March 16, 2006 through September 16, 2008, and on behalf of purchasers of various AIG securities offered pursuant to three shelf registration statements filed on June 12, 2003, June 12, 2007, and May 12, 2008. The consolidated complaint alleges that defendants made statements during the class period in press releases, AIG’s quarterly and year-end filings, during conference calls and in various registration statements and prospectuses in connection with the various offerings that were materially false and misleading and that artificially inflated the price of AIG’s stock. The alleged false and misleading statements relate to, among other things, unrealized market valuation losses on AIGFP’s super senior credit default swap portfolio as a result of severe credit market disruption and AIG’s securities lending program. The consolidated complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act and Sections 11, 12(a)(2), and 15 of the Securities Act. On August 5, 2009, defendants filed motions to dismiss the consolidated complaint.

On February 27, 2009, AIG’s former Chairman and Chief Executive Officer, Maurice R. Greenberg, filed a securities action in the Southern District of New York against AIG and certain of its current and former officers and directors, asserting violations of Sections 10(b) and 20(a) of the Exchange Act and a state common law fraud claim with respect to his alleged election in December 2007 to receive certain AIG shares from a deferred compensation program, and based generally on the same allegations as in the securities class actions described above. On May 19, 2009, plaintiff Greenberg filed an amended complaint. The amended complaint in the Greenberg litigation asserts the same claims and is based generally on the same factual allegations as the original complaint. On August 5, 2009, defendants filed motions to dismiss the amended complaint.

ERISA Actions — Southern District of New York. Between June 25, 2008, and November 25, 2008, AIG, certain of its executive officers and directors, and members of AIG’s Retirement Board and Investment Committee were named as defendants in eight purported class action complaints asserting claims on behalf of participants in certain pension plans sponsored by AIG or its subsidiaries. On March 19, 2009, the Court consolidated these eight actions as In re American International Group, Inc. ERISA Litigation II, and appointed interim lead plaintiffs’ counsel. On June 26, 2009, lead plaintiffs’ counsel filed a consolidated amended complaint. The action purports to be brought as a class action under the Employee Retirement Income Security Act of 1974, as amended (ERISA), on behalf of all participants in or beneficiaries of the AIG Incentive Savings Plan, American General Agents’ and Managers’ Plan, and the CommoLoCo Plan (the Plans) during the period June 15, 2007 through the present and whose participant accounts included shares of AIG’s common stock. In the consolidated amended complaint, plaintiffs allege, among other things, that the defendants breached their fiduciary responsibilities to Plan participants and their beneficiaries under ERISA, by continuing to offer the AIG Stock Fund as an investment option in the Plans after it allegedly became imprudent to do so. The alleged ERISA violations relate to, among other things, the defendants’ purported failure to monitor and/or disclose unrealized market valuation losses on AIGFP’s super senior credit default swap portfolio as a result of severe credit market disruption.

Derivative Action — Southern District of New York. On November 20, 2007, two purported shareholder derivative actions were filed in the Southern District of New York naming as defendants the then current directors of AIG and certain senior officers of AIG and its subsidiaries. The actions were consolidated as In re American International Group, Inc. 2007 Derivative Litigation (the Consolidated 2007 Derivative Litigation).

On August 6, 2008, a purported shareholder derivative action was filed in the Southern District of New York asserting claims on behalf of AIG based generally on the same allegations as in the consolidated amended complaint in the Consolidated 2007 Derivative Litigation.

On February 11, 2009, the Court approved a stipulation consolidating the derivative litigation filed on August 6, 2008 with the Consolidated 2007 Derivative Litigation, and appointing the Louisiana Municipal Police Employees’ Retirement System as lead plaintiff. On June 3, 2009, lead plaintiffs filed a consolidated amended complaint asserting claims on behalf of nominal defendant AIG for breach of fiduciary duty, waste of corporate assets, unjust enrichment, contribution and violations of Sections 10(b) and 20(a) of the Exchange Act. The factual allegations are generally the same as those alleged in the Consolidated 2008 Securities Litigation. On August 5, 2009, defendants filed motions to dismiss the consolidated complaint.

Derivative and Class Action — Central District of California. On March 26, 2009, a purported derivative and class action complaint was filed in the United States District Court for the Central District of California purporting to assert claims on behalf of nominal defendant AIG and its shareholders against certain current and former officers and directors of AIG. The claims relate to losses suffered by AIG and its shareholders as a result of AIG’s alleged exposure to risks related to the subprime mortgage market in its credit default swap portfolio, and to AIGFP employee retention arrangements. Plaintiffs also allege that defendants misrepresented and omitted material facts during the alleged class period, December 8, 2000 to the present, relating to AIG’s consolidated financial condition regarding the true size and scope and the nature of AIG’s exposure to risk. The complaint alleges claims for breach of fiduciary duty, gross mismanagement, waste of corporate assets, unjust enrichment and violations of Section 14(e) of the Exchange Act of 1934. On May 15, 2009, defendants moved to stay, dismiss or transfer the action. On June 5, 2009, the Court granted the motion and ordered the action transferred to the Southern District of New York for consolidation with the consolidated federal actions.

Derivative Action — Supreme Court of New York, Nassau County. On February 29, 2008, a purported shareholder derivative complaint was filed in the Supreme Court of Nassau County naming as defendants the then-current directors of AIG and certain former and present senior officers of AIG and its subsidiaries. Plaintiff asserts claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment in connection with AIG’s public disclosures regarding its exposure to what the complaint describes as the subprime mortgage market. On May 19, 2008, defendants filed a motion to dismiss or to stay the proceedings in light of the pending Consolidated 2007 Derivative Litigation. On March 9, 2009, the Court granted defendants’ motion to stay the action.

Derivative Action — Supreme Court of New York, New York County. On March 20, 2009, a purported shareholder derivative complaint was filed in the Supreme Court of New York County naming as defendants certain of the current directors of AIG and the recipients of payments under the AIGFP Employee Retention Plan. Plaintiffs assert claims on behalf of nominal defendant AIG for breach of fiduciary duty and waste of corporate assets against the directors, and for rescission and constructive trust against the recipients of payments under the AIGFP Employee Retention Plan.

Derivative Actions — Delaware Court of Chancery. On September 17, 2008, a purported shareholder derivative complaint was filed in the Court of Chancery of Delaware naming as defendants certain former and present directors and senior officers of AIG and its subsidiaries. Plaintiff asserts claims on behalf of nominal defendant AIG for breach of fiduciary duty, waste of corporate assets, and mismanagement in connection with AIG’s public disclosures regarding its exposure to the subprime lending market. On December 19, 2008, a motion to stay or dismiss the action was filed on behalf of defendants. On July 17, 2009, the Court granted defendants’ motion to stay the action.

On January 15, 2009, a purported shareholder derivative complaint was filed in the Court of Chancery of Delaware naming as defendants certain former and present directors of AIG and Joseph Cassano, the former Chief Executive Officer of AIGFP, and asserting claims on behalf of nominal defendant AIGFP. As sole shareholder of AIGFP, AIG was also named as a nominal defendant. Plaintiff asserts claims against Joseph Cassano for breach of fiduciary duty and unjust enrichment. The complaint alleges that Cassano was responsible for losses suffered by AIGFP related to its exposure to subprime-backed credit default swaps and collateralized debt obligations and that he concealed these losses for his own benefit. On July 17, 2009, plaintiff filed an amended complaint that asserts the same claims and is based generally on the same factual allegations as the original complaint.

Derivative Action — Superior Court for the State of California, Los Angeles County. On April 1, 2009, a purported shareholder derivative complaint was filed in the Superior Court for the State of California, Los Angeles County, asserting claims on behalf of nominal defendant AIG against certain officers and directors of AIG. The complaint asserts claims for waste of corporate assets, breach of fiduciary duty, abuse of control, and unjust enrichment and constructive trust in connection with defendants’ approval of bonuses and retention payments. On May 29, 2009, Defendants moved to stay or dismiss the case in favor of the Consolidated 2007 Derivative Litigation and to quash service of summons due to lack of personal jurisdiction over certain individual defendants.

Action by the Starr Foundation — Supreme Court of New York. On May 7, 2008, the Starr Foundation filed a complaint in New York State Supreme Court against AIG, AIG’s former Chief Executive Officer, Martin Sullivan, and AIG’s then Chief Financial Officer, Steven Bensinger, asserting a claim for common law fraud. The complaint alleges that the defendants made materially misleading statements and omissions concerning alleged multi-billion dollar losses in AIG’s portfolio of credit default swaps. The complaint asserts that if the Starr Foundation had known the truth about the alleged losses, it would have sold its remaining shares of AIG Common Stock and alleges that the Starr Foundation has suffered damages of at least $300 million. On May 30, 2008, a motion to dismiss the complaint was filed on behalf of defendants. After a hearing, the complaint was dismissed. On December 23, 2008, plaintiff filed a notice of appeal and a decision on the appeal is pending.

Canadian Securities Class Action — Ontario Superior Court of Justice. On November 13, 2008, an application was filed in the Ontario Superior Court of Justice for leave to bring a purported securities fraud class action against AIG, AIGFP, certain of AIG’s current and former officers and directors, and the former Chief Executive Officer of AIGFP. If the Court grants the application, a class plaintiff will be permitted to file a statement of claim against AIG. The proposed statement of claim would assert a class period of November 10, 2006 through September 16, 2008, and would allege that during this period defendants made false and misleading statements and omissions in quarterly and annual reports and during oral presentations in violation of the Ontario Securities Act. On April 17, 2009, defendants filed a motion record in support of their motion to stay or dismiss for lack of jurisdiction and forum non conveniens. Plaintiffs are opposing that motion.

Panama Action — Tribunal del Circuito Civil, Panama City, Panama. On February 26, 2009, Starr International Company, Inc. (SICO) sought permission to file a complaint in Panamanian court against AIG. In the complaint, SICO alleges that AIG intentionally concealed from its shareholders, including SICO, its unstable financial situation and risk of losses, which ultimately resulted in losses to the value of SICO’s shares of AIG Common Stock. AIG has not yet appeared in the action.

2006 Regulatory Settlements and Related Matters

2006 Regulatory Settlements. In February 2006, AIG reached a resolution of claims and matters under investigation with the DOJ, the SEC, the Office of the New York Attorney General (NYAG) and the New York State Department of Insurance (DOI). AIG recorded an after-tax charge of $1.15 billion relating to these settlements in the fourth quarter of 2005. The settlements resolved investigations conducted by the SEC, NYAG and DOI in connection with the accounting, financial reporting and insurance brokerage practices of AIG and its subsidiaries, as well as claims relating to the underpayment of certain workers’ compensation premium taxes and other assessments. These settlements did not, however, resolve investigations by regulators from other states into insurance brokerage practices related to contingent commissions and other broker-related conduct, such as alleged bid rigging. Nor did the settlements resolve any obligations that AIG may have to state guarantee funds in connection with any of these matters.

As a result of these settlements, AIG made payments or placed amounts in escrow in 2006 totaling approximately $1.64 billion, $225 million of which represented fines and penalties. Amounts held in escrow totaling approximately $339 million, including interest thereon, are included in other assets at June 30, 2009. At that date, all of the funds were escrowed for settlement of claims resulting from the underpayment by AIG of its residual market assessments for workers’ compensation.

In addition to the escrowed funds, $800 million was deposited into a fund under the supervision of the SEC as part of the settlements to be available to resolve claims asserted against AIG by investors, including the securities class action shareholder lawsuits described below. On April 14, 2008, the court overseeing the Fair Fund approved a plan for distribution of monies in the fund, and on May 18, 2009 ordered that the Distribution Agent was authorized to commence distribution of Fair Fund monies to approved eligible claimants.

Also, as part of the settlements, AIG agreed to retain, for a period of three years, an independent consultant to conduct a review that included, among other things, the adequacy of AIG’s internal control over financial reporting, the policies, procedures and effectiveness of AIG’s regulatory, compliance and legal functions and the remediation plan that AIG has implemented as a result of its own internal review.

Other Regulatory Settlements. AIG’s 2006 regulatory settlements with the SEC, DOJ, NYAG and DOI did not resolve investigations by regulators from other states into insurance brokerage practices. AIG entered into agreements effective January 29, 2008 with the Attorneys General of the States of Florida, Hawaii, Maryland, Michigan, Oregon, Texas and West Virginia; the Commonwealths of Massachusetts and Pennsylvania; and the District of Columbia; as well as the Florida Department of Financial Services and the Florida Office of Insurance Regulation, relating to their respective industry-wide investigations into producer compensation and insurance placement practices. The settlements call for total payments of $12.5 million to be allocated among the ten jurisdictions representing restitution to state agencies and reimbursement of the costs of the investigation. During the term of the settlement agreements, AIG will continue to maintain certain producer compensation disclosure and ongoing compliance initiatives. AIG will also continue to cooperate with the industry-wide investigations. The agreement with the Texas Attorney General also settles allegations of anticompetitive conduct relating to AIG’s relationship with Allied World Assurance Company and includes an additional settlement payment of $500,000 related thereto.

AIG entered into an agreement effective March 13, 2008 with the Pennsylvania Insurance Department relating to the Department’s investigation into the affairs of AIG and certain of its Pennsylvania-domiciled insurance company subsidiaries. The settlement calls for total payments of approximately $13.5 million, of which approximately $4.4 million was paid under previous settlement agreements. During the term of the settlement agreement, AIG will provide annual reinsurance reports, as well as maintain certain producer compensation disclosure and ongoing compliance initiatives.

NAIC Examination of Workers’ Compensation Premium Reporting. During 2006, the Settlement Review Working Group of the National Association of Insurance Commissioners (NAIC), under the direction of the states of Indiana, Minnesota and Rhode Island, began an investigation into AIG’s reporting of workers’ compensation premiums. In late 2007, the Settlement Review Working Group recommended that a multi-state targeted market conduct examination focusing on workers’ compensation insurance be commenced under the direction of the NAIC’s Market Analysis Working Group. AIG was informed of the multi-state targeted market conduct examination in January 2008. The lead states in the multi-state examination are Delaware, Florida, Indiana, Massachusetts, Minnesota, New York, Pennsylvania, and Rhode Island. All other states (and the District of Columbia) have agreed to participate in the multi-state examination. To date, the examination has focused on legacy issues related to AIG’s writing and reporting of workers’ compensation insurance prior to 1996. AIG has also been advised that the examination will focus on current compliance with legal requirements applicable to such business. AIG has been advised by the lead states that to date no determinations have been made with respect to these issues, and AIG cannot predict either the outcome of the investigation or provide any assurance regarding regulatory action that may result from the investigation.

Securities Action — Southern District of New York. Beginning in October 2004, a number of putative securities fraud class action suits were filed in the Southern District of New York against AIG and consolidated as In re American International Group, Inc. Securities Litigation. Subsequently, a separate, though similar, securities fraud action was also brought against AIG by certain Florida pension funds. The lead plaintiff in the class action is a group of public retirement systems and pension funds benefiting Ohio state employees, suing on behalf of themselves and all purchasers of AIG’s publicly traded securities between October 28, 1999 and April 1, 2005. The named defendants are AIG and a number of present and former AIG officers and directors, as well as Starr, SICO, General Reinsurance Corporation (General Re), and PricewaterhouseCoopers LLP (PwC), among others. The lead plaintiff alleges, among other things, that AIG: (1) concealed that it engaged in anti-competitive conduct through alleged payment of contingent commissions to brokers and participation in illegal bid-rigging; (2) concealed that it used “income smoothing” products and other techniques to inflate its earnings; (3) concealed that it marketed and sold “income smoothing” insurance products to other companies; and (4) misled investors about the scope of government investigations. In addition, the lead plaintiff alleges that AIG’s former Chief Executive Officer, Maurice R. Greenberg, manipulated AIG’s stock price. The lead plaintiff asserts claims for violations of Sections 11 and 15 of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, Section 20(a) of the Exchange Act, and Section 20A of the Exchange Act. In April 2006, the court denied the defendants’ motions to dismiss the second amended class action complaint and the Florida complaint. In December 2006, a third amended class action complaint was filed, which does not differ substantially from the prior complaint. Fact discovery is currently ongoing. On February 20, 2008, the lead plaintiff filed a motion for class certification. The motion remains pending.

Derivative Action — Southern District of New York. Between October 25, 2004 and July 14, 2005, seven separate derivative actions were filed in the Southern District of New York, five of which were consolidated into a single action (the New York 2004/2005 Derivative Litigation). The complaint in this action contains nearly the same types of allegations made in the securities fraud action described above. The named defendants include current and former officers and directors of AIG, as well as Marsh & McLennan Companies, Inc. (Marsh), SICO, Starr, ACE Limited and subsidiaries (Ace), General Re, PwC, and certain employees or officers of these entity defendants. Plaintiffs assert claims for breach of fiduciary duty, gross mismanagement, waste of corporate assets, unjust enrichment, insider selling, auditor breach of contract, auditor professional negligence and disgorgement from AIG’s former Chief Executive Officer, Maurice R. Greenberg, and former Chief Financial Officer, Howard I. Smith, of incentive-based compensation and AIG share proceeds under Section 304 of the Sarbanes-Oxley Act, among others. Plaintiffs seek, among other things, compensatory damages, corporate governance reforms, and a voiding of the election of certain AIG directors. AIG’s Board of Directors has appointed a special committee of independent directors (Special Committee) to review the matters asserted in the operative consolidated derivative complaint. The court has entered an order staying this action pending resolution of the Delaware 2004/2005 Derivative Litigation discussed below. The court also has entered an order that termination of certain named defendants from the Delaware action applies to this action without further order of the court. On February 26, 2009, the Court dismissed those AIG officer and director defendants against whom the shareholder plaintiffs in the Delaware action had not pursued claims.

Derivative Actions — Delaware Chancery Court. From October 2004 to April 2005, AIG shareholders filed five derivative complaints in the Delaware Chancery Court. All of these derivative lawsuits were consolidated into a single action as In re American International Group, Inc. Consolidated Derivative Litigation (the Delaware 2004/2005 Derivative Litigation). The amended consolidated complaint named 43 defendants (not including nominal defendant AIG) who, as in the New York 2004/2005 Derivative Litigation, were current and former officers and directors of AIG, as well as other entities and certain of their current and former employees and directors. The factual allegations, legal claims and relief sought in this action are similar to those alleged in the New York 2004/2005 Derivative Litigation, except that the claims are only under state law. In early 2007, the court approved an agreement that AIG be realigned as plaintiff, and, on June 13, 2007, acting on the direction of the Special Committee, AIG filed an amended complaint against former directors and officers Maurice R. Greenberg and Howard I. Smith, alleging breach of fiduciary duty and indemnification. Also on June 13, 2007, the Special Committee filed a motion to terminate the litigation as to certain defendants, while taking no action as to others. Defendants Greenberg and Smith filed answers to AIG’s complaint and brought third-party complaints against certain current and former AIG directors and officers, PwC and Regulatory Insurance Services, Inc. On September 28, 2007, AIG and the shareholder plaintiffs filed a combined amended complaint in which AIG continued to assert claims against defendants Greenberg and Smith and took no position as to the claims asserted by the shareholder plaintiffs in the remainder of the combined amended complaint. In that pleading, the shareholder plaintiffs are no longer pursuing claims against certain AIG officers and directors. On February 12, 2008, the court granted AIG’s motion to stay discovery pending the resolution of claims against AIG in the New York consolidated securities action. On April 11, 2008, the shareholder plaintiffs filed the First Amended Combined Complaint, which added claims against former AIG directors and officers Maurice Greenberg, Edward Matthews, and Thomas Tizzio for breach of fiduciary duty based on alleged bid-rigging in the municipal derivatives market. On June 13, 2008, certain defendants filed motions to dismiss the shareholder plaintiffs’ portions of the complaint. On February 11, 2009, the court denied the motions to dismiss filed by Maurice Greenberg, Edward Matthews, and Thomas Tizzio; granted the motion to dismiss filed by PwC without prejudice; and granted the motion to dismiss filed by certain former employees of AIG without prejudice for lack of personal jurisdiction. The motions to dismiss filed by the remaining parties are pending. On March 6, 2009, the Court granted an Order of Dismissal, Notice and Order of Voluntary Dismissal and Stipulation and Order of Dismissal to dismiss those individual defendants who were similarly situated to the individuals dismissed by the Court for lack of personal jurisdiction. On March 12, 2009, Defendant Greenberg filed his verified answer to AIG’s complaint; cross-claims against Marsh, Ace, General Re, and Thomas Tizzio; and a third-party complaint against certain current and former AIG directors and officers, as well as INS Regulatory Insurance Services, Inc. Defendant Smith has also filed his answer to AIG’s complaint, which was amended on July 9, 2009 to add cross-claims against Thomas Tizzio and third-party claims against certain current and former AIG directors and officers, as well as INS Regulatory Insurance Services, Inc. On June 17, 2009, the Court issued an opinion granting the motions to dismiss filed by General Re, Marsh, ACE, and Susan Rivera. On July 13, 2009 and July 17, 2009, the Court entered final judgments in favor of PwC, General Re, Marsh, ACE, and Rivera.

AIG was also named as a defendant in a derivative action in the Delaware Chancery Court brought by shareholders of Marsh. On July 10, 2008, shareholder plaintiffs filed a second consolidated amended complaint, which contains claims against AIG for aiding and abetting a breach of fiduciary duty and contribution and indemnification in connection with alleged bid-rigging and steering practices in the commercial insurance market that are the subject of the Policyholder Antitrust and Racketeering Influenced and Corrupt Organizations Act (RICO) Actions described below. On November 10, 2008, AIG and certain defendants filed motions to dismiss the shareholder plaintiffs’ portions of the complaint. On June 17, 2009, the Court dismissed the claims against AIG, Maurice R. Greenberg, and Zachary Carter with prejudice and denied the motions to dismiss filed by the remaining defendants. Final judgment was entered on June 19, 2009.

Derivative Action — Supreme Court of New York. On February 11, 2009, shareholder plaintiffs in the Delaware 2004/2005 Derivative Litigation filed a derivative complaint in the Supreme Court of New York against the individual defendants who moved to dismiss the complaint in the Delaware 2004/2005 Derivative Litigation on personal jurisdiction grounds. The defendants include current and former officers and employees of AIG, Marsh, and General Re; AIG is named as a nominal defendant. The complaint in this action contains similar allegations to those made in the Delaware 2004/2005 Derivative Litigation described above. Discovery in this action is stayed pending the resolution of the claims against AIG in the securities actions described above under Securities Actions — Southern District of New York. Defendants filed motions to dismiss the complaint on May 1, and the shareholder plaintiffs have reached an agreement staying discovery as well as any motions to dismiss with the General Re and Marsh defendants pending final adjudication of any claims against those parties in the Delaware 2004/2005 Derivative Litigation.

Policyholder Antitrust and RICO Actions. Commencing in 2004, policyholders brought multiple federal antitrust and RICO class actions in jurisdictions across the nation against insurers and brokers, including AIG and a number of its subsidiaries, alleging that the insurers and brokers engaged in a broad conspiracy to allocate customers, steer business, and rig bids. These actions, including 24 complaints filed in different federal courts naming AIG or an AIG subsidiary as a defendant, were consolidated by the judicial panel on multi-district litigation and transferred to the United States District Court for the District of New Jersey (District of New Jersey) for coordinated pretrial proceedings. The consolidated actions have proceeded in that court in two parallel actions, In re Insurance Brokerage Antitrust Litigation (the Commercial Complaint) and In re Employee Benefit Insurance Brokerage Antitrust Litigation (the Employee Benefits Complaint, and, together with the Commercial Complaint, the Multi-district Litigation).

The plaintiffs in the Commercial Complaint are a group of corporations, individuals and public entities that contracted with the broker defendants for the provision of insurance brokerage services for a variety of insurance needs. The broker defendants are alleged to have placed insurance coverage on the plaintiffs’ behalf with a number of insurance companies named as defendants, including AIG subsidiaries. The Commercial Complaint also named various brokers and other insurers as defendants (three of which have since settled). The Commercial Complaint alleges, among other things, that defendants engaged in a widespread conspiracy to allocate customers through bid-rigging and steering practices. Plaintiffs assert that the defendants violated the Sherman Antitrust Act, RICO, and the antitrust laws of 48 states and the District of Columbia, and are liable under common law breach of fiduciary duty and unjust enrichment theories. Plaintiffs seek treble damages plus interest and attorneys’ fees as a result of the alleged RICO and Sherman Antitrust Act violations.

The plaintiffs in the Employee Benefits Complaint are a group of individual employees and corporate and municipal employers alleging claims on behalf of two separate nationwide purported classes: an employee class and an employer class that acquired insurance products from the defendants from January 1, 1998 to December 31, 2004. The Employee Benefits Complaint names AIG, as well as various other brokers and insurers, as defendants. The activities alleged in the Employee Benefits Complaint, with certain exceptions, track the allegations made in the Commercial Complaint.

The Court in connection with the Commercial Complaint granted (without leave to amend) defendants’ motions to dismiss the federal antitrust and RICO claims on August 31, 2007 and September 28, 2007, respectively. The court declined to exercise supplemental jurisdiction over the state law claims in the Commercial Complaint and therefore dismissed it in its entirety. On January 14, 2008, the court granted defendants’ motion for summary judgment on the ERISA claims in the Employee Benefits Complaint and subsequently dismissed the remaining state law claims without prejudice, thereby dismissing the Employee Benefits Complaint in its entirety. On February 12, 2008, plaintiffs filed a notice of appeal to the United States Court of Appeals for the Third Circuit with respect to the dismissal of the Employee Benefits Complaint. Plaintiffs previously appealed the dismissal of the Commercial Complaint to the United States Court of Appeals for the Third Circuit on October 10, 2007. Both appeals are fully briefed and oral argument in both appeals was held on April 21, 2009.

A number of complaints making allegations similar to those in the Multi-district Litigation have been filed against AIG and other defendants in state and federal courts around the country. The defendants have thus far been successful in having the federal actions transferred to the District of New Jersey and consolidated into the Multi-district Litigation. These additional consolidated actions are still pending in the District of New Jersey, but are currently stayed pending a decision by the court on whether they will proceed during the appeal of the dismissal of the Multi-district Litigation. On August 20, 2008, the District Court, however, granted plaintiff’s motion to lift the stay in one tag-along matter and suggested that the case be remanded to the transferor court, and on November 26, 2008, the Judicial Panel on Multi-district Litigation issued an order remanding the case to the transferor court. On March 12, 2009, the transferor court held oral argument on the insurer defendants’ motion to dismiss and granted that motion from the bench. The AIG defendants have also sought to have state court actions making similar allegations stayed pending resolution of the Multi-district Litigation proceeding. These efforts have generally been successful, although discovery has recently commenced in one case pending in New Jersey state court. Plaintiffs in another case pending in Texas state court moved to reopen discovery, and a hearing on that motion was held on April 9, 2008. The court subsequently issued an order deferring a ruling on the motion until a hearing was held on defendants’ special exceptions, which was held on April 3, 2009. At the April 3, 2009 hearing, the Court sustained defendants’ special exceptions and granted plaintiff leave to replead. The Court also continued the discovery stay. On July 13, 2009, Plaintiff filed an amended petition. AIG has settled several of the various federal and state actions alleging claims similar to those in the Multi-district Litigation, including a state court action pending in Florida in which discovery had been allowed to proceed.

Ohio Attorney General Action — Ohio Court of Common Pleas. On August 24, 2007, the Ohio Attorney General filed a complaint in the Ohio Court of Common Pleas against AIG and a number of its subsidiaries, as well as several other broker and insurer defendants, asserting violation of Ohio’s antitrust laws. The complaint, which is similar to the Commercial Complaint, alleges that AIG and the other broker and insurer defendants conspired to allocate customers, divide markets, and restrain competition in commercial lines of casualty insurance sold through the broker defendant. The complaint seeks treble damages on behalf of Ohio public purchasers of commercial casualty insurance, disgorgement on behalf of both public and private purchasers of commercial casualty insurance, and a $500-per-day penalty for each day of conspiratorial conduct. AIG, along with other co-defendants, moved to dismiss the complaint on November 16, 2007. On June 30, 2008, the Court denied defendants’ motion to dismiss. On August 18, 2008, defendants filed their answers to the complaint. Discovery is ongoing.

Actions Relating to Workers’ Compensation Premium Reporting — Northern District of Illinois. On May 24, 2007, the National Workers’ Compensation Reinsurance Pool (the NWCRP), on behalf of its participant members, filed a lawsuit in the United States District Court for the Northern District of Illinois against AIG with respect to the underpayment by AIG of its residual market assessments for workers’ compensation insurance. The complaint alleges claims for violations of RICO, breach of contract, fraud and related state law claims arising out of AIG’s alleged underpayment of these assessments between 1970 and the present and seeks damages purportedly in excess of $1 billion. On August 6, 2007, the court denied AIG’s motion seeking to dismiss or stay the complaint or, in the alternative, to transfer to the Southern District of New York. On December 26, 2007, the court denied AIG’s motion to dismiss the complaint. On March 17, 2008, AIG filed an amended answer, counterclaims and third-party claims against the National Council on Compensation Insurance (in its capacity as attorney-in-fact for the NWCRP), the NWCRP, its board members, and certain of the other insurance companies that are members of the NWCRP alleging violations of RICO, as well as claims for conspiracy, fraud, and other state law claims. The counterclaim-defendants and third-party defendants filed motions to dismiss on June 9, 2008. On January 26, 2009, AIG filed a motion to dismiss all claims in the complaint for lack of subject-matter jurisdiction. On February 23, 2009, the Court issued a decision and order sustaining AIG’s counterclaims and sustaining, in part, AIG’s third-party claims. The Court also dismissed certain of AIG’s third-party claims without prejudice. On April 13, 2009, third-party defendant Liberty Mutual filed third-party counterclaims against AIG, certain of its subsidiaries, and former AIG executives. The third-party counterclaims are substantially similar to those filed by the NWCRP, but also seek damages related to non-NWCRP states, guaranty funds, and special assessments, in addition to asserting claims for other violations of state law. On April 16, 2009, the Court ordered that all third-party defendants must assert any third-party counterclaims by April 30, 2009. The Court has otherwise stayed the entire case pending a ruling on AIG’s motion to dismiss for lack of subject matter jurisdiction.

On April 1, 2009, Safeco Insurance Company of America and Ohio Casualty Insurance Company filed a complaint in the United States District Court for the Northern District of Illinois, on behalf of a purported class of all NWCRP participant members, against AIG and certain of its subsidiaries with respect to the underpayment by AIG of its residual market assessments for workers’ compensation insurance. The complaint is styled as an “alternative complaint,” should the court grant AIG’s motion to dismiss the NWCRP lawsuit for lack of subject-matter jurisdiction. The allegations in the class action complaint are substantially similar to those filed by the NWCRP, but the complaint names former AIG executives as defendants and asserts a RICO claim against those executives. On April 9, 2009, the Court stayed the case pending disposition of AIG’s motion to dismiss for lack of subject-matter jurisdiction in the NWCRP lawsuit.

Action Relating to Workers’ Compensation Premium Reporting — District of South Carolina. A purported class action was filed in the United States District Court for the District of South Carolina on January 25, 2008 against AIG and certain of its subsidiaries, on behalf of a class of employers that obtained workers’ compensation insurance from AIG companies and allegedly paid inflated premiums as a result of AIG’s alleged underreporting of workers’ compensation premiums. An amended complaint was filed on March 24, 2008, and AIG filed a motion to dismiss the amended complaint on April 21, 2008. On July 8, 2008, the court granted AIG’s motion to dismiss all claims without prejudice and granted plaintiff leave to refile subject to certain conditions. Plaintiffs filed their second amended complaint on July 22, 2008. AIG moved to dismiss the second amended complaint on August 22, 2008. On March 27, 2009, the court granted AIG’s motion to dismiss all claims related to pre-2001 policies and all claims against two AIG subsidiaries but denied the motion to dismiss as to claims against AIG and the remaining subsidiaries. The court also granted AIG’s motion to strike certain allegations from the complaint, including allegations relating to AIG’s alleged underreporting of workers’ compensation premiums. Limited discovery related to AIG’s filed-rate doctrine defense was conducted and certain legal issues related to that defense have been certified to the South Carolina Supreme Court for determination. However, this action no longer involves allegations of underreporting of workers’ compensation premiums and no longer relates to the regulatory settlements and litigation concerning those issues.

Litigation Relating to SICO. In July 2005 SICO filed a complaint against AIG in the Southern District of New York, claiming that AIG had refused to provide SICO access to certain artwork, and asking the court to order AIG immediately to release the property to SICO. AIG filed an answer denying SICO’s allegations and setting forth defenses to SICO’s claims. In addition, AIG filed counterclaims asserting breach of contract, unjust enrichment, conversion, breach of fiduciary duty, a constructive trust and declaratory judgment relating to SICO’s breach of its commitment to use its AIG shares only for the benefit of AIG and AIG employees. On June 23, 2008, the Court denied in part and granted in part SICO’s motion for summary judgment, and on July 31, 2008 the parties submitted a joint pre-trial order. Trial of AIG’s claims for breach of fiduciary duty and conversion commenced on June 15, 2009. On July 7, 2009, a jury returned a verdict in SICO’s favor on the conversion claim and an advisory verdict in SICO’s favor on AIG’s breach of fiduciary duty claim. The Court indicated that it would reach its own binding decision on the breach of fiduciary duty claim in August 2009.

Litigation Matters Relating to AIG’s General Insurance Operations

Caremark. AIG and certain of its subsidiaries have been named defendants in two putative class actions in state court in Alabama that arise out of the 1999 settlement of class and derivative litigation involving Caremark Rx, Inc. (Caremark). The plaintiffs in the second-filed action have intervened in the first-filed action, and the second-filed action has been dismissed. An excess policy issued by a subsidiary of AIG with respect to the 1999 litigation was expressly stated to be without limit of liability. In the current actions, plaintiffs allege that the judge approving the 1999 settlement was misled as to the extent of available insurance coverage and would not have approved the settlement had he known of the existence and/or unlimited nature of the excess policy. They further allege that AIG, its subsidiaries, and Caremark are liable for fraud and suppression for misrepresenting and/or concealing the nature and extent of coverage. In addition, the intervenor-plaintiffs originally alleged that various lawyers and law firms who represented parties in the underlying class and derivative litigation (the Lawyer Defendants) were also liable for fraud and suppression, misrepresentation, and breach of fiduciary duty. The complaints filed by the plaintiffs and the intervenor-plaintiffs request compensatory damages for the 1999 class in the amount of $3.2 billion, plus punitive damages. AIG and its subsidiaries deny the allegations of fraud and suppression and have asserted that information concerning the excess policy was publicly disclosed months prior to the approval of the settlement. AIG and its subsidiaries further assert that the current claims are barred by the statute of limitations and that plaintiffs’ assertions that the statute was tolled cannot stand against the public disclosure of the excess coverage. The plaintiffs and intervenor-plaintiffs, in turn, have asserted that the disclosure was insufficient to inform them of the nature of the coverage and did not start the running of the statute of limitations. On November 26, 2007, the trial court issued an order that dismissed the intervenors’ complaint against the Lawyer Defendants and entered a final judgment in favor of the Lawyer Defendants. The matter was stayed pending appeal to the Alabama Supreme Court. In September 2008, the Alabama Supreme Court affirmed the trial court’s dismissal of the Lawyer Defendants. After the case was sent back down to the trial court, the intervenor-plaintiffs retained additional counsel — the law firm of Haskell Slaughter Young & Rediker, LLC (Haskell Slaughter) — and filed an Amended Complaint in Intervention on December 1, 2008. The Amended Complaint in Intervention names only Caremark and AIG and various subsidiaries as defendants and purports to bring claims against all defendants for deceit and conspiracy to deceive. In addition, the Amended Complaint in Intervention purports to bring a claim against AIG and its subsidiaries for aiding and abetting Caremark’s alleged deception. The defendants have moved to dismiss the Amended Complaint, and, in the alternative, for a more definite statement. The intervenor-plaintiffs have yet to respond to defendants’ motion but have indicated to the court that they intend to remedy any defects in their Amended Complaint by filing another amended complaint. After the appearance of the Haskell Slaughter firm on behalf of the intervenor-plaintiffs, the plaintiffs moved to disqualify all of the lawyers for the intervenor-plaintiffs because, among other things, the Haskell Slaughter firm previously represented Caremark. The intervenor-plaintiffs, in turn, moved to disqualify the lawyers for the plaintiffs in the first-filed action. The trial court heard oral argument on the motions to disqualify on February 6, 2009. On March 2, 2009, both sets of plaintiffs filed motions to withdraw their respective motions to disqualify each other after reaching an agreement among themselves that the Lauriello plaintiffs would act as lead counsel. The McArthur intervenors also moved to withdraw their Amended Complaint in Intervention. The trial court granted all motions to withdraw and ordered the parties to appear on March 26, 2009 for a status conference. Before the conference, the McArthur intervenors purported to dismiss their claims against Lauriello with prejudice pursuant to Ala. R. Civ. P. 41. The defendants argued that such dismissal was improper absent Court approval, but the Court approved the dismissal on April 2, 2009. At a class action scheduling conference held on April 14, 2009, the Court established a schedule for class action discovery that will lead to a hearing on class certification in March 2010. The parties are presently engaged in class discovery.


*(b)*	*Commitments*

Flight Equipment

At June 30, 2009, ILFC had committed to purchase 128 new aircraft deliverable from 2009 through 2019, at an estimated aggregate purchase price of $14.3 billion. ILFC will be required to find lessees for any aircraft acquired and to arrange financing for a substantial portion of the purchase price.

Included in the 128 new aircraft are 74 Boeing 787 aircraft (B787s), with the first aircraft currently scheduled to be delivered in July 2012, not taking into account recent additional delays in the production of the B787s. ILFC is in discussion with Boeing related to revisions to the delivery schedule and potential delay compensation and penalties for which ILFC may be eligible. ILFC has signed contracts for 31 of the 74 B787s on order. Under the terms of ILFC’s B787 leases, the lessees may be entitled to share in any compensation which ILFC receives from Boeing for late delivery of the aircraft.

Other Commitments

In the normal course of business, AIG enters into commitments to invest in limited partnerships, private equities, hedge funds and mutual funds and to purchase and develop real estate in the U.S. and abroad. These commitments totaled $7.9 billion at June 30, 2009.

On June 27, 2005, AIG entered into an agreement pursuant to which AIG agreed, subject to certain conditions, to make any payment that is not promptly paid with respect to the benefits accrued by certain employees of AIG and its subsidiaries under the SICO Plans (as discussed in (c) below under “Benefits Provided by Starr International Company, Inc. and C.V. Starr & Co., Inc.”).


*(c)*	*Contingencies*

Liability for unpaid claims and claims adjustment expense

Although AIG regularly reviews the adequacy of the established liability for unpaid claims and claims adjustment expense, there can be no assurance that AIG’s ultimate liability for unpaid claims and claims adjustment expense will not develop adversely and materially exceed AIG’s current liability for unpaid claims and claims adjustment expense. Estimation of ultimate net claims, claims adjustment expenses and liability for unpaid claims and claims adjustment expense is a complex process for long-tail casualty lines of business, which include excess and umbrella liability, directors and officers liability (D&O), professional liability, medical malpractice, workers’ compensation, general liability, products liability and related classes, as well as for asbestos and environmental exposures. Generally, actual historical loss development factors are used to project future loss development. However, there can be no assurance that future loss development patterns will be the same as in the past. Moreover, any deviation in loss cost trends or in loss development factors might not be discernible for an extended period of time subsequent to the recording of the initial loss reserve estimates for any accident year. Thus, there is the potential for reserves with respect to a number of years to be significantly affected by changes in loss cost trends or loss development factors that were relied upon in setting the reserves. These changes in loss cost trends or loss development factors could be attributable to changes in inflation, in labor and material costs or in the judicial environment, or in other social or economic phenomena affecting claims.

Benefits Provided by Starr International Company, Inc. and C.V. Starr & Co., Inc.

SICO has provided a series of two-year Deferred Compensation Profit Participation Plans (SICO Plans) to certain AIG employees. The SICO Plans were created in 1975 when the voting shareholders and Board of Directors of SICO, a private holding company whose principal asset is AIG common stock, decided that a portion of the capital value of SICO should be used to provide an incentive plan for the current and succeeding managements of all American International companies, including AIG.

None of the costs of the various benefits provided under the SICO Plans has been paid by AIG, although AIG has recorded a charge to reported earnings for the deferred compensation amounts paid to AIG employees by SICO, with an offsetting amount credited to additional paid-in capital reflecting amounts considered to be contributed by SICO. The SICO Plans provide that shares currently owned by SICO are set aside by SICO for the benefit of the participant and distributed upon retirement. The SICO Board of Directors currently may permit an early payout of units under certain circumstances. Prior to payout, the participant is not entitled to vote, dispose of or receive dividends with respect to such shares, and shares are subject to forfeiture under certain conditions, including but not limited to the participant’s voluntary termination of employment with AIG prior to normal retirement age. Under the SICO Plans, SICO’s Board of Directors may elect to pay a participant cash in lieu of shares of AIG common stock. Following notification from SICO to participants in the SICO Plans that it will settle specific future awards under the SICO Plans with shares rather than cash, AIG modified its accounting for the SICO Plans from variable to fixed measurement accounting. AIG gave effect to this change in settlement method beginning on December 9, 2005, the date of SICO’s notice to participants in the SICO Plans.


*(d)*	*Guarantees*

AIG has issued unconditional guarantees with respect to the prompt payment, when due, of all present and future payment obligations and liabilities of AIGFP arising from transactions entered into by AIGFP. Also see Note 13 herein for additional disclosures on guarantees of outstanding debt.

SAI Deferred Compensation Holdings, Inc., a wholly owned subsidiary of AIG, has established a deferred compensation plan for registered representatives of certain AIG subsidiaries, pursuant to which participants have the opportunity to invest deferred commissions and fees on a notional basis. The value of the deferred compensation fluctuates with the value of the deferred investment alternatives chosen. AIG has provided a full and unconditional guarantee of the obligations of SAI Deferred Compensation Holdings, Inc. to pay the deferred compensation under the plan. In December 2008, AIG terminated the plan for current employees and ceased to permit new deferrals into the plan.

See Note 6 herein for commitments and guarantees associated with VIEs.

Consolidated Balance Sheet (parenthetical) - USD ($)	Jun. 30, 2009	Dec. 31, 2008
Assets Abstract
us-gaap:AvailableForSaleSecuritiesDebtMaturitiesAmortizedCost	$ 372,480,000,000	$ 373,600,000,000
aig:SecuritiesReceivedAsCollateralAtCost	1,334,000,000	3,905,000,000
aig:AvailableForSaleSecuritiesEquitySecuritesCost	7,030,000,000	8,381,000,000
aig:MortgageAndOtherLoansReceivableAtFairValue	99,000,000	131,000,000
aig:InvestedAssetsOtherFairValue	15,739,000,000	19,196,000,000
aig:OtherShortTermInvestmentsFairValue	24,726,000,000	19,316,000,000
aig:PrepaidCommitmentAsset	13,814,000,000	15,458,000,000
us-gaap:OtherAssetsFairValueDisclosure	306,000,000	369,000,000
Liabilities:
aig:PolicyholderContractDepositsAtFairValue	7,273,000,000	5,458,000,000
us-gaap:SecuritiesLoanedOrSoldUnderAgreementsToRepurchaseFairValueDisclosure	2,716,000,000	4,508,000,000
aig:DepositsAtFairValue	26,000,000	30,000,000
aig:FrbnyCommericialPaperFundingFacilityAtFairValue	6,233,000,000	6,802,000,000
aig:OtherLongTermDebtAtFairValue	16,153,000,000	16,595,000,000
aig:OtherLiabilitiesAtFairValue	$ 3,277,000,000	$ 1,355,000,000
Stockholders Equity Abstract
us-gaap:CommonStockParOrStatedValuePerShare	$ 2.50	$ 2.50
Common stock, authorized (in shares)	5,000,000,000	5,000,000,000
us-gaap:CommonStockSharesIssued	147,377,020	147,401,900
us-gaap:TreasuryStockShares	12,807,642	12,918,446
Preferred Stock Series EMember
Stockholders Equity Abstract
us-gaap:PreferredStockParOrStatedValuePerShare	$ 5.00
aig:PreferredStockLiquidationPreferenceOfAllShares	$ 41,604,576,000
us-gaap:PreferredStockSharesIssued	400,000	0
Preferred Stock Series FMember
Stockholders Equity Abstract
us-gaap:PreferredStockParOrStatedValuePerShare	$ 5.00
aig:PreferredStockLiquidationPreferenceOfAllShares	$ 1,149,999,000
us-gaap:PreferredStockSharesIssued	300,000	0
Preferred Stock Series CMember
Stockholders Equity Abstract
us-gaap:PreferredStockParOrStatedValuePerShare	$ 5.00
aig:PreferredStockLiquidationPreferenceOfAllShares	$ 500,000
us-gaap:PreferredStockSharesIssued	100,000	0
Preferred Stock Series DMember
Stockholders Equity Abstract
us-gaap:PreferredStockParOrStatedValuePerShare		$ 5.00
aig:PreferredStockLiquidationPreferenceOfAllShares		$ 40,000,000,000
us-gaap:PreferredStockSharesIssued	0	4,000,000

Consolidated Statement of Income (Loss) - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2009	Jun. 30, 2008	Jun. 30, 2009	Jun. 30, 2008
Revenues:
us-gaap:PremiumsEarnedNet	$ 17,769	$ 21,735	$ 36,589	$ 42,407
Net investment income	8,785	6,728	11,068	11,682
Realized Investment Gains Losses Abstract
us-gaap:MarketableSecuritiesRealizedGainLossOtherThanTemporaryImpairmentsAmount	(1,190)	(6,720)	(5,051)	(12,260)
aig:OtherThanTemporaryImpairmentInOtherComprehensiveIncomeReclassificationBeforeTax	369		369
aig:NetImpairmentLossesOnAvailableForSaleSecurities	(821)	(6,720)	(4,682)	(12,260)
aig:NetGainLossExcludingAvailableForSaleImpairments	(478)	639	281	90
us-gaap:RealizedInvestmentGainsLosses	(1,299)	(6,081)	(4,401)	(12,170)
aig:UnrealizedMarketValuationLossesOnAigfp	636	(5,565)	184	(14,672)
us-gaap:OtherIncome	3,634	3,116	6,543	6,717
Total revenues	29,525	19,933	49,983	33,964
Benefits Losses And Expenses Abstract
Pol icyholder benefits and claims incurred	17,273	18,450	33,316	34,332
us-gaap:SellingGeneralAndAdministrativeExpense	5,694	6,029	10,988	11,641
Interest expense	2,600	1,333	5,445	2,605
us-gaap:RestructuringSettlementAndImpairmentProvisions	343		705
us-gaap:OtherExpenses	2,296	2,877	4,578	5,406
us-gaap:BenefitsLossesAndExpenses	28,206	28,689	55,032	53,984
aig:IncomeLossFromContinuingOperationsBeforeIncomeTaxes	1,319	(8,756)	(5,049)	(20,020)
us-gaap:IncomeTaxExpenseBenefit	(526)	(3,357)	(1,761)	(6,894)
us-gaap:ProfitLoss	1,845	(5,399)	(3,288)	(13,126)
us-gaap:NetIncomeLossAttributableToNoncontrollingInterest	23	(42)	(757)	36
Net income (loss) attributable to AIG	1,822	(5,357)	(2,531)	(13,162)
us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic	$ 311	$ (5,357)	$ (3,826)	$ (13,162)
Earnings Per Share Abstract
us-gaap:EarningsPerShareBasic	$ 2.30	$ (41.13)	$ (28.29)	$ (102.24)
Diluted (in dollars per share)	$ 2.30	(41.13)	$ (28.29)	(102.24)
us-gaap:CommonStockDividendsPerShareDeclared		$ 4.42		$ 8.33
Weighted Average Number Of Shares Outstanding Abstract
us-gaap:WeightedAverageNumberOfSharesOutstandingBasic	135,281,740	130,248,736	135,267,735	128,732,239
us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding	135,336,440	130,248,736	135,267,735	128,732,239

Consolidated Statement of Comprehensive Income (Loss) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2009	Jun. 30, 2008	Jun. 30, 2009	Jun. 30, 2008
Statement Line Items
us-gaap:ProfitLoss	$ 1,845	$ (5,399)	$ (3,288)	$ (13,126)
Other Comprehensive Income Loss Net Of Tax Period Increase Decrease Abstract
us-gaap:OtherComprehensiveIncomeCumulativeEffectOfChangeInAccountingPrincipleBeforeTaxes				(162)
us-gaap:OtherComprehensiveIncomeCumulativeEffectOfChangeInAccountingPrincipleTaxes				57
aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnFixedMaturityInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenBeforeTaxes	1,112		1,112
aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnFixedMaturityInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenTaxes	(450)		(450)
aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnAllInvestmentsOtherThanInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenBeforeTaxes	8,957	(3,737)	5,585	(14,414)
aig:OtherComprehensiveIncomeUnrealizedHoldingGainLossOnAllInvestmentsOtherThanInvestmentsOnWhichOtherThanTemporaryImpairmentsWereTakenTaxes	(3,863)	1,065	(2,471)	4,813
us-gaap:OtherComprehensiveIncomeForeignCurrencyTransactionAndTranslationAdjustmentBeforeTaxPeriodIncreaseDecrease	1,936	(221)	995	1,196
us-gaap:OtherComprehensiveIncomeForeignCurrencyTranslationAdjustmentTax	(618)	127	(409)	(124)
us-gaap:OtherComprehensiveIncomeDerivativesQualifyingAsHedgesBeforeTaxPeriodIncreaseDecrease	45	144	71	11
us-gaap:OtherComprehensiveIncomeDerivativesQualifyingAsHedgesTaxEffectPeriodIncreaseDecrease	(48)	(50)	(21)	(5)
us-gaap:OtherComprehensiveIncomeDefinedBenefitPlansAdjustmentBeforeTaxPeriodIncreaseDecrease	33	7	91	13
us-gaap:OtherComprehensiveIncomeDefinedBenefitPlansTax	(12)	(5)	(30)	(3)
us-gaap:OtherComprehensiveIncomeLossNetOfTaxPeriodIncreaseDecrease	7,092	(2,670)	4,473	(8,618)
us-gaap:ComprehensiveIncomeNetOfTaxIncludingPortionAttributableToNoncontrollingInterest	8,937	(8,069)	1,185	(21,744)
us-gaap:ComprehensiveIncomeNetOfTaxAttributableToNoncontrollingInterest	193	(80)	(674)	(36)
Comprehensive income (loss) attributable to AIG	$ 8,744	$ (7,989)	$ 1,859	$ (21,708)

Document and Entity Information - USD ($)	6 Months Ended
Document and Entity Information - USD ($)	Jun. 30, 2009	Jul. 31, 2009	Jun. 30, 2008
Document And Entity Information Abstract
Entity Registrant Name	AMERICAN INTERNATIONAL GROUP INC
Entity Central Index Key	0000005272
Document Type	10-Q
Document Period End Date	Jun. 30, 2009
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 61,753,000,000
Entity Common Stock, Shares Outstanding		134,575,809