(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2008
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from           to

Delaware		13-2592361
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
70 Pine Street, New York, New York		10270
(Address of principal executive offices)		(Zip Code)

Large accelerated filer    þ	Accelerated filer     o	Non-accelerated filer    o	Smaller reporting company    o

(Do not check if a
smaller reporting company)

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						Page
Description						Number
PART I — FINANCIAL INFORMATION							1
		Item 1.		Financial Statements (unaudited)			1
		Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			38
		Item 3.		Quantitative and Qualitative Disclosures About Market Risk			123
		Item 4.		Controls and Procedures			123
PART II — OTHER INFORMATION							124
		Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			124
		Item 4.		Submission of Matters to a Vote of Security Holders			124
		Item 6.		Exhibits			124
SIGNATURES							125

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					June 30,				December 31,
					2008				2007
Assets:
	Investments and Financial Services assets:
		Fixed maturity securities:
			Bonds available for sale, at fair value (amortized cost: 2008 – $400,052; 2007 – $393,170)		$	393,316			$	397,372
			Bonds held to maturity, at amortized cost (fair value: 2008 – $21,809; 2007 – $22,157)			21,632				21,581
			Bond trading securities, at fair value			8,801				9,982
		Equity securities:
			Common stocks available for sale, at fair value (cost: 2008 – $13,490; 2007 – $12,588)			17,306				17,900
			Common and preferred stocks trading, at fair value			22,514				21,376
			Preferred stocks available for sale, at fair value (cost: 2008 – $2,596; 2007 – $2,600)			2,496				2,370
		Mortgage and other loans receivable, net of allowance (2008 – $99; 2007 – $77) (held for sale: 2008 – $30; 2007 – $377 (amount measured at fair value: 2008 – $745)				34,384				33,727
		Financial Services assets:
			Flight equipment primarily under operating leases, net of accumulated depreciation (2008 – $11,359; 2007 – $10,499)			43,887				41,984
			Securities available for sale, at fair value (cost: 2008 – $1,246; 2007 – $40,157)			1,205				40,305
			Trading securities, at fair value			35,170				4,197
			Spot commodities, at fair value			90				238
			Unrealized gain on swaps, options and forward transactions, at fair value			11,548				12,318
			Trade receivables			2,294				672
			Securities purchased under agreements to resell, at fair value in 2008			16,597				20,950
			Finance receivables, net of allowance (2008 – $1,133; 2007 – $878) (held for sale: 2008 – $36; 2007 – $233)			33,311				31,234
		Securities lending invested collateral, at fair value (cost: 2008 – $67,758; 2007 – $80,641)				59,530				75,662
		Other invested assets (amount measured at fair value: 2008 – $22,099; 2007 – $20,827)				62,029				58,823
		Short-term investments (amount measured at fair value: 2008 – $24,167)				69,492				51,351
			Total Investments and Financial Services assets			835,602				842,042
	Cash					2,229				2,284
	Investment income due and accrued					6,614				6,587
	Premiums and insurance balances receivable, net of allowance (2008 – $596; 2007 – $662)					20,050				18,395
	Reinsurance assets, net of allowance (2008 – $502; 2007 – $520)					22,940				23,103
	Current and deferred income taxes					8,211				—
	Deferred policy acquisition costs					46,733				43,914
	Investments in partially owned companies					628				654
	Real estate and other fixed assets, net of accumulated depreciation (2008 – $5,710; 2007 – $5,446)					5,692				5,518
	Separate and variable accounts, at fair value					73,401				78,684
	Goodwill					10,661				9,414
	Other assets (amount measured at fair value: 2008 – $2,452; 2007 – $4,152)					17,115				17,766
Total assets					$	1,049,876			$	1,048,361

1

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				June 30,				December 31,
				2008				2007
Liabilities:
	Reserve for losses and loss expenses			$	88,747			$	85,500
	Unearned premiums				28,738				27,703
	Future policy benefits for life and accident and health insurance contracts				147,232				136,387
	Policyholders’ contract deposits (amount measured at fair value: 2008 – $4,179; 2007 – $295)				265,411				258,459
	Other policyholders’ funds				13,773				12,599
	Commissions, expenses and taxes payable				5,597				6,310
	Insurance balances payable				5,569				4,878
	Funds held by companies under reinsurance treaties				2,498				2,501
	Current income taxes payable				—				3,823
	Financial Services liabilities:
		Securities sold under agreements to repurchase (amount measured at fair value: 2008 – $8,338)			9,659				8,331
		Trade payables			1,622				6,445
		Securities and spot commodities sold but not yet purchased, at fair value			3,189				4,709
		Unrealized loss on swaps, options and forward transactions, at fair value			24,232				14,817
		Trust deposits and deposits due to banks and other depositors (amount measured at fair value: 2008 – $240)			6,165				4,903
	Commercial paper and extendible commercial notes				15,061				13,114
	Long-term borrowings (amount measured at fair value: 2008 – $53,839)				163,577				162,935
	Separate and variable accounts				73,401				78,684
	Securities lending payable				75,056				81,965
	Minority interest				11,149				10,422
	Other liabilities (amount measured at fair value: 2008 – $6,861; 2007 – $3,262)				31,012				27,975
Total liabilities					971,688				952,460
Preferred shareholders’ equity in subsidiary companies					100				100
Commitments, Contingencies and Guarantees (See Note 6)
Shareholders’ equity:
	Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued 2008 – 2,948,038,001; 2007 – 2,751,327,476				7,370				6,878
	Additional paid-in capital				9,446				2,848
	Payments advanced to purchase shares				—				(912	)
	Retained earnings				73,743				89,029
	Accumulated other comprehensive income (loss)				(3,903	)			4,643
	Treasury stock, at cost; 2008 – 259,225,244; 2007 – 221,743,421 shares of common stock				(8,568	)			(6,685	)
Total shareholders’ equity					78,088				95,801
Total liabilities, preferred shareholders’ equity in subsidiary companies and shareholders’ equity				$	1,049,876			$	1,048,361

2

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(in millions, except per share data) (unaudited)
			Three Months								Six Months
			Ended June 30,								Ended June 30,
			2008				2007				2008				2007
Revenues:
	Premiums and other considerations		$	21,735			$	19,533			$	42,407			$	39,175
	Net investment income			6,728				7,853				11,682				14,977
	Net realized capital losses			(6,081	)			(28	)			(12,170	)			(98	)
	Unrealized market valuation losses on AIGFP super senior credit default swap portfolio			(5,565	)			—				(14,672	)			—
	Other income			3,116				3,792				6,717				7,741
	Total revenues			19,933				31,150				33,964				61,795
Benefits and expenses:
	Incurred policy losses and benefits			18,450				16,221				34,332				32,367
	Insurance acquisition and other operating expenses			10,239				8,601				19,652				16,928
	Total benefits and expenses			28,689				24,822				53,984				49,295
Income (loss) before income taxes (benefits) and minority interest				(8,756	)			6,328				(20,020	)			12,500
Income taxes (benefits)				(3,357	)			1,679				(6,894	)			3,405
Income (loss) before minority interest				(5,399	)			4,649				(13,126	)			9,095
Minority interest				42				(372	)			(36	)			(688	)
Net income (loss)			$	(5,357	)		$	4,277			$	(13,162	)		$	8,407
Earnings (loss) per common share:
	Basic		$	(2.06	)		$	1.64			$	(5.11	)		$	3.22
	Diluted		$	(2.06	)		$	1.64			$	(5.11	)		$	3.21
Dividends declared per common share			$	0.220			$	0.200			$	0.420			$	0.365
Average shares outstanding:
	Basic			2,605				2,602				2,575				2,607
	Diluted			2,605				2,613				2,575				2,621

3

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				Six Months Ended June 30, 2008
(in millions, except share and per share data) (unaudited)				Amounts				Shares
Common stock:
	Balance, beginning of period			$	6,878				2,751,327,476
		Issuances			492				196,710,525
	Balance, end of period				7,370				2,948,038,001
Additional paid-in capital:
	Balance, beginning of period				2,848
		Excess of proceeds over par value of common stock issued			6,851
		Present value of future contract adjustment payments related to issuance of equity units			(431	)
		Excess of cost over proceeds of common stock issued under stock plans			(13	)
		Other			191
	Balance, end of period				9,446
Payments advanced to purchase shares:
	Balance, beginning of period				(912	)
		Payments advanced			(1,000	)
		Shares purchased			1,912
	Balance, end of period				—
Retained earnings:
	Balance, beginning of period				89,029
		Cumulative effect of accounting changes, net of tax			(1,003	)
		Adjusted balance, beginning of period			88,026
		Net loss			(13,162	)
		Dividends to common shareholders ($0.42 per share)			(1,121	)
	Balance, end of period				73,743
Accumulated other comprehensive income (loss):
	Unrealized appreciation (depreciation) of investments, net of tax:
	Balance, beginning of period				4,375
		Cumulative effect of accounting changes, net of tax			(105	)
		Adjusted balance, beginning of period			4,270
		Unrealized depreciation of investments, net of reclassification adjustments			(14,254	)
		Income tax benefit			4,813
	Balance, end of period				(5,171	)
	Foreign currency translation adjustments, net of tax:
	Balance, beginning of period				880
		Translation adjustment			1,108
		Income tax expense			(124	)
	Balance, end of period				1,864
	Net derivative gains (losses) arising from cash flow hedging activities:
	Balance, beginning of period				(87	)
		Net deferred gains on cash flow hedges, net of reclassification adjustments			11
		Deferred income tax expense			(5	)
	Balance, end of period				(81	)
	Retirement plan liabilities adjustment, net of taxes:
	Balance, beginning of period				(525	)
		Net actuarial loss			18
		Prior service credit			(5	)
		Deferred income tax expense			(3	)
	Balance, end of period				(515	)
	Accumulated other comprehensive income (loss), end of period				(3,903	)
Treasury stock, at cost:
	Balance, beginning of period				(6,685	)			(221,743,421	)
		Shares acquired			(1,912	)			(37,927,125	)
		Issued under stock plans			24				443,767
		Other			5				1,535
	Balance, end of period				(8,568	)			(259,225,244	)
Total shareholders’ equity, end of period				$	78,088

4

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(in millions) (unaudited)
				Six Months
				Ended June 30,
				2008				2007
Summary:
	Net cash provided by (used in) operating activities			$	16,589			$	17,431
	Net cash provided by (used in) investing activities				(21,963	)			(40,314	)
	Net cash provided by (used in) financing activities				5,274				22,947
	Effect of exchange rate changes on cash				45				(19	)
	Change in cash				(55	)			45
	Cash at beginning of year period				2,284				1,590
	Cash at end of year period			$	2,229			$	1,635
Cash flows from operating activities:
	Net income (loss)			$	(13,162	)		$	8,407
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Noncash revenues, expenses, gains and losses included in income (loss):
		Unrealized market valuation losses on AIGFP super senior credit default swap portfolio			14,672				—
		Net gains on sales of securities available for sale and other assets			(494	)			(732	)
		Foreign exchange transaction (gains) losses			857				639
		Net unrealized (gains) losses on non-AIGFP derivatives and other assets and liabilities			2,086				(123	)
		Equity in income of partially owned companies and other invested assets			(151	)			(2,747	)
		Amortization of deferred policy acquisition costs			7,343				5,911
		Depreciation and other amortization			1,799				1,608
		Provision for mortgage, other loans and finance receivables			578				229
		Other-than-temporary impairments			12,416				884
	Changes in operating assets and liabilities:
		General and life insurance reserves			9,748				8,238
		Premiums and insurance balances receivable and payable – net			(1,104	)			(941	)
		Reinsurance assets			196				434
		Capitalization of deferred policy acquisition costs			(9,160	)			(7,567	)
		Investment income due and accrued			118				(44	)
		Funds held under reinsurance treaties			(25	)			(210	)
		Other policyholders’ funds			851				879
		Income taxes receivable and payable – net			(6,960	)			(225	)
		Commissions, expenses and taxes payable			52				724
		Other assets and liabilities – net			1,809				553
		Trade receivables and payables – net			(6,446	)			(925	)
		Trading securities			930				(2,258	)
		Spot commodities			148				127
		Net unrealized (gain) loss on swaps, options and forward transactions			(3,993	)			1,317
		Securities purchased under agreements to resell			4,353				2,116
		Securities sold under agreements to repurchase			1,237				(226	)
		Securities and spot commodities sold but not yet purchased			(1,531	)			221
		Finance receivables and other loans held for sale – originations and purchases			(279	)			(3,957	)
		Sales of finance receivables and other loans – held for sale			492				4,177
		Other, net			209				922
		Total adjustments			29,751				9,024
Net cash provided by operating activities				$	16,589			$	17,431

5

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(in millions) (unaudited)
			Six Months
			Ended June 30,
			2008				2007
Cash flows from investing activities:
Proceeds from (payments for)
	Sales and maturities of fixed maturity securities available for sale and hybrid investments		$	42,026			$	64,563
	Sales of equity securities available for sale			4,861				4,275
	Proceeds from fixed maturity securities held to maturity			33				133
	Sales of trading securities			14,120				—
	Sales of flight equipment			372				28
	Sales or distributions of other invested assets			8,715				6,208
	Payments received on mortgage and other loans receivable			3,457				2,270
	Principal payments received on finance receivables held for investment			6,757				6,430
	Purchases of fixed maturity securities available for sale and hybrid investments			(47,114	)			(72,348	)
	Purchases of equity securities available for sale			(5,808	)			(5,852	)
	Purchases of fixed maturity securities held to maturity			(88	)			(129	)
	Purchases of trading securities			(9,244	)			—
	Purchases of flight equipment (including progress payments)			(2,950	)			(3,883	)
	Purchases of other invested assets			(11,988	)			(12,171	)
	Mortgage and other loans receivable issued			(3,340	)			(5,029	)
	Finance receivables held for investment – originations and purchases			(8,778	)			(7,387	)
	Change in securities lending invested collateral			6,315				(11,772	)
	Net additions to real estate, fixed assets, and other assets			(663	)			(466	)
	Net change in short-term investments			(18,832	)			(4,636	)
	Net change in non-AIGFP derivative assets and liabilities			186				(548	)
Net cash provided by (used in) investing activities			$	(21,963	)		$	(40,314	)
Cash flows from financing activities:
Proceeds from (payments for)
	Policyholders’ contract deposits		$	33,322			$	28,769
	Policyholders’ contract withdrawals			(27,926	)			(29,379	)
	Change in other deposits			682				(823	)
	Change in commercial paper and extendible commercial notes			1,930				1,768
	Long-term borrowings issued			55,685				50,091
	Repayments on long-term borrowings			(56,645	)			(34,937	)
	Change in securities lending payable			(6,919	)			12,021
	Proceeds from common stock issued			7,343				—
	Issuance of treasury stock			11				180
	Payments advanced to purchase treasury stock			(1,000	)			(4,000	)
	Cash dividends paid to shareholders			(1,036	)			(859	)
	Acquisition of treasury stock			—				(16	)
	Other, net			(173	)			132
Net cash provided by (used in) financing activities			$	5,274			$	22,947
Supplementary disclosure of cash flow information:
Cash paid (received) during the period for:
	Interest		$	3,493			$	3,744
	Taxes		$	66			$	3,524
Non-cash financing activities:
	Interest credited to policyholder accounts included in financing activities		$	3,815			$	5,932
	Treasury stock acquired using payments advanced to purchase shares		$	1,912			$	1,664
	Present value of future contract adjustment payments related to issuance of equity units		$	431			$	—
Non-cash investing activities:
	Debt assumed on acquisitions and warehoused investments		$	153			$	354

6

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(in millions) (unaudited)
				Three Months								Six Months
				Ended June 30,								Ended June 30,
				2008				2007				2008				2007
Net income (loss)				$	(5,357	)		$	4,277			$	(13,162	)		$	8,407
Other comprehensive income (loss):
	Cumulative effect of accounting changes				—				—				(162	)			—
		Deferred income tax benefit on above changes			—				—				57				—
	Unrealized (depreciation) appreciation of investments – net of reclassification adjustments				(3,682	)			(2,161	)			(14,254	)			(852	)
		Deferred income tax benefit on above changes			1,065				598				4,813				140
	Foreign currency translation adjustments				(238	)			(164	)			1,108				(329	)
		Deferred income tax benefit (expense) on above changes			127				7				(124	)			35
	Net derivative gains (losses) arising from cash flow hedging activities – net of reclassification adjustments				144				61				11				62
		Deferred income tax benefit on above changes			(50	)			(22	)			(5	)			5
	Change in pension and postretirement unrecognized periodic benefit				7				15				13				18
		Deferred income tax benefit (expense) on above changes			(5	)			(1	)			(3	)			(2	)
Other comprehensive income (loss)					(2,632	)			(1,667	)			(8,546	)			(923	)
Comprehensive income (loss)				$	(7,989	)		$	2,610			$	(21,708	)		$	7,484

7

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1.	Summary of Significant Accounting Policies

8

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1.	Summary of Significant Accounting Policies (continued)

		At January 1, 2008
		Accumulated								Cumulative
		Other								Effect of
		Comprehensive				Retained				Accounting
(in millions)		Income/(Loss)				Earnings				Changes
FAS 157		$	—			$	4			$	4
FAS 159			(105	)			(1,007	)			(1,112	)
Cumulative effect of accounting changes		$	(105	)		$	(1,003	)		$	(1,108	)

9

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1.	Summary of Significant Accounting Policies (continued)

10

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2.	Segment Information

			Three Months								Six Months
			Ended June 30,								Ended June 30,
Operating Segments
(in millions)			2008				2007				2008				2007
Total revenues(a):
	General Insurance		$	12,757			$	12,928			$	25,046			$	25,831
	Life Insurance & Retirement Services(b)			10,161				14,023				18,913				27,705
	Financial Services(c)(d)			(3,605	)			2,123				(10,165	)			4,324
	Asset Management(e)			797				1,781				648				3,450
	Other			208				263				80				394
	Consolidation and eliminations			(385	)			32				(558	)			91
Total			$	19,933			$	31,150			$	33,964			$	61,795
Operating income (loss)(a):
	General Insurance		$	827			$	2,976			$	2,164			$	6,072
	Life Insurance & Retirement Services(b)			(2,401	)			2,620				(4,232	)			4,901
	Financial Services(c)(d)			(5,905	)			47				(14,677	)			339
	Asset Management(e)			(314	)			927				(1,565	)			1,685
	Other(f)			(715	)			(460	)			(1,483	)			(930	)
	Consolidation and eliminations			(248	)			218				(227	)			433
Total			$	(8,756	)		$	6,328			$	(20,020	)		$	12,500

(a)	Includes other-than-temporary impairment charges of $6.8 billion and $417 million for the three-month periods ended June 30, 2008 and 2007, respectively, and $12.4 billion and $884 million for the six-month periods ended June 30, 2008 and 2007, respectively. Also includes gains (losses) from hedging activities that did not qualify for hedge accounting treatment under FAS 133, including the related foreign exchange gains and losses. For the three-month periods ended June 30, 2008 and 2007, the effect was $272 million and $(430) million, respectively. For the six-month periods ended June 30, 2008 and 2007, the effect was $(476) million and $(882) million, respectively. These amounts result primarily from interest rate and foreign currency derivatives that are effective economic hedges of investments and borrowings.
(b)	Includes other-than-temporary impairment charges of $5.2 billion and $324 million for the three-month periods ended June 30, 2008 and 2007, respectively, and $9.6 billion and $716 million for the six-month periods ended June 30, 2008 and 2007, respectively.
(c)	Includes gains (losses) from hedging activities that did not qualify for hedge accounting treatment under FAS 133, including the related foreign exchange gains and losses. For the three-month periods ended June 30, 2008 and 2007, the effect was $5 million and $(443) million, respectively. For the six-month periods ended June 30, 2008 and 2007, the effect was $(199) million and $(603) million, respectively. These amounts result primarily from interest rate and foreign currency derivatives that are effective economic hedges of investments and borrowings.
(d)	For the three- and six-month periods ended June 30, 2008, includes unrealized market valuation losses of $5.6 billion and $14.7 billion, respectively, on AIGFP’s super senior credit default swap portfolio.

(e)	Includes net realized capital losses of $464 million and $1.9 billion for the three- and six-month periods ended June 30, 2008, respectively, including other-than-temporary impairment charges of $882 million and $1.9 billion, respectively.
(f)	Includes AIG parent and other operations that are not required to be reported separately. The following table presents the operating loss for AIG’s Other category:

			Three Months								Six Months
			Ended June 30,								Ended June 30,
Other
(in millions)			2008				2007				2008				2007
Operating income (loss):
	Equity earnings in partially owned companies		$	8			$	50			$	16			$	91
	Interest expense			(452	)			(302	)			(820	)			(554	)
	Unallocated corporate expenses(a)			(282	)			(210	)			(375	)			(382	)
	Net realized capital gains (losses)(b)			30				22				(235	)			(27	)
	Other miscellaneous, net			(19	)			(20	)			(69	)			(58	)
Total Other			$	(715	)		$	(460	)		$	(1,483	)		$	(930	)

	(a)	Includes expenses of corporate staff not attributable to specific operating segments, expenses related to efforts to improve internal controls, corporate initiatives and certain compensation plan expenses. For the three- and six-month periods ended June 30, 2008, includes a charge of $101 million as a result of the settlement of a dispute in connection with the July 2008 purchase of the balance of Ascot Underwriting Holdings Ltd., partially offset by a decrease in certain compensation plan expenses.

	(b)	The increase in net realized capital losses in the six-month period ended June 30, 2008 reflected higher foreign exchange losses on foreign-denominated debt, a portion of which was economically hedged but did not qualify for hedge accounting treatment under FAS 133, and losses on non-hedged derivatives.

11

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2.	Segment Information (continued)

			Three Months								Six Months
			Ended June 30,								Ended June 30,
General Insurance
(in millions)			2008				2007				2008				2007
Total revenues:
	Commercial Insurance		$	5,937			$	6,904			$	11,924			$	13,995
	Transatlantic			1,103				1,069				2,222				2,165
	Personal Lines			1,259				1,223				2,511				2,436
	Mortgage Guaranty			313				257				611				505
	Foreign General Insurance			4,139				3,475				7,767				6,737
	Reclassifications and eliminations			6				—				11				(7	)
Total			$	12,757			$	12,928			$	25,046			$	25,831
Operating income (loss):
	Commercial Insurance		$	381			$	1,904			$	1,166			$	3,833
	Transatlantic			141				168				303				319
	Personal Lines			21				118				24				224
	Mortgage Guaranty			(518	)			(81	)			(872	)			(73	)
	Foreign General Insurance			796				867				1,532				1,776
	Reclassifications and eliminations			6				—				11				(7	)
Total			$	827			$	2,976			$	2,164			$	6,072

				Three Months								Six Months
				Ended June 30,								Ended June 30,
Life Insurance & Retirement Services
(in millions)				2008				2007				2008				2007
Total revenues:
	Foreign:
		Japan and Other		$	5,369			$	4,863			$	9,265			$	9,633
		Asia			4,575				5,019				8,852				9,510
	Domestic:
		Domestic Life Insurance			1,234				2,359				2,517				4,880
		Domestic Retirement Services			(1,017	)			1,782				(1,721	)			3,682
Total				$	10,161			$	14,023			$	18,913			$	27,705
Operating income (loss):
	Foreign:
		Japan and Other		$	577			$	810			$	1,060			$	1,723
		Asia			196				844				448				1,215
	Domestic:
		Domestic Life Insurance			(1,005	)			368				(1,875	)			713
		Domestic Retirement Services			(2,169	)			598				(3,865	)			1,250
Total				$	(2,401	)		$	2,620			$	(4,232	)		$	4,901

			Three Months								Six Months
			Ended June 30,								Ended June 30,
Financial Services
(in millions)			2008				2007				2008				2007
Total revenues:
	Aircraft Leasing		$	1,298			$	1,173			$	2,463			$	2,231
	Capital Markets(a)			(6,088	)			(67	)			(14,831	)			161
	Consumer Finance(b)			1,028				911				1,959				1,756
	Other, including intercompany adjustments			157				106				244				176
Total			$	(3,605	)		$	2,123			$	(10,165	)		$	4,324
Operating income (loss):
	Aircraft Leasing		$	334			$	207			$	555			$	371
	Capital Markets(a)			(6,284	)			(255	)			(15,211	)			(187	)
	Consumer Finance(b)			(33	)			75				(85	)			111
	Other, including intercompany adjustments			78				20				64				44
Total			$	(5,905	)		$	47			$	(14,677	)		$	339

(a)	Revenues are shown net of interest expense of $1.2 billion and $805 million in the three-month periods ended June 30, 2008 and 2007, respectively, and $1.7 billion and $1.9 billion for the six-month periods ended June 30, 2008 and 2007, respectively. In the three- and six-month periods ended June 30, 2008, both revenues and operating income (loss) includes unrealized market valuation losses of $5.6 billion and $14.7 billion, respectively, on AIGFP’s super senior credit default swap portfolio.
(b)	The three- and six-month periods ended June 30, 2007 included pre-tax charges of $50 million and $178 million, respectively, in connection with domestic Consumer Finance’s mortgage banking activities. Based on a current evaluation of the estimated cost of implementing the Supervisory Agreement entered into with the Office of Thrift Supervision (OTS), partial reversals of these prior year charges of $25 million and $43 million, respectively, are included in the three- and six-month periods ended June 30, 2008.

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3.	Fair Value Measurements

			Net Pre-Tax Increase (Decrease)
			Three Months				Six Months
			Ended June 30,				Ended June 30,				Liabilities Carried		Business Segment
(in millions)			2008				2008				at Fair Value		Affected
Income statement caption:
	Net realized capital gains (losses)		$	(37	)		$	251			Freestanding derivatives		All segments - excluding AIGFP
				—				(155	)		Embedded policy derivatives		Life Insurance & Retirement Services
	Unrealized market valuation losses on AIGFP super senior credit default swap portfolio			44	*			109	*		Super senior credit default swap portfolio		AIGFP
	Other income			(156	)*			2,427	*		Notes, GIAs, derivatives, other liabilities		AIGFP
Net pre-tax increase			$	(149	)		$	2,632
Liabilities already carried at fair value			$	20			$	1,354
Newly elected liabilities measured at fair value (FAS 159 elected)				(169	)			1,278
Net pre-tax increase			$	(149	)		$	2,632

*

The effect of changes in AIG’s own credit spreads on pre-tax income for AIGFP was a decrease of $112 million and an increase of $2.5 billion for the three- and six-month periods ended June 30, 2008, respectively. The effect of the changes in counterparty credit spreads for assets measured at fair value at AIGFP was decreases in pre-tax income of $362 million and $3.0 billion for the three- and six-month periods ended June 30, 2008, respectively.

13

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3.	Fair Value Measurements (continued)

14

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3.	Fair Value Measurements (continued)

•	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.

•	Held to Maturity Securities, Cost and Equity-Method Investments: When AIG determines the carrying value of these assets may not be recoverable, AIG records the assets

15

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3.	Fair Value Measurements (continued)

•	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 flows 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 of 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.
•	Goodwill: AIG tests goodwill for impairment whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable, but at least annually. When AIG determines goodwill may be impaired, AIG uses techniques that consider market-based earnings multiples of the unit’s peer companies or discounted cash flow techniques based on the price that could be received in a current transaction to sell the asset assuming the asset would be used with other assets as a group (in-use premise).
•	Intangible Assets: AIG tests its intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an intangible asset may not be recoverable. AIG measures the fair value of intangible 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.

•	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, certain listed equities, state, municipal and provincial obligations, hybrid securities, mutual fund and hedge fund investments, derivative contracts, guaranteed investment agreements at AIGFP 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

16

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3.	Fair Value Measurements (continued)

																				Total
																Counterparty				June 30,
(in millions)				Level 1				Level 2				Level 3				Netting				2008
Assets:
	Bonds available for sale			$	3,986			$	370,850			$	18,480			$	–			$	393,316
	Bond trading securities				1				8,605				195				–				8,801
	Common stocks available for sale				16,812				267				227				–				17,306
	Common and preferred stocks trading				21,510				999				5				–				22,514
	Preferred stocks available for sale				–				2,238				258				–				2,496
	Mortgage and other loans receivable				–				741				4				–				745
	Financial Services assets:
		Securities available for sale			2				831				372				–				1,205
		Trading securities			1,276				30,214				3,680				–				35,170
		Spot commodities			–				90				–				–				90
		Unrealized gain on swaps, options and forward transactions			–				59,493				3,625				(51,570	)			11,548
		Securities purchased under agreements to resell			–				16,597				–				–				16,597
	Securities lending invested collateral(a)				–				40,595				8,489				–				49,084
	Other invested assets(b)				2,643				7,588				11,868				–				22,099
	Short-term investments(c)				39				24,128				–				–				24,167
	Separate and variable accounts				69,162				3,061				1,178				–				73,401
	Other assets				94				4,611				353				(2,606	)			2,452
Total				$	115,525			$	570,908			$	48,734			$	(54,176	)		$	680,991
Liabilities:
	Policyholders’ contract deposits			$	–			$	–			$	4,179			$	–			$	4,179
	Other policyholders’ funds				2				–				–				–				2
	Financial Services liabilities:
		Securities sold under agreements to repurchase			–				8,298				40				–				8,338
		Securities and spot commodities sold but not yet purchased			94				3,095				–				–				3,189
		Unrealized loss on swaps, options and forward transactions(d)			–				52,897				30,299				(58,964	)			24,232
		Trust deposits and deposits due to banks and other depositors			–				240				–				–				240
	Long-term borrowings				–				51,150				2,689				–				53,839
	Other liabilities				6				7,005				44				(194	)			6,861
Total				$	102			$	122,685			$	37,251			$	(59,158	)		$	100,880

(a)	Amounts exclude short-term investments that are carried at cost, which approximates fair value of $10.4 billion.
(b)	Approximately 13 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. AIG’s ownership in these funds represented 22 percent, or $1.4 billion of the Level 3 amount.

(c)	Level 2 includes short-term investments that are carried at cost, which approximates fair value of $23.1 billion.

(d)	Included in Level 3 are unrealized market valuation losses of $26.1 billion on AIGFP super senior credit default swap portfolio.

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3.	Fair Value Measurements (continued)

								Net																				Changes in
								Realized and																				Unrealized Gains
								Unrealized				Accumulated				Purchases,												(Losses) on
				Balance				Gains (Losses)				Other				Sales,								Balance at				Instruments
				Beginning of				Included				Comprehensive				Issuances and				Transfers				June 30,				Held at
(in millions)				Period(a)				in Income(b)				Income (Loss)				Settlements-net				In (Out)				2008				June 30, 2008
Three Months Ended June 30, 2008:
Assets:
	Bonds available for sale			$	17,198			$	(679	)		$	(58	)		$	(34	)		$	2,053			$	18,480			$	–
	Bond trading securities				116				5				2				15				57				195				7
	Common stocks available for sale				251				(3	)			(3	)			(15	)			(3	)			227				–
	Common and preferred stocks trading				25				(1	)			1				(13	)			(7	)			5				–
	Preferred stocks available for sale				133				(3	)			8				(59	)			179				258				–
	Mortgage and other loans receivable				–				–				–				–				4				4				–
	Financial Services assets:
		Securities available for sale			294				(3	)			2				77				2				372				–
		Trading securities			3,419				(472	)			–				713				20				3,680				(361	)
	Securities lending invested collateral				9,622				(1,346	)			908				(590	)			(105	)			8,489				–
	Other invested assets				11,348				(153	)			70				533				70				11,868				166
	Separate and variable accounts				1,065				(3	)			–				116				–				1,178				(4	)
	Other assets				337				(6	)			–				3				–				334				(6	)
Total				$	43,808			$	(2,664	)		$	930			$	746			$	2,270			$	45,090			$	(198	)
Liabilities:
	Policyholders’ contract deposits			$	(4,118	)		$	129			$	13			$	(203	)		$	–			$	(4,179	)		$	62
	Financial Services liabilities:
		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	)
	Long-term borrowings				(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	)
Six Months Ended June 30, 2008:
Assets:
	Bonds available for sale			$	18,786			$	(1,444	)		$	(550	)		$	(224	)		$	1,912			$	18,480			$	–
	Bond trading securities				141				(20	)			2				15				57				195				(10	)
	Common stocks available for sale				224				(5	)			–				11				(3	)			227
	Common and preferred stocks trading				30				(1	)			2				(19	)			(7	)			5				–
	Preferred stocks available for sale				135				(2	)			6				(67	)			186				258				–
	Mortgage and other loans receivable				–				–				–				–				4				4				–
	Financial Services assets:
		Securities available for sale			285				(3	)			8				82				–				372				–
		Trading securities			4,422				(1,433	)			–				702				(11	)			3,680				(1,233	)
	Securities lending invested collateral				11,353				(3,138	)			1,087				(818	)			5				8,489				–
	Other invested assets				10,373				192				137				1,148				18				11,868				818
	Separate and variable accounts				1,003				27				–				148				–				1,178				27
	Other assets				141				–				–				193				–				334				–
Total				$	46,893			$	(5,827	)		$	692			$	1,171			$	2,161			$	45,090			$	(398	)
Liabilities:
	Policyholders’ contract deposits			$	(3,674	)		$	(57	)		$	(51	)		$	(397	)		$	–			$	(4,179	)		$	(221	)
	Financial Services liabilities:
		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	)
	Long-term borrowings				(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)

Certain recharacterizations of amounts previously reported in Level 3 were identified in the second quarter of 2008, and have been adjusted. The effect of these reclassifications and recharacterizations on Level 3 net assets were net decreases of $1.8 billion and $1.0 billion at January 1, 2008 and March 31, 2008, respectively. The Consolidated Statement of Income, the Consolidated Balance Sheet, and the Consolidated Statement of Cash Flows presented in the 2008

18

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3.	Fair Value Measurements (continued)

	first quarter Form 10-Q were not affected by these changes. 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 on the consolidated statement of income (loss) primarily as follows:

Major category of Assets/ Liabilities		Consolidated Statement of Income (Loss) Line Items
Financial Services assets and liabilities		• Other income
		• Unrealized market valuation losses on AIGFP super senior credit default swap portfolio
Other invested assets		• Net realized capital gains (losses)
Policyholders’ contract deposits		• Incurred policy losses and benefits
		• Net realized capital gains (losses)

19

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3.	Fair Value Measurements (continued)

20

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3.	Fair Value Measurements (continued)

															Gain (Loss)				Gain (Loss)
			January 1,				Transition				January 1,				Three Months				Six Months
			2008				Adjustment				2008				Ended				Ended
			prior to				upon				after				June 30,				June 30,
(in millions)			Adoption				Adoption				Adoption				2008				2008
Mortgage and other loans receivable			$	1,109			$	—			$	1,109			$	11			$	79
Financial Services assets(b):
	Trading securities (formerly available for sale)			39,278				5				39,283				(718	)			(1,151	)
	Securities purchased under agreements to resell			20,950				1				20,951				307				575
Other invested assets				321				(1	)			320				2				12
Short-term investments				6,969				—				6,969				43				67
Deferred policy acquisition costs				1,147				(1,147	)			—				—				—
Other assets				435				(435	)			—				—				—
Future policy benefits for life, accident and health insurance contracts				299				299				—				—				—
Policyholders’ contract deposits(c)				3,739				360				3,379				3				118
Financial Services liabilities(b):
	Securities sold under agreements to repurchase			6,750				(10	)			6,760				(120	)			(416	)
	Securities and spot commodities sold but not yet purchased			3,797				(10	)			3,807				(34	)			(13	)
	Trust deposits and deposits due to banks and other depositors			216				(25	)			241				4				(11	)
Long-term borrowings				57,968				(675	)			58,643				582				(391	)
Other liabilities				1,792				—				1,792				(286	)			(319	)
Total gain (loss) for the three- and six-month periods ended June 30, 2008															$	(206	)		$	(1,450	)
Pre-tax cumulative effect of adopting the fair value option								(1,638	)
Decrease in deferred tax liabilities								526
Cumulative effect of adopting the fair value option							$	(1,112	)

(a)	Certain of AIG’s financial instruments are required to be accounted for at fair value, with changes in fair value included in earnings, under FAS 115, “Accounting for Certain Investments in Debt and Equity Securities,” or FAS 133 and are not included in the table above.
(b)	AIGFP elected to apply the fair value option to all eligible assets and liabilities (other than equity method investments, trade receivables and trade payables) because electing the fair value option will allow AIGFP to more closely align its earnings with the economics of its transactions by recognizing concurrently through earnings the change in fair value of its derivatives and the offsetting change in fair value of the assets and liabilities being hedged as well as the manner in which the business is evaluated by management. Substantially all of the gain (loss) amounts shown above are reported in other income on the consolidated statement of income (loss).
(c)	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 policyholders’ 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 will more effectively align 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 will allow 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 initiated in the second 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 policyholders’ contract deposits because other contracts do not share the same contract features that created the disparity between the accounting presentation and the economic performance.

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							Principal
			Fair Value at				Amount
			June 30,				Due Upon
(in millions)			2008				Maturity				Difference
Assets:
	Mortgage and other loans receivable		$	745			$	716			$	29
Liabilities:
	Long-term borrowings		$	48,176			$	47,168			$	1,008

4.	Shareholders’ Equity and Earnings (Loss) Per Share

If the applicable market
value is:		then AIG is obligated to issue:
• Greater than or equal to $45.60		• 0.54823 shares per stock purchase contract
• Between $45.60 and $38.00		• Shares equal to $25 divided by the applicable market value
• Less than or equal to $38.00		• 0.6579 shares per stock purchase contract

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4.	Shareholders’ Equity and Earnings (Loss) Per Share (continued)

				Three Months								Six Months
				Ended June 30,								Ended June 30,
(in millions, except per share data)				2008				2007				2008				2007
Numerator for EPS:
Net income (loss)				$	(5,357	)		$	4,277			$	(13,162	)		$	8,407
Denominator for EPS:
	Weighted average shares outstanding used in the computation of EPS:
		Common stock issued			2,850				2,751				2,808				2,751
		Common stock in treasury			(258	)			(161	)			(247	)			(156	)
		Deferred shares			13				12				14				12
Weighted average shares outstanding – basic					2,605				2,602				2,575				2,607
Incremental shares arising from awards outstanding under share-based employee compensation plans*					—				11				—				14
Weighted average shares outstanding – diluted*					2,605				2,613				2,575				2,621
EPS:
	Basic			$	(2.06	)		$	1.64			$	(5.11	)		$	3.22
	Diluted			$	(2.06	)		$	1.64			$	(5.11	)		$	3.21

*	Calculated using the treasury stock method. Certain potential common shares arising from share-based employee compensation plans were not included in the computation of diluted EPS because the effect would have been antidilutive. The number of potential shares excluded was 7 million for the six-month period ended 2007.

5.	Ownership

6.	Commitments, Contingencies and Guarantees

(a)	Litigation and Investigations

23

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6.	Commitments, Contingencies and Guarantees (continued)

24

---

 

6.	Commitments, Contingencies and Guarantees (continued)

25

---

 

6.	Commitments, Contingencies and Guarantees (continued)

26

---

 

6.	Commitments, Contingencies and Guarantees (continued)

27

---

 

6.	Commitments, Contingencies and Guarantees (continued)

28

---

 

6.	Commitments, Contingencies and Guarantees (continued)

29

---

 

6.	Commitments, Contingencies and Guarantees (continued)

(b)	Commitments

(c)	Contingencies

30

---

 

6.	Commitments, Contingencies and Guarantees (continued)

(d)	Guarantees

31

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7.	Employee Benefits

			Pensions												Postretirement
			Non-U.S.				U.S.								Non-U.S.				U.S.
(in millions)			Plans				Plans				Total				Plans				Plans				Total
Three Months Ended June 30, 2008
	Components of net periodic benefit cost:
	Service cost		$	26			$	32			$	58			$	2			$	2			$	4
	Interest cost			14				50				64				1				4				5
	Expected return on assets			(12	)			(59	)			(71	)			–				–				–
	Amortization of prior service cost			(2	)			(1	)			(3	)			–				–				–
	Amortization of net loss			3				5				8				–				–				–
	Settlement loss			2				–				2				–				–				–
Net periodic benefit cost			$	31			$	27			$	58			$	3			$	6			$	9
Three Months Ended June 30, 2007
	Components of net periodic benefit cost:
	Service cost		$	21			$	30			$	51			$	2			$	3			$	5
	Interest cost			12				44				56				–				4				4
	Expected return on assets			(9	)			(54	)			(63	)			–				–				–
	Amortization of prior service cost			(3	)			–				(3	)			–				(1	)			(1	)
	Amortization of net loss			3				9				12				–				–				–
	Settlement loss			1				–				1				–				–				–
Net periodic benefit cost			$	25			$	29			$	54			$	2			$	6			$	8
Six Months Ended June 30, 2008
	Components of net periodic benefit cost:
	Service cost		$	50			$	64			$	114			$	4			$	4			$	8
	Interest cost			28				100				128				2				8				10
	Expected return on assets			(23	)			(119	)			(142	)			–				–				–
	Amortization of prior service cost			(5	)			(1	)			(6	)			–				–				–
	Amortization of net loss			7				9				16				–				–				–
	Settlement loss			2				–				2				–				–				–
Net periodic benefit cost			$	59			$	53			$	112			$	6			$	12			$	18
Six Months Ended June 30, 2007
	Components of net periodic benefit cost:
	Service cost		$	44			$	60			$	104			$	3			$	5			$	8
	Interest cost			24				89				113				1				8				9
	Expected return on assets			(18	)			(107	)			(125	)			–				–				–
	Amortization of prior service cost			(5	)			(1	)			(6	)			–				(1	)			(1	)
	Amortization of net loss			5				18				23				–				–				–
	Settlement loss			1				–				1				–				–				–
Net periodic benefit cost			$	51			$	59			$	110			$	4			$	12			$	16

8.	Federal Income Taxes

32

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8.	Federal Income Taxes (continued)

33

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9.	Information Provided in Connection with Outstanding Debt

•	AIG Life Holdings (US), Inc. (AIGLH), formerly known as American General Corporation, is a holding company and a wholly owned subsidiary of AIG. AIG provides a full and unconditional guarantee of all outstanding debt of AIGLH.
•	AIG Liquidity Corp. is a wholly owned subsidiary of AIG. AIG provides a full and unconditional guarantee of all obligations of AIG Liquidity Corp.
•	AIG Program Funding, Inc. is a wholly owned subsidiary of AIG. AIG provides a full and unconditional guarantee of all obligations of AIG Program Funding, Inc.

			American
			International								AIG				AIG
			Group, Inc.								Liquidity				Program				Other								Consolidated
(in millions)			(As Guarantor)				AIGLH				Corp.				Funding, Inc.				Subsidiaries				Eliminations				AIG
June 30, 2008
Assets:
	Investments and Financial Services assets		$	28,453			$	40			$	–			$	–			$	829,778			$	(22,669	)		$	835,602
	Cash			3				–				–				–				2,226				–				2,229
	Carrying value of subsidiaries and partially owned companies, at equity			91,567				19,869				–				–				19,151				(129,959	)			628
	Other assets			19,511				2,608				–				–				189,172				126				211,417
Total assets			$	139,534			$	22,517			$	–			$	–			$	1,040,327			$	(152,502	)		$	1,049,876
Liabilities:
	Insurance liabilities		$	–			$	–			$	–			$	–			$	557,673			$	(108	)		$	557,565
	Debt			47,827				2,136				–				–				149,034				(20,359	)			178,638
	Other liabilities			13,619				2,991				–				–				220,587				(1,712	)			235,485
Total liabilities				61,446				5,127				–				–				927,294				(22,179	)			971,688
Preferred shareholders’ equity in subsidiary companies				–				–				–				–				100				–				100
Total shareholders’ equity				78,088				17,390				–				–				112,933				(130,323	)			78,088
Total liabilities, preferred shareholders’ equity in subsidiary companies and shareholders’ equity			$	139,534			$	22,517			$	–			$	–			$	1,040,327			$	(152,502	)		$	1,049,876
December 31, 2007
Assets:
	Investments and Financial Services assets		$	14,648			$	40			$	–			$	–			$	849,144			$	(21,790	)		$	842,042
	Cash			84				1				–				–				2,199				–				2,284
	Carrying value of subsidiaries and partially owned companies, at equity			111,714				24,396				–				–				18,542				(153,998	)			654
	Other assets			9,414				2,592				–				–				191,220				155				203,381
Total assets			$	135,860			$	27,029			$	–			$	–			$	1,061,105			$	(175,633	)		$	1,048,361
Liabilities:
	Insurance liabilities		$	43			$	–			$	–			$	–			$	534,369			$	(75	)		$	534,337
	Debt			36,045				2,136				–				–				156,003				(18,135	)			176,049
	Other liabilities			3,971				2,826				–				–				238,362				(3,085	)			242,074
Total liabilities				40,059				4,962				–				–				928,734				(21,295	)			952,460
Preferred shareholders’ equity in subsidiary companies				–				–				–				–				100				–				100
Total shareholders’ equity				95,801				22,067				–				–				132,271				(154,338	)			95,801
Total liabilities, preferred shareholders’ equity in subsidiary companies and shareholders’ equity			$	135,860			$	27,029			$	–			$	–			$	1,061,105			$	(175,633	)		$	1,048,361

34

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9.	Information Provided in Connection with Outstanding Debt (continued)

		American
		International								AIG				AIG
		Group, Inc.								Liquidity				Program				Other								Consolidated
(in millions)		(As Guarantor)				AIGLH				Corp.				Funding, Inc.				Subsidiaries				Eliminations				AIG
Three Months Ended June 30, 2008
Operating income (loss)		$	(52	)		$	(20	)		$	*			$	–			$	(8,684	)		$	–			$	(8,756	)
Equity in undistributed net income of consolidated subsidiaries			(6,164	)			(1,729	)			–				–				–				7,893				–
Dividend income from consolidated subsidiaries			724				–				–				–				–				(724	)			–
Income taxes (benefits)			(135	)			(4	)			*				–				(3,218	)			–				(3,357	)
Minority interest			–				–				–				–				42				–				42
Net income (loss)		$	(5,357	)		$	(1,745	)		$	*			$	–			$	(5,424	)		$	7,169			$	(5,357	)
Three Months Ended June 30, 2007
Operating income (loss)		$	(282	)		$	(13	)		$	*			$	–			$	6,623			$	–			$	6,328
Equity in undistributed net income of consolidated subsidiaries			3,605				340				–				–				–				(3,945	)			–
Dividend income from consolidated subsidiaries			879				218				–				–				–				(1,097	)			–
Income taxes (benefits)			(75	)			(15	)			*				–				1,769				–				1,679
Minority interest			–				–				–				–				(372	)			–				(372	)
Net income (loss)		$	4,277			$	560			$	*			$	–			$	4,482			$	(5,042	)		$	4,277
Six Months Ended June 30, 2008
Operating income (loss)		$	(885	)		$	(41	)		$	*			$	–			$	(19,094	)		$	–			$	(20,020	)
Equity in undistributed net income of consolidated subsidiaries			(13,918	)			(2,975	)			–				–				–				16,893				–
Dividend income from consolidated subsidiaries			1,473				–				–				–				–				(1,473	)			–
Income taxes (benefits)			(168	)			(7	)			*				–				(6,719	)			–				(6,894	)
Minority interest			–				–				–				–				(36	)			–				(36	)
Net income (loss)		$	(13,162	)		$	(3,009	)		$	*			$	–			$	(12,411	)		$	15,420			$	(13,162	)
Six Months Ended June 30, 2007
Operating income (loss)		$	(543	)		$	(86	)		$	*			$	–			$	13,129			$	–			$	12,500
Equity in undistributed net income of consolidated subsidiaries			6,849				491				–				–				–				(7,340	)			–
Dividend income from consolidated subsidiaries			2,165				658				–				–				–				(2,823	)			–
Income taxes (benefits)			64				(7	)			*				–				3,348				–				3,405
Minority interest			–				–				–				–				(688	)			–				(688	)
Net income (loss)		$	8,407			$	1,070			$	*			$	–			$	9,093			$	(10,163	)		$	8,407

35

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9.	Information Provided in Connection with Outstanding Debt (continued)

			American
			International								AIG				AIG
			Group, Inc.								Liquidity				Program				Other				Consolidated
(in millions)			(As Guarantor)				AIGLH				Corp.				Funding, Inc.				Subsidiaries				AIG
Six Months Ended June 30, 2008
Net cash provided by (used in) operating activities			$	(594	)		$	115			$	*			$	–			$	17,068			$	16,589
Cash flows from investing:
	Invested assets disposed			603				–				–				–				79,738				80,341
	Invested assets acquired			(2,096	)			–				–				–				(87,214	)			(89,310	)
	Other			(11,466	)			(116	)			*				–				(1,412	)			(12,994	)
Net cash provided by (used in) investing activities				(12,959	)			(116	)			*				–				(8,888	)			(21,963	)
Cash flows from financing activities:
	Issuance of debt			13,080				–				–				–				42,605				55,685
	Repayments of debt			(1,912	)			–				–				–				(54,733	)			(56,645	)
	Proceeds from common stock issued			7,343																–				7,343
	Payments advanced to purchase shares			(1,000	)			–				–				–				–				(1,000	)
	Cash dividends paid to shareholders			(1,036	)			–				–				–				–				(1,036	)
	Other			(3,003	)			–				*				–				3,930				927
Net cash provided by (used in) financing activities				13,472				–				*				–				(8,198	)			5,274
Effect of exchange rate changes on cash				–				–				–				–				45				45
Change in cash				(81	)			(1	)			*				–				27				(55	)
Cash at beginning of period				84				1				–				–				2,199				2,284
Cash at end of period			$	3			$	–			$	*			$	–			$	2,226			$	2,229
Six Months Ended June 30, 2007
Net cash provided by (used in) operating activities			$	(1,076	)		$	172			$	*			$	–			$	18,335			$	17,431
Cash flows from investing:
	Invested assets disposed			1,768				–				–				–				82,139				83,907
	Invested assets acquired			(6,857	)			–				–				–				(99,942	)			(106,799	)
	Other			(2,012	)			(76	)			*				–				(15,334	)			(17,422	)
Net cash provided by (used in) investing activities				(7,101	)			(76	)			*				–				(33,137	)			(40,314	)
Cash flows from financing activities:
	Issuance of debt			11,958				–				–				–				38,133				50,091
	Repayments of debt			(790	)			–				–				–				(34,147	)			(34,937	)
	Proceeds from common stock issued			–				–				–				–				–				–
	Payments advanced to purchase shares			(4,000	)			–				–				–				–				(4,000	)
	Cash dividends paid to shareholders			(859	)			–				–				–				–				(859	)
	Other			1,828				(96	)			*				–				10,920				12,652
Net cash provided by (used in) financing activities				8,137				(96	)			*				–				14,906				22,947
Effect of exchange rate changes on cash				–				–				–				–				(19	)			(19	)
Change in cash				(40	)			–				*				–				85				45
Cash at beginning of period				76				–				–				–				1,514				1,590
Cash at end of period			$	36			$	–			$	*			$	–			$	1,599			$	1,635

		Originally Reported
(in millions)		June 30, 2007				Revisions				As Revised
Cash flows provided by (used in) operating activities		$	743			$	(1,819	)		$	(1,076	)
Cash flows provided by (used in) investing activities			(7,215	)			114				(7,101	)
Cash flows provided by (used in) financing activities			6,432				1,705				8,137

36

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10.	Cash Flows

		Originally Reported
(in millions)		June 30, 2007				Revisions				As Revised
Cash flows provided by (used in) from operating activities		$	15,071			$	2,360			$	17,431
Cash flows provided by (used in) from investing activities			(37,873	)			(2,441	)			(40,314	)
Cash flows provided by (used in) financing activities			22,866				81				22,947

37

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ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

				Page
CAUTIONARY STATEMENT REGARDING PROJECTIONS AND OTHER INFORMATION ABOUT FUTURE EVENTS					38
OVERVIEW OF OPERATIONS AND BUSINESS RESULTS					39
	Outlook				39
	Consolidated Results				43
	Segment Results				44
	Capital Resources				45
	Liquidity				46
CRITICAL ACCOUNTING ESTIMATES					46
OPERATING REVIEW					53
	General Insurance Operations				53
		General Insurance Results			55
		Reserve for Losses and Loss Expenses			61
	Life Insurance & Retirement Services Operations				67
		Life Insurance & Retirement Services Results			68
		Deferred Policy Acquisition Costs and Sales Inducement Assets			82
	Financial Services Operations				85
	Asset Management Operations				90
	Other Operations				94
CAPITAL RESOURCES AND LIQUIDITY					95
	Borrowings				96
	Shareholders’ Equity				103
	Liquidity				103
INVESTED ASSETS					105
	Investment Strategy				106
	Portfolio Review				112
	Other-Than-Temporary Impairments				112
	Unrealized gains and losses				116
RISK MANAGEMENT					117
	Insurance, Asset Management and Non-Trading Financial Services VaR				118
	Capital Markets Trading VaR				119
	Credit Derivatives				120
	Stress Testing/Sensitivity Analysis				122

38

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39

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40

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41

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42

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		Three Months Ended												Six Months Ended
		June 30,								Percentage				June 30,								Percentage
										Increase/												Increase/
(in millions)		2008				2007				(Decrease)				2008				2007				(Decrease)
Total revenues		$	19,933			$	31,150				(36)	%		$	33,964			$	61,795				(45)	%
Income (loss) before income taxes and minority interest			(8,756	)			6,328				—				(20,020	)			12,500				—
Net income (loss)		$	(5,357	)		$	4,277				—	%		$	(13,162	)		$	8,407				—	%

43

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			Three Months Ended												Six Months Ended
			June 30,								Percentage				June 30,								Percentage
Operating Segments											Increase/												Increase/
(in millions)			2008				2007				(Decrease)				2008				2007				(Decrease)
Total revenues(a):
	General Insurance		$	12,757			$	12,928				(1)	%		$	25,046			$	25,831				(3)	%
	Life Insurance & Retirement Services(b)			10,161				14,023				(28)				18,913				27,705				(32)
	Financial Services(c)(d)			(3,605	)			2,123				—				(10,165	)			4,324				—
	Asset Management(e)			797				1,781				(55)				648				3,450				(81)
	Other			208				263				(21)				80				394				(80)
	Consolidation and eliminations			(385	)			32				—				(558	)			91				—
Total			$	19,933			$	31,150				(36)	%		$	33,964			$	61,795				(45)	%
Operating income (loss)(a):
	General Insurance		$	827			$	2,976				(72)	%		$	2,164			$	6,072				(64)	%
	Life Insurance & Retirement Services(b)			(2,401	)			2,620				—				(4,232	)			4,901				—
	Financial Services(c)(d)			(5,905	)			47				—				(14,677	)			339				—
	Asset Management(e)			(314	)			927				—				(1,565	)			1,685				—
	Other			(715	)			(460	)			—				(1,483	)			(930	)			—
	Consolidation and eliminations			(248	)			218				—				(227	)			433				—
Total			$	(8,756	)		$	6,328				—			$	(20,020	)		$	12,500				—	%

(a)	Includes other-than-temporary impairment charges of $6.8 billion and $417 million for the three-month periods ended June 30, 2008 and 2007, respectively, and $12.4 billion and $884 million for the six-month periods ended June 30, 2008 and 2007, respectively. Also includes gains (losses) from hedging activities that did not qualify for hedge accounting treatment under FAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (FAS 133), including the related foreign exchange gains and losses. For the three-month periods ended June 30, 2008 and 2007, the effect was $272 million and $(430) million, respectively, in both revenues and operating income (loss). For the six-month periods ended June 30, 2008 and 2007, the effect was $(476) million and $(882) million, respectively, in both revenues and operating income (loss). These amounts result primarily from interest rate and foreign currency derivatives that are effective economic hedges of investments and borrowings.
(b)	Includes other-than-temporary impairment charges of $5.2 billion and $324 million for the three-month periods ended June 30, 2008 and 2007, respectively, and $9.6 billion and $716 million for the six-month periods ended June 30, 2008 and 2007, respectively.

(c)

Includes gains (losses) from hedging activities that did not qualify for hedge accounting treatment under FAS 133, including the related foreign exchange gains and losses. For the three-month periods ended June 30, 2008 and 2007, the effect was $5 million and $(443) million, respectively, in both revenues and operating income (loss). For the six-month periods ended June 30, 2008 and 2007, the effect was $(199) million and $(603) million, respectively, in both revenues and operating income (loss). These amounts result primarily from interest rate and foreign currency derivatives that are effective economic hedges of investments and borrowings.

(d)	For the three- and six-month periods ended June 30, 2008, both revenues and operating income (loss) include unrealized market valuation losses of $5.6 billion and $14.7 billion, respectively, on AIGFP’s super senior credit default swap portfolio.

(e)	Includes net realized capital losses of $464 million and $1.9 billion for the three- and six-month periods ended June 30, 2008, respectively, including other-than-temporary impairment charges of $882 million and $1.9 billion, respectively.

44

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45

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•	Loss trend factors: used to establish expected loss ratios for subsequent accident years based on premium rate adequacy and the projected loss ratio with respect to prior accident years.
•	Expected loss ratios for the latest accident year: in this case, accident year 2008 for the year-end 2008 loss reserve analysis. For low-frequency, high-severity classes such as excess casualty, expected loss ratios generally are utilized for at least the three most recent accident years.
•	Loss development factors: used to project the reported losses for each accident year to an ultimate amount.
•	Reinsurance recoverable on unpaid losses: the expected recoveries from reinsurers on losses that have not yet been reported and/or settled.

•	Interest rates: which vary by geographical region, year of issuance and products.
•	Mortality, morbidity and surrender rates: based upon actual experience by geographical region modified to allow for variation in policy form, risk classification and distribution channel.

•	Recoverability: based on current and future expected profitability, which is affected by interest rates, foreign exchange rates, mortality/morbidity experience, expenses, investment returns and policy persistency.

•	Recoverability: based upon the current terms and profitability of the underlying insurance contracts.

•	Estimated gross profits: to be realized over the estimated duration of the contracts (investment-oriented products) affect the carrying value of DAC, unearned revenue liability, SIAs and associated amortization patterns. Estimated gross profits include investment income and gains and losses on investments less required interest, actual mortality and other expenses.

•	Historical defaults and delinquency experience: utilizing factors, such as delinquency ratio, allowance ratio, charge-off ratio and charge-off coverage.
•	Portfolio characteristics: portfolio composition and consideration of the recent changes to underwriting criteria and portfolio seasoning.
•	External factors: consideration of current economic conditions, including levels of unemployment and personal bankruptcies.

46

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•	Migration analysis: empirical technique measuring historical movement of similar finance receivables through various levels of repayment, delinquency, and loss categories to existing finance receivable pools.

•	Expected undiscounted future net cash flows: based upon current lease rates, projected future lease rates and estimated terminal values of each aircraft based on expectations of market participants.

•	Trading at a significant (25 percent or more) discount to par, amortized cost (if lower) or cost for an extended period of time (nine consecutive months or longer);
•	The occurrence of a discrete credit event 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 may not realize a full recovery on its investment, regardless of the occurrence of one of the foregoing events.

47

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48

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•	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.

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											Unrealized Market
											Valuation Loss
											(Gain)
											Three				Six
							Fair Value				Months				Months
							Loss at				Ended				Ended
			Notional				June 30,				June 30,				June 30,
(in millions)			Amount				2008				2008(a)				2008(a)
Regulatory Capital:(b)
	Corporate loans		$	172,717			$	—			$	—			$	—
	Prime residential mortgages			132,612				—				—				—
	Other(c)(d)			1,619				125				125				125
	Total			306,948				125				125				125
Arbitrage:
	Multi-sector CDOs(e)			80,301				24,785				5,569				13,606
	Corporate debt/ CLOs			53,767				996				(126	)			770
	Total			134,068				25,781				5,443				14,376
Mezzanine tranches(f)				5,824				171				(3	)			171
Total			$	446,840			$	26,077	(g)		$	5,565			$	14,672

(a)	Includes credit valuation adjustment gains of $44 million and $109 million, respectively, for the three- and six-month periods ended June 30, 2008.
(b)	Represents predominantly transactions written to facilitate regulatory capital relief.

(c)	Represents transactions where AIGFP believes the counterparties are no longer using the transactions to obtain regulatory capital relief.

(d)	During the second quarter of 2008, a European RMBS regulatory capital relief transaction with a notional amount of $1.6 billion was not

50

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	terminated as expected when it no longer provided regulatory capital relief to the counterparty.

(e)	Approximately $57.8 billion in net notional amount includes some exposure to U.S. sub-prime mortgages and approximately $9.6 billion in net notional amount includes CDOs of CMBS.
(f)	Represents credit default swaps written by AIGFP on tranches below super senior on certain regulatory capital relief trades.

(g)	Fair value amounts are shown before the effects of counterparty netting adjustments.

	•	it is known and utilized by other institutions;
	•	it has been studied extensively, documented and enhanced over many years;
	•	it is transparent and relatively simple to apply;
	•	the parameters required to run the BET model are generally observable; and
	•	it can easily be modified to use probabilities of default and expected losses derived from the underlying collateral securities market prices instead of using rating-based historical probabilities of default.

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			Increase
			(Decrease) To
			Unrealized Market
(in millions)			Valuation Loss
Weighted average lives
	Effect of an increase of 1 year										$	519
	Effect of a decrease of 1 year											(905	)
Recovery rates
	Effect of an increase of 10%											(18	)
	Effect of a decrease of 10%											254
Diversity scores
	Effect of an increase of 5											(84	)
	Effect of a decrease of 5											261
Discount curve
	Effect of an increase of 100 basis points											181

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			Increase
			(Decrease) To
			Unrealized Market
(in millions)			Valuation Loss
CDS maturity (in years)				5				7				10
CDX Index
	Effect of an increase of 10 basis points		$	(23	)		$	(48	)		$	(10	)
	Effect of a decrease of 10 basis points			23				49				10
iTraxx Index
	Effect of an increase of 10 basis points			(11	)			(37	)			(8	)
	Effect of a decrease of 10 basis points			11				37				8

53

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54

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				Three Months												Six Months Ended
				Ended June 30,								Percentage				June 30,								Percentage
												Increase/												Increase/
(in millions, except ratios)				2008				2007				(Decrease)				2008				2007				(Decrease)
Net premiums written:
	AIG Property Casualty Group
		Commercial Insurance		$	5,988			$	6,439				(7	)%		$	11,101			$	12,448				(11	)%
		Transatlantic			988				983				1				2,024				1,967				3
		Personal Lines			1,230				1,203				2				2,518				2,432				4
		Mortgage Guaranty			288				272				6				592				538				10
	Foreign General Insurance				3,726				3,242				15				8,065				6,860				18
Total				$	12,220			$	12,139				1%			$	24,300			$	24,245				—%
Net premiums earned:
	AIG Property Casualty Group
		Commercial Insurance		$	5,912			$	5,996				(1	)%		$	11,329			$	11,977				(5	)%
		Transatlantic			1,023				948				8				2,040				1,913				7
		Personal Lines			1,209				1,168				4				2,408				2,323				4
		Mortgage Guaranty			269				221				22				525				431				22
	Foreign General Insurance				3,740				3,030				23				7,208				5,938				21
Total				$	12,153			$	11,363				7%			$	23,510			$	22,582				4%
Net investment income:
	AIG Property Casualty Group
		Commercial Insurance		$	587			$	984				(40	)%		$	1,330			$	2,017				(34	)%
		Transatlantic			120				119				1				237				235				1
		Personal Lines			56				57				(2	)			113				114				(1	)
		Mortgage Guaranty			44				39				13				88				76				16
	Foreign General Insurance				357				427				(16	)			599				746				(20	)
Reclassifications and eliminations					3				2				50				5				3				67
Total				$	1,167			$	1,628				(28	)%		$	2,372			$	3,191				(26	)%
Net realized capital gains (losses)				$	(563	)		$	(63	)			—%			$	(836	)		$	58				—%
Operating income (loss):
	AIG Property Casualty Group
		Commercial Insurance		$	381			$	1,904				(80	)%		$	1,166			$	3,833				(70	)%
		Transatlantic			141				168				(16	)			303				319				(5	)
		Personal Lines			21				118				(82	)			24				224				(89	)
		Mortgage Guaranty			(518	)			(81	)			—				(872	)			(73	)			—
	Foreign General Insurance				796				867				(8	)			1,532				1,776				(14	)
Reclassifications and eliminations					6				—				—				11				(7	)			—
Total				$	827			$	2,976				(72	)%		$	2,164			$	6,072				(64	)%
Statutory underwriting profit (loss)(b):
	AIG Property Casualty Group
		Commercial Insurance		$	357			$	946				(62	)%		$	575			$	1,730				(67	)%
		Transatlantic			66				37				78				120				53				126
		Personal Lines			(42	)			56				—				(105	)			89				—
		Mortgage Guaranty			(564	)			(126	)			—				(971	)			(168	)			—
	Foreign General Insurance				443				371				19				807				773				4
Total				$	260			$	1,284				(80	)%		$	426			$	2,477				(83	)%
AIG Property Casualty Group:
	Loss Ratio				80.6				68.2								79.6				68.5
	Expense Ratio				21.4				19.6								22.8				20.3
Combined Ratio					102.0				87.8								102.4				88.8
Foreign General Insurance:
	Loss Ratio				53.7				52.1								52.8				51.4
	Expense Ratio(a)				34.6				33.3								32.2				30.8
Combined ratio					88.3				85.4								85.0				82.2
Consolidated:
	Loss Ratio				72.3				63.9								71.4				64.0
	Expense Ratio				25.4				23.2								25.9				23.3
Combined Ratio					97.7				87.1								97.3				87.3

(a)	Includes amortization of advertising costs.
(b)	Statutory underwriting profit (loss) is a measure that U.S. domiciled insurance companies are required to report to their regulatory authorities. The following table reconciles statutory underwriting profit (loss) to operating income for General Insurance:

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																			Foreign
			Commercial								Personal				Mortgage				General				Reclassifications
(in millions)			Insurance				Transatlantic				Lines				Guaranty				Insurance				and Eliminations				Total
Three Months Ended June 30, 2008:
	Statutory underwriting profit (loss)		$	357			$	66			$	(42	)		$	(564	)		$	443			$	–			$	260
	Increase (decrease) in DAC			(1	)			(5	)			13				2				(46	)			–				(37	)
	Net investment income			587				120				56				44				357				3				1,167
	Net realized capital gains (losses)			(562	)			(40	)			(6	)			–				42				3				(563	)
Operating income (loss)			$	381			$	141			$	21			$	(518	)		$	796			$	6			$	827
Three Months Ended June 30, 2007:
	Statutory underwriting profit (loss)		$	946			$	37			$	56			$	(126	)		$	371			$	–			$	1,284
	Increase (decrease) in DAC			50				10				7				9				51				–				127
	Net investment income			984				119				57				39				427				2				1,628
	Net realized capital gains (losses)			(76	)			2				(2	)			(3	)			18				(2	)			(63	)
Operating income (loss)			$	1,904			$	168			$	118			$	(81	)		$	867			$	–			$	2,976
Six Months Ended June 30, 2008:
	Statutory underwriting profit (loss)		$	575			$	120			$	(105	)		$	(971	)		$	807			$	–			$	426
	Increase (decrease) in DAC			(4	)			1				26				13				166				–				202
	Net investment income			1,330				237				113				88				599				5				2,372
	Net realized capital gains (losses)			(735	)			(55	)			(10	)			(2	)			(40	)			6				(836	)
Operating income (loss)			$	1,166			$	303			$	24			$	(872	)		$	1,532			$	11			$	2,164
Six Months Ended June 30, 2007:
	Statutory underwriting profit (loss)		$	1,730			$	53			$	89			$	(168	)		$	773			$	–			$	2,477
	Increase (decrease) in DAC			85				14				22				21				204				–				346
	Net investment income			2,017				235				114				76				746				3				3,191
	Net realized capital gains (losses)			1				17				(1	)			(2	)			53				(10	)			58
Operating income (loss)			$	3,833			$	319			$	224			$	(73	)		$	1,776			$	(7	)		$	6,072

		Three Months								Six Months
		Ended								Ended
		June 30,								June 30,
		2008				2007				2008				2007
Growth in original currency*			(2.2	)%			3.3	%			(2.8	)%			4.7	%
Foreign exchange effect			2.9				1.0				3.0				1.2
Growth as reported in U.S. dollars			0.7	%			4.3	%			0.2	%			5.9	%

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57

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58

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59

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60

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		June 30,				December 31,
(in millions)		2008				2007
Other liability occurrence		$	21,233			$	20,580
Workers compensation			15,234				15,568
Other liability claims made			13,896				13,878
International			8,372				7,036
Auto liability			6,240				6,068
Property			4,554				4,274
Reinsurance			3,395				3,127
Products liability			2,430				2,416
Medical malpractice			2,307				2,361
Mortgage guaranty/credit			2,291				1,426
Accident and health			1,831				1,818
Commercial multiple peril			1,796				1,900
Aircraft			1,725				1,623
Fidelity/surety			1,221				1,222
Other			2,222				2,203
Total		$	88,747			$	85,500

*	Presented by lines of business pursuant to statutory reporting requirements as prescribed by the National Association of Insurance Commissioners.

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		June 30,				December 31,
(in millions)		2008				2007
Commercial Insurance(a)			$48,443				$47,392
Transatlantic			7,317				6,900
Personal Lines(b)			2,448				2,417
Mortgage Guaranty			2,057				1,339
Foreign General Insurance(c)			12,066				11,240
Total Net Loss Reserve			$72,331				$69,288

(a)	At June 30, 2008 and December 31, 2007, Commercial Insurance loss reserves include approximately $2.89 billion and $3.13 billion, respectively, ($3.08 billion and $3.34 billion, respectively, before discount), related to business written by Commercial Insurance but ceded to American International Reinsurance Company Limited (AIRCO) and reported in AIRCO’s statutory filings. Commercial Insurance loss reserves also include approximately $648 million and $590 million related to business included in AIUO’s statutory filings at June 30, 2008 and December 31, 2007, respectively.
(b)	At June 30, 2008 and December 31, 2007, Personal Lines loss reserves include $1.03 billion and $894 million, respectively, related to business ceded to Commercial Insurance and reported in Commercial Insurance’s statutory filings.
(c)	At June 30, 2008 and December 31, 2007, Foreign General Insurance loss reserves include approximately $2.04 billion and $3.02 billion, respectively, related to business reported in Commercial Insurance’s statutory filings.

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		Three Months								Six Months
		Ended June 30,								Ended June 30,
(in millions)		2008				2007				2008				2007
Net reserve for losses and loss expenses at beginning of period		$	70,507			$	64,034			$	69,288			$	62,630
Foreign exchange effect			193				252				263				214
Losses and loss expenses incurred:
Current year			8,620				7,334				16,641				14,549
Prior years, other than accretion of discount			93				(120	)			(71	)			(268	)
Prior years, accretion of discount			72				12				176				128
Losses and loss expenses incurred			8,785				7,226				16,746				14,409
Losses and loss expenses paid			7,154				6,315				13,966				12,056
Net reserve for losses and loss expenses at end of period		$	72,331			$	65,197			$	72,331			$	65,197

			Three Months								Six Months
			Ended June 30,								Ended June 30,
(in millions)			2008				2007				2008				2007
Prior Accident Year Development by
	Reporting Unit:
	Commercial Insurance		$	75			$	(65	)		$	(142	)		$	(152	)
	Personal Lines			29				(32	)			65				(61	)
	Mortgage Guaranty			(10	)			(4	)			58				27
	Foreign General Insurance			1				(4	)			(16	)			(68	)
Subtotal				95				(105	)			(35	)			(254	)
	Transatlantic			(2	)			18				1				36
	Asbestos settlements			—				(33	)			(37	)			(50	)
Prior years, other than accretion of discount			$	93			$	(120	)		$	(71	)		$	(268	)

			Calendar Year
(in millions)			2008				2007
Prior Accident Year Development by Accident Year:
	2007		$	(135	)
	2006			(256	)		$	(454	)
	2005			(260	)			(165	)
	2004			(190	)			(136	)
	2003			16				15
	2002			18				112
	2001 and prior			736				360
Prior years, other than accretion of discount			$	(71	)		$	(268	)

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			Six Months Ended June 30,
			2008								2007
(in millions)			Gross				Net				Gross(a)				Net
Asbestos:
	Reserve for losses and loss expenses at beginning of year		$	3,864			$	1,454			$	4,523			$	1,889
	Losses and loss expenses incurred(b)			60				4				10				(25	)
	Losses and loss expenses paid(b)			(383	)			(170	)			(454	)			(268	)
Reserve for losses and loss expenses at end of period			$	3,541			$	1,288			$	4,079			$	1,596
Environmental:
	Reserve for losses and loss expenses at beginning of year		$	515			$	237			$	629			$	290
	Losses and loss expenses incurred(b)			(40	)			1				—				(1	)
	Losses and loss expenses paid(b)			(25	)			(17	)			(54	)			(31	)
Reserve for losses and loss expenses at end of period			$	450			$	221			$	575			$	258
Combined:
	Reserve for losses and loss expenses at beginning of year		$	4,379			$	1,691			$	5,152			$	2,179
	Losses and loss expenses incurred(b)			20				5				10				(26	)
	Losses and loss expenses paid(b)			(408	)			(187	)			(508	)			(299	)
Reserve for losses and loss expenses at end of period			$	3,991			$	1,509			$	4,654			$	1,854

(a)	Gross amounts were revised from the presentation in prior periods to reflect the inclusion of certain reserves not previously identified as asbestos and environmental related. This revision had no effect on net reserves.
(b)	All amounts pertain to policies underwritten in prior years, primarily to policies issued in 1984 and prior.

		Six Months Ended June 30,
		2008								2007
(in millions)		Gross				Net				Gross*				Net
Asbestos		$	2,256			$	997			$	3,068			$	1,279
Environmental			264				117				355				148
Combined		$	2,520			$	1,114			$	3,423			$	1,427

*	Gross amounts were revised from the presentation in prior periods to reflect the inclusion of certain reserves not previously identified as asbestos and environmental related. This revision had no effect on net reserves.

			Six Months Ended June 30,
			2008												2007
			Asbestos				Environmental				Combined				Asbestos				Environmental				Combined
Claims at beginning of year				6,563				7,652				14,215				6,878				9,442				16,320
Claims during year:
	Opened			392				674				1,066				300				695				995
	Settled			(97	)			(65	)			(162	)			(66	)			(59	)			(125	)
	Dismissed or otherwise resolved			(551	)			(1,172	)			(1,723	)			(544	)			(899	)			(1,443	)
Claims at end of period				6,307				7,089				13,396				6,568				9,179				15,747

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			Gross*		Net
2008
Survival ratios:
	Asbestos		5.7		4.3
	Environmental		4.5		3.7
	Combined		5.5		4.2
2007
Survival ratios:
	Asbestos		8.6		7.4
	Environmental		5.2		4.0
	Combined		8.0		6.6

*	Gross amounts for 2007 were revised from the presentation in prior periods to reflect the inclusion of certain reserves not previously identified as asbestos and environmental related. This revision had no effect on net reserves.

	•	American Life Insurance Company (ALICO)
	•	AIG Star Life Insurance Co., Ltd. (AIG Star Life)
	•	AIG Edison Life Insurance Company (AIG Edison Life)

	•	American International Assurance Company, Limited, together with American International Assurance Company (Bermuda) Limited (AIA)
	•	Nan Shan Life Insurance Company, Ltd. (Nan Shan)
	•	American International Reinsurance Company Limited (AIRCO)
	•	The Philippine American Life and General Insurance Company (Philamlife)

	•	American General Life Insurance Company (AIG American General)
	•	The United States Life Insurance Company in the City of New York (USLIFE)
	•	American General Life and Accident Insurance Company (AGLA)

	•	The Variable Annuity Life Insurance Company (VALIC)
	•	AIG Annuity Insurance Company (AIG Annuity)
	•	AIG SunAmerica Life Assurance Company (AIG SunAmerica)

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				Premiums				Net				Net Realized								Operating
				and Other				Investment				Capital Gains				Total				Income
(in millions)				Considerations				Income				(Losses)				Revenues				(Loss)
Three Months Ended June 30, 2008
	Foreign Life Insurance & Retirement Services			$	7,691			$	3,162			$	(909	)		$	9,944			$	773
	Domestic Life Insurance				1,604				1,006				(1,376	)			1,234				(1,005	)
	Domestic Retirement Services				290				1,418				(2,725	)			(1,017	)			(2,169	)
		Total		$	9,585			$	5,586			$	(5,010	)		$	10,161			$	(2,401	)
Three months ended June 30, 2007
	Foreign Life Insurance & Retirement Services			$	6,503			$	3,361			$	18			$	9,882			$	1,654
	Domestic Life Insurance				1,369				1,006				(16	)			2,359				368
	Domestic Retirement Services				298				1,765				(281	)			1,782				598
		Total		$	8,170			$	6,132			$	(279	)		$	14,023			$	2,620
Percentage Increase/(Decrease) from Prior Year:
	Foreign Life Insurance & Retirement Services				18	%			(6	)%			—	%			1	%			(53	)%
	Domestic Life Insurance				17				—				—				(48	)			—
	Domestic Retirement Services				(3	)			(20	)			—				—				—
		Total			17	%			(9	)%			—	%			(28	)%			—	%
Six Months Ended June 30, 2008
	Foreign Life Insurance & Retirement Services			$	15,138			$	4,610			$	(1,631	)		$	18,117			$	1,508
	Domestic Life Insurance				3,191				1,990				(2,664	)			2,517				(1,875	)
	Domestic Retirement Services				574				2,789				(5,084	)			(1,721	)			(3,865	)
		Total		$	18,903			$	9,389			$	(9,379	)		$	18,913			$	(4,232	)
Six months ended June 30, 2007
	Foreign Life Insurance & Retirement Services			$	13,116			$	6,244			$	(217	)		$	19,143			$	2,938
	Domestic Life Insurance				2,897				2,011				(28	)			4,880				713
	Domestic Retirement Services				582				3,390				(290	)			3,682				1,250
		Total		$	16,595			$	11,645			$	(535	)		$	27,705			$	4,901
Percentage Increase/(Decrease) from Prior Year:
	Foreign Life Insurance & Retirement Services				15	%			(26	)%			—	%			(5	)%			(49	)%
	Domestic Life Insurance				10				(1	)			—				(48	)			—
	Domestic Retirement Services				(1	)			(18	)			—				—				—
		Total			14	%			(19	)%			—	%			(32	)%			—	%

			June 30,				December 31,
(in millions)			2008				2007
Foreign*			$	1,438,309			$	1,327,251
Domestic				1,014,785				984,794
	Total		$	2,453,094			$	2,312,045

*	Includes an increase of $45.2 billion related to changes in foreign exchange rates at June 30, 2008.

68

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69

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				Premiums				Net				Net Realized								Operating
				and Other				Investment				Capital Gains				Total				Income
(in millions)				Considerations				Income				(Losses)				Revenues				(Loss)
Three Months Ended June 30, 2008
	Life insurance			$	4,634			$	1,813			$	(750	)		$	5,697			$	252
	Personal accident				1,855				109				(26	)			1,938				386
	Group products				1,002				244				(11	)			1,235				116
	Individual fixed annuities				79				660				(115	)			624				44
	Individual variable annuities				121				336				(7	)			450				(25	)
		Total		$	7,691			$	3,162			$	(909	)		$	9,944			$	773
Three Months Ended June 30, 2007
	Life insurance			$	4,105			$	2,092			$	141			$	6,338			$	1,155
	Personal accident				1,487				87				2				1,576				325
	Group products				690				222				(6	)			906				89
	Individual fixed annuities				118				574				(120	)			572				52
	Individual variable annuities				103				386				1				490				33
		Total		$	6,503			$	3,361			$	18			$	9,882			$	1,654
Percentage Increase/(Decrease) from Prior Year:
	Life insurance				13	%			(13	)%			—	%			(10	)%			(78	)%
	Personal accident				25				25				—				23				19
	Group products				45				10				—				36				30
	Individual fixed annuities				(33	)			15				—				9				(15	)
	Individual variable annuities				17				(13	)			—				(8	)			—
		Total			18	%			(6	)%			—	%			1	%			(53	)%
Six Months Ended June 30, 2008
	Life insurance			$	9,146			$	2,732			$	(1,317	)		$	10,561			$	483
	Personal accident				3,546				201				(66	)			3,681				763
	Group products				1,998				397				(41	)			2,354				206
	Individual fixed annuities				208				1,229				(228	)			1,209				102
	Individual variable annuities				240				51				21				312				(46	)
		Total		$	15,138			$	4,610			$	(1,631	)		$	18,117			$	1,508
Six Months Ended June 30, 2007
	Life insurance			$	8,272			$	3,649			$	(27	)		$	11,894			$	1,807
	Personal accident				2,960				170				(6	)			3,124				693
	Group products				1,443				396				(27	)			1,812				152
	Individual fixed annuities				246				1,148				(157	)			1,237				201
	Individual variable annuities				195				881				—				1,076				85
		Total		$	13,116			$	6,244			$	(217	)		$	19,143			$	2,938
Percentage Increase/(Decrease) from Prior Year:
	Life insurance				11	%			(25	)%			—	%			(11	)%			(73	)%
	Personal accident				20				18				—				18				10
	Group products				38				—				—				30				36
	Individual fixed annuities				(15	)			7				—				(2	)			(49	)
	Individual variable annuities				23				(94	)			—				(71	)			—
		Total			15	%			(26	)%			—	%			(5	)%			(49	)%

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
Growth in original currency*			7.5	%			7.8	%			7.1	%			6.5	%
Foreign exchange effect			10.8				0.9				8.3				1.9
Growth as reported in U.S. dollars			18.3	%			8.7	%			15.4	%			8.4	%

*	Computed using a constant exchange rate each period.

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										Percentage
										Increase/
		Three Months								(Decrease)
		Ended June 30,
														Original
(in millions)		2008				2007				U.S.$				Currency
First year premium		$	734			$	673				9	%			(4	)%
Single premium			2,178				2,121				3	%			(1	)%
Annuity deposits			6,018				4,141				45	%			43	%

				Premiums				Net				Net Realized								Operating
				and Other				Investment				Capital Gains				Total				Income
(in millions)				Considerations				Income				(Losses)				Revenues				(Loss)
Three Months Ended June 30, 2008
	Life insurance			$	1,568			$	643			$	(298	)		$	1,913			$	144
	Personal accident				1,336				69				(7	)			1,398				338
	Group products				802				229				(10	)			1,021				84
	Individual fixed annuities				70				626				(107	)			589				43
	Individual variable annuities				120				335				(7	)			448				(32	)
		Total		$	3,896			$	1,902			$	(429	)		$	5,369			$	577
Three Months Ended June 30, 2007
	Life insurance			$	1,350			$	641			$	33			$	2,024			$	438
	Personal accident				1,041				52				—				1,093				243
	Group products				539				201				1				741				63
	Individual fixed annuities				101				546				(129	)			518				34
	Individual variable annuities				102				385				—				487				32
		Total		$	3,133			$	1,825			$	(95	)		$	4,863			$	810
Percentage Increase/(Decrease) from Prior Year:
	Life insurance				16	%			—	%			—	%			(5	)%			(67	)%
	Personal accident				28				33				—				28				39
	Group products				49				14				—				38				33
	Individual fixed annuities				(31	)			15				—				14				26
	Individual variable annuities				18				(13	)			—				(8	)			—
		Total			24	%			4	%			—	%			10	%			(29	)%

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										Percentage
										Increase/
		Six Months								(Decrease)
		Ended June 30,
														Original
(in millions)		2008				2007				U.S.$				Currency
First year premium		$	1,376			$	1,293				6	%			(4	)%
Single premium			5,134				4,118				25	%			21	%
Annuity deposits			11,525				8,212				40	%			38	%

				Premiums and				Net				Net Realized								Operating
				Other				Investment				Capital Gains				Total				Income
(in millions)				Considerations				Income				(Losses)				Revenues				(Loss)
Six Months Ended June 30, 2008
	Life insurance			$	2,896			$	980			$	(545	)		$	3,331			$	201
	Personal accident				2,513				121				(35	)			2,599				639
	Group products				1,552				340				(17	)			1,875				156
	Individual fixed annuities				187				1,162				(196	)			1,153				111
	Individual variable annuities				237				49				21				307				(47	)
		Total		$	7,385			$	2,652			$	(772	)		$	9,265			$	1,060
Six Months Ended June 30, 2007
	Life insurance			$	2,566			$	1,191			$	15			$	3,772			$	790
	Personal accident				2,069				102				2				2,173				532
	Group products				1,114				351				6				1,471				136
	Individual fixed annuities				217				1,092				(164	)			1,145				181
	Individual variable annuities				193				879				—				1,072				84
		Total		$	6,159			$	3,615			$	(141	)		$	9,633			$	1,723
Percentage Increase/(Decrease) from Prior Year:
	Life insurance				13	%			(18	)%			—	%			(12	)%			(75	)%
	Personal accident				21				19				—				20				20
	Group products				39				(3	)			—				27				15
	Individual fixed annuities				(14	)			6				—				1				(39	)
	Individual variable annuities				23				(94	)%			—				(71	)%			—
		Total			20	%			(27	)%			—	%			(4	)%			(38	)%

72

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										Percentage
										Increase/
		Three Months								(Decrease)
		Ended June 30,
														Original
(in millions)		2008				2007				U.S.$				Currency
First year premium		$	762			$	740				3	%			—	%
Single premium			893				922				(3	)%			(9	)%
Annuity deposits			334				240				39	%			34	%

				Premiums				Net				Net Realized
				and Other				Investment				Capital Gains				Total				Operating
(in millions)				Considerations				Income				(Losses)				Revenues				Income
Three Months Ended June 30, 2008
	Life insurance			$	3,066			$	1,170			$	(452	)		$	3,784			$	108
	Personal accident				519				40				(19	)			540				48
	Group products				200				15				(1	)			214				32
	Individual fixed annuities				9				34				(8	)			35				1
	Individual variable annuities				1				1				—				2				7
		Total		$	3,795			$	1,260			$	(480	)		$	4,575			$	196
Three Months Ended June 30, 2007
	Life insurance			$	2,755			$	1,451			$	108			$	4,314			$	717
	Personal accident				446				35				2				483				82
	Group products				151				21				(7	)			165				26
	Individual fixed annuities				17				28				9				54				18
	Individual variable annuities				1				1				1				3				1
		Total		$	3,370			$	1,536			$	113			$	5,019			$	844
Percentage Increase/(Decrease) from Prior Year:
	Life insurance				11	%			(19	)%			—	%			(12	)%			(85	)%
	Personal accident				16				14				—				12				(41	)
	Group products				32				(29	)			—				30				23
	Individual fixed annuities				(47	)			21				—				(35	)			(94	)
	Individual variable annuities				—				—				—				(33	)			—
		Total			13	%			(18	)%			—	%			(9	)%			(77	)%

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		Six Months								Percentage
		Ended								Increase/
		June 30,								(Decrease)
														Original
(in millions)		2008				2007				U.S.$				Currency
First year premium		$	1,480			$	1,414				5	%			2	%
Single premium			1,850				1,570				18	%			12	%
Annuity deposits			666				371				80	%			76	%

				Premiums and				Net				Net Realized								Operating
				Other				Investment				Capital Gains				Total				Income
(in millions)				Considerations				Income				(Losses)				Revenues				(Loss)
Six Months Ended June 30, 2008
	Life insurance			$	6,250			$	1,752			$	(772	)		$	7,230			$	282
	Personal accident				1,033				80				(31	)			1,082				124
	Group products				446				57				(24	)			479				50
	Individual fixed annuities				21				67				(32	)			56				(9	)
	Individual variable annuities				3				2				—				5				1
		Total		$	7,753			$	1,958			$	(859	)		$	8,852			$	448
Six Months Ended June 30, 2007
	Life insurance			$	5,706			$	2,458			$	(42	)		$	8,122			$	1,017
	Personal accident				891				68				(8	)			951				161
	Group products				329				45				(33	)			341				16
	Individual fixed annuities				29				56				7				92				20
	Individual variable annuities				2				2				—				4				1
		Total		$	6,957			$	2,629			$	(76	)		$	9,510			$	1,215
Percentage Increase/(Decrease) from Prior Year:
	Life insurance				10	%			(29	)%			—	%			(11	)%			(72	)%
	Personal accident				16				18				—				14				(23	)
	Group products				36				27				—				40				—
	Individual fixed annuities				(28	)			20				—				(39	)			—
	Individual variable annuities				50				—				—				25				—
		Total			11	%			(26	)%			—	%			(7	)%			(63	)%

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				Premiums				Net				Net Realized								Operating
				and Other				Investment				Capital Gains				Total				Income
(in millions)				Considerations				Income				(Losses)				Revenues				(Loss)
Three Months Ended June 30, 2008
	Life insurance			$	621			$	365			$	(1,110	)		$	(124	)		$	(918	)
	Home service				186				163				(198	)			151				(112	)
	Group life/health				218				48				(13	)			253				4
	Payout annuities*				564				320				(33	)			851				17
	Individual fixed and runoff annuities				15				110				(22	)			103				4
		Total		$	1,604			$	1,006			$	(1,376	)		$	1,234			$	(1,005	)
Three Months Ended June 30, 2007
	Life insurance			$	603			$	402			$	43			$	1,048			$	262
	Home service				192				158				(11	)			339				66
	Group life/health				197				51				(4	)			244				1
	Payout annuities*				364				276				(35	)			605				17
	Individual fixed and runoff annuities				13				119				(9	)			123				22
		Total		$	1,369			$	1,006			$	(16	)		$	2,359			$	368
Percentage Increase/(Decrease) from Prior Year:
	Life insurance				3	%			(9	)%			—	%			—	%			—	%
	Home service				(3	)			3				—				(55	)			—
	Group life/health				11				(6	)			—				4				—
	Payout annuities				55				16				—				41				—
	Individual fixed and runoff annuities				15				(8	)			—				(16	)			(82	)
		Total			17	%			—	%			—	%			(48	)%			—	%

*	Includes structured settlements, single premium immediate annuities and terminal funding annuities.

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				Premiums and				Net				Net Realized								Operating
				Other				Investment				Capital Gains				Total				Income
(in millions)				Considerations				Income				(Losses)				Revenues				(Loss)
Six Months Ended June 30, 2008
	Life insurance			$	1,210			$	738			$	(2,165	)		$	(217	)		$	(1,757	)
	Home service				374				316				(338	)			352				(174	)
	Group life/health				422				95				(27	)			490				6
	Payout annuities*				1,158				623				(55	)			1,726				55
	Individual fixed and runoff annuities				27				218				(79	)			166				(5	)
		Total		$	3,191			$	1,990			$	(2,664	)		$	2,517			$	(1,875	)
Six Months Ended June 30, 2007
	Life insurance			$	1,181			$	774			$	40			$	1,995			$	449
	Home service				387				319				(13	)			693				148
	Group life/health				426				104				(5	)			525				4
	Payout annuities*				876				565				(41	)			1,400				68
	Individual fixed and runoff annuities				27				249				(9	)			267				44
		Total		$	2,897			$	2,011			$	(28	)		$	4,880			$	713
Percentage Increase/(Decrease) from Prior Year:
	Life insurance				2	%			(5	)%			—	%			—	%			—	%
	Home service				(3	)			(1	)			—				(49	)			—
	Group life/health				(1	)			(9	)			—				(7	)			50
	Payout annuities				32				10				—				23				(19	)
	Individual fixed and runoff annuities				—				(12	)			—				(38	)			—
		Total			10	%			(1	)%			—	%			(48	)%			—	%

*	Includes structured settlements, single premium immediate annuities and terminal funding annuities.

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				Three Months												Six Months
				Ended												Ended
				June 30,								Percentage				June 30,								Percentage
												Increase/												Increase/
(in millions)				2008				2007				(Decrease)				2008				2007				(Decrease)
Life insurance
Periodic premium by product:
	Universal life			$	46			$	47				(2	)%		$	93			$	98				(5	)%
	Variable universal life				15				12				25				42				25				68
	Term life				61				57				7				113				112				1
	Whole life/other				3				3				—				6				5				20
		Total periodic premiums by product			125				119				5	%			254				240				6	%
Unscheduled and single deposits					113				115				(2	)			173				181				(4	)
		Total life insurance			238				234				2	%			427				421				1	%
Home service
	Life insurance and accident and health				24				25				(4	)%			44				49				(10	)%
	Fixed annuities				40				25				60				69				45				53
	Unscheduled and single deposits				5				5				—				10				8				25
		Total home service			69				55				25	%			123				102				21	%
Group life/health					31				22				41	%			72				60				20	%
Payout annuities					751				600				25	%			1,550				1,285				21	%
Individual fixed and runoff annuities					256				101				—	%			340				188				81	%
Total sales and deposits				$	1,345			$	1,012				33	%		$	2,512			$	2,056				22	%

*	Life insurance sales include periodic premium from new business expected to be collected over a one-year period and unscheduled and single premiums from new and existing policyholders. Sales of group accident and health insurance represent annualized first year premium from new policies. Annuity sales represent deposits from new and existing policyholders.

				Premiums and				Net				Net Realized								Operating
				Other				Investment				Capital Gains				Total				Income
(in millions)				Considerations				Income				(Losses)				Revenues				(Loss)
Three Months Ended June 30, 2008
	Group retirement products			$	111			$	488			$	(940	)		$	(341	)		$	(699	)
	Individual fixed annuities				17				817				(1,591	)			(757	)			(1,274	)
	Individual variable annuities				157				34				(43	)			148				(50	)
	Individual annuities — runoff*				5				79				(151	)			(67	)			(146	)
		Total		$	290			$	1,418			$	(2,725	)		$	(1,017	)		$	(2,169	)
Three Months Ended June 30, 2007
	Group retirement products			$	112			$	641			$	(103	)		$	650			$	265
	Individual fixed annuities				26				981				(158	)			849				261
	Individual variable annuities				155				43				(17	)			181				53
	Individual annuities — runoff*				5				100				(3	)			102				19
		Total		$	298			$	1,765			$	(281	)		$	1,782			$	598
Percentage Increase/(Decrease) from Prior Year:
	Group retirement products				(1	)%			(24	)%			—	%			—	%			—	%
	Individual fixed annuities				(35	)			(17	)			—				—				—
	Individual variable annuities				1				(21	)			—				(18	)			—
	Individual annuities — runoff				—				(21	)			—				—				—
		Total			(3	)%			(20	)%			—	%			—	%			—	%

*	Primarily represents runoff annuity business sold through discontinued distribution relationships.

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												Net Realized
				Premiums and				Net				Capital								Operating
				Other				Investment				Gains				Total				Income
(in millions)				Considerations				Income				(Losses)				Revenues				(Loss)
Six Months Ended June 30, 2008
	Group retirement products			$	218			$	982			$	(1,680	)		$	(480	)		$	(1,192	)
	Individual fixed annuities				40				1,576				(2,837	)			(1,221	)			(2,230	)
	Individual variable annuities				309				69				(295	)			83				(187	)
	Individual annuities – runoff*				7				162				(272	)			(103	)			(256	)
		Total		$	574			$	2,789			$	(5,084	)		$	(1,721	)		$	(3,865	)
Six Months Ended June 30, 2007
	Group retirement products			$	217			$	1,211			$	(113	)		$	1,315			$	541
	Individual fixed annuities				51				1,895				(169	)			1,777				564
	Individual variable annuities				301				85				(7	)			379				105
	Individual annuities – runoff*				13				199				(1	)			211				40
		Total		$	582			$	3,390			$	(290	)		$	3,682			$	1,250
Percentage Increase/(Decrease) from Prior Year:
	Group retirement products				—	%			(19	)%			—	%			—	%			—	%
	Individual fixed annuities				(22	)			(17	)			—				—				—
	Individual variable annuities				3				(19	)			—				(78	)			—
	Individual annuities – runoff				(46	)			(19	)			—				—				—
	Total				(1	)%			(18	)%			—	%			—	%			—	%

*	Primarily represents runoff annuity business sold through discontinued distribution relationships.

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			Three Months Ended								Six Months Ended
			June 30,								June 30,
(in millions)			2008				2007				2008				2007
Group retirement products
Balance at beginning of period			$	65,640			$	65,216			$	68,109			$	64,357
	Deposits – annuities			1,472				1,463				2,925				2,881
	Deposits – mutual funds			371				330				795				795
	Total deposits			1,843				1,793				3,720				3,676
	Surrenders and other withdrawals			(1,282	)			(1,487	)			(2,772	)			(3,412	)
	Death benefits			(64	)			(70	)			(123	)			(130	)
	Net inflows (outflows)			497				236				825				134
	Change in fair value of underlying investments, interest credited, net of fees			52				2,234				(2,745	)			3,195
	Other			—				1				—				1
Balance at end of period			$	66,189			$	67,687			$	66,189			$	67,687
Individual fixed annuities
Balance at beginning of period			$	51,540			$	52,339			$	50,508			$	52,685
	Deposits			1,944				1,633				4,475				2,864
	Surrenders and other withdrawals			(1,461	)			(1,859	)			(3,040	)			(3,519	)
	Death benefits			(442	)			(449	)			(824	)			(857	)
	Net inflows (outflows)			41				(675	)			611				(1,512	)
	Change in fair value of underlying investments, interest credited, net of fees			496				506				958				997
Balance at end of period			$	52,077			$	52,170			$	52,077			$	52,170
Individual variable annuities
Balance at beginning of period			$	30,830			$	31,432			$	33,108			$	31,093
	Deposits			1,122				1,204				2,139				2,212
	Surrenders and other withdrawals			(964	)			(1,057	)			(1,873	)			(2,047	)
	Death benefits			(123	)			(129	)			(250	)			(250	)
	Net inflows (outflows)			35				18				16				(85	)
	Change in fair value of underlying investments, interest credited, net of fees			(198	)			1,601				(2,457	)			2,043
Balance at end of period			$	30,667			$	33,051			$	30,667			$	33,051
Total Domestic Retirement Services
Balance at beginning of period			$	148,010			$	148,987			$	151,725			$	148,135
	Deposits			4,909				4,630				10,334				8,752
	Surrenders and other withdrawals			(3,707	)			(4,403	)			(7,685	)			(8,978	)
	Death benefits			(629	)			(648	)			(1,197	)			(1,237	)
	Net inflows (outflows)			573				(421	)			1,452				(1,463	)
	Change in fair value of underlying investments, interest credited, net of fees			350				4,341				(4,244	)			6,235
	Other			—				1				—				1
	Balance at end of period, excluding runoff			148,933				152,908				148,933				152,908
	Individual annuities runoff			5,476				5,977				5,476				5,977
Balance at end of period			$	154,409			$	158,885			$	154,409			$	158,885
General and separate account reserves and mutual funds
	General account reserve										$	91,467			$	90,729
	Separate account reserve											54,629				60,554
Total general and separate account reserves												146,096				151,283
	Group retirement mutual funds											8,313				7,602
Total reserves and mutual funds											$	154,409			$	158,885

			Group				Individual				Individual
			Retirement				Fixed				Variable
(in millions)			Products*				Annuities				Annuities
June 30, 2008
	No surrender charge		$	48,399			$	11,465			$	12,288
	0% - 2%			2,659				3,519				4,545
	Greater than 2% - 4%			3,309				7,325				4,002
	Greater than 4%			2,621				26,441				9,524
	Non-surrenderable			888				3,327				308
	Total reserves		$	57,876			$	52,077			$	30,667
Surrender rates				8.4	%			11.8	%			12.0	%
June 30, 2007
	No surrender charge		$	45,361			$	10,813			$	12,591
	0% - 2%			6,734				4,068				5,424
	Greater than 2% - 4%			3,872				6,665				5,589
	Greater than 4%			3,241				27,182				9,355
	Non-surrenderable			877				3,442				92
	Total reserves		$	60,085			$	52,170			$	33,051
Surrender rates				10.4	%			13.4	%			12.8	%

*	Excludes mutual funds of $8.3 billion and $7.6 billion at June 30, 2008 and 2007, respectively.

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			Three Months Ended								Six Months Ended
			June 30,								June 30,
(in millions)			2008				2007				2008				2007
Foreign Life Insurance & Retirement Services:
	Fixed maturities, including short-term investments		$	2,334			$	1,940			$	4,547			$	3,839
	Equity securities			79				126				111				98
	Interest on mortgage and other loans			143				114				275				227
	Partnership income			9				38				11				86
	Mutual funds			76				103				(4	)			163
	Trading account losses			(133	)			(14	)			(221	)			(14	)
	Other(a)			134				60				246				128
	Total investment income before policyholder income and trading gains (losses)			2,642				2,367				4,965				4,527
	Policyholder investment income and trading gains (losses)(b)			606				1,079				(156	)			1,876
	Total investment income			3,248				3,446				4,809				6,403
	Investment expenses			86				85				199				159
	Net investment income		$	3,162			$	3,361			$	4,610			$	6,244
Domestic Life Insurance:
	Fixed maturities, including short-term investments		$	847			$	870			$	1,711			$	1,781
	Equity securities			24				(2	)			41				(3	)
	Interest on mortgage and other loans			105				102				202				202
	Partnership income — excluding Synfuels			(6	)			60				25				87
	Partnership loss — Synfuels			(4	)			(42	)			(8	)			(75	)
	Mutual funds			3				3				1				5
	Other(a)			41				26				62				40
	Total investment income before policyholder income and trading gains (losses)			1,010				1,017				2,034				2,037
	Policyholder investment income and trading gains (losses)(b)			11				—				(12	)			—
	Total investment income			1,021				1,017				2,022				2,037
	Investment expenses			15				11				32				26
	Net investment income		$	1,006			$	1,006			$	1,990			$	2,011
Domestic Retirement Services:
	Fixed maturities, including short-term investments		$	1,137			$	1,364			$	2,348			$	2,764
	Equity securities			6				21				9				24
	Interest on mortgage and other loans			149				135				297				256
	Partnership income			83				253				94				383
	Other(a)			59				4				72				(8	)
Total investment income				1,434				1,777				2,820				3,419
	Investment expenses			16				12				31				29
	Net investment income		$	1,418			$	1,765			$	2,789			$	3,390
Total:
	Fixed maturities, including short-term investments		$	4,318			$	4,174			$	8,606			$	8,384
	Equity securities			109				145				161				119
	Interest on mortgage and other loans			397				351				774				685
	Partnership income — excluding Synfuels			86				351				130				556
	Partnership loss — Synfuels			(4	)			(42	)			(8	)			(75	)
	Mutual funds			79				106				(3	)			168
	Trading account losses			(133	)			(14	)			(221	)			(14	)
	Other(a)			234				90				380				160
Total investment income before policyholder income and trading gains (losses)				5,086				5,161				9,819				9,983
	Policyholder investment income and trading gains (losses)(b)			617				1,079				(168	)			1,876
	Total investment income			5,703				6,240				9,651				11,859
	Investment expenses			117				108				262				214
Net investment income			$	5,586			$	6,132			$	9,389			$	11,645

(a)	Includes real estate income, income on non-partnership invested assets, securities lending and Foreign Life Insurance & Retirement Services’ equal share of the results of AIG Credit Card Company (Taiwan).
(b)	Relates principally to assets held in various trading securities accounts that do not qualify for separate account treatment under AICPA SOP 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts” (SOP 03-1). These amounts are principally offset by an equal change included in incurred policy losses and benefits.

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				Three Months								Six Months Ended
				Ended June 30,								June 30,
(in millions)				2008				2007				2008				2007
Foreign Life Insurance & Retirement Services:
	Sales of fixed maturities			$	19			$	(25	)		$	16			$	(45	)
	Sales of equity securities				192				180				271				212
	Other:
		Other-than-temporary impairments(a)			(1,071	)			(131	)			(2,087	)			(462	)
		Foreign exchange transactions			(170	)			(25	)			(193	)			90
		Derivatives instruments			(32	)			52				83				(65	)
		Other(b)			153				(33	)			279				53
Total Foreign Life Insurance & Retirement Services				$	(909	)		$	18			$	(1,631	)		$	(217	)
Domestic Life Insurance:
	Sales of fixed maturities			$	(18	)		$	(58	)		$	(10	)		$	(39	)
	Sales of equity securities				2				4				3				5
	Other:
		Other-than-temporary impairments(a)			(1,440	)			(49	)			(2,659	)			(68	)
		Foreign exchange transactions			6				–				4				2
		Derivatives instruments			58				41				(67	)			30
		Other(c)			16				46				65				42
Total Domestic Life Insurance				$	(1,376	)		$	(16	)		$	(2,664	)		$	(28	)
Domestic Retirement Services:
	Sales of fixed maturities			$	(55	)		$	(79	)		$	(63	)		$	(60	)
	Sales of equity securities				3				5				23				16
	Other:
		Other-than-temporary impairments(a)			(2,682	)			(144	)			(4,839	)			(186	)
		Foreign exchange transactions			14				1				(1	)			7
		Derivatives instruments			15				(52	)			(185	)			(47	)
		Other(c)			(20	)			(12	)			(19	)			(20	)
Total Domestic Retirement Services				$	(2,725	)		$	(281	)		$	(5,084	)		$	(290	)
Total:
	Sales of fixed maturities			$	(54	)		$	(162	)		$	(57	)		$	(144	)
	Sales of equity securities				197				189				297				233
	Other:
		Other-than-temporary impairments(a)			(5,193	)			(324	)			(9,585	)			(716	)
		Foreign exchange transactions			(150	)			(24	)			(190	)			99
		Derivatives instruments			41				41				(169	)			(82	)
		Other(b)(c)			149				1				325				75
Total				$	(5,010	)		$	(279	)		$	(9,379	)		$	(535	)

(a)	See Invested Assets — Portfolio Review — Other-Than-Temporary Impairments for additional information.
(b)	Includes losses of $167 million and gains of $66 million allocated to participating policyholders for the three-month periods ended June 30, 2008 and 2007, respectively, and losses of $178 million and $5 million for the six-month periods ended June 30, 2008 and 2007, respectively.

(c)	Includes losses of $12 million and $143 million for the six-month period ended June 30, 2008 for Domestic Life Insurance and Domestic Retirement Services, respectively, related to the adoption of FAS 157 related to embedded policy derivatives.

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82

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			Six Months Ended June 30,
(in millions)			2008												2007
			DAC/VOBA				SIA				Total				DAC/VOBA				SIA				Total
Foreign Life Insurance & Retirement Services
Balance at beginning of year			$	26,175			$	681			$	26,856			$	21,153			$	404			$	21,557
Acquisition costs deferred				2,711				49				2,760				2,510				60				2,570
Amortization (charged) or credited to operating income:
	Related to net realized capital gains (losses)			60				(3	)			57				45				1				46
	Related to unlocking future assumptions			(4	)			(2	)			(6	)			30				2				32
	All other amortization			(1,783	)			(28	)			(1,811	)			(1,344	)			2				(1,342	)
Change in unrealized gains (losses) on securities				692				5				697				531				7				538
Increase (decrease) due to foreign exchange				781				2				783				(230	)			1				(229	)
Other*				(1,090	)			(299	)			(1,389	)			(78	)			—				(78	)
Balance at end of period			$	27,542			$	405			$	27,947			$	22,617			$	477			$	23,094
Domestic Life Insurance
Balance at beginning of year			$	6,432			$	53			$	6,485			$	6,006			$	46			$	6,052
Acquisition costs deferred				439				10				449				442				10				452
Amortization (charged) or credited to operating income:
	Related to net realized capital gains (losses)			37				—				37				4				—				4
	All other amortization			(302	)			(5	)			(307	)			(344	)			(3	)			(347	)
Change in unrealized gains (losses) on securities				210				—				210				230				—				230
Increase (decrease) due to foreign exchange				(17	)			—				(17	)			45				—				45
Other*				—				—				—				(64	)							(64	)
Balance at end of period			$	6,799			$	58			$	6,857			$	6,319			$	53			$	6,372
Domestic Retirement Services
Balance at beginning of year			$	5,838			$	991			$	6,829			$	5,651			$	887			$	6,538
Acquisition costs deferred				462				108				570				376				101				477
Amortization (charged) or credited to operating income:
	Related to net realized capital gains (losses)			309				76				385				52				12				64
	Related to unlocking future assumptions			—				—				—				2				—				2
	All other amortization			(409	)			(92	)			(501	)			(445	)			(79	)			(524	)
Change in unrealized gains (losses) on securities				439				96				535				318				64				382
Increase (decrease) due to foreign exchange				1				—				1				—				—				—
Balance at end of period			$	6,640			$	1,179			$	7,819			$	5,954			$	985			$	6,939
Total Life Insurance & Retirement Services
Balance at beginning of year			$	38,445			$	1,725			$	40,170			$	32,810			$	1,337			$	34,147
Acquisition costs deferred				3,612				167				3,779				3,328				171				3,499
Amortization (charged) or credited to operating income:
	Related to net realized capital gains (losses)			406				73				479				101				13				114
	Related to unlocking future assumptions			(4	)			(2	)			(6	)			32				2				34
	All other amortization			(2,494	)			(125	)			(2,619	)			(2,133	)			(80	)			(2,213	)
Change in unrealized gains (losses) on securities				1,341				101				1,442				1,079				71				1,150
Increase (decrease) due to foreign exchange				765				2				767				(185	)			1				(184	)
Other*				(1,090	)			(299	)			(1,389	)			(142	)			—				(142	)
Balance at end of period			$	40,981			$	1,642			$	42,623			$	34,890			$	1,515			$	36,405

*	In 2008, primarily represents the cumulative effect of adoption of FAS 159. In 2007, primarily represents the cumulative effect of adoption of SOP 05-1.

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•	variable separate account products which do not contain interest rate guarantees,
•	participating products which contain very low implied interest rate guarantees, and
•	accident and health policies and riders.

•	Observed historical mortality improvement trends have been projected to 2014;
•	Morbidity, expense and termination rates have been updated to reflect recent experience;
•	Taiwan government bond rates are expected to remain at current levels for 10 years and gradually increase to best-estimate assumptions of a market consensus view of long-term interest rate expectations;
•	Foreign assets are assumed to comprise 35 percent of invested assets, resulting in a composite long-term investment assumption of approximately 4.8 percent; and
•	The current practice permitted in Taiwan of offsetting positive mortality experience with negative interest margins, thus eliminating the need for mortality dividends, will continue.

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			Three Months Ended												Six Months Ended
			June 30,								Percentage				June 30,								Percentage
											Increase/												Increase/
(in millions)			2008				2007				(Decrease)				2008				2007				(Decrease)
Total revenues:
	Aircraft Leasing		$	1,298			$	1,173				11	%		$	2,463			$	2,231				10	%
	Capital Markets(a)			(6,088	)			(67	)			—				(14,831	)			161				—
	Consumer Finance(b)			1,028				911				13				1,959				1,756				12
	Other, including intercompany adjustments			157				106				48				244				176				39
Total			$	(3,605	)		$	2,123				—	%		$	(10,165	)		$	4,324				—	%
Operating income (loss):
	Aircraft Leasing		$	334			$	207				61	%		$	555			$	371				50	%
	Capital Markets(a)			(6,284	)			(255	)			—				(15,211	)			(187	)			—
	Consumer Finance(b)			(33	)			75				—				(85	)			111				—
	Other, including intercompany adjustments			78				20				290				64				44				45
Total			$	(5,905	)		$	47				—	%		$	(14,677	)		$	339				—	%

(a)	Revenues are shown net of interest expense of $1.2 billion and $805 million in the three-month periods ended June 30, 2008 and 2007, respectively, and $1.7 billion and $1.9 billion for the six-month periods ended June 30, 2008 and 2007, respectively. In the three- and six-month periods ended June 30, 2008, both revenues and operating income (loss) include unrealized market valuation losses of $5.6 billion and $14.7 billion, respectively, on AIGFP’s super senior credit default swap portfolio.
(b)	The three-month and six-month periods ended June 30, 2007 included pre-tax charges of $50 million and $178 million, respectively, in connection with domestic Consumer Finance’s mortgage banking activities. Based on a current evaluation of the estimated cost of implementing the Supervisory Agreement entered into with the OTS, partial reversals of these prior year charges included in the three- and six-month periods ended June 30, 2008 were $25 million and $43 million, respectively.

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											Unrealized Market
											Valuation Loss
											(Gain)
							Fair				Three				Six
							Value				Months				Months
							Loss at				Ended				Ended
			Notional				June 30,				June 30,				June 30,
(in millions)			Amount				2008				2008(a)				2008(a)
Regulatory Capital:(b)
	Corporate loans		$	172,717			$	—			$	—			$	—
	Prime residential mortgages			132,612				—				—				—
	Other(c)(d)			1,619				125				125				125
	Total			306,948				125				125				125
Arbitrage:
	Multi-sector CDOs(e)			80,301				24,785				5,569				13,606
	Corporate debt/ CLOs			53,767				996				(126	)			770
	Total			134,068				25,781				5,443				14,376
Mezzanine tranches(f)				5,824				171				(3	)			171
Total			$	446,840			$	26,077	(g)		$	5,565			$	14,672

(a)	Includes credit valuation adjustment gains of $44 million and $109 million, respectively, for the three- and six-month periods ended June 30, 2008.
(b)	Represents predominantly transactions written to facilitate regulatory capital relief.

(c)	Represents transactions where AIGFP believes the counterparties are no longer using the transactions to obtain regulatory capital relief.

(d)	During the second quarter of 2008, a European RMBS regulatory capital relief transaction with a notional amount of $1.6 billion was not terminated as expected when it no longer provided regulatory capital relief to the counterparty.

(e)	Approximately $57.8 billion in net notional amount includes some exposure to U.S. sub-prime mortgages and approximately $9.6 billion in net notional amount includes CDOs of CMBS.
(f)	Represents credit default swaps written by AIGFP on tranches below super senior on certain regulatory capital relief trades.

(g)	Fair value amounts are shown before the effects of counterparty netting adjustments.

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(in millions)
Counterparty Credit Spread						AIG Inc.’s Own Credit Spread
Sensitivity on Assets						Sensitivity on Liabilities
Trading securities		$	(503	)		Term notes		$	(79	)
Loans and other assets			(4	)		Hybrid term notes			(47	)
Derivative assets			145			GIA’s			(84	)
						Other liabilities			(2	)
						Derivative liabilities*			100
Decrease in assets		$	(362	)		Increase in liabilities		$	(112	)
Net pre-tax decrease to other income		$	(474	)

*	Includes super senior CDS portfolio

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(in millions)
Counterparty Credit Spread						AIG Inc.’s Own Credit Spread
Sensitivity on Assets						Sensitivity on Liabilities
Trading securities		$	(2,651	)		Term notes		$	182
Loans and other assets			(28	)		Hybrid term notes			615
Derivative assets			(303	)		GIA’s			1,072
						Other liabilities			28
						Derivative liabilities*			639
Decrease in assets		$	(2,982	)		Decrease in liabilities		$	2,536
Net pre-tax decrease to other income		$	(446	)

*	Includes super senior CDS portfolio

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90

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			Three Months								Percentage				Six Months								Percentage
			Ended June 30,								Increase/				Ended June 30,								Increase/
(in millions)			2008				2007				(Decrease)				2008				2007				(Decrease)
Total revenues:
	Spread-Based Investment business		$	2			$	734				—	%		$	(807	)		$	1,749				—	%
	Institutional Asset Management			687				869				(21)				1,211				1,298				(7)
	Brokerage Services and Mutual Funds			74				82				(10)				148				160				(8)
	Other Asset Management			34				96				(65)				96				243				(60)
Total			$	797			$	1,781				(55)	%		$	648			$	3,450				(81)	%
Operating income (loss):
	Spread-Based Investment business		$	(420	)		$	244				—	%		$	(1,671	)		$	735				—	%
	Institutional Asset Management			58				569				(90)				(20	)			666				—
	Brokerage Services and Mutual Funds			17				21				(19)				36				47				(23)
	Other Asset Management			31				93				(67)				90				237				(62)
Total			$	(314	)		$	927				—	%		$	(1,565	)		$	1,685				—	%

92

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		Less Than				1-3				3(+)-5				Over Five
(in billions)		One Year				Years				Years				Years				Total
Domestic GICs		$	11.2			$	4.2			$	2.0				$5.6			$	23.0

93

---

 

		Three Months								Six Months
		Ended June 30,								Ended June 30,
(in millions)		2008				2007				2008				2007
Operating income (loss):
Equity earnings in partially owned companies		$	8			$	50			$	16			$	91
Interest expense			(452	)			(302	)			(820	)			(554	)
Unallocated corporate expenses*			(282	)			(210	)			(375	)			(382	)
Net realized capital gains (losses)			30				22				(235	)			(27	)
Other miscellaneous, net			(19	)			(20	)			(69	)			(58	)
Total Other		$	(715	)		$	(460	)		$	(1,483	)		$	(930	)

*	Includes a charge for settlement of a dispute, expenses of corporate staff not attributable to specific operating segments, expenses related to efforts to improve internal controls, corporate initiatives and certain compensation plan expenses.

94

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	•	196,710,525 shares of AIG common stock in a public offering at a price per share of $38, for an aggregate amount of $7.47 billion;
	•	78.4 million equity units in a public offering at a price per unit of $75, for an aggregate amount of $5.88 billion. The equity units consist of an ownership interest in AIG junior subordinated debentures and a stock purchase contract obligating the holder of an equity unit to purchase, and obligating AIG to sell, a variable number of shares of AIG common stock on three dates in 2011 (a minimum of 128,944,480 shares and a maximum of 154,738,080 shares, subject to anti-dilution adjustments); and
	•	$6.9 billion in unregistered offerings of junior subordinated debentures in three series: $4.0 billion 8.175 percent Series A-6 junior subordinated debentures, EUR 750 million 8.0 percent Series A-7 junior subordinated debentures, and GBP 900 million 8.625 percent Series A-8 junior subordinated debentures.

95

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			June 30,				December 31,
(in millions)			2008				2007
Borrowings issued by AIG:
	Notes and bonds payable		$	12,960			$	14,588
	Junior subordinated debt			12,866				5,809
	Junior subordinated debt attributable to equity units			5,880				—
	Loans and mortgages payable			893				729
	MIP matched notes and bonds payable			14,621				14,267
	Series AIGFP matched notes and bonds payable			998				874
	Total AIG borrowings			48,218				36,267
Borrowings guaranteed by AIG:
AIGFP(a)
	GIAs			18,296				19,908
	Notes and bonds payable			28,304				36,676
	Loans and mortgages payable			1,577				1,384
	Hybrid financial instrument liabilities(b)			5,662				7,479
	Total AIGFP borrowings			53,839				65,447
AIG Funding, Inc. commercial paper				5,765				4,222
AIGLH notes and bonds payable				797				797
Liabilities connected to trust preferred stock				1,415				1,435
Total borrowings issued or guaranteed by AIG				110,034				108,168
Borrowings not guaranteed by AIG:
ILFC
	Commercial paper			4,608				4,483
	Junior subordinated debt			999				999
	Notes and bonds payable(c)			26,818				25,737
	Total ILFC borrowings			32,425				31,219
AGF
	Commercial paper and extendible commercial notes			3,912				3,801
	Junior subordinated debt			349				349
	Notes and bonds payable			21,204				22,369
	Total AGF borrowings			25,465				26,519
AIGCFG
	Commercial paper			273				287
	Loans and mortgages payable			2,257				1,839
	Total AIGCFG borrowings			2,530				2,126
AIG Finance Taiwan Limited commercial paper				3				—
Other subsidiaries				709				775
Borrowings of consolidated investments:
	A.I. Credit(d)			500				321
	AIG Investments			1,502				1,636
	AIG Global Real Estate Investment			5,294				5,096
	AIG SunAmerica			176				186
	ALICO			—				3
	Total borrowings of consolidated investments			7,472				7,242
Total borrowings not guaranteed by AIG				68,604				67,881
Consolidated:
	Total commercial paper and extendible commercial notes			15,061				13,114
	Total long-term borrowings			163,577				162,935
	Total borrowings		$	178,638			$	176,049

(a)	In 2008, AIGFP borrowings are carried at fair value.
(b)	Represents structured notes issued by AIGFP that are accounted for using the fair value option at 2008 and 2007.

(c)	Includes borrowings under Export Credit Facility of $2.6 billion and $2.5 billion at June 30, 2008 and December 31, 2007, respectively.

(d)	Represents commercial paper issued by a variable interest entity secured by receivables of A.I. Credit.

96

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(in millions)
			Balance at								Maturities				Effect of								Balance at
			December 31,								and				Foreign				Other				June 30,
			2007				Issuances				Repayments				Exchange				Changes(b)				2008
AIG
	Notes and bonds payable		$	14,588			$	—			$	(1,792	)		$	70			$	94			$	12,960
	Junior subordinated debt			5,809				6,953				—				104				—				12,866
	Junior subordinated debt attributable to equity units			—				5,880				—				—				—				5,880
	Loans and mortgages payable			729				306				(140	)			14				(16	)			893
	MIP matched notes and bonds payable			14,267				—				—				20				334				14,621
	Series AIGFP matched notes and bonds payable			874				214				(95	)			—				5				998
AIGFP(a)
	GIAs			19,908				2,944				(5,039	)			—				483				18,296
	Notes and bonds payable and hybrid financial instrument liabilities			44,155				33,553				(44,951	)			—				1,209				33,966
	Loans and mortgages payable			1,384				235				(165	)			—				123				1,577
AIGLH notes and bonds payable				797				—				—				—				—				797
Liabilities connected to trust preferred stock				1,435				—				(19	)			—				(1	)			1,415
ILFC notes and bonds payable				25,737				2,680				(1,884	)			286				(1	)			26,818
ILFC junior subordinated debt				999				—				—				—				—				999
AGF notes and bonds payable				22,369				736				(2,098	)			147				50				21,204
AGF junior subordinated debt				349				—				—				—				—				349
AIGCFG loans and mortgages payable				1,839				1,234				(1,089	)			123				150				2,257
Other subsidiaries				775				23				(102	)			10				3				709
Total			$	156,014			$	54,758			$	(57,374	)		$	774			$	2,433			$	156,605

(a)	In 2008, AIGFP borrowings are carried at fair value.
(b)	Includes the cumulative effect of the adoption of FAS 159.

97

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98

---

 

99

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																	One-Year
									Available								Term-Out
Facility			Size				Borrower(s)		Amount				Expiration				Option
AIG:
	364-Day Syndicated Facility		$	2,125			AIG/AIG Funding(a) AIG Capital Corporation(a)		$	2,125				July 2008 (b)				Yes
	5-Year Syndicated Facility			1,625			AIG/AIG Funding(a) AIG Capital Corporation(a)			1,625				July 2011				No
	364-Day Bilateral Facility (c)			3,200			AIG/AIG Funding			102				December 2008				Yes
	364-Day Intercompany Facility(d)			5,335			AIG			5,335				September  2008				Yes
Total AIG			$	12,285					$	9,187
ILFC:
	5-Year Syndicated Facility		$	2,500			ILFC		$	2,500				October 2011				No
	5-Year Syndicated Facility			2,000			ILFC			2,000				October 2010				No
	5-Year Syndicated Facility			2,000			ILFC			2,000				October 2009				No
Total ILFC			$	6,500					$	6,500
AGF:
	364-Day Syndicated Facility		$	2,625			American General Finance Corporation American General Finance, Inc.(e)		$	2,625				July 2008 (f)				Yes
	5-Year Syndicated Facility			2,125			American General Finance Corporation			2,125				July 2010				No
Total AGF			$	4,750					$	4,750

(a)	Guaranteed by AIG.

(b)	In July 2008, this facility was resyndicated at the same aggregate amount and the expiration was extended to July 2009.

(c)	This facility can be drawn in the form of loans or letters of credit. All drawn amounts shown above are in the form of letters of credit.

(d)	Subsidiaries of AIG are the lenders on this facility.

(e)	American General Finance, Inc. is an eligible borrower for up to $400 million only.
(f)	In July 2008, this facility was resyndicated at an aggregate amount of $2.45 billion and the expiration was extended to July 2009.

Short-term Debt

Senior Long-term Debt

Moody’s

S&P

Fitch

Moody’s(a)

S&P(b)

Fitch(c)

AIG

P-1 (1st of 3)

A-1+ (1st of 6)

F1+ (1st of 5)

Aa3 (2nd of 9) (e)

AA- (2nd of 8) (f)

AA- (2nd of 9) (g)

AIG Financial Products Corp.(d)

P-1

A-1+

–

Aa3(e)

AA-(f)

–

AIG Funding, Inc. (d)

P-1

A-1+

F1+

–

–

–

ILFC

P-1

A-1 (1st of 6)

F1 (1st of 5)

A1 (3rd of 9) (e)

A+ (3rd of 8) (f)

A (3rd of 9)

American General Finance Corporation

P-1

A-1

F1

A1(e)

A+(f)

A

American General Finance, Inc.

P-1

A-1

F1

–

–

A

(a)	Moody’s appends numerical modifiers 1, 2 and 3 to the generic rating categories to show relative position within rating categories.
(b)	S&P ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
(c)	Fitch Ratings (Fitch) ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
(d)	AIG guarantees all obligations of AIG Financial Products Corp. and AIG Funding, Inc.
(e)	Negative outlook. A negative outlook by Moody’s indicates that a rating may be lowered but is not necessarily a precursor of a ratings change.
(f)	Negative outlook on Counterparty Credit Ratings or Corporate Credit Ratings. A negative outlook by S&P indicates that a rating may be lowered but is not necessarily a precursor of a ratings change.
(g)	Negative outlook on Issuer Default and Senior Unsecured Debt Ratings. A negative outlook by Fitch indicates that a rating may be lowered but is not necessarily a precursor of a ratings change.

100

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						Payments due by Period
		Total				Less Than				1-3				3+-5				Over Five
(in millions)		Payments				One Year				Years				Years				Years
Borrowings(a)		$	156,605			$	34,019			$	33,408			$	25,983			$	63,195
Interest payments on borrowings			78,502				5,930				11,136				9,477				51,959
Loss reserves(b)			88,747				24,405				27,068				12,869				24,405
Insurance and investment contract liabilities(c)			706,108				31,947				43,609				41,707				588,845
GIC liabilities(d)			25,458				11,011				4,766				2,421				7,260
Aircraft purchase commitments			17,566				1,018				3,206				3,295				10,047
Other long-term obligations			609				221				361				27				—
Total(e)(f)		$	1,073,595			$	108,551			$	123,554			$	95,779			$	745,711

(a)	Excludes commercial paper and borrowings incurred by consolidated investments and includes hybrid financial instrument liabilities recorded at fair value.
(b)	Represents future loss and loss adjustment expense payments estimated based on historical loss development payment patterns. Due to the significance of the assumptions used, the periodic amounts presented could be materially different from actual required payments.
(c)	Insurance and investment contract liabilities include various investment-type products with contractually scheduled maturities, including periodic payments of a term certain nature. Insurance and investment contract liabilities also include benefit and claim liabilities, of which a significant portion represents policies and contracts that do not have stated contractual maturity dates and may not result in any future payment obligations. For these policies and contracts (i) AIG is currently not making payments until the occurrence of an insurable event, such as death or disability, (ii) payments are conditional on survivorship, or (iii) payment may occur due to a surrender or other non-scheduled event out of AIG’s control. AIG has made significant assumptions to determine the estimated undiscounted cash flows of these contractual policy benefits, which assumptions include mortality, morbidity, future lapse rates, expenses, investment returns and interest crediting rates, offset by expected future deposits and premiums on in force policies. Due to the significance of the assumptions used, the periodic amounts presented could be materially different from actual required payments. The amounts presented in this table are undiscounted and therefore exceed the future policy benefits and policyholders’ contract deposits included in the balance sheet.
(d)	Represents guaranteed maturities under GICs.
(e)	Does not reflect unrecognized tax benefits of $2.5 billion, the timing of which is uncertain.

101

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(f)

The majority of AIGFP’s credit default swaps require AIGFP to provide credit protection on a designated portfolio of loans or debt securities. At June 30, 2008, AIG had recorded $26.1 billion of cumulative unrealized market valuation losses in its financial statements relating to AIGFP’s super senior credit default swap portfolio, net of amounts realized in extinguishing derivative obligations. However, AIG’s credit-based stress testing scenarios illustrate potential pre-tax realized credit losses from these contracts at approximately $5.0 billion and approximately $8.5 billion at that date. Due to the long-term maturities of these credit default swaps, AIG is unable to make reasonable estimates of the periods during which any payments would be made.

							Amount of Commitment Expiration
			Total
			Amounts				Less Than				1-3				3+-5				Over Five
(in millions)			Committed				One Year				Years				Years				Years
Guarantees:
	Liquidity facilities(a)		$	2,552			$	72			$	884			$	1,325			$	271
	Standby letters of credit			1,702				1,481				45				32				144
	Construction guarantees(b)			490				—				—				—				490
	Guarantees of indebtedness			1,284				147				144				500				493
	All other guarantees			1,104				159				165				27				753
Commitments:
	Investment commitments(c)			8,711				3,304				3,619				1,605				183
	Commitments to extend credit			1,828				1,352				366				110				—
	Letters of credit			1,115				835				120				—				160
	Maturity shortening puts(d)			7,995				2,071				2,595				1,648				1,681
	Other commercial commitments(e)			1,193				83				23				79				1,008
Total(f)			$	27,974			$	9,504			$	7,961			$	5,326			$	5,183

(a)	Primarily liquidity facilities provided in connection with certain municipal swap transactions and collateralized bond obligations.
(b)	Primarily AIG SunAmerica construction guarantees connected to affordable housing investments.
(c)	Includes commitments to invest in limited partnerships, private equity, hedge funds and mutual funds and commitments to purchase and develop real estate in the United States and abroad.

(d)	Represents obligations under 2a-7 Puts to purchase certain multi-sector CDOs at pre-determined contractual prices.
(e)	Includes options to acquire aircraft. Excludes commitments with respect to pension plans. The annual pension contribution for 2008 is expected to be approximately $118 million for U.S. and non-U.S.  plans.

102

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			Six Months Ended
			June 30,
(in millions)			2008
Beginning of year				$95,801
	Net income (loss)			(13,162	)
	Unrealized (depreciation) appreciation of investments, net of tax			(9,441	)
	Cumulative translation adjustment, net of tax			984
	Dividends to shareholders			(1,121	)
	Payments advanced to purchase shares, net			912
	New share issuance			7,343
	Share purchases			(1,912	)
	Cumulative effect of accounting changes, net of tax			(1,108	)
	Other*			(208	)
End of period				$78,088

*	Reflects the effects of employee stock transactions and the present value of future contract adjustment payments related to the issuance of equity units.

103

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104

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							Life
							Insurance &
			General				Retirement				Financial				Asset
(in millions)			Insurance				Services				Services				Management				Other				Total
June 30, 2008
Fixed maturity securities:
	Bonds available for sale, at fair value		$	72,981			$	297,095			$	1,370			$	21,870			$	—			$	393,316
	Bonds held to maturity, at amortized cost			21,346				1				—				285				—				21,632
	Bond trading securities, at fair value			—				8,764				—				37				—				8,801
Equity securities:
	Common stocks available for sale, at fair value			4,522				12,018				—				787				(21	)			17,306
	Common and preferred stocks trading, at fair value			285				22,200				—				29				—				22,514
	Preferred stocks available for sale, at fair value			1,943				543				10				—				—				2,496
Mortgage and other loans receivable, net of allowance				16				26,010				1,038				7,275				45				34,384
Financial Services assets:
	Flight equipment primarily under operating leases, net of accumulated depreciation			—				—				43,887				—				—				43,887
	Securities available for sale, at fair value			—				—				1,205				—				—				1,205
	Trading securities, at fair value			—				—				35,170				—				—				35,170
	Spot commodities, at fair value			—				—				90				—				—				90
	Unrealized gain on swaps, options and forward transactions, at fair value			—				—				12,720				—				(1,172	)			11,548
	Trade receivables			—				—				2,294				—				—				2,294
	Securities purchased under agreements to resell, at fair value			—				—				16,597				—				—				16,597
	Finance receivables, net of allowance			—				5				33,306				—				—				33,311
Securities lending invested collateral, at fair value				4,951				48,312				141				6,126				—				59,530
Other invested assets				12,616				20,810				3,670				17,840				7,093				62,029
Short-term investments				9,967				32,724				3,974				7,125				15,702				69,492
Total Investments and Financial Services assets as shown on the balance sheet				128,627				468,482				155,472				61,374				21,647				835,602
Cash				499				979				476				269				6				2,229
Investment income due and accrued				1,380				4,952				29				255				(2	)			6,614
Real estate, net of accumulated depreciation				342				965				28				95				224				1,654
Total invested assets*			$	130,848			$	475,378			$	156,005			$	61,993			$	21,875			$	846,099

105

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							Life
							Insurance &
			General				Retirement				Financial				Asset
(in millions)			Insurance				Services				Services				Management				Other				Total
December 31, 2007
Fixed maturity securities:
	Bonds available for sale, at fair value		$	74,057				$294,162			$	1,400			$	27,753			$	—			$	397,372
	Bonds held to maturity, at amortized cost			21,355				1				—				225				—				21,581
	Bond trading securities, at fair value			—				9,948				—				34				—				9,982
Equity securities:
	Common stocks available for sale, at fair value			5,599				11,616				—				609				76				17,900
	Common and preferred stocks trading, at fair value			321				21,026				—				29				—				21,376
	Preferred stocks available for sale, at fair value			1,885				477				8				—				—				2,370
Mortgage and other loans receivable, net of allowance				13				24,851				1,365				7,442				56				33,727
Financial Services assets:
	Flight equipment primarily under operating leases, net of accumulated depreciation			—				—				41,984				—				—				41,984
	Securities available for sale, at fair value			—				—				40,305				—				—				40,305
	Trading securities, at fair value			—				—				4,197				—				—				4,197
	Spot commodities			—				—				238				—				—				238
	Unrealized gain on swaps, options and forward transactions, at fair value			—				—				13,010				—				(692	)			12,318
	Trade receivables			—				—				672				—				—				672
	Securities purchased under agreements to resell, at contract value			—				—				20,950				—				—				20,950
	Finance receivables, net of allowance			—				5				31,229				—				—				31,234
Securities lending invested collateral, at fair value				5,031				57,471				148				13,012				—				75,662
Other invested assets				11,895				19,015				3,663				17,261				6,989				58,823
Short-term investments				7,356				25,236				12,249				4,919				1,591				51,351
Total Investments and Financial Services assets as shown on the balance sheet				127,512				463,808				171,418				71,284				8,020				842,042
Cash				497				1,000				389				269				129				2,284
Investment income due and accrued				1,431				4,728				29				401				(2	)			6,587
Real estate, net of accumulated depreciation				349				976				17				89				231				1,662
Total invested assets*			$	129,789				$470,512			$	171,853			$	72,043			$	8,378			$	852,575

*	At December 31, 2007, approximately 65 percent and 35 percent of invested assets were held in domestic and foreign investments, respectively.

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			June 30, 2008																December 31, 2007
			Amortized				Gross				Gross								Amortized				Gross				Gross
			Cost or				Unrealized				Unrealized				Fair				Cost or				Unrealized				Unrealized				Fair
(in millions)			Cost				Gains				Losses				Value				Cost				Gains				Losses				Value
Bonds – available for sale:(a)
	U.S. government and government sponsored entities		$	4,588			$	158			$	34			$	4,712			$	7,956			$	333			$	37			$	8,252
	Obligations of states, municipalities and political subdivisions			45,847				465				660				45,652				46,087				927				160				46,854
	Non-U.S. governments			72,596				3,606				1,285				74,917				67,023				3,920				743				70,200
	Corporate debt			223,902				3,693				8,247				219,348				239,822				6,216				4,518				241,520
	Mortgage-backed, asset- backed and collateralized			111,678				840				13,541				98,977				140,982				1,221				7,703				134,500
Total bonds			$	458,611			$	8,762			$	23,767			$	443,606			$	501,870			$	12,617			$	13,161			$	501,326
Equity securities				16,086				4,332				616				19,802				15,188				5,545				463				20,270
Total			$	474,697			$	13,094			$	24,383			$	463,408			$	517,058			$	18,162			$	13,624			$	521,596
Held to maturity: (b)			$	21,632			$	322			$	145			$	21,809			$	21,581			$	609			$	33			$	22,157

(a)	At December 31, 2007, included AIGFP available for sale securities with a fair value of $39.3 billion, for which AIGFP elected the fair value option effective January 1, 2008, consisting primarily of corporate debt, mortgage-backed, asset-backed and collateralized securities. At June 30, 2008 and December 31, 2007, fixed maturities held by AIG that were below investment grade or not rated totaled $23.0 billion and $27.0 billion, respectively.
(b)	Represents obligations of states, municipalities and political subdivisions.

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			June 30,				December 31,
Rating			2008				2007
	AAA			30	%			38	%
	AA			30				28
	A			22				18
	BBB			13				11
	Below investment grade			4				4
	Non-rated			1				1
Total				100	%			100	%

			June 30,				December 31,
Industry Category			2008				2007
Financial institutions				43	%			42	%
Utilities				12				11
Communications				8				8
Consumer noncyclical				7				7
Capital goods				6				6
Consumer cyclical				5				5
Energy				5				4
Other				14				17
	Total*			100	%			100	%

*	At both June 30, 2008 and December 31, 2007, approximately 95 percent of these investments were rated investment grade.

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			June 30, 2008																December 31, 2007
							Gross				Gross												Gross				Gross
			Amortized				Unrealized				Unrealized				Fair				Amortized				Unrealized				Unrealized				Fair
(in millions)			Cost				Gains				Losses				Value				Cost				Gains				Losses				Value
Bonds — available for sale:
AIG, excluding AIGFP:
	RMBS		$	77,531			$	506			$	10,139			$	67,898			$	89,851			$	433			$	5,504			$	84,780
	CMBS			22,935				210				1,942				21,203				23,918				237				1,156				22,999
	CDO/ ABS			11,212				124				1,460				9,876				10,844				196				593				10,447
Subtotal, excluding AIGFP				111,678				840				13,541				98,977				124,613				866				7,253				118,226
AIGFP*				—				—				—				—				16,369				355				450				16,274
Total			$	111,678			$	840			$	13,541			$	98,977			$	140,982			$	1,221			$	7,703			$	134,500

*	Represents total AIGFP investments in mortgage-backed, asset-backed and collateralized securities for which AIGFP has elected the fair value option effective January 1, 2008. At June 30, 2008, the fair value of these securities were $20.3 billion. An additional $1.8 billion related to insurance company investments is included in Bonds — trading.

			June 30, 2008																				December 31, 2007
							Gross				Gross																Gross				Gross
			Amortized				Unrealized				Unrealized				Fair				Percent				Amortized				Unrealized				Unrealized				Fair				Percent
(in millions)			Cost				Gains				Losses				Value				of Total				Cost				Gains				Losses				Value				of Total
RMBS:
	U.S. agencies		$	16,642			$	243			$	181			$	16,704				25	%		$	14,575			$	320			$	70			$	14,825				17	%
	Prime non-agency (a)			17,575				36				1,646				15,965				23				21,552				72				550				21,074				25
	Alt-A			20,236				69				3,896				16,409				24				25,349				17				1,620				23,746				28
	Other housing- related(b)			3,090				2				532				2,560				4				4,301				2				357				3,946				5
	Subprime			19,988				156				3,884				16,260				24				24,074				22				2,907				21,189				25
Total			$	77,531			$	506			$	10,139			$	67,898				100	%		$	89,851			$	433			$	5,504			$	84,780				100	%

(a)	Includes foreign and jumbo RMBS-related securities.
(b)	Primarily wrapped second-lien.

109

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			Year of Vintage
(in billions)			Prior				2004				2005				2006				2007				2008				Total
Rating:
Total RMBS
	AAA		$	8,968			$	6,057			$	13,149			$	20,561			$	15,485			$	3,011			$	67,231
	AA			1,030				648				1,539				1,940				1,250				—				6,407
	A			221				193				265				273				193				9				1,154
	BBB and below			168				306				378				870				964				53				2,739
Total RMBS			$	10,387			$	7,204			$	15,331			$	23,644			$	17,892			$	3,073			$	77,531
Alt-A RMBS
	AAA		$	753			$	850			$	4,312			$	7,606			$	5,290			$	—			$	18,811
	AA			241				164				301				99				280				—				1,085
	A			27				41				89				18				42				—				217
	BBB and below			15				27				68				13				—				—				123
Total Alt-A			$	1,036			$	1,082			$	4,770			$	7,736			$	5,612			$	—			$	20,236
Subprime RMBS
	AAA		$	398			$	423			$	4,403			$	7,760			$	3,884			$	—			$	16,868
	AA			129				102				398				785				276				—				1,690
	A			77				62				68				126				103				—				436
	BBB and below			1				66				65				475				387				—				994
Total Subprime			$	605			$	653			$	4,934			$	9,146			$	4,650			$	—			$	19,988

		Amortized				Percent
(in millions)		Cost				of Total
CMBS (traditional)		$	20,819				91	%
ReRemic/ CRE CDO			1,465				6
Agency			246				1
Other			405				2
Total		$	22,935				100	%

			Percentage
Rating:
	AAA			79	%
	AA			12
	A			7
	BBB and below			2
Total				100	%

			Percentage
Year:
	2008			1	%
	2007			24
	2006			14
	2005			18
	2004			15
	2003 and prior			28
Total				100	%

110

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			Percentage
Geographic region:
	New York			17	%
	California			15
	Texas			7
	Florida			6
	Virginia			4
	Illinois			4
	New Jersey			3
	Pennsylvania			3
	Georgia			3
	Massachusetts			3
	All Other			35
Total				100	%

			Amortized				Percent
(in millions)			Cost				of Total
Collateral Type:
	Bank loans (CLO)		$	2,108				51	%
	Synthetic investment grade			1,233				30
	Other			733				18
	Subprime ABS			46				1
Total			$	4,120				100	%

			Amortized				Percent
(in millions)			Cost				of Total
Rating:
	AAA		$	872				21	%
	AA			766				19
	A			2,085				51
	BBB			313				8
	Below investment grade and equity			84				1
Total			$	4,120				100	%

														BBB/Not				Short-
(in millions)		AAA				AA				A				Rated				Term				Total
Corporate debt		$	696			$	7,407			$	3,557			$	1,245			$	—			$	12,905
Mortgage-backed, asset-backed and collateralized			30,933				3,170				437				1,640				—				36,180
Cash and short-term investments			—				—				—				—				10,445				10,445
Total		$	31,629			$	10,577			$	3,994			$	2,885			$	10,445			$	59,530

111

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		Percent
		Participation
Domestic Life Insurance and Domestic Retirement Services			71	%
Foreign Life Insurance			11
AIG Property Casualty Group			4
Foreign General Insurance			5
Asset Management			9
Total			100	%

	•	securities that AIG does not intend to hold until recovery;
	•	declines due to foreign exchange rates;
	•	issuer-specific credit events;
	•	certain structured securities impaired under Emerging Issues Task Force Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests that Continue to be Held by a Transferor in Securitized Financial Assets”; and
	•	other impairments, including equity securities and partnership investments.

112

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		Three Months								Six Months
		Ended								Ended
		June 30,								June 30,
(in millions)		2008				2007				2008				2007
Sales of fixed maturities		$	(29	)		$	(210	)		$	(10	)		$	(169	)
Sales of equity securities			240				285				320				443
Sales of real estate and other assets			172				364				325				499
Other-than-temporary impairments			(6,777	)			(417	)			(12,370	)			(884	)
Foreign exchange transactions			(74	)			(244	)			(738	)			(108	)
Derivative instruments			387				194				303				121
Total		$	(6,081	)		$	(28	)		$	(12,170	)		$	(98	)

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							Life
							Insurance &
			General				Retirement				Financial				Asset
(in millions)			Insurance				Services				Services				Management				Other				Total
Three months ended June 30, 2008
Impairment Type:
	Severity		$	(633	)		$	(3,374	)		$	(16	)		$	(820	)		$	—			$	(4,843	)
	Trading at 25 percent or more discount for nine consecutive months			—				—				—				—				—				—
	Lack of intent to hold to recovery			—				(237	)			(1	)			(3	)			—				(241	)
	Foreign currency declines			—				(633	)			—				—				—				(633	)
	Issuer-specific credit events			(46	)			(276	)			—				—				—				(322	)
	Adverse projected cash flows on structured securities			(6	)			(673	)			—				(59	)			—				(738	)
Total			$	(685	)		$	(5,193	)		$	(17	)		$	(882	)		$	—			$	(6,777	)
Three months ended June 30, 2007
Impairment Type:
	Severity		$	—			$	—			$	—			$	—			$	—			$	—
	Trading at 25 percent or more discount for nine consecutive months			—				(6	)			—				—				—				(6	)
	Lack of intent to hold to recovery			(64	)			(211	)			(2	)			—				—				(277	)
	Foreign currency declines			—				(92	)			—				—				—				(92	)
	Issuer-specific credit events			(20	)			(9	)			—				—				(6	)			(35	)
	Adverse projected cash flows on structured securities			—				(6	)			—				(1	)			—				(7	)
Total			$	(84	)		$	(324	)		$	(2	)		$	(1	)		$	(6	)		$	(417	)
Six months ended June 30, 2008
Impairment Type:
	Severity		$	(745	)		$	(6,530	)		$	(27	)		$	(1,645	)		$	(1	)		$	(8,948	)
	Trading at 25 percent or more discount for nine consecutive months			—				—				—				—				—				—
	Lack of intent to hold to recovery			(21	)			(928	)			(2	)			(70	)			—				(1,021	)
	Foreign currency declines			—				(1,034	)			—				—				—				(1,034	)
	Issuer-specific credit events			(67	)			(388	)			—				(38	)			—				(493	)
	Adverse projected cash flows on structured securities			(7	)			(705	)			—				(162	)			—				(874	)
Total			$	(840	)		$	(9,585	)		$	(29	)		$	(1,915	)		$	(1	)		$	(12,370	)
Six months ended June 30, 2007
Impairment Type:
	Severity		$	—			$	—			$	—			$	—			$	—			$	—
	Trading at 25 percent or more discount for nine consecutive months			—				(6	)			—				—				—				(6	)
	Lack of intent to hold to recovery			(72	)			(298	)			(2	)			(2	)			—				(374	)
	Foreign currency declines			—				(304	)			—				—				—				(304	)
	Issuer-specific credit events			(58	)			(101	)			—				(27	)			(6	)			(192	)
	Adverse projected cash flows on structured securities			—				(7	)			—				(1	)			—				(8	)
Total			$	(130	)		$	(716	)		$	(2	)		$	(30	)		$	(6	)		$	(884	)

114

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Rating:															Other
(in millions)			RMBS				CDO				CMBS				Securities				Total
Three months ended June 30, 2008
Fixed Maturities:
	AAA		$	2,964			$	1			$	106			$	—			$	3,071
	AA			704				1				32				—				737
	A			178				6				187				—				371
	BBB and below			254				39				62				—				355
	Nonrated			—				—				—				—				—
Equities				—				—				—				309				309
Total			$	4,100			$	47			$	387			$	309			$	4,843
Six months ended June 30, 2008*
Fixed Maturities:
	AAA		$	4,460			$	22			$	223			$	12			$	4,717
	AA			1,556				41				71				1				1,669
	A			482				55				485				4				1,026
	BBB and below			750				39				125				20				934
	Nonrated			—				—				—				17				17
Equities				—				—				—				585				585
Total			$	7,248			$	157			$	904			$	639			$	8,948

115

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			Less than or equal												Greater than 20%												Greater than 50%
			to 20% of Cost(b)												to 50% of Cost(b)												of Cost(b)												Total
Aging(a)
(dollars in							Unrealized												Unrealized												Unrealized												Unrealized
millions)			Cost(c)				Loss				Items				Cost(c)				Loss				Items				Cost(c)				Loss				Items				Cost(c)				Loss(d)				Items
Investment grade bonds
	0-6 months		$	133,610			$	4,302				19,544			$	1,910			$	467				334			$	—			$	—				—			$	135,520			$	4,769				19,878
	7-12 months			56,297				4,597				4,337				23,676				7,118				740				—				—				—				79,973				11,715				5,077
	>12 months			58,277				4,773				8,523				7,541				2,074				827				—				—				—				65,818				6,847				9,350
Total			$	248,184			$	13,672				32,404			$	33,127			$	9,659				1,901			$	—			$	—				—			$	281,311			$	23,331				34,305
Below investment grade bonds
	0-6 months		$	6,215			$	173				1,384			$	154			$	54				24			$	—			$	—				—			$	6,369			$	227				1,408
	7-12 months			1,294				94				349				74				21				21				—				—				—				1,368				115				370
	>12 months			1,163				79				540				59				15				14				—				—				—				1,222				94				554
Total			$	8,672			$	346				2,273			$	287			$	90				59			$	—			$	—				—			$	8,959			$	436				2,332
Total bonds
	0-6 months		$	139,826			$	4,475				20,928			$	2,064			$	521				358			$	—			$	—				—			$	141,890			$	4,996				21,286
	7-12 months			57,590				4,691				4,686				23,750				7,139				761				—				—				—				81,340				11,830				5,447
	>12 months			59,440				4,852				9,063				7,600				2,089				841				—				—				—				67,040				6,941				9,904
Total(e)			$	256,856			$	14,018				34,677			$	33,414			$	9,749	(f)			1,960			$	—			$	—				—			$	290,270			$	23,767				36,637
Equity securities
	0-6 months		$	4,590			$	336				3,900			$	316			$	86				667			$	—			$	—				—			$	4,906			$	422				4,567
	7-12 months			747				86				325				381				108				272				—				—				—				1,128				194				597
	>12 months			—				—				—				—				—				—				—				—				—				—				—				—
Total			$	5,337			$	422				4,225			$	697			$	194				939			$	—			$	—				—			$	6,034			$	616				5,164

(a)	Represents the number of consecutive months that fair value has been less than cost by any amount.
(b)	Represents the percentage by which fair value is less than cost at the balance sheet date.

(c)	For bonds, represents amortized cost.

(d)	The effect on net income of unrealized losses after taxes will be mitigated upon realization because certain realized losses will be charged to participating policyholder accounts, or realization will result in current decreases in the amortization of certain DAC.

(e)	Includes securities lending invested collateral.

(f)	Of this $9.7 billion, $6.7 billion relates to RMBS, CMBS, CDOs and ABS with unrealized losses between 25 percent and 50 percent; and $1.9 billion relates to RMBS, CMBS, CDOs and ABS with unrealized losses between 20 percent and 25 percent. The balance represents all other classes of fixed maturity securities.

		Third				Fourth				First
		Quarter				Quarter				Quarter
(in millions)		2008				2008				2009				Total
Unrealized loss percent
25 to 50 percent		$	69			$	3,574			$	3,104			$	6,747
20 to less than 25 percent		$	6			$	35			$	1,856			$	1,897

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	•	These securities were valued, in the aggregate, at approximately 92 percent of their current amortized cost.
	•	Approximately 12 percent of these securities were valued at less than 20 percent of their current cost, or amortized cost.
	•	Approximately three percent of the fixed maturity securities had issuer credit ratings that were below investment grade.

		Amortized				Fair
(in millions)		Cost				Value
Due in one year or less		$	8,067			$	7,945
Due after one year through five years			43,226				41,595
Due after five years through ten years			68,941				65,592
Due after ten years			77,824				72,700
Mortgage-backed, asset-backed and collateralized			92,212				78,671
Total		$	290,270			$	266,503

							Credit Exposure
							as a Percentage of Total
							Consolidated
Category			Risk Rating(a)				Shareholders’ Equity
Investment Grade:
	10 largest combined			A+ (weighted) average	(b)			113.9	%
	Single largest non- sovereign (financial institution)			A+				13.3
	Single largest corporate			AAA				9.0
	Single largest sovereign			A				22.2
Non-Investment Grade:
	Single largest sovereign			BB+				1.0
	Single largest non- sovereign			BB+				0.6

(a)	Risk rating is based on external ratings, or equivalent based on AIG’s internal risk rating process.
(b)	Five of the ten largest credit exposures are to highly-rated financial institutions and four are to investment-grade rated sovereigns; none is rated lower than BBB+ or its equivalent.

117

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•	Oil and gas;
•	Electric and water utilities;
•	European regional financial institutions;
•	Global life insurance carriers;
•	Global telecommunications companies;
•	U.S.-based regional financial institutions;
•	Global securities firms and exchanges;
•	Global reinsurance firms;
•	Government sponsored entities;
•	Healthcare companies; and
•	Retail companies.

118

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			2008																2007
							Six Months Ended June 30,																Year Ended December 31,
			As of																As of
(in millions)			June 30				Average				High				Low				December 31				Average				High				Low
Total AIG non-trading market risk:
	Diversified		$	6,645			$	6,363			$	6,851			$	5,593			$	5,593			$	5,316			$	5,619			$	5,073
	Interest rate			4,822				4,798				5,190				4,383				4,383				4,600				4,757				4,383
	Currency			1,022				884				1,022				785				785				729				785				685
	Equity			3,138				3,011				3,268				2,627				2,627				2,183				2,627				1,873
General Insurance:
	Diversified		$	1,377			$	1,365			$	1,377			$	1,356			$	1,363			$	1,637			$	1,892			$	1,363
	Interest rate			1,218				1,138				1,218				1,078				1,117				1,492				1,792				1,117
	Currency			328				296				328				255				255				222				255				205
	Equity			1,030				958				1,030				835				835				659				835				573
Life Insurance & Retirement Services:
	Diversified		$	6,096			$	5,853			$	6,284			$	5,180			$	5,180			$	4,848			$	5,180			$	4,574
	Interest rate			4,658				4,683				4,987				4,405				4,405				4,465				4,611				4,287
	Currency			807				693				807				621				649				621				678				568
	Equity			2,196				2,072				2,210				1,810				1,810				1,512				1,810				1,293
Non-Trading Financial Services:
	Diversified		$	131			$	132			$	167			$	99			$	99			$	117			$	170			$	85
	Interest rate			125				128				164				95				95				116				168				76
	Currency			17				15				17				13				13				12				13				11
	Equity			2				1				2				1				1				1				1				1
Asset Management:
	Diversified		$	61			$	50			$	61			$	38			$	38			$	49			$	74			$	26
	Interest rate			56				43				56				32				32				45				72				22
	Currency			2				2				2				2				2				3				5				2
	Equity			11				12				13				11				13				11				13				8

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							Six Months Ended June 30, 2008																Year Ended December 31, 2007
			As of																As of
(in millions)			June 30				Average				High				Low				December 31				Average				High				Low
Capital Markets trading market risk:
	Diversified		$	6			$	6			$	9			$	5			$	5			$	5			$	8			$	4
	Interest rate			2				2				3				1				3				2				3				2
	Currency			1				1				2				—				1				1				2				1
	Equity			2				2				4				2				3				3				5				2
	Commodity			5				5				7				3				3				3				7				2

120

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121

---

 

122

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ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk

ITEM 4.	Controls and Procedures

123

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ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Maximum Number

Total Number of

of Shares that

Average

Shares

May Yet Be

Price

Purchased as

Purchased

Total

Paid

Part of Publicly

Under the Plans

Number of

per

Announced Plans

or Programs

Period

Shares Purchased(a)

Share

or Programs

at End of Month(b)

April 1 - 30

3,832,276

$

46.78

3,832,276

May 1 - 31

—

—

June 1 - 30

—

—

Total

3,832,276

$

46.78

3,832,276

(a)	Reflects date of delivery. Does not include 4,245 shares delivered or attested to in satisfaction of the exercise price by holders of AIG employee stock options exercised during the three months ended June 30, 2008.
(b)	In February 2007, AIG’s Board of Directors increased AIG’s share repurchase program by authorizing the repurchase of shares with an aggregate purchase price of $8 billion. In November 2007, AIG’s Board of Directors authorized the repurchase of an additional $8 billion in common stock. A balance of $9 billion remained for purchases under the program as of June 30, 2008. AIG does not expect to purchase additional shares under its share repurchase program for the foreseeable future.

ITEM 4.	Submission of Matters to a Vote of Security Holders

Nominee		Shares For				Shares Withheld				Abstained
Stephen F. Bollenbach			1,685,779,934				501,561,929				63,124,235
Martin S. Feldstein			1,691,691,682				506,469,958				52,304,458
Ellen V. Futter			1,652,157,470				542,842,042				55,466,586
Richard C. Holbrooke			1,518,501,128				675,477,016				56,487,954
Fred H. Langhammer			1,675,419,092				541,328,771				33,718,235
George L. Miles, Jr.			1,496,407,272				717,640,163				36,418,663
Morris W. Offit			1,532,712,325				682,550,113				35,203,660
James F. Orr III			1,603,644,400				609,750,276				37,071,422
Virginia M. Rometty			1,653,815,644				542,266,335				54,384,119
Martin J. Sullivan			1,691,337,900				520,729,226				38,398,972
Michael H. Sutton			1,499,773,544				715,209,935				35,482,619
Edmund S.W. Tse			1,690,069,518				521,903,489				38,493,091
Robert B. Willumstad			1,658,750,176				556,048,522				35,667,400

(b)	Approved by a vote of 1,599,775,289 shares for and 616,864,546 shares against, with 33,826,263 shares abstaining, a proposal to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for 2008. There were no broker non-votes with respect to this item.

(c)	Rejected by a vote of 313,891,912 shares for and 1,363,468,866 shares against, with 391,665,309 shares abstaining and 181,440,011 broker non-votes, a shareholder proposal relating to the human right to water.

(d)	Rejected by a vote of 347,720,077 shares for and 1,357,015,652 shares against, with 364,290,358 shares abstaining and 181,440,011 broker non-votes, a shareholder proposal relating to the reporting of political contributions.

ITEM 6.	Exhibits

124

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	AMERICAN INTERNATIONAL GROUP, INC.
	(Registrant)
	/s/ Steven J. Bensinger
	Steven J. Bensinger
	Vice Chairman — Financial Services and
	Chief Financial Officer
	/s/ David L. Herzog
	David L. Herzog
	Senior Vice President and Comptroller
	Principal Accounting Officer

125

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Exhibit
Number		Description				Location
11		Statement re computation of per share earnings				Included in Note 4 of Notes to Consolidated Financial Statements.
12		Computation of ratios of earnings to fixed charges				Filed herewith.
31		Rule 13a-14(a)/15d-14(a) Certifications				Filed herewith.
32		Section 1350 Certifications				Filed herewith.