Key questions and answers from the second quarter fiscal 2007 earnings call conducted by American International Group Inc. on August 9, 2007.

Josh Shanker (Citigroup): Is there any slowing of business generation in AIG Financial Products, as there might be less buyers for the less subordinated tranches?

Andy Foster: In terms of whether we are going to be slowing down our business, the CDOs and writing protection on those, that basically stopped completely back at the end of 2005, when we stopped taking sub-prime as collateral, given the increasing percentage in all the CDOs, that meant that we were effectively ruled out of that market. Yes, that part of our business is effectively stopped.

Joe Cassano: Obviously with the last four weeks of market volatility here, we are not seeing new portfolios of other assets to write, right now. There has been a bit of a slowdown in the flow within the credit business. The Financial Products platform is fairly diverse, and we still see good flows in our equity business, our commodities business, our currencies and rates businesses.

Josh Shanker: Has AIG corporate been a purchaser of any of the less subordinated tranches from AIG Financial Products?

Joe Cassano: If it did happen, it happened coincidentally and it may have been very small. We don’t work in a coordinated fashion with the parent in terms of the super senior portfolios that we have been writing protection on. If it happened, it has to be a de minimus one-off kind of thing.

Josh Shanker: Given some of the ratios that we have seen for 2Q 2007, which have looked good in American General, should we be concerned about what 3Q 2007's ratios are going to be looking like?

Rick Geissinger: Our credit quality statistics for the end of the second quarter are strong. We set target ranges back in 1996, and we are well below those for delinquency. The target range was 3% to 4%. Charge-off range was 0.75% to 1.25%. But we are well below those target ranges within which we can operate the business at a 15% after-tax ROE or better.

If you look at historical seasonality, delinquency and charge-offs get a little worse every year in the third and fourth quarter. You can expect to see those numbers be a little bit higher. We do have July results, and the change in delinquency and charge-offs is slightly up, but de minimus.

Andrew Kligerman (UBS): The partnership income was phenomenally strong this quarter. At this point in time, how the performance would be if the quarter stopped right now?

Rick Geissinger: It would be a little difficult to tell you exactly what it would look like if the quarter stopped right now. We have said repeatedly that we expect our partnership portfolio, including our hedge fund portfolio, to yield somewhere between 10% and 15% a quarter on a long-term basis. We have been significantly north of that for the last six quarters. The last five quarters anyway.

Andrew Kligerman: On Japan, could you provide an update on the regulatory environment that was mentioned in the press release and how that might affect the Japan sales going forward?

Bob Clyde: The regulatory environment is still strict. The claims reviews that we have been going through have been public information and that has put a little bit of pressure on sales for the industry. This is an industry wide issue. In first quarter, the FSA undertook an industry wide claims review covering claims for the periods of 2001 to 2005; and required us to submit our results to the FSA on April 13. At the first quarter, we reserved for our best estimate exposure for additional claims resulting from this review and subsequent follow-up with our claimants. We have had charges for additional claims and reserves in the second quarter.

Andrew Kligerman: Are the Japan sales going to tick up again now or do you still think there will still be pressure for a while?

Bob Clyde: We expect the second half to be better than the first half by a few percentage points. We anticipate that on June 25 ALICO Japan launched a new premium medical product called Returns, which has been well received by our agency force and also direct marketing. Direct marketing premiums will take some time to be realized, but the initial response rate to our TV advertising has been good. In addition, ALICO has launched a revitalization plan for agency with renewed emphasis on medical sales. Edison Life has seen increased interest in its cancer products. Star Life continues to produce strong medical sales, as it expands its agency and branch channels. Furthermore, while we continue to rationalize our marketing spend in ALICO Japan over this past year and that has had a dampening effect on sales. It is clearly improving our profitability, which will help drive the bottom line going forward.

Andrew Kligerman: You mentioned that you had strong commercial property, commercial liability rates or results. It was a little weaker in excess casualty and D&O. Could you give a sense of the rates, where they are going, and what is the range right now?

Martin Sullivan: As we mentioned on our first-quarter call, we saw an uptick in competition in April. That continued somewhat through the quarter. Rates domestically were down 7% to 10%; internationally it was in the 10% range. But, we saw a further uptick in competition in the month of July.

Overall, terms and conditions are still holding reasonably well, particularly outside of the US. But we are seeing some pressure on deductibles. It is not a significant change, but it is a little difference in scenario.

Kris Moor: Yes, further on the D&O rates, they were down for the quarter about 10% to 15% and on excess liability down about 8% to 10%. July was a little tougher month. It was the first time our overall portfolio in property went to negative rates, down a few points. The third quarter is heating up a little bit more than the second quarter.

Jay Gelb (Lehman Brothers): On an overall basis on the investment portfolio, can you walk us through the accounting treatment of when AIG may need to take mark-to-market adjustments in the investment portfolio because of the sub-prime issue?