INVESTMENTS (Tables)

6 Months Ended

Jun. 30, 2015

INVESTMENTS

The amortized cost or cost and fair value of AIG's available for sale securities and other invested assets carried at fair value

										Other-Than-
		Amortized		Gross		Gross				Temporary
		Cost or		Unrealized		Unrealized		Fair		Impairments
(in millions)		Cost		Gains		Losses		Value		in AOCI(a)
June 30, 2015
Bonds available for sale:
U.S. government and government sponsored entities	$	2,364	$	164	$	(14)	$	2,514	$	-
Obligations of states, municipalities and political subdivisions		26,610		1,224		(172)		27,662		15
Non-U.S. governments		18,441		911		(203)		19,149		-
Corporate debt		134,361		8,386		(1,884)		140,863		29
Mortgage-backed, asset-backed and collateralized:
RMBS		33,448		3,133		(333)		36,248		1,582
CMBS		12,944		687		(109)		13,522		212
CDO/ABS		14,749		485		(126)		15,108		43
Total mortgage-backed, asset-backed and collateralized		61,141		4,305		(568)		64,878		1,837
Total bonds available for sale(b)		242,917		14,990		(2,841)		255,066		1,881
Equity securities available for sale:
Common stock		1,499		2,364		(12)		3,851		-
Preferred stock		21		4		-		25		-
Mutual funds		865		62		(48)		879		-
Total equity securities available for sale		2,385		2,430		(60)		4,755		-
Total	$	245,302	$	17,420	$	(2,901)	$	259,821	$	1,881
December 31, 2014
Bonds available for sale:
U.S. government and government sponsored entities	$	2,806	$	204	$	(18)	$	2,992	$	-
Obligations of states, municipalities and political subdivisions		25,979		1,729		(49)		27,659		(13)
Non-U.S. governments		20,280		966		(151)		21,095		-
Corporate debt		134,961		10,594		(1,122)		144,433		64
Mortgage-backed, asset-backed and collateralized:
RMBS		34,377		3,435		(292)		37,520		1,767
CMBS		12,129		815		(59)		12,885		215
CDO/ABS		12,775		628		(128)		13,275		47
Total mortgage-backed, asset-backed and collateralized		59,281		4,878		(479)		63,680		2,029
Total bonds available for sale(b)		243,307		18,371		(1,819)		259,859		2,080
Equity securities available for sale:
Common stock		1,185		2,461		(17)		3,629		-
Preferred stock		21		4		-		25		-
Mutual funds		724		54		(37)		741		-
Total equity securities available for sale		1,930		2,519		(54)		4,395		-
Total	$	245,237	$	20,890	$	(1,873)	$	264,254	$	2,080

(a) Represents the amount of other-than-temporary impairments recognized in Accumulated other comprehensive income. Amount includes unrealized gains and losses on impaired securities relating to changes in the fair value of such securities subsequent to the impairment measurement date.

(b) At June 30,2015 and December 31,2014, bonds available for sale held by us that were below investment grade or not rated totaled $35.9 billion and $35.1 billion, respectively.

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

	Less than 12 Months				12 Months or More				Total
				Gross				Gross				Gross
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in millions)		Value		Losses		Value		Losses		Value		Losses
June 30, 2015
Bonds available for sale:
U.S. government and government sponsored entities	$	431	$	8	$	128	$	6	$	559	$	14
Obligations of states, municipalities and political
subdivisions		4,954		147		315		25		5,269		172
Non-U.S. governments		3,363		113		743		90		4,106		203
Corporate debt		31,074		1,351		4,161		533		35,235		1,884
RMBS		6,478		162		2,878		171		9,356		333
CMBS		3,040		82		610		27		3,650		109
CDO/ABS		3,136		39		1,593		87		4,729		126
Total bonds available for sale		52,476		1,902		10,428		939		62,904		2,841
Equity securities available for sale:
Common stock		85		12		1		-		86		12
Mutual funds		544		41		29		7		573		48
Total equity securities available for sale		629		53		30		7		659		60
Total	$	53,105	$	1,955	$	10,458	$	946	$	63,563	$	2,901
December 31, 2014
Bonds available for sale:
U.S. government and government sponsored entities	$	526	$	5	$	281	$	13	$	807	$	18
Obligations of states, municipalities and political
subdivisions		495		9		794		40		1,289		49
Non-U.S. governments		1,606		42		1,690		109		3,296		151
Corporate debt		12,132		450		11,570		672		23,702		1,122
RMBS		4,621		109		3,996		183		8,617		292
CMBS		220		1		2,087		58		2,307		59
CDO/ABS		3,857		50		1,860		78		5,717		128
Total bonds available for sale		23,457		666		22,278		1,153		45,735		1,819
Equity securities available for sale:
Common stock		88		16		2		1		90		17
Mutual funds		280		37		64		-		344		37
Total equity securities available for sale		368		53		66		1		434		54
Total	$	23,825	$	719	$	22,344	$	1,154	$	46,169	$	1,873

The amortized cost and fair value of fixed maturity securities available for sale by contractual maturity

	Total Fixed Maturity Securities				Fixed Maturity Securities in a Loss
June 30, 2015	Available for Sale				Position Available for Sale
(in millions)		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	11,166	$	11,331	$	927	$	912
Due after one year through five years		46,392		49,034		6,317		6,171
Due after five years through ten years		58,311		60,423		16,885		16,245
Due after ten years		65,907		69,400		23,313		21,841
Mortgage-backed, asset-backed and collateralized		61,141		64,878		18,303		17,735
Total	$	242,917	$	255,066	$	65,745	$	62,904
December 31, 2014
Due in one year or less	$	9,821	$	9,975	$	637	$	620
Due after one year through five years		48,352		50,873		6,669		6,529
Due after five years through ten years		62,685		65,889		12,873		12,338
Due after ten years		63,168		69,442		10,255		9,607
Mortgage-backed, asset-backed and collateralized		59,281		63,680		17,120		16,641
Total	$	243,307	$	259,859	$	47,554	$	45,735

The gross realized gains and gross realized losses from sales of AIG's available for sale securities

	Three Months Ended June 30,								Six Months Ended June 30,
		2015				2014			2015					2014
		Gross		Gross		Gross		Gross		Gross		Gross		Gross		Gross
	Realized		Realized		Realized		Realized		Realized		Realized		Realized			Realized
(in millions)		Gains		Losses		Gains		Losses		Gains		Losses		Gains		Losses
Fixed maturity securities	$	194	$	59	$	194	$	13	$	343	$	177		$	410	$	44
Equity securities		24		3		39		4		520		8			69		6
Total	$	218	$	62	$	233	$	17	$	863	$	185		$	479	$	50

The fair value of AIG's other securities

		June 30, 2015				December 31, 2014
		Fair	Percent			Fair	Percent
(in millions)		Value	of Total			Value	of Total
Fixed maturity securities:
U.S. government and government sponsored entities	$	3,815	21	%	$	5,498	27	%
Obligations of states, municipalities and political subdivisions		75	-			122	1
Non-U.S. governments		2	-			2	-
Corporate debt		452	4			719	3
Mortgage-backed, asset-backed and collateralized:
RMBS		2,210	12			2,094	10
CMBS		867	5			1,077	5
CDO/ABS and other collateralized*		9,177	51			10,200	49
Total mortgage-backed, asset-backed and collateralized		12,254	68			13,371	64
Total fixed maturity securities		16,598	93			19,712	95
Equity securities		1,323	7			1,049	5
Total	$	17,921	100	%	$	20,761	100	%

* Includes $793 million and $859 million of U.S. Government agency backed ABS at June 30,2015 and December 31,2014, respectively.

Components of net investment income

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)		2015		2014		2015		2014
Fixed maturity securities, including short-term investments	$	2,800	$	3,111	$	5,683	$	6,242
Equity securities		66		17		81		(68)
Interest on mortgage and other loans		347		311		686		629
Alternative investments*		694		547		1,383		1,472
Real estate		24		33		50		61
Other investments		12		(2)		50		9
Total investment income		3,943		4,017		7,933		8,345
Investment expenses		117		133		269		265
Net investment income	$	3,826	$	3,884	$	7,664	$	8,080

*Includes hedge funds, private equity funds, affordable housing partnerships, investments in life settlements and other investment partnerships.

Components of net realized capital gains (losses)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)		2015		2014		2015		2014
Sales of fixed maturity securities	$	135	$	181	$	166	$	366
Sales of equity securities		21		35		512		63
Other-than-temporary impairments:
Severity		-		-		(2)		-
Change in intent		(88)		(1)		(112)		(6)
Foreign currency declines		(3)		(6)		(32)		(10)
Issuer-specific credit events		(70)		(44)		(138)		(93)
Adverse projected cash flows		(3)		(4)		(8)		(5)
Provision for loan losses		(13)		15		11		20
Foreign exchange transactions		66		(47)		320		(21)
Derivative instruments		288		73		496		(216)
Impairments on investments in life settlements		(72)		(45)		(142)		(87)
Other*		(135)		5		396		(1)
Net realized capital gains	$	126	$	162	$	1,467	$	10

* Includes realized gains due to the sale of Class B shares of Prudential Financial, Inc. and common shares of Springleaf Holdings, Inc. and realized losses on the sale of ordinary shares of AerCap.

Schedule of increase (decrease) in unrealized appreciation (depreciation) of available for sale securities and other investements

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)		2015		2014		2015		2014
Increase (decrease) in unrealized appreciation (depreciation) of investments:
Fixed maturity securities	$	(6,559)	$	3,644	$	(4,403)	$	7,638
Equity securities		287		173		(95)		45
Other investments		(37)		(40)		(540)		33
Total Increase (decrease) in unrealized appreciation (depreciation) of investments	$	(6,309)	$	3,777	$	(5,038)	$	7,716

Credit impairments recognized in earnings for available for sale fixed maturity securities

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)		2015		2014		2015		2014
Balance, beginning of period	$	2,466	$	3,389	$	2,659	$	3,872
Increases due to:
Credit impairments on new securities subject to impairment losses		35		14		50		22
Additional credit impairments on previously impaired securities		25		18		47		54
Reductions due to:
Credit impaired securities fully disposed of for which there was no
prior intent or requirement to sell		(108)		(82)		(150)		(412)
Accretion on securities previously impaired due to credit*		(180)		(173)		(368)		(361)
Other		-		-		-		(9)
Balance, end of period	$	2,238	$	3,166	$	2,238	$	3,166

* Represents both accretion recognized due to changes in cash flows expected to be collected over the remaining expected term of the credit impaired securities and the accretion due to the passage of time.

Schedule of Purchased Credit Impaired (PCI) Securities, at acquisition date

(in millions)	At Date of Acquisition
Contractually required payments (principal and interest)	$	32,118
Cash flows expected to be collected*		25,976
Recorded investment in acquired securities		17,330

*Represents undiscounted expected cash flows, including both principal and interest.

Schedule of Purchased Credit Impaired (PCI) Securities, at reporting date

(in millions)	June 30, 2015		December 31, 2014
Outstanding principal balance	$	17,232	$	16,962
Amortized cost		12,542		12,216
Fair value		13,669		13,462

Activity for accretable yield on Purchased Credit Impaired (PCI) Securities

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)		2015		2014		2015		2014
Balance, beginning of period	$	6,765	$	7,170	$	6,865	$	6,940
Newly purchased PCI securities		170		247		415		769
Disposals		(13)		-		(13)		-
Accretion		(221)		(219)		(441)		(431)
Effect of changes in interest rate indices		(6)		(172)		(144)		(231)
Net reclassification from (to) non-accretable difference,
including effects of prepayments		138		16		151		(5)
Balance, end of period	$	6,833	$	7,042	$	6,833	$	7,042

Schedule of fair value of securities pledged to counterparties under secured financing transactions

(in millions)		June 30, 2015		December 31, 2014
Fixed maturity securities available for sale	$	843	$	-
Other bond securities, at fair value	$	176	$	2,122

Schedule of fair value of securities pledged to the entity under reverse repurchase agreements

(in millions)		June 30, 2015		December 31, 2014
Securities collateral pledged to us	$	5,388	$	2,506
Amount sold or repledged by us	$	164	$	131