INVESTMENTS (Tables)

9 Months Ended

Sep. 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)
September 30, 2015
Bonds available for sale:
U.S. government and government sponsored entities	$	1,705	$	179	$	(2)	$	1,882	$	-
Obligations of states, municipalities and political subdivisions		26,305		1,361		(120)		27,546		16
Non-U.S. governments		17,940		818		(330)		18,428		-
Corporate debt		134,852		8,032		(2,762)		140,122		21
Mortgage-backed, asset-backed and collateralized:
RMBS		32,891		3,046		(312)		35,625		1,479
CMBS		13,014		775		(72)		13,717		206
CDO/ABS		15,278		505		(149)		15,634		40
Total mortgage-backed, asset-backed and collateralized		61,183		4,326		(533)		64,976		1,725
Total bonds available for sale(b)		241,985		14,716		(3,747)		252,954		1,762
Equity securities available for sale:
Common stock		986		1,993		(18)		2,961		-
Preferred stock		19		4		-		23		-
Mutual funds		801		43		(36)		808		-
Total equity securities available for sale		1,806		2,040		(54)		3,792		-
Total	$	243,791	$	16,756	$	(3,801)	$	256,746	$	1,762
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 September 30,2015 and December 31,2014, bonds available for sale held by us that were below investment grade or not rated totaled $35.4 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
September 30, 2015
Bonds available for sale:
U.S. government and government sponsored entities	$	121	$	2	$	1	$	-	$	122	$	2
Obligations of states, municipalities and political
subdivisions		3,190		103		259		17		3,449		120
Non-U.S. governments		4,140		194		725		136		4,865		330
Corporate debt		32,818		1,858		4,664		904		37,482		2,762
RMBS		5,056		82		4,146		230		9,202		312
CMBS		2,239		46		571		26		2,810		72
CDO/ABS		4,686		44		2,018		105		6,704		149
Total bonds available for sale		52,250		2,329		12,384		1,418		64,634		3,747
Equity securities available for sale:
Common stock		96		18		6		-		102		18
Mutual funds		297		28		16		8		313		36
Total equity securities available for sale		393		46		22		8		415		54
Total	$	52,643	$	2,375	$	12,406	$	1,426	$	65,049	$	3,801
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
September 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	$	10,295	$	10,412	$	945	$	926
Due after one year through five years		46,854		49,320		7,176		6,915
Due after five years through ten years		55,985		57,443		17,681		16,601
Due after ten years		67,668		70,803		23,330		21,476
Mortgage-backed, asset-backed and collateralized		61,183		64,976		19,249		18,716
Total	$	241,985	$	252,954	$	68,381	$	64,634
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 September 30,								Nine Months Ended September 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	$	96	$	112	$	118	$	21	$	439	$	289		$	528	$	65
Equity securities		24		8		33		4		544		16			102		10
Total	$	120	$	120	$	151	$	25	$	983	$	305		$	630	$	75

The fair value of AIG's other securities

		September 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	$	3,813	21	%	$	5,498	27	%
Obligations of states, municipalities and political subdivisions		75	-			122	1
Non-U.S. governments		2	-			2	-
Corporate debt		1,249	7			719	3
Mortgage-backed, asset-backed and collateralized:
RMBS		2,285	13			2,094	10
CMBS		819	5			1,077	5
CDO/ABS and other collateralized*		8,579	48			10,200	49
Total mortgage-backed, asset-backed and collateralized		11,683	66			13,371	64
Total fixed maturity securities		16,822	94			19,712	95
Equity securities		1,066	6			1,049	5
Total	$	17,888	100	%	$	20,761	100	%

* Includes $748 million and $859million of U.S. Government agency-backed ABS at September 30,2015 and December 31,2014, respectively.

Components of net investment income

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2015		2014		2015		2014
Fixed maturity securities, including short-term investments	$	2,794	$	3,022	$	8,477	$	9,264
Equity securities		(5)		135		76		67
Interest on mortgage and other loans		360		318		1,046		947
Alternative investments*		88		636		1,471		2,108
Real estate		66		25		116		86
Other investments		36		25		86		34
Total investment income		3,339		4,161		11,272		12,506
Investment expenses		133		133		402		398
Net investment income	$	3,206	$	4,028	$	10,870	$	12,108

*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				Nine Months Ended
	September 30,				September 30,
(in millions)		2015		2014		2015			2014
Sales of fixed maturity securities	$	(16)	$	97	$	150		$	463
Sales of equity securities		16		29		528			92
Other-than-temporary impairments:
Severity		(10)		-		(12)			-
Change in intent		(81)		(14)		(193)			(20)
Foreign currency declines		(5)		(3)		(37)			(13)
Issuer-specific credit events		(176)		(31)		(314)			(124)
Adverse projected cash flows		(1)		(2)		(9)			(7)
Provision for loan losses		32		(11)		43			9
Foreign exchange transactions		(16)		350		304			329
Derivative instruments		13		102		509			(114)
Impairments on investments in life settlements		(58)		(52)		(200)			(139)
Other		(40)		71		356	*		70
Net realized capital gains (losses)	$	(342)	$	536	$	1,125		$	546

* 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				Nine Months Ended
	September 30,				September 30,
(in millions)		2015		2014		2015		2014
Increase (decrease) in unrealized appreciation (depreciation) of investments:
Fixed maturity securities	$	(1,180)	$	(1,515)	$	(5,583)	$	6,123
Equity securities		(384)		303		(479)		348
Other investments		(85)		94		(625)		127
Total Increase (decrease) in unrealized appreciation (depreciation) of investments	$	(1,649)	$	(1,118)	$	(6,687)	$	6,598

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2015		2014		2015		2014
Balance, beginning of period	$	2,238	$	3,166	$	2,659	$	3,872
Increases due to:
Credit impairments on new securities subject to impairment losses		51		13		101		35
Additional credit impairments on previously impaired securities		37		5		84		59
Reductions due to:
Credit impaired securities fully disposed of for which there was no
prior intent or requirement to sell		(63)		(116)		(213)		(528)
Credit impaired securities for which there is a current intent or
anticipated requirement to sell		(1)		-		(1)		-
Accretion on securities previously impaired due to credit*		(197)		(183)		(565)		(544)
Other		-		-		-		(9)
Balance, end of period	$	2,065	$	2,885	$	2,065	$	2,885

* 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)	$	32,656
Cash flows expected to be collected*		26,444
Recorded investment in acquired securities		17,662

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

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

(in millions)	September 30, 2015		December 31, 2014
Outstanding principal balance	$	17,017	$	16,962
Amortized cost		12,408		12,216
Fair value		13,426		13,462

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2015		2014		2015		2014
Balance, beginning of period	$	6,833	$	7,042	$	6,865	$	6,940
Newly purchased PCI securities		136		358		551		1,127
Disposals		-		-		(13)		-
Accretion		(220)		(223)		(661)		(654)
Effect of changes in interest rate indices		4		(96)		(140)		(327)
Net reclassification from (to) non-accretable difference,
including effects of prepayments		180		30		331		25
Balance, end of period	$	6,933	$	7,111	$	6,933	$	7,111

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

(in millions)		September 30, 2015		December 31, 2014
Fixed maturity securities available for sale	$	996	$	-
Other bond securities, at fair value	$	994	$	2,122

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

(in millions)		September 30, 2015		December 31, 2014
Securities collateral pledged to us	$	2,969	$	2,506
Amount sold or repledged by us	$	126	$	131