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DERIVATIVES AND HEDGE ACCOUNTING (Tables)
 9 Months Ended
Sep. 30, 2017
DERIVATIVES AND HEDGE ACCOUNTING  
Notional amounts and fair values of derivative instruments
September 30, 2017December 31, 2016
Gross Derivative AssetsGross Derivative LiabilitiesGross Derivative AssetsGross Derivative Liabilities
NotionalFairNotionalFairNotionalFairNotionalFair
(in millions)AmountValueAmountValueAmountValueAmountValue
Derivatives designated as
hedging instruments:(a)
Interest rate contracts$290$1$615$9$175$-$782$11
Foreign exchange contracts2,6341984,5462893,5273852,602184
Equity contracts--1433--1137
Derivatives not designated
as hedging instruments:(a)
Interest rate contracts49,8012,25333,3032,24551,0302,32844,2113,066
Foreign exchange contracts6,14366910,7631,0129,4689357,6741,185
Equity contracts14,3404698,2245614,0603058,63312
Credit contracts(b)3197527842861331
Other contracts(c)38,0312361537,63322626
Total derivatives, gross$111,242$3,614$58,630$3,897$115,897$3,977$64,938$4,802
Counterparty netting(d)(1,390)(1,390)(1,265)(1,265)
Cash collateral(e)(1,324)(1,395)(903)(1,521)
Total derivatives on condensed
consolidated balance sheets(f)$900$1,112$1,809$2,016

(a) Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.

(b) As of September 30, 2017 and December 31, 2016, included CDSs on super senior multi-sector CDOs with a net notional amount of $716 million and $801 million (fair value liability of $263 million and $308 million), respectively. The expected weighted average maturity as of September 30, 2017 is six years. Because of long-term maturities of the CDSs in the portfolio, we are unable to make reasonable estimates of the periods during which any payments would be made. However, the net notional amount represents the maximum exposure to loss on the portfolio. As of September 30, 2017 and December 31, 2016, there were no super senior corporate debt/CLOs remaining.

(c) Consists primarily of stable value wraps and contracts with multiple underlying exposures.

(d) Represents netting of derivative exposures covered by a qualifying master netting agreement.

(e) Represents cash collateral posted and received that is eligible for netting.

(f) Freestanding derivatives only, excludes Embedded derivatives. Derivative instrument assets and liabilities are recorded in Other Assets and Liabilities, respectively. Fair value of assets related to bifurcated Embedded derivatives was zero at both September 30, 2017 and December 31, 2016. Fair value of liabilities related to bifurcated Embedded derivatives was $4.0 billion and $3.1 billion, respectively, at September 30, 2017 and December 31, 2016. A bifurcated Embedded derivative is generally presented with the host contract in the Condensed Consolidated Balance Sheets. Embedded derivatives are primarily related to guarantee features in variable annuity products, which include equity and interest rate components.

Gain (loss) recognized in earnings on AIG's derivative instruments in fair value hedging relationships in the Consolidated Statements of Income
Gains/(Losses) Recognized in Earnings for:Including Gains/(Losses) Attributable to:
HedgingHedgedHedgeExcluded
(in millions)Derivatives(a)ItemsIneffectivenessComponentsOther(b)
Three Months Ended September 30, 2017
Interest rate contracts:
Realized capital gains/(losses)$(1)$1$-$-$-
Other income-----
Foreign exchange contracts:
Realized capital gains/(losses)(157)142-(15)-
Other income-----
Equity contracts:
Realized capital gains/(losses)(3)2-(1)-
Three Months Ended September 30, 2016
Interest rate contracts:
Realized capital gains/(losses)$(1)$1$-$-$-
Other income-3--3
Foreign exchange contracts:
Realized capital gains/(losses)(10)(34)-(44)-
Other income-3--3
Equity contracts:
Realized capital gains/(losses)8(9)-(1)-
Nine Months Ended September 30, 2017
Interest rate contracts:
Realized capital gains/(losses)$1$(1)$-$-$-
Other income-----
Foreign exchange contracts:
Realized capital gains/(losses)(318)332-14-
Other income-4--4
Equity contracts:
Realized capital gains/(losses)(29)26-(3)-
Nine Months Ended September 30, 2016
Interest rate contracts:
Realized capital gains/(losses)$-$(6)$-$-$(6)
Other income-10--10
Foreign exchange contracts:
Realized capital gains/(losses)413(443)-(30)-
Other income-15--15
Equity contracts:
Realized capital gains/(losses)28(28)---

(a) The amounts presented do not include the periodic net coupon settlements of the derivative contract or the coupon income (expense) related to the hedged item.

(b) Represents accretion/amortization of opening fair value of the hedged item at inception of hedge relationship, amortization of basis adjustment on hedged item following the discontinuation of hedge accounting, and the release of debt basis adjustment following the repurchase of issued debt that was part of previously-discontinued fair value hedge relationship.
Effect of AIG's derivative instruments not designated as hedging instruments in the Consolidated Statements of Income
Gains (Losses) Recognized in Earnings
Three Months EndedNine Months Ended
September 30,September 30,
(in millions)2017201620172016
By Derivative Type:
Interest rate contracts$(18)$91$81$1,464
Foreign exchange contracts(98)49(220)203
Equity contracts(233)(317)(723)(589)
Commodity contracts----
Credit contracts19365570
Other contracts19225558
Embedded derivatives(213)30(326)(1,255)
Total$(524)$(89)$(1,078)$(49)
By Classification:
Policy fees$20$20$59$60
Net investment income(3)2(10)14
Net realized capital losses(550)(181)(1,250)(93)
Other income (losses)869121(43)
Policyholder benefits and claims incurred11213
Total$(524)$(89)$(1,078)$(49)