aig-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

——————————

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-8787

American International Group, Inc.

(Exact name of registrant as specified in its charter)


Delaware			13-2592361
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1271 Avenue of the Americas, New York, New York			10020
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (212) 770-7000

——————————

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, Par Value $2.50 Per Share	AIG	New York Stock Exchange
4.875% Series A-3 Junior Subordinated Debentures	AIG 67EU	New York Stock Exchange
Stock Purchase Rights		New York Stock Exchange
Depositary Shares Each Representing a 1/1,000th Interest in a Share of Series A 5.85% Non-Cumulative Perpetual Preferred Stock	AIG PRA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of October 27, 2022, there were 742,980,010 shares outstanding of the registrant’s common stock.

AMERICAN INTERNATIONAL GROUP, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

FORM 10-Q


Item Number	Description		Page
Part I – Financial Information
ITEM 1	Financial Statements		2
	Note 1.	Basis of Presentation	9
	Note 2.	Summary of Significant Accounting Policies	11
	Note 3.	Segment Information	13
	Note 4.	Fair Value Measurements	16
	Note 5.	Investments	33
	Note 6.	Lending Activities	42
	Note 7.	Reinsurance	46
	Note 8.	Variable Interest Entities	48
	Note 9.	Derivatives and Hedge Accounting	50
	Note 10.	Insurance Liabilities	54
	Note 11.	Contingencies, Commitments and Guarantees	56
	Note 12.	Equity	58
	Note 13.	Earnings Per Common Share (EPS)	63

	Note 14.	Income Taxes	64
	Note 15.	Subsequent Events	67
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		68
	•Cautionary Statement Regarding Forward-Looking Information		68
	•Use of Non-GAAP Measures		71
	•Critical Accounting Estimates		73
	•Executive Summary		74
	•Consolidated Results of Operations		82
	•Business Segment Operations		87
	•Investments		116
	•Insurance Reserves		126
	•Liquidity and Capital Resources		139
	•Enterprise Risk Management		149
	•Regulatory Environment		149
	•Glossary		150
	•Acronyms		153
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk		154
ITEM 4	Controls and Procedures		154
Part II – Other Information
ITEM 1	Legal Proceedings		155
ITEM 1A	Risk Factors		155
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds		156
ITEM 4	Mine Safety Disclosures		156
ITEM 6	Exhibits		157
Signatures			158


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Part I – Financial Information

Item 1. | Financial Statements

American International Group, Inc.

Condensed Consolidated Balance Sheets (unaudited)


(in millions, except for share data)	September 30, 2022		December 31, 2021
Assets:
Investments:
Fixed maturity securities:
Bonds available for sale, at fair value, net of allowance for credit losses of $115 in 2022 and $98 in 2021 (amortized cost: 2022 - $251,983; 2021 - $259,210)*	$	219,767	$	277,202
Other bond securities, at fair value (See Note 5)*		7,131		6,278
Equity securities, at fair value (See Note 5)*		608		739
Mortgage and other loans receivable, net of allowance for credit losses of $655 in 2022 and $629 in 2021*		48,124		46,048
Other invested assets (portion measured at fair value: 2022 - $11,839; 2021 - $10,504)*		15,794		15,668
Short-term investments, including restricted cash of $133 in 2022 and $197 in 2021 (portion measured at fair value: 2022 - $5,344; 2021 - $4,426)*		14,663		13,357
Total investments		306,087		359,292
Cash*		2,294		2,198
Accrued investment income*		2,286		2,239
Premiums and other receivables, net of allowance for credit losses and disputes of $176 in 2022 and $185 in 2021		13,476		12,409
Reinsurance assets - Fortitude Re, net of allowance for credit losses and disputes of $0 in 2022 and $0 in 2021		32,598		33,365
Reinsurance assets - other, net of allowance for credit losses and disputes of $345 in 2022 and $333 in 2021		40,949		40,919
Deferred income taxes		15,250		11,714
Deferred policy acquisition costs		15,822		10,514
Other assets, net of allowance for credit losses of $49 in 2022 and $49 in 2021, including restricted cash of $69 in 2022 and $32 in 2021 (portion measured at fair value: 2022 - $500; 2021 - $957)*		12,868		14,351
Separate account assets, at fair value		81,302		109,111
Total assets	$	522,932	$	596,112
Liabilities:
Liability for unpaid losses and loss adjustment expenses, including allowance for credit losses of $14 in 2022 and $14 in 2021	$	75,519	$	79,026
Unearned premiums		20,371		19,313
Future policy benefits for life and accident and health insurance contracts		57,266		59,950
Policyholder contract deposits (portion measured at fair value: 2022 - $6,385; 2021 - $9,736)		157,612		156,686
Other policyholder funds		3,928		3,476
Fortitude Re funds withheld payable (portion measured at fair value: 2022 - $(2,505); 2021 - $5,922)		30,424		40,771
Other liabilities (portion measured at fair value: 2022 - $276; 2021 - $586)*		25,077		28,704
Short-term and long-term debt, of which $1,502 is short-term debt in 2022 (portion measured at fair value: 2022 - $1,613; 2021 - $1,871)		24,508		23,741
Debt of consolidated investment entities*		5,924		6,422
Separate account liabilities		81,302		109,111
Total liabilities		481,931		527,200
Contingencies, commitments and guarantees (See Note 11)
AIG shareholders’ equity:
Series A non-cumulative preferred stock and additional paid in capital, $5.00 par value; 100,000,000 shares authorized; shares issued: 2022 - 20,000 and 2021 - 20,000; liquidation preference $500		485		485
Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued: 2022 - 1,906,671,492 and 2021 - 1,906,671,492		4,766		4,766
Treasury stock, at cost; 2022 - 1,159,455,582 shares; 2021 - 1,087,984,129 shares of common stock		(55,745)		(51,618)
Additional paid-in capital		80,301		81,851
Retained earnings		33,009		23,785
Accumulated other comprehensive income (loss)		(23,793)		6,687
Total AIG shareholders’ equity		39,023		65,956
Non-redeemable noncontrolling interests		1,978		2,956
Total equity		41,001		68,912
Total liabilities and equity	$	522,932	$	596,112

*See Note 8 for details of balances associated with variable interest entities.

See accompanying Notes to Condensed Consolidated Financial Statements.


2			AIG \| Third Quarter 2022 Form 10-Q

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American International Group, Inc.

Condensed Consolidated Statements of Income (Loss) (unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(dollars in millions, except per common share data)		2022		2021		2022		2021
Revenues:
Premiums	$	7,832	$	7,504	$	22,458	$	21,925
Policy fees		732		714		2,238		2,269
Net investment income:
Net investment income - excluding Fortitude Re funds withheld assets		2,513		3,220		7,875		9,559
Net investment income - Fortitude Re funds withheld assets		155		495		634		1,488
Total net investment income		2,668		3,715		8,509		11,047
Net realized gains (losses):
Net realized gains - excluding Fortitude Re funds withheld assets and embedded derivative		1,504		679		3,447		1,331
Net realized gains (losses) on Fortitude Re funds withheld assets		(86)		190		(312)		536
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative		1,757		(209)		7,851		117
Total net realized gains		3,175		660		10,986		1,984
Other income		195		242		660		745
Total revenues		14,602		12,835		44,851		37,970
Benefits, losses and expenses:
Policyholder benefits and losses incurred		6,187		5,959		16,565		17,182
Interest credited to policyholder account balances		951		923		2,738		2,663
Amortization of deferred policy acquisition costs		1,248		1,260		3,983		3,479
General operating and other expenses		2,093		2,240		6,497		6,546
Interest expense		282		328		811		1,008
Loss on extinguishment of debt		—		51		299		149
Net gain on divestitures		(6)		(102)		(45)		(108)
Total benefits, losses and expenses		10,755		10,659		30,848		30,919
Income from continuing operations before income tax expense		3,847		2,176		14,003		7,051



Income tax expense		806		439		2,913		1,234
Income from continuing operations		3,041		1,737		11,090		5,817
Loss from discontinued operations, net of income taxes		—		—		(1)		—
Net income		3,041		1,737		11,089		5,817
Less:
Net income from continuing operations attributable to noncontrolling interests		332		70		1,084		175
Net income attributable to AIG		2,709		1,667		10,005		5,642
Less: Dividends on preferred stock		7		7		22		22
Net income attributable to AIG common shareholders	$	2,702	$	1,660	$	9,983	$	5,620
Income per common share attributable to AIG common shareholders:
Basic:
Income from continuing operations	$	3.54	$	1.95	$	12.64	$	6.53
Income from discontinued operations	$	—	$	—	$	—	$	—
Net income attributable to AIG common shareholders	$	3.54	$	1.95	$	12.64	$	6.53
Diluted:
Income from continuing operations	$	3.50	$	1.92	$	12.49	$	6.45
Income from discontinued operations	$	—	$	—	$	—	$	—
Net income attributable to AIG common shareholders	$	3.50	$	1.92	$	12.49	$	6.45
Weighted average shares outstanding:
Basic		763,051,482		852,765,263		789,888,322		861,211,983
Diluted		771,132,401		864,019,494		799,092,556		871,002,018

See accompanying Notes to Condensed Consolidated Financial Statements.


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American International Group, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2022		2021		2022		2021
Net income	$	3,041	$	1,737	$	11,089	$	5,817
Other comprehensive income (loss), net of tax
Change in unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken		(73)		12		(78)		49
Change in unrealized depreciation of all other investments		(8,324)		(1,510)		(34,469)		(4,999)
Change in foreign currency translation adjustments		(591)		(135)		(877)		4
Change in retirement plan liabilities adjustment		15		31		40		42
Change in fair value of liabilities under fair value option attributable to changes in own credit risk		—		—		(4)		(1)
Other comprehensive loss		(8,973)		(1,602)		(35,388)		(4,905)
Comprehensive income (loss)		(5,932)		135		(24,299)		912
Comprehensive income (loss) attributable to noncontrolling interests		(464)		71		(1,784)		175
Comprehensive income (loss) attributable to AIG	$	(5,468)	$	64	$	(22,515)	$	737

See accompanying Notes to Condensed Consolidated Financial Statements.


4			AIG \| Third Quarter 2022 Form 10-Q

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American International Group, Inc.

Condensed Consolidated Statements of Equity (unaudited)


(in millions)	Preferred Stock and Additional Paid-in Capital			Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings	Accumulated Other Comprehensive Income (Loss)		Total AIG Share- holders' Equity		Non- redeemable Non- controlling Interests			Total Equity
Three Months Ended September 30, 2022
Balance, beginning of period	$	485	$	4,766	$	(54,480)	$	81,679	$	30,550	$	(17,656)	$	45,344	$	1,480	$	46,824
Common stock issued under stock plans		—		—		3		(1)		—		—		2		—		2
Purchase of common stock		—		—		(1,268)		—		—		—		(1,268)		—		(1,268)
Net income attributable to AIG or noncontrolling interests		—		—		—		—		2,709		—		2,709		332		3,041
Dividends on preferred stock		—		—		—		—		(7)		—		(7)		—		(7)
Dividends on common stock		—		—		—		—		(240)		—		(240)		—		(240)
Other comprehensive loss		—		—		—		—		—		(8,177)		(8,177)		(796)		(8,973)
Net increase due to divestitures and acquisitions		—		—		—		(1,432)		—		2,040		608		1,018		1,626
Contributions from noncontrolling interests		—		—		—		—		—		—		—		17		17
Distributions to noncontrolling interests		—		—		—		—		—		—		—		(63)		(63)
Other		—		—		—		55		(3)		—		52		(10)		42
Balance, end of period	$	485	$	4,766	$	(55,745)	$	80,301	$	33,009	$	(23,793)	$	39,023	$	1,978	$	41,001
Three Months Ended September 30, 2021
Balance, beginning of period	$	485	$	4,766	$	(49,634)	$	81,322	$	18,935	$	10,209	$	66,083	$	825	$	66,908
Common stock issued under stock plans		—		—		24		(19)		—		—		5		—		5
Purchase of common stock		—		—		(1,030)		(29)		—		—		(1,059)		—		(1,059)
Net income attributable to AIG or noncontrolling interests		—		—		—		—		1,667		—		1,667		70		1,737
Dividends on preferred stock		—		—		—		—		(7)		—		(7)		—		(7)
Dividends on common stock		—		—		—		—		(269)		—		(269)		—		(269)
Other comprehensive income (loss)		—		—		—		—		—		(1,603)		(1,603)		1		(1,602)
Net decrease due to divestitures and acquisitions		—		—		—		—		—		—		—		(8)		(8)
Contributions from noncontrolling interests		—		—		—		—		—		—		—		1		1
Distributions to noncontrolling interests		—		—		—		—		—		—		—		(98)		(98)
Other		—		—		(1)		53		(6)		—		46		5		51
Balance, end of period	$	485	$	4,766	$	(50,641)	$	81,327	$	20,320	$	8,606	$	64,863	$	796	$	65,659


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American International Group, Inc.

Condensed Consolidated Statements of Equity (unaudited)(continued)


(in millions)	Preferred Stock and Additional Paid-in Capital			Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings	Accumulated Other Comprehensive Income (Loss)			Total AIG Share- holders' Equity	Non- redeemable Non- controlling Interests			Total Equity
Nine Months Ended September 30, 2022
Balance, beginning of the year	$	485	$	4,766	$	(51,618)	$	81,851	$	23,785	$	6,687	$	65,956	$	2,956	$	68,912

Common stock issued under stock plans		—		—		243		(326)		—		—		(83)		—		(83)
Purchase of common stock		—		—		(4,370)		—		—		—		(4,370)		—		(4,370)
Net income attributable to AIG or noncontrolling interests		—		—		—		—		10,005		—		10,005		1,084		11,089
Dividends on preferred stock		—		—		—		—		(22)		—		(22)		—		(22)
Dividends on common stock		—		—		—		—		(746)		—		(746)		—		(746)
Other comprehensive loss		—		—		—		—		—		(32,520)		(32,520)		(2,868)		(35,388)
Net increase due to divestitures and acquisitions		—		—		—		(1,432)		—		2,040		608		1,018		1,626
Contributions from noncontrolling interests		—		—		—		—		—		—		—		22		22
Distributions to noncontrolling interests		—		—		—		—		—		—		—		(230)		(230)
Other		—		—		—		208		(13)		—		195		(4)		191
Balance, end of period	$	485	$	4,766	$	(55,745)	$	80,301	$	33,009	$	(23,793)	$	39,023	$	1,978	$	41,001
Nine Months Ended September 30, 2021
Balance, beginning of year	$	485	$	4,766	$	(49,322)	$	81,418	$	15,504	$	13,511	$	66,362	$	837	$	67,199

Common stock issued under stock plans		—		—		202		(279)		—		—		(77)		—		(77)
Purchase of common stock		—		—		(1,622)		(29)		—		—		(1,651)		—		(1,651)
Net income attributable to AIG or noncontrolling interests		—		—		—		—		5,642		—		5,642		175		5,817
Dividends on preferred stock		—		—		—		—		(22)		—		(22)		—		(22)
Dividends on common stock		—		—		—		—		(819)		—		(819)		—		(819)
Other comprehensive loss		—		—		—		—		—		(4,905)		(4,905)		—		(4,905)
Net increase due to divestitures and acquisitions		—		—		—		—		—		—		—		50		50
Contributions from noncontrolling interests		—		—		—		—		—		—		—		8		8
Distributions to noncontrolling interests		—		—		—		—		—		—		—		(279)		(279)
Other		—		—		101		217		15		—		333		5		338
Balance, end of period	$	485	$	4,766	$	(50,641)	$	81,327	$	20,320	$	8,606	$	64,863	$	796	$	65,659

See accompanying Notes to Condensed Consolidated Financial Statements.


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American International Group, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)


	Nine Months Ended September 30,
(in millions)		2022		2021
Cash flows from operating activities:
Net income	$	11,089	$	5,817
Loss from discontinued operations		1		—
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Noncash revenues, expenses, gains and losses included in income (loss):
Net (gains) losses on sales of securities available for sale and other assets		737		(1,141)
Net gain on divestitures		(45)		(108)
Loss on extinguishment of debt		299		149
Unrealized gains in earnings - net		(2,738)		(1,295)
Equity in (income) loss from equity method investments, net of dividends or distributions		(159)		14
Depreciation and other amortization		3,918		3,590
Impairments of assets		12		19
Changes in operating assets and liabilities:
Insurance reserves		1,720		5,829
Premiums and other receivables and payables - net		(8,914)		(1,387)
Reinsurance assets, net		200		(1,739)
Capitalization of deferred policy acquisition costs		(3,704)		(3,858)
Current and deferred income taxes - net		2,424		497
Other, net		(822)		(623)
Total adjustments		(7,072)		(53)
Net cash provided by operating activities		4,018		5,764
Cash flows from investing activities:
Proceeds from (payments for)
Sales or distributions of:
Available for sale securities		17,296		19,211
Other securities		1,288		703
Other invested assets		2,239		3,298
Divestitures, net		—		137
Maturities of fixed maturity securities available for sale		14,702		26,424
Principal payments received on and sales of mortgage and other loans receivable		6,064		5,684
Purchases of:
Available for sale securities		(28,896)		(53,220)
Other securities		(3,198)		(128)
Other invested assets		(1,701)		(2,134)
Mortgage and other loans receivable		(9,824)		(6,156)
Net change in short-term investments		(1,599)		4,569
Other, net		1,364		(1,312)
Net cash used in investing activities		(2,265)		(2,924)
Cash flows from financing activities:
Proceeds from (payments for)
Policyholder contract deposits		19,779		19,522
Policyholder contract withdrawals		(14,736)		(16,208)
Issuance of long-term debt		7,473		79
Issuance of debt of consolidated investment entities		849		3,458
Repayments of long-term debt		(7,649)		(3,451)
Repayments of debt of consolidated investment entities		(1,112)		(3,210)
Borrowings under delayed draw term loan agreement		1,502		—
Purchase of common stock		(4,398)		(1,651)
Dividends paid on preferred stock		(22)		(22)
Dividends paid on common stock		(746)		(819)
Other, net		(2,511)		(458)
Net cash used in financing activities		(1,571)		(2,760)
Effect of exchange rate changes on cash and restricted cash		(114)		(40)
Net increase in cash and restricted cash		69		40
Cash and restricted cash at beginning of year		2,427		3,230
Change in cash of held for sale assets		—		(436)
Cash and restricted cash at end of period	$	2,496	$	2,834


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American International Group, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)(continued)

Supplementary Disclosure of Condensed Consolidated Cash Flow Information


	Nine Months Ended September 30,
(in millions)		2022		2021
Cash	$	2,294	$	2,699
Restricted cash included in Short-term investments*		133		77
Restricted cash included in Other assets*		69		58
Total cash and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	2,496	$	2,834
Cash paid during the period for:
Interest	$	734	$	781
Taxes	$	489	$	737
Non-cash investing activities:
Fixed maturity securities available for sale received in connection with pension risk transfer transactions	$	—	$	797
Fixed maturity securities received in connection with reinsurance transactions	$	2	$	58
Fixed maturity securities transferred in connection with reinsurance transactions	$	(212)	$	(734)
Non-cash financing activities:
Interest credited to policyholder contract deposits included in financing activities	$	2,615	$	2,691
Fee income debited to policyholder contract deposits included in financing activities	$	(1,268)	$	(1,267)

*Includes funds held for tax sharing payments to AIG Parent, security deposits, and replacement reserve deposits related to real estate.

See accompanying Notes to Condensed Consolidated Financial Statements.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 1. Basis of Presentation

1. Basis of Presentation

American International Group, Inc. (AIG) is a leading global insurance organization serving customers in approximately 70 countries and jurisdictions. AIG companies serve commercial and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG Common Stock, par value $2.50 per share (AIG Common Stock), is listed on the New York Stock Exchange (NYSE: AIG). Unless the context indicates otherwise, the terms “AIG,” “we,” “us”, “our” or "the Company" mean American International Group, Inc. and its consolidated subsidiaries and the term “AIG Parent” means American International Group, Inc. and not any of its consolidated subsidiaries.

These unaudited Condensed Consolidated Financial Statements do not include all disclosures that are normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) and should be read in conjunction with the audited Consolidated Financial Statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the 2021 Annual Report). The condensed consolidated financial information as of December 31, 2021 included herein has been derived from the audited Consolidated Financial Statements in the 2021 Annual Report.

Certain of our foreign subsidiaries included in the Condensed Consolidated Financial Statements report on the basis of a fiscal year ending November 30. The effect on our consolidated financial condition and results of operations of all material events occurring at these subsidiaries through the date of each of the periods presented in these Condensed Consolidated Financial Statements has been considered for adjustment and/or disclosure. In the opinion of management, these Condensed Consolidated Financial Statements contain normal recurring adjustments, including eliminations of material intercompany accounts and transactions, necessary for a fair statement of the results presented herein. Operating results for the nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

We evaluated the need to recognize or disclose events that occurred subsequent to September 30, 2022 and prior to the issuance of these Condensed Consolidated Financial Statements.

SALES/DISPOSALS OF ASSETS AND BUSINESSES

Separation of Life and Retirement Business and Relationship with Blackstone Inc.

On September 19, 2022, AIG closed on the initial public offering (IPO) of 80 million shares of Corebridge Financial, Inc. (Corebridge) common stock at a public offering price of $21.00 per share, representing 12.4 percent of Corebridge's common stock. Corebridge is the holding company for AIG’s Life and Retirement business. The aggregate gross proceeds of the offering to AIG, before deducting underwriting discounts and commissions and other expenses payable by AIG, were approximately $1.7 billion. After consideration of underwriting discounts, commissions and other related expenses payable by AIG, AIG recorded $608 million as an increase in AIG’s shareholder’s equity.

In November 2021, AIG and Blackstone Inc. (Blackstone) completed the acquisition by Blackstone of a 9.9 percent equity stake in Corebridge. Blackstone is required to hold its ownership interest in Corebridge following the completion of the separation of the Life and Retirement business, subject to exceptions permitting Blackstone to sell 25 percent, 67 percent and 75 percent of its shares after the first, second and third anniversaries, respectively, of Corebridge IPO (which will be September 19, 2023, 2024 and 2025, respectively), with the transfer restrictions terminating in full on the fifth anniversary of the IPO (September 19, 2027). In the event that the IPO of Corebridge was not completed prior to November 2, 2023, Blackstone had the right to require AIG to undertake the IPO, and in the event that the IPO had not been completed prior to November 2, 2024, Blackstone had the right to exchange all or a portion of its ownership interest in Corebridge for shares of AIG's common stock. As a result of the consummation of the IPO on September 19, 2022, this exchange right of Blackstone was terminated. Also in November 2021, Corebridge declared a dividend payable to AIG Parent in the amount of $8.3 billion. In connection with such dividend, Corebridge issued a promissory note to AIG Parent in the amount of $8.3 billion (the Intercompany Note). The Intercompany Note was repaid to AIG Parent prior to the IPO of Corebridge with the proceeds of (i) the issuance by Corebridge, on April 5, 2022, of senior unsecured notes in the aggregate principal amount of $6.5 billion, (ii) the issuance by Corebridge, on August 23, 2022, of $1.0 billion aggregate principal amount of 6.875% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2052, and (iii) a portion of the $1.5 billion borrowing under Corebridge's $1.5 billion 3-Year Delayed Draw Term Loan Agreement.

Following the IPO, AIG owns 77.7 percent of the outstanding common stock of Corebridge and continues to consolidate the assets, liabilities, and results of operations of Corebridge in AIG’s Condensed Consolidated Financial Statements. The portion of equity interest of Corebridge that AIG does not own is reflected as noncontrolling interest in AIG’s Condensed Consolidated Financial Statements.


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TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 1. Basis of Presentation

On December 15, 2021, AIG and Blackstone Real Estate Income Trust (BREIT), a long-term, perpetual capital vehicle affiliated with Blackstone, completed the acquisition by BREIT of AIG’s interests in a U.S. affordable housing portfolio. The historical results of the U.S. affordable housing portfolio were reported in our Life and Retirement operating segments.

Our Investment Management Agreements with BlackRock

Sale of Certain AIG Life and Retirement Retail Mutual Funds Business

On February 8, 2021, AIG announced the execution of a definitive agreement with Touchstone Investments (Touchstone), an indirect wholly-owned subsidiary of Western & Southern Financial Group, to sell certain assets of Life and Retirement’s Retail Mutual Funds business. This sale consisted of the reorganization of twelve of the retail mutual funds managed by SunAmerica Asset Management, LLC (SAAMCo), a Life and Retirement entity, into certain Touchstone funds. The transaction closed on July 16, 2021, at which time we received initial proceeds and the twelve retail mutual funds managed by SAAMCo, with $6.8 billion in assets, were reorganized into Touchstone funds. Additional consideration may be earned over a three-year period based on asset levels in certain reorganized funds. Six retail mutual funds managed by SAAMCo and not included in the transaction were liquidated. We will retain our fund management platform and capabilities dedicated to our variable annuity insurance products.

DEBT CASH TENDER OFFERS AND REDEMPTIONS

In the nine months ended September 30, 2022, we repurchased, through cash tender offers, and redeemed $7.6 billion aggregate principal amount of certain notes and debentures issued or guaranteed by AIG, for an aggregate purchase price of $7.8 billion, resulting in a total loss on extinguishment of debt of $299 million.

USE OF ESTIMATES

The preparation of financial statements in accordance with U.S. GAAP requires the application of accounting policies that often involve a significant degree of judgment. Accounting policies that we believe are most dependent on the application of estimates and assumptions are considered our critical accounting estimates and are related to the determination of:

•loss reserves;

•future policy benefit reserves for life and accident and health insurance contracts;

•liabilities for guaranteed benefit features of variable annuity, fixed annuity and fixed index annuity products;

•embedded derivative liabilities for fixed index annuity and life products;

•estimated gross profits to value deferred acquisition costs and unearned revenue for investment-oriented products;

•reinsurance assets, including the allowance for credit losses and disputes;

•goodwill impairment;

•allowance for credit losses on certain investments, primarily on loans and available for sale fixed maturity securities;

•legal contingencies;

•fair value measurements of certain financial assets and financial liabilities; and

•income taxes, in particular the recoverability of our deferred tax asset and establishment of provisions for uncertain tax positions.

These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial condition, results of operations and cash flows could be materially affected.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 2. Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

ACCOUNTING STANDARDS ADOPTED

Reference Rate Reform

On March 12, 2020, the FASB issued an accounting standard that provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The standard allows us to account for certain contract modifications that result from the discontinuation of the London Inter-Bank Offered Rate (LIBOR) or another reference rate as a continuation of the existing contract without additional analysis. This standard may be elected and applied prospectively over time from March 12, 2020 through December 31, 2022 as reference rate reform activities occur.

Where permitted by the guidance, we have accounted for contract modifications stemming from the discontinuation of LIBOR or another reference rate as a continuation of the existing contract. As part of our implementation efforts, we have and will continue to assess our operational readiness and current and alternative reference rates’ merits, limitations, risks and suitability for our investment and insurance processes. The adoption of the standard has not had, and is not expected to have, a material impact on our reported consolidated financial condition, results of operations, cash flows and required disclosures.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the FASB issued an accounting standard update with the objective of making targeted improvements to the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity.

The Company will adopt the standard on January 1, 2023. We continue to evaluate and expect the adoption of this standard will impact our financial condition, results of operations, statement of cash flows and disclosures, as well as systems, processes and controls.

The Company will adopt the standard using the modified retrospective transition method relating to liabilities for traditional and limited payment contracts and deferred policy acquisition costs associated therewith. The Company will adopt the standard in relation to market risk benefits (MRBs) on a retrospective basis. Based upon this transition method, the Company currently estimates that the January 1, 2021 transition date (Transition Date) impact from adoption is likely to result in a decrease in AIG’s equity between approximately $1.0 billion and $3.0 billion in AIG’s Life and Retirement business. The most significant drivers of the transition adjustment are expected to be (1) changes related to market risk benefits in our Individual Retirement and Group Retirement segments, including the impact of non-performance adjustments (2) changes to the discount rate which will most significantly impact our Life Insurance and Institutional Markets segments and (3) the removal of balances recorded in accumulated other comprehensive income (loss) (AOCI) related to changes in unrealized appreciation (depreciation) on investments.

Market risk benefits: The standard requires the measurement of all MRBs associated with deposit (or account balance) contracts at fair value at each reporting period. Changes in fair value compared to prior periods will be recorded and presented separately within the income statement, with the exception of instrument-specific credit risk changes (non-performance adjustments), which will be recognized in other comprehensive income. MRBs will impact both retained earnings and AOCI upon transition.

As MRBs are required to be accounted for at fair value, the quarterly valuation of these items will result in variability and volatility in the Company’s results following adoption.

Discount rate assumption: The standard requires the discount rate assumption for the liability for future policy benefits to be updated at the end of each reporting period using an upper-medium grade (low credit risk) fixed income instrument yield that maximizes the use of observable market inputs. Upon transition, the Company currently estimates an adjustment to AOCI due to the fact that the market upper-medium grade (low credit risk) interest rates as of the Transition Date differ from reserve interest accretion rates. Lower interest rates result in a higher liability for future policy benefits, and are anticipated to more significantly impact our Life Insurance and Institutional Markets segments.

Following adoption, the impact of changes to discount rates will be recognized through other comprehensive income. Changes resulting from unlocking the discount rate each reporting period will primarily impact term life insurance and other traditional life insurance products, as well as pension risk transfer and structured settlement products.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 2. Summary of Significant Accounting Policies

Removal of balances related to changes in unrealized appreciation (depreciation) on investments: Under the standard, the majority of balances recorded in AOCI related to changes in unrealized appreciation (depreciation) on investments will be eliminated.

In addition to the above, the standard also:

•Requires the review and if necessary, update of future policy benefit assumptions at least annually for traditional and limited pay long duration contracts, with the recognition and separate presentation of any resulting re-measurement gain or loss (except for discount rate changes as noted above) in the income statement.

•Simplifies the amortization of DAC to a constant level basis over the expected term of the related contracts with adjustments for unexpected terminations, but no longer requires an impairment test.

•Increased disclosures of disaggregated roll-forwards of several balances, including: liabilities for future policy benefits, deferred acquisition costs, account balances, market risk benefits, separate account liabilities and information about significant inputs, judgments and methods used in measurement and changes thereto and impact of those changes.

We expect that the accounting for Fortitude Reinsurance Company Ltd. (Fortitude Re) will continue to remain largely unchanged. With respect to Fortitude Re, the reinsurance assets, including the discount rates, will continue to be calculated using the same methodology and assumptions as the direct policies. Accounting for modified coinsurance (modco) remains unchanged.

The Company has created a governance framework and a plan to support implementation of the updated standard. As part of its implementation plan, the Company has also advanced the modernization of its actuarial technology platform to enhance its modeling, data management, experience study and analytical capabilities, increase the end-to-end automation of key reporting and analytical processes and optimize its control framework. The Company has designed and begun implementation and testing of internal controls related to the new processes created as part of implementing the updated standard and will continue to refine these internal controls until the formal implementation in the first quarter of 2023.

Troubled Debt Restructuring and Vintage Disclosures

In March 2022, the FASB issued an accounting standard update that eliminates the accounting guidance for troubled debt restructurings for creditors and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The standard also updates the requirements for accounting for credit losses by adding enhanced disclosures for creditors related to loan refinancings and restructurings for borrowers experiencing financial difficulty. Because the Company has already adopted the current expected credit loss model, the amendments in this standard are effective for fiscal years beginning after December 15, 2022, including interim periods within those years. We do not expect the standard to have a material impact on our reported consolidated financial condition, results of operations, cash flows or required disclosures.

Fair Value Measurement

On June 30, 2022, the FASB issued an accounting standards update to address diversity in practice by clarifying that a contractual sale restriction should not be considered in the measurement of the fair value of an equity security. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities. The guidance is effective for public companies for fiscal years beginning after December 15, 2023 and interim period within those years, with early adoption permitted. For entities other than investment companies, the accounting standards update applies prospectively, with any adjustments resulting from adoption recognized in earnings on the date of adoption. We are assessing the impact of this standard.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 3. Segment Information

3. Segment Information

We report our results of operations consistent with the manner in which our chief operating decision makers review the business to assess performance and allocate resources, as follows:

GENERAL INSURANCE

General Insurance business is presented as two operating segments:

•North America – consists of insurance businesses in the United States, Canada and Bermuda, and our global reinsurance business, AIG Re.

•International – consists of regional insurance businesses in Japan, the United Kingdom, Europe, Middle East and Africa (EMEA region), Asia Pacific, Latin America and Caribbean, and China. International also includes the results of Talbot Holdings, Ltd. as well as AIG’s Global Specialty business.

North America and International operating segments consist of the following products:

–Commercial Lines – consists of Property, Liability, Financial Lines, and Specialty.

–Personal Insurance – consists of Accident & Health and Personal Lines.

LIFE AND RETIREMENT

Life and Retirement business is presented as four operating segments:

•Individual Retirement – consists of fixed annuities, fixed index annuities, variable annuities and retail mutual funds.

•Group Retirement – consists of record-keeping, plan administrative and compliance services, financial planning and advisory solutions offered to employer-defined contribution plan participants, along with proprietary and non-proprietary annuities and advisory and brokerage products offered outside of plans.

•Life Insurance – primary products in the U.S. include term life and universal life insurance. International operations primarily include distribution of life and health products in the UK and Ireland.

•Institutional Markets – consists of stable value wrap products, structured settlement and pension risk transfer annuities, corporate- and bank-owned life insurance, high net worth products and guaranteed investment contracts (GICs).

OTHER OPERATIONS

Other Operations primarily consists of income from assets held by AIG Parent and other corporate subsidiaries, deferred tax assets related to tax attributes, corporate expenses and intercompany eliminations, our institutional asset management business and results of our consolidated investment entities, General Insurance portfolios in run-off as well as the historical results of our legacy insurance lines ceded to Fortitude Re.

We evaluate segment performance based on adjusted revenues and adjusted pre-tax income (loss). Adjusted revenues and adjusted pre-tax income (loss) are derived by excluding certain items from total revenues and pre-tax income (loss), respectively. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to our current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and measures that we believe to be common to the industry. Legal entities are attributed to each segment based upon the predominance of activity in that legal entity. For the items excluded from adjusted revenues and adjusted pre-tax income (loss) see the table below.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 3. Segment Information

The following table presents AIG’s continuing operations by operating segment:


Three Months Ended September 30,	2022					2021
(in millions)		Adjusted Revenues		Adjusted Pre-tax Income (Loss)			Adjusted Revenues		Adjusted Pre-tax Income (Loss)
General Insurance
North America	$	3,140	$	(439)	(a)	$	2,907	$	(166)	(a)
International		3,267		607	(a)		3,516		186	(a)
Net investment income		582		582			791		791
Total General Insurance		6,989		750			7,214		811
Life and Retirement
Individual Retirement		1,312		200			1,560		292
Group Retirement		680		183			832		316
Life Insurance		1,234		123			1,211		134
Institutional Markets		1,110		83			841		135
Total Life and Retirement		4,336		589			4,444		877
Other Operations
Other Operations before consolidation and eliminations		126		(467)			301		(370)
Consolidation and eliminations		(152)		(147)			(206)		(192)
Total Other Operations		(26)		(614)			95		(562)
Total		11,299		725			11,753		1,126
Reconciling items:
Changes in fair value of securities used to hedge guaranteed living benefits		14		6			14		26
Changes in benefit reserves and DAC, VOBA and DSI related to net realized gains (losses)		—		(28)			—		9
Changes in the fair value of equity securities		16		16			(45)		(45)
Other income (expense) - net		(7)		—			(6)		—
Loss on extinguishment of debt		—		—			—		(51)
Net investment income on Fortitude Re funds withheld assets		155		155			495		495
Net realized gains (losses) on Fortitude Re funds withheld assets		(86)		(86)			190		190
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative		1,757		1,757			(209)		(209)
Net realized gains(b)		1,446		1,449			643		652
Net gain on divestitures		—		6			—		102
Non-operating litigation reserves and settlements		8		3			—		(3)
Favorable prior year development and related amortization changes ceded under retroactive reinsurance agreements		—		62			—		115
Net loss reserve discount charge		—		(10)			—		(72)
Pension expense related to a one-time lump sum payment to former employees		—		—			—		(27)
Integration and transaction costs associated with acquiring or divesting businesses		—		(52)			—		(11)
Restructuring and other costs		—		(147)			—		(104)
Non-recurring costs related to regulatory or accounting changes		—		(9)			—		(17)
Revenues and pre-tax income	$	14,602	$	3,847		$	12,835	$	2,176


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 3. Segment Information


Nine Months Ended September 30,	2022					2021
(in millions)		Adjusted Revenues		Adjusted Pre-tax Income (Loss)			Adjusted Revenues		Adjusted Pre-tax Income (Loss)
General Insurance
North America	$	8,901	$	223	(a)	$	7,980	$	(199)	(a)
International		10,148		1,190	(a)		10,524		755	(a)
Net investment income		1,805		1,805			2,294		2,294
Total General Insurance		20,854		3,218			20,798		2,850
Life and Retirement
Individual Retirement		3,985		788			4,556		1,441
Group Retirement		2,106		572			2,458		970
Life Insurance		3,820		231			3,839		114
Institutional Markets		2,445		285			2,617		417
Total Life and Retirement		12,356		1,876			13,470		2,942
Other Operations
Other Operations before consolidation and eliminations		627		(1,086)			884		(1,240)
AIG consolidation and eliminations		(424)		(410)			(511)		(462)
Total Other Operations		203		(1,496)			373		(1,702)
Total		33,413		3,598			34,641		4,090
Reconciling items:
Changes in fair value of securities used to hedge guaranteed living benefits		41		29			46		61
Changes in benefit reserves and DAC, VOBA and DSI related to net realized gains (losses)		—		(429)			—		(74)
Changes in the fair value of equity securities		(41)		(41)			(36)		(36)
Other income (expense) - net		(23)		—			(14)		—
Loss on extinguishment of debt		—		(299)			—		(149)
Net investment income on Fortitude Re funds withheld assets		634		634			1,488		1,488
Net realized gains (losses) on Fortitude Re funds withheld assets		(312)		(312)			536		536
Net realized gains on Fortitude Re funds withheld embedded derivative		7,851		7,851			117		117
Net realized gains(b)		3,242		3,257			1,192		1,220
Net gain on divestitures		—		45			—		108
Non-operating litigation reserves and settlements		46		41			—		(3)
Favorable prior year development and related amortization changes ceded under retroactive reinsurance agreements		—		206			—		199
Net loss reserve discount charge		—		(4)			—		(62)
Pension expense related to a one-time lump sum payment to former employees		—		—			—		(27)
Integration and transaction costs associated with acquiring or divesting businesses		—		(136)			—		(55)
Restructuring and other costs		—		(415)			—		(304)
Non-recurring costs related to regulatory or accounting changes		—		(22)			—		(58)
Revenues and pre-tax income	$	44,851	$	14,003		$	37,970	$	7,051

(a)General Insurance North America’s and General Insurance International’s Adjusted pre-tax income does not include Net investment income as the investment portfolio results are managed at the General Insurance level. Net investment income is shown separately as a component of General Insurance’s total Adjusted pre-tax income results.

(b)Includes all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication and net realized gains and losses on Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG (Fortitude Re funds withheld assets).


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

4. Fair Value Measurements

FAIR VALUE MEASUREMENTS ON A RECURRING BASIS

Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs:

•Level 1: Fair value measurements based on quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.

•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, quoted prices for identical or similar assets or liabilities in markets that are not active, 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.

•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions about the inputs a hypothetical market participant would use to value that 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.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS

The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:


September 30, 2022		Level 1		Level 2		Level 3	Counterparty Netting(a)		Cash Collateral			Total
(in millions)
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	5	$	7,945	$	—	$	—	$	—	$	7,950
Obligations of states, municipalities and political subdivisions		—		11,077		814		—		—		11,891
Non-U.S. governments		111		12,887		9		—		—		13,007
Corporate debt		—		129,419		3,917		—		—		133,336
RMBS		—		10,626		7,881		—		—		18,507
CMBS		—		13,125		806		—		—		13,931
CDO/ABS		—		9,362		11,783		—		—		21,145
Total bonds available for sale		116		194,441		25,210		—		—		219,767
Other bond securities:
U.S. government and government sponsored entities		—		1,565		—		—		—		1,565
Obligations of states, municipalities and political subdivisions		—		111		—		—		—		111
Non-U.S. governments		—		64		—		—		—		64
Corporate debt		—		1,485		549		—		—		2,034
RMBS		—		130		211		—		—		341
CMBS		—		362		29		—		—		391
CDO/ABS		—		369		2,256		—		—		2,625
Total other bond securities		—		4,086		3,045		—		—		7,131
Equity securities		481		93		34		—		—		608
Other invested assets(b)		—		130		1,958		—		—		2,088
Derivative assets(c):
Interest rate contracts		4		3,142		210		—		—		3,356
Foreign exchange contracts		—		2,788		—		—		—		2,788
Equity contracts		14		392		159		—		—		565
Commodity contracts		—		18		—		—		—		18
Credit contracts		—		—		1		—		—		1
Other contracts		—		—		16		—		—		16
Counterparty netting and cash collateral		—		—		—		(3,170)		(3,181)		(6,351)
Total derivative assets		18		6,340		386		(3,170)		(3,181)		393
Short-term investments		3,405		1,939		—		—		—		5,344
Other assets(c)		—		—		107		—		—		107
Separate account assets		77,683		3,619		—		—		—		81,302
Total	$	81,703	$	210,648	$	30,740	$	(3,170)	$	(3,181)	$	316,740
Liabilities:
Policyholder contract deposits	$	—	$	37	$	6,348	$	—	$	—	$	6,385
Derivative liabilities(c):
Interest rate contracts		—		4,856		—		—		—		4,856
Foreign exchange contracts		—		726		1		—		—		727
Equity contracts		4		76		4		—		—		84
Credit contracts		—		10		32		—		—		42

Counterparty netting and cash collateral		—		—		—		(3,170)		(2,263)		(5,433)
Total derivative liabilities		4		5,668		37		(3,170)		(2,263)		276
Fortitude Re funds withheld payable		—		—		(2,505)		—		—		(2,505)

Long-term debt		—		1,613		—		—		—		1,613
Total	$	4	$	7,318	$	3,880	$	(3,170)	$	(2,263)	$	5,769


AIG \| Third Quarter 2022 Form 10-Q			17

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements


December 31, 2021		Level 1		Level 2		Level 3	Counterparty Netting(a)		Cash Collateral			Total
(in millions)
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	2,553	$	5,641	$	—	$	—	$	—	$	8,194
Obligations of states, municipalities and political subdivisions		—		13,096		1,431		—		—		14,527
Non-U.S. governments		9		16,314		7		—		—		16,330
Corporate debt		—		172,967		2,641		—		—		175,608
RMBS		—		16,909		10,378		—		—		27,287
CMBS		—		14,619		1,190		—		—		15,809
CDO/ABS		—		8,232		11,215		—		—		19,447
Total bonds available for sale		2,562		247,778		26,862		—		—		277,202
Other bond securities:
U.S. government and government sponsored entities		—		1,750		—		—		—		1,750
Obligations of states, municipalities and political subdivisions		—		97		—		—		—		97
Non-U.S. governments		—		76		—		—		—		76
Corporate debt		—		916		134		—		—		1,050
RMBS		—		215		196		—		—		411
CMBS		—		280		35		—		—		315
CDO/ABS		—		247		2,332		—		—		2,579
Total other bond securities		—		3,581		2,697		—		—		6,278
Equity securities		669		64		6		—		—		739
Other invested assets (b)		—		138		1,948		—		—		2,086
Derivative assets(c):
Interest rate contracts		—		3,873		—		—		—		3,873
Foreign exchange contracts		—		1,188		1		—		—		1,189
Equity contracts		7		224		450		—		—		681
Commodity contracts		—		4		—		—		—		4
Credit contracts		—		—		1		—		—		1
Other contracts		—		—		13		—		—		13
Counterparty netting and cash collateral		—		—		—		(2,779)		(2,139)		(4,918)
Total derivative assets		7		5,289		465		(2,779)		(2,139)		843
Short-term investments		2,584		1,842		—		—		—		4,426
Other assets(c)		—		—		114		—		—		114
Separate account assets		105,221		3,890		—		—		—		109,111
Total	$	111,043	$	262,582	$	32,092	$	(2,779)	$	(2,139)	$	400,799
Liabilities:
Policyholder contract deposits	$	—	$	54	$	9,682	$	—	$	—	$	9,736
Derivative liabilities(c):
Interest rate contracts		1		3,632		—		—		—		3,633
Foreign exchange contracts		—		721		—		—		—		721
Equity contracts		1		46		6		—		—		53
Credit contracts		—		16		31		—		—		47

Counterparty netting and cash collateral		—		—		—		(2,779)		(1,089)		(3,868)
Total derivative liabilities		2		4,415		37		(2,779)		(1,089)		586
Fortitude Re funds withheld payable		—		—		5,922		—		—		5,922

Long-term debt		—		1,871		—		—		—		1,871
Total	$	2	$	6,340	$	15,641	$	(2,779)	$	(1,089)	$	18,115

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

(b)Excludes investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent), which totaled $9.8 billion and $8.4 billion as of September 30, 2022 and December 31, 2021, respectively.

(c)Presented as part of Other assets and Other liabilities on the Condensed Consolidated Balance Sheets.


18			AIG \| Third Quarter 2022 Form 10-Q

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

CHANGES IN LEVEL 3 RECURRING FAIR VALUE MEASUREMENTS

The following tables present changes during the three- and nine-month periods ended September 30, 2022 and 2021 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) related to the Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets at September 30, 2022 and 2021:


(in millions)		Fair Value Beginning of Period		Net Realized and Unrealized Gains (Losses) Included in Income		Other Comprehensive Income (Loss)		Purchases, Sales, Issuances and Settlements, Net		Gross Transfers In		Gross Transfers Out		Other		Fair Value End of Period		Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period		Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Three Months Ended September 30, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	957	$	(1)	$	(106)	$	(29)	$	—	$	(7)	$	—	$	814	$	—	$	(167)
Non-U.S. governments		9		—		—		(1)		1		—		—		9		—		—
Corporate debt		2,483		(31)		(53)		(100)		1,781		(163)		—		3,917		—		(55)
RMBS		8,352		101		(267)		(299)		2		(8)		—		7,881		—		(39)
CMBS		871		(1)		(31)		(33)		12		(12)		—		806		—		(50)
CDO/ABS		11,696		(25)		(454)		523		366		(323)		—		11,783		—		(557)
Total bonds available for sale		24,368		43		(911)		61		2,162		(513)		—		25,210		—		(868)
Other bond securities:
Corporate Debt		461		(5)		—		66		28		(1)		—		549		(7)		—
RMBS		192		(7)		—		26		—		—		—		211		(8)		—
CMBS		32		(3)		—		—		—		—		—		29		(3)		—
CDO/ABS		2,442		(25)		—		(158)		12		(15)		—		2,256		(92)		—
Total other bond securities		3,127		(40)		—		(66)		40		(16)		—		3,045		(110)		—
Equity securities		12		(1)		—		8		15		—		—		34		—		—
Other invested assets		2,008		62		(25)		(45)		—		(42)		—		1,958		20		—
Other assets		107		—		—		—		—		—		—		107		—		—
Total	$	29,622	$	64	$	(936)	$	(42)	$	2,217	$	(571)	$	—	$	30,354	$	(90)	$	(868)
(in millions)		Fair Value Beginning of Period		Net Realized and Unrealized (Gains) Losses Included in Income		Other Comprehensive Income (Loss)		Purchases, Sales, Issuances and Settlements, Net		Gross Transfers In		Gross Transfers Out		Other		Fair Value End of Period		Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period		Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Liabilities:
Policyholder contract deposits	$	6,957	$	(936)	$	—	$	327	$	—	$	—	$	—	$	6,348	$	949	$	—
Derivative liabilities, net:
Interest rate contracts		(143)		37		—		(110)		—		6		—		(210)		30		—
Foreign exchange contracts		1		—		—		—		—		—		—		1		—		—
Equity contracts		(149)		88		—		(94)		—		—		—		(155)		(89)		—
Credit contracts		32		1		—		(2)		—		—		—		31		—		—
Other contracts		(16)		(16)		—		16		—		—		—		(16)		17		—
Total derivative liabilities, net(a)		(275)		110		—		(190)		—		6		—		(349)		(42)		—
Fortitude Re funds withheld payable		(638)		(1,757)		—		(110)		—		—		—		(2,505)		1,791		—
Total	$	6,044	$	(2,583)	$	—	$	27	$	—	$	6	$	—	$	3,494	$	2,698	$	—


AIG \| Third Quarter 2022 Form 10-Q			19

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements


(in millions)		Fair Value Beginning of Period		Net Realized and Unrealized Gains (Losses) Included in Income		Other Comprehensive Income (Loss)		Purchases, Sales, Issuances and Settlements, Net		Gross Transfers In		Gross Transfers Out		Other		Fair Value End of Period		Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period		Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Three Months Ended September 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	1,939	$	6	$	(9)	$	(7)	$	—	$	(61)	$	(62)	$	1,806	$	—	$	—
Non-U.S. governments		10		—		—		—		—		(3)		—		7		—		—
Corporate debt		2,773		(1)		2		(173)		57		(12)		—		2,646		—		—
RMBS		11,085		118		(8)		(86)		8		(19)		—		11,098		—		—
CMBS		1,082		4		(6)		(13)		—		(42)		—		1,025		—		—
CDO/ABS		9,318		22		(41)		180		64		(356)		—		9,187		—		—
Total bonds available for sale		26,207		149		(62)		(99)		129		(493)		(62)		25,769		—		—
Other bond securities:
RMBS		113		2		—		(8)		—		—		—		107		—		—
CMBS		46		(1)		—		(9)		—		—		—		36		—		—
CDO/ABS		2,279		40		—		(134)		—		—		—		2,185		—		—
Total other bond securities		2,438		41		—		(151)		—		—		—		2,328		—		—
Equity securities		4		—		1		(1)		1		—		—		5		—		—
Other invested assets		2,099		161		(3)		(351)		—		—		—		1,906		141		—
Other assets		113		—		—		1		—		—		—		114		—		—
Total	$	30,861	$	351	$	(64)	$	(601)	$	130	$	(493)	$	(62)	$	30,122	$	141	$	—
(in millions)		Fair Value Beginning of Period		Net Realized and Unrealized (Gains) Losses Included in Income		Other Comprehensive Income (Loss)		Purchases, Sales, Issuances and Settlements, Net		Gross Transfers In		Gross Transfers Out		Other		Fair Value End of Period		Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period		Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Liabilities:
Policyholder contract deposits	$	9,020	$	(26)	$	—	$	279	$	—	$	—	$	—	$	9,273	$	362	$	—
Derivative liabilities, net:
Interest rate contracts		(1)		(2)		—		2		—		—		—		(1)		2		—
Foreign exchange contracts		(1)		(1)		—		1		—		—		—		(1)		1		—
Equity contracts		(357)		99		—		(50)		—		1		—		(307)		(90)		—
Credit contracts		43		—		—		(2)		—		—		—		41		1		—
Other contracts		(10)		(17)		—		16		—		—		—		(11)		16		—
Total derivative liabilities, net(a)		(326)		79		—		(33)		—		1		—		(279)		(70)		—
Fortitude Re funds withheld payable		5,317		209		—		(93)		—		—		—		5,433		414		—
Total	$	14,011	$	262	$	—	$	153	$	—	$	1	$	—	$	14,427	$	706	$	—


20			AIG \| Third Quarter 2022 Form 10-Q

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements


(in millions)		Fair Value Beginning of Period		Net Realized and Unrealized Gains (Losses) Included in Income		Other Comprehensive Income (Loss)		Purchases, Sales, Issuances and Settlements, Net		Gross Transfers In		Gross Transfers Out		Other		Fair Value End of Period		Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period		Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Nine Months Ended September 30, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	1,431	$	1	$	(534)	$	(94)	$	17	$	(7)	$	—	$	814	$	—	$	(319)
Non-U.S. governments		7		—		—		(1)		3		—		—		9		—		—
Corporate debt		2,641		(57)		(204)		(137)		2,163		(489)		—		3,917		—		(183)
RMBS		10,378		323		(1,210)		(1,173)		2		(439)		—		7,881		—		(704)
CMBS		1,190		12		(144)		84		12		(348)		—		806		—		(143)
CDO/ABS		11,215		(6)		(1,457)		2,174		1,830		(1,973)		—		11,783		—		(1,486)
Total bonds available for sale		26,862		273		(3,549)		853		4,027		(3,256)		—		25,210		—		(2,835)
Other bond securities:
Corporate Debt		134		(9)		—		190		250		(16)		—		549		(8)		—
RMBS		196		(25)		—		40		—		—		—		211		(28)		—
CMBS		35		(6)		—		—		—		—		—		29		(6)		—
CDO/ABS		2,332		(274)		—		194		75		(71)		—		2,256		(414)		—
Total other bond securities		2,697		(314)		—		424		325		(87)		—		3,045		(456)		—
Equity securities		6		(1)		—		14		15		—		—		34		—		—
Other invested assets		1,948		307		(52)		(83)		47		(209)		—		1,958		316		—
Other assets		114		—		—		(7)		—		—		—		107		—		—
Total	$	31,627	$	265	$	(3,601)	$	1,201	$	4,414	$	(3,552)	$	—	$	30,354	$	(140)	$	(2,835)
(in millions)		Fair Value Beginning of Period		Net Realized and Unrealized (Gains) Losses Included in Income		Other Comprehensive Income (Loss)		Purchases, Sales, Issuances and Settlements, Net		Gross Transfers In		Gross Transfers Out		Other		Fair Value End of Period		Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period		Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Liabilities:
Policyholder contract deposits	$	9,682	$	(4,055)	$	—	$	721	$	—	$	—	$	—	$	6,348	$	4,302	$	—
Derivative liabilities, net:
Interest rate contracts		—		48		—		(183)		(81)		6		—		(210)		27		—
Foreign exchange contracts		(1)		1		—		1		—		—		—		1		(1)		—
Equity contracts		(444)		478		—		(188)		—		(1)		—		(155)		(272)		—
Credit contracts		30		3		—		(2)		—		—		—		31		—		—
Other contracts		(13)		(48)		—		45		—		—		—		(16)		49		—
Total derivative liabilities, net(a)		(428)		482		—		(327)		(81)		5		—		(349)		(197)		—
Fortitude Re funds withheld payable		5,922		(7,851)		—		(576)		—		—		—		(2,505)		8,107		—
Total	$	15,176	$	(11,424)	$	—	$	(182)	$	(81)	$	5	$	—	$	3,494	$	12,212	$	—


AIG \| Third Quarter 2022 Form 10-Q			21

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements


(in millions)		Fair Value Beginning of Period		Net Realized and Unrealized Gains (Losses) Included in Income		Other Comprehensive Income (Loss)		Purchases, Sales, Issuances and Settlements, Net		Gross Transfers In		Gross Transfers Out		Other		Fair Value End of Period		Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period		Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Nine Months Ended September 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	2,105	$	14	$	(40)	$	(125)	$	—	$	(86)	$	(62)	$	1,806	$	—	$	225
Non-U.S. governments		5		—		(1)		1		5		(3)		—		7		—		—
Corporate debt		2,349		12		9		35		452		(211)		—		2,646		—		(106)
RMBS		11,694		435		17		(977)		8		(79)		—		11,098		—		934
CMBS		922		20		(39)		245		56		(179)		—		1,025		—		(45)
CDO/ABS		9,814		37		(11)		(358)		902		(1,197)		—		9,187		—		425
Total bonds available for sale		26,889		518		(65)		(1,179)		1,423		(1,755)		(62)		25,769		—		1,433
Other bond securities:
RMBS		139		6		—		(38)		—		—		—		107		(86)		—
CMBS		47		(2)		—		(15)		6		—		—		36		2		—
CDO/ABS		2,512		74		—		(401)		—		—		—		2,185		235		—
Total other bond securities		2,698		78		—		(454)		6		—		—		2,328		151		—
Equity securities		51		11		1		(124)		77		(11)		—		5		3		—
Other invested assets		1,827		417		(10)		(328)		—		—		—		1,906		386		—
Other assets		113		—		—		1		—		—		—		114		—		—
Total	$	31,578	$	1,024	$	(74)	$	(2,084)	$	1,506	$	(1,766)	$	(62)	$	30,122	$	540	$	1,433
(in millions)		Fair Value Beginning of Period		Net Realized and Unrealized (Gains) Losses Included in Income		Other Comprehensive Income (Loss)		Purchases, Sales, Issuances and Settlements, Net		Gross Transfers In		Gross Transfers Out		Other		Fair Value End of Period		Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period		Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Liabilities:
Policyholder contract deposits	$	9,798	$	(923)	$	—	$	398	$	—	$	—	$	—	$	9,273	$	1,914	$	—
Derivative liabilities, net:
Interest rate contracts		—		(4)		—		3		—		—		—		(1)		4		—
Foreign exchange contracts		(2)		—		—		1		—		—		—		(1)		—		—
Equity contracts		(151)		2		—		(204)		—		46		—		(307)		(58)		—
Credit contracts		42		7		—		(8)		—		—		—		41		2		—
Other contracts		(8)		(50)		—		47		—		—		—		(11)		50		—
Total derivative liabilities, net(a)		(119)		(45)		—		(161)		—		46		—		(279)		(2)		—
Fortitude Re funds withheld payable		6,042		(117)		—		(492)		—		—		—		5,433		1,917		—
Total	$	15,721	$	(1,085)	$	—	$	(255)	$	—	$	46	$	—	$	14,427	$	3,829	$	—

(a)Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.


22			AIG \| Third Quarter 2022 Form 10-Q

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

Net realized and unrealized gains and losses included in income related to Level 3 assets and liabilities shown above are reported in the Condensed Consolidated Statements of Income (Loss) as follows:


(in millions)		Net Investment Income		Net Realized Gains (Losses)		Other Income		Total
Three Months Ended September 30, 2022
Assets:
Bonds available for sale	$	106	$	(63)	$	—	$	43
Other bond securities		(40)		—		—		(40)
Equity securities		(1)		—		—		(1)
Other invested assets		62		—		—		62
Three Months Ended September 30, 2021
Assets:
Bonds available for sale	$	155	$	(6)	$	—	$	149
Other bond securities		41		—		—		41

Other invested assets		165		(4)		—		161
Nine Months Ended September 30, 2022
Assets:
Bonds available for sale	$	412	$	(139)	$	—	$	273
Other bond securities		(314)		—		—		(314)
Equity securities		(1)		—		—		(1)
Other invested assets		307		—		—		307
Nine Months Ended September 30, 2021
Assets:
Bonds available for sale	$	503	$	15	$	—	$	518
Other bond securities		78		—		—		78
Equity securities		11		—		—		11
Other invested assets		406		11		—		417
(in millions)		Net Investment Income		Net Realized (Gains) Losses		Other Income		Total
Three Months Ended September 30, 2022
Liabilities:
Policyholder contract deposits*	$	—	$	(936)	$	—	$	(936)
Derivative liabilities, net		—		127		(17)		110
Fortitude Re funds withheld payable		—		(1,757)		—		(1,757)
Three Months Ended September 30, 2021
Liabilities:
Policyholder contract deposits*	$	—	$	(26)	$	—	$	(26)
Derivative liabilities, net		—		93		(14)		79
Fortitude Re funds withheld payable		—		209		—		209
Nine Months Ended September 30, 2022
Liabilities:
Policyholder contract deposits*	$	—	$	(4,055)	$	—	$	(4,055)
Derivative liabilities, net		—		527		(45)		482
Fortitude Re funds withheld payable		—		(7,851)		—		(7,851)
Nine Months Ended September 30, 2021
Liabilities:
Policyholder contract deposits*	$	—	$	(923)	$	—	$	(923)
Derivative liabilities, net		—		(2)		(43)		(45)
Fortitude Re funds withheld payable		—		(117)		—		(117)

*Primarily embedded derivatives.


AIG \| Third Quarter 2022 Form 10-Q			23

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

The following table presents the gross components of purchases, sales, issuances and settlements, net, shown above, for the three- and nine-month periods ended September 30, 2022 and 2021 related to Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets:


(in millions)		Purchases		Sales		Issuances and Settlements(a)		Purchases, Sales, Issuances and Settlements, Net(a)
Three Months Ended September 30, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	5	$	—	$	(34)	$	(29)

Corporate debt		31		(49)		(82)		(100)
RMBS		56		—		(355)		(299)
CMBS		27		—		(60)		(33)
CDO/ABS		581		(22)		(36)		523
Total bonds available for sale		700		(71)		(568)		61
Other bond securities:
Corporate debt		2		—		64		66
RMBS		31		—		(5)		26

CDO/ABS		65		(123)		(100)		(158)
Total other bond securities		98		(123)		(41)		(66)
Equity securities		8		—		—		8
Other invested assets		53		—		(98)		(45)
Other assets		—		—		—		—
Total	$	859	$	(194)	$	(707)	$	(42)
Liabilities:
Policyholder contract deposits	$	—	$	294	$	33	$	327
Derivative liabilities, net		(243)		3		50		(190)
Fortitude Re funds withheld payable		—		—		(110)		(110)
Total	$	(243)	$	297	$	(27)	$	27
Three Months Ended September 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	40	$	(16)	$	(31)	$	(7)
Non-U.S. governments		—		—		—		—
Corporate debt		23		(61)		(135)		(173)
RMBS		704		(164)		(626)		(86)
CMBS		7		(3)		(17)		(13)
CDO/ABS		849		—		(669)		180
Total bonds available for sale		1,623		(244)		(1,478)		(99)
Other bond securities:
RMBS		—		(2)		(6)		(8)
CMBS		—		(9)		—		(9)
CDO/ABS		—		—		(134)		(134)
Total other bond securities		—		(11)		(140)		(151)
Equity securities		—		—		(1)		(1)
Other invested assets		32		—		(383)		(351)
Other assets		—		—		1		1
Total	$	1,655	$	(255)	$	(2,001)	$	(601)
Liabilities:
Policyholder contract deposits	$	—	$	214	$	65	$	279
Derivative liabilities, net		(75)		2		40		(33)
Fortitude Re funds withheld payable		—		—		(93)		(93)
Total	$	(75)	$	216	$	12	$	153


24			AIG \| Third Quarter 2022 Form 10-Q

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements


(in millions)		Purchases		Sales		Issuances and Settlements(a)		Purchases, Sales, Issuances and Settlements, Net(a)
Nine Months Ended September 30, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	6	$	(64)	$	(36)	$	(94)

Corporate debt		54		(49)		(142)		(137)
RMBS		341		—		(1,514)		(1,173)
CMBS		173		—		(89)		84
CDO/ABS		2,712		(22)		(516)		2,174
Total bonds available for sale		3,286		(135)		(2,298)		853
Other bond securities:
Corporate debt		26		—		164		190
RMBS		62		—		(22)		40

CDO/ABS		681		(123)		(364)		194
Total other bond securities		769		(123)		(222)		424
Equity securities		13		—		1		14
Other invested assets		570		—		(653)		(83)
Other assets		—		—		(7)		(7)
Total	$	4,638	$	(258)	$	(3,179)	$	1,201
Liabilities:
Policyholder contract deposits	$	—	$	761	$	(40)	$	721
Derivative liabilities, net		(492)		6		159		(327)
Fortitude Re funds withheld payable		—		—		(576)		(576)
Total	$	(492)	$	767	$	(457)	$	(182)
Nine Months Ended September 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	51	$	(59)	$	(117)	$	(125)
Non-U.S. governments		1		—		—		1
Corporate Debt		976		(94)		(847)		35
RMBS		1,186		(279)		(1,884)		(977)
CMBS		297		(3)		(49)		245
CDO/ABS		2,005		70		(2,433)		(358)
Total bonds available for sale		4,516		(365)		(5,330)		(1,179)
Other bond securities:
RMBS		1		(11)		(28)		(38)
CMBS		—		(15)		—		(15)
CDO/ABS		—		(39)		(362)		(401)
Total other bond securities		1		(65)		(390)		(454)
Equity securities		—		(3)		(121)		(124)
Other invested assets		424		—		(752)		(328)
Other assets		—		—		1		1
Total	$	4,941	$	(433)	$	(6,592)	$	(2,084)
Liabilities:
Policyholder contract deposits	$	—	$	607	$	(209)	$	398
Derivative liabilities, net		(198)		4		33		(161)
Fortitude Re funds withheld payable		—		—		(492)		(492)
Total	$	(198)	$	611	$	(668)	$	(255)

(a)There were no issuances during the three- and nine-month periods ended September 30, 2022 and 2021.


AIG \| Third Quarter 2022 Form 10-Q			25

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at September 30, 2022 and 2021 may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable inputs (e.g., changes in unobservable long-dated volatilities).

Transfers of Level 3 Assets and Liabilities

The Net realized and unrealized gains (losses) included in income (loss) or Other comprehensive income (loss) as shown in the table above excludes $(25) million and $(98) million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three- and nine-month periods ended September 30, 2022, respectively, and includes $(36) million and $(122) million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three- and nine-month periods ended September 30, 2022, respectively.

The Net realized and unrealized gains (losses) included in income (loss) or Other comprehensive income (loss) as shown in the table above excludes $1 million and $28 million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three- and nine-month periods ended September 30, 2021, respectively, and includes $10 million and $7 million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three- and nine-month periods ended September 30, 2021, respectively.

Transfers of Level 3 Assets

During the three- and nine-month periods ended September 30, 2022 and 2021, transfers into Level 3 assets primarily included certain investments in private placement corporate debt, RMBS, CMBS and CDO/ABS. Transfers of private placement corporate debt and certain ABS into Level 3 assets were primarily the result of limited market pricing information that required us to determine fair value for these securities based on inputs that are adjusted to better reflect our own assumptions regarding the characteristics of a specific security or associated market liquidity. The transfers of investments in RMBS, CMBS and CDO and certain ABS into Level 3 assets were due to diminished market transparency and liquidity for individual security types.

During the three- and nine-month periods ended September 30, 2022 and 2021, transfers out of Level 3 assets primarily included certain investments in private placement corporate debt, RMBS, CMBS, CDO/ABS. Transfers of private placement corporate debt and certain ABS into Level 3 assets were primarily the result of limited market pricing information that required us to determine fair value for these securities based on inputs that are adjusted to better reflect our own assumptions regarding the characteristics of a specific security or associated market liquidity. The transfers of investments in RMBS, CMBS and CDO and certain ABS into Level 3 assets were due to diminished market transparency and liquidity for individual security types.

Transfers of Level 3 Liabilities

During the nine-month period ended September 30, 2022, transfers of derivatives into Level 3 were primarily due to increased long-dated European swaption activity with Secured Overnight Financing Rate tenors. There were no significant transfers of derivative or other liabilities into or out of Level 3 for the three- and nine-month periods ended September 30, 2021.


26			AIG \| Third Quarter 2022 Form 10-Q

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments, and includes only those instruments for which information about the inputs is reasonably available to us, such as data from independent third-party valuation service providers. Because input information from third-parties with respect to certain Level 3 instruments (primarily CDO/ABS) may not be reasonably available to us, balances shown below may not equal total amounts reported for such Level 3 assets and liabilities:


(in millions)	Fair Value at September 30, 2022		Valuation Technique	Unobservable Input(b)	Range (Weighted Average)(c)
Assets:
Obligations of states, municipalities and political subdivisions	$	815	Discounted cash flow	Yield	5.08% - 6.07% (5.57%)
Corporate debt		2,059	Discounted cash flow	Yield	3.42% - 14.51% (7.92%)
RMBS(a)		5,530	Discounted cash flow	Constant prepayment rate	4.78% - 10.05% (7.42%)
				Loss severity	44.65% - 76.04% (60.35%)
				Constant default rate	0.87% - 2.79% (1.83%)
				Yield	5.58% - 7.22% (6.40%)
CDO/ABS(a)		8,802	Discounted cash flow	Yield	5.72% - 7.99% (6.85%)
CMBS		553	Discounted cash flow	Yield	5.16% - 9.47% (7.31%)
Liabilities(d):
Embedded derivatives within Policyholder contract deposits:
Variable annuity guaranteed minimum withdrawal benefits (GMWB)		698	Discounted cash flow	Equity volatility	6.05% - 48.05%
				Base lapse rate	0.16% - 12.60%
				Dynamic lapse multiplier	20.00% - 186.00%
				Mortality multiplier(e)	38.00% - 147.00%
				Utilization	90.00% - 100.00%
				Equity / interest rate correlation	10.00% - 30.00%
				NPA(f)	0.13% - 2.29%
Fixed Index annuities including certain GMWB		5,095	Discounted cash flow	Base lapse rate	0.50% - 50.00%
				Dynamic lapse multiplier	20.00% - 186.00%
				Mortality multiplier(e)	24.00% - 180.00%
				Utilization(g)	60.00% - 95.00%
				Option budget	0.00% - 5.00%
				Equity volatility	6.05% - 48.05%
				NPA(f)	0.13% - 2.29%
Indexed life		555	Discounted cash flow	Base lapse rate	0.00% - 37.97%
				Mortality rate	0.00% - 100.00%
				Equity volatility	6.20% - 26.11%
				NPA(f)	0.13% - 2.29%


AIG \| Third Quarter 2022 Form 10-Q			27

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements


(in millions)	Fair Value at December 31, 2021		Valuation Technique	Unobservable Input(b)	Range (Weighted Average)(c)
Assets:
Obligations of states, municipalities and political subdivisions	$	1,400	Discounted cash flow	Yield	2.74% - 3.33% (3.06%)
Corporate debt		1,561	Discounted cash flow	Yield	2.23% - 7.69% (4.96%)
RMBS(a)		9,916	Discounted cash flow	Constant prepayment rate	5.25% - 17.70% (11.47%)
				Loss severity	26.13% - 71.93% (49.03%)
				Constant default rate	1.15% - 5.85% (3.50%)
				Yield	1.69% - 3.97% (2.83%)
CDO/ABS(a)		8,229	Discounted cash flow	Yield	1.84% - 4.77% (3.31%)
CMBS		580	Discounted cash flow	Yield	1.50% - 5.01% (3.25%)
Liabilities(d):
Embedded derivatives within Policyholder contract deposits:
GMWB		2,472	Discounted cash flow	Equity volatility	5.95% - 46.65%
				Base lapse rate	0.16% - 12.60%
				Dynamic lapse multiplier	20.00% - 186.00%
				Mortality multiplier(e)	38.00% - 147.00%
				Utilization	90.00% - 100.00%
				Equity / interest rate correlation	20.00% - 40.00%
				NPA(f)	0.01% - 1.40%
Fixed Index annuities including certain GMWB		6,445	Discounted cash flow	Base lapse rate	0.50% - 50.00%
				Dynamic lapse multiplier	20.00% - 186.00%
				Mortality multiplier(e)	24.00% - 180.00%
				Utilization(g)	60.00% - 95.00%
				Option budget	0.00% - 4.00%
				Equity volatility	5.95% - 46.65%
				NPA(f)	0.01% - 1.40%
Indexed life		765	Discounted cash flow	Base lapse rate	0.00% - 37.97%
				Mortality rate	0.00% - 100.00%
				Equity volatility	7.65% - 20.70%
				NPA(f)	0.01% - 1.40%

(a)Information received from third-party valuation service providers. The ranges of the unobservable inputs for constant prepayment rate, loss severity and constant default rate relate to each of the individual underlying mortgage loans that comprise the entire portfolio of securities in the RMBS and CDO securitization vehicles and not necessarily to the securitization vehicle bonds (tranches) purchased by us. The ranges of these inputs do not directly correlate to changes in the fair values of the tranches purchased by us, because there are other factors relevant to the fair values of specific tranches owned by us including, but not limited to, purchase price, position in the waterfall, senior versus subordinated position and attachment points.

(b)Represents discount rates, estimates and assumptions that we believe would be used by market participants when valuing these assets and liabilities.

(c)The weighted averaging for fixed maturity securities is based on the estimated fair value of the securities. Because the valuation methodology for embedded derivatives within Policyholder contract deposits uses a range of inputs that vary at the contract level over the cash flow projection period, management believes that presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(d)The Fortitude Re funds withheld payable has been excluded from the above table. As discussed in Note 7, the Fortitude Re funds withheld payable is created through modco and funds withheld reinsurance arrangements where the investments supporting the reinsurance agreements are withheld by, and continue to reside on AIG’s balance sheet. This embedded derivative is valued as a total return swap with reference to the fair value of the invested assets held by AIG. Accordingly, the unobservable inputs utilized in the valuation of the embedded derivative are a component of the invested assets supporting the reinsurance agreements that are held on AIG’s balance sheet.

(e)Mortality inputs are shown as multipliers of the 2012 Individual Annuity Mortality Basic table.

(f)The non-performance risk adjustment (NPA) applied as a spread over risk-free curve for discounting.

(g)The partial withdrawal utilization unobservable input range shown applies only to policies with guaranteed minimum withdrawal benefit riders that are accounted for as an embedded derivative. The total embedded derivative liability at September 30, 2022 and December 31, 2021 was approximately $920 million and $1.2 billion, respectively. The remaining guaranteed minimum riders on the fixed index annuities are valued under the accounting guidance for certain nontraditional long-duration contracts.

The ranges of reported inputs for Obligations of states, municipalities and political subdivisions, Corporate debt, RMBS, CDO/ABS, and CMBS valued using a discounted cash flow technique consist of one standard deviation in either direction from the value-weighted average. The preceding table does not give effect to our risk management practices that might offset risks inherent in these Level 3 assets and liabilities.


28			AIG \| Third Quarter 2022 Form 10-Q

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

Interrelationships between Unobservable Inputs

We consider unobservable inputs to be those for which market data is not available and that are developed using the best information available to us about the assumptions that market participants would use when pricing the asset or liability. Relevant inputs vary depending on the nature of the instrument being measured at fair value. The following paragraphs provide a general description of significant unobservable inputs along with interrelationships between and among the significant unobservable inputs and their impact on the fair value measurements. In practice, simultaneous changes in assumptions may not always have a linear effect on the inputs discussed below. Interrelationships may also exist between observable and unobservable inputs. Such relationships have not been included in the discussion below. For each of the individual relationships described below, the inverse relationship would also generally apply.

Fixed Maturity Securities

The significant unobservable input used in the fair value measurement of fixed maturity securities is yield. The yield is affected by the market movements in credit spreads and U.S. Treasury yields. The yield may be affected by other factors including constant prepayment rates, loss severity, and constant default rates. In general, increases in the yield would decrease the fair value of investments, and conversely, decreases in the yield would increase the fair value of investments.

Embedded derivatives within Policyholder contract deposits

Embedded derivatives reported within Policyholder contract deposits include interest crediting rates based on market indices within fixed index annuities, indexed life, and GICs as well as GMWB within variable annuity and certain fixed index annuity products. For any given contract, assumptions for unobservable inputs vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. The following unobservable inputs are used for valuing embedded derivatives measured at fair value:

•Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. Increases in assumed volatility will generally increase the fair value of both the projected cash flows from rider fees as well as the projected cash flows related to benefit payments. Therefore, the net change in the fair value of the liability may be either a decrease or an increase, depending on the relative changes in projected rider fees and projected benefit payments.

•Equity / interest rate correlation estimates the relationship between changes in equity returns and interest rates in the economic scenario generator used to value our GMWB embedded derivatives. In general, a higher positive correlation assumes that equity markets and interest rates move in a more correlated fashion, which generally increases the fair value of the liability.

•Base lapse rate assumptions are determined by company experience and are adjusted at the contract level using a dynamic lapse function, which reduces the base lapse rate when the contract is in-the-money (when the contract holder’s guaranteed value, as estimated by the company, is worth more than their underlying account value). Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. Increases in assumed lapse rates will generally decrease the fair value of the liability, as fewer policyholders would persist to collect guaranteed withdrawal amounts.

•Mortality rate assumptions, which vary by age and gender, are based on company experience and include a mortality improvement assumption. Increases in assumed mortality rates will decrease the fair value of the liability, while lower mortality rate assumptions will generally increase the fair value of the liability, because guaranteed payments will be made for a longer period of time.

•Utilization assumptions estimate the timing when policyholders with a GMWB will elect to utilize their benefit and begin taking withdrawals. The assumptions may vary by the type of guarantee, tax-qualified status, the contract’s withdrawal history and the age of the policyholder. Utilization assumptions are based on company experience and other factors, which includes partial withdrawal behavior. Increases in assumed utilization rates will generally increase the fair value of the liability.

•Option budget estimates the expected long-term cost of options used to hedge exposures associated with equity price changes. The level of option budgets determines future costs of the options, which impacts the growth in account value and the valuation of embedded derivatives.

•Non-performance or “own credit” risk adjustment used in the valuation of embedded derivatives, which reflects a market participant’s view of our claims-paying ability by incorporating a different spread (the NPA spread) to the curve used to discount projected benefit cash flows. When corporate credit spreads widen, the change in the NPA spread generally reduces the fair value of the embedded derivative liabilities, resulting in a gain, and when corporate credit spreads narrow or tighten, the change in the NPA spread generally increases the fair value of the embedded derivative liabilities, resulting in a loss. In addition to changes driven by credit market- related movements in the NPA spread, the NPA balance also reflects changes in business activity and in the net amount at risk from the underlying guaranteed living benefits offered by variable and certain fixed index annuities.


AIG \| Third Quarter 2022 Form 10-Q			29

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

Embedded derivatives within reinsurance contracts

The fair value of embedded derivatives associated with funds withheld reinsurance contracts is determined based upon a total return swap technique with reference to the fair value of the investments held by AIG related to AIG’s funds withheld payable. The fair value of the underlying assets is generally based on market observable inputs using industry standard valuation techniques. The valuation also requires certain significant inputs, which are generally not observable and accordingly, the valuation is considered Level 3 in the fair value hierarchy.

INVESTMENTS IN CERTAIN ENTITIES CARRIED AT FAIR VALUE USING NET ASSET VALUE PER SHARE

The following table includes information related to our investments in certain other invested assets, including private equity funds, hedge funds and other alternative investments that calculate net asset value per share (or its equivalent). For these investments, which are measured at fair value on a recurring basis, we use the net asset value per share to measure fair value.


			September 30, 2022				December 31, 2021
(in millions)	Investment Category Includes		Fair Value Using NAV Per Share (or its equivalent)		Unfunded Commitments		Fair Value Using NAV Per Share (or its equivalent)		Unfunded Commitments
Investment Category
Private equity funds:
Leveraged buyout	Debt and/or equity investments made as part of a transaction in which assets of mature companies are acquired from the current shareholders, typically with the use of financial leverage	$	3,114	$	2,534	$	2,768	$	1,798
Real assets	Investments in real estate properties, agricultural and infrastructure assets, including power plants and other energy producing assets		1,870		778		904		487
Venture capital	Early-stage, high-potential, growth companies expected to generate a return through an eventual realization event, such as an initial public offering or sale of the company		265		189		252		201
Growth equity	Funds that make investments in established companies for the purpose of growing their businesses		774		63		914		82
Mezzanine	Funds that make investments in the junior debt and equity securities of leveraged companies		577		230		534		354
Other	Includes distressed funds that invest in securities of companies that are in default or under bankruptcy protection, as well as funds that have multi- strategy, and other strategies		1,626		384		1,216		408
Total private equity funds			8,226		4,178		6,588		3,330
Hedge funds:
Event-driven	Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations		282		—		466		—
Long-short	Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk		383		—		432		—
Macro	Investments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions		443		—		516		—
Other	Includes investments held in funds that are less liquid, as well as other strategies which allow for broader allocation between public and private investments		417		5		416		—
Total hedge funds			1,525		5		1,830		—
Total		$	9,751	$	4,183	$	8,418	$	3,330

Private equity fund investments included above are not redeemable, because distributions from the funds will be received when underlying investments of the funds are liquidated. Private equity funds are generally expected to have 10-year lives at their inception, but these lives may be extended at the fund manager’s discretion, typically in one or two-year increments.

The hedge fund investments included above, which are carried at fair value, are generally redeemable subject to the redemption notices period. The majority of our hedge fund investments are redeemable monthly or quarterly.


30			AIG \| Third Quarter 2022 Form 10-Q

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

FAIR VALUE OPTION

The following table presents the gains or losses recorded related to the eligible instruments for which we elected the fair value option:


	Gain (Loss) Three Months Ended September 30,				Gain (Loss) Nine Months Ended September 30,
(in millions)		2022		2021		2022		2021
Assets:
Other bond securities(a)	$	(241)	$	35	$	(915)	$	32
Alternative investments(b)		(57)		403		174		1,248
Liabilities:
Long-term debt(c)		69		6		240		39
Total gain (loss)	$	(229)	$	444	$	(501)	$	1,319

(a)Includes certain securities supporting the funds withheld arrangements with Fortitude Re. For additional information regarding the gains and losses for Other bond securities, see Note 5. For additional information regarding the funds withheld arrangements with Fortitude Re, see Note 7.

(b)Includes certain hedge funds, private equity funds and other investment partnerships.

(c)Includes guaranteed investment agreements (GIAs), notes, bonds and mortgages payable.

We calculate the effect of these credit spread changes using discounted cash flow techniques that incorporate current market interest rates, our observable credit spreads on these liabilities and other factors that mitigate the risk of nonperformance such as cash collateral posted.

The following table presents the difference between fair value and the aggregate contractual principal amount of long-term debt for which the fair value option was elected:


		September 30, 2022						December 31, 2021
(in millions)		Fair Value		Outstanding Principal Amount		Difference		Fair Value		Outstanding Principal Amount		Difference
Liabilities:
Long-term debt*	$	1,613	$	1,451	$	162	$	1,871	$	1,405	$	466

*Includes GIAs, notes, bonds, loans and mortgages payable.

FAIR VALUE MEASUREMENTS ON A NON-RECURRING BASIS

The following table presents assets measured at fair value on a non-recurring basis at the time of impairment and the related impairment charges recorded during the periods presented:


	Assets at Fair Value								Impairment Charges
	Non-Recurring Basis								Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)		Level 1		Level 2		Level 3		Total		2022		2021		2022		2021
September 30, 2022
Other investments	$	—	$	—	$	17	$	17	$	11	$	—	$	11	$	6
Other assets		—		—		—		—		—		13		—		13
Total	$	—	$	—	$	17	$	17	$	11	$	13	$	11	$	19
December 31, 2021
Other investments	$	—	$	—	$	104	$	104

Total	$	—	$	—	$	104	$	104

In addition to the assets presented in the table above, AIG had $170 million of loans held for sale which are carried at fair value at September 30, 2022. There is no associated impairment charge.


AIG \| Third Quarter 2022 Form 10-Q			31

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Fair Value Measurements

FAIR VALUE INFORMATION ABOUT FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE

The following table presents the carrying amounts and estimated fair values of our financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:


		Estimated Fair Value								Carrying Value
(in millions)		Level 1		Level 2		Level 3		Total
September 30, 2022
Assets:
Mortgage and other loans receivable	$	—	$	56	$	44,341	$	44,397	$	47,954
Other invested assets		—		869		6		875		871
Short-term investments		—		9,319		—		9,319		9,319
Cash		2,294		—		—		2,294		2,294
Other assets		57		12		—		69		69
Liabilities:
Policyholder contract deposits associated with investment-type contracts		—		132		138,398		138,530		138,255
Fortitude Re funds withheld payable		—		—		32,929		32,929		32,929
Other liabilities		—		207		—		207		207
Short-term and long-term debt		—		19,054		273		19,327		22,895
Debt of consolidated investment entities		—		3,039		2,713		5,752		5,924
Separate account liabilities - investment contracts		—		77,070		—		77,070		77,070
December 31, 2021
Assets:
Mortgage and other loans receivable	$	—	$	82	$	47,947	$	48,029	$	46,033
Other invested assets		—		871		6		877		878
Short-term investments		—		8,931		—		8,931		8,931
Cash		2,198		—		—		2,198		2,198
Other assets		21		11		—		32		32
Liabilities:
Policyholder contract deposits associated with investment-type contracts		—		169		142,974		143,143		133,043
Fortitude Re funds withheld payable		—		—		34,849		34,849		34,849
Other liabilities		—		3,704		—		3,704		3,704
Short-term and long-term debt		—		24,758		336		25,094		21,870
Debt of consolidated investment entities		—		3,077		3,313		6,390		6,422
Separate account liabilities - investment contracts		—		104,126		—		104,126		104,126


32			AIG \| Third Quarter 2022 Form 10-Q

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Investments

5. Investments

SECURITIES AVAILABLE FOR SALE

The following table presents the amortized cost and fair value of our available for sale securities:


(in millions)		Amortized Cost		Allowance for Credit Losses(a)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2022
Bonds available for sale:
U.S. government and government sponsored entities	$	8,609	$	—	$	20	$	(679)	$	7,950
Obligations of states, municipalities and political subdivisions		13,072		—		75		(1,256)		11,891
Non-U.S. governments		14,866		(9)		92		(1,942)		13,007
Corporate debt		157,955		(75)		1,024		(25,568)		133,336
Mortgage-backed, asset-backed and collateralized:
RMBS		19,174		(30)		908		(1,545)		18,507
CMBS		15,272		—		12		(1,353)		13,931
CDO/ABS		23,035		(1)		57		(1,946)		21,145
Total mortgage-backed, asset-backed and collateralized		57,481		(31)		977		(4,844)		53,583
Total bonds available for sale(b)	$	251,983	$	(115)	$	2,188	$	(34,289)	$	219,767
December 31, 2021
Bonds available for sale:
U.S. government and government sponsored entities	$	7,874	$	—	$	347	$	(27)	$	8,194
Obligations of states, municipalities and political subdivisions		12,760		—		1,782		(15)		14,527
Non-U.S. governments		15,858		—		719		(247)		16,330
Corporate debt		163,064		(89)		13,892		(1,259)		175,608
Mortgage-backed, asset-backed and collateralized:
RMBS		25,027		(9)		2,422		(153)		27,287
CMBS		15,333		—		555		(79)		15,809
CDO/ABS		19,294		—		276		(123)		19,447
Total mortgage-backed, asset-backed and collateralized		59,654		(9)		3,253		(355)		62,543
Total bonds available for sale(b)	$	259,210	$	(98)	$	19,993	$	(1,903)	$	277,202

(a)Represents the allowance for credit losses that has been recognized. Changes in the allowance for credit losses are recorded through Net realized gains (losses) and are not recognized in Other comprehensive income (loss).

(b)At September 30, 2022 and December 31, 2021, bonds available for sale held by us that were below investment grade or not rated totaled $22.4 billion or 10 percent and $27.0 billion or 10 percent, respectively.


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TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Investments

Securities Available for Sale in a Loss Position for Which No Allowance for Credit Loss Has Been Recorded

The following table summarizes the fair value and gross unrealized losses on our available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position for which no allowance for credit loss has been recorded:


		Less than 12 Months				12 Months or More				Total
(in millions)		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
September 30, 2022
Bonds available for sale:
U.S. government and government sponsored entities	$	6,560	$	588	$	947	$	91	$	7,507	$	679
Obligations of states, municipalities and political subdivisions		9,854		1,225		144		31		9,998		1,256
Non-U.S. governments		8,824		1,387		2,382		529		11,206		1,916
Corporate debt		110,817		22,151		11,263		3,345		122,080		25,496
RMBS		10,909		1,362		513		96		11,422		1,458
CMBS		13,068		1,312		335		41		13,403		1,353
CDO/ABS		19,110		1,788		1,030		158		20,140		1,946
Total bonds available for sale	$	179,142	$	29,813	$	16,614	$	4,291	$	195,756	$	34,104
December 31, 2021
Bonds available for sale:
U.S. government and government sponsored entities	$	3,696	$	14	$	447	$	13	$	4,143	$	27
Obligations of states, municipalities and political subdivisions		714		11		57		4		771		15
Non-U.S. governments		4,644		115		1,324		132		5,968		247
Corporate debt		31,914		720		8,819		467		40,733		1,187
RMBS		5,362		102		1,154		46		6,516		148
CMBS		3,980		63		153		16		4,133		79
CDO/ABS		8,263		112		339		11		8,602		123
Total bonds available for sale	$	58,573	$	1,137	$	12,293	$	689	$	70,866	$	1,826

At September 30, 2022, we held 36,267 individual fixed maturity securities that were in an unrealized loss position and for which no allowance for credit losses has been recorded (including 5,241 individual fixed maturity securities that were in a continuous unrealized loss position for 12 months or more). At December 31, 2021, we held 15,029 individual fixed maturity securities that were in an unrealized loss position and for which no allowance for credit losses has been recorded (including 2,644 individual fixed maturity securities that were in a continuous unrealized loss position for 12 months or more). We did not recognize the unrealized losses in earnings on these fixed maturity securities at September 30, 2022 because it was determined that such losses were due to non-credit factors. Additionally, we neither intend to sell the securities nor do we believe that it is more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. For fixed maturity securities with significant declines, we performed fundamental credit analyses on a security-by-security basis, which included consideration of credit enhancements, liquidity position, expected defaults, industry and sector analysis, forecasts and available market data.


34			AIG \| Third Quarter 2022 Form 10-Q

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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Investments

Contractual Maturities of Fixed Maturity Securities Available for Sale

The following table presents the amortized cost and fair value of fixed maturity securities available for sale by contractual maturity:


		Total Fixed Maturity Securities Available for Sale
(in millions)		Amortized Cost, Net of Allowance		Fair Value
September 30, 2022
Due in one year or less	$	8,048	$	7,972
Due after one year through five years		50,823		48,051
Due after five years through ten years		44,127		38,775
Due after ten years		91,420		71,386
Mortgage-backed, asset-backed and collateralized		57,450		53,583
Total	$	251,868	$	219,767

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.

The following table presents the gross realized gains and gross realized losses from sales or maturities of our available for sale securities:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
(in millions)		Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses
Fixed maturity securities	$	123	$	254	$	348	$	123	$	406	$	1,280	$	1,098	$	349

For the three- and nine-month periods ended September 30, 2022, the aggregate fair value of available for sale securities sold was $2.0 billion and $16.0 billion, respectively, which resulted in net realized gains (losses) of $(131) million and $(874) million, respectively. Included within the net realized gains (losses) are $(64) million and $(218) million of net realized gains (losses) for the three- and nine-month periods ended September 30, 2022, respectively, which relate to Fortitude Re funds withheld assets. These net realized gains (losses) are included in Net realized gains (losses) on Fortitude Re funds withheld assets.

For the three- and nine-month periods ended September 30, 2021, the aggregate fair value of available for sale securities sold was $6.7 billion and $19.1 billion, respectively, which resulted in net realized gains (losses) of $225 million and $749 million, respectively. Included within the net realized gains (losses) are $159 million and $549 million of net realized gains (losses) for the three- and nine-month periods ended September 30, 2021, respectively, which relate to Fortitude Re funds withheld assets. These net realized gains (losses) are included in Net realized gains (losses) on Fortitude Re funds withheld assets.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Investments

OTHER SECURITIES MEASURED AT FAIR VALUE

The following table presents the fair value of fixed maturity securities measured at fair value based on our election of the fair value option, which are reported in the other bond securities caption in the financial statements, and equity securities measured at fair value:


(in millions)		September 30, 2022				December 31, 2021
		Fair Value	Percent of Total			Fair Value	Percent of Total
Fixed maturity securities:
U.S. government and government sponsored entities	$	1,565	20	%	$	1,750	25	%
Obligations of states, municipalities and political subdivisions		111	1			97	1
Non-U.S. governments		64	1			76	1
Corporate debt		2,034	26			1,050	15
Mortgage-backed, asset-backed and collateralized:
RMBS		341	4			411	6
CMBS		391	5			315	4
CDO/ABS and other collateralized		2,625	34			2,579	37
Total mortgage-backed, asset-backed and collateralized		3,357	43			3,305	47
Total fixed maturity securities		7,131	91			6,278	89
Equity securities		608	9			739	11
Total	$	7,739	100	%	$	7,017	100	%

OTHER INVESTED ASSETS

The following table summarizes the carrying amount of other invested assets:


(in millions)		September 30, 2022		December 31, 2021
Alternative investments(a)(b)	$	11,625	$	10,951
Investment real estate(c)		2,205		2,727
All other investments(d)		1,964		1,990
Total	$	15,794	$	15,668

(a)At September 30, 2022, included hedge funds of $1.5 billion and private equity funds of $10.1 billion. At December 31, 2021, included hedge funds of $2.0 billion, private equity funds of $8.9 billion.

(b)At September 30, 2022, approximately 56 percent of our hedge fund portfolio is available for redemption in 2022. The remaining 44 percent will be available for redemption between 2023 and 2028.

(c)Represents values net of accumulated depreciation. At September 30, 2022 and December 31, 2021, the accumulated depreciation was $774 million and $778 million, respectively.

(d)Includes AIG's ownership interest in Fortitude Group Holdings, LLC (FRL), which is recorded using the measurement alternative for equity securities. Our investment in FRL totaled $156 million and $100 million at September 30, 2022 and December 31, 2021, respectively.


36			AIG \| Third Quarter 2022 Form 10-Q

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Investments

NET INVESTMENT INCOME

The following table presents the components of Net investment income:


Three Months Ended September 30,	2022						2021
(in millions)	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets			Total	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets			Total
Available for sale fixed maturity securities, including short-term investments	$	2,150	$	256	$	2,406	$	2,173	$	374	$	2,547
Other fixed maturity securities(a)		(73)		(168)		(241)		32		3		35
Equity securities		16		—		16		(45)		—		(45)
Interest on mortgage and other loans		515		53		568		435		50		485
Alternative investments(b)		(49)		11		(38)		616		77		693
Real estate		14		—		14		99		—		99
Other investments(c)		83		11		94		41		1		42
Total investment income		2,656		163		2,819		3,351		505		3,856
Investment expenses		143		8		151		131		10		141
Net investment income	$	2,513	$	155	$	2,668	$	3,220	$	495	$	3,715


Nine Months Ended September 30,	2022						2021
(in millions)	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets		Total		Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets		Total
Available for sale fixed maturity securities, including short-term investments	$	6,338	$	824	$	7,162	$	6,481	$	1,112	$	7,593
Other fixed maturity securities(a)		(449)		(466)		(915)		23		9		32
Equity securities		(41)		—		(41)		(36)		—		(36)
Interest on mortgage and other loans		1,428		150		1,578		1,295		154		1,449
Alternative investments(b)		729		138		867		1,767		238		2,005
Real estate		46		—		46		215		—		215
Other investments(c)		277		14		291		162		3		165
Total investment income		8,328		660		8,988		9,907		1,516		11,423
Investment expenses		453		26		479		348		28		376
Net investment income	$	7,875	$	634	$	8,509	$	9,559	$	1,488	$	11,047

(a)Included in the three- and nine-month periods ended September 30, 2022 were income (loss) of $(57) million and $(208) million, respectively, related to fixed maturity securities measured at fair value that economically hedge liabilities described in (c) below. Included in the three- and nine-month periods ended September 30, 2021 were income (loss) of $(3) million and $(49) million, respectively, related to fixed maturity securities measured at fair value that economically hedge liabilities described in (c) below.

(b)Included income from hedge funds, private equity funds and affordable housing partnerships. Hedge funds are recorded as of the balance sheet date. Private equity funds are generally reported on a one-quarter lag.

(c)Included in the three- and nine-month periods ended September 30, 2022 were income (loss) of $62 million and $194 million, respectively, related to liabilities measured at fair value that are economically hedged with fixed maturity securities as described in (a) above. Included in the three- and nine-month periods ended September 30, 2021 were income (loss) of $9 million and $52 million, respectively, related to liabilities measured at fair value that are economically hedged with fixed maturity securities as described in (a) above.


AIG \| Third Quarter 2022 Form 10-Q			37

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Investments

NET REALIZED GAINS AND LOSSES

The following table presents the components of Net realized gains (losses):


Three Months Ended September 30,		2022						2021
(in millions)	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets			Total	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets			Total
Sales of fixed maturity securities	$	(67)	$	(64)	$	(131)	$	66	$	159	$	225


Change in allowance for credit losses on fixed maturity securities		(1)		7		6		3		1		4
Change in allowance for credit losses on loans		(26)		(24)		(50)		22		3		25
Foreign exchange transactions		(244)		(22)		(266)		(127)		(9)		(136)
Variable annuity embedded derivatives, net of related hedges		441		—		441		(39)		—		(39)
All other derivatives and hedge accounting		1,240		(13)		1,227		317		(15)		302
Sales of alternative investments and real estate investments		137		32		169		336		52		388
Other		24		(2)		22		101		(1)		100
Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative		1,504		(86)		1,418		679		190		869
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative		—		1,757		1,757		—		(209)		(209)
Net realized gains (losses)	$	1,504	$	1,671	$	3,175	$	679	$	(19)	$	660


Nine Months Ended September 30,	2022						2021
(in millions)	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets			Total	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets			Total
Sales of fixed maturity securities	$	(656)	$	(218)	$	(874)	$	200	$	549	$	749

Change in allowance for credit losses on fixed maturity securities		(101)		(34)		(135)		64		7		71
Change in allowance for credit losses on loans		(21)		(26)		(47)		130		6		136
Foreign exchange transactions		(489)		(46)		(535)		(37)		(6)		(43)
Variable annuity embedded derivatives, net of related hedges		1,401		—		1,401		(3)		—		(3)
All other derivatives and hedge accounting		3,149		(21)		3,128		332		(72)		260
Sales of alternative investments and real estate investments		160		35		195		393		53		446
Other		4		(2)		2		252		(1)		251
Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative		3,447		(312)		3,135		1,331		536		1,867
Net realized gains on Fortitude Re funds withheld embedded derivative		—		7,851		7,851		—		117		117
Net realized gains	$	3,447	$	7,539	$	10,986	$	1,331	$	653	$	1,984


38			AIG \| Third Quarter 2022 Form 10-Q

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Investments

CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS

The following table presents the increase (decrease) in unrealized appreciation (depreciation) of our available for sale securities and other investments:


		Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)		2022		2021		2022		2021
Increase (decrease) in unrealized appreciation (depreciation) of investments:
Fixed maturity securities	$	(12,134)	$	(2,065)	$	(50,191)	$	(7,863)
Other investments		—		—		(14)		(5)
Total increase (decrease) in unrealized appreciation (depreciation) of investments	$	(12,134)	$	(2,065)	$	(50,205)	$	(7,868)

The following table summarizes the unrealized gains and losses recognized in Net investment income during the reporting period on equity securities and other investments still held at the reporting date:


Three Months Ended September 30,		2022						2021
(in millions)		Equities		Other Invested Assets		Total		Equities		Other Invested Assets		Total
Net gains (losses) recognized during the period on equity securities and other investments	$	16	$	(98)	$	(82)	$	(45)	$	471	$	426
Less: Net gains recognized during the period on equity securities and other investments sold during the period		26		13		39		8		23		31
Unrealized gains (losses) recognized during the reporting period on equity securities and other investments still held at the reporting date	$	(10)	$	(111)	$	(121)	$	(53)	$	448	$	395


Nine Months Ended September 30,		2022						2021
(in millions)		Equities		Other Invested Assets		Total		Equities		Other Invested Assets		Total
Net gains (losses) recognized during the period on equity securities and other investments	$	(41)	$	306	$	265	$	(36)	$	1,484	$	1,448
Less: Net gains (losses) recognized during the period on equity securities and other investments sold during the period		119		(23)		96		(192)		38		(154)
Unrealized gains (losses) recognized during the reporting period on equity securities and other investments still held at the reporting date	$	(160)	$	329	$	169	$	156	$	1,446	$	1,602

EVALUATING INVESTMENTS FOR AN ALLOWANCE FOR CREDIT LOSSES

For a discussion of our policy for evaluating investments for an allowance for credit losses, see Note 5 to the Consolidated Financial Statements in the 2021 Annual Report.

Credit Impairments

The following table presents a rollforward of the changes in allowance for credit losses on available for sale fixed maturity securities by major investment category:


Three Months Ended September 30,		2022						2021
(in millions)	Structured		Non- Structured			Total	Structured		Non- Structured			Total
Balance, beginning of period	$	26	$	149	$	175	$	10	$	87	$	97
Additions:
Securities for which allowance for credit losses were not previously recorded		6		25		31		—		20		20


Reductions:
Securities sold during the period		(1)		(45)		(46)		—		(21)		(21)
Addition to (release of) the allowance for credit losses on securities that had an allowance recorded in a previous period, for which there was no intent to sell before recovery of amortized cost basis		—		(37)		(37)		(3)		(21)		(24)
Write-offs charged against the allowance		—		(7)		(7)		—		(6)		(6)
Other		(1)		—		(1)		—		—		—
Balance, end of period	$	30	$	85	$	115	$	7	$	59	$	66


AIG \| Third Quarter 2022 Form 10-Q			39

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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Investments



Nine Months Ended September 30,		2022						2021
(in millions)	Structured		Non- Structured			Total	Structured		Non- Structured			Total
Balance, beginning of period	$	8	$	90	$	98	$	17	$	169	$	186
Additions:
Securities for which allowance for credit losses were not previously recorded		57		181		238		8		48		56


Reductions:
Securities sold during the period		(2)		(86)		(88)		(3)		(28)		(31)
Addition to (release of) the allowance for credit losses on securities that had an allowance recorded in a previous period, for which there was no intent to sell before recovery of amortized cost basis		(32)		(71)		(103)		(15)		(112)		(127)
Write-offs charged against the allowance		—		(29)		(29)		—		(18)		(18)
Other		(1)		—		(1)		—		—		—
Balance, end of period	$	30	$	85	$	115	$	7	$	59	$	66

Purchased Credit Deteriorated (PCD) Securities

We purchase certain RMBS securities that have experienced more-than-insignificant deterioration in credit quality since origination. These are referred to as PCD assets. At the time of purchase an allowance is recognized for these PCD assets by adding it to the purchase price to arrive at the initial amortized cost. There is no credit loss expense recognized upon acquisition of a PCD asset. When determining the initial allowance for credit losses, management considers the historical performance of underlying assets and available market information as well as bond-specific structural considerations, such as credit enhancement and the priority of payment structure of the security. In addition, the process of estimating future cash flows includes, but is not limited to, the following critical inputs:

•Current delinquency rates;

•Expected default rates and the timing of such defaults;

•Loss severity and the timing of any recovery; and

•Expected prepayment speeds.

Subsequent to the acquisition date, the PCD assets follow the same accounting as other structured securities that are not high credit quality.

We did not purchase securities with more than insignificant credit deterioration since their origination during the nine-month periods ended September 30, 2022 and 2021.

PLEDGED INVESTMENTS

Secured Financing and Similar Arrangements

We enter into secured financing transactions whereby certain securities are sold under agreements to repurchase (repurchase agreements), in which we transfer securities in exchange for cash, with an agreement by us to repurchase the same or substantially similar securities. Our secured financing transactions also include those that involve the transfer of securities to financial institutions in exchange for cash (securities lending agreements). In all of these secured financing transactions, the securities transferred by us (pledged collateral) may be sold or repledged by the counterparties. These agreements are recorded at their contracted amounts plus accrued interest, other than those that are accounted for at fair value.

Pledged collateral levels are monitored daily and are generally maintained at an agreed-upon percentage of the fair value of the amounts borrowed during the life of the transactions. In the event of a decline in the fair value of the pledged collateral under these secured financing transactions, we may be required to transfer cash or additional securities as pledged collateral under these agreements. At the termination of the transactions, we and our counterparties are obligated to return the amounts borrowed and the securities transferred, respectively.

The following table presents the fair value of securities pledged to counterparties under secured financing transactions, including repurchase and securities lending agreements:


(in millions)		September 30, 2022		December 31, 2021
Fixed maturity securities available for sale	$	321	$	3,583

At September 30, 2022 and December 31, 2021, amounts borrowed under repurchase and securities lending agreements totaled $408 million and $3.7 billion, respectively.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Investments

The following table presents the fair value of securities pledged under our repurchase agreements by collateral type and by remaining contractual maturity:


		Remaining Contractual Maturity of the Agreements
(in millions)		Overnight and Continuous		up to 30 days		31 - 90 days		91 - 364 days		365 days or greater		Total
September 30, 2022
Bonds available for sale:
U.S. government and government sponsored entities	$	—	$	26	$	50	$	14	$	—	$	90
Non-U.S. governments		28		—		—		28		—		56
Corporate debt		175		—		—		—		—		175
Total	$	203	$	26	$	50	$	42	$	—	$	321


December 31, 2021
Bonds available for sale:
Non-U.S. governments	$	48	$	—	$	—	$	—	$	—	$	48
Corporate debt		128		61		22		—		—		211
Total	$	176	$	61	$	22	$	—	$	—	$	259

The following table presents the fair value of securities pledged under our securities lending agreements by collateral type and by remaining contractual maturity:

Remaining Contractual Maturity of the Agreements

(in millions)

Overnight
and
Continuous

up to
30 days

31 - 90
days

91 - 364
days

365 days
or greater

Total

September 30, 2022

Bonds available for sale:

Obligations of states, municipalities and political subdivisions

—

Non-U.S. governments

—

Total

—


December 31, 2021
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	—	$	—	$	106	$	—	$	—	$	106
Non-U.S. governments		—		—		43		—		—		43
Corporate debt		—		534		2,641		—		—		3,175
Total	$	—	$	534	$	2,790	$	—	$	—	$	3,324

We also enter into agreements in which securities are purchased by us under agreements to resell (reverse repurchase agreements), which are accounted for as secured financing transactions and reported as short-term investments or other assets, depending on their terms. These agreements are recorded at their contracted resale amounts plus accrued interest, other than those that are accounted for at fair value. In all reverse repurchase transactions, we take possession of or obtain a security interest in the related securities, and we have the right to sell or repledge this collateral received.

The following table presents information on the fair value of securities pledged to us under reverse repurchase agreements:


(in millions)		September 30, 2022		December 31, 2021
Securities collateral pledged to us	$	265	$	1,839

At September 30, 2022 and December 31, 2021, the carrying value of reverse repurchase agreements totaled $270 million and $1.9 billion, respectively.

We do not currently offset any secured financing transactions. All such transactions are collateralized and margined on a daily basis consistent with market standards and subject to enforceable master netting arrangements with rights of set off.


AIG \| Third Quarter 2022 Form 10-Q			41

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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Investments

Insurance – Statutory and Other Deposits

The total carrying value of cash and securities deposited by our insurance subsidiaries under requirements of regulatory authorities or other insurance-related arrangements, including certain annuity-related obligations and certain reinsurance contracts, was $11.4 billion and $13.5 billion at September 30, 2022 and December 31, 2021, respectively.

Other Pledges and Restrictions

Certain of our subsidiaries are members of Federal Home Loan Banks (FHLBs) and such membership requires the members to own stock in these FHLBs. We owned an aggregate of $239 million and $211 million of stock in FHLBs at September 30, 2022 and December 31, 2021, respectively. In addition, our subsidiaries have pledged securities available for sale and residential loans associated with borrowings and funding agreements from FHLBs, with a fair value of $5.5 billion and $1.8 billion, respectively, at September 30, 2022 and $5.1 billion and $1.5 billion, respectively, at December 31, 2021.

Certain GIAs have provisions that require collateral to be posted or payments to be made by us upon a downgrade of our long-term debt ratings. The actual amount of collateral required to be posted to the counterparties in the event of such downgrades, and the aggregate amount of payments that we could be required to make, depend on market conditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of the downgrade. The fair value of securities pledged as collateral with respect to these obligations was approximately $1.5 billion and $1.4 billion, at September 30, 2022 and December 31, 2021, respectively. This collateral primarily consists of securities of the U.S. government and government sponsored entities and generally cannot be repledged or resold by the counterparties.

Investments held in escrow accounts or otherwise subject to restriction as to their use were $594 million and $514 million, comprised of bonds available for sale and short-term investments at September 30, 2022 and December 31, 2021, respectively.

Reinsurance transactions between AIG and Fortitude Re were structured as modco and loss portfolio transfer arrangements with funds withheld.

6. Lending Activities

The following table presents the composition of Mortgage and other loans receivable, net:


(in millions)		September 30, 2022		December 31, 2021
Commercial mortgages(a)	$	35,824	$	35,665
Residential mortgages		5,640		5,492
Life insurance policy loans		1,773		1,843
Commercial loans, other loans and notes receivable(b)		5,542		3,677
Total mortgage and other loans receivable		48,779		46,677
Allowance for credit losses(c)		(655)		(629)
Mortgage and other loans receivable, net	$	48,124	$	46,048

(a)Commercial mortgages primarily represent loans for apartments, offices and retail properties, with exposures in New York and California representing the largest geographic concentrations (aggregating approximately 19 percent and 12 percent, respectively, at September 30, 2022 and 21 percent and 10 percent, respectively, at December 31, 2021).

(b)Includes loans held for sale which are carried at lower of cost or market and are collateralized primarily by apartments. As of September 30, 2022 and December 31, 2021, the net carrying value of these loans were $176 million and $15 million, respectively.

(c)Does not include allowance for credit losses of $87 million and $71 million, respectively, at September 30, 2022 and December 31, 2021, in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities.

Interest income is not accrued when payment of contractual principal and interest is not expected. Any cash received on impaired loans is generally recorded as a reduction of the current carrying amount of the loan. Accrual of interest income is generally resumed when delinquent contractual principal and interest is repaid or when a portion of the delinquent contractual payments are made and the ongoing required contractual payments have been made for an appropriate period. As of September 30, 2022, $6 million and $772 million of residential mortgage loans and commercial mortgage loans, respectively, were placed on nonaccrual status. As of December 31, 2021, $7 million and $226 million of residential mortgage loans and commercial mortgage loans, respectively, were placed on nonaccrual status.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Lending Activities

Accrued interest is presented separately and is included in Accrued investment income on the Condensed Consolidated Balance Sheets. As of September 30, 2022, accrued interest receivable was $13 million and $132 million associated with residential mortgage loans and commercial mortgage loans, respectively. As of December 31, 2021, accrued interest receivable was $12 million and $126 million associated with residential mortgage loans and commercial mortgage loans, respectively.

A significant majority of commercial mortgages in the portfolio are non-recourse loans and, accordingly, the only guarantees are for specific items that are exceptions to the non-recourse provisions. It is therefore extremely rare for us to have cause to enforce the provisions of a guarantee on a commercial real estate or mortgage loan.

Nonperforming loans are generally those loans where payment of contractual principal or interest is more than 90 days past due. Nonperforming loans were not significant for any of the periods presented.

CREDIT QUALITY OF COMMERCIAL MORTGAGES

The following table presents debt service coverage ratios(a) for commercial mortgages by year of vintage:


September 30, 2022		2022		2021		2020		2019		2018		Prior		Total
(in millions)
>1.2X	$	4,521	$	2,318	$	1,885	$	5,056	$	3,936	$	11,491	$	29,207
1.00 - 1.20X		425		712		504		424		382		1,443		3,890
<1.00X		—		—		21		52		1,026		1,628		2,727
Total commercial mortgages	$	4,946	$	3,030	$	2,410	$	5,532	$	5,344	$	14,562	$	35,824

December 31, 2021		2021		2020		2019		2018		2017		Prior		Total
(in millions)
>1.2X	$	2,245	$	1,662	$	5,126	$	3,926	$	3,557	$	10,796	$	27,312
1.00 - 1.20X		574		1,019		700		1,138		136		1,929		5,496
<1.00X		1		27		71		925		41		1,792		2,857
Total commercial mortgages	$	2,820	$	2,708	$	5,897	$	5,989	$	3,734	$	14,517	$	35,665

The following table presents loan-to-value ratios(b) for commercial mortgages by year of vintage:


September 30, 2022		2022		2021		2020		2019		2018		Prior		Total
(in millions)
Less than 65%	$	4,225	$	2,464	$	2,171	$	4,048	$	3,667	$	10,418	$	26,993
65% to 75%		721		329		213		1,484		1,359		2,854		6,960
76% to 80%		—		237		—		—		—		99		336
Greater than 80%		—		—		26		—		318		1,191		1,535
Total commercial mortgages	$	4,946	$	3,030	$	2,410	$	5,532	$	5,344	$	14,562	$	35,824

December 31, 2021		2021		2020		2019		2018		2017		Prior		Total
(in millions)
Less than 65%	$	2,286	$	2,272	$	4,149	$	4,815	$	2,892	$	9,902	$	26,316
65% to 75%		372		410		1,748		1,174		406		3,490		7,600
76% to 80%		—		—		—		—		188		274		462
Greater than 80%		162		26		—		—		248		851		1,287
Total commercial mortgages	$	2,820	$	2,708	$	5,897	$	5,989	$	3,734	$	14,517	$	35,665

(a)The debt service coverage ratio compares a property’s net operating income to its debt service payments, including principal and interest. Our weighted average debt service coverage ratio was 2.0X at period ended September 30, 2022 and 1.9X at period ended December 31, 2021. The debt service coverage ratios have been updated within the last three months. The debt service coverage ratios are updated when additional relevant information becomes available.

(b)The loan-to-value ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan. Our weighted average loan-to-value ratio was 57 percent at both September 30, 2022 and December 31, 2021. The loan-to-value ratios have been updated within the last three months.


AIG \| Third Quarter 2022 Form 10-Q			43

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Lending Activities

The following table presents the credit quality performance indicators for commercial mortgages:


	Number of Loans		Class													Percent of Total
(dollars in millions)			Apartments		Offices		Retail		Industrial		Hotel		Others		Total
September 30, 2022
Credit Quality Performance Indicator:
In good standing	620	$	13,472	$	9,785	$	3,631	$	5,597	$	2,008	$	368	$	34,861	98	%
Restructured(a)	11		—		456		140		—		137		—		733	2
90 days or less delinquent	1		—		157		—		—		—		—		157	—
>90 days delinquent or in process of foreclosure	3		—		30		43		—		—		—		73	—
Total(b)	635	$	13,472	$	10,428	$	3,814	$	5,597	$	2,145	$	368	$	35,824	100	%
Allowance for credit losses		$	94	$	275		84		72		30		9	$	564	2	%


December 31, 2021
Credit Quality Performance Indicator:
In good standing	636	$	14,267	$	9,695	$	4,778	$	3,858	$	1,985	$	432	$	35,015	98	%
Restructured(a)	8		—		354		25		—		136		—		515	2
90 days or less delinquent	—		—		—		—		—		—		—		—	—
>90 days delinquent or in process of foreclosure	5		—		81		54		—		—		—		135	—
Total(b)	649	$	14,267	$	10,130	$	4,857	$	3,858	$	2,121	$	432	$	35,665	100	%
Allowance for credit losses		$	109	$	247	$	103	$	47	$	31	$	8	$	545	2	%

(a)Loans that have been modified in troubled debt restructurings and are performing according to their restructured terms. For additional discussion of troubled debt restructurings, see Note 6 to the Consolidated Financial Statements in the 2021 Annual Report.

(b)Does not reflect allowance for credit losses.

The following table presents credit quality performance indicators for residential mortgages by year of vintage:


September 30, 2022		2022		2021		2020		2019		2018		Prior		Total
(in millions)
FICO*:
780 and greater	$	205	$	2,233	$	663	$	237	$	80	$	574	$	3,992
720 - 779		219		737		171		76		32		171		1,406
660 - 719		13		81		29		16		9		62		210
600 - 659		—		4		2		2		2		14		24
Less than 600		—		—		—		1		—		7		8
Total residential mortgages	$	437	$	3,055	$	865	$	332	$	123	$	828	$	5,640

December 31, 2021		2021		2020		2019		2018		2017		Prior		Total
(in millions)
FICO*:
780 and greater	$	1,601	$	691	$	297	$	107	$	192	$	501	$	3,389
720 - 779		1,306		230		86		44		58		154		1,878
660 - 719		48		42		22		12		20		49		193
600 - 659		1		1		2		3		2		12		21
Less than 600		—		—		1		1		2		7		11
Total residential mortgages	$	2,956	$	964	$	408	$	167	$	274	$	723	$	5,492

*Fair Isaac Corporation (FICO) is the credit quality indicator used to evaluate consumer credit risk for residential mortgage loan borrowers and have been updated within the last twelve months.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Lending Activities

METHODOLOGY USED TO ESTIMATE THE ALLOWANCE FOR CREDIT LOSSES

For a discussion of our accounting policy for evaluating Mortgage and other loans receivable for impairment see Note 6 to the Consolidated Financial Statements in the 2021 Annual Report.

The following table presents a rollforward of the changes in the allowance for credit losses on Mortgage and other loans receivable(a):


Three Months Ended September 30,		2022						2021
(in millions)		Commercial Mortgages		Other Loans		Total		Commercial Mortgages		Other Loans		Total
Allowance, beginning of period	$	525	$	78	$	603	$	587	$	114	$	701

Loans charged off		—		—		—		(2)		—		(2)

Net charge-offs		—		—		—		(2)		—		(2)
Addition to (release of) allowance for loan losses		39		13		52		(28)		1		(27)

Reclassified to held for sale(b)		—		—		—		—		(31)		(31)
Allowance, end of period	$	564	$	91	$	655	$	557	$	84	$	641
Nine Months Ended September 30,		2022						2021
(in millions)		Commercial Mortgages		Other Loans		Total		Commercial Mortgages		Other Loans		Total
Allowance, beginning of year	$	545	$	84	$	629	$	685	$	129	$	814


Loans charged off		(4)		—		(4)		(2)		—		(2)

Net charge-offs		(4)		—		(4)		(2)		—		(2)
Addition to (release of) allowance for loan losses		23		7		30		(126)		(14)		(140)

Reclassified to held for sale(b)		—		—		—		—		(31)		(31)
Allowance, end of period	$	564	$	91	$	655	$	557	$	84	$	641

(a)Does not include allowance for credit losses of $87 million and $83 million, respectively, at September 30, 2022 and 2021 in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities.

(b)Reported in Other assets in the Condensed Consolidated Balance Sheets.

Our expectations and models used to estimate the allowance for losses on commercial and residential mortgage loans are regularly updated to reflect the current economic environment. The full impact of COVID-19 on real estate valuations remains uncertain and we will continue to review our valuations as further information becomes available.

TROUBLED DEBT RESTRUCTURINGS

We modify loans to optimize their returns and improve their collectability, among other things. When we undertake such a modification with a borrower that is experiencing financial difficulty and the modification involves us granting a concession to the troubled debtor, the modification is a troubled debt restructuring (TDR). We assess whether a borrower is experiencing financial difficulty based on a variety of factors, including the borrower’s current default on any of its outstanding debt, the probability of a default on any of its debt in the foreseeable future without the modification, the insufficiency of the borrower’s forecasted cash flows to service any of its outstanding debt (including both principal and interest), and the borrower’s inability to access alternative third-party financing at an interest rate that would be reflective of current market conditions for a non-troubled debtor. Concessions granted may include extended maturity dates, interest rate changes, principal or interest forgiveness, payment deferrals and easing of loan covenants.

During the nine-month periods ended September 30, 2022 and 2021, loans with a carrying value of $220 million and $45 million, respectively, were modified in TDRs.


AIG \| Third Quarter 2022 Form 10-Q			45

TABLE OF CONTENTS

ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 7. Reinsurance

7. Reinsurance

FORTITUDE RE

Fortitude Re is the reinsurer of the majority of AIG’s run-off operations. The reinsurance transactions are structured as modco and loss portfolio transfer arrangements with funds withheld (funds withheld). In modco and funds withheld arrangements, the investments supporting the reinsurance agreements, and which reflect the majority of the consideration that would be paid to the reinsurer for entering into the transaction, are withheld by, and therefore continue to reside on the balance sheet of, the ceding company (i.e., AIG) thereby creating an obligation for the ceding company to pay the reinsurer (i.e., Fortitude Re) at a later date. Additionally, as AIG maintains ownership of these investments, AIG will maintain its existing accounting for these assets (e.g., the changes in fair value of available for sale securities will be recognized within Other comprehensive income (loss)). As a result of the deconsolidation resulting from the sale of our majority interest in Fortitude Group Holdings, LLC, AIG has established a funds withheld payable to Fortitude Re while simultaneously establishing a reinsurance asset representing reserves for the insurance coverage that Fortitude Re has assumed. The funds withheld payable contains an embedded derivative and changes in fair value of the embedded derivative related to the funds withheld payable are recognized in earnings through Net realized gains (losses). This embedded derivative is considered a total return swap with contractual returns that are attributable to various assets and liabilities associated with these reinsurance agreements.

For additional information on Fortitude Re see Note 7 to the Consolidated Financial Statements in the 2021 Annual Report.

There is a diverse pool of assets supporting the funds withheld arrangements with Fortitude Re. The following summarizes the composition of the pool of assets:


	September 30, 2022				December 31, 2021
(in millions)	Carrying Value			Fair Value	Carrying Value			Fair Value	Corresponding Accounting Policy
Fixed maturity securities - available for sale(a)	$	19,247	$	19,247	$	31,815	$	31,815	Fair value through other comprehensive income (loss)
Fixed maturity securities - fair value option		3,800		3,800		1,983		1,983	Fair value through net investment income
Commercial mortgage loans		4,076		3,830		3,637		3,859	Amortized cost
Real estate investments		139		364		201		395	Amortized cost
Private equity funds / hedge funds		1,861		1,861		1,606		1,606	Fair value through net investment income
Policy loans		357		357		380		380	Amortized cost
Short-term investments		160		160		50		50	Fair value through net investment income
Funds withheld investment assets		29,640		29,619		39,672		40,088
Derivative assets, net(b)		97		97		81		81	Fair value through net realized gains (losses)
Other(c)		708		708		602		602	Amortized cost
Total	$	30,445	$	30,424	$	40,355	$	40,771

(a)The change in the net unrealized gains (losses) on available for sale securities related to the Fortitude Re funds withheld assets was $(7.7) billion ($(6.1) billion after-tax) and $(2.1) billion ($(1.6) billion after-tax), respectively for the nine months ended September 30, 2022 and 2021.

(b)The derivative assets and liabilities have been presented net of cash collateral. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $366 million and $19 million, respectively, as of September 30, 2022. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $389 million and $10 million, respectively, as of December 31, 2021. These derivative assets and liabilities are fully collateralized either by cash or securities.

(c)Primarily comprised of Cash and Accrued investment income.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 7. Reinsurance

The impact of the funds withheld arrangements with Fortitude Re was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)		2022		2021		2022		2021
Net underwriting income	$	—	$	—	$	—	$	—
Net investment income - Fortitude Re funds withheld assets		155		495		634		1,488
Net realized gains (losses) on Fortitude Re funds withheld assets:
Net realized gains (losses) - Fortitude Re funds withheld assets		(86)		190		(312)		536
Net realized gains (losses) - Fortitude Re embedded derivative		1,757		(209)		7,851		117
Net realized gains (losses) on Fortitude Re funds withheld assets		1,671		(19)		7,539		653
Income from continuing operations before income tax expense		1,826		476		8,173		2,141
Income tax expense(a)		383		99		1,716		449
Net income		1,443		377		6,457		1,692
Change in unrealized depreciation of all other investments(a)		(1,317)		(360)		(6,111)		(1,645)
Comprehensive income	$	126	$	17	$	346	$	47

(a)The income tax expense (benefit) and the tax impact in AOCI was computed using AIG’s U.S. statutory tax rate of 21 percent.

Various assets supporting the Fortitude Re funds withheld arrangements are reported at amortized cost, and as such, changes in the fair value of these assets are not reflected in the financial statements. However, changes in the fair value of these assets are included in the embedded derivative in the Fortitude Re funds withheld arrangements and the appreciation of these assets is the primary driver of the comprehensive income (loss) reflected above.

REINSURANCE – CREDIT LOSSES

The estimation of reinsurance recoverables involves a significant amount of judgment, particularly for latent exposures, such as asbestos, due to their long-tail nature. Reinsurance assets include reinsurance recoverables on unpaid losses and loss adjustment expenses that are estimated as part of our loss reserving process and, consequently, are subject to similar judgments and uncertainties as the estimation of gross loss reserves. Similarly, Other assets include reinsurance recoverables for contracts which are accounted for as deposits.

We assess the collectability of reinsurance recoverable balances in each reporting period, through either historical trends of disputes and credit events or financial analysis of the credit quality of the reinsurer. We record adjustments to reflect the results of these assessments through an allowance for credit losses and disputes that reduces the carrying amount of reinsurance and other assets on the consolidated balance sheets (collectively, reinsurance recoverables). This estimate requires significant judgment for which key considerations include:

•paid and unpaid amounts recoverable;

•whether the balance is in dispute or subject to legal collection;

•the relative financial health of the reinsurer as determined by the Obligor Risk Ratings (ORRs) we assign to each reinsurer based upon our financial reviews; reinsurers that are financially troubled (i.e., in run-off, have voluntarily or involuntarily been placed in receivership, are insolvent, are in the process of liquidation or otherwise subject to formal or informal regulatory restriction) are assigned ORRs that will generate a significant allowance; and

•whether collateral and collateral arrangements exist.

An estimate of the reinsurance recoverables lifetime expected credit losses is established utilizing a probability of default and loss given default method, which reflects the reinsurer’s ORR. The allowance for credit losses excludes disputed amounts. An allowance for disputes is established for a reinsurance recoverable using the losses incurred model for contingencies.

The total reinsurance recoverables as of September 30, 2022 were $75.7 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 92 percent of the reinsurance recoverables were investment grade, of which 53 percent related to General Insurance and 39 percent related to Life and Retirement; (ii) approximately 7 percent of the reinsurance recoverables were non-investment grade, the majority of which related to General Insurance; (iii) less than one percent of the non-investment grade reinsurance recoverables related to Life and Retirement and (iv) approximately one percent of the reinsurance recoverables related to entities that were not rated by AIG.

The total reinsurance recoverables as of December 31, 2021 were $76.3 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 92 percent of the reinsurance recoverables were investment grade, of which 52 percent related to General Insurance and 40 percent related to Life and Retirement; (ii) approximately 7 percent of the reinsurance recoverables were non-investment grade, the majority of which related to General Insurance; (iii) less than one percent of the non-investment grade reinsurance recoverables related to Life and Retirement and (iv) approximately one percent of the reinsurance recoverables related to entities that were not rated by AIG.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 7. Reinsurance

As of September 30, 2022 and December 31, 2021, approximately 73 percent and 71 percent, respectively, of our non-investment grade reinsurance exposure related to captive insurers. These arrangements are typically collateralized by letters of credit, funds withheld or trust agreements.

Reinsurance Recoverable Allowance

The following table presents a rollforward of the reinsurance recoverable allowance:


Three Months Ended September 30,		2022						2021
(in millions)	General Insurance		Life and Retirement			Total	General Insurance		Life and Retirement			Total
Balance, beginning of period	$	284	$	107	$	391	$	287	$	87	$	374
Addition to (release of) allowance for expected credit losses and disputes, net		4		1		5		5		15		20
Write-offs charged against the allowance for credit losses and disputes		(1)		—		(1)		(8)		—		(8)
Recoveries of amounts previously written off		—		—		—		—		—		—
Other changes		(1)		—		(1)		2		—		2
Balance, end of period	$	286	$	108	$	394	$	286	$	102	$	388
Nine Months Ended September 30,		2022						2021
(in millions)	General Insurance		Life and Retirement			Total	General Insurance		Life and Retirement			Total
Balance, beginning of year	$	281	$	101	$	382	$	292	$	83	$	375

Addition to (release of) allowance for expected credit losses and disputes, net		5		7		12		5		19		24
Write-offs charged against the allowance for credit losses and disputes		(3)		—		(3)		(15)		—		(15)
Recoveries of amounts previously written off		2		—		2		—		—		—
Other changes		1		—		1		4		—		4
Balance, end of period	$	286	$	108	$	394	$	286	$	102	$	388

There were no material recoveries of credit losses previously written off for the three- and nine-month periods ended September 30, 2021.

Past-Due Status

We consider a reinsurance asset to be past due when it is 90 days past due. The allowance for credit losses is estimated excluding disputed amounts. An allowance for disputes is established using the losses incurred method for contingencies. Past due balances on claims that are not in dispute were not material for any of the periods presented.

8. Variable Interest Entities

We enter into various arrangements with variable interest entities (VIEs) in the normal course of business and consolidate the VIEs when we determine we are the primary beneficiary. This analysis includes a review of the VIE’s capital structure, related contractual relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and our involvement with the entity. When assessing the need to consolidate a VIE, we evaluate the design of the VIE as well as the related risks to which the entity was designed to expose the variable interest holders.

The primary beneficiary is the entity that has both (i) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (ii) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of our decision-making ability and our ability to influence activities that significantly affect the economic performance of the VIE.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 8. Variable Interest Entities

BALANCE SHEET CLASSIFICATION AND EXPOSURE TO LOSS

Creditors or beneficial interest holders of VIEs for which AIG is the primary beneficiary generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to AIG, except in limited circumstances when AIG has provided a guarantee to the VIE’s interest holders. The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the Condensed Consolidated Balance Sheets:


(in millions)		Real Estate and Investment Entities(d)		Securitization Vehicles		Total
September 30, 2022
Assets:
Bonds available for sale	$	—	$	3,613	$	3,613
Other bond securities		—		1,345		1,345
Equity securities		60		—		60
Mortgage and other loans receivable		—		2,341		2,341
Other invested assets
Alternative investments(a)		2,572		—		2,572
Investment real estate		1,785		—		1,785
Short-term investments		172		170		342
Cash		82		—		82
Accrued investment income		—		8		8
Other assets		95		75		170

Total(b)	$	4,766	$	7,552	$	12,318
Liabilities:
Debt of consolidated investment entities	$	1,359	$	4,378	$	5,737
Other(c)		85		37		122
Total	$	1,444	$	4,415	$	5,859

December 31, 2021
Assets:
Bonds available for sale	$	—	$	5,543	$	5,543
Other bond securities		—		1,852		1,852
Equity securities		223		—		223
Mortgage and other loans receivable		—		2,523		2,523
Other invested assets
Alternative investments(a)		3,017		—		3,017
Investment real estate		2,257		—		2,257
Short-term investments		487		151		638
Cash		96		—		96
Accrued investment income		—		17		17
Other assets		190		558		748
Total(b)	$	6,270	$	10,644	$	16,914
Liabilities:
Debt of consolidated investment entities	$	1,743	$	4,504	$	6,247
Other(c)		122		722		844
Total	$	1,865	$	5,226	$	7,091

(a)Comprised primarily of investments in real estate joint ventures at September 30, 2022 and December 31, 2021.

(b)The assets of each VIE can be used only to settle specific obligations of that VIE.

(c)Comprised primarily of Other liabilities at September 30, 2022 and December 31, 2021.

(d)At September 30, 2022 and December 31, 2021, off-balance sheet exposure primarily consisting of our insurance companies’ commitments to real estate and investment entities were $2.3 billion and $2.2 billion, respectively, of which commitments to external parties were $0.5 billion and $0.6 billion, respectively.

We calculate our maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE, (ii) the notional amount of VIE assets or liabilities where we have also provided credit protection to the VIE with the VIE as the referenced obligation, and (iii) other commitments and guarantees to the VIE.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 8. Variable Interest Entities

The following table presents total assets of unconsolidated VIEs in which we hold a variable interest, as well as our maximum exposure to loss associated with these VIEs:


				Maximum Exposure to Loss
(in millions)		Total VIE Assets		On-Balance Sheet(b)		Off-Balance Sheet			Total
September 30, 2022
Real estate and investment entities(a)	$	493,750	$	8,468	$	4,107	(c)	$	12,575
Other		1,732		265		747	(d)		1,012
Total	$	495,482	$	8,733	$	4,854		$	13,587
December 31, 2021
Real estate and investment entities(a)	$	457,335	$	7,650	$	3,448	(c)	$	11,098
Other		1,738		237		528	(d)		765
Total	$	459,073	$	7,887	$	3,976		$	11,863

(a)Comprised primarily of hedge funds and private equity funds.

(b)At September 30, 2022 and December 31, 2021, $8.7 billion and $7.8 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.

(c)These amounts represent our unfunded commitments to invest in private equity funds and hedge funds.

(d)These amounts represent our estimate of the maximum exposure to loss under certain insurance policies issued to VIEs if a hypothetical loss occurred to the extent of the full amount of the insured value. Our insurance policies cover defined risks and our estimate of liability is included in our insurance reserves on the balance sheet.

For additional information on VIEs see Note 9 to the Consolidated Financial Statements in the 2021 Annual Report.

9. Derivatives and Hedge Accounting

We use derivatives and other financial instruments as part of our financial risk management programs and as part of our investment operations. Interest rate derivatives (such as interest rate swaps) are used to manage interest rate risk associated with embedded derivatives contained in insurance contract liabilities, fixed maturity securities, outstanding medium- and long-term notes as well as other interest rate sensitive assets and liabilities. Foreign exchange derivatives (principally foreign exchange forwards and swaps) are used to economically mitigate risk associated with non-U.S. dollar denominated debt, net capital exposures, foreign currency transactions, and foreign denominated investments. Equity derivatives are used to mitigate financial risk embedded in certain insurance liabilities and economically hedge certain investments. We use credit derivatives to manage our credit exposures. Commodity derivatives are used to hedge exposures within reinsurance contracts. The derivatives are effective economic hedges of the exposures that they are meant to offset. In addition to hedging activities, we also enter into derivative contracts with respect to investment operations, which may include, among other things, credit default swaps (CDSs), total return swaps and purchases of investments with embedded derivatives, such as equity-linked notes and convertible bonds.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 9. Derivatives and Hedge Accounting

The following table presents the notional amounts of our derivatives and the fair value of derivative assets and liabilities in the Condensed Consolidated Balance Sheets:


	September 30, 2022								December 31, 2021
	Gross Derivative Assets				Gross Derivative Liabilities				Gross Derivative Assets				Gross Derivative Liabilities
(in millions)		Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value
Derivatives designated as
hedging instruments:(a)
Interest rate contracts	$	318	$	230	$	1,696	$	72	$	265	$	5	$	895	$	11
Foreign exchange contracts		6,972		1,036		1,742		214		5,431		467		5,828		197
Derivatives not designated
as hedging instruments:(a)
Interest rate contracts		29,749		3,126		34,068		4,784		47,499		3,868		42,113		3,622
Foreign exchange contracts		11,711		1,752		3,740		513		7,905		722		9,997		524
Equity contracts		29,587		565		3,431		84		27,423		681		5,091		53
Commodity contracts		324		18		66		—		303		4		219		—
Credit contracts(b)		1,776		1		932		42		3,790		1		936		47
Other contracts(c)		45,889		16		—		—		43,892		13		51		—
Total derivatives, gross	$	126,326	$	6,744	$	45,675	$	5,709	$	136,508	$	5,761	$	65,130	$	4,454
Counterparty netting(d)				(3,170)				(3,170)				(2,779)				(2,779)
Cash collateral(e)				(3,181)				(2,263)				(2,139)				(1,089)
Total derivatives on Condensed
Consolidated Balance Sheets(f)			$	393			$	276			$	843			$	586

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

(b)As of September 30, 2022 and December 31, 2021, included CDSs on super senior multi-sector CDOs with a net notional amount of $79 million and $97 million (fair value liability of $32 million and $30 million), respectively. The net notional amount represents the maximum exposure to loss on the portfolio.

(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 Other liabilities, respectively. Fair value of assets related to bifurcated embedded derivatives was $2.5 billion at September 30, 2022 and zero at December 31, 2021. Fair value of liabilities related to bifurcated embedded derivatives was $6.4 billion and $14.5 billion, respectively, at September 30, 2022 and December 31, 2021. 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, and the funds withheld arrangement with Fortitude Re. For additional information see Note 7.

COLLATERAL

We engage in derivative transactions that are not subject to a clearing requirement directly with unaffiliated third parties, in most cases, under International Swaps and Derivatives Association, Inc. (ISDA) Master Agreements. Many of the ISDA Master Agreements also include Credit Support Annex provisions, which provide for collateral postings that may vary at various ratings and threshold levels. We attempt to reduce our risk with certain counterparties by entering into agreements that enable collateral to be obtained from a counterparty on an upfront or contingent basis. We minimize the risk that counterparties might be unable to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value and generally requiring additional collateral to be posted upon the occurrence of certain events or circumstances. In addition, certain derivative transactions have provisions that require collateral to be posted by us upon a downgrade of our long-term debt ratings or give the counterparty the right to terminate the transaction. In the case of some of the derivative transactions, upon a downgrade of our long-term debt ratings, as an alternative to posting collateral and subject to certain conditions, we may assign the transaction to an obligor with higher debt ratings or arrange for a substitute guarantee of our obligations by an obligor with higher debt ratings or take other similar action. The actual amount of collateral required to be posted to counterparties in the event of such downgrades, or the aggregate amount of payments that we could be required to make, depends on market conditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of the downgrade.

Collateral posted by us to third parties for derivative transactions was $3.3 billion at September 30, 2022 and $2.7 billion at December 31, 2021. In the case of collateral posted under derivative transactions that are not subject to clearing, this collateral can generally be repledged or resold by the counterparties. Collateral provided to us from third parties for derivative transactions was $3.8 billion and $2.4 billion at September 30, 2022 and December 31, 2021, respectively. In the case of collateral provided to us under derivative transactions that are not subject to clearing, we generally can repledge or resell collateral.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 9. Derivatives and Hedge Accounting

OFFSETTING

We have elected to present all derivative receivables and derivative payables, and the related cash collateral received and paid, on a net basis on our Condensed Consolidated Balance Sheets when a legally enforceable ISDA Master Agreement exists between us and our derivative counterparty. An ISDA Master Agreement is an agreement governing multiple derivative transactions between two counterparties. The ISDA Master Agreement generally provides for the net settlement of all, or a specified group, of these derivative transactions, as well as transferred collateral, through a single payment, and in a single currency, as applicable. The net settlement provisions apply in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions governed by the ISDA Master Agreement.

HEDGE ACCOUNTING

We designated certain derivatives entered into with third parties as fair value hedges of available for sale investment securities held by our insurance subsidiaries. The fair value hedges include foreign currency forwards and cross currency swaps designated as hedges of the change in fair value of foreign currency denominated available for sale securities attributable to changes in foreign exchange rates. We also designated certain interest rate swaps entered into with third parties as fair value hedges of fixed rate GICs attributable to changes in benchmark interest rates.

We use foreign currency denominated debt and cross-currency swaps as hedging instruments in net investment hedge relationships to mitigate the foreign exchange risk associated with our non-U.S. dollar functional currency foreign subsidiaries. For net investment hedge relationships where issued debt is used as a hedging instrument, we assess the hedge effectiveness and measure the amount of ineffectiveness based on changes in spot rates. For net investment hedge relationships that use derivatives as hedging instruments, we assess hedge effectiveness and measure hedge ineffectiveness using changes in forward rates. For the three- and nine-month periods ended September 30, 2022, we recognized gains (losses) of $137 million and $444 million, respectively, and for the three- and nine-month periods ended September 30, 2021, we recognized gains (losses) of $57 million and $163 million, respectively, included in Change in foreign currency translation adjustments in Other comprehensive income (loss) related to the net investment hedge relationships.

A qualitative methodology is utilized to assess hedge effectiveness for net investment hedges, while regression analysis is employed for all other hedges.

The following table presents the gain (loss) recognized in income on our derivative instruments in fair value hedging relationships in the Condensed Consolidated Statements of Income (Loss):


		Gains/(Losses) Recognized in Income for:
(in millions)		Hedging Derivatives(a)		Excluded Components(b)		Hedged Items		Net Impact
Three Months Ended September 30, 2022
Interest rate contracts:
Interest credited to policyholder account balances	$	(62)	$	—	$	62	$	—
Net investment income (loss)		25		—		(24)		1
Foreign exchange contracts:
Net realized gains/(losses)		455		122		(455)		122
Three Months Ended September 30, 2021
Interest rate contracts:
Interest credited to policyholder account balances	$	(3)	$	—	$	6	$	3
Net investment income (loss)		1		—		(2)		(1)
Foreign exchange contracts:
Net realized gains/(losses)		205		30		(205)		30
Nine Months Ended September 30, 2022
Interest rate contracts:
Interest credited to policyholder account balances	$	(90)	$	—	$	93	$	3
Net investment income (loss)		26		—		(25)		1
Foreign exchange contracts:
Net realized gains/(losses)		889		262		(889)		262
Nine Months Ended September 30, 2021
Interest rate contracts:
Interest credited to policyholder account balances	$	(10)	$	—	$	13	$	3
Net investment income (loss)		8		—		(9)		(1)


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 9. Derivatives and Hedge Accounting


Foreign exchange contracts:
Net realized gains/(losses)	201	108	(201)	108

(a)Gains and losses on derivative instruments designated and qualifying in fair value hedges that are included in the assessment of hedge effectiveness.

(b)Gains and losses on derivative instruments designated and qualifying in fair value hedges that are excluded from the assessment of hedge effectiveness and recognized in income on a mark-to-market basis.

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

The following table presents the effect of derivative instruments not designated as hedging instruments in the Condensed Consolidated Statements of Income (Loss):


	Gains (Losses) Recognized in Income
	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)		2022		2021		2022		2021
By Derivative Type:
Interest rate contracts	$	(528)	$	(172)	$	(2,010)	$	(861)
Foreign exchange contracts		1,010		310		1,976		271
Equity contracts		19		(55)		(107)		(606)
Commodity contracts		4		(5)		(3)		(4)
Credit contracts		(3)		—		(4)		(9)
Other contracts		42		17		73		49
Embedded derivatives		2,899		(28)		12,490		1,569
Total	$	3,443	$	67	$	12,415	$	409
By Classification:
Policy fees	$	17	$	16	$	47	$	46
Net investment income		8		(1)		10		(6)
Net realized gains - excluding Fortitude Re funds withheld assets		1,679		277		4,547		329
Net realized gains (losses) on Fortitude Re funds withheld assets(a)		1,744		(224)		7,830		45
Policyholder benefits and claims incurred		(5)		(1)		(19)		(5)
Total	$	3,443	$	67	$	12,415	$	409

(a)Includes over-the-counter derivatives supporting the funds withheld arrangements with Fortitude Re and the embedded derivative contained within the funds withheld payable with Fortitude Re.

CREDIT RISK-RELATED CONTINGENT FEATURES

We estimate that at September 30, 2022, based on our outstanding financial derivative transactions, a downgrade of our long-term senior debt ratings to BBB or BBB– by Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc., and/or a downgrade to Baa2 or Baa3 by Moody’s Investors’ Service, Inc. would permit counterparties to make additional collateral calls and permit certain counterparties to elect early termination of contracts, resulting in corresponding collateral postings and termination payments in the total amount of up to approximately $6 million. The aggregate fair value of our derivatives that were in a net liability position and that contain such credit risk-related contingencies which can be triggered below our long-term senior debt ratings of BBB+ or Baa1 was approximately $32 million and $206 million at September 30, 2022 and December 31, 2021, respectively. The aggregate fair value of assets posted as collateral under these contracts at September 30, 2022 and December 31, 2021, was approximately $33 million and $239 million, respectively.

HYBRID SECURITIES WITH EMBEDDED CREDIT DERIVATIVES

We invest in hybrid securities (such as credit-linked notes) with the intent of generating income and not specifically to acquire exposure to embedded derivative risk. As is the case with our other investments in RMBS, CMBS, CDOs and ABS, our investments in these hybrid securities are exposed to losses only up to the amount of our initial investment in the hybrid security. Other than our initial investment in the hybrid securities, we have no further obligation to make payments on the embedded credit derivatives in the related hybrid securities.

We elect to account for our investments in these hybrid securities with embedded written credit derivatives at fair value, with changes in fair value recognized in Net investment income. Our investments in these hybrid securities are reported as Other bond securities in the Condensed Consolidated Balance Sheets. The fair values of these hybrid securities were $1.3 billion and $2.0 billion at September 30, 2022 and December 31, 2021, respectively. These securities have par amounts of $3.5 billion and $4.6 billion at September 30, 2022 and December 31, 2021, respectively, and have remaining stated maturity dates that extend to 2052.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 10. Insurance Liabilities

10. Insurance Liabilities

LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (LOSS RESERVES)

Loss reserves represent the accumulation of estimates of unpaid claims, including estimates for claims incurred but not reported and loss adjustment expenses, less applicable discount. We regularly review and update the methods used to determine loss reserve estimates. Because these estimates are subject to the outcome of future events, changes in estimates are common given that loss trends vary and time is often required for changes in trends to be recognized and confirmed. Any adjustments resulting from this review are reflected currently in pre-tax income, except to the extent such adjustment impacts a deferred gain under a retroactive reinsurance agreement, in which case the ceded portion would be amortized into pre-tax income in subsequent periods. Reserve changes that increase previous estimates of ultimate cost are referred to as unfavorable or adverse development or reserve strengthening. Reserve changes that decrease previous estimates of ultimate cost are referred to as favorable development or reserve releases.

Our gross loss reserves before reinsurance and discount are net of contractual deductible recoverable amounts due from policyholders of approximately $12.4 billion and $12.3 billion at September 30, 2022 and December 31, 2021, respectively. These recoverable amounts are related to certain policies with high deductibles (in excess of high dollar amounts retained by the insured through self-insured retentions, deductibles, retrospective programs, or captive arrangements, each referred to generically as “deductibles”), primarily for U.S. Commercial casualty business. With respect to the deductible portion of the claim, we manage and pay the entire claim on behalf of the insured and are reimbursed by the insured for the deductible portion of the claim. Thus, these recoverable amounts represent a credit exposure to us. At September 30, 2022 and December 31, 2021, we held collateral of approximately $8.6 billion and $8.6 billion, respectively, for these deductible recoverable amounts, consisting primarily of letters of credit and funded trust agreements. Allowance for credit losses for the unsecured portion of these recoverable amounts was $14 million at both September 30, 2022 and December 31, 2021.

The following table presents the rollforward of activity in loss reserves:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)		2022		2021		2022		2021
Liability for unpaid loss and loss adjustment expenses, beginning of period	$	76,739	$	78,981	$	79,026	$	77,720
Reinsurance recoverable		(33,583)		(34,866)		(35,213)		(34,431)

Net Liability for unpaid loss and loss adjustment expenses, beginning of period		43,156		44,115		43,813		43,289
Losses and loss adjustment expenses incurred:
Current year		4,373		4,467		12,020		12,262
Prior years, excluding discount and amortization of deferred gain		(112)		(153)		(537)		(166)
Prior years, discount charge (benefit)		36		83		78		99
Prior years, amortization of deferred gain on retroactive reinsurance(a)		(23)		(13)		(37)		(107)
Total losses and loss adjustment expenses incurred		4,274		4,384		11,524		12,088
Losses and loss adjustment expenses paid:
Current year		(1,132)		(1,147)		(2,289)		(2,370)
Prior years		(2,673)		(2,449)		(8,844)		(8,653)
Total losses and loss adjustment expenses paid		(3,805)		(3,596)		(11,133)		(11,023)
Other changes:
Foreign exchange effect		(1,031)		(414)		(1,827)		(57)

Retroactive reinsurance adjustment (net of discount)(b)		101		159		318		351

Total other changes		(930)		(255)		(1,509)		294
Liability for unpaid loss and loss adjustment expenses, end of period:
Net liability for unpaid losses and loss adjustment expenses		42,695		44,648		42,695		44,648
Reinsurance recoverable		32,824		34,626		32,824		34,626
Total	$	75,519	$	79,274	$	75,519	$	79,274

(a)Includes $5 million and $5 million for the retroactive reinsurance agreement with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc. (Berkshire), covering U.S. asbestos exposures for the three-month periods ended September 30, 2022 and 2021, respectively, and $15 million and $23 million for the nine-month periods ended September 30, 2022 and 2021.

(b)Includes benefit (charge) from change in discount on retroactive reinsurance in the amount of $17 million and $22 million for the three-month periods ended September 30, 2022 and 2021 respectively, and $74 million and $78 million for the nine-month periods ended September 30, 2022 and 2021 respectively.


54			AIG \| Third Quarter 2022 Form 10-Q

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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 10. Insurance Liabilities

On January 20, 2017, we entered into an adverse development reinsurance agreement with NICO, under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the paid losses on subject business paid on or after January 1, 2016 in excess of $25 billion of net paid losses, up to an aggregate limit of $25 billion. At NICO’s 80 percent share, NICO’s limit of liability under the contract is $20 billion. We account for this transaction as retroactive reinsurance. We paid total consideration, including interest, of $10.2 billion. The consideration was placed into a collateral trust account as security for NICO’s claim payment obligations, and Berkshire has provided a parental guarantee to secure the obligations of NICO under the agreement.

Prior Year Development

During the three-month period ended September 30, 2022, we recognized favorable prior year loss reserve development of $112 million excluding discount and amortization of deferred gain. During the nine-month period ended September 30, 2022, we recognized favorable prior year loss reserve development of $537 million excluding discount and amortization of deferred gain. The development in these periods was largely driven by favorable development on U.S. Workers Compensation, U.S. Other Casualty, Global Specialty and International Personal Lines led by Japan, with unfavorable development in Financial Lines (U.S. and International) and International Casualty Lines.

During the three-month period ended September 30, 2021, we recognized favorable prior year loss reserve development of $153 million excluding discount and amortization of deferred gain. During the nine-month period ended September 30, 2021, we recognized favorable prior year loss reserve development of $166 million excluding discount and amortization of deferred gain. The development in these periods was primarily driven by favorable development on U.S. Workers Compensation, global short-tailed Commercial Lines and Personal Insurance, including catastrophes, partially offset by unfavorable development in Financial Lines (U.S. and International).

Discounting of Loss Reserves

At September 30, 2022 and December 31, 2021, the loss reserves reflect a net loss reserve discount of $946 million and $876 million, respectively, including tabular and non-tabular calculations based upon the following assumptions:

•The non-tabular workers’ compensation discount is calculated separately for companies domiciled in New York, Pennsylvania and Delaware, and follows the statutory regulations (prescribed or permitted) for each state.

–For New York companies, the discount is based on a 5 percent interest rate and the companies’ own payout patterns.

–The Pennsylvania and Delaware regulators approved use of a consistent benchmark discount rate and spread (U.S. Treasury rate plus a liquidity premium) to all of our workers’ compensation reserves in our Pennsylvania domiciled and Delaware domiciled companies, as well as our use of updated payout patterns specific to our primary and excess workers compensation portfolios. In 2020, the regulators also approved that the discount rate will be updated on an annual basis.

•The tabular workers’ compensation discount is calculated based on the mortality rate used in the 2007 U.S. Life table and interest rates prescribed or permitted by each state (i.e. New York is based on 5 percent interest rate and Pennsylvania and Delaware are based on U.S. Treasury rate plus a liquidity premium). In the case that applying this tabular discount factor to our nominal reserves produces a tabular discount that is greater than the indemnity portion of our case reserves, the tabular discount is capped at our estimate of the indemnity portion of our cases reserves (45 percent).

The discount for asbestos reserves has been fully accreted.

At September 30, 2022 and December 31, 2021, the discount consists of $266 million and $260 million of tabular discount, respectively, and $680 million and $616 million of non-tabular discount for workers’ compensation, respectively. During the nine-month periods ended September 30, 2022 and 2021, the benefit / (charge) from changes in discount of $(4) million and $(62) million, respectively, were recorded as part of the policyholder benefits and losses incurred in the Condensed Consolidated Statements of Income (Loss).

The following table presents the components of the loss reserve discount discussed above:


(in millions)		September 30, 2022		December 31, 2021
U.S. workers' compensation	$	1,825	$	1,829
Retroactive reinsurance		(879)		(953)
Total reserve discount(a)(b)	$	946	$	876

(a)Excludes $131 million and $116 million of discount related to certain long-tail liabilities in the UK at September 30, 2022 and December 31, 2021, respectively.

(b)Includes gross discount of $480 million and $500 million, which was 100 percent ceded to Fortitude Re at September 30, 2022 and December 31, 2021, respectively.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 10. Insurance Liabilities

The following table presents the net loss reserve discount benefit (charge):


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)		2022		2021		2022		2021
Current accident year	$	26	$	11	$	74	$	37
Accretion and other adjustments to prior year discount		(36)		(83)		(78)		(99)

Net reserve discount benefit (charge)		(10)		(72)		(4)		(62)
Change in discount on loss reserves ceded under retroactive reinsurance		17		22		74		78
Net change in total reserve discount*	$	7	$	(50)	$	70	$	16

*Excludes $20 million and $(39) million discount related to certain long-tail liabilities in the UK for the three-month periods ended September 30, 2022 and 2021, respectively, and excludes $15 million and $(30) million discount related to certain long-tail liabilities in the UK for the nine-month periods ended September 30, 2022 and 2021, respectively.

Amortization of Deferred Gain on Retroactive Reinsurance

Amortization of the deferred gain on retroactive reinsurance includes $18 million and $8 million related to the adverse development reinsurance cover with NICO for the three-month periods ended September 30, 2022 and 2021, respectively, and $22 million and $84 million related to the adverse development reinsurance cover with NICO for the nine-month periods ended September 30, 2022 and 2021, respectively.

Amounts recognized reflect the amortization of the initial deferred gain at inception, as amended for subsequent changes in the deferred gain due to changes in subject reserves.

11. Contingencies, Commitments and Guarantees

In the normal course of business, various contingent liabilities and commitments are entered into by AIG and our subsidiaries. In addition, AIG Parent guarantees various obligations of certain subsidiaries.

Although AIG cannot currently quantify its ultimate liability for unresolved litigation and investigation matters, including those referred to below, it is possible that such liability could have a material adverse effect on AIG’s consolidated financial condition or its consolidated results of operations or consolidated cash flows for an individual reporting period.

LEGAL CONTINGENCIES

Overview

In the normal course of business, AIG and our subsidiaries are subject to regulatory and government investigations and actions, and litigation and other forms of dispute resolution in a large number of proceedings pending in various domestic and foreign jurisdictions. Certain of these matters involve potentially significant risk of loss due to potential for significant jury awards and settlements, punitive damages or other penalties. Many of these matters are also highly complex and may seek recovery on behalf of a class or similarly large number of plaintiffs. It is therefore inherently difficult to predict the size or scope of potential future losses arising from these matters. In our insurance and reinsurance operations, litigation and arbitration concerning the scope of coverage under insurance and reinsurance contracts, and litigation and arbitration in which our subsidiaries defend or indemnify their insureds under insurance contracts, are generally considered in the establishment of our loss reserves. Separate and apart from the foregoing matters involving insurance and reinsurance coverage, AIG, our subsidiaries and their respective officers and directors are subject to a variety of additional types of legal proceedings brought by holders of AIG securities, customers, employees and others, alleging, among other things, breach of contractual or fiduciary duties, bad faith, indemnification and violations of federal and state statutes and regulations. With respect to these other categories of matters not arising out of claims for insurance or reinsurance coverage, we establish reserves for loss contingencies when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. In many instances, we are unable to determine whether a loss is probable or to reasonably estimate the amount of such a loss and, therefore, the potential future losses arising from legal proceedings may exceed the amount of liabilities that we have recorded in our financial statements covering these matters. While such potential future charges could be material, based on information currently known to management, management does not believe, other than as may be discussed below, that any such charges are likely to have a material adverse effect on our financial position or results of operation.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Contingencies, Commitments and Guarantees

Additionally, from time to time, various regulatory and governmental agencies review the transactions and practices of AIG and our subsidiaries in connection with industry- wide and other inquiries or examinations into, among other matters, the business practices of current and former operating insurance subsidiaries. Such investigations, inquiries or examinations could develop into administrative, civil or criminal proceedings or enforcement actions, in which remedies could include fines, penalties, restitution or alterations in our business practices, and could result in additional expenses, limitations on certain business activities and reputational damage.

Moriarty Litigation

Effective January 1, 2013, the California legislature enacted AB 1747 (the Act), which amended the Insurance Code to mandate that life insurance policies issued and delivered in California contain a 60-day grace period during which time the policies must remain in force after a premium payment is missed, and that life insurers provide both a 30-day minimum notification of lapse and the right of policy owners to designate a secondary recipient for lapse and termination notices. Following guidance from the California Department of Insurance and certain industry trade groups, American General Life Insurance Company (AGL) interpreted the Act to be prospective in nature, applying only to policies issued and delivered on or after the Act’s January 1, 2013, effective date. On July 18, 2017, AGL was sued in a putative class action captioned Moriarty v. American General Life Insurance Company, No. 17-cv-1709 (S.D. Cal.), challenging AGL’s prospective application of the Act. Plaintiff’s complaint, which is similar to complaints filed against other insurers, argues that policies issued and delivered prior to January 1, 2013, like the $1 million policy issued to Plaintiff’s husband do not lapse—despite nonpayment of premiums—if the insurer has not complied with the Act’s terms. On August 30, 2021, the California Supreme Court issued an opinion in McHugh v. Protective Life Insurance, 12 Cal. 5th 213 (2021), ruling that the Act applies to all policies in force on January 1, 2013, regardless of when the policies were issued. On February 7, 2022, Plaintiff filed motions for summary judgment and class certification; AGL opposed both motions and filed its own motion for partial summary judgment. On July 26, 2022, the District Court granted in part and denied in part AGL’s motion for partial summary judgment, and on September 7, 2022, the District Court denied Plaintiff's motion for summary judgment. In the summary judgment decisions, the District Court declined to adopt Plaintiff's theory that a failure to comply with the Act necessitates payment of policy benefits or to make a pre-trial determination as to AGL’s liability. On September 27, 2022, the District Court denied Plaintiff’s motion for class certification without prejudice and thereafter set a trial date for February 7, 2023. The District Court declined to certify Plaintiff's proposed class consisting of claims for monetary damages and equitable relief, but indicated that Plaintiff could seek the certification of a narrower class consisting only of claims for monetary damages. The District Court indicated, however, that it has "substantial concerns" as to whether individual issues such as actual damages and causation would predominate, precluding class certification. Proceedings are ongoing in other California cases that raise similar industry-wide issues, including in the McHugh case on remand from the California Supreme Court, in which the California Court of Appeal rendered an unpublished opinion on October 10, 2022 that also declined to hold that failure to comply with the Act automatically necessitates payment of policy benefits. We have accrued our current estimate of probable loss with respect to this litigation.

OTHER COMMITMENTS

In the normal course of business, we enter into commitments to invest in limited partnerships, private equity funds and hedge funds and to purchase and develop real estate in the U.S. and abroad. These commitments totaled $7.1 billion and $7.3 billion at September 30, 2022 and December 31, 2021, respectively.

GUARANTEES

Subsidiaries

We have issued unconditional guarantees with respect to the prompt payment, when due, of all present and future payment obligations and liabilities of AIG Financial Products Corp. and related subsidiaries (collectively AIGFP) and of AIG Markets, Inc. arising from transactions entered into by AIG Markets, Inc.

In connection with AIGFP’s business activities, AIGFP has issued, in a limited number of transactions, standby letters of credit or similar facilities to equity investors of structured leasing transactions in an amount equal to the termination value owing to the equity investor by the lessee in the event of a lessee default (the equity termination value). The total amount outstanding at September 30, 2022 was $69 million. In those transactions, AIGFP has agreed to pay such amount if the lessee fails to pay. The amount payable by AIGFP is, in certain cases, partially offset by amounts payable under other instruments typically equal to the present value of scheduled payments to be made by AIGFP. In the event that AIGFP is required to make a payment to the equity investor, the lessee is unconditionally obligated to reimburse AIGFP. To the extent that the equity investor is paid the equity termination value from the standby letter of credit and/or other sources, including payments by the lessee, AIGFP takes an assignment of the equity investor’s rights under the lease of the underlying property. Because the obligations of the lessee under the lease transactions are generally economically defeased, lessee bankruptcy is the most likely circumstance in which AIGFP would be required to pay without reimbursement.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Contingencies, Commitments and Guarantees

Business and Asset Dispositions

We are subject to financial guarantees and indemnity arrangements in connection with the completed sales of businesses and assets. The various arrangements may be triggered by, among other things, declines in asset values, the occurrence of specified business contingencies, the realization of contingent liabilities, developments in litigation or breaches of representations, warranties or covenants provided by us. These arrangements are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential obligation is subject to contractual limitations, while in other cases such limitations are not specified or are not applicable.

We are unable to develop a reasonable estimate of the maximum potential payout under certain of these arrangements. Overall, we believe the likelihood that we will have to make any material payments related to completed sales under these arrangements is remote, and no material liabilities related to these arrangements have been recorded in the Condensed Consolidated Balance Sheets.

Other

•For additional information on commitments and guarantees associated with VIEs, see Note 8.

•For additional information on derivatives, see Note 9.

12. Equity

SHARES OUTSTANDING

Preferred Stock

On March 14, 2019, we issued 20,000 shares of Series A 5.85% Non-Cumulative Perpetual Preferred Stock (Series A Preferred Stock) (equivalent to 20,000,000 Depositary Shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock), $5.00 par value and $25,000 liquidation preference per share (equivalent to $25 per Depositary Share). After underwriting discounts and expenses, we received net proceeds of approximately $485 million.

The following table presents declaration date, record date, payment date and dividends paid per preferred share and per depository share on the Series A Preferred Stock in the nine months ended September 30, 2022 and 2021:


			Dividends Paid
Declaration Date	Record Date	Payment Date	Per Preferred Share		Per Depositary Share
August 8, 2022	August 31, 2022	September 15, 2022	$	365.625	$	0.365625
May 3, 2022	May 31, 2022	June 15, 2022	365.625		0.365625
February 16, 2022	February 28, 2022	March 15, 2022	365.625		0.365625
August 5, 2021	August 31, 2021	September 15, 2021	$	365.625	$	0.365625
May 6, 2021	May 31, 2021	June 15, 2021	365.625		0.365625
February 16, 2021	February 26, 2021	March 15, 2021	365.625		0.365625

Common Stock

The following table presents a rollforward of outstanding shares:


Nine Months Ended September 30, 2022	Common Stock Issued	Treasury Stock	Common Stock Outstanding
Shares, beginning of year	1,906,671,492	(1,087,984,129)	818,687,363
Shares issued	—	5,209,573	5,209,573
Shares repurchased	—	(76,681,026)	(76,681,026)
Shares, end of period	1,906,671,492	(1,159,455,582)	747,215,910


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Equity

Dividends

Dividends are payable on AIG Common Stock only when, as and if declared by our Board of Directors in its discretion, from funds legally available for this purpose. In considering whether to pay a dividend on or purchase shares of AIG Common Stock, our Board of Directors considers a number of factors, including, but not limited to: the capital resources available to support our insurance operations and business strategies, AIG’s funding capacity and capital resources in comparison to internal benchmarks, expectations for capital generation, rating agency expectations for capital, regulatory standards for capital and capital distributions, and such other factors as our Board of Directors may deem relevant. The payment of dividends is also subject to the terms of AIG’s outstanding Series A Preferred Stock, pursuant to which no dividends may be declared or paid on any AIG Common Stock unless the full dividends for the latest completed dividend period on all outstanding shares of Series A Preferred Stock have been declared and paid or provided for.

The following table presents declaration date, record date, payment date and dividends paid per common share on AIG Common Stock in the nine months ended September 30, 2022 and 2021:

Declaration Date

Record Date

Payment Date

Dividends Paid
Per Common Share

August 8, 2022

September 16, 2022

September 30, 2022

0.32

May 3, 2022

June 16, 2022

June 30, 2022

0.32

February 16, 2022

March 17, 2022

March 31, 2022

0.32

August 5, 2021

September 16, 2021

September 30, 2021

0.32

May 6, 2021

June 15, 2021

June 29, 2021

0.32

February 16, 2021

March 16, 2021

March 30, 2021

0.32

For a discussion of restrictions on payments of dividends to AIG Parent by its subsidiaries see Note 18 to the Consolidated Financial Statements in the 2021 Annual Report.

Repurchase of AIG Common Stock

The timing of any future repurchases will depend on market conditions, our business and strategic plans, financial condition, results of operations, liquidity and other factors. The repurchase of AIG Common Stock is also subject to the terms of AIG’s outstanding Series A Preferred Stock, pursuant to which AIG may not (other than in limited circumstances) purchase, redeem or otherwise acquire AIG Common Stock unless the full dividends for the latest completed dividend period on all outstanding shares of Series A Preferred Stock have been declared and paid or provided for.

The following table presents repurchases of AIG Common Stock:


Nine Months Ended September 30,
(in millions)		2022		2021
Aggregate repurchases of common stock*	$	4,370	$	1,651
Total number of common shares repurchased		77		32

*For the nine months ended September 30, 2021, approximately $92 million of these share repurchases were funded with proceeds received from warrant exercises that occurred prior to the expiration of warrants to purchase shares of AIG Common Stock on January 19, 2021.

Pursuant to an Exchange Act Rule 10b5-1 repurchase plan from October 1, 2022 to October 27, 2022, we repurchased approximately 4 million shares of AIG Common Stock for an aggregate purchase price of approximately $221 million.

DIVIDENDS DECLARED

On November 1, 2022, our Board of Directors declared a cash dividend on AIG Common Stock of $0.32 per share, payable on December 29, 2022 to shareholders of record on December 15, 2022. On November 1, 2022, our Board of Directors declared a cash dividend on AIG’s Series A Preferred Stock of $365.625 per share, payable on December 15, 2022 to holders of record on November 30, 2022.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Equity

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents a rollforward of Accumulated other comprehensive income (loss):


(in millions)		Unrealized Appreciation (Depreciation) of Fixed Maturity Securities on Which Allowance for Credit Losses Was Taken		Unrealized Appreciation (Depreciation) of All Other Investments		Foreign Currency Translation Adjustments		Retirement Plan Liabilities Adjustment		Fair Value of Liabilities Under Fair Value Option Attributable to Changes in Own Credit Risk		Total
Balance, June 30, 2022, net of tax	$	(61)	$	(13,972)	$	(2,747)	$	(878)	$	2	$	(17,656)
Change in unrealized appreciation (depreciation) of investments		(94)		(12,040)		—		—		—		(12,134)
Change in deferred policy acquisition costs adjustment and other		2		1,391		—		—		—		1,393
Change in future policy benefits		—		582		—		—		—		582
Change in foreign currency translation adjustments		—		—		(589)		—		—		(589)
Change in net actuarial loss		—		—		—		15		—		15
Change in prior service cost		—		—		—		3		—		3
Change in deferred tax asset (liability)		19		1,743		(2)		(3)		—		1,757
Change in fair value of liabilities under fair value option attributable to changes in own credit risk		—		—		—		—		—		—
Total other comprehensive income (loss)		(73)		(8,324)		(591)		15		—		(8,973)
Other changes in AOCI:
Corebridge 12.4% noncontrolling interests sale		—		2,044		(3)		(1)		—		2,040
Noncontrolling interests		(6)		(785)		(5)		—		—		(796)
Balance, September 30, 2022, net of tax	$	(128)	$	(19,467)	$	(3,336)	$	(864)	$	2	$	(23,793)

Balance, June 30, 2021, net of tax	$	(58)	$	13,605	$	(2,128)	$	(1,217)	$	7	$	10,209
Change in unrealized appreciation (depreciation) of investments		21		(2,086)		—		—		—		(2,065)
Change in deferred policy acquisition costs adjustment and other		(6)		138		—		—		—		132
Change in future policy benefits		—		72		—		—		—		72
Change in foreign currency translation adjustments		—		—		(132)		—		—		(132)
Change in net actuarial loss		—		—		—		40		—		40
Change in prior service cost		—		—		—		1		—		1
Change in deferred tax asset (liability)		(3)		366		(3)		(10)		—		350
Change in fair value of liabilities under fair value option attributable to changes in own credit risk		—		—		—		—		—		—
Total other comprehensive income (loss)		12		(1,510)		(135)		31		—		(1,602)
Noncontrolling interests		—		1		—		—		—		1
Balance, September 30, 2021, net of tax	$	(46)	$	12,094	$	(2,263)	$	(1,186)	$	7	$	8,606


(in millions)		Unrealized Appreciation (Depreciation) of Fixed Maturity Securities on Which Allowance for Credit Losses Was Taken		Unrealized Appreciation (Depreciation) of All Other Investments		Foreign Currency Translation Adjustments		Retirement Plan Liabilities Adjustment		Fair Value of Liabilities Under Fair Value Option Attributable to Changes in Own Credit Risk		Total
Balance, December 31, 2021, net of tax	$	(57)	$	10,094	$	(2,453)	$	(903)	$	6	$	6,687
Change in unrealized appreciation (depreciation) of investments		(106)		(50,099)		—		—		—		(50,205)
Change in deferred policy acquisition costs adjustment and other		6		6,723		—		—		—		6,729
Change in future policy benefits		—		2,707		—		—		—		2,707
Change in foreign currency translation adjustments		—		—		(794)		—		—		(794)
Change in net actuarial loss		—		—		—		31		—		31
Change in prior service cost		—		—		—		8		—		8
Change in deferred tax asset (liability)		22		6,200		(83)		1		—		6,140
Change in fair value of liabilities under fair value option attributable to changes in own credit risk		—		—		—		—		(4)		(4)
Total other comprehensive income (loss)		(78)		(34,469)		(877)		40		(4)		(35,388)
Other changes in AOCI:
Corebridge 12.4% noncontrolling interests sale		—		2,044		(3)		(1)		—		2,040
Noncontrolling interests		(7)		(2,864)		3		—		—		(2,868)
Balance, September 30, 2022, net of tax	$	(128)	$	(19,467)	$	(3,336)	$	(864)	$	2	$	(23,793)


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Equity


(in millions)		Unrealized Appreciation (Depreciation) of Fixed Maturity Securities on Which Allowance for Credit Losses Was Taken		Unrealized Appreciation (Depreciation) of All Other Investments		Foreign Currency Translation Adjustments		Retirement Plan Liabilities Adjustment		Fair Value of Liabilities Under Fair Value Option Attributable to Changes in Own Credit Risk		Total
Balance, December 31, 2020, net of tax	$	(95)	$	17,093	$	(2,267)	$	(1,228)	$	8	$	13,511
Change in unrealized appreciation (depreciation) of investments		72		(7,940)		—		—		—		(7,868)
Change in deferred policy acquisition costs adjustment and other		(10)		840		—		—		—		830
Change in future policy benefits		—		839		—		—		—		839
Change in foreign currency translation adjustments		—		—		63		—		—		63
Change in net actuarial loss		—		—		—		51		—		51
Change in prior service cost		—		—		—		5		—		5
Change in deferred tax asset (liability)		(13)		1,262		(59)		(14)		—		1,176
Change in fair value of liabilities under fair value option attributable to changes in own credit risk		—		—		—		—		(1)		(1)
Total other comprehensive income (loss)		49		(4,999)		4		42		(1)		(4,905)


Noncontrolling interests		—		—		—		—		—		—
Balance, September 30, 2021, net of tax	$	(46)	$	12,094	$	(2,263)	$	(1,186)	$	7	$	8,606

The following table presents the other comprehensive income (loss) reclassification adjustments for the three- and nine-month periods ended September 30, 2022 and 2021, respectively:


(in millions)	Unrealized Appreciation (Depreciation) of Fixed Maturity Securities on Which Allowance for Credit Losses Was Taken			Unrealized Appreciation (Depreciation) of All Other Investments		Foreign Currency Translation Adjustments		Retirement Plan Liabilities Adjustment		Fair Value of Liabilities Under Fair Value Option Attributable to Changes in Own Credit Risk		Total
Three Months Ended September 30, 2022
Unrealized change arising during period	$	(75)	$	(10,215)	$	(589)	$	10	$	—	$	(10,869)
Less: Reclassification adjustments included in net income		17		(148)		—		(8)		—		(139)
Total other comprehensive income (loss), before income tax expense (benefit)		(92)		(10,067)		(589)		18		—		(10,730)
Less: Income tax expense (benefit)		(19)		(1,743)		2		3		—		(1,757)
Total other comprehensive income (loss), net of income tax expense (benefit)	$	(73)	$	(8,324)	$	(591)	$	15	$	—	$	(8,973)

Three Months Ended September 30, 2021
Unrealized change arising during period	$	21	$	(1,657)	$	(132)	$	30	$	—	$	(1,738)
Less: Reclassification adjustments included in net income		6		219		—		(11)		—		214
Total other comprehensive income (loss), before income tax expense (benefit)		15		(1,876)		(132)		41		—		(1,952)
Less: Income tax expense (benefit)		3		(366)		3		10		—		(350)
Total other comprehensive income (loss), net of income tax expense (benefit)	$	12	$	(1,510)	$	(135)	$	31	$	—	$	(1,602)

Nine Months Ended September 30, 2022
Unrealized change arising during period	$	(91)	$	(41,552)	$	(794)	$	16	$	(4)	$	(42,425)
Less: Reclassification adjustments included in net income		9		(883)		—		(23)		—		(897)
Total other comprehensive income (loss), before of income tax expense (benefit)		(100)		(40,669)		(794)		39		(4)		(41,528)
Less: Income tax expense (benefit)		(22)		(6,200)		83		(1)		—		(6,140)
Total other comprehensive income (loss), net of income tax expense (benefit)	$	(78)	$	(34,469)	$	(877)	$	40	$	(4)	$	(35,388)


Nine Months Ended September 30, 2021
Unrealized change arising during period	$	62	$	(5,512)	$	63	$	22	$	(1)	$	(5,366)
Less: Reclassification adjustments included in net income		—		749		—		(34)		—		715
Total other comprehensive income (loss), before income tax expense (benefit)		62		(6,261)		63		56		(1)		(6,081)
Less: Income tax expense (benefit)		13		(1,262)		59		14		—		(1,176)
Total other comprehensive income (loss), net of income tax expense (benefit)	$	49	$	(4,999)	$	4	$	42	$	(1)	$	(4,905)


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Equity

The following table presents the effect of the reclassification of significant items out of AOCI on the respective line items in the Condensed Consolidated Statements of Income (Loss):


		Amount Reclassified from AOCI			Affected Line Item in the
		Three Months Ended September 30,			Condensed Consolidated
(in millions)		2022		2021	Statements of Income (Loss)
Unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken
Investments	$	17	$	6	Net realized gains (losses)
Total		17		6
Unrealized appreciation (depreciation) of all other investments
Investments		(148)		219	Net realized gains (losses)
Total		(148)		219
Change in retirement plan liabilities adjustment
Prior-service credit		(1)		(1)	*
Actuarial losses		(7)		(10)	*
Total		(8)		(11)
Total reclassifications for the period	$	(139)	$	214
		Amount Reclassified from AOCI			Affected Line Item in the
		Nine Months Ended September 30,			Condensed Consolidated
(in millions)		2022		2021	Statements of Income (Loss)
Unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken
Investments	$	9	$	—	Net realized gains (losses)
Total		9		—
Unrealized appreciation (depreciation) of all other investments
Investments		(883)		749	Net realized gains (losses)
Total		(883)		749
Change in retirement plan liabilities adjustment
Prior-service credit		(2)		(3)
Actuarial losses		(21)		(31)
Total		(23)		(34)
Total reclassifications for the period	$	(897)	$	715

*These AOCI components are included in the computation of net periodic pension cost.

NON-CONTROLLING INTEREST

On September 19, 2022, AIG sold a 12.4 percent equity interest in Corebridge in the IPO, reducing its equity ownership to 77.7 percent.

For additional information on the Corebridge IPO see Note 1.

The following table presents the effect of changes in our ownership interest in Corebridge on our equity as of September 19, 2022:


Nine Months Ended September 30,
(in millions)		2022
Net income attributable to AIG common shareholders	$	9,983
Changes in AIG equity for sale of 12.4% interest in Corebridge		608
Change from Net income attributable to AIG common shareholders and changes in AIG's ownership interests	$	10,591


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 13. Earnings Per Common Share (EPS)

13. Earnings Per Common Share (EPS)

The basic EPS computation is based on the weighted average number of common shares outstanding, adjusted to reflect all stock dividends and stock splits. The diluted EPS computation is based on those shares used in the basic EPS computation plus common shares that would have been outstanding assuming issuance of common shares for all dilutive potential common shares outstanding and adjusted to reflect all stock dividends and stock splits, using the treasury stock method or the if-converted method, as applicable.

The following table presents the computation of basic and diluted EPS:


		Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in millions, except per common share data)		2022		2021		2022		2021
Numerator for EPS:
Income from continuing operations	$	3,041	$	1,737	$	11,090	$	5,817
Less: Net income from continuing operations attributable to noncontrolling interests		332		70		1,084		175
Less: Preferred stock dividends		7		7		22		22
Income attributable to AIG common shareholders from continuing operations		2,702		1,660		9,984		5,620
Income (loss) from discontinued operations, net of income tax expense		—		—		(1)		—
Net income attributable to AIG common shareholders	$	2,702	$	1,660	$	9,983	$	5,620
Denominator for EPS:
Weighted average common shares outstanding - basic		763,051,482		852,765,263		789,888,322		861,211,983
Dilutive common shares		8,080,919		11,254,231		9,204,234		9,790,035
Weighted average common shares outstanding - diluted(a)		771,132,401		864,019,494		799,092,556		871,002,018
Income per common share attributable to AIG common shareholders:
Basic:
Income from continuing operations	$	3.54	$	1.95	$	12.64	$	6.53
Income from discontinued operations	$	—	$	—	$	—	$	—
Income attributable to AIG common shareholders	$	3.54	$	1.95	$	12.64	$	6.53
Diluted:
Income from continuing operations	$	3.50	$	1.92	$	12.49	$	6.45
Income from discontinued operations	$	—	$	—	$	—	$	—
Income attributable to AIG common shareholders	$	3.50	$	1.92	$	12.49	$	6.45

(a)Potential dilutive common shares include our share-based employee compensation plans, a weighted average portion of the 10-year warrants issued to AIG shareholders as part of AIG’s recapitalization in January 2011, which expired in January 2021 and an option for Blackstone to exchange all or a portion of its ownership interest in Corebridge for AIG common shares in the event an IPO did not occur prior to 2024. As a result of the consummation of the IPO on September 19, 2022, this exchange right of Blackstone was terminated. The number of common shares excluded from diluted shares outstanding was 6.0 million and 30.8 million for the three- and nine-month periods ended September 30, 2022, respectively, and 5.2 million and 6.6 million for the three- and nine-month periods ended September 30, 2021, respectively, because the effect of including those common shares in the calculation would have been anti-dilutive.

For information regarding the Blackstone option to exchange all or a portion of its ownership interest in Corebridge for AIG common shares, see Note 1. For information regarding our repurchases of AIG Common Stock, see Note 12.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 14. Income Taxes

14. Income Taxes

U.S. TAX LAW CHANGES

On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) of 2022 (H.R. 5376), which finances climate and energy provisions and an extension of enhanced subsidies under the Affordable Care Act. Key provisions include a 15 percent corporate alternative minimum tax (CAMT) on adjusted financial statement income for corporations with average profits over $1 billion over a three-year period, a 1 percent stock buyback tax, increased IRS enforcement funding, and Medicare's new ability to negotiate prescription drug prices. CAMT and the stock buyback tax are effective for tax years beginning after December 31, 2022. The tax provisions of IRA are not expected to have a material impact on AIG’s financial results. However, the CAMT may impact our U.S. cash tax liabilities.

BASIS OF PRESENTATION

We file a consolidated U.S. federal income tax return with our eligible U.S. subsidiaries. Income earned by subsidiaries operating outside the U.S. is taxed, and income tax expense is recorded, based on applicable U.S. and foreign laws.

Following the IPO of Corebridge on September 19, 2022, AIG’s remaining ownership in Corebridge decreased below 80 percent, resulting in tax deconsolidation of Corebridge parent and its subsidiaries from the AIG consolidated U.S. federal income tax group as well as certain state and local jurisdictions where unitary returns are filed.

Subsequent to the tax deconsolidation from AIG, due to the application of relevant U.S. tax laws, American General Corporation and its directly owned life insurance subsidiaries (the AGC Group) will not be permitted to join in the filing of a consolidated U.S. federal income tax return with Corebridge parent and its non-life-insurance subsidiaries for a period of five years. Corebridge’s net operating losses and tax credit carryforwards that have not been utilized prior to tax deconsolidation from AIG will remain with the relevant Corebridge entities and will be available for utilization by the respective Corebridge U.S. federal income tax groups. The realizability of the deferred tax assets related to such carryforwards is based on the positive and negative evidence applicable to each U.S. federal income tax group.

TAX ACCOUNTING POLICIES

We use an item-by-item approach to release the stranded or disproportionate income tax effects in AOCI related to our available-for-sale securities. Under this approach, a portion of the disproportionate tax effects is assigned to each individual security lot at the date the amount becomes lodged. When the individual securities are sold, mature, or are otherwise impaired on an other-than-temporary basis, the assigned portion of the disproportionate tax effect is reclassified from AOCI to income (loss) from continuing operations.

We consider our foreign earnings with respect to certain operations in Canada, South Africa, Japan, Latin America, Bermuda as well as the European, Asia Pacific and Middle East regions to be indefinitely reinvested. These earnings relate to ongoing operations and have been reinvested in active business operations. A deferred tax liability has not been recorded for those foreign subsidiaries whose earnings are considered to be indefinitely reinvested. If recorded, such deferred tax liability would not be material to our consolidated financial condition. Deferred taxes, if necessary, have been provided on earnings of non-U.S. affiliates whose earnings are not indefinitely reinvested.

Global Intangible Low-Taxed Income (GILTI) imposes U.S. taxes on the excess of a deemed return on tangible assets of certain foreign subsidiaries. Consistent with accounting guidance, we have made an accounting policy election to treat GILTI taxes as a period tax charge in the period the tax is incurred.

INTERIM TAX CALCULATION METHOD

We use the estimated annual effective tax rate method in computing our interim tax provision. Certain items, including those deemed to be unusual, infrequent or that cannot be reliably estimated, are excluded from the estimated annual effective tax rate. In these cases, the actual tax expense or benefit is reported in the same period as the related item. Certain tax effects are also not reflected in the estimated annual effective tax rate, primarily certain changes in uncertain tax positions and realizability of deferred tax assets, and are recorded in the period in which the change occurs.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 14. Income Taxes

INTERIM TAX EXPENSE (BENEFIT)

For the three-month period ended September 30, 2022, the effective tax rate on income from continuing operations was 21.0 percent. While the effective tax rate on income from continuing operations does not differ from the statutory tax rate of 21 percent, we recognized tax benefits associated with tax exempt income and reclassifications from AOCI to income from continuing operations related to the disposal of available for sale securities, offset by tax charges associated with the effect of foreign operations, state and local income taxes, and non-deductible transfer pricing charges. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.

For the nine-month period ended September 30, 2022, the effective tax rate on income from continuing operations was 20.8 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax benefits associated with tax exempt income, reclassifications from AOCI to income from continuing operations related to the disposal of available for sale securities, excess tax benefits related to share based compensation payments recorded through the income statement and tax adjustments related to prior year returns. These tax benefits were partially offset by tax charges associated with the effect of foreign operations, state and local income taxes, and non-deductible transfer pricing charges. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.

For the three-month period ended September 30, 2021, the effective tax rate on income from continuing operations was 20.2 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax benefits associated with tax adjustments related to prior year returns, tax exempt income, and reclassifications from AOCI to income from continuing operations related to the disposal of available for sale securities. These tax benefits were partially offset by tax charges associated with the effect of foreign operations, valuation allowance activity related to certain foreign subsidiaries, state and local income taxes, and non-deductible transfer pricing charges. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.

For the nine-month period ended September 30, 2021, the effective tax rate on income from continuing operations was 17.5 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax benefits associated with the release of reserves for uncertain tax positions, penalties and interest related to the recent completion of audit activity by the IRS, release of reserves for uncertain tax positions and interest related to a New York State tax settlement based on the completion of recent audit activity, tax adjustments related to prior year returns, tax exempt income, remeasurement of deferred taxes as a result of an increase in the UK corporate income tax rate enacted during the second quarter, and reclassifications from AOCI to income from continuing operations related to the disposal of available for sale securities. These tax benefits were partially offset by tax charges associated with the establishment of U.S. federal valuation allowance related to certain tax attribute carryforwards, the effect of foreign operations, excess tax charges related to share based compensation payments recorded through the income statement, state and local income taxes, and non-deductible transfer pricing charges. We also recognized a tax charge associated with reduction of net operating loss deferred tax assets in certain foreign jurisdictions, with a corresponding decrease in the related deferred tax asset valuation allowance. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.

ASSESSMENT OF DEFERRED TAX ASSET VALUATION ALLOWANCE

The evaluation of the recoverability of our deferred tax asset and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax asset will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed.

Recent events, including changes in target interest rates by the Board of Governors of the Federal Reserve System, and significant market volatility, continue to impact actual and projected results of our business operations as well as our views on potential effectiveness of certain prudent and feasible tax planning strategies. In order to demonstrate the predictability and sufficiency of future taxable income necessary to support the realizability of the net operating losses and foreign tax credit carryforwards, we have considered forecasts of future income for each of our businesses, including assumptions about future macro-economic and AIG-specific conditions and events, and any impact these conditions and events may have on our prudent and feasible tax planning strategies. We also subjected the forecasts to a variety of stresses of key assumptions and evaluated the effect on tax attribute utilization.

The carryforward period of our foreign tax credit carryforwards runs through 2023. Carryforward periods for our net operating losses extend from 2028 forward. However, utilization of a portion of our net operating losses is limited under separate return limitation year rules.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 14. Income Taxes

To the extent that the valuation allowance is attributed to changes in forecast of current year taxable income, the impact is included in our estimated annualized effective tax rate. A valuation allowance related to changes in forecasts of income in future periods as well as other items not related to the current year is recorded discretely.

Although tax deconsolidation of Corebridge from the AIG consolidated U.S. federal income tax group resulted in the formation of new federal tax filing groups requiring separate deferred tax asset realizability assessments, there was no overall change to the total deferred tax asset valuation allowance recorded as of September 30, 2022. After factoring in multiple data points and assessing relative weight of all positive and negative evidence, we concluded that a valuation allowance of $850 million is still necessary. Accordingly, as of September 30, 2022, the balance sheet reflects a valuation allowance of $850 million, of which $705 million and $145 million was recorded by AIG Parent and Corebridge, respectively. The valuation allowance at AIG Parent relates to a portion of our U.S. consolidated federal income tax group tax attribute carryforwards that are no longer more-likely-than-not to be realized. The valuation allowance at Corebridge relates to a portion of both tax attribute carryforwards and certain other deferred tax assets of the Corebridge non-life insurance group that are not more-likely-than-not to be realized.

For the nine-month period ended September 30, 2022, recent changes in market conditions, including rising interest rates, impacted the unrealized tax gains and losses in the available for sale securities portfolios of both our U.S. Life Insurance and non-life insurance companies, resulting in deferred tax assets related to net unrealized tax capital losses. The deferred tax assets relate to the unrealized tax capital losses for which the carryforward period has not yet begun, and as such, when assessing recoverability, we consider our ability and intent to hold the underlying securities to recovery. As of September 30, 2022, based on all available evidence, we concluded that a valuation allowance should be established on a portion of the deferred tax assets related to unrealized tax capital losses that are not more-likely-than-not to be realized. For the nine-month period ended September 30, 2022, we established $1.6 billion of valuation allowance associated with the unrealized tax capital losses in the U.S. Life Insurance Companies’ available for sale securities portfolio and $991 million of valuation allowance associated with the unrealized tax capital losses in the non-life insurance companies’ available for sale securities portfolio. For the three-month period ended September 30, 2022, we recorded an increase in valuation allowance of $75 million associated with the unrealized tax capital losses in the U.S. Life Insurance Companies’ available for sale securities portfolio and $361 million associated with the unrealized tax capital losses in the non-life insurance companies’ available for sale securities portfolio. The valuation allowance establishment was allocated to other comprehensive income.

For the nine-month period ended September 30, 2022, we recognized a net $15 million decrease in deferred tax asset valuation allowance associated with certain foreign and state jurisdictions, primarily attributable to current year activity.

TAX EXAMINATIONS AND LITIGATION

We are currently under examination by the IRS for the tax years 2011 through 2019.

In September 2020, we received the IRS Revenue Agent Report containing agreed and disagreed issues for the audit of tax years 2007-2010. In October 2020, we filed a protest of the disagreed issues with the IRS Independent Office of Appeals (IRS Appeals). In March 2021, the IRS audit team issued their rebuttal to the protest of disagreed issues to IRS Appeals. We had an IRS Appeals conference in October 2021 and are continuing to engage in the Appeals process.

In 2009, after paying amounts due on a statutory notice of deficiency related to the disallowance of foreign tax credits associated with cross border financing transactions, we filed a refund lawsuit in the Southern District of New York (Southern District) with respect to tax year 1997. In 2020, the parties executed a binding settlement agreement with respect to the underlying issues in the lawsuit. On October 22, 2020, the Southern District dismissed the case based upon the settlement reached between AIG and the government. In March 2022, interest amounts due on the settlement of items challenged by the IRS during the audit of AIG's 2006 and prior years were agreed to between AIG and the IRS, thus concluding this matter.

ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES

At both September 30, 2022 and December 31, 2021, our unrecognized tax benefits, excluding interest and penalties, were $1.2 billion. At September 30, 2022 and December 31, 2021, our unrecognized tax benefits related to tax positions that, if recognized, would not affect the effective tax rate because they relate to such factors as the timing, rather than the permissibility, of the deduction were $2 million and $22 million, respectively. Accordingly, at September 30, 2022 and December 31, 2021, the amounts of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate were $1.2 billion and $1.1 billion, respectively.


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ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 14. Income Taxes

Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At September 30, 2022 and December 31, 2021, we had accrued liabilities of $61 million and $69 million, respectively for the payment of interest (net of the federal benefit) and penalties. For the nine-month period ended September 30, 2022, we accrued benefit of $8 million for the payment of interest and penalties. The interest activity related to unrecognized tax benefits for the nine-month period ended September 30, 2022 was due to the completion of audit activity and expiration of a certain statute related to foreign operations. For the nine-month period ended September 30, 2021, we accrued benefit of $203 million for the payment of interest and penalties. The activity for the nine-month period ended September 30, 2021 primarily related to the completion of audit activity by the IRS and New York State.

Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next 12 months, based on the information currently available, we do not expect any change to be material to our consolidated financial condition.

15. Subsequent Events

DEBT REDEMPTIONS

On October 24, 2022, AIG redeemed (i) $750 million aggregate principal amount of our 3.900% Notes Due 2026 for a redemption price of 100 percent of the principal amount, plus accrued and unpaid interest, (ii) approximately $522 million aggregate principal amount of our 3.750% Notes Due 2025 for a redemption price of 100 percent of the principal amount, plus accrued and unpaid interest and (iii) $500 million aggregate principal amount of our 2.500% Notes Due 2025 for a redemption price of 100 percent of the principal amount, plus accrued and unpaid interest.


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

Glossary and Acronyms of Selected Insurance Terms and References

Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), we use certain terms and abbreviations, which are summarized in the Glossary and Acronyms.

American International Group, Inc. (AIG) has incorporated into this discussion a number of cross-references to additional information included throughout this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021 (the 2021 Annual Report) to assist readers seeking additional information related to a particular subject.

In this Quarterly Report on Form 10-Q, unless otherwise mentioned or unless the context indicates otherwise, we use the terms “AIG,” “we,” “us” and “our” to refer to American International Group, Inc., a Delaware corporation, and its consolidated subsidiaries. We use the term “AIG Parent” to refer solely to American International Group, Inc., and not to any of its consolidated subsidiaries.

Cautionary Statement Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q and other publicly available documents may include, and members of AIG management may from time to time make and discuss, statements which, to the extent they are not statements of historical or present fact, may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward‑looking statements are intended to provide management’s current expectations or plans for AIG’s future operating and financial performance, based on assumptions currently believed to be valid and accurate. Forward-looking statements are often preceded by, followed by or include words such as “will,” “believe,” “anticipate,” “expect,” “expectations,” “intend,” “plan,” “strategy,” “prospects,” “project,” “anticipate,” “should,” “guidance,” “outlook,” “confident,” “focused on achieving,” “view,” “target,” “goal,” “estimate” and other words of similar meaning in connection with a discussion of future operating or financial performance. These statements may include, among other things, projections, goals and assumptions that relate to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expense reduction efforts, the outcome of contingencies such as legal proceedings, anticipated organizational, business or regulatory changes, such as the separation of the Life and Retirement business from AIG, the effect of catastrophes, and macroeconomic and/or geopolitical events, anticipated dispositions, monetization and/or acquisitions of businesses or assets, or successful integration of acquired businesses, management succession and retention plans, exposure to risk, trends in operations and financial results, and other statements that are not historical facts.


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All forward-looking statements involve risks, uncertainties and other factors that may cause AIG’s actual results and financial condition to differ, possibly materially, from the results and financial condition expressed or implied in the forward-looking statements. Factors that could cause AIG’s actual results to differ, possibly materially, from those in specific projections, goals, assumptions and statements include, without limitation:

•the effects of economic conditions in the markets in which AIG and its businesses operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in interest rates and foreign currency exchange rates and inflationary pressures, each of which may also be affected by geopolitical conflicts, including the conflict between Russia and Ukraine;

•the occurrence of catastrophic events, both natural and man-made, including geopolitical conflicts, pandemics, civil unrest and the effects of climate change;

•availability of reinsurance or access to reinsurance on acceptable terms;

•disruptions in the availability of AIG's electronic data systems or those of third parties, including as a result of information technology, cybersecurity or data security breaches due to supply chain disruptions, cyber-attacks or security vulnerabilities, the likelihood of which may increase as a result of continued remote business operations;

•AIG's ability to realize expected strategic, financial, operational or other benefits from the separation of Corebridge Financial, Inc. (Corebridge);

•AIG's ability to effectively execute on and benefit from its ongoing restructuring programs;

•changes in judgments concerning potential cost-saving opportunities;

•concentrations in AIG’s investment portfolios, including as a result of our asset management relationships with Blackstone Inc. (Blackstone) and BlackRock, Inc. (BlackRock);

•changes in the valuation of AIG’s investments;

•the effectiveness of AIG’s enterprise risk management policies and procedures, including with respect to business continuity and disaster recovery plans;

•the effectiveness of strategies to recruit and retain key personnel and to implement effective succession plans;

•actions by rating agencies with respect to AIG’s credit and financial strength ratings as well as those of its businesses and subsidiaries;

•changes to sources of or access to liquidity;

•changes in judgments concerning the recognition of deferred tax assets and the impairment of goodwill;

•changes in judgments or assumptions concerning insurance underwriting and insurance liabilities;

•AIG’s ability to successfully dispose of, monetize and/or acquire businesses or assets or successfully integrate acquired businesses;

•nonperformance or defaults by counterparties, including Fortitude Reinsurance Company Ltd. (Fortitude Re);

•requirements, which may change from time to time, of the global regulatory framework to which AIG is subject;

•significant legal, regulatory or governmental proceedings;

•the effects of sanctions, including those related to the conflict between Russia and Ukraine and failure to comply therewith;

•the impact of COVID-19 and its variants and responses thereto;

•AIG’s ability to effectively execute on environmental, social and governance targets and standards; and

•such other factors discussed in:

–Part I, Item 2. MD&A of this Quarterly Report on Form 10‑Q; and

–Part I, Item 1A. Risk Factors and Part II, Item 7. MD&A of the 2021 Annual Report.

Forward-looking statements speak only as of the date of this report, or in the case of any document incorporated by reference, the date of that document. We are not under any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in any forward-looking statements is disclosed from time to time in other filings with the Securities and Exchange Commission (SEC).


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INDEX TO ITEM 2
			Page
Use of Non-GAAP Measures			71
Critical Accounting Estimates			73
Executive Summary			74
Overview			74
Operating Structure			75
Financial Performance Summary			76
AIG's Outlook – Industry and Economic Factors			78
Consolidated Results of Operations			82
Business Segment Operations			87
General Insurance			88
Life and Retirement			99
Other Operations			114
Investments			116
Overview			116
Investment Highlights in the Nine Months Ended September 30, 2022			116
Investment Strategies			116
Credit Ratings			118
Insurance Reserves			126
Loss Reserves			126
Life and Annuity Future Policy Benefits, Policyholder Contract Deposits and DAC			131
Liquidity and Capital Resources			139
Overview			139
Liquidity and Capital Resources Highlights			140
Analysis of Sources and Uses of Cash			141
Liquidity and Capital Resources of AIG Parent and Subsidiaries			141
Credit Facilities			143
Contractual Obligations			144
Off-Balance Sheet Arrangements and Commercial Commitments			144
Debt			144
Credit Ratings			146
Financial Strength Ratings			147
Rating Agency Actions Related to Corebridge Offering s and Other Recent Actions			147
Regulation and Supervision			147
Dividends			148
Repurchases of AIG Common Stock			148
Dividend Restrictions			148
Enterprise Risk Management			149
Overview			149
Regulatory Environment			149
Overview			149
Glossary			150
Acronyms			153


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ITEM 2 | Use of Non-GAAP Measures

Use of Non-GAAP Measures

Throughout this MD&A, we present our financial condition and results of operations in the way we believe will be most meaningful and representative of our business results. Some of the measurements we use are “non-GAAP financial measures” under SEC rules and regulations. GAAP is the acronym for “generally accepted accounting principles” in the United States. The non-GAAP financial measures we present may not be comparable to similarly-named measures reported by other companies.

We use the following operating performance measures because we believe they enhance the understanding of the underlying profitability of continuing operations and trends of our business segments. We believe they also allow for more meaningful comparisons with our insurance competitors. When we use these measures, reconciliations to the most comparable GAAP measure are provided on a consolidated basis in the Consolidated Results of Operations section of this MD&A.

Book value per common share, excluding accumulated other comprehensive income (loss) (AOCI) adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets and deferred tax assets (DTA) (Adjusted book value per common share) is used to show the amount of our net worth on a per-common share basis after eliminating items that can fluctuate significantly from period to period including changes in fair value of AIG’s available for sale securities portfolio, foreign currency translation adjustments and U.S. tax attribute deferred tax assets. This measure also eliminates the asymmetrical impact resulting from changes in fair value of our available for sale securities portfolio wherein there is largely no offsetting impact for certain related insurance liabilities. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG post deconsolidation of Fortitude Re (Fortitude Re funds withheld assets) since these fair value movements are economically transferred to Fortitude Re. We exclude deferred tax assets representing U.S. tax attributes related to net operating loss carryforwards and foreign tax credits as they have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As net operating loss carryforwards and foreign tax credits are utilized, the portion of the DTA utilized is included in these book value per common share metrics. Adjusted book value per common share is derived by dividing total AIG common shareholders’ equity, excluding AOCI adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets, and DTA (Adjusted common shareholders’ equity), by total common shares outstanding.

Return on common equity – Adjusted after-tax income excluding AOCI adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets and DTA (Adjusted return on common equity) is used to show the rate of return on common shareholders’ equity. We believe this measure is useful to investors because it eliminates items that can fluctuate significantly from period to period, including changes in fair value of our available for sale securities portfolio, foreign currency translation adjustments and U.S. tax attribute deferred tax assets. This measure also eliminates the asymmetrical impact resulting from changes in fair value of our available for sale securities portfolio wherein there is largely no offsetting impact for certain related insurance liabilities. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets since these fair value movements are economically transferred to Fortitude Re. We exclude deferred tax assets representing U.S. tax attributes related to net operating loss carryforwards and foreign tax credits as they have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As net operating loss carryforwards and foreign tax credits are utilized, the portion of the DTA utilized is included in Adjusted return on common equity. Adjusted return on common equity is derived by dividing actual or annualized adjusted after-tax income attributable to AIG common shareholders by average Adjusted common shareholders’ equity.

Adjusted after-tax income attributable to AIG common shareholders is derived by excluding the tax effected adjusted pre-tax income (APTI) adjustments described below, dividends on preferred stock, noncontrolling interest on net realized gains (losses), other non-operating expenses and the following tax items from net income attributable to AIG:

•deferred income tax valuation allowance releases and charges;

•changes in uncertain tax positions and other tax items related to legacy matters having no relevance to our current businesses or operating performance; and

•net tax charge related to the enactment of the Tax Cuts and Jobs Act (the Tax Act).

Adjusted revenues exclude Net realized gains (losses), income from non-operating litigation settlements (included in Other income for GAAP purposes) and changes in fair value of securities used to hedge guaranteed living benefits (included in Net investment income for GAAP purposes). Adjusted revenues is a GAAP measure for our segments.


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ITEM 2 | Use of Non-GAAP Measures

Adjusted pre-tax income is derived by excluding the items set forth below from income from continuing operations before income tax. This definition is consistent across our segments. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to our current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and measures that we believe to be common to the industry. APTI is a GAAP measure for our segments. Excluded items include the following:

•changes in fair value of securities used to hedge guaranteed living benefits;

•changes in benefit reserves and deferred policy acquisition costs (DAC), value of business acquired (VOBA), and deferred sales inducements (DSI) related to net realized gains and losses;

•changes in the fair value of equity securities;

•net investment income on Fortitude Re funds withheld assets;

•following deconsolidation of Fortitude Re, net realized gains and losses on Fortitude Re funds withheld assets;

•loss (gain) on extinguishment of debt;

•all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non- qualifying (economic) hedging or for asset replication. Earned income on such economic hedges is reclassified from net realized gains and losses to specific APTI line items based on the economic risk being hedged (e.g. net investment income and interest credited to policyholder account balances);

•income or loss from discontinued operations;

•net loss reserve discount benefit (charge);

•pension expense related to lump sum payments to former employees;

•net gain or loss on divestitures;

•non-operating litigation reserves and settlements;

•restructuring and other costs related to initiatives designed to reduce operating expenses, improve efficiency and simplify our organization;

•the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain;

•integration and transaction costs associated with acquiring or divesting businesses;

•losses from the impairment of goodwill; and

•non-recurring costs associated with the implementation of non-ordinary course legal or regulatory changes or changes to accounting principles.

•General Insurance

–Ratios: We, along with most property and casualty insurance companies, use the loss ratio, the expense ratio and the combined ratio as measures of underwriting performance. These ratios are relative measurements that describe, for every $100 of net premiums earned, the amount of losses and loss adjustment expenses (which for General Insurance excludes net loss reserve discount), and the amount of other underwriting expenses that would be incurred. A combined ratio of less than 100 indicates underwriting income and a combined ratio of over 100 indicates an underwriting loss. Our ratios are calculated using the relevant segment information calculated under GAAP, and thus may not be comparable to similar ratios calculated for regulatory reporting purposes. The underwriting environment varies across countries and products, as does the degree of litigation activity, all of which affect such ratios. In addition, investment returns, local taxes, cost of capital, regulation, product type and competition can have an effect on pricing and consequently on profitability as reflected in underwriting income and associated ratios.

–Accident year loss and accident year combined ratios, as adjusted (Accident year loss ratio, ex-CAT and Accident year combined ratio, ex-CAT): both the accident year loss and accident year combined ratios, as adjusted, exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting. Natural catastrophe losses are generally weather or seismic events, in each case, having a net impact on AIG in excess of $10 million and man-made catastrophe losses, such as terrorism and civil disorders that exceed the $10 million threshold. We believe that as adjusted ratios are meaningful measures of our underwriting results on an ongoing basis as they exclude catastrophes and the impact of reserve discounting which are outside of management’s control. We also exclude prior year development to provide transparency related to current accident year results.

•Life and Retirement

–Premiums and deposits: includes direct and assumed amounts received and earned on traditional life insurance policies, group benefit policies and life-contingent payout annuities, as well as deposits received on universal life, investment-type annuity contracts, Federal Home Loan Bank (FHLB) funding agreements and mutual funds. We believe the measure of premiums and deposits is useful in understanding customer demand for our products, evolving product trends and our sales performance period over period.

Results from discontinued operations are excluded from all of these measures.


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ITEM 2 | Critical Accounting Estimates

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment.


The accounting policies that we believe are most dependent on the application of estimates and assumptions, which are critical accounting estimates, are related to the determination of:

•loss reserves; •future policy benefit reserves for life and accident and health insurance contracts; •liabilities for guaranteed benefit features of variable annuity, fixed annuity and fixed index annuity products; •embedded derivative liabilities for fixed index annuity and life products; •estimated gross profits to value deferred acquisition costs and unearned revenue for investment-oriented products; •reinsurance assets, including the allowance for credit losses and disputes; •goodwill impairment; •allowance for credit losses on certain investments, primarily on loans and available for sale fixed maturity securities; •legal contingencies; •fair value measurements of certain financial assets and financial liabilities; and •income taxes, in particular the recoverability of our deferred tax asset and establishment of provisions for uncertain tax positions.

For a complete discussion of our critical accounting estimates, see Part II, Item 7. MD&A – Critical Accounting Estimates in the 2021 Annual Report.


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ITEM 2 | Executive Summary

Executive Summary

OVERVIEW

This overview of the MD&A highlights selected information and may not contain all of the information that is important to current or potential investors in our securities. You should read this Quarterly Report on Form 10-Q, together with the 2021 Annual Report, in their entirety for a more detailed description of events, trends, uncertainties, risks and critical accounting estimates affecting us.

Separation of Life and Retirement Business and Relationship with Blackstone

Our Investment Management Agreements with BlackRock

On March 28, 2022, we announced entry into a binding letter of intent with BlackRock pursuant to which certain of our insurance company subsidiaries would enter into separate investment management agreements with BlackRock. Since that date, certain of our insurance company subsidiaries have entered into such investment management agreements, with the expectation that certain additional insurance company subsidiaries will enter into such investment management agreements over the coming months. We are in the process of transferring the management of up to $150 billion of our investments in liquid fixed income and certain private placement assets, including up to $90 billion of the Corebridge investment portfolio, to BlackRock under such investment management agreements, and anticipate completing the transfer of a majority of such assets by the end of 2022. The investment management agreements contain detailed investment guidelines and reporting requirements. These agreements also contain reasonable and customary representations and warranties, standard of care, expense reimbursement, liability, indemnity and other provisions. The investment management agreements continue unless terminated by either party on 45 days’ notice or by us immediately for cause. We continue to be responsible for our overall investment portfolio, including decisions surrounding asset allocation, risk composition and investment strategy. There can be no assurance that all of such investment management agreements will be entered into as contemplated, or at all.


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OPERATING STRUCTURE

AIG reports the results of its businesses through three segments – General Insurance, Life and Retirement and Other Operations. General Insurance consists of two operating segments – North America and International. Life and Retirement consists of four operating segments – Individual Retirement, Group Retirement, Life Insurance and Institutional Markets. Other Operations is primarily comprised of corporate, our institutional asset management business and consolidation and eliminations.

Consistent with how we manage our business, our General Insurance North America operating segment primarily includes insurance businesses in the United States, Canada and Bermuda, and our global reinsurance business, AIG Re. Our General Insurance International operating segment includes regional insurance businesses in Japan, the United Kingdom, Europe, Middle East and Africa (EMEA region), Asia Pacific, Latin America and Caribbean, and China. International also includes the results of Talbot Holdings, Ltd. as well as AIG’s Global Specialty business.

For additional information on our business segments, see Note 3 to the Condensed Consolidated Financial Statements, and for information regarding the separation of Life and Retirement, see Note 1 to the Condensed Consolidated Financial Statements.

Business Segments

General Insurance

Life and Retirement

General Insurance is a leading provider of insurance products and services for commercial and personal insurance customers. It includes one of the world’s most far-reaching property casualty networks. General Insurance offers a broad range of products to customers through a diversified, multichannel distribution network. Customers value General Insurance’s strong capital position, extensive risk management and claims experience and its ability to be a market leader in critical lines of the insurance business.

Life and Retirement is a unique franchise that brings together a broad portfolio of life insurance, retirement and institutional products offered through an extensive, multichannel distribution network. It holds long-standing, leading market positions in many of the markets it serves in the U.S. With its strong capital position, customer-focused service, breadth of product expertise and deep distribution relationships across multiple channels, Life and Retirement is well positioned to serve growing market needs.

General Insurance includes the following major operating companies: National Union Fire Insurance Company of Pittsburgh, Pa. (National Union); American Home Assurance Company (American Home); Lexington Insurance Company (Lexington); AIG General Insurance Company, Ltd. (AIG Sonpo); AIG Asia Pacific Insurance, Pte, Ltd.; AIG Europe S.A.; American International Group UK Ltd.; Validus Reinsurance, Ltd. (Validus Re); Talbot Holdings Ltd. (Talbot); Western World Insurance Group, Inc. and Glatfelter Insurance Group (Glatfelter).

Life and Retirement includes the following major operating companies: American General Life Insurance Company (AGL); The Variable Annuity Life Insurance Company (VALIC); The United States Life Insurance Company in the City of New York (U.S. Life); Laya Healthcare Limited and AIG Life Limited.

Other Operations


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ITEM 2 | Executive Summary

FINANCIAL PERFORMANCE SUMMARY

Net Income (Loss) Attributable to AIG Common Shareholders

Three Months Ended September 30,

(in millions)


			Quarterly 2022 and 2021 Comparison
			Net income attributable to AIG common shareholders increased $1.0 billion due to the following, on a pre-tax basis:
			•an increase in Net realized gains on Fortitude Re funds withheld embedded derivative of $2.0 billion driven by interest rate movements, partially offset by losses on Fortitude Re funds withheld assets of $86 million in 2022 compared to a gain of $190 million in 2021;
			•an increase in Net realized gains excluding Fortitude Re funds withheld assets and embedded derivative of $825 million, driven by a $1.4 billion increase in derivative and hedge activity and gains on variable annuity embedded derivatives, net of hedging partially offset by losses on sales of alternative investments and real estate of $199 million and other securities of $133 million and unfavorable effects of foreign exchange of $117 million; and
			•higher underwriting income in General Insurance of $148 million reflecting the continued earn-in of positive rate change and strength of renewal retentions and new business production, favorable business mix changes, as well as increased favorable prior year development. Underwriting income was negatively impacted by unfavorable movements in foreign exchange.
			The increase in Net income attributable to AIG common shareholders was partially offset by the following:
			•lower net investment income of $1.0 billion primarily driven by declines in alternative investments of $731 million and fair value of fixed maturity securities of $276 million, where we elected the fair value option as a result of negative equity market performance.
			•higher income attributable to noncontrolling interest of $262 million driven by the sale of 9.9 percent interest of Corebridge to Blackstone in December 2021 of $242 million.
			The $367 million increase in income tax expense was primarily attributable to higher income from continuing operations.
			For further discussion see Consolidated Results of Operations.


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Net Income (Loss) Attributable to AIG Common Shareholders Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Net income attributable to AIG common shareholders increased $4.4 billion due to the following, on a pre-tax basis:
			•an increase in Net realized gains on Fortitude Re funds withheld embedded derivative of $7.7 billion driven by interest rate movements, partially offset by losses on Fortitude Re funds withheld assets of $312 million in 2022 compared to a gain of $536 million in 2021;
			•an increase in Net realized gains excluding Fortitude Re funds withheld assets and embedded derivative of $2.1 billion, driven by a $4.2 billion increase in derivative and hedge activity and gains on variable annuity embedded derivatives, net of hedging, partially offset by losses on sales of securities of $856 million and sales of alternative investments and real estate of $233 million, unfavorable effects of foreign exchange $452 million and unfavorable movement in the allowance for credit losses on fixed maturity securities and loans of $316 million;
			•higher underwriting income in General Insurance of $857 million reflecting the continued earn-in of positive rate change and strength of renewal retentions and new business production, favorable business mix changes, as well as increased favorable prior year development and lower catastrophe losses. Underwriting income was negatively impacted by unfavorable movements in foreign exchange.
			•lower interest expense of $197 million primarily driven by interest savings of $172 million from $7.6 billion debt repurchases, through cash tender offers, and debt redemptions in the nine months ended September 30, 2022 as well as $646 million debt repurchases, through cash tender offers in the three months ended December 31, 2021 and interest savings of $56 million resulting from redemptions of $3.0 billion of debt in the nine months ended September 30, 2021 as well as interest savings from consolidated investment entities of $91 million. These decreases are partially offset by interest expense of $138 million on $6.5 billion Corebridge senior unsecured notes, $1.5 billion draw down on DDTL facility and $1 billion junior subordinated debt issued in the nine months ended September 30, 2022.
			The increase in Net income attributable to AIG common shareholders was partially offset by the following:
			•lower net investment income of $2.5 billion primarily driven by lower returns on our alternative investments of $1.1 billion, declines in fair value of fixed maturity securities, where we elected the fair value option of $947 million, and lower returns on available for sale fixed maturity securities of $431 million as a result of the higher rate environment and negative equity market performance.
			•higher income attributable to noncontrolling interest of $909 million driven by the sale of 9.9 percent interest of Corebridge to Blackstone in December 2021 of $902 million.
			The $1.7 billion increase in income tax expense was primarily attributable to higher income from continuing operations.
			For further discussion see Consolidated Results of Operations.


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ITEM 2 | Executive Summary


Adjusted Pre-Tax Income (Loss)* Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Adjusted pre-tax income decreased $401 million driven by lower net investment income at General Insurance ($209 million) and Life and Retirement ($431 million), primarily as a result of lower yield enhancement income and alternative investment income. In addition, Life and Retirement results were impacted by favorable impact from annual assumptions update of $109 million, lower DAC amortization and policyholder benefits, net of premiums, excluding the impact of assumptions updates, as a result of lower mortality partially offset by lower variable annuity separate account returns of $89 million, and lower policy and advisory fee income, net of advisory fee expense, of $99 million, excluding the impact of assumptions updates, due to negative equity market performance.

			This decrease was partially offset by higher underwriting income in General Insurance of $148 million as the calendar year combined ratio improved 2.4 points, reflecting the continued earn-in of positive rate change and strength of renewal retentions and new business production, favorable business mix changes, as well as increased favorable prior year development. Underwriting income was negatively impacted by unfavorable movements in foreign exchange.


Adjusted Pre-Tax Income* Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Adjusted pre-tax income decreased $492 million driven by lower net investment income at General Insurance ($489 million) and Life and Retirement ($1.0 billion), primarily as a result of lower yield enhancement income and alternative investment income. In addition, Life and Retirement results were impacted by a favorable impact from annual assumptions updates of $109 million and lower policy and advisory fee income, net of advisory fee expense of $176 million, excluding the impact of assumptions update, due to negative equity market performance.

			This decrease was partially offset by higher underwriting income in General Insurance ($857 million) as the calendar year combined ratio improved 4.4 points, reflecting the continued earn-in of positive rate change and strength of renewal retentions and new business production, favorable business mix changes, as well as increased favorable prior year development and lower catastrophe losses. Underwriting income was negatively impacted by unfavorable movements in foreign exchange.

*Non-GAAP measure – for reconciliation of Non-GAAP to GAAP measures see Consolidated Results of Operations.

AIG’S OUTLOOK – INDUSTRY AND ECONOMIC FACTORS

Our business is affected by industry and economic factors such as interest rates, currency exchange rates, credit and equity market conditions, catastrophic claims events, regulation, tax policy, competition, and general economic, market and political conditions. We continued to operate under challenging market conditions in the first nine months of 2022, characterized by factors such as the impact of COVID-19 and the related governmental and societal responses, rising interest rates, inflationary pressures, an uneven global economic recovery and global trade tensions. Responses by central banks and monetary authorities with respect to inflation, growth concerns and other macroeconomic factors have also affected global exchange rates and volatility.

Russia/Ukraine Conflict

The Russia/Ukraine conflict began in February 2022. The conflict has and may continue to have a significant impact on the global macroeconomic and geopolitical environments, including increased volatility in capital and commodity markets, rapid changes to regulatory conditions around the globe including the use of sanctions, operational challenges for multinational corporations, inflationary pressures and an increased risk of cybersecurity incidents.


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The conflict is evolving and has the potential to adversely affect our business and results of operations from an investment, underwriting and operational perspective. While we believe we have taken appropriate actions to minimize related risk, we continue to monitor potential exposure and operational impacts, as well as any actual and potential claims activity. The ultimate impact will depend on future developments that are uncertain and cannot be predicted, including scope, severity and duration, the governmental, legislative and regulatory actions taken (including the application of sanctions), and court decisions, if any, rendered in response to those actions.

Impact of Changes in the Interest Rate Environment and Equity Markets

Key U.S. benchmark rates have continued to rise during the first nine months of 2022 as markets react to heightened inflation measures, geopolitical risk, and the Board of Governors of the Federal Reserve System raising short term interest rates for the first time since 2018. As of September 30, 2022, due to increases in benchmark rates, combined with general widening of credit spreads, the yield on new investments has generally exceeded the yield on asset maturities and redemptions (runoff yield). The yield pick-up of new investments over the runoff assets has widened to more than 100 basis points during three months ended September 30, 2022. This combined with resetting of coupon rates on floating rate securities have steadily improved the overall portfolio yields. However, the key benchmark rates remain highly volatile. We actively manage our exposure to the interest rate environment through portfolio selection and asset-liability management, including spread management strategies for our investment-oriented products and economic hedging of interest rate risk from guarantee features in our variable and fixed index annuities, but we may not be able to fully mitigate our interest rate risk by matching exposure of our assets relative to our liabilities.

Equity Markets

Our financial results are impacted by the performance of equity markets which impacts the performance of our alternative investment portfolio, fee income, net amount at risk, policyholder benefits and DAC on our variable annuity portfolio. For instance, in our variable annuity separate accounts, mutual fund assets and brokerage and advisory assets, we generally earn fee income based on the account value, which fluctuates with the equity markets as a significant amount of these assets are invested in equity funds. The impact of equity market returns, both increases and decreases, is reflected in our results due to the impact on the account value and the fair values of equity-exposed securities in our Life and Retirement investment portfolio.

In Life and Retirement, hedging costs could also be significantly impacted by changes in the level of equity markets as rebalancing and option costs are tied to the equity market volatility, and we may be required to post additional collateral when equity markets are higher. These hedging costs are mostly offset by our rider fees that are tied to the level of the Chicago Board Options Exchange Volatility Index. As rebalancing and option costs increase or decrease, the rider fees will increase or decrease partially offsetting the hedging costs incurred.

Annuity Sales and Surrenders

The rising rate environment and our partnership with Blackstone have provided a strong tailwind for fixed annuity sales with sales in the three to five‑year products significantly increasing. Continued rising interest rates could create the potential for increased sales, but may also drive higher surrenders. Fixed annuities have surrender charge periods, generally in the three-to-seven year range. Fixed index annuities have surrender charge periods, generally in the five-to-ten year range, and within our Group Retirement segment, certain of our fixed investment options are subject to other withdrawal restrictions, which may help mitigate increased early surrenders in a rising rate environment. In addition, older contracts that have higher minimum interest rates and continue to be attractive to contract holders have driven better than expected persistency in fixed annuities, although the reserves for such contracts have continued to decrease over time in amount and as a percentage of the total annuity portfolio. We closely monitor surrenders of fixed annuities as contracts with lower minimum interest rates come out of the surrender charge period. Changes in interest rates significantly impact the valuation of our liabilities for annuities with guaranteed living benefit features and the value of the related hedging portfolio.

Reinvestment and Spread Management

We actively monitor fixed income markets, including the level of interest rates, credit spreads and the shape of the yield curve. We also frequently review our interest rate assumptions and actively manage the crediting rates used for new and in-force business. Business strategies continue to evolve and we attempt to maintain profitability of the overall business in light of the interest rate environment. A rising interest rate environment results in improved yields on new investments and improves margins for our Life and Retirement business while also making certain products, such as fixed annuities, more attractive to potential customers. However, the rising rate environment has resulted in lower values on general and separate accounts assets, mutual fund assets and brokerage and advisory assets that hold investments in fixed income assets.

For additional information on our investment and asset-liability management strategies see Investments.


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ITEM 2 | Executive Summary

For investment-oriented products, including universal life insurance, and variable, fixed and fixed index annuities, in our Individual Retirement, Group Retirement, Life Insurance and Institutional Markets businesses, our spread management strategies include disciplined pricing and product design for new business, modifying or limiting the sale of products that do not achieve targeted spreads, using asset-liability management to match assets to liabilities to the extent practicable, and actively managing crediting rates to help mitigate some of the pressure on investment spreads. Renewal crediting rate management is done under contractual provisions that were designed to allow crediting rates to be reset at pre-established intervals in accordance with state and federal laws and subject to minimum crediting rate guarantees. We expect to continue to adjust crediting rates on in-force business, as appropriate, to be responsive to a rising rate environment. As interest rates rise, we may need to raise crediting rates on in-force business for competitive and other reasons, potentially offsetting a portion of the additional investment income resulting from investing in a higher interest rate environment.

Of the aggregate fixed account values of our Individual Retirement and Group Retirement annuity products, 67 percent were crediting at the contractual minimum guaranteed interest rate as of September 30, 2022. The percentage of fixed account values of our annuity products that are currently crediting at rates above one percent were 55 percent and 58 percent as of September 30, 2022 and December 31, 2021, respectively. In the universal life products in our Life Insurance business, 66 percent and 67 percent of the account values were crediting at the contractual minimum guaranteed interest rate as of September 30, 2022 and December 31, 2021, respectively. These businesses continue to focus on pricing discipline and strategies to manage the minimum guaranteed interest crediting rates offered on new sales in the context of regulatory requirements and competitive positioning.

The following table presents fixed annuity and universal life account values of our Individual Retirement, Group Retirement and Life Insurance operating segments by contractual minimum guaranteed interest rate and current crediting rates, excluding balances ceded to Fortitude Re:


		Current Crediting Rates
September 30, 2022				1-50 Basis		More than 50
Contractual Minimum Guaranteed		At Contractual		Points Above		Basis Points
Interest Rate		Minimum		Minimum		Above Minimum
(in millions)		Guarantee		Guarantee		Guarantee		Total
Individual Retirement*
<=1%	$	9,822	$	1,656	$	20,778	$	32,256
> 1% - 2%		4,261		24		1,960		6,245
> 2% - 3%		9,790		—		17		9,807
> 3% - 4%		7,805		40		6		7,851
> 4% - 5%		464		—		5		469
> 5% - 5.5%		33		—		4		37
Total Individual Retirement	$	32,175	$	1,720	$	22,770	$	56,665
Group Retirement*
<=1%	$	3,726	$	1,614	$	5,178	$	10,518
> 1% - 2%		6,024		437		23		6,484
> 2% - 3%		14,449		—		—		14,449
> 3% - 4%		690		—		—		690
> 4% - 5%		6,943		—		—		6,943
> 5% - 5.5%		159		—		—		159
Total Group Retirement	$	31,991	$	2,051	$	5,201	$	39,243
Universal life insurance
<=1%	$	—	$	—	$	—	$	—
> 1% - 2%		106		24		353		483
> 2% - 3%		235		635		1,112		1,982
> 3% - 4%		1,374		183		192		1,749
> 4% - 5%		2,999		—		—		2,999
> 5% - 5.5%		224		—		—		224
Total universal life insurance	$	4,938	$	842	$	1,657	$	7,437
Total	$	69,104	$	4,613	$	29,628	$	103,345
Percentage of total		67	%	4	%	29	%	100	%

*Individual Retirement and Group Retirement amounts shown include fixed options within variable annuity products.


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General Insurance

Our net investment income is significantly impacted by market interest rates as well as the deployment of asset allocation strategies to manage duration, enhance yield and manage interest rate risk. As interest rates increase, so too does our ability to reinvest future cash inflows from premiums, as well as sales and maturities of existing investments, at more favorable rates. For additional information on our investment and asset-liability management strategies see Investments.

While the impact of rising interest rates on our General Insurance segment increases the benefit of investment income, the current and medium-term inflationary environment may also translate into higher loss cost trends. We monitor these trends closely, particularly loss cost trend uncertainty, to ensure that not only our pricing, but also our loss reserving assumptions are proactive to, and considerate of, current and future economic conditions.

For our General Insurance segment loss reserves, rising interest rates may favorably impact the statutory net loss reserve discount for workers’ compensation and its associated amortization.

Impact of Currency Volatility

Currency volatility remains acute. Strengthening of the U.S. dollar against the Euro, British pound and the Japanese yen (the Major Currencies) impacts income for our businesses with substantial international operations. In particular, growth trends in net premiums written reported in U.S. dollars can differ significantly from those measured in original currencies. The net effect on underwriting results, however, is significantly mitigated, as both revenues and expenses are similarly affected.

These currencies may continue to fluctuate, especially as a result of central bank responses to inflation, concerns regarding future economic growth and other macroeconomic factors, and such fluctuations will affect net premiums written growth trends reported in U.S. dollars, as well as financial statement line item comparability.

General Insurance businesses are transacted in most major foreign currencies. The following table presents the average of the quarterly weighted average exchange rates of the Major Currencies, which have the most significant impact on our businesses:


	Three Months Ended September 30,		Percentage		Nine Months Ended September 30,		Percentage
Rate for 1 USD	2022	2021	Change		2022	2021	Change
Currency:
GBP	0.83	0.72	15	%	0.78	0.72	8	%
EUR	0.97	0.84	15	%	0.93	0.83	12	%
JPY	135.35	110.06	23	%	124.80	107.77	16	%

Unless otherwise noted, references to the effects of foreign exchange in the General Insurance discussion of results of operations are with respect to movements in the Major Currencies included in the preceding table.


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ITEM 2 | Consolidated Results of Operations

Consolidated Results of Operations

The following section provides a comparative discussion of our consolidated results of operations on a reported basis for the three- and nine-month periods ended September 30, 2022 and 2021. Factors that relate primarily to a specific business are discussed in more detail within the business segment operations section.

For information regarding the Critical Accounting Estimates that affect our results of operations see Critical Accounting Estimates in this MD&A and Part II, Item 7. MD&A – Critical Accounting Estimates in the 2021 Annual Report.

The following table presents our consolidated results of operations and other key financial metrics:


		Three Months Ended September 30,			Percentage			Nine Months Ended September 30,			Percentage
(in millions)		2022		2021	Change			2022		2021	Change
Revenues:
Premiums	$	7,832	$	7,504	4	%	$	22,458	$	21,925	2	%
Policy fees		732		714	3			2,238		2,269	(1)
Net investment income:
Net investment income - excluding Fortitude Re funds withheld assets		2,513		3,220	(22)			7,875		9,559	(18)
Net investment income - Fortitude Re funds withheld assets		155		495	(69)			634		1,488	(57)
Total net investment income		2,668		3,715	(28)			8,509		11,047	(23)
Net realized gains (losses):
Net realized gains - excluding Fortitude Re funds withheld assets and embedded derivative		1,504		679	122			3,447		1,331	159
Net realized gains (losses) on Fortitude Re funds withheld assets		(86)		190	NM			(312)		536	NM
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative		1,757		(209)	NM			7,851		117	NM
Total net realized gains		3,175		660	381			10,986		1,984	454
Other income		195		242	(19)			660		745	(11)
Total revenues		14,602		12,835	14			44,851		37,970	18
Benefits, losses and expenses:
Policyholder benefits and losses incurred		6,187		5,959	4			16,565		17,182	(4)
Interest credited to policyholder account balances		951		923	3			2,738		2,663	3
Amortization of deferred policy acquisition costs		1,248		1,260	(1)			3,983		3,479	14
General operating and other expenses		2,093		2,240	(7)			6,497		6,546	(1)
Interest expense		282		328	(14)			811		1,008	(20)
Loss on extinguishment of debt		—		51	NM			299		149	101
Net gain on divestitures		(6)		(102)	94			(45)		(108)	58
Total benefits, losses and expenses		10,755		10,659	1			30,848		30,919	—
Income from continuing operations before income tax expense		3,847		2,176	77			14,003		7,051	99


Income tax expense		806		439	84			2,913		1,234	136
Income from continuing operations		3,041		1,737	75			11,090		5,817	91
Income (loss) from discontinued operations, net of income taxes		—		—	NM			(1)		—	NM
Net income		3,041		1,737	75			11,089		5,817	91
Less: Net income attributable to noncontrolling interests		332		70	374			1,084		175	NM
Net income attributable to AIG		2,709		1,667	63			10,005		5,642	77
Less: Dividends on preferred stock		7		7	—			22		22	—
Net income attributable to AIG common shareholders	$	2,702	$	1,660	63	%	$	9,983	$	5,620	78	%


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ITEM 2 | Consolidated Results of Operations


(in millions, except per common share data)		September 30, 2022		December 31, 2021
Balance sheet data:
Total assets	$	522,932	$	596,112
Short-term and long-term debt		24,508		23,741
Debt of consolidated investment entities		5,924		6,422
Total AIG shareholders’ equity		39,023		65,956
Book value per common share		51.58		79.97
Adjusted book value per common share		73.28		68.83

The following table presents a reconciliation of Book value per common share to Adjusted book value per common share, which is a non-GAAP measure. For additional information see Use of Non-GAAP Measures.


(in millions, except per common share data)		September 30, 2022		December 31, 2021
Total AIG shareholders' equity	$	39,023	$	65,956
Preferred equity		485		485
Total AIG common shareholders' equity		38,538		65,471
Less: Deferred tax assets		4,556		5,221
Less: Accumulated other comprehensive income (loss)		(23,793)		6,687
Add: Cumulative unrealized gains and losses related to Fortitude Re funds withheld assets		(3,021)		2,791
Subtotal: AOCI plus cumulative unrealized gains and losses related to Fortitude Re funds withheld assets		(20,772)		3,896
Adjusted common shareholders' equity	$	54,754	$	56,354

Total common shares outstanding		747.2		818.7

Book value per common share	$	51.58	$	79.97
Adjusted book value per common share		73.28		68.83

The following table presents a reconciliation of Return on common equity to Adjusted return on common equity, which is a non-GAAP measure. For additional information see Use of Non-GAAP Measures.


		Three Months Ended September 30,					Nine Months Ended September 30,				Year Ended December 31,
(dollars in millions)		2022		2021			2022		2021		2021
Actual or annualized net income (loss) attributable to AIG common shareholders	$	10,808	$	6,640		$	13,311	$	7,493	$	9,359
Actual or annualized adjusted after-tax income attributable to AIG common shareholders		2,036		3,348			3,416		4,121		4,430

Average AIG common shareholders' equity	$	41,699	$	64,988		$	51,082	$	64,512	$	64,704
Less: Average DTA		4,569		7,229			4,794		7,476		7,025
Less: Average AOCI		(20,725)		9,408			(10,166)		9,698		9,096
Add: Average cumulative unrealized gains and losses related to Fortitude Re funds withheld assets		(2,622)		3,154			(601)		3,303		3,200
Subtotal: AOCI plus cumulative unrealized gains and losses related to Fortitude Re funds withheld assets		(18,103)		6,254			(9,565)		6,395		5,896
Average adjusted AIG common shareholders' equity	$	55,233	$	51,505		$	55,853	$	50,641	$	51,783
Return on common equity		25.9	%	10.2	%		26.1	%	11.6	%	14.5	%
Adjusted return on common equity		3.7	%	6.5	%		6.1	%	8.1	%	8.6	%


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ITEM 2 | Consolidated Results of Operations

The following table presents a reconciliation of revenues to adjusted revenues:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)		2022		2021		2022		2021
Revenues	$	14,602	$	12,835	$	44,851	$	37,970
Changes in fair value of securities used to hedge guaranteed living benefits		(14)		(14)		(41)		(46)
Changes in the fair value of equity securities		(16)		45		41		36
Other (income) expense - net		7		6		23		14
Net investment income on Fortitude Re funds withheld assets		(155)		(495)		(634)		(1,488)
Net realized (gains) losses on Fortitude Re funds withheld assets		86		(190)		312		(536)
Net realized (gains) losses on Fortitude Re funds withheld embedded derivative		(1,757)		209		(7,851)		(117)
Net realized gains*		(1,446)		(643)		(3,242)		(1,192)
Non-operating litigation reserves and settlements		(8)		—		(46)		—
Adjusted revenues	$	11,299	$	11,753	$	33,413	$	34,641

*Includes all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication and net realized gains and losses on Fortitude Re funds withheld assets.

The following table presents a reconciliation of pre-tax income (loss)/net income (loss) attributable to AIG to adjusted pre-tax income (loss)/adjusted after-tax income (loss) attributable to AIG:


Three Months Ended September 30,	2022								2021
(in millions, except per common share data)		Pre-tax		Total Tax (Benefit) Charge		Non- controlling Interests(d)		After Tax		Pre-tax		Total Tax (Benefit) Charge		Non- controlling Interests(d)		After Tax
Pre-tax income/net income, including noncontrolling interests	$	3,847	$	806	$	—	$	3,041	$	2,176	$	439	$	—	$	1,737
Noncontrolling interests						(332)		(332)						(70)		(70)
Pre-tax income/net income attributable to AIG	$	3,847	$	806	$	(332)	$	2,709	$	2,176	$	439	$	(70)	$	1,667
Dividends on preferred stock								7								7
Net income attributable to AIG common shareholders							$	2,702							$	1,660
Changes in uncertain tax positions and other tax adjustments(a)				2		—		(2)				35		—		(35)
Deferred income tax valuation allowance charges(b)				(8)		—		8				(45)		—		45
Changes in fair value of securities used to hedge guaranteed living benefits		(6)		(1)		—		(5)		(26)		(5)		—		(21)
Changes in benefit reserves and DAC, VOBA and DSI related to net realized gains (losses)		28		6		—		22		(9)		(3)		—		(6)
Changes in the fair value of equity securities		(16)		(3)		—		(13)		45		7		—		38
Loss on extinguishment of debt		—		—		—		—		51		10		—		41
Net investment income on Fortitude Re funds withheld assets		(155)		(32)		—		(123)		(495)		(103)		—		(392)
Net realized (gains) losses on Fortitude Re funds withheld assets		86		17		—		69		(190)		(40)		—		(150)
Net realized (gains) losses on Fortitude Re funds withheld embedded derivative		(1,757)		(369)		—		(1,388)		209		44		—		165
Net realized gains(c)		(1,449)		(299)		—		(1,150)		(652)		(132)		—		(520)
Loss from discontinued operations								—								—
Net gain on divestitures		(6)		(1)		—		(5)		(102)		(22)		—		(80)
Non-operating litigation reserves and settlements		(3)		(1)		—		(2)		3		—		—		3
Favorable prior year development and related amortization changes ceded under retroactive reinsurance agreements		(62)		(13)		—		(49)		(115)		(23)		—		(92)
Net loss reserve discount charge		10		2		—		8		72		15		—		57
Pension expense related to a one-time lump sum payment to former employees		—		—		—		—		27		6		—		21
Integration and transaction costs associated with acquiring or divesting businesses		52		11		—		41		11		3		—		8
Restructuring and other costs		147		29		—		118		104		22		—		82
Non-recurring costs related to regulatory or accounting changes		9		2		—		7		17		4		—		13
Noncontrolling interests(d)						271		271						—		—
Adjusted pre-tax income/Adjusted after-tax income attributable to AIG common shareholders	$	725	$	148	$	(61)	$	509	$	1,126	$	212	$	(70)	$	837
Weighted average diluted shares outstanding								771.1								864.0
Income per common share attributable to AIG common shareholders (diluted)							$	3.50							$	1.92
Adjusted after-tax income per common share attributable to AIG common shareholders (diluted)							$	0.66							$	0.97


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ITEM 2 | Consolidated Results of Operations



Nine Months Ended September 30,	2022								2021
(in millions, except per common share data)		Pre-tax		Total Tax (Benefit) Charge		Non- controlling Interests(d)		After Tax		Pre-tax		Total Tax (Benefit) Charge		Non- controlling Interests(d)		After Tax
Pre-tax income/net income, including noncontrolling interests	$	14,003	$	2,913	$	—	$	11,089	$	7,051	$	1,234	$	—	$	5,817
Noncontrolling interests						(1,084)		(1,084)						(175)		(175)
Pre-tax income/net income attributable to AIG	$	14,003	$	2,913	$	(1,084)	$	10,005	$	7,051	$	1,234	$	(175)	$	5,642
Dividends on preferred stock								22								22
Net income attributable to AIG common shareholders							$	9,983							$	5,620
Changes in uncertain tax positions and other tax adjustments(a)				90		—		(90)				901		—		(901)
Deferred income tax valuation allowance (releases) charges(b)				15		—		(15)				(706)		—		706
Changes in fair value of securities used to hedge guaranteed living benefits		(29)		(6)		—		(23)		(61)		(12)		—		(49)
Changes in benefit reserves and DAC, VOBA and DSI related to net realized gains (losses)		429		90		—		339		74		15		—		59
Changes in the fair value of equity securities		41		9		—		32		36		5		—		31
Loss on extinguishment of debt		299		63		—		236		149		31		—		118
Net investment income on Fortitude Re funds withheld assets		(634)		(133)		—		(501)		(1,488)		(312)		—		(1,176)
Net realized (gains) losses on Fortitude Re funds withheld assets		312		65		—		247		(536)		(113)		—		(423)
Net realized gains on Fortitude Re funds withheld embedded derivative		(7,851)		(1,649)		—		(6,202)		(117)		(24)		—		(93)
Net realized gains(c)		(3,257)		(734)		—		(2,523)		(1,220)		(260)		—		(960)
Loss from discontinued operations								1								—
Net gain on divestitures		(45)		(9)		—		(36)		(108)		(23)		—		(85)
Non-operating litigation reserves and settlements		(41)		(9)		—		(32)		3		—		—		3
Favorable prior year development and related amortization changes ceded under retroactive reinsurance agreements		(206)		(43)		—		(163)		(199)		(41)		—		(158)
Net loss reserve discount charge		4		1		—		3		62		13		—		49
Pension expense related to a one-time lump sum payment to former employees		—		—		—		—		27		6		—		21
Integration and transaction costs associated with acquiring or divesting businesses		136		29		—		107		55		12		—		43
Restructuring and other costs		415		85		—		330		304		64		—		240
Non-recurring costs related to regulatory or accounting changes		22		5		—		17		58		12		—		46
Noncontrolling interests(d)						852		852						—		—
Adjusted pre-tax income/Adjusted after-tax income attributable to AIG common shareholders	$	3,598	$	782	$	(232)	$	2,562	$	4,090	$	802	$	(175)	$	3,091
Weighted average diluted shares outstanding								799.1								871.0
Income per common share attributable to AIG common shareholders (diluted)							$	12.49							$	6.45
Adjusted after-tax income per common share attributable to AIG common shareholders (diluted)							$	3.21							$	3.55

(a)Nine months ended September 30, 2021 includes the completion of audit activity by the Internal Revenue Service (IRS).

(b)Nine months ended September 30, 2021 includes an increase in the valuation allowance against a portion of certain tax attribute carryforwards of AIG's U.S. federal consolidated income tax group, as well as net valuation allowance release in certain foreign jurisdictions.

(c)Includes all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication and net realized gains and losses on Fortitude Re funds withheld assets.

(d)Includes the portion of equity interest of Corebridge that AIG does not own and realized non-operating gains on consolidated investment entities.

PRE-TAX INCOME (LOSS) QUARTERLY AND YEAR-TO-DATE COMPARISON FOR 2022 AND 2021

Pre-tax income was $3.8 billion in the three-month period ended September 30, 2022 compared to $2.2 billion in the same period in 2021.

Pre-tax income was $14.0 billion in the nine-month period ended September 30, 2022 compared to $7.1 billion in the same period in 2021.

For the main drivers impacting AIG’s results of operations, see Executive Summary – Financial Performance Summary – Net Income (Loss) Attributable to AIG Common Shareholders.


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ITEM 2 | Consolidated Results of Operations

U.S. TAX LAW CHANGES

INTERIM TAX CALCULATION METHOD

INCOME TAX EXPENSE ANALYSIS

For the three-month period ended September 30, 2022, the effective tax rate on income from continuing operations was 21.0 percent. While the effective tax rate on income from continuing operations does not differ from the statutory tax rate of 21 percent tax benefits associated with tax exempt income and reclassifications from AOCI to income from continuing operations related to the disposal of available for sale securities, offset by tax charges associated with the effect of foreign operations, state and local income taxes, and non-deductible transfer pricing charges. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.


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ITEM 2 | Business Segment Operations

Business Segment Operations

Our business operations consist of General Insurance, Life and Retirement, and Other Operations.

General Insurance consists of two operating segments: North America and International. Life and Retirement consists of four operating segments: Individual Retirement, Group Retirement, Life Insurance and Institutional Markets. Other Operations is primarily comprised of corporate, our institutional asset management business and consolidation and eliminations.

On October 26, 2020, AIG announced its intention to separate its Life and Retirement business from AIG. For additional information on the separation of Life and Retirement, see Note 1 to the Condensed Consolidated Financial Statements.

The following table summarizes Adjusted pre-tax income (loss) from our business segment operations. See also Note 3 to the Condensed Consolidated Financial Statements.


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(in millions)		2022		2021		2022		2021
General Insurance
North America - Underwriting income (loss)	$	(439)	$	(166)	$	223	$	(199)
International - Underwriting income		607		186		1,190		755
Net investment income		582		791		1,805		2,294
General Insurance		750		811		3,218		2,850
Life and Retirement
Individual Retirement		200		292		788		1,441
Group Retirement		183		316		572		970
Life Insurance		123		134		231		114
Institutional Markets		83		135		285		417
Life and Retirement		589		877		1,876		2,942
Other Operations
Other Operations before consolidation and eliminations		(467)		(370)		(1,086)		(1,240)
Consolidation and eliminations		(147)		(192)		(410)		(462)
Other Operations		(614)		(562)		(1,496)		(1,702)
Adjusted pre-tax income	$	725	$	1,126	$	3,598	$	4,090


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ITEM 2 | Business Segment Operations | General Insurance


General Insurance
General Insurance is managed by our geographic markets of North America and International. Our global presence is underpinned by our multinational capabilities to provide our Commercial Lines and Personal Insurance products within these geographic markets.
PRODUCTS AND DISTRIBUTION


North America consists of insurance businesses in the United States, Canada and Bermuda, and our global reinsurance business, AIG Re.			International consists of regional insurance businesses in Japan, the United Kingdom, Europe, Middle East and Africa (EMEA region), Asia Pacific, Latin America and Caribbean, and China. International also includes the results of Talbot Holdings, Ltd. as well as AIG’s Global Specialty business.

Property: Products include commercial and industrial property, including business interruption, as well as package insurance products and services that cover exposures to man-made and natural disasters.

Liability: Products include general liability, environmental, commercial automobile liability, workers’ compensation, excess casualty and crisis management insurance products. Casualty also includes risk-sharing and other customized structured programs for large corporate and multinational customers.

Financial Lines: Products include professional liability insurance for a range of businesses and risks, including directors and officers, mergers and acquisitions, fidelity, employment practices, fiduciary liability, cyber risk, kidnap and ransom, and errors and omissions insurance.

Specialty: Products include marine, energy-related property insurance products, aviation, political risk, trade credit, trade finance and portfolio solutions, as well as our global reinsurance business AIG Re and Crop Risk Services which includes multi-peril and hail coverages.

Accident & Health: Products include voluntary and sponsor-paid personal accident and supplemental health products for individuals, employees, associations and other organizations, as well as a broad range of travel insurance products and services for leisure and business travelers.

Personal Lines: Products include personal auto and personal property in selected markets, comprehensive extended warranty, device protection insurance, home warranty and related services, and insurance for high net-worth individuals offered through AIG’s Private Client Group (PCG) in the U.S. that covers auto, homeowners, umbrella, yacht, fine art and collections.

General Insurance products in North America and International markets are distributed through various channels, including captive and independent agents, brokers, affinity partners, airlines and travel agents, and retailers. Our global platform enables writing multinational and cross-border risks in both Commercial Lines and Personal Insurance.


BUSINESS STRATEGY

Profitable Growth: Build on our high-quality portfolio by focusing on targeted growth through continued underwriting discipline, improved retentions and new business development. Deploy capital efficiently to act opportunistically and achieve growth in profitable lines, geographies and customer segments, while taking a disciplined underwriting approach to exposure management, terms and conditions and rate change to achieve our risk/return hurdles. Continue to be open to inorganic growth opportunities in profitable markets and segments to expand our capabilities and footprint.


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ITEM 2 | Business Segment Operations | General Insurance

Reinsurance Optimization: Strategically partner with reinsurers to effectively manage exposure to losses arising from frequency of large catastrophic events and severity from individual risk losses. We strive to optimize our reinsurance program to manage volatility and protect the balance sheet from tail events and unpredictable net losses in support of our profitable growth objectives.

Underwriting Excellence: Continue to enhance portfolio optimization through strength of underwriting framework and guidelines as well as clear communication of risk appetite and rate adequacy. Empower and increase accountability of the underwriter and continue to integrate underwriting, claims and actuarial to enable better decision making. Focus on enhancing risk selection, driving consistent underwriting best practices and building robust monitoring standards to improve underwriting results.


COMPETITION AND CHALLENGES

General Insurance operates in a highly competitive industry against global, national and local insurers and reinsurers and underwriting syndicates in specific market areas and product types. Insurance companies compete through a combination of risk acceptance criteria, product pricing, service levels and terms and conditions. We serve our business and individual customers on a global basis – from the largest multinational corporations to local businesses and individuals. General Insurance seeks to differentiate itself in the markets where we participate by providing leading expertise and insight to clients, distribution partners and other stakeholders, delivering underwriting excellence and value-driven insurance solutions and providing high quality, tailored end-to-end support to stakeholders. In doing so, we leverage our world-class global franchise, multinational capabilities, balance sheet strength and financial flexibility.

Our challenges include:

•ensuring adequate business pricing given passage of time to reporting and settlement for insurance business, particularly with respect to long-tail Commercial Lines exposures;

•impact of social and economic inflation on claim frequency and severity; and

•volatility in claims arising from natural and man-made catastrophes and other aggregations of risk exposure.


OUTLOOK – INDUSTRY AND ECONOMIC FACTORS

Below is a discussion of the industry and economic factors impacting our operating segments:

The results of General Insurance for the nine months ended September 30, 2022 reflect continued strong performance from our Commercial Lines portfolio and focused execution on our portfolio management strategies within Personal Insurance. Across our North America and International Commercial Lines of business we have seen increased demand for our insurance products with continued positive rate change and improvement in terms and conditions. We continue to monitor inflationary impacts resulting from government stimulus in recent years, ongoing labor force and supply chain disruptions and rising commodity prices, among other factors, on rate adequacy and loss cost trends. Similarly, we are monitoring the responsive monetary policy actions taken or anticipated to be taken by central banks, to curb inflation and the corresponding impact on market interest rates.


General Insurance – North America

North America Commercial remains in a firm market amidst a backdrop of increasing claims severity due to elevated economic and social inflation, as well as a higher frequency and severity of natural catastrophe losses over recent years (which we believe to be in part connected to climate change). While market discipline continues to support price increases across most lines, we are seeing capacity move back into the market in certain segments given the improved pricing levels which is putting pressure on rates. We have focused on retaining our best accounts which has led to improving retention across the portfolio. These retention rates are often coupled with an exposure limit management strategy to reduce volatility within the portfolio. We continue to proactively identify segment growth areas as market conditions warrant through effective portfolio management, while non-renewing unprofitable business.

Personal Insurance growth prospects are supported by the need for full life cycle products and coverage, increases in personal wealth accumulation, and awareness of insurance protection and risk management. We compete in the high net worth market, accident and health insurance, travel insurance, and warranty services and will continue to expand our innovative products and services to distribution partners and clients.


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ITEM 2 | Business Segment Operations | General Insurance


General Insurance – International

We are continuing to pursue growth in our most profitable lines of business and diversify our portfolio across all regions by expanding key business lines (i.e. Financial Lines and Accident & Health) while remaining a market leader in key developed and developing markets. Overall, Commercial Lines continue to show positive rate change, particularly in our Financial Lines, Property, Energy and Marine portfolios and across international markets where market events or withdrawal of capability and capacity have favorably impacted pricing. We are maintaining our underwriting discipline, reducing gross and net limits where appropriate, utilizing reinsurance to reduce volatility, as well as continuing our risk selection strategy to improve profitability.

Personal Insurance focuses on individual customers, as well as group and corporate clients. Although market competition within Personal Insurance has increased, we continue to benefit from the underwriting quality and portfolio diversity.


GENERAL INSURANCE RESULTS


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)		2022		2021	Change			2022		2021	Change
Underwriting results:
Net premiums written	$	6,403	$	6,590	(3)	%	$	19,902	$	19,929	—	%
(Increase) decrease in unearned premiums		4		(167)	NM			(853)		(1,425)	40
Net premiums earned		6,407		6,423	—			19,049		18,504	3
Losses and loss adjustment expenses incurred(a)		4,326		4,392	(2)			11,726		12,050	(3)
Acquisition expenses:
Amortization of deferred policy acquisition costs		909		892	2			2,662		2,619	2
Other acquisition expenses		260		380	(32)			992		1,026	(3)
Total acquisition expenses		1,169		1,272	(8)			3,654		3,645	—
General operating expenses		744		739	1			2,256		2,253	—
Underwriting income		168		20	NM			1,413		556	154
Net investment income		582		791	(26)			1,805		2,294	(21)
Adjusted pre-tax income	$	750	$	811	(8)	%	$	3,218	$	2,850	13	%
Loss ratio(a)		67.5		68.4	(0.9)			61.6		65.1	(3.5)
Acquisition ratio		18.2		19.8	(1.6)			19.2		19.7	(0.5)
General operating expense ratio		11.6		11.5	0.1			11.8		12.2	(0.4)
Expense ratio		29.8		31.3	(1.5)			31.0		31.9	(0.9)
Combined ratio(a)		97.3		99.7	(2.4)			92.6		97.0	(4.4)
Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:
Catastrophe losses and reinstatement premiums		(9.8)		(9.7)	(0.1)			(5.5)		(6.4)	0.9
Prior year development, net of reinsurance and prior year premiums		0.9		0.5	0.4			1.7		0.7	1.0
Accident year loss ratio, as adjusted		58.6		59.2	(0.6)			57.8		59.4	(1.6)
Accident year combined ratio, as adjusted		88.4		90.5	(2.1)			88.8		91.3	(2.5)

(a)Consistent with our definition of APTI, excludes net loss reserve discount and the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain.


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The following table presents General Insurance net premiums written by operating segment, showing change on both reported and constant dollar basis:


	Three Months Ended September 30,				Percentage Change in				Nine Months Ended September 30,				Percentage Change in
(in millions)		2022		2021	U.S. dollars		Original Currency			2022		2021	U.S. dollars		Original Currency
North America	$	3,138	$	3,005	4	%	5	%	$	9,690	$	9,091	7	%	7	%
International		3,265		3,585	(9)		2			10,212		10,838	(6)		2
Total net premiums written	$	6,403	$	6,590	(3)	%	3	%	$	19,902	$	19,929	—	%	4	%

The following tables present General Insurance accident year catastrophes(a) by geography and number of events:


(in millions)	# of Events		North America		International		Total
Three Months Ended September 30, 2022
Flooding, rainstorms and other	3	$	18	$	—	$	18
Windstorms and hailstorms	13		486		97		583
Winter storms	2		—		—		—

Earthquakes	1		—		(1)		(1)

Russia / Ukraine	N/A	(b)	—		—		—
Reinstatement premiums			52		3		55
Total catastrophe-related charges	19	$	556	$	99	$	655
Three Months Ended September 30, 2021
Flooding, rainstorms and other	5	$	95	$	122	$	217
Windstorms and hailstorms	7		376		46		422
Winter storms	3		(61)		(15)		(76)
Wildfires	2		35		—		35
Earthquakes	—		—		—		—

Civil unrest	1		5		25		30
Reinstatement premiums			(11)		1		(10)
Total catastrophe-related charges	18	$	439	$	179	$	618
Nine Months Ended September 30, 2022
Flooding, rainstorms and other	3	$	53	$	107	$	160
Windstorms and hailstorms	13		552		147		699
Winter storms	2		10		18		28

Earthquakes	1		—		21		21

Russia / Ukraine	N/A	(b)	—		85		85
Reinstatement premiums			53		18		71
Total catastrophe-related charges	19	$	668	$	396	$	1,064
Nine Months Ended September 30, 2021
Flooding, rainstorms and other	5	$	95	$	132	$	227
Windstorms and hailstorms	7		458		46		504
Winter storms	3		288		65		353
Wildfires	2		35		—		35
Earthquakes	1		—		19		19

Civil unrest	1		5		25		30
Reinstatement premiums			7		15		22
Total catastrophe-related charges	19	$	888	$	302	$	1,190

(a)Natural catastrophe losses are generally weather or seismic events, in each case, having a net impact on AIG in excess of $10 million and man-made catastrophe losses, such as terrorism and civil unrest that exceed the $10 million threshold.

(b)As the Russia/Ukraine conflict continues to evolve the number of events is yet to be determined.


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NORTH AMERICA RESULTS


	Three Months Ended September 30,							Nine Months Ended September 30,
(in millions)		2022		2021	Change			2022		2021	Change
Underwriting results:
Net premiums written	$	3,138	$	3,005	4	%	$	9,690	$	9,091	7	%
(Increase) decrease in unearned premiums		2		(98)	NM			(789)		(1,111)	29
Net premiums earned		3,140		2,907	8			8,901		7,980	12
Losses and loss adjustment expenses incurred(a)		2,757		2,308	19			6,214		6,020	3
Acquisition expenses:
Amortization of deferred policy acquisition costs		434		347	25			1,176		963	22
Other acquisition expenses		74		136	(46)			371		343	8
Total acquisition expenses		508		483	5			1,547		1,306	18
General operating expenses		314		282	11			917		853	8
Underwriting income (loss)	$	(439)	$	(166)	(164)	%	$	223	$	(199)	NM	%
Loss ratio(a)		87.8		79.4	8.4			69.8		75.4	(5.6)
Acquisition ratio		16.2		16.6	(0.4)			17.4		16.4	1.0
General operating expense ratio		10.0		9.7	0.3			10.3		10.7	(0.4)
Expense ratio		26.2		26.3	(0.1)			27.7		27.1	0.6
Combined ratio(a)		114.0		105.7	8.3			97.5		102.5	(5.0)
Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:
Catastrophe losses and reinstatement premiums		(17.2)		(15.2)	(2.0)			(7.3)		(11.1)	3.8
Prior year development, net of reinsurance and prior year premiums		(8.6)		1.0	(9.6)			(0.7)		1.7	(2.4)
Accident year loss ratio, as adjusted		62.0		65.2	(3.2)			61.8		66.0	(4.2)
Accident year combined ratio, as adjusted		88.2		91.5	(3.3)			89.5		93.1	(3.6)

Business and Financial Highlights


North America Net Premiums Written Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Net premiums written increased by $133 million primarily due to growth in Commercial Lines ($181 million), particularly in Property, AIG Re and Casualty, driven by continued positive rate change, higher renewal retentions and strong new business production, as well as growth in Crop Risk Services driven by higher commodity prices, partially offset by a decrease in Financial Lines due to volatility in capital markets and uncertain economic conditions.

			This increase was partially offset by lower production in Personal Insurance ($48 million), particularly in Warranty as well as underwriting actions taken in PCG to improve profitability, partially offset by an increase in Travel.


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North America Net Premiums Written Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Net premiums written increased by $599 million primarily due to growth in Commercial Lines ($609 million), particularly in Property, AIG Re and Casualty, driven by continued positive rate change, higher renewal retentions and strong new business production, as well as growth in Crop Risk Services driven by higher commodity prices, partially offset by a decrease in Financial Lines due to volatility in capital markets and uncertain economic conditions.

			This increase was partially offset by lower production in Personal Insurance ($10 million), particularly in Warranty as well as underwriting actions taken in PCG to improve profitability, partially offset by an increase in Travel.


North America Underwriting Income (Loss) Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Underwriting loss increased by $273 million primarily due to:
			•net unfavorable prior year reserve development in 2022 compared to net favorable development in 2021 (9.6 points or $306 million), primarily due to lower favorable development within PCG and higher unfavorable development in Financial Lines, partially offset by higher favorable development in Property and Crop Risk Services; and
			•higher catastrophe losses (2.0 points or $117 million).

			This higher underwriting loss was partially offset by:

			•premium growth with improvement in the accident year loss ratio, as adjusted (3.2 points) primarily driven by changes in business mix along with continued positive rate change, focused risk selection and improved terms and conditions; and
			•lower expense ratio of (0.1) points reflecting a lower acquisition ratio (0.4 points) primarily driven by changes in business mix, partially offset by a higher general operating expense ratio (0.3 points).


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North America Underwriting Income (Loss) Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Underwriting income of $223 million in 2022 compared to an underwriting loss of $199 million in 2021 primarily reflected:

			•premium growth with improvement in the accident year loss ratio, as adjusted (4.2 points) primarily driven by changes in business mix along with continued positive rate change, focused risk selection and improved terms and conditions; and
			•lower catastrophe losses (3.8 points or $220 million).

			This improvement was partially offset by:

			•net unfavorable prior year reserve development in 2022 compared to net favorable prior year reserve development in 2021 (2.4 points or $221 million), primarily due to lower favorable development in PCG and higher unfavorable development within Financial Lines, partially offset by higher favorable development in Casualty, Property and Crop Risk Services; and
			•higher expense ratio of 0.6 points reflecting a higher acquisition ratio (1.0 points) primarily driven by changes in business mix and reinsurance, partially offset by a lower general operating expense ratio (0.4 points) resulting from continued general expense discipline as we grow the portfolio.


North America Combined Ratios Three Months Ended September 30,


			Quarterly 2022 and 2021 Comparison
			The increase in the calendar year combined ratio of 8.3 points reflected an increase in loss ratio (8.4 points), partially offset by a slight decrease in expense ratio (0.1 points).

			The increase in the loss ratio of 8.4 points reflected:

			•net unfavorable prior year reserve development in 2022 compared to net favorable development in 2021 (9.6 points), primarily due to lower favorable development within PCG and higher unfavorable development in Financial Lines, partially offset by higher favorable development in Property and Crop Risk Services; and
			•higher catastrophe losses (2.0 points); partially offset by
			•premium growth with improvement in the accident year loss ratio, as adjusted (3.2 points) primarily driven by changes in business mix along with continued positive rate change, focused risk selection and improved terms and conditions.

			The decrease in the expense ratio of 0.1 points, reflected a lower acquisition ratio (0.4 points) primarily driven by changes in business mix, partially offset by higher general operating expense ratio (0.3 points).


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North America Combined Ratios Nine Months Ended September 30,


			Year-to-Date 2022 and 2021 Comparison
			The decrease in the calendar year combined ratio of 5.0 points reflected a decrease in loss ratio (5.6 points) partially offset by an increase in expense ratio (0.6 points).

			The decrease in the loss ratio of 5.6 points reflected:

			•premium growth with improvement in the accident year loss ratio, as adjusted (4.2 points) primarily driven by changes in business mix along with continued positive rate change, focused risk selection and improved terms and conditions; and
			•lower catastrophe losses (3.8 points); partially offset by
			•net unfavorable prior year reserve development in 2022 compared to net favorable development in 2021 (2.4 points), primarily due to lower favorable development in PCG and higher unfavorable development within Financial Lines, partially offset by higher favorable development in Casualty, Property and Crop Risk Services.

			The increase in the expense ratio of 0.6 points reflected a higher acquisition ratio (1.0 points) primarily driven by changes in business mix and reinsurance, partially offset by a lower general operating expense ratio (0.4 points) resulting from continued general expense discipline as we grow the portfolio.

INTERNATIONAL RESULTS


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)		2022		2021	Change			2022		2021	Change
Underwriting results:
Net premiums written	$	3,265	$	3,585	(9)	%	$	10,212	$	10,838	(6)	%
(Increase) decrease in unearned premiums		2		(69)	NM			(64)		(314)	80
Net premiums earned		3,267		3,516	(7)			10,148		10,524	(4)
Losses and loss adjustment expenses incurred		1,569		2,084	(25)			5,512		6,030	(9)
Acquisition expenses:
Amortization of deferred policy acquisition costs		475		545	(13)			1,486		1,656	(10)
Other acquisition expenses		186		244	(24)			621		683	(9)
Total acquisition expenses		661		789	(16)			2,107		2,339	(10)
General operating expenses		430		457	(6)			1,339		1,400	(4)
Underwriting income	$	607	$	186	226	%	$	1,190	$	755	58	%
Loss ratio		48.0		59.3	(11.3)			54.3		57.3	(3.0)
Acquisition ratio		20.2		22.4	(2.2)			20.8		22.2	(1.4)
General operating expense ratio		13.2		13.0	0.2			13.2		13.3	(0.1)
Expense ratio		33.4		35.4	(2.0)			34.0		35.5	(1.5)
Combined ratio		81.4		94.7	(13.3)			88.3		92.8	(4.5)
Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:
Catastrophe losses and reinstatement premiums		(3.0)		(5.1)	2.1			(3.8)		(2.8)	(1.0)
Prior year development, net of reinsurance and prior year premiums		10.2		—	10.2			3.7		(0.1)	3.8
Accident year loss ratio, as adjusted		55.2		54.2	1.0			54.2		54.4	(0.2)
Accident year combined ratio, as adjusted		88.6		89.6	(1.0)			88.2		89.9	(1.7)


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Business and Financial Highlights


International Net Premiums Written Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Net premiums written, excluding the unfavorable impact of foreign exchange ($393 million), increased by $73 million due to growth in Commercial Lines ($95 million), notably Specialty and Property, driven by continued positive rate change and strong new business production.

			This increase was partially offset by lower production in Personal Insurance ($22 million), where a decline in Warranty was partially offset by growth in Travel and Accident & Health.


International Net Premiums Written Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Net premiums written, excluding the impact of unfavorable foreign exchange ($864 million), increased by $238 million due to growth in Commercial Lines ($385 million), notably Specialty, Property and Financial Lines driven by continued positive rate change and strong new business production.

			This increase was partially offset by lower production in Personal Insurance ($147 million), where declines in Warranty and Personal Auto were partially offset by growth in Accident & Health and Travel.


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International Underwriting Income (Loss) Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Underwriting income increased by $421 million primarily due to:

			•net favorable prior year reserve development in 2022 (10.2 points or $334 million), primarily as a result of lower unfavorable development in Financial Lines and higher favorable development in Specialty and Property;
			•lower catastrophe losses (2.1 points or $(80) million); and
			•a lower expense ratio (2.0 points), including a lower acquisition ratio (2.2 points) primarily driven by changes in business mix and improved commission terms, partially offset by a slight increase in the general operating expense ratio (0.2 points).

			This increase was partially offset by a higher accident year loss ratio, as adjusted (1.0 points) primarily driven by Accident & Health, partially offset by benefit from continued positive rate change, focused risk selection and improved terms and conditions.


International Underwriting Income (Loss) Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Underwriting income increased by $435 million primarily due to:

			•net favorable prior year reserve development in 2022 compared to net adverse prior year reserve development in 2021 (3.8 points or $390 million), primarily as a result of lower unfavorable development in Financial Lines and higher favorable development in Specialty and Property;
			•a lower expense ratio (1.5 points), including a lower acquisition ratio (1.4 points) primarily driven by changes in business mix, improved commission terms and reinsurance program changes, as well as a lower general operating expense ratio (0.1 points), which reflects continued general expense discipline; and
			•improvement in the accident year loss ratio, as adjusted (0.2 points) primarily driven by changes in business mix along with continued positive rate change, focused risk selection and improved terms and conditions.

			These increases were partially offset by higher catastrophe losses (1.0 points or $94 million).


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International Combined Ratios Three Months Ended September 30,


			Quarterly 2022 and 2021 Comparison
			The decrease in the calendar year combined ratio of 13.3 points reflected a decrease in both the loss ratio (11.3 points) and the expense ratio (2.0 points).

			The decrease in the loss ratio of 11.3 points reflected:

			•net favorable prior year reserve development in 2022 (10.2 points), primarily as a result of lower unfavorable development in Financial Lines and higher favorable development in Specialty and Property; and
			•lower catastrophe losses (2.1 points); partially offset by
			•higher accident year loss ratio, as adjusted (1.0 points) primarily driven by Accident & Health, partially offset by benefit from continued positive rate change, focused risk selection and improved terms and conditions.

			The decrease in the expense ratio of 2.0 points reflected a lower acquisition ratio (2.2 points) primarily driven by changes in business mix and improved commission terms, partially offset by a higher general operating expense ratio (0.2 points).


International Combined Ratios Nine Months Ended September 30,


			Year-to-Date 2022 and 2021 Comparison
			The decrease in the calendar year combined ratio of 4.5 points reflected a decrease in both the loss ratio (3.0 points) and the expense ratio (1.5 points).

			The decrease in the loss ratio of 3.0 points reflected:

			•net favorable prior year reserve development in 2022 compared to net unfavorable prior year reserve development in 2021 (3.8 points), primarily as a result of lower unfavorable development in Financial Lines and higher favorable development in Specialty and Property; and
			•improvement in the accident year loss ratio, as adjusted (0.2 points) primarily driven by changes in business mix along with continued positive rate change, focused risk selection and improved terms and conditions; partially offset by
			•higher catastrophe losses (1.0 points).

			The decrease in the expense ratio of 1.5 points reflected:

			•lower acquisition ratio (1.4 points) primarily driven by changes in business mix, improved commission terms and reinsurance program changes; and
			•lower general operating expense ratio (0.1 points), which reflects continued general expense discipline.


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Life and Retirement
Life and Retirement consists of four operating segments: Individual Retirement, Group Retirement, Life Insurance and Institutional Markets. We offer a broad portfolio of products in the U.S. through a multichannel distribution network and life and health products in the UK and Ireland.
PRODUCTS AND DISTRIBUTION


			Variable Annuities: Products include variable annuities that offer a combination of growth potential, death benefit features and income protection features. Variable annuities are distributed primarily through banks, wirehouses, and regional and independent broker-dealers.
			Fixed Index Annuities: Products include fixed index annuities that provide growth potential based in part on the performance of a market index as well as optional living guaranteed features that provide lifetime income protection. Fixed index annuities are distributed primarily through banks, broker-dealers, independent marketing organizations and independent insurance agents.
			Fixed Annuities: Products include single premium fixed annuities, immediate annuities and deferred income annuities. Certain fixed deferred annuity products offer optional income protection features. The fixed annuities product line maintains an industry-leading position in the U.S. bank distribution channel by designing products collaboratively with banks and offering an efficient and flexible administration platform.
			Retail Mutual Funds: Included our mutual fund offerings and related administration and servicing operations. Retail Mutual Funds were distributed primarily through broker-dealers. On July 16, 2021, the Company sold certain assets of the AIG Retail Mutual Funds business.


			Group Retirement: Products and services consist of record-keeping, plan administrative and compliance services, financial planning and advisory solutions offered to employer defined contribution plans and their participants, along with proprietary and non-proprietary annuities and advisory and brokerage products offered outside of plans.
			AIG Retirement Services offers its products and services through The Variable Annuity Life Insurance Company and its subsidiaries, VALIC Financial Advisors, Inc. and VALIC Retirement Services Company.
			AIG Retirement Services career financial advisors serve individual clients, including in-plan enrollment support and education, and comprehensive financial planning services.


			Life Insurance: In the U.S., products primarily include term life and universal life insurance distributed through independent marketing organizations, independent insurance agents, financial advisors and direct marketing. International operations primarily include the distribution of life and health products in the UK and Ireland.


			Institutional Markets: Products primarily include stable value wrap products, structured settlement and pension risk transfer annuities (direct and assumed reinsurance), corporate- and bank-owned life insurance, high net worth products and guaranteed investment contracts (GICs). Institutional Markets products are primarily distributed through specialized marketing and consulting firms and structured settlement brokers.

FHLB Funding Agreements Funding agreements are issued by our U.S. Life and Retirement companies to FHLBs in their respective districts at fixed or floating rates over specified periods, which can be prepaid at our discretion. Proceeds are generally invested in fixed income securities and other suitable investments to generate spread income. These investment contracts do not have mortality or morbidity risk and are similar to GICs.


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BUSINESS STRATEGY

Deliver client-centric solutions through our unique franchise by bringing together a broad portfolio of life insurance, retirement and institutional products offered through an extensive, multichannel distribution network. Life and Retirement focuses on ease of doing business, offering valuable solutions, and expanding and deepening its distribution relationships across multiple channels.

Position market leading businesses to serve growing needs by continually enhancing product solutions, service delivery and digital capabilities while using data and analytics in an innovative manner to improve customer experience.

Individual Retirement will continue to capitalize on the opportunity to meet consumer demand for guaranteed income by maintaining innovative variable and fixed index annuity products, while also managing risk from guarantee features through risk-mitigating product design and well-developed economic hedging capabilities.

Our fixed annuity products provide diversity in our annuity product suite by offering stable returns for retirement savings.

Group Retirement continues to enhance its technology platform to improve the customer experience for plan sponsors and individual participants. AIG Retirement Services’ self-service tools paired with its career financial advisors provide a compelling service platform. Group Retirement’s strategy also involves providing financial planning services for its clients and meeting their need for income in retirement. In this advisory role, Group Retirement’s clients may invest in assets in which AIG or a third-party is custodian.

Life Insurance in the U.S. will continue to position itself for growth and changing market dynamics while continuing to execute strategies to enhance returns. Our focus is on materializing success from a multi-year effort of building state-of-the-art platforms and underwriting innovations, which are expected to bring process improvements and cost efficiencies.

In the UK, AIG Life Insurance will continue to focus on growing the business organically and through potential acquisition opportunities.

Institutional Markets continues to grow its assets under management across multiple product lines, including stable value wrap, GICs and pension risk transfer annuities. Our growth strategy is transactional and allows us to pursue select transactions that meet our risk-adjusted return requirements.

Enhance Operational Effectiveness by simplifying processes and operating environments to increase competitiveness, improve service and product capabilities and facilitate delivery of our target customer experience. We continue to invest in technology to improve operating efficiency and ease of doing business for our distribution partners and customers. We believe that simplifying our operating models will enhance productivity and support further profitable growth.

Manage our Balance Sheet through a rigorous approach to our products and portfolio. We match our product design and high-quality investments with our asset and liability exposures to support our cash and liquidity needs under various operating scenarios.

Deliver Value Creation and Manage Capital by striving to deliver solid earnings and returns on capital through disciplined pricing, sustainable underwriting improvements, expense efficiency, and diversification of risk, while optimizing capital allocation and efficiency within insurance entities to enhance return on common equity.


COMPETITION AND CHALLENGES

Life and Retirement operates in the highly competitive insurance and financial services industry in the U.S. and select international markets, competing against various financial services companies, including banks and other life insurance and mutual fund companies. Competition is primarily based on product pricing and design, distribution, financial strength, customer service and ease of doing business.

Our business remains competitive due to its long-standing market leading positions, innovative products, distribution relationships across multiple channels, customer- focused service and strong financial ratings.


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Our primary challenges include:

•Managing a rising rate environment. While a rising rate environment improves yields on new investment, improves margins on our business, and increases sales in certain products such as fixed annuities, it may also result in increased competition for certain products resulting in a need to increase crediting rates, and has resulted in lower separate account asset values for investments in fixed income which has reduced fee income;

•increased competition in our primary markets, including aggressive pricing of annuities by competitors, increased competition and consolidation of employer groups in the group retirement planning market, and competitors with different profitability targets in the pension risk transfer space as well as other product lines;

•increasingly complex new and proposed regulatory requirements, which have affected industry growth and costs; and

•upgrading our technology and underwriting processes while managing general operating expenses.


OUTLOOK–INDUSTRY AND ECONOMIC FACTORS

Below is a discussion of the industry and economic factors impacting our specific operating segments:

The worldwide health and economic impact of COVID-19 continues to evolve, influenced by the scope, severity and duration of the pandemic, including resurgences and variants of the virus as well as the distribution and effectiveness of vaccinations.

On October 26, 2020, AIG announced its intention to separate its Life and Retirement business from AIG. On November 2, 2021, AIG and Blackstone completed the acquisition by Blackstone of a 9.9 percent equity stake in Corebridge, which is the holding company for AIG’s Life and Retirement business. On September 19, 2022, Corebridge completed the IPO in which AIG sold 80 million shares of Corebridge common stock to the public. Following the IPO, AIG owns 77.7 percent of the outstanding common stock of Corebridge. On November 1, 2021, Corebridge declared a dividend payable to AIG Parent in the amount of $8.3 billion. In connection with such dividend, Corebridge issued a promissory note to AIG Parent in the amount of $8.3 billion. This promissory note was repaid to AIG Parent prior to the completion of the IPO of Corebridge.

On December 15, 2021, AIG and BREIT, a long-term, perpetual capital vehicle affiliated with Blackstone, completed the acquisition by BREIT of AIG’s interests in a U.S. affordable housing portfolio. The historical results of the U.S. affordable housing portfolio were reported in our Life and Retirement operating segments.

For additional information on the separation of Life and Retirement please see Note 1 to the Condensed Consolidated Financial Statements and the 2021 Annual Report, Part I, Item 1A. Risk Factors – Business and Operations – “No assurances can be given that the separation of our Life and Retirement business will occur or as to the specific terms or timing thereof. In addition, the separation could cause the emergence or exacerbate the effects of other risks to which AIG is exposed.”

Individual Retirement

Increasing life expectancy and reduced expectations for traditional retirement income from defined benefit programs and fixed income securities are leading Americans to seek additional financial security as they approach retirement. The strong demand for fixed index and fixed annuities with guaranteed living benefit features has attracted increased competition in this product space. In response to the low interest rate environment that prevailed over the past several years we have developed guaranteed living benefits for variable, fixed index and fixed annuities with margins that are less sensitive to the level of interest rates.

Changes in the capital markets (interest rate environment, credit spreads, equity markets, volatility) can have a significant impact on sales, surrender rates, investment returns, guaranteed income features, and net investment spreads in the annuity industry.

Group Retirement

Group Retirement competes in the defined contribution market under the AIG Retirement Services brand. AIG Retirement Services is a leading retirement plan provider in the U.S. for K-12 schools and school districts, higher education, healthcare, government and other not-for-profit institutions. The defined contribution market is a highly efficient and competitive market that requires support for both plan sponsors and individual participants. To meet this challenge, AIG Retirement Services is investing in a client- focused technology platform to support improved compliance and self-service functionality. AIG Retirement Services’ model pairs self-service tools with its career financial advisors who provide individual plan participants with enrollment support and comprehensive financial planning services.

Changes in the interest rates, credit spreads and equity market environment can have a significant impact on investment returns, fee income, advisory and other income, guaranteed income features, and net investment spreads, and a moderate impact on sales and surrender rates.


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Life Insurance

Consumers have a significant need for life insurance, whether it is used for income replacement for their surviving family, estate planning or wealth transfer. Additionally, consumers use life insurance to provide living benefits in case of chronic, critical or terminal illnesses, and to supplement retirement income.

In response to consumer needs and a low interest rate environment, our Life Insurance product portfolio will continue to promote products with less long-duration interest rate risk and mitigate exposure to products that have long-duration interest rate risk through sales levels and hedging strategies.

As life insurance ownership remains at historical lows in the U.S. and the UK, efforts to expand the reach and increase the affordability of life insurance are critical. The industry is investing in consumer-centric efforts to reduce traditional barriers to securing life protection by simplifying the sales and service experience. Digitally enabled processes and tools provide a fast, friendly and simple path to life insurance protection.

Institutional Markets

Institutional Markets serves a variety of needs for corporate clients. Demand is driven by a number of factors including the macroeconomic and regulatory environment. We expect to see continued growth in the pension risk transfer market (direct and assumed reinsurance) as corporate plan sponsors look to transfer asset or liability, longevity, administrative and operational risks associated with their defined benefit plans.

Changes in interest rates and credit spreads can have a significant impact on investment returns and net investment spreads, impacting organic growth opportunities.

For additional information on the impact of market interest rate movement on our Life and Retirement business see Executive Summary – AIG’s Outlook – Industry and Economic Factors – Impact of Changes in the Interest Rate Environment and Equity Markets.

LIFE AND RETIREMENT RESULTS


		Three Months Ended September 30,			Percentage Change		Nine Months Ended September 30,				Percentage Change
(in millions)		2022		2021			2022		2021
Adjusted revenues:
Premiums	$	1,404	$	1,041	35	%	$	3,363	$	3,286	2	%
Policy fees		732		715	2			2,238		2,270	(1)
Net investment income		2,004		2,435	(18)			6,122		7,164	(15)
Advisory fee and other income		196		253	(23)			633		750	(16)
Total adjusted revenues		4,336		4,444	(2)			12,356		13,470	(8)
Benefits, losses and expenses:
Policyholder benefits and losses incurred		1,888		1,544	22			4,985		5,024	(1)
Interest credited to policyholder account balances		943		935	1			2,716		2,687	1
Amortization of deferred policy acquisition costs		315		382	(18)			896		775	16
Non deferrable insurance commissions		156		168	(7)			483		471	3
Advisory fee expenses		65		77	(16)			201		245	(18)
General operating expenses		373		428	(13)			1,181		1,224	(4)
Interest expense		7		33	(79)			18		102	(82)
Total benefits, losses and expenses		3,747		3,567	5			10,480		10,528	—
Adjusted pre-tax income	$	589	$	877	(33)	%	$	1,876	$	2,942	(36)	%

Our insurance companies generate significant revenues from investment activities. As a result, the operating segments in Life and Retirement are significantly impacted by variances in net investment income on the asset portfolios that support insurance liabilities and surplus.

For additional information on our investment strategy, asset-liability management process and invested asset composition see Investments.


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INDIVIDUAL RETIREMENT RESULTS


		Three Months Ended September 30,				Percentage Change			Nine Months Ended September 30,				Percentage Change
(in millions)		2022		2021					2022		2021
Adjusted revenues:
Premiums	$	56	$	66		(15)	%	$	168	$	123		37	%
Policy fees		203		245		(17)			637		718		(11)
Net investment income		945		1,103		(14)			2,834		3,260		(13)
Advisory fee and other income		108		146		(26)			346		455		(24)
Total adjusted revenues		1,312		1,560		(16)			3,985		4,556		(13)
Benefits and expenses:
Policyholder benefits and losses incurred		165		163		1			494		374		32
Interest credited to policyholder account balances		488		483		1			1,392		1,342		4
Amortization of deferred policy acquisition costs		234		371		(37)			613		612		—
Non deferrable insurance commissions		87		94		(7)			265		271		(2)
Advisory fee expenses		34		43		(21)			106		149		(29)
General operating expenses		100		98		2			318		319		—
Interest expense		4		16		(75)			9		48		(81)
Total benefits, losses and expenses		1,112		1,268		(12)			3,197		3,115		3
Adjusted pre-tax income	$	200	$	292		(32)	%	$	788	$	1,441		(45)	%
Fixed annuities base net investment spread:
Base yield*		4.07	%	3.92	%	15	bps		3.86	%	3.98	%	(12)	bps
Cost of funds		2.61		2.56		5			2.59		2.59		—
Fixed annuities base net investment spread		1.46	%	1.36	%	10	bps		1.27	%	1.39	%	(12)	bps
Variable and fixed index annuities base net investment spread:
Base yield*		3.92	%	3.82	%	10	bps		3.81	%	3.87	%	(6)	bps
Cost of funds		1.45		1.31		14			1.42		1.31		11
Variable and fixed index annuities base net investment spread		2.47	%	2.51	%	(4)	bps		2.39	%	2.56	%	(17)	bps

*Includes returns from base portfolio including accretion and income (loss) from certain other invested assets.

Business and Financial Highlights


Individual Retirement Adjusted Pre-Tax Income (Loss) Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Adjusted pre-tax income decreased $92 million primarily due to:

			•lower net investment income, net of interest credited ($197 million) primarily driven by lower alternative investment income ($144 million), lower yield enhancement income ($95 million), partially offset by higher base portfolio income, net of interest credited ($42 million);
			•higher DAC amortization and policyholder benefits net of premiums, excluding the review and update of actuarial assumptions ($24 million) primarily due to lower variable annuity separate account returns; and
			•lower policy and advisory fee income, net of advisory fee expenses ($71 million), primarily due to a decrease in variable annuity separate account assets driven by negative equity market performance.
			Partially offset by:
			•net favorable impact from the review and update of actuarial assumptions ($184 million);


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Individual Retirement Adjusted Pre-Tax Income (Loss) Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Adjusted pre-tax income decreased $653 million primarily due to:

			•lower net investment income, net of interest credited ($502 million) primarily driven by lower alternative investment income ($252 million), lower yield enhancement income ($234 million) and lower base portfolio income, net of interest credited ($16 million);
			•higher DAC amortization and policyholder benefits net of premiums, excluding the review and update of actuarial assumptions ($225 million) primarily due to lower variable annuity separate account returns; and
			•lower policy and advisory fee income, net of advisory fee expenses ($147 million), primarily due to a decrease in variable annuity separate account assets driven by negative equity market performance.
			Partially offset by:
			•net favorable impact from the review and update of actuarial assumptions ($184 million);

INDIVIDUAL RETIREMENT GAAP PREMIUMS, PREMIUMS AND DEPOSITS, SURRENDERS AND NET FLOWS

Premiums and deposits are a non-GAAP financial measure that includes, in addition to direct and assumed premiums, deposits received on investment-type annuity contracts, FHLB funding agreements and mutual funds under administration.

Net flows for annuity products in Individual Retirement represent premiums and deposits less death, surrender and other withdrawal benefits. Net flows for mutual funds represent deposits less withdrawals.

The following table presents a reconciliation of Individual Retirement GAAP premiums to premiums and deposits:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2022		2021		2022		2021
Premiums	$	56	$	66	$	168	$	123
Deposits		3,740		3,190		11,136		10,488
Other		(4)		1		(11)		(3)
Premiums and deposits	$	3,792	$	3,257	$	11,293	$	10,608

The following table presents surrenders as a percentage of average reserves:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Surrenders as a percentage of average reserves
Fixed annuities	9.6	%	6.6	%	8.1	%	7.2	%

Variable annuities	6.5		7.1		6.4		7.1
Fixed index annuities	4.6		4.4		4.2		4.6


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The following table presents reserves for fixed annuities and variable and fixed index annuities by surrender charge category:


		September 30, 2022						December 31, 2021
(in millions)		Fixed Annuities		Fixed Index Annuities		Variable Annuities		Fixed Annuities		Fixed Index Annuities		Variable Annuities
No surrender charge	$	25,275	$	2,011	$	26,719	$	26,419	$	2,009	$	34,030
Greater than 0% - 2%		2,075		1,452		7,362		2,091		1,681		10,926
Greater than 2% - 4%		2,260		3,950		4,958		2,424		4,195		9,884
Greater than 4%		18,334		24,400		12,794		16,443		22,489		13,219
Non-surrenderable		2,405		—		—		2,373		—		—
Total reserves	$	50,349	$	31,813	$	51,833	$	49,750	$	30,374	$	68,059

Individual Retirement annuities are typically subject to a three- to seven-year surrender charge period, depending on the product. For fixed and fixed index annuities, the proportion of reserves subject to surrender charge at September 30, 2022 increased compared to December 31, 2021 primarily due to growth in business. The increase in the proportion of reserves with no surrender charge for variable annuities as of September 30, 2022 compared to December 31, 2021 was principally due to normal aging of business.

A discussion of the significant variances in premiums and deposits and net flows for each product line follows:


Individual Retirement Premiums and Deposits (P&D) and Net Flows Three Months Ended September 30, (in millions)


P&D			Net Flows


			Quarterly 2022 and 2021 Comparison
			•Fixed Annuities Net outflows decreased ($326 million) over the prior year, primarily due to higher premiums and deposits ($683 million) due to competitive pricing and higher interest rates, lower death benefits ($34 million), partially offset by higher surrenders and withdrawals ($391 million).
			•Variable Annuities Net flows deteriorated ($139 million) primarily due to lower premiums and deposits ($466 million) due to market volatility, partially offset by lower surrenders and withdrawals ($305 million) and lower death benefits ($22 million).
			•Fixed Index Annuities Net flows increased ($269 million) primarily due to higher premiums and deposits ($329 million) due to competitive pricing and higher interest rates, partially offset by higher surrenders and withdrawals ($44 million) and higher death benefits ($16 million).
			•Retail Mutual Funds There were no flows in 2022 due to the Touchstone Investments (Touchstone) sale in the third quarter of 2021.

			For additional information regarding the sale of certain assets of the AIG Life and Retirement Retail Mutual Funds business, see Note 1 to the Condensed Consolidated Financial Statements.


*In 2021, Retail Mutual Fund premiums and deposits and net flows reflects customer activity of the funds that were transferred or liquidated in the third quarter of 2021.


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Individual Retirement Premiums and Deposits (P&D) and Net Flows Nine Months Ended September 30, (in millions)


P&D			Net Flows


			Year-to-Date 2022 and 2021 Comparison
			•Fixed Annuities Net outflows decreased ($1.8 billion) over the prior year, primarily due to higher premiums and deposits ($2.1 billion) due to competitive pricing and higher interest rates and lower death benefits ($99 million), partially offset by higher surrenders and withdrawals ($335 million).
			•Variable Annuities Net flows deteriorated ($651 million) primarily due to lower premiums and deposits ($1.4 billion), due to market volatility; partially offset by lower surrenders and withdrawals ($649 million) and lower death benefits ($65 million).
			•Fixed Index Annuities Net flows increased ($179 million) primarily due to higher premiums and deposits ($249 million), due to competitive pricing and higher interest rates; partially offset by higher surrenders and withdrawals ($34 million) and higher death benefits ($36 million).
			•Retail Mutual Funds There were no flows in 2022 due to the Touchstone sale in the second quarter of 2021.

			For additional information regarding the sale of certain assets of the AIG Life and Retirement Retail Mutual Funds business, see Note 1 to the Condensed Consolidated Financial Statements.


*In 2021, Retail Mutual Fund premiums and deposits and net flows reflects customer activity of the funds that were transferred or liquidated in the third quarter of 2021.

GROUP RETIREMENT RESULTS


	Three Months Ended September 30,					Percentage Change		Nine Months Ended September 30,					Percentage Change
(in millions)		2022		2021					2022		2021
Adjusted revenues:
Premiums	$	3	$	7		(57)	%	$	16	$	15		7	%
Policy fees		109		135		(19)			347		389		(11)
Net investment income		494		601		(18)			1,511		1,806		(16)
Advisory fee and other income		74		89		(17)			232		248		(6)
Total adjusted revenues		680		832		(18)			2,106		2,458		(14)
Benefits and expenses:
Policyholder benefits and losses incurred		24		30		(20)			78		56		39
Interest credited to policyholder account balances		286		289		(1)			853		859		(1)
Amortization of deferred policy acquisition costs		22		16		38			85		45		89
Non deferrable insurance commissions		31		31		—			89		78		14
Advisory fee expenses		31		34		(9)			95		96		(1)
General operating expenses		101		107		(6)			329		326		1
Interest expense		2		9		(78)			5		28		(82)
Total benefits, losses and expenses		497		516		(4)			1,534		1,488		3
Adjusted pre-tax income	$	183	$	316		(42)	%	$	572	$	970		(41)	%
Base net investment spread:
Base yield*		4.18	%	4.12	%	6	bps		3.99	%	4.13	%	(14)	bps
Cost of funds		2.59		2.60		(1)			2.58		2.61		(3)
Base net investment spread		1.59	%	1.52	%	7	bps		1.41	%	1.52	%	(11)	bps

*Includes returns from base portfolio including accretion and income (loss) from certain other invested assets.


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Business and Financial Highlights


Group Retirement Adjusted Pre-Tax Income (Loss) Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Adjusted pre-tax income decreased $133 million primarily due to:
			•lower net investment income, net of interest credited ($105 million) primarily driven by lower alternative investment income ($76 million), lower yield enhancement income ($36 million); partially offset by slightly higher base portfolio income net of interest credited ($7 million).
			•lower policy and advisory fee income, net of advisory fee expenses of ($38 million) due to lower fee based assets under administration as a result of lower equity market performance.


Group Retirement Adjusted Pre-Tax Income (Loss) Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Adjusted pre-tax income decreased $398 million primarily due to:
			•lower net investment income, net of interest credited ($288 million) primarily driven by lower yield enhancement income ($119 million), lower alternative investment income ($131 million) and lower base portfolio income net of interest credited ($38 million).
			•higher DAC amortization and policyholder benefits, net of premiums mostly due to lower equity market performance ($61 million).

			•lower policy and advisory fee income, net of advisory fee expenses of $(57) million due to lower fee based assets under administration as a result of lower equity market performance.

GROUP RETIREMENT GAAP PREMIUMS, PREMIUMS AND DEPOSITS, SURRENDERS AND NET FLOWS

Net flows for annuity products included in Group Retirement represent premiums and deposits less death, surrender and other withdrawal benefits. Net flows for mutual funds represent deposits less withdrawals. Client deposits into advisory and brokerage accounts less total client withdrawals from advisory and brokerage accounts, are not included in net flows, but do contribute to growth in assets under administration and advisory fee income.

The following table presents a reconciliation of Group Retirement GAAP premiums to premiums and deposits:


		Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)		2022		2021		2022		2021
Premiums	$	3	$	7	$	16	$	15
Deposits		2,036		1,824		5,683		5,889

Premiums and deposits(a)	$	2,039	$	1,831	$	5,699	$	5,904

(a)Excludes client deposits into advisory and brokerage accounts of $1.6 billion and $1.9 billion for the nine months ended September 30, 2022 and 2021, respectively.


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The following table presents Group Retirement surrenders as a percentage of average reserves and mutual funds under administration:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Surrenders as a percentage of average reserves and mutual funds	10.4	%	9.1	%	8.8	%	8.6	%

The following table presents reserves for Group Retirement annuities by surrender charge category:


(in millions)		September 30, 2022(a)		December 31, 2021(a)
No surrender charge(b)	$	68,789	$	81,132
Greater than 0% - 2%		509		716
Greater than 2% - 4%		390		857
Greater than 4%		6,190		6,197
Non-surrenderable		749		810
Total reserves	$	76,627	$	89,712

(a)Excludes mutual fund assets under administration of $22.1 billion and $28.8 billion at September 30, 2022 and December 31, 2021, respectively.

(b)Group Retirement amounts in this category include general account reserves of approximately $4.6 billion and $4.7 billion at September 30, 2022 and December 31, 2021, respectively, which are subject to 20 percent annual withdrawal limitations at the participant level and general account reserves of $5.8 billion and $5.7 billion at September 30, 2022 and December 31, 2021, respectively, which are subject to 20 percent annual withdrawal limitations at the plan level.

Group Retirement annuity deposits are typically subject to a five- to seven-year surrender charge period, depending on the product. At September 30, 2022, Group Retirement annuity reserves with no surrender charge decreased compared to December 31, 2021 primarily due to decline in assets under management from lower equity markets.

A discussion of the significant variances in premiums and deposits and net flows follows:


Group Retirement Premiums and Deposits and Net Flows Three Months Ended September 30, (in millions)


P&D			Net Flows


			Quarterly 2022 and 2021 Comparison
			Net flows increased ($226 million) due to higher premiums and deposits ($208 million), higher death and payout annuity benefits of $10 million, partially offset by lower surrenders and withdrawals of $28 million. In general, net outflows are concentrated in fixed annuity products with higher contractual guaranteed minimum crediting rates. Large plan acquisitions and surrenders contribute period-to-period volatility and resulted in higher net outflows of $0.2 billion compared to the same period in the prior year.


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Group Retirement Premiums and Deposits and Net Flows Nine Months Ended September 30, (in millions)


P&D			Net Flows


			Year-to-Date 2022 and 2021 Comparison
			Net flows deteriorated ($19 million) primarily due to lower premiums and deposits ($205 million) and higher death and payout annuity benefits of $42 million, partially offset by lower surrenders and withdrawals of ($228 million). In general, net outflows are concentrated in fixed annuity products with higher contractual guaranteed minimum crediting rates. Large plan acquisitions and surrenders resulted in higher net flows of $0.4 billion compared to the same period in the prior year.

LIFE INSURANCE RESULTS


		Three Months Ended						Nine Months Ended
		September 30,			Percentage			September 30,			Percentage
(in millions)		2022		2021	Change			2022		2021	Change
Adjusted revenues:
Premiums	$	541	$	469	15	%	$	1,641	$	1,533	7	%
Policy fees		371		288	29			1,109		1,023	8
Net investment income		308		437	(30)			1,016		1,238	(18)
Other income		14		17	(18)			54		45	20
Total adjusted revenues		1,234		1,211	2			3,820		3,839	—
Benefits and expenses:
Policyholder benefits and losses incurred		784		753	4			2,550		2,707	(6)
Interest credited to policyholder account balances		84		88	(5)			256		265	(3)
Amortization of deferred policy acquisition costs		57		(6)	NM			193		114	69
Non deferrable insurance commissions		31		37	(16)			108		103	5

General operating expenses		154		199	(23)			479		517	(7)
Interest expense		1		6	(83)			3		19	(84)
Total benefits, losses and expenses		1,111		1,077	3			3,589		3,725	(4)
Adjusted pre-tax income	$	123	$	134	(8)	%	$	231	$	114	103	%


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Business and Financial Highlights


Life Insurance Adjusted Pre-Tax Income (Loss) Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Adjusted pre-tax income decreased $11 million primarily due to:
			•lower net investment income, net of interest credited ($125 million), primarily driven by lower alternative investment and yield enhancement income ($119 million) primarily due to lower equity partnership performance and reduced gains on calls, and lower base portfolio income, net of interest credited ($6 million).
			•lower net favorable impact from the review and update of actuarial assumptions ($82 million).
			Partially offsetting this decrease was:
			•higher premiums and policy fees, net of policyholder benefits, excluding actuarial assumptions update ($146 million), primarily due to favorable mortality.
			•lower general operating expenses ($45 million).


Life Insurance Adjusted Pre-Tax Income (Loss) Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Adjusted pre-tax income increased $117 million primarily due to:
			•higher premiums and policy fees, net of policyholder benefits, excluding actuarial assumptions update ($373 million), primarily due to favorable mortality.
			•lower general operating expenses ($38 million).
			Partially offsetting this increase was:
			•lower net investment income, net of interest credited ($213 million), primarily driven by lower alternative investment and yield enhancement income ($190 million) primarily due to lower equity partnership performance and reduced gains on calls, and lower base portfolio income, net of interest credited ($23 million).
			•lower net favorable impact from the review and update of actuarial assumptions ($82 million).


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LIFE INSURANCE GAAP PREMIUMS AND PREMIUMS AND DEPOSITS

Premiums for Life Insurance represent amounts received on traditional life insurance policies, primarily term life and international life and health. Premiums, excluding the effect of foreign exchange, increased $106 million and $177 million in the three- and nine-month periods ended September 30, 2022, respectively, compared to the same periods in the prior year. Premiums and deposits for Life Insurance is a non-GAAP financial measure that includes direct and assumed premiums as well as deposits received on universal life insurance.

The following table presents a reconciliation of Life Insurance GAAP premiums to premiums and deposits:


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(in millions)		2022		2021		2022		2021
Premiums	$	541	$	469	$	1,641	$	1,533
Deposits		405		403		1,190		1,209
Other*		220		280		661		702
Premiums and deposits	$	1,166	$	1,152	$	3,492	$	3,444

*Other principally consists of adding back ceded premiums to reflect the gross premiums and deposits.

A discussion of the significant variances in premiums and deposits follows:


Life Insurance Premiums and Deposits Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Premiums and deposits, excluding the effect of foreign exchange, increased $58 million primarily due to growth in international life premiums.


Life Insurance Premiums and Deposits Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Premiums and deposits, excluding the effect of foreign exchange, increased $136 million primarily due to growth in international life premiums.


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ITEM 2 | Business Segment Operations | Life and Retirement

INSTITUTIONAL MARKETS RESULTS


	Three Months Ended						Nine Months Ended
	September 30,				Percentage		September 30,				Percentage
(in millions)		2022		2021	Change			2022		2021	Change
Adjusted revenues:
Premiums	$	804	$	499	61	%	$	1,538	$	1,615	(5)	%
Policy fees		49		47	4			145		140	4
Net investment income		257		294	(13)			761		860	(12)
Other income		—		1	NM			1		2	(50)
Total adjusted revenues		1,110		841	32			2,445		2,617	(7)
Benefits and expenses:
Policyholder benefits and losses incurred		915		598	53			1,863		1,887	(1)
Interest credited to policyholder account balances		85		75	13			215		221	(3)
Amortization of deferred policy acquisition costs		2		1	100			5		4	25
Non deferrable insurance commissions		7		6	17			21		19	11
General operating expenses		18		24	(25)			55		62	(11)
Interest expense		—		2	NM			1		7	(86)
Total benefits, losses and expenses		1,027		706	45			2,160		2,200	(2)
Adjusted pre-tax income	$	83	$	135	(39)	%	$	285	$	417	(32)	%

Business and Financial Highlights


Institutional Markets Adjusted Pre-Tax Income (Loss) Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Adjusted pre-tax income decrease $52 million is primarily due to:
			•lower net investment income ($37 million) primarily driven by lower alternative investment income ($47 million) and lower yield enhancement income ($31 million) partially offset by higher base portfolio income ($41 million); and
			•an increase in policyholder benefits and losses incurred (including interest accretion) primarily on new pension risk transfer business ($317 million).
			Partially offsetting these decreases were:
			•higher premiums primarily on new pension risk transfer business ($305 million)


Institutional Markets Adjusted Pre-Tax Income (Loss) Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Adjusted pre-tax income decrease $132 million is primarily due to:
			•lower net investment income ($99 million) primarily driven by lower alternative investment income ($89 million) and lower yield enhancement income ($65 million) partially offset by higher base portfolio income ($55 million); and
			•lower premiums primarily on new pension risk transfer business ($77 million)

			Partially offsetting these decreases were:
			•a decrease in policyholder benefits and losses incurred (including interest accretion) primarily on new pension risk transfer business ($24 million)


112			AIG \| Third Quarter 2022 Form 10-Q

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ITEM 2 | Business Segment Operations | Life and Retirement

INSTITUTIONAL MARKETS GAAP PREMIUMS AND PREMIUMS AND DEPOSITS

Premiums for Institutional Markets primarily represent amounts received on pension risk transfer or structured settlement annuities with life contingencies. Premiums increased $305 million in the three-month period ended September 30, 2022, compared to the same period in the prior year primarily driven by the transactional nature of the pension risk transfer business (direct and assumed reinsurance). Premiums decreased $77 million in the nine-month period ended September 30, 2022, compared to the same period in the prior year primarily driven by the transactional nature of the pension risk transfer business (direct and assumed reinsurance).

Premiums and deposits for Institutional Markets is a non-GAAP financial measure that includes direct and assumed premiums as well as deposits received on investment-type annuity contracts. Deposits primarily include GICs, FHLB funding agreements and structured settlement annuities with no life contingencies.

The following table presents a reconciliation of Institutional Markets GAAP premiums to premiums and deposits:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2022		2021		2022		2021
Premiums	$	804	$	499	$	1,538	$	1,615
Deposits		1,085		488		1,213		1,081
Other*		8		7		23		19
Premiums and deposits	$	1,897	$	994	$	2,774	$	2,715

*Other principally consists of adding back ceded premiums to reflect the gross premiums and deposits.

A discussion of the significant variances in premiums and deposits follows:


Institutional Markets Premiums and Deposits Three Months Ended September 30, (in millions)


			Quarterly 2022 and 2021 Comparison
			Premiums and deposits increased ($903 million) primarily due to higher premiums on new pension risk transfer business and higher deposits on GICs driven by the transactional nature of these businesses.


Institutional Markets Premiums and Deposits Nine Months Ended September 30, (in millions)


			Year-to-Date 2022 and 2021 Comparison
			Premiums and deposits increased ($59 million) primarily due to deposits on new structured settlement annuities.


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ITEM 2 | Business Segment Operations | Other Operations


Other Operations


OTHER OPERATIONS RESULTS


	Three Months Ended September 30,				Percentage		Nine Months Ended September 30,				Percentage
(in millions)		2022		2021	Change			2022		2021	Change
Adjusted revenues:
Premiums	$	15	$	42	(64)	%	$	65	$	148	(56)	%
Policy fees		—		—	NM			—		—	NM
Net investment income:
Interest and dividends		78		35	123			238		130	83
Alternative investments		46		216	(79)			482		541	(11)
Other investment income (loss)		(20)		23	NM			(167)		66	NM
Investment expenses		2		(17)	NM			(11)		(31)	65
Total net investment income		106		257	(59)			542		706	(23)
Other income		5		2	150			20		30	(33)
Total adjusted revenues		126		301	(58)			627		884	(29)
Benefits, losses and expenses:
Policyholder benefits and losses incurred		4		50	(92)			27		212	(87)
Interest credited to policyholder account balances		—		—	NM			—		—	NM
Acquisition expenses:
Amortization of deferred policy acquisition costs		—		9	NM			5		30	(83)
Other acquisition expenses		(1)		2	NM			(3)		1	NM
Total acquisition expenses		(1)		11	NM			2		31	(94)
General operating expenses:
Corporate and Other		294		295	—			804		855	(6)
Asset Management		8		7	14			38		55	(31)
Amortization of intangible assets		10		10	—			30		30	—
Total General operating expenses		312		312	—			872		940	(7)
Interest expense:
Corporate and Other		221		257	(14)			665		794	(16)
Asset Management*		57		41	39			147		147	—
Total interest expense		278		298	(7)			812		941	(14)
Total benefits, losses and expenses		593		671	(12)			1,713		2,124	(19)
Adjusted pre-tax loss before consolidation and eliminations		(467)		(370)	(26)			(1,086)		(1,240)	12
Consolidation and eliminations		(147)		(192)	23			(410)		(462)	11
Adjusted pre-tax loss	$	(614)	$	(562)	(9)	%	$	(1,496)	$	(1,702)	12	%
Adjusted pre-tax income (loss) by activities:
Corporate and Other	$	(518)	$	(583)	11	%	$	(1,559)		(1,752)	11	%
Asset Management		51		213	(76)			473		512	(8)
Consolidation and eliminations		(147)		(192)	23			(410)		(462)	11
Adjusted pre-tax loss	$	(614)	$	(562)	(9)	%	$	(1,496)	$	(1,702)	12	%

*Interest – Asset Management primarily represents interest expense on consolidated investment entities of $56 million and $39 million in the three-month periods ended September 30, 2022 and 2021, respectively, and $143 million and $141 million in the nine-month periods ended September 30, 2022 and 2021, respectively.


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ITEM 2 | Business Segment Operations | Other Operations

QUARTERLY 2022 AND 2021 COMPARISON

Adjusted pre-tax loss before consolidation and eliminations of $467 million in 2022 compared to $370 million in 2021, increased $97 million, was primarily due to:

•lower net investment income driven by lower income associated with consolidated investment entities of $148 million and an increase in mark to market losses on CDO securities of $35 million partially offset by higher income on AIG Parent portfolio of $20 million; and

•lower corporate interest expense of $36 million primarily driven by interest savings of $83 million from $7.6 billion debt repurchases, through cash tender offers, and debt redemption in the nine months ended September 30, 2022 as well as $646 million debt repurchases, through cash tender offers in the three months ended December 31, 2021 and interest savings of $14 million resulting from redemptions of $1.5 billion of debt in the three months ended September 30, 2021, partially offset by interest expense of $77 million on $6.5 billion Corebridge senior unsecured notes, $1.5 billion draw down on DDTL facility and $1.0 billion junior subordinated debt issued in the nine months ended September 30, 2022.

Adjusted pre-tax loss on consolidation and eliminations of $147 million in 2022 compared to $192 million in 2021, an increase of $45 million, was primarily due to the elimination of the insurance companies’ net investment income from their investment in the consolidated investment entities of $47 million.

YEAR-TO-DATE 2022 AND 2021 COMPARISON

Adjusted pre-tax loss before consolidation and eliminations of $1.1 billion in 2022 compared to $1.2 billion in 2021, decreased $154 million, was primarily due to:

•lower corporate interest expense primarily driven by interest savings of $172 million from $7.6 billion debt repurchases, through cash tender offers, and debt redemption in the nine months ended September 30, 2022 as well as $646 million debt repurchases, through cash tender offers in the three months ended December 31, 2021 and interest savings of $56 million resulting from redemptions of $3.0 billion of debt in the nine months ended in September 30, 2021, partially offset by interest expense of $138 million on $6.5 billion Corebridge senior unsecured notes, $1.5 billion draw down on DDTL facility and $1.0 billion junior subordinated debt issued in the nine months ended September 30, 2022;

•lower underwriting loss attributable to decreased catastrophe losses and absence of unfavorable prior year development ($121 million in 2021) within Other Operations Run-Off, primarily Blackboard;

•lower corporate and other general operating expenses of $57 million primarily driven by decreases in employment costs of $203 million partially offset by higher informational technology professional fees of $153 million; and

•lower net investment income driven by an increase in mark to market losses on CDO securities of $244 million and income associated consolidated investment entities of $38 million, partially offset by lower income associated with equity investments of $56 million and higher income on AIG Parent portfolio of $47 million.

Adjusted pre-tax loss on consolidation and eliminations of $410 million in 2022 compared to $462 million in 2021, a decrease of $52 million, was primarily due to the elimination of the insurance companies’ net investment income from their investment in the consolidated investment entities of $67 million.


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ITEM 2 | Investments

Investments

OVERVIEW

Our investment strategies are tailored to the specific business needs of each operating unit by targeting an asset allocation mix that supports estimated cash flows of our outstanding liabilities and provides diversification from an asset class, sector, issuer, and geographic perspective. The primary objectives are generation of investment income, preservation of capital, liquidity management and growth of surplus. The majority of assets backing our insurance liabilities consist of fixed maturity securities.

Over the past several quarters inflation has continued to remain elevated, which has led to the increases in interest rates by the Board of Governors of the Federal Reserve System in several years. This has also led to a significant rise in interest rates across the yield curve and a widening of credit spreads reflecting ongoing recession concerns.


INVESTMENT HIGHLIGHTS IN THE NINE MONTHS ENDED SEPTEMBER 30, 2022
•A significant rise in interest rates and widening of credit spreads resulted in net unrealized losses in our available for sale fixed security portfolio of $50.2 billion during the nine months ended September 30, 2022. Our Net unrealized gain of $18.1 billion as of December 31, 2021 decreased to a net unrealized loss of $32.1 billion on our available for sale portfolio as of September 30, 2022. •We continued to make investments in structured securities and other fixed maturity securities with favorable risk compared to return characteristics to improve yields and increase net investment income. •We experienced a decrease in net investment income in the nine-month period ended September 30, 2022 compared to the same period in the prior year due primarily to lower returns in our private equity and hedge funds versus gains in the prior year, and lower income in our available for sale fixed security portfolio primarily driven by lower call and prepayment income, which was partially offset by higher income in base portfolio. •Blended investment yields on new investments are higher than blended rates on investments that were sold, matured or called.

INVESTMENT STRATEGIES

Investment strategies are assessed at the segment level and involve considerations that include local and general market conditions, duration and cash flow management, risk appetite and volatility constraints, rating agency and regulatory capital considerations, and tax and legal investment limitations.

Some of our key investment strategies are as follows:

•Our fundamental strategy across the portfolios is to seek investments with similar characteristics to the associated insurance liabilities to the extent practicable.

•AIG embeds Environmental, Social and Governance (ESG) considerations in its fundamental investment analysis of the companies or projects we invest in to ensure that they have sustainable earnings over the full term of our investment. This analysis is performed where ESG considerations are relevant or material to a particular investment. AIG considers internal and external factors and evaluates changes in consumer behavior, industry trends related to ESG factors as well as the ability of the management of companies to respond appropriately to these changes in order to maintain their competitive advantage.

•We seek to originate investments that offer enhanced yield through illiquidity premiums, such as private placements and commercial mortgage loans, which also add portfolio diversification. These assets typically afford credit protections through covenants, ability to customize structures that meet our insurance liability needs, and deeper due diligence given information access.

•Given our global presence, we have access to assets that provide diversification from local markets. To the extent we purchase these investments, we generally hedge any currency risk using derivatives, which could provide opportunities to earn higher risk adjusted returns compared to assets in the functional currency.

•AIG Parent, included in Other Operations, actively manages its assets and liabilities, counterparties and duration. AIG Parent’s liquidity sources are held primarily in the form of cash, short-term investments and publicly traded, investment grade rated fixed maturity securities that can be readily monetized through sales or repurchase agreements. This strategy allows us to both diversify our sources of liquidity and reduce the cost of maintaining sufficient liquidity.


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ITEM 2 | Investments

•Within the U.S., the Life and Retirement and General Insurance investments are generally split between reserve backing and surplus portfolios.

–Insurance reserves are backed by mainly investment grade fixed maturity securities that meet our duration, risk-return, tax, liquidity, credit quality and diversification objectives. We assess asset classes based on their fundamental underlying risk factors, including credit (public and private), commercial real estate and residential real estate regardless of whether such investments are bonds, loans, or structured products.

–Surplus investments seek to enhance portfolio returns and are generally comprised of a mix of fixed maturity investment grade and below investment grade securities and various alternative asset classes, including private equity, real estate equity, and hedge funds. Over the past few years, hedge fund investments have been reduced with more emphasis given to private equity, real estate and below investment grade credit.

•Outside of the U.S., fixed maturity securities held by insurance companies consist primarily of investment-grade securities generally denominated in the currencies of the countries in which we operate.

Asset-Liability Management

The investment strategy within the General Insurance companies focuses on growth of surplus, maintenance of sufficient liquidity for unanticipated insurance claims, and preservation of capital. General Insurance invests primarily in fixed maturity securities issued by corporations, municipalities and other governmental agencies; structured securities collateralized by, among other assets, residential and commercial real estate; and commercial mortgage loans. Fixed maturity securities of the General Insurance companies’ North America operations have an average duration of 4.0 years. Fixed maturity securities of the General Insurance companies’ International operations have an average duration of 3.3 years.

While invested assets backing reserves of the General Insurance companies are primarily invested in conventional liquid fixed maturity securities, we have continued to allocate to asset classes that offer higher yields through structural and illiquidity premiums, particularly in our North America operations. In addition, we continue to invest in both fixed rate and floating rate asset-backed investments to manage our exposure to potential changes in interest rates and inflation. We seek to diversify the portfolio across asset classes, sectors and issuers to mitigate idiosyncratic portfolio risks.

In addition, a portion of the surplus of General Insurance is invested in a diversified portfolio of alternative investments that seek to balance liquidity, volatility and growth of surplus. There is a higher allocation to equity-oriented investments in General Insurance surplus relative to other AIG portfolios given the underlying inflation risks inherent in that business. Although these alternative investments are subject to periodic earnings fluctuations, they have historically achieved yields in excess of the fixed maturity portfolio yields and have provided added diversification to the broader portfolio.

The investment strategy of the Life and Retirement companies is to provide net investment income to back liabilities that result in stable distributable earnings and enhance portfolio value, subject to asset-liability management, capital, liquidity and regulatory constraints.

The Life and Retirement companies use asset-liability management as a primary tool to monitor and manage risk in their businesses. The Life and Retirement companies maintain a diversified, high-to-medium quality portfolio of fixed maturity securities issued by corporations, municipalities and other governmental agencies; structured securities collateralized by, among other assets, residential and commercial real estate; and commercial mortgage loans that, to the extent practicable, match the duration characteristics of the liabilities. We seek to diversify the portfolio across asset classes, sectors, and issuers to mitigate idiosyncratic portfolio risks. The investment portfolio of each product line is tailored to the specific characteristics of its insurance liabilities, and as a result, duration varies between distinct portfolios. The interest rate environment has a direct impact on the asset-liability management profile of the businesses, and changes in the interest rate environment may result in the need to lengthen or shorten the duration of the portfolio. In a rising rate environment, we may shorten the duration of the investment portfolio.

Fixed maturity securities of the Life and Retirement companies’ domestic operations have an average duration of 7.3 years.

In addition, the Life and Retirement companies seek to enhance surplus portfolio returns through investments in a diversified portfolio of alternative investments. Although these alternative investments are subject to periodic earnings fluctuations, they have historically achieved returns in excess of the fixed maturity portfolio returns.


AIG \| Third Quarter 2022 Form 10-Q			117

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ITEM 2 | Investments

NAIC Designations of Fixed Maturity Securities

The Securities Valuation Office (SVO) of the NAIC evaluates the investments of U.S. insurers for statutory reporting purposes and assigns fixed maturity securities to one of six categories called ‘NAIC Designations.’ In general, NAIC Designations of ‘1’ highest quality, or ‘2’ high quality, include fixed maturity securities considered investment grade, while NAIC Designations of ‘3’ through ‘6’ generally include fixed maturity securities referred to as below investment grade. NAIC Designations for non-agency residential mortgage backed securities (RMBS) and commercial mortgage backed securities (CMBS) are calculated using third party modeling results provided through the NAIC. These methodologies result in an improved NAIC Designation for such securities compared to the rating typically assigned by the three major rating agencies. The following tables summarize the ratings distribution of AIG subsidiaries’ fixed maturity security portfolio by NAIC Designation, and the distribution by composite AIG credit rating, which is generally based on ratings of the three major rating agencies. For fixed maturity securities where no NAIC Designation is assigned or able to be calculated using third-party data, the NAIC Designation category used in the first table below reflects an internal rating.

The NAIC Designations presented below do not reflect the added granularity to the designation categories adopted by the NAIC in 2020, which further subdivide each category of fixed maturity securities by appending letter modifiers to the numerical designations.

For a full description of the composite AIG credit ratings see – Credit Ratings below.

The following table presents the fixed maturity security portfolio categorized by NAIC Designation, at fair value:


September 30, 2022
(in millions)
NAIC Designation		1		2		Total Investment Grade		3		4		5		6		Total Below Investment Grade		Total
Other fixed maturity securities	$	88,260	$	65,158	$	153,418	$	7,028	$	8,327	$	766	$	382	$	16,503	$	169,921
Mortgage-backed, asset-backed and collateralized		48,720		6,983		55,703		226		82		27		903		1,238		56,941
Total*	$	136,980	$	72,141	$	209,121	$	7,254	$	8,409	$	793	$	1,285	$	17,741	$	226,862

*Excludes $36 million of fixed maturity securities for which no NAIC Designation is available.

The following table presents the fixed maturity security portfolio categorized by composite AIG credit rating, at fair value:


September 30, 2022
(in millions)
Composite AIG Credit Rating		AAA/AA/A		BBB		Total Investment Grade		BB		B		CCC and Lower		Total Below Investment Grade		Total
Other fixed maturity securities	$	91,015	$	61,929	$	152,944	$	7,257	$	7,412	$	2,308	$	16,977	$	169,921
Mortgage-backed, asset-backed and collateralized		42,538		7,437		49,975		473		403		6,090		6,966		56,941
Total*	$	133,553	$	69,366	$	202,919	$	7,730	$	7,815	$	8,398	$	23,943	$	226,862

*Excludes $36 million of fixed maturity securities for which no NAIC Designation is available.

CREDIT RATINGS

At September 30, 2022, approximately 87 percent of our fixed maturity securities were held by our domestic entities. Approximately 89 percent of these securities were rated investment grade by one or more of the principal rating agencies.

Moody’s Investors Service Inc. (Moody’s), Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc. (S&P), or similar foreign rating services rate a significant portion of our foreign entities’ fixed maturity securities portfolio. Rating services are not available for some foreign-issued securities. Our Credit Risk Management department closely reviews the credit quality of the foreign portfolio’s non-rated fixed maturity securities. At September 30, 2022, approximately 94 percent of such investments were either rated investment grade or, on the basis of our internal analysis, were equivalent from a credit standpoint to securities rated investment grade. Approximately 27 percent of the foreign entities’ fixed maturity securities portfolio is comprised of sovereign fixed maturity securities supporting policy liabilities in the country of issuance.


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ITEM 2 | Investments

Composite AIG Credit Ratings

With respect to our fixed maturity securities, the credit ratings in the table below and in subsequent tables reflect: (i) a composite of the ratings of the three major rating agencies, or when agency ratings are not available, the NAIC designation assigned by the NAIC SVO (98 percent of total fixed maturity securities), or (ii) our internal ratings when these investments have not been rated by any of the major rating agencies or the NAIC. The “Non-rated” category in those tables consists of fixed maturity securities that have not been rated by any of the major rating agencies, the NAIC or us.

For information regarding credit risks associated with Investments see Part II, Item 7. MD&A – Enterprise Risk Management in the 2021 Annual Report.

The following table presents the composite AIG credit ratings of our fixed maturity securities calculated on the basis of their fair value:


		Available for Sale				Other				Total
(in millions)		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Rating:
Other fixed maturity securities
AAA	$	14,479	$	15,578	$	1,561	$	1,756	$	16,040	$	17,334
AA		31,792		39,110		799		282		32,591		39,392
A		42,222		57,346		164		160		42,386		57,506
BBB		61,085		83,192		843		461		61,928		83,653
Below investment grade		15,404		17,795		405		314		15,809		18,109
Non-rated		1,202		1,638		2		—		1,204		1,638
Total	$	166,184	$	214,659	$	3,774	$	2,973	$	169,958	$	217,632
Mortgage-backed, asset-backed and collateralized

AAA	$	19,939	$	27,144	$	323	$	232	$	20,262	$	27,376
AA		14,874		15,688		717		485		15,591		16,173
A		6,453		6,685		233		197		6,686		6,882
BBB		6,501		5,492		936		725		7,437		6,217
Below investment grade		5,815		7,508		1,016		1,462		6,831		8,970
Non-rated		1		26		132		204		133		230
Total	$	53,583	$	62,543	$	3,357	$	3,305	$	56,940	$	65,848
Total
AAA	$	34,418	$	42,722	$	1,884	$	1,988	$	36,302	$	44,710
AA		46,666		54,798		1,516		767		48,182		55,565
A		48,675		64,031		397		357		49,072		64,388
BBB		67,586		88,684		1,779		1,186		69,365		89,870
Below investment grade		21,219		25,303		1,421		1,776		22,640		27,079
Non-rated		1,203		1,664		134		204		1,337		1,868
Total	$	219,767	$	277,202	$	7,131	$	6,278	$	226,898	$	283,480

Available-for-Sale Investments

The following table presents the fair value of our available-for-sale securities:


(in millions)		September 30, 2022		December 31, 2021
Bonds available for sale:
U.S. government and government sponsored entities	$	7,950	$	8,194
Obligations of states, municipalities and political subdivisions		11,891		14,527
Non-U.S. governments		13,007		16,330
Corporate debt		133,336		175,608
Mortgage-backed, asset-backed and collateralized:
RMBS		18,507		27,287
CMBS		13,931		15,809
CDO/ABS		21,145		19,447
Total mortgage-backed, asset-backed and collateralized		53,583		62,543
Total bonds available for sale*	$	219,767	$	277,202

*At September 30, 2022 and December 31, 2021, the fair value of bonds available for sale held by us that were below investment grade or not rated totaled $22.4 billion and $27.0 billion, respectively.


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ITEM 2 | Investments

The following table presents the fair value of our aggregate credit exposures to non-U.S. governments for our fixed maturity securities:


(in millions)		September 30, 2022		December 31, 2021
Canada	$	1,232	$	1,233
Japan		869		1,230
Germany		807		702
France		605		731
Indonesia		468		634
United Kingdom		440		1,031
Singapore		405		362
Israel		374		515
United Arab Emirates		371		484
Chile		365		511
Other		7,135		8,973
Total	$	13,071	$	16,406

The following table presents the fair value of our aggregate European credit exposures by major sector for our fixed maturity securities:


		September 30, 2022										December 31, 2021 Total
(in millions)		Sovereign		Financial Institution		Non-Financial Corporates		Structured Products		Total
Euro-Zone countries:
Germany	$	807	$	219	$	1,971	$	—	$	2,997	$	3,610
France		605		1,257		972		—		2,834		3,870
Netherlands		183		814		987		33		2,017		2,652
Ireland		8		72		361		841		1,282		1,958
Belgium		56		249		867		40		1,212		1,620
Luxembourg		16		714		294		—		1,024		880
Spain		5		292		390		—		687		888
Italy		17		71		360		—		448		636
Denmark		212		72		131		—		415		518
Finland		31		29		36		—		96		150
Other Euro-Zone		238		—		22		—		260		379
Total Euro-Zone	$	2,178	$	3,789	$	6,391	$	914	$	13,272	$	17,161
Remainder of Europe:
United Kingdom	$	440	$	3,381	$	6,719	$	830	$	11,370	$	16,908
Switzerland		29		732		706		—		1,467		1,884
Norway		257		119		211		—		587		797
Sweden		170		171		96		—		437		537
Jersey (Channel Islands)		3		134		19		—		156		225
Russian Federation		4		—		32		—		36		359
Other - Remainder of Europe		51		28		79		—		158		261
Total - Remainder of Europe	$	954	$	4,565	$	7,862	$	830	$	14,211	$	20,971
Total	$	3,132	$	8,354	$	14,253	$	1,744	$	27,483	$	38,132


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ITEM 2 | Investments

Investments in Municipal Bonds

At September 30, 2022, the U.S. municipal bond portfolio was composed primarily of essential service revenue bonds and high-quality tax-exempt bonds with 97 percent of the portfolio rated A or higher.

The following table presents the fair values of our available for sale U.S. municipal bond portfolio by state and municipal bond type:


	September 30, 2022
(in millions)		State General Obligation		Local General Obligation		Revenue		Total Fair Value		December 31, 2021 Total Fair Value
California	$	536	$	424	$	1,602	$	2,562	$	3,108
New York		29		198		1,944		2,171		2,765
Texas		31		455		699		1,185		1,416
Illinois		76		71		698		845		1,009
Massachusetts		238		19		313		570		666
Pennsylvania		57		2		311		370		397
Georgia		91		58		197		346		474
Florida		5		—		325		330		403
Ohio		8		—		319		327		488
New Jersey		9		3		294		306		282
Virginia		9		—		269		278		380
Washington		96		6		168		270		359
Washington, D.C.		10		—		237		247		293
All other states(a)		310		148		1,626		2,084		2,487
Total(b)(c)	$	1,505	$	1,384	$	9,002	$	11,891	$	14,527

(a)We did not have material credit exposure to the government of Puerto Rico.

(b)Excludes certain university and not-for-profit entities that issue their bonds in the corporate debt market. Includes industrial revenue bonds.

(c)Includes $344 million of pre-refunded municipal bonds.

Investments in Corporate Debt Securities

The following table presents the fair value of our available for sale corporate debt securities by industry categories:


Industry Category
(in millions)		September 30, 2022		December 31, 2021
Financial institutions:
Money center/Global bank groups	$	7,945	$	10,053
Regional banks – other		386		434
Life insurance		2,164		3,094
Securities firms and other finance companies		299		350
Insurance non-life		4,889		6,795
Regional banks – North America		5,516		7,228
Other financial institutions		15,816		18,255
Utilities		17,844		24,180
Communications		8,556		11,510
Consumer noncyclical		17,727		24,411
Capital goods		6,637		8,668
Energy		10,044		13,506
Consumer cyclical		10,505		13,279
Basic		4,470		6,041
Other		20,538		27,804
Total*	$	133,336	$	175,608

*At September 30, 2022 and December 31, 2021, approximately 88 percent and 90 percent, respectively, of these investments were rated investment grade.


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ITEM 2 | Investments

Our investments in the energy category, as a percentage of total investments in available-for-sale fixed maturities, was 4.6 percent and 4.9 percent, at September 30, 2022 and December 31, 2021, respectively. While the energy investments are primarily investment grade and are actively managed, the category continues to experience volatility that could adversely affect credit quality and fair value.

Investments in RMBS

The following table presents the fair value of AIG’s RMBS available for sale securities:


(in millions)		September 30, 2022		December 31, 2021
Agency RMBS	$	7,833	$	13,778
Alt-A RMBS		4,621		5,936
Subprime RMBS		1,859		2,329
Prime non-agency		2,001		3,058
Other housing related		2,193		2,186
Total RMBS(a)(b)	$	18,507	$	27,287

(a)Includes approximately $4.7 billion and $6.1 billion at September 30, 2022 and December 31, 2021, respectively, of certain RMBS that had experienced deterioration in credit quality since their origination. For additional information on Purchased Credit Deteriorated Securities see Note 5 to the Condensed Consolidated Financial Statements.

(b)The weighted average expected life was six years at September 30, 2022 and five years at December 31, 2021.

Our underwriting practices for investing in RMBS, other asset-backed securities (ABS) and CDOs take into consideration the quality of the originator, the manager, the servicer, security credit ratings, underlying characteristics of the mortgages, borrower characteristics, and the level of credit enhancement in the transaction.

Investments in CMBS

The following table presents the fair value of our CMBS available for sale securities:


(in millions)		September 30, 2022		December 31, 2021
CMBS (traditional)	$	12,059	$	13,091
Agency		1,275		1,627
Other		597		1,091
Total	$	13,931	$	15,809

The fair value of CMBS holdings remained stable during the first nine months of 2022. The majority of our investments in CMBS are in tranches that contain substantial protection features through collateral subordination. The majority of CMBS holdings are traditional conduit transactions, broadly diversified across property types and geographical areas.

Investments in ABS/CDOs

The following table presents the fair value of our ABS/CDO available for sale securities by collateral type:



(in millions)		September 30, 2022		December 31, 2021
Collateral Type:
ABS	$	11,504	$	10,532
Bank loans (collateralized loan obligation)		9,606		8,899
Other		35		16
Total	$	21,145	$	19,447


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ITEM 2 | Investments

Unrealized Losses of Fixed Maturity Securities

The following table shows the aging of the unrealized losses of fixed maturity securities, the extent to which the fair value is less than amortized cost or cost, and the number of respective items in each category:


September 30, 2022		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)			Unrealized					Unrealized					Unrealized					Unrealized
(dollars in millions)		Cost(c)		Loss	Items(e)		Cost(c)		Loss	Items(e)		Cost(c)		Loss	Items(e)		Cost(c)		Loss (d)	Items(e)
Investment grade bonds
0-6 months	$	100,520	$	8,265	15,651	$	25,572	$	7,250	3,496	$	44	$	25	6	$	126,136	$	15,540	19,153
7-11 months		39,848		4,028	5,469		28,381		8,300	2,160		1,051		571	61		69,280		12,899	7,690
12 months or more		8,452		848	1,964		8,128		2,721	1,003		449		255	18		17,029		3,824	2,985
Total	$	148,820	$	13,141	23,084	$	62,081	$	18,271	6,659	$	1,544	$	851	85	$	212,445	$	32,263	29,828
Below investment grade bonds
0-6 months	$	7,679	$	451	2,754	$	1,232	$	352	492	$	90	$	59	33	$	9,001	$	862	3,279
7-11 months		5,150		405	2,026		883		223	190		9		5	8		6,042		633	2,224
12 months or more		2,996		187	1,016		1,081		298	301		68		46	17		4,145		531	1,334
Total	$	15,825	$	1,043	5,796	$	3,196	$	873	983	$	167	$	110	58	$	19,188	$	2,026	6,837
Total bonds
0-6 months	$	108,199	$	8,716	18,405	$	26,804	$	7,602	3,988	$	134	$	84	39	$	135,137	$	16,402	22,432
7-11 months		44,998		4,433	7,495		29,264		8,523	2,350		1,060		576	69		75,322		13,532	9,914
12 months or more		11,448		1,035	2,980		9,209		3,019	1,304		517		301	35		21,174		4,355	4,319
Total(e)	$	164,645	$	14,184	28,880	$	65,277	$	19,144	7,642	$	1,711	$	961	143	$	231,633	$	34,289	36,665

(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.

(c)For bonds, represents amortized cost net of allowance.

(d)The effect on Net income of unrealized losses after taxes will be mitigated upon realization because certain realized losses will result in current decreases in the amortization of certain DAC.

(e)Item count is by CUSIP by subsidiary.

The allowance for credit losses was $8 million for investment grade bonds and $107 million for below investment grade bonds as of September 30, 2022.

Commercial Mortgage Loans

At September 30, 2022, we had direct commercial mortgage loan exposure of $35.8 billion.

The following table presents the commercial mortgage loan exposure by location and class of loan based on amortized cost:


	Number of Loans		Class													Percent of Total
(dollars in millions)			Apartments		Offices		Retail		Industrial		Hotel		Others		Total
September 30, 2022
State:
New York	82	$	1,309	$	4,563	$	482	$	415	$	104	$	—	$	6,873	19	%
California	61		758		1,277		172		1,318		743		13		4,281	12
New Jersey	65		2,225		163		437		462		11		32		3,330	9
Texas	47		835		1,002		153		185		143		—		2,318	6
Florida	58		506		121		364		199		391		—		1,581	4
Massachusetts	15		571		366		526		23		—		—		1,486	4
Illinois	22		572		623		3		46		—		21		1,265	4
Pennsylvania	18		77		133		257		222		24		—		713	2
Washington, D.C.	11		482		183		—		—		17		—		682	2
Ohio	22		146		10		170		325		—		—		651	2
Other states	138		1,870		498		862		963		325		3		4,521	13
Foreign	96		4,121		1,489		388		1,439		387		299		8,123	23
Total*	635	$	13,472	$	10,428	$	3,814	$	5,597	$	2,145	$	368	$	35,824	100	%


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ITEM 2 | Investments


December 31, 2021
State:
New York	94	$	2,217	$	4,329	$	450	$	438	$	103	$	—	$	7,537	21	%
California	62		817		1,293		239		553		761		13		3,676	10
New Jersey	48		2,092		30		462		225		11		33		2,853	8
Texas	49		630		1,133		167		187		144		—		2,261	6
Florida	60		469		152		368		214		281		—		1,484	4
Massachusetts	13		534		290		537		24		—		—		1,385	4
Illinois	24		554		626		9		50		—		21		1,260	5
Pennsylvania	22		78		144		477		76		25		—		800	2
Washington, D.C.	11		455		184		—		—		18		—		657	2
Ohio	25		167		10		175		289		—		—		641	2
Other states	155		1,852		598		975		686		329		—		4,440	12
Foreign	86		4,402		1,341		998		1,116		449		365		8,671	24
Total*	649	$	14,267	$	10,130	$	4,857	$	3,858	$	2,121	$	432	$	35,665	100	%

*Does not reflect allowance for credit losses.

For additional information on commercial mortgage loans, see Note 6 to the Consolidated Financial Statements in the 2021 Annual Report.

Net Realized Gains and Losses

The following table presents the components of Net realized gains (losses):


Three Months Ended September 30,		2022						2021
(in millions)	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets			Total	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets			Total
Sales of fixed maturity securities	$	(67)	$	(64)	$	(131)	$	66	$	159	$	225

Change in allowance for credit losses on fixed maturity securities		(1)		7		6		3		1		4
Change in allowance for credit losses on loans		(26)		(24)		(50)		22		3		25
Foreign exchange transactions		(244)		(22)		(266)		(127)		(9)		(136)
Variable annuity embedded derivatives, net of related hedges		441		—		441		(39)		—		(39)
All other derivatives and hedge accounting		1,240		(13)		1,227		317		(15)		302
Sales of alternative investments and real estate investments		137		32		169		336		52		388
Other		24		(2)		22		101		(1)		100
Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative		1,504		(86)		1,418		679		190		869
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative		—		1,757		1,757		—		(209)		(209)
Net realized gains (losses)	$	1,504	$	1,671	$	3,175	$	679	$	(19)	$	660


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ITEM 2 | Investments


Nine Months Ended September 30,	2022						2021
(in millions)	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets			Total	Excluding Fortitude Re Funds Withheld Assets		Fortitude Re Funds Withheld Assets			Total
Sales of fixed maturity securities	$	(656)	$	(218)	$	(874)	$	200	$	549	$	749

Change in allowance for credit losses on fixed maturity securities		(101)		(34)		(135)		64		7		71
Change in allowance for credit losses on loans		(21)		(26)		(47)		130		6		136
Foreign exchange transactions		(489)		(46)		(535)		(37)		(6)		(43)
Variable annuity embedded derivatives, net of related hedges		1,401		—		1,401		(3)		—		(3)
All other derivatives and hedge accounting		3,149		(21)		3,128		332		(72)		260
Sales of alternative investments and real estate investments		160		35		195		393		53		446
Other		4		(2)		2		252		(1)		251
Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative		3,447		(312)		3,135		1,331		536		1,867
Net realized gains on Fortitude Re funds withheld embedded derivative		—		7,851		7,851		—		117		117
Net realized gains	$	3,447	$	7,539	$	10,986	$	1,331	$	653	$	1,984

Higher Net realized capital gains excluding Fortitude Re funds withheld assets in the three- and nine-month periods ended September 30, 2022 compared to same periods in the prior year were due primarily to higher derivative gains, which was partially offset by losses in sales of securities versus gains in the prior periods.

Variable annuity embedded derivatives, net of related hedges, reflected higher gains in the three- and nine-month periods ended September 30, 2022 compared to the same periods in the prior year. Fair value gains or losses in the hedging portfolio are typically not fully offset by increases or decreases in liabilities due to the non-performance or “own credit” risk adjustment used in the valuation of the variable annuities with GMWB embedded derivative, which are not hedged as part of our economic hedging program, and other risk margins used for valuation that cause the embedded derivatives to be less sensitive to changes in market rates than the hedge portfolio.

Net realized gains (losses) on Fortitude Re funds withheld assets primarily reflect changes in the valuation of the modified coinsurance and funds withheld assets. Increases in the valuation of these assets result in losses to AIG as the appreciation on the assets must under those reinsurance arrangements be transferred to Fortitude Re. Decreases in valuation of the assets result in gains to AIG as the depreciation on the assets under those reinsurance arrangements must be transferred to Fortitude Re. For additional information on the impact of the funds withheld arrangements with Fortitude Re see Note 7 to the Condensed Consolidated Financial Statements.

For additional information on market risk management related to these product features, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – Life and Retirement Companies’ Key Risks – Variable Annuity, Index Annuity and Universal Life Risk Management and Hedging Programs in the 2021 Annual Report. For additional information on the economic hedging target and the impact to pre-tax income of this program, see Insurance Reserves – Life and Annuity Future Policy Benefits, Policyholder Contract Deposits and DAC – Variable Annuity Guaranteed Benefits and Hedging Results in this MD&A.

For additional information on our investment portfolio, see Note 5 to the Condensed Consolidated Financial Statements.

Change in Unrealized Gains and Losses on Investments

The change in net unrealized gains and losses on investments in the three- and nine-month periods ended September 30, 2022 was primarily attributable to decrease in the fair value of fixed maturity securities. For the three-month period ended September 30, 2022, net unrealized losses related to fixed maturity securities were $12.1 billion due primarily to a significant increase in interest rates and widening of credit spreads. For the nine-month period ended September 30, 2022, net unrealized losses were $50.2 billion due to increase in interest rates.

The change in net unrealized gains and losses on investments in the three- and nine-month periods ended September 30, 2021 was primarily attributable to movements in interest rate and spreads. For the three-month period ended September 30, 2021, net unrealized losses related to fixed maturity securities were $2.1 billion due primarily to a rise in rates and widening spreads. For the nine-month period ending September 30, 2021, net unrealized losses related to fixed maturity securities were $7.9 billion due primarily to an increase in interest rates.

For additional information on our investment portfolio, see Note 5 to the Condensed Consolidated Financial Statements.


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ITEM 2 | Insurance Reserves

Insurance Reserves

LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (LOSS RESERVES)

The following table presents the components of our gross and net loss reserves by segment and major lines of business(a):


	September 30, 2022							December 31, 2021
(in millions)	Net liability for unpaid losses and loss adjustment expenses		Reinsurance recoverable on unpaid losses and loss adjustment expenses		Gross liability for unpaid losses and loss adjustment expenses			Net liability for unpaid losses and loss adjustment expenses	Reinsurance recoverable on unpaid losses and loss adjustment expenses		Gross liability for unpaid losses and loss adjustment expenses
General Insurance:
U.S. Workers' Compensation (net of discount)	$	2,977	$	4,685	$	7,662	$	3,282	$	5,216	$	8,498
U.S. Excess Casualty		3,707		3,771		7,478		3,850		4,195		8,045
U.S. Other Casualty		4,206		3,917		8,123		3,805		4,191		7,996
U.S. Financial Lines		5,620		1,752		7,372		5,356		1,893		7,249
U.S. Property and Special Risks		6,466		3,204		9,670		6,615		3,587		10,202
U.S. Personal Insurance		775		2,007		2,782		1,001		2,198		3,199
UK/Europe Casualty and Financial Lines		6,690		1,590		8,280		7,175		1,603		8,778
UK/Europe Property and Special Risks		2,598		1,465		4,063		2,631		1,492		4,123
UK/Europe and Japan Personal Insurance		1,685		604		2,289		1,962		608		2,570
Other product lines(b)		5,925		5,203		11,128		5,815		5,468		11,283
Unallocated loss adjustment expenses(b)		1,361		938		2,299		1,654		1,015		2,669
Total General Insurance		42,010		29,136		71,146		43,146		31,466		74,612
Other Operations Run-Off:
U.S. run-off long tail insurance lines (net of discount)		275		3,381		3,656		164		3,434		3,598
Other run-off product lines		244		56		300		264		61		325
Blackboard U.S. Holdings, Inc.		153		137		290		217		138		355
Unallocated loss adjustment expenses		13		114		127		22		114		136
Total Other Operations Run-Off		685		3,688		4,373		667		3,747		4,414
Total	$	42,695	$	32,824	$	75,519	$	43,813	$	35,213	$	79,026

(a)Includes net loss reserve discount of $946 million and $876 million as of September 30, 2022 and December 31, 2021, respectively. For information regarding loss reserve discount see Note 10 to the Condensed Consolidated Financial Statements.

(b)Other product lines and Unallocated loss adjustment expenses includes Gross liability for unpaid losses and loss adjustment expense and Reinsurance recoverable on unpaid losses and loss adjustment expense for the Fortitude Re reinsurance of $3.3 billion and $3.5 billion as of September 30, 2022 and December 31, 2021, respectively.

Prior Year Development

The following table summarizes incurred (favorable) unfavorable prior year development net of reinsurance by segment:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2022		2021		2022		2021
General Insurance:
North America	$	256	$	(49)	$	(8)	$	(165)
International		(328)		(1)		(359)		8
Total General Insurance*	$	(72)	$	(50)	$	(367)	$	(157)
Other Operations Run-Off		—		—		(1)		84
Total prior year favorable development	$	(72)	$	(50)	$	(368)	$	(73)

*Includes the amortization attributed to the deferred gain at inception from the National Indemnity Company (NICO) adverse development reinsurance agreement of $42 million and $47 million for the three-month periods ended September 30, 2022 and 2021, respectively, and $126 million and $148 million for the nine-month periods ended September 30, 2022 and 2021, respectively. Consistent with our definition of APTI, the amount excludes the portion of (favorable)/unfavorable prior year reserve development for which we have ceded the risk under the NICO reinsurance agreements of $(82) million and $(150) million for the three-month periods ended September 30, 2022 and 2021, respectively, and $(295) million and $(241) million for the nine-month periods ended September 30, 2022 and 2021, respectively. Also excludes the related changes in amortization of the deferred gain, which were $(19) million and $(34) million for the three-month periods ended September 30, 2022 and 2021, respectively, and $(89) million and $(41) million for the nine-month periods ended September 30, 2022 and 2021, respectively.


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ITEM 2 | Insurance Reserves

Net Loss Development

In the three-month period ended September 30, 2022, we recognized favorable prior year loss reserve development of $72 million. The key components of this development were:

North America

•Favorable development driven by Workers' Compensation and Property.

•Unfavorable development driven by U.S. Financial Lines.

International

•Favorable development driven by Global Specialty and Personal Lines led by Japan.

•Unfavorable development in Financial Lines and Casualty.

In the nine-month period ended September 30, 2022, we recognized favorable prior year loss reserve development of $368 million. The key components of this development were:

North America

•Favorable development driven by Workers' Compensation, short tail lines and U.S. Other Casualty.

•Unfavorable development driven by U.S. Financial Lines.

International

•Favorable development driven by Global Specialty and Japan personal Lines.

•Unfavorable development driven by Casualty and Financial Lines

In the three-month period ended September 30, 2021, we recognized favorable prior year loss reserve development of $50 million. The key components of this development were:

North America

•Strong favorable development in Personal Insurance, primarily attributable to subrogation recovery related to the 2017 and 2018 California wildfires partially offset by the impact of dropping below the attachment point of our 2018 catastrophe aggregate treaty, which also adversely impacted our U.S. Property and Special Risk Commercial Lines.

•Favorable development on U.S. Workers Compensation and Other short-tailed commercial lines reflecting lower frequency and severity in recent calendar years.

•Amortization benefit of $47 million related to the deferred gain on the adverse development cover.

•Reserve strengthening within U.S. Financial Lines, reflecting higher severity of claims in Directors & Officers, principally from accident years 2018 and prior.

International

•Favorable development on short-tailed International Commercial Lines and Personal Insurance, reflecting lower frequency and severity of claims. Adverse development on Property and Other short-tail lines.

•Reserve strengthening on International Financial Lines, reflecting higher severity of claims, the majority of which is from accident years 2018 and prior.

In the nine-month period ended September 30, 2021, we recognized favorable prior year loss reserve development of $73 million. The key components of this development were:

North America

•Favorable development on U.S. Workers Compensation and Other short-tailed commercial lines reflecting lower frequency and severity in recent calendar years.

•Amortization benefit of $148 million related to the deferred gain on the adverse development cover.

•Reserve strengthening within U.S. Financial Lines, reflecting higher severity of claims in Directors & Officers, principally from accident years 2018 and prior.


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ITEM 2 | Insurance Reserves

International

•Favorable development on short-tailed International Commercial Lines and Personal Insurance, reflecting lower frequency and severity of claims.

•Reserve strengthening on International Financial Lines, reflecting higher severity of claims, the majority of which is from accident years 2018 and prior.

Other Operations

•Unfavorable development primarily attributed to the Blackboard insurance portfolio due to increased severity on reported claims.

The following tables summarize incurred (favorable) unfavorable prior year development net of reinsurance, by segment and major lines of business, and by accident year groupings:


Three Months Ended September 30, 2022
(in millions)		Total		2021		2020 & Prior
General Insurance North America:
U.S. Workers' Compensation	$	(201)	$	(10)	$	(191)
U.S. Excess Casualty		23		—		23
U.S. Other Casualty		(37)		5		(42)
U.S. Financial Lines		653		—		653
U.S. Property and Special Risks		(103)		(106)		3
U.S. Personal Insurance		(22)		14		(36)
Other Product Lines		(57)		(10)		(47)
Total General Insurance North America	$	256	$	(107)	$	363
General Insurance International:
UK/Europe Casualty and Financial Lines	$	68	$	(2)	$	70
UK/Europe Property and Special Risks		(139)		(4)		(135)
UK/Europe and Japan Personal Insurance		(96)		(56)		(40)
Other product lines		(161)		(90)		(71)
Total General Insurance International	$	(328)	$	(152)	$	(176)
Other Operations Run-Off		—		—		—
Total Prior Year (Favorable) Unfavorable Development	$	(72)	$	(259)	$	187


Three Months Ended September 30, 2021
(in millions)		Total		2020		2019 & Prior
General Insurance North America:
U.S. Workers' Compensation	$	(211)	$	(27)	$	(184)
U.S. Excess Casualty		19		6		13
U.S. Other Casualty		31		65		(34)
U.S. Financial Lines		466		(4)		470
U.S. Property and Special Risks		136		(25)		161
U.S. Personal Insurance		(380)		(33)		(347)
Other Product Lines		(110)		(40)		(70)
Total General Insurance North America	$	(49)	$	(58)	$	9
General Insurance International:
UK/Europe Casualty and Financial Lines	$	175	$	62	$	113
UK/Europe Property and Special Risks		(69)		(47)		(22)
UK/Europe and Japan Personal Insurance		(158)		(141)		(17)
Other product lines		51		(5)		56
Total General Insurance International	$	(1)	$	(131)	$	130
Other Operations Run-Off		—		—		—
Total Prior Year (Favorable) Unfavorable Development	$	(50)	$	(189)	$	139


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ITEM 2 | Insurance Reserves


Nine Months Ended September 30, 2022
(in millions)		Total		2021		2020 & Prior
General Insurance North America:
U.S. Workers' Compensation	$	(386)	$	(19)	$	(367)
U.S. Excess Casualty		3		—		3
U.S. Other Casualty		(89)		5		(94)
U.S. Financial Lines		639		—		639
U.S. Property and Special Risks		(79)		(181)		102
U.S. Personal Insurance		(28)		16		(44)
Other Product Lines		(68)		(23)		(45)
Total General Insurance North America	$	(8)	$	(202)	$	194
General Insurance International:
UK/Europe Casualty and Financial Lines	$	73	$	(4)	$	77
UK/Europe Property and Special Risks		(155)		(26)		(129)
UK/Europe and Japan Personal Insurance		(109)		(69)		(40)
Other product lines		(168)		(76)		(92)
Total General Insurance International	$	(359)	$	(175)	$	(184)
Other Operations Run-Off		(1)		—		(1)
Total Prior Year (Favorable) Unfavorable Development	$	(368)	$	(377)	$	9

Nine Months Ended September 30, 2021
(in millions)		Total		2020		2019 & Prior
General Insurance North America:
U.S. Workers' Compensation	$	(316)	$	(14)	$	(302)
U.S. Excess Casualty		(5)		6		(11)
U.S. Other Casualty		32		63		(31)
U.S. Financial Lines		487		(4)		491
U.S. Property and Special Risks		156		(34)		190
U.S. Personal Insurance		(402)		(42)		(360)
Other Product Lines		(117)		(46)		(71)
Total General Insurance North America	$	(165)	$	(71)	$	(94)
General Insurance International:
UK/Europe Casualty and Financial Lines	$	183	$	61	$	122
UK/Europe Property and Special Risks		(79)		(48)		(31)
UK/Europe and Japan Personal Insurance		(162)		(145)		(17)
Other product lines		66		13		53
Total General Insurance International	$	8	$	(119)	$	127
Other Operations Run-Off		84		33		51
Total Prior Year (Favorable) Unfavorable Development	$	(73)	$	(157)	$	84

We note that for certain categories of claims (e.g., construction defect claims and environmental claims) and for reinsurance recoverable, losses may sometimes be reclassified to an earlier or later accident year as more information about the date of occurrence becomes available to us.

Significant Reinsurance Agreements

In the first quarter of 2017, we entered into an adverse development reinsurance agreement with NICO, under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. Commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the losses on subject business paid on or after January 1, 2016 in excess of $25 billion of net paid losses, up to an aggregate limit of $25 billion. We account for this transaction as retroactive reinsurance. This transaction resulted in a gain, which under GAAP retroactive reinsurance accounting is deferred and amortized into income over the settlement period. NICO created a collateral trust account as security for their claim payment obligations to us, into which they deposited the consideration paid under the agreement, and Berkshire Hathaway Inc. has provided a parental guarantee to secure NICO’s obligations under the agreement.

For a description of AIG’s catastrophe reinsurance protection for 2021, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – General Insurance Companies’ Key Risks – Natural Catastrophe Risk in the 2021 Annual Report.


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ITEM 2 | Insurance Reserves

The table below shows the calculation of the deferred gain on the adverse development reinsurance agreement as of September 30, 2022 and as of December 31, 2021, showing the effect of discounting of loss reserves and amortization of the deferred gain.


(in millions)		September 30, 2022		December 31, 2021
Gross Covered Losses
Covered reserves before discount	$	12,730	$	14,398
Inception to date losses paid		28,322		27,023
Attachment point		(25,000)		(25,000)
Covered losses above attachment point	$	16,052	$	16,421
Deferred Gain Development
Covered losses above attachment ceded to NICO (80%)	$	12,842	$	13,137
Consideration paid including interest		(10,188)		(10,188)
Pre-tax deferred gain before discount and amortization		2,654		2,949
Discount on ceded losses(a)		(879)		(953)
Pre-tax deferred gain before amortization		1,775		1,996
Inception to date amortization of deferred gain at inception		(1,223)		(1,097)
Inception to date amortization attributed to changes in deferred gain(b)		74		(30)
Deferred gain liability reflected in AIG's balance sheet	$	626	$	869

(a)The accretion of discount and a reduction in effective interest rates is offset by changes in estimates of the amount and timing of future recoveries.

(b)Excluded from APTI.

The following table presents the rollforward of activity in the deferred gain from the adverse development reinsurance agreement:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2022		2021		2022		2021
Balance at beginning of period, net of discount	$	709	$	1,186	$	869	$	1,297
(Favorable) unfavorable prior year reserve development ceded to NICO(a)		(82)		(150)		(295)		(241)
Amortization attributed to deferred gain at inception(b)		(42)		(47)		(126)		(148)
Amortization attributed to changes in deferred gain(c)		24		39		104		64
Changes in discount on ceded loss reserves		17		22		74		78
Balance at end of period, net of discount	$	626	$	1,050	$	626	$	1,050

(a)Prior year reserve development ceded to NICO under the retroactive reinsurance agreement is deferred under GAAP.

(b)Represents amortization of the deferred gain recognized in APTI.

(c)Excluded from APTI.

The lines of business subject to this agreement include those with longer tails, which carry a higher degree of uncertainty. Since inception, there have been periods of unfavorable prior year development, with more recent favorable development. This agreement will continue to reduce the impact of volatility in the development on our ultimate loss estimates over time. The agreement has resulted in lower capital charges for reserve risks at our U.S. insurance subsidiaries. In addition, net investment income declined as a result of lower invested assets.

Fortitude Re was established during the first quarter of 2018 in a series of reinsurance transactions related to our run-off operations. Those reinsurance transactions were designed to consolidate most of our Insurance run-off lines into a single legal entity. As of September 30, 2022, approximately $29.1 billion of reserves from our Life and Retirement Run-Off Lines and approximately $3.5 billion of reserves from our General Insurance Run-Off Lines related to business written by multiple wholly-owned AIG subsidiaries, had been ceded to Fortitude Re under these reinsurance transactions.


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ITEM 2 | Insurance Reserves

Of the Fortitude Re reinsurance agreements, the largest is the Amended and Restated Combination Coinsurance and Modified Coinsurance Agreement by and between our subsidiary AGL and Fortitude Re. Under this treaty, approximately $22.2 billion of AGL reserves as of September 30, 2022 were ceded to Fortitude Re representing a mix of life and annuity risks. Fortitude Re provides 100 percent reinsurance of the ceded risks. AGL retains the risk of collection of any third party reinsurance covering the ceded business. At effectiveness of the treaty, an amount equal to the aggregate ceded reserves was deposited by AGL into a modified coinsurance account of AGL to secure the obligations of Fortitude Re. Fortitude Re receives or makes quarterly payments that represent the net gain or loss under the treaty for the relevant quarter, including any net investment gain or loss on the assets in the modified coinsurance account. An AIG affiliate will serve as portfolio manager of assets in the modified coinsurance account for a minimum of three years after the June 2, 2020 closing of the sale of our majority interest in Fortitude Group Holdings, LLC.

Following receipt of all regulatory approvals and the satisfaction of other conditions, effective as of January 1, 2022, AIG sold to an affiliate of Fortitude Re all of the outstanding capital stock of two servicing companies that administer the Life and Retirement and General Insurance ceded business, and the ceding insurers entered into administrative services agreements pursuant to which AIG transferred administration of certain Life and Retirement and General Insurance ceded business to such companies.

For a summary of significant reinsurers see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – Reinsurance Activities – Reinsurance Recoverable in the 2021 Annual Report.

LIFE AND ANNUITY FUTURE POLICY BENEFITS, POLICYHOLDER CONTRACT DEPOSITS AND DAC

The following section provides discussion of life and annuity future policy benefits, policyholder contract deposits and deferred policy acquisition costs.

Update of Actuarial Assumptions and Models

The life insurance companies review and update actuarial assumptions at least annually, generally in the third quarter.

Investment-Oriented Products

The life insurance companies review and update estimated gross profit assumptions used to amortize DAC and related items (which may include VOBA, SIA and unearned revenue reserves) as well as assessments used to accrue guaranteed benefit reserves at least annually. Estimated gross profit projections include assumptions for investment-related returns and spreads (including investment expenses), product-related fees and expenses, mortality gains and losses, policyholder behavior and other factors. In estimating future gross profits, lapse assumptions require judgment and can have a material impact on DAC amortization. If the assumptions used for estimated gross profits change significantly, DAC and related reserves are recalculated using the new projections, and any resulting adjustment is included in income. Updating such projections may result in acceleration of amortization in some products and deceleration of amortization in other products.

The life insurance companies also review assumptions related to their respective GMWB living benefits that are accounted for as embedded derivatives and measured at fair value. The fair value of these embedded derivatives is based on actuarial assumptions, including policyholder behavior, as well as capital market assumptions.

Various assumptions were updated, including the following effective September 30, 2022:

•Expected lapses increased primarily due to the impact of higher interest rates for fixed annuities in Individual Retirement; and

•Interest rates and equity correlation used to generate risk neutral path for variable annuities in Individual Retirement and Group Retirement decreased resulting in a reduction of GMWB embedded derivatives.

Traditional long-duration products

For long-duration traditional products, which include whole life insurance, term life insurance, accident and health insurance, long‑term care insurance, and life-contingent single premium immediate annuities and structured settlements, a “lock-in” principle applies. The assumptions used to calculate the benefit liabilities and DAC are set when a policy is issued and do not change with changes in actual experience, unless a loss recognition event occurs. A loss recognition event occurs when current liabilities together with expected future premiums are not sufficient to provide for all future benefits, expenses, and DAC amortization, net of reinsurance. A loss recognition event is driven by observed changes in actual experience or estimates differing significantly from “locked-in” assumptions. Underlying assumptions, including interest rates, are reviewed periodically and updated as appropriate for loss recognition testing purposes. As it relates to business ceded to Fortitude Re, as our accounting policy is to include reinsurance balances when performing loss recognition testing and as there will be no future profits recognized on this business, we will not incur any future loss recognition events related to business ceded to Fortitude Re, absent any decisions by us to recapture the business. The net increases (decreases) to pre-tax income and adjusted pre-tax income as a result of the update of actuarial assumptions for the three- and nine-month periods ended September 30, 2022 and 2021 are shown in the following tables.


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ITEM 2 | Insurance Reserves

The following table presents the decrease in pre-tax income resulting from the update of actuarial assumptions in the life insurance companies, by line item as reported in Results of Operations:


Nine Months Ended September 30,
(in millions)		2022		2021
Premiums	$	—	$	(41)
Policy fees		(3)		(74)
Interest credited to policyholder account balances		(15)		(50)
Amortization of deferred policy acquisition costs		(56)		(139)

Policyholder benefits and losses incurred		17		138
Decrease in adjusted pre-tax income		(57)		(166)
Change in DAC related to net realized gains and losses		(19)		57
Net realized gains (losses)		70		(100)
Decrease in pre-tax income	$	(6)	$	(209)

The following table presents the increase (decrease) in adjusted pre-tax income resulting from the update of actuarial assumptions for the life insurance companies, by segment and product line:


Nine Months Ended September 30,
(in millions)		2022		2021
Life and Retirement:
Individual Retirement
Fixed annuities	$	(83)	$	(274)
Variable and indexed annuities		(3)		4
Total Individual Retirement		(86)		(270)
Group Retirement		2		(2)
Life Insurance		24		106
Institutional Markets		3		—
Total decrease in adjusted pre-tax income from update of assumptions	$	(57)	$	(166)

For the period ended September 30, 2022, adjusted pre-tax income included a net unfavorable update of $57 million, primarily in fixed annuities driven by the impact of higher interest rates on expected lapses.

For the period ended September 30, 2021, adjusted pre-tax income included a net unfavorable update of 166 million, primarily in fixed annuities driven by changes to earned rates causing spread compression partially offset by favorable updates to full surrender assumptions, and updates to the Life Insurance reserves for universal life with secondary guarantees and similar features (excluding base policy liabilities and embedded derivatives) model.

The updates related to the update of actuarial assumptions in each period are discussed by business segment below.

Update of Actuarial Assumptions by Business Segment Impact to Adjusted Pre-tax Income (Loss)

Individual Retirement

The annual update of actuarial assumptions resulted in net unfavorable impact to adjusted pre-tax income of Individual Retirement of $86 million and $270 million for the periods ended September 30, 2022 and 2021, respectively.

For the period ended September 30, 2022, in fixed annuities, the impact of higher interest rates on expected lapses resulted in a net unfavorable impact of $83 million. For the period ended September 30, 2021, the update of estimated gross profit assumptions resulted in a net unfavorable impact of $274 million which reflected lower projected investment earnings.

For the period ended September 30, 2022, in variable and index annuities, the update of assumptions resulted in a net unfavorable impact of $3 million due to a small model refinement. For the period ended September 30, 2021, the update of estimated gross profit assumptions resulted in a net favorable impact of $4 million, driven by lower assumed lapses. These updates were largely offset by lower projected investment earnings.

Group Retirement

For the period ended September 30, 2022, in Group Retirement, the update of assumptions resulted in a net favorable impact of $2 million. For the period ended September 30, 2021, the update of estimated gross profit assumptions resulted in a net unfavorable impact of $2 million, driven primarily in the variable annuities line by lower projected investment earnings, largely offset by resetting the reversion to the mean rate.


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Life Insurance

For the period ended September 30, 2022, in Life Insurance, the update of actuarial assumptions resulted in a net favorable impact of $24 million, primarily driven by modeling refinements to reflect actual vs expected asset data related to calls and capital gains. For the period ended September 30, 2021, for the update of actuarial assumptions resulted in a net favorable impact of $106 million, primarily driven by updates to the reserves for universal life with secondary guarantees and similar features (excluding base policy liabilities and embedded derivatives), which was partially offset by lower projected investment earnings and model updates involving reinsurance.

Institutional Markets

For the period ended September 30, 2022, in Institutional Markets, the update of actuarial assumptions resulted in a net favorable impact of $3 million, primarily driven by updates to our corporate- and bank-owned life insurance products.

Variable Annuity Guaranteed Benefits and Hedging Results

Our Individual Retirement and Group Retirement businesses offer variable annuity products with GMWB riders that provide guaranteed living benefit features. The liabilities for GMWB are accounted for as embedded derivatives measured at fair value. The fair value of the embedded derivatives may fluctuate significantly based on market interest rates, equity prices, credit spreads, market volatility, policyholder behavior and other factors.

In addition to risk-mitigating features in our variable annuity product design, we have an economic hedging program designed to manage market risk from GMWB, including exposures to changes in interest rates, equity prices, credit spreads and volatility. The hedging program utilizes derivative instruments, including but not limited to equity options, futures contracts and interest rate swap and swaption contracts, as well as fixed maturity securities with a fair value election.

For additional information on market risk management related to these product features see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – Life and Retirement Companies’ Key Risks – Variable Annuity, Index Annuity and Universal Life Risk Management and Hedging Programs in the 2021 Annual Report.

Differences in Valuation of Embedded Derivatives and Economic Hedge Target

The variable annuity hedging program utilizes an economic hedge target, which represents an estimate of the underlying economic risks in our GMWB riders. The economic hedge target differs from the GAAP valuation of the GMWB embedded derivatives, creating volatility in our net income (loss) primarily due to the following:

•The economic hedge target includes 100 percent of rider fees in present value calculations; the GAAP valuation reflects only those fees attributed to the embedded derivative such that the initial value at contract issue equals zero;

•The economic hedge target uses best estimate actuarial assumptions and excludes explicit risk margins used for GAAP valuation, such as margins for policyholder behavior, mortality, and volatility; and

•The economic hedge target excludes the non-performance or “own credit” risk adjustment used in the GAAP valuation, which reflects a market participant’s view of our claims-paying ability by incorporating a different spread (the NPA spread) to the curve used to discount projected benefit cash flows. Because the discount rate includes the NPA spread and other explicit risk margins, the GAAP valuation has different sensitivities to movements in interest rates and other market factors, and to changes from actuarial assumption updates, than the economic hedge target. For additional information on our valuation methodology for embedded derivatives within policyholder contract deposits, see Note 4 to the Condensed Consolidated Financial Statements.

The market value of the hedge portfolio compared to the economic hedge target at any point in time may be different and is not expected to be fully offsetting. In addition to the derivatives held in conjunction with the variable annuity hedging program, the Life and Retirement companies have cash and invested assets available to cover future claims payable under these guarantees. The primary sources of difference between the change in the fair value of the hedging portfolio and the economic hedge target include:

•Basis risk due to the variance between expected and actual fund returns, which may be either positive or negative;

•Realized volatility versus implied volatility;

•Actual versus expected changes in the hedge target driven by assumptions not subject to hedging, particularly policyholder behavior; and

•Risk exposures that we have elected not to explicitly or fully hedge.


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ITEM 2 | Insurance Reserves

The following table presents a reconciliation between the fair value of the GAAP embedded derivatives and the value of our economic hedge target:


(in millions)		September 30, 2022		December 31, 2021
Reconciliation of embedded derivatives and economic hedge target:
Embedded derivative liability	$	698	$	2,472
Exclude non-performance risk adjustment		(2,737)		(2,508)
Embedded derivative liability, excluding NPA		3,435		4,980
Adjustments for risk margins and differences in valuation		(2,523)		(2,172)
Economic hedge target liability	$	912	$	2,808

Impact on Pre-tax Income (Loss)

The impact on our pre-tax income (loss) of variable annuity guaranteed living benefits and related hedging results includes changes in the fair value of the GMWB embedded derivatives, and changes in the fair value of related derivative hedging instruments, both of which are recorded in Net realized gains (losses). Realized gains (losses), as well as net investment income from changes in the fair value of fixed maturity securities used in the hedging program, are excluded from adjusted pre-tax income of Individual Retirement and Group Retirement.

The change in the fair value of the embedded derivatives and the change in the value of the hedging portfolio are not expected to be fully offsetting, primarily due to the differences in valuation between the economic hedge target, the GAAP embedded derivatives and the fair value of the hedging portfolio, as discussed above. When corporate credit spreads widen, the change in the NPA spread generally reduces the fair value of the embedded derivative liabilities, resulting in a gain, and when corporate credit spreads narrow or tighten, the change in the NPA spread generally increases the fair value of the embedded derivative liabilities, resulting in a loss. In addition to changes driven by credit market-related movements in the NPA spread, the NPA balance also reflects changes in business activity and in the net amount at risk from the underlying guaranteed living benefits.

The following table presents the net increase (decrease) to consolidated pre-tax income (loss) from changes in the fair value of the GMWB embedded derivatives and related hedges, excluding related DAC amortization:


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in millions)		2022		2021		2022		2021
Change in fair value of embedded derivatives, excluding updated of actuarial assumptions and NPA	$	722	$	219	$	2,056	$	2,136
Change in fair value of variable annuity hedging portfolio:
Fixed maturity securities*		6		12		29		43
Interest rate derivative contracts		(479)		(140)		(2,071)		(784)
Equity derivative contracts		194		12		1,109		(768)
Change in fair value of variable annuity hedging portfolio		(279)		(116)		(933)		(1,509)
Change in fair value of embedded derivatives, excluding updated of actuarial assumptions and NPA, net of hedging portfolio		443		103		1,123		627
Change in fair value of embedded derivatives due to NPA spread		216		(43)		1,188		(136)
Change in fair value of embedded derivatives due to change in NPA volume		(290)		(27)		(959)		(391)
Change in fair value of embedded derivatives due to update of actuarial assumptions		79		(60)		79		(60)
Total change due to update of actuarial assumptions and NPA		5		(130)		308		(587)
Net impact on pre-tax income (loss)	$	448	$	(27)	$	1,431	$	40
Impact to Condensed Consolidated Income Statement
Net investment income, net of related interest credited to policyholder account balances	$	6	$	12	$	29	$	43
Net realized gains (losses)		442		(39)		1,402		(3)
Net impact on pre-tax income (loss)	$	448	$	(27)	$	1,431	$	40
Net change in value of economic hedge target and related hedges
Net impact on economic gains (losses)	$	476	$	58	$	845	$	135

*The change in fair value of available-for-sale fixed maturity securities recognized as a component of other comprehensive income (loss) were losses of $120 million and $550 million for the three- and nine-month periods ended September 30, 2022 due to higher interest rates and wider credit spreads. The change in fair value of available-for-sale fixed maturity securities recognized as a component of other comprehensive income (loss) were losses of $23 million for the three-month period ended September 30, 2021 and losses of $134 million for the nine-month period ended September 30, 2021, due to higher interest rates.


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The three-month period ended September 30, 2022 net impact on pre-tax income (loss) of $448 million resulted from:

•$443 million gain in the fair value of embedded derivatives excluding NPA, net of the hedging portfolio was driven by increases in interest rates, partially offset by lower equity markets.

•$74 million loss due to NPA was driven by the impact of higher interest rates that resulted in NPA volume losses from lower expected GMWB payments, partially offset by widening of the NPA credit spread.

•$79 million gain from the review and update of actuarial assumptions.

On an economic basis, the changes in the fair value of the hedge portfolio were partially offset by the changes in the economic hedge target. In the three months ended September 30, 2022, we had a net mark-to-market gain of approximately $476 million from our hedging activities related to our economic hedge target primarily driven by widening credit spreads and update of actuarial assumptions.

The nine-month period ended September 30, 2022 net impact on pre-tax income (loss) of $1,431 million resulted from:

•$1,123 million gain in the fair value of embedded derivatives excluding NPA, net of the hedging portfolio was driven by increases in interest rates, partially offset by lower equity markets.

•$229 million gain due to NPA was driven by a widening of the NPA credit spread, partially offset by the impact of higher interest rates that resulted in NPA volume losses from lower expected GMWB payments.

•$79 million gain from the review and update of actuarial assumptions.

On an economic basis, the changes in the fair value of the hedge portfolio were partially offset by the changes in the economic hedge target. In the nine months ended September 30, 2022, we had a net mark-to-market gain of approximately $845 million from our hedging activities related to our economic hedge target primarily driven by widening credit spreads and update of actuarial assumptions.

The three-month period ended September 30, 2021 net impact on pre-tax income (loss) of $(27) million resulted from:

•$103 million gain in the fair value of embedded derivatives excluding NPA, net of the hedging portfolio was driven by impact of higher interest rates and higher equity markets.

•$70 million loss due to NPA driven by a tightening of the NPA credit spread and the impact of higher interest rates that resulted in NPA volume losses from lower expected GMWB payments.

•$60 million loss from the review and update of actuarial assumptions

On an economic basis, the changes in the fair value of the hedge portfolio were partially offset by the changes in the economic hedge target. In the three months ended September 30, 2021, we had a net mark-to-market gain of approximately $58 million from our hedging activities related to our economic hedge target primarily driven by higher equity markets, partially offset by losses from the review and update of actuarial assumptions.

The nine-month period ended September 30, 2021 net impact on pre-tax income (loss) of $40 million resulted from:

•$627 million gain in the fair value of embedded derivatives excluding NPA, net of the hedging portfolio was driven by increases in interest rates and higher equity markets.

•$527 million loss due to NPA was driven by a tightening of the NPA credit spread, and the impact of higher interest rates that resulted in NPA volume losses from lower expected GMWB payments.

•$60 million loss from the review and update of actuarial assumptions

On an economic basis, the changes in the fair value of the hedge portfolio were partially offset by the changes in the economic hedge target. In the nine months ended September 30, 2021, we had a net mark-to-market gain of approximately $135 million from our hedging activities related to our economic hedge target primarily driven by higher equity markets, partially offset by losses from the review and update of actuarial assumptions.

Change in Economic Hedge Target

The decrease in the economic hedge target liability in the three- and nine-month periods ended September 30, 2022 was primarily driven by higher interest rates and widening credit spreads, offset by lower equity markets. The decrease in the economic hedge target liability in the three- and nine-month periods ended September 30, 2021 was primarily driven higher interest rates and rising equity markets, partially offset by losses from the review and update of actuarial assumptions.


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ITEM 2 | Insurance Reserves

Change in Fair Value of the Hedging Portfolio

The changes in the fair value of the economic hedge target and, to a lesser extent, the embedded derivative valuation under GAAP, were offset in part by the following changes in the fair value of the variable annuity hedging portfolio:

•Changes in the fair value of interest rate derivative contracts, which included swaps, swaptions and futures, resulted in losses driven by higher interest rates in the three- and nine-month periods ended September 30, 2022 and 2021.

•Changes in the fair value of equity derivative contracts, which included futures and options, resulted in gains in three- and nine-month periods ended September 30, 2022 driven by the decline in the equity market compared to gains in the three-month period ended September 30, 2021 and losses in nine-month period ended September 30, 2021, primarily due to gains in the equity market.

•Changes in the fair value of fixed maturity securities, primarily corporate bonds, are used as a capital-efficient way to economically hedge interest rate and credit spread-related risk. The change in the fair value of the corporate bond hedging program in the three- and nine-month periods ended September 30, 2022 reflected losses due to increases in interest rates and widening credit spreads. The change in the fair value of the corporate bond hedging program in the three- and nine-month periods ended September 30, 2021 reflected losses due to higher interest rates.

DAC

The following table summarizes the major components of the changes in DAC, including VOBA, within the Life and Retirement companies:


Nine Months Ended September 30,
(in millions)		2022		2021
Balance, beginning of year	$	8,086	$	7,316

Acquisition costs deferred		742		788
Amortization expense:
Update of assumptions included in adjusted pre-tax income		(56)		(139)
Related to realized gains and losses		(418)		(56)
All other operating amortization		(840)		(636)
Increase (decrease) in DAC due to foreign exchange		(129)		(10)
Change related to unrealized depreciation (appreciation) of investments		5,961		706
Balance, end of period(a)	$	13,346	$	7,969

(a)DAC balance excluding the amount related to unrealized depreciation (appreciation) of investments was $9.8 billion and $10.4 billion at September 30, 2022 and 2021, respectively.

DAC and Reserves Related to Unrealized Appreciation of Investments

DAC and Reserves for universal life insurance and investment-oriented products are adjusted at each balance sheet date to reflect the change in DAC, unearned revenue, and benefit reserves with an offset to Other comprehensive income (loss) (OCI) as if securities available for sale had been sold at their stated aggregate fair value and the proceeds reinvested at current yields (changes related to unrealized appreciation (depreciation) of investments). Similarly, for long-duration traditional products, significant unrealized appreciation of investments in a sustained low interest rate environment may cause additional future policy benefit liabilities with an offset to OCI to be recorded.

Changes related to unrealized appreciation (depreciation) of investments related to DAC and unearned revenue generally move in the opposite direction of the change in unrealized appreciation of the available for sale securities portfolio, reducing the reported DAC and unearned revenue balance when market interest rates decline. Conversely, changes related to unrealized appreciation (depreciation) of investments related to benefit reserves generally move in the same direction as the change in unrealized appreciation of the available for sale securities portfolio, increasing reported future policy benefit liabilities balance when market interest rates decline.

Market conditions in the nine-month period ended September 30, 2022 drove a $42.0 billion decrease in the unrealized appreciation of the available for sale fixed maturity securities portfolio held to support the Life and Retirement businesses at September 30, 2022 compared to December 31, 2021. At September 30, 2022, the changes related to unrealized appreciation (depreciation) of investments reflected increases in amortized balances including DAC and unearned revenue reserves, while accrued liabilities such as policyholder benefit liabilities decreased $3.1 billion from December 31, 2021.


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ITEM 2 | Insurance Reserves

Reserves

The following table presents a rollforward of insurance reserves by operating segments for Life and Retirement, including future policy benefits, policyholder contract deposits, other policyholder funds, and separate account liabilities, as well as Retail Mutual Funds and Group Retirement mutual fund assets under administration:


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(in millions)		2022		2021		2022		2021
Individual Retirement
Balance at beginning of period, gross	$	136,618	$	152,459	$	148,492	$	148,837
Premiums and deposits		3,792		3,257		11,293		10,608
Surrenders and withdrawals		(2,447)		(2,473)		(6,881)		(8,822)
Death and other contract benefits		(649)		(689)		(2,214)		(2,342)
Subtotal		137,314		152,554		150,690		148,281
Change in fair value of underlying assets and reserve accretion, net of policy fees		(3,224)		(564)		(16,565)		2,970
Cost of funds(a)		459		421		1,327		1,250
Other reserve changes		(243)		167		(1,146)		77
Less the sale of retail mutual fund assets		—		(7,009)		—		(7,009)
Balance at end of period		134,306		145,569		134,306		145,569
Reinsurance ceded		(311)		(311)		(311)		(311)
Total Individual Retirement insurance reserves and mutual fund assets	$	133,995	$	145,258	$	133,995	$	145,258
Group Retirement
Balance at beginning of period, gross	$	102,530	$	116,942	$	118,492	$	110,651
Premiums and deposits		2,039		1,831		5,699		5,904
Surrenders and withdrawals		(2,610)		(2,638)		(7,157)		(7,385)
Death and other contract benefits		(217)		(207)		(697)		(655)
Subtotal		101,742		115,928		116,337		108,515
Change in fair value of underlying assets and reserve accretion, net of policy fees		(3,321)		(619)		(18,417)		6,430
Cost of funds(a)		285		287		844		851
Other reserve changes		64		(57)		6		(257)
Balance at end of period		98,770		115,539		98,770		115,539

Total Group Retirement insurance reserves and mutual fund assets	$	98,770	$	115,539	$	98,770	$	115,539
Life Insurance
Balance at beginning of period, gross	$	26,714	$	28,307	$	28,415	$	27,998
Premiums and deposits		1,057		1,045		3,163		3,130
Surrenders and withdrawals		(165)		(113)		(429)		(373)
Death and other contract benefits		(118)		(136)		(392)		(447)
Subtotal		27,488		29,103		30,757		30,308
Change in fair value of underlying assets and reserve accretion, net of policy fees		(300)		(228)		(1,034)		(634)
Cost of funds(a)		84		88		256		265
Other reserve changes		(1,122)		(793)		(3,829)		(1,769)
Balance at end of period		26,150		28,170		26,150		28,170
Reinsurance ceded		(1,528)		(1,504)		(1,528)		(1,504)
Total Life Insurance reserves	$	24,622	$	26,666	$	24,622	$	26,666
Institutional Markets
Balance at beginning of period, gross	$	30,114	$	27,999	$	30,264	$	27,342
Premiums and deposits		1,897		994		2,774		2,715
Surrenders and withdrawals		(365)		(15)		(434)		(934)
Death and other contract benefits		(309)		(254)		(815)		(656)
Subtotal		31,337		28,724		31,789		28,467
Change in fair value of underlying assets and reserve accretion, net of policy fees		(44)		155		(220)		600
Cost of funds(a)		85		75		215		221
Other reserve changes		(306)		(8)		(712)		(342)
Balance at end of period		31,072		28,946		31,072		28,946
Reinsurance ceded		(45)		(45)		(45)		(45)
Total Institutional Markets reserves	$	31,027	$	28,901	$	31,027	$	28,901


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ITEM 2 | Insurance Reserves


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(in millions)		2022		2021		2022		2021












Total insurance reserves and mutual fund assets
Balance at beginning of period, gross	$	295,976	$	325,707	$	325,663	$	314,828
Premiums and deposits		8,785		7,127		22,929		22,357
Surrenders and withdrawals		(5,587)		(5,239)		(14,901)		(17,514)
Death and other contract benefits		(1,293)		(1,286)		(4,118)		(4,100)
Subtotal		297,881		326,309		329,573		315,571
Change in fair value of underlying assets and reserve accretion, net of policy fees		(6,889)		(1,256)		(36,236)		9,366
Cost of funds(a)		913		871		2,642		2,587
Other reserve changes		(1,607)		(691)		(5,681)		(2,291)
Less the sale of retail mutual fund assets		—		(7,009)		—		(7,009)
Balance at end of period, excluding Fortitude Re reserves		290,298		318,224		290,298		318,224
Fortitude Re reserves(b)		27,300		27,833		27,300		27,833
Balance at end of period, including Fortitude Re reserves		317,598		346,057		317,598		346,057
Fortitude Re reinsurance ceded(b)		(27,300)		(27,833)		(27,300)		(27,833)
Reinsurance ceded		(1,884)		(1,860)		(1,884)		(1,860)
Total insurance reserves and mutual fund assets	$	288,414	$	316,364	$	288,414	$	316,364

(a)Excludes amortization of deferred sales inducements.

(b)Includes amounts related to policies where AIG has partially ceded to other reinsurers and Fortitude Re.

Insurance reserves and Group Retirement mutual fund assets under administration, were comprised of the following balances:


(in millions)		September 30, 2022	December 31, 2021
Future policy benefits	$	55,408	$	57,749
Policyholder contract deposits		157,733		156,844
Other policyholder funds(a)		1,013		833
Separate account liabilities		81,302		109,111
Total insurance reserves		295,456		324,537
Mutual fund assets		22,142		28,780
Total insurance reserves and mutual fund assets	$	317,598	$	353,317

(a)Excludes unearned revenue liability.


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ITEM 2 | Liquidity and Capital Resources

Liquidity and Capital Resources

OVERVIEW

Liquidity refers to the ability to generate sufficient cash resources to meet our payment obligations. It is defined as cash and unencumbered assets that can be monetized in a short period of time at a reasonable cost. Our liquidity risk framework is designed to manage liquidity at both AIG Parent and its subsidiaries to meet our financial obligations for a minimum of six months under a liquidity stress scenario.

Capital refers to the long-term financial resources available to support the operation of our businesses, fund business growth, and cover financial and operational needs that arise from adverse circumstances.

For additional information, see Part II, Item 7. MD&A – Enterprise Risk Management – Risk Appetite, Limits, Identification and Measurement and Part II, Item 7. MD&A – Enterprise Risk Management – Liquidity Risk Management in the 2021 Annual Report.

We believe that we have sufficient liquidity and capital resources to satisfy future requirements and meet our obligations to policyholders, customers, creditors and debt-holders, including those arising from reasonably foreseeable contingencies or events.

Nevertheless, some circumstances may cause our cash or capital needs to exceed projected liquidity or readily deployable capital resources. Additional collateral calls, deterioration in investment portfolios or reserve strengthening affecting statutory surplus, higher surrenders of annuities and other policies, downgrades in credit ratings, catastrophic losses or fluctuations in the capital markets generally may result in significant additional cash or capital needs and loss of sources of liquidity and capital. Other potential events that could cause a liquidity strain include an economic collapse of a nation or region significant to our operations, nationalization, catastrophic terrorist acts, pandemics or other events causing economic or political upheaval. In addition, regulatory and other legal restrictions could limit our ability to transfer funds freely, either to or from our subsidiaries.

Depending on market conditions, regulatory and rating agency considerations and other factors, we may take various liability and capital management actions. Liability management actions may include, but are not limited to, repurchasing or redeeming outstanding debt, issuing new debt or engaging in debt exchange offers. Capital management actions may include, but are not limited to, issuing preferred stock, paying dividends to our shareholders on the AIG Common Stock, par value $2.50 per share (AIG Common Stock), paying dividends to the holders of our Series A 5.85% Non-Cumulative Perpetual Preferred Stock (Series A Preferred Stock), and repurchases of AIG Common Stock.


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ITEM 2 | Liquidity and Capital Resources

LIQUIDITY AND CAPITAL RESOURCES HIGHLIGHTS


SOURCES

Liquidity to AIG Parent from Subsidiaries

During the nine-month period ended September 30, 2022, our General Insurance companies distributed cash and fixed maturity securities of $1.6 billion, and our Life and Retirement companies distributed $1.9 billion of cash to AIG Parent or applicable intermediate holding companies.

Senior Note Offering of Corebridge

On April 5, 2022, Corebridge issued senior unsecured notes in the aggregate principal amount of $6.5 billion, the proceeds of which were used to repay a portion of the $8.3 billion promissory note previously issued by Corebridge to AIG Parent in November 2021 (the Intercompany Note).

Hybrid Offering of Corebridge

On August 23, 2022, Corebridge issued $1.0 billion aggregate principal amount of 6.875% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2052, the proceeds of which were used to repay a portion of the Intercompany Note.

Delayed Draw Term Loan Facility of Corebridge

On September 15, 2022, Corebridge borrowed $1.5 billion under its $1.5 billion 3-Year Delayed Draw Term Loan Agreement, a portion of which were used to repay the remainder of the Intercompany Note.

Corebridge Initial Public Offering

On September 19, 2022, AIG closed on the initial public offering of 80 million shares of Corebridge common stock at a public offering price of $21.00 per share. The aggregate gross proceeds of the offering to AIG, before deducting underwriting discounts and commissions and other expenses payable by AIG, were approximately $1.7 billion.


USES

General Borrowings(a)

During the three-month period ended September 30, 2022, no debt categorized as general borrowings was repaid or redeemed. During the nine-month period ended September 30, 2022, $7.6 billion of debt categorized as general borrowings matured, was repaid or redeemed as follows:

•Redeemed €750 million aggregate principal amount of our 1.500% Notes due 2023 for a redemption price of 101.494 percent of the principal amount, plus accrued and unpaid interest.

•Repurchased, through cash tender offers, approximately $6.8 billion aggregate principal amount of certain notes and debentures issued or guaranteed by AIG for an aggregate purchase price of approximately $7.1 billion.

We made interest payments on our general borrowings totaling $563 million during the nine-month period ended September 30, 2022 including interest payments made by AIG Parent on AIG Parent-issued debt instruments of $544 million.

Dividends

During the nine-month period ended September 30, 2022:

•We made quarterly cash dividend payments of $365.625 per share on AIG’s Series A Preferred Stock totaling $22 million.

•We made quarterly cash dividend payments of $0.32 per share on AIG Common Stock totaling $746 million.

•Corebridge made cash dividend payments of $57 million in the aggregate to Blackstone.

Repurchases of Common Stock(b)

During the nine-month period ended September 30, 2022, AIG Parent repurchased approximately 77 million shares of AIG Common Stock, for an aggregate purchase price of approximately $4.4 billion.

(a)On October 24, 2022, AIG redeemed (i) $750 million aggregate principal amount of our 3.900% Notes Due 2026 for a redemption price of 100 percent of the principal amount, plus accrued and unpaid interest, (ii) approximately $522 million aggregate principal amount of our 3.750% Notes Due 2025 for a redemption price of 100 percent of the principal amount, plus accrued and unpaid interest and (iii) $500 million aggregate principal amount of our 2.500% Notes Due 2025 for a redemption price of 100 percent of the principal amount, plus accrued and unpaid interest.

(b)Pursuant to a Securities Exchange Act of 1934 (the Exchange Act) Rule 10b5-1 repurchase plan, from October 1, 2022 to October 27, 2022, we repurchased approximately 4 million shares of AIG Common Stock for an aggregate purchase price of approximately $221 million.


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ITEM 2 | Liquidity and Capital Resources

ANALYSIS OF SOURCES AND USES OF CASH

Operating Cash Flow Activities

Insurance companies generally receive most premiums in advance of the payment of claims or policy benefits. The ability of insurance companies to generate positive cash flow is affected by the frequency and severity of losses under their insurance policies, policy retention rates, effective management of our investment portfolio and operating expense discipline.

Interest payments totaled $734 million and $781 million in the nine-month periods ended September 30, 2022 and 2021. Excluding interest payments, AIG had operating cash inflows of $4.8 billion in the nine-month period ended September 30, 2022 compared to operating cash inflows of $6.5 billion in the same period in the prior year.

Investing Cash Flow Activities

Net cash used in investing activities in the nine-month period ended September 30, 2022 was $2.3 billion compared to net cash used in investing activities of $2.9 billion in the same period in the prior year.

Financing Cash Flow Activities

Net cash used in financing activities in the nine-month period ended September 30, 2022 reflected:

•$746 million to pay a dividend of $0.32 per share per quarter on AIG Common Stock;

•$22 million to pay a dividend of $365.625 per share per quarter on AIG’s Series A Preferred Stock;

•$57 million paid by Corebridge in the form of a cash dividend to Blackstone;

•$4.4 billion to repurchase approximately 77 million shares of AIG Common Stock;

•$1.5 billion inflow from drawdown on 3-Year Delayed Draw Term Loan Agreement of Corebridge;

•$176 million in net outflows from the issuance and repayment of long-term debt; and

•$263 million in net outflows from the issuance and repayment of debt of consolidated investment entities.

Net cash used in financing activities in the nine-month period ended September 30, 2021 reflected:

•$819 million to pay a dividend of $0.32 per share per quarter on AIG Common Stock;

•$22 million to pay a dividend of $365.625 per share per quarter on AIG’s Series A Preferred Stock;

•$1,651 million to repurchase approximately 32 million shares of AIG Common Stock;

•$3.4 billion in net outflows from the issuance and repayment of long-term debt; and

•$248 million in net inflows from the issuance and repayment of debt of consolidated investment entities.

LIQUIDITY AND CAPITAL RESOURCES OF AIG PARENT AND SUBSIDIARIES

AIG Parent

As of September 30, 2022, AIG Parent and applicable intermediate holding companies had approximately $11.0 billion in liquidity sources. AIG Parent’s liquidity sources are primarily held in the form of cash and short-term investments substantially all of which are U.S. government securities, and also include a committed, revolving syndicated credit facility. AIG Parent actively manages its assets and liabilities in terms of products, counterparties and duration. Based upon an assessment of funding needs, the liquidity sources can be readily monetized through sales or repurchase agreements or contributed as admitted assets to regulated insurance companies. AIG Parent liquidity is monitored through the use of various internal liquidity risk measures. AIG Parent’s primary sources of liquidity are dividends, distributions, loans and other payments from subsidiaries and credit facilities. AIG Parent’s primary uses of liquidity are for debt service, capital and liability management, and operating expenses.

We believe that we have sufficient liquidity and capital resources to satisfy our reasonably foreseeable future requirements and meet our obligations to our creditors, debt-holders and insurance company subsidiaries. We expect to access the debt and preferred equity markets from time to time to meet funding requirements as needed.

We utilize our capital resources to support our businesses, with the majority of capital allocated to our insurance operations. Should we have or generate more capital than is needed to support our business strategies (including organic growth or acquisition opportunities) or mitigate risks inherent to our business, we may develop plans to distribute such capital to shareholders via dividends or AIG Common Stock repurchase authorizations or deploy such capital towards liability management.

In the normal course, it is expected that a portion of the capital released by our insurance companies, by our other operations or through the utilization of AIG’s deferred tax assets may be available to support our business strategies, for distribution to shareholders or for liability management.


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ITEM 2 | Liquidity and Capital Resources

In developing plans to distribute capital, AIG considers a number of factors, including, but not limited to: AIG’s business and strategic plans, expectations for capital generation and utilization, AIG’s funding capacity and capital resources in comparison to internal benchmarks, as well as rating agency expectations, regulatory requirements, bank creditor covenants and internal stress tests for capital.

The following table presents AIG Parent and applicable intermediate holding companies liquidity sources:


(in millions)		September 30, 2022		December 31, 2021
Cash and short-term investments(a)	$	3,761	$	4,334
Unencumbered fixed maturity securities(b)		2,787		6,357
Total AIG Parent liquidity(c)		6,548		10,691
Available capacity under committed, syndicated credit facility(d)		4,500		4,500
Total AIG Parent liquidity sources	$	11,048	$	15,191

(a)Cash and short-term investments include agreements in which securities are purchased by us under agreements to resell totaling $270 million and $1.9 billion as of September 30, 2022 and December 31, 2021, respectively.

(b)Unencumbered securities consist of publicly traded, investment grade rated fixed maturity securities. As of September 30, 2022, substantially all fixed maturity securities consisted of U.S. government securities.

(c)As of September 30, 2022, following the initial public offering of Corebridge, $1.7 billion of Corebridge liquidity is no longer reflected in AIG Parent's liquidity.

(d)For additional information relating to this committed, syndicated credit facility, see – Credit Facilities below.

Insurance Companies

We expect that our insurance companies will be able to continue to satisfy reasonably foreseeable future liquidity requirements and meet their obligations, including those arising from reasonably foreseeable contingencies or events, through cash from operations and, to the extent necessary, monetization of invested assets. Our insurance companies’ liquidity resources are primarily held in the form of cash, short-term investments and publicly traded, investment grade rated fixed maturity securities.

Each of our material insurance companies’ liquidity is monitored through various internal liquidity risk measures. The primary sources of liquidity are premiums, fees, reinsurance recoverables and investment income and maturities. The primary uses of liquidity are paid losses, reinsurance payments, benefit claims, surrenders, withdrawals, interest payments, dividends, expenses, investment purchases and collateral requirements.

Our insurance companies may require additional funding to meet capital or liquidity needs under certain circumstances. For example, large catastrophes may require us to provide additional support to the affected operations of our General Insurance companies, and a shift in interest rates may require us to provide support to the affected operations of our Life and Retirement companies.

Downgrades in our credit ratings could put pressure on the insurer financial strength ratings of our subsidiaries, which could result in non-renewals or cancellations by policyholders and adversely affect a subsidiary’s ability to meet its own obligations. Increases in market interest rates may adversely affect the financial strength ratings of our subsidiaries, as rating agency capital models may reduce the amount of available capital relative to required capital.

Management believes that because of the size and liquidity of our Life and Retirement companies’ investment portfolios, normal deviations from projected claim or surrender experience would not create significant liquidity risk. Furthermore, our Life and Retirement companies’ products contain certain features that mitigate surrender risk, including surrender charges. However, in times of extreme capital markets disruption or as a result of fluctuations in the capital markets generally, liquidity needs could outpace resources.

As part of their risk management framework, our insurance companies continue to evaluate and, where appropriate, pursue strategies and programs to improve their liquidity position and facilitate their ability to maintain a fully invested asset portfolio.

Certain of our U.S. insurance companies are members of the FHLBs in their respective districts. Our borrowings from FHLBs are non-puttable and are used to supplement liquidity or for other uses deemed appropriate by management. Our U.S. General Insurance companies had no outstanding borrowings from FHLBs at both September 30, 2022 and December 31, 2021. Our U.S. Life and Retirement companies had $4.6 billion and $3.6 billion which were due to FHLBs in their respective districts at September 30, 2022 and December 31, 2021, respectively, under funding agreements issued through our Individual Retirement, Group Retirement and Institutional Markets operating segments, which were reported in Policyholder contract deposits. Proceeds from funding agreements are generally invested in fixed income securities and other investments intended to generate spread income. In addition, our U.S. Life and Retirement companies had no outstanding borrowings in the form of cash advances from FHLBs at September 30, 2022.

Certain of our U.S. Life and Retirement companies have securities lending programs that lend securities from their investment portfolio to supplement liquidity or for other uses as deemed appropriate by management. Under these programs, these U.S. Life and Retirement companies lend securities to financial institutions and receive cash as collateral equal to 102 percent of the fair value of the loaned securities. Cash collateral received is invested in short-term investments or used for short-term liquidity purposes.


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ITEM 2 | Liquidity and Capital Resources

Additionally, the aggregate amount of securities that a Life and Retirement company is able to lend under its program at any time is limited to 5 percent of its general account statutory-basis admitted assets. Our U.S. Life and Retirement companies had $3.3 billion of securities subject to these agreements at December 31, 2021 and $3.4 billion of liabilities to borrowers for collateral received at December 31, 2021. As of September 30, 2022 we had no loans outstanding under these programs.

AIG generally manages capital between AIG Parent and our insurance companies through internal, Board-approved policies and limits, as well as management standards. In addition, AIG Parent has unconditional capital maintenance agreements in place with certain subsidiaries. Nevertheless, regulatory and other legal restrictions could limit our ability to transfer capital freely, either to or from our subsidiaries.

AIG Parent and/or certain subsidiaries are parties to several letter of credit agreements with various financial institutions, which issue letters of credit from time to time in support of our insurance companies. These letters of credit are subject to reimbursement by AIG Parent and/or certain subsidiaries in the event of a drawdown of these letters of credit. Letters of credit issued in support of the General Insurance companies totaled approximately $4.0 billion at September 30, 2022. Letters of credit issued in support of the Life and Retirement companies totaled approximately $264 million at September 30, 2022, which are subject to reimbursement by Corebridge with no recourse to AIG Parent.

In the nine-month period ended September 30, 2022, our General Insurance companies collectively paid to AIG Parent or applicable intermediate holding companies a total of approximately $1.5 billion in dividends in the form of cash and fixed maturity securities and $93 million in tax sharing payments in the form of cash. The fixed maturity securities primarily included U.S. treasuries and securities issued by U.S. agencies.

In the nine-month period ended September 30, 2022, our Life and Retirement companies collectively paid to AIG Parent or applicable intermediate holding companies a total of approximately $914 million in dividends in the form of cash and $986 million in tax sharing payments in the form of cash. On November 1, 2021, Corebridge declared a dividend payable to AIG Parent in the amount of $8.3 billion. In connection with such dividend, Corebridge issued the Intercompany Note, which, as of September 15, 2022, was repaid in full by Corebridge.

Following the initial public offering of Corebridge, AIG holds 77.7 percent of Corebridge common stock, resulting in the tax deconsolidation of Corebridge from AIG. As such, as of September 15, 2022, AIG is no longer receiving tax sharing payments from Corebridge for tax liabilities of subsequent periods. Pursuant to the Tax Matters Agreement entered into by Corebridge and AIG on September 14, 2022, the parties will make tax payments to each other in respect of historic tax periods and tax periods prior to the tax deconsolidation of Corebridge from AIG in a manner consistent with pre-existing tax sharing arrangements between the companies.

CREDIT FACILITIES

We maintain a committed, revolving syndicated credit facility (the Facility) as a potential source of liquidity for general corporate purposes. The Facility provides for aggregate commitments by the bank syndicate to provide unsecured revolving loans and/or standby letters of credit of up to $4.5 billion without any limits on the type of borrowings and is scheduled to expire in November 2026.

As of September 30, 2022, a total of $4.5 billion remained available for borrowing under the Facility. Our ability to utilize the Facility is not contingent on our credit ratings. However, our ability to utilize the Facility is conditioned on the satisfaction of certain legal, operating, administrative and financial covenants and other requirements contained in the Facility. These include covenants relating to our maintenance of a specified total consolidated net worth and total consolidated debt to total consolidated capitalization. Failure to satisfy these and other requirements contained in the Facility would restrict our access to the Facility and could have a material adverse effect on our financial condition, results of operations and liquidity. We expect to utilize the Facility from time to time, and may use the proceeds for general corporate purposes.

Corebridge maintains a revolving syndicated credit facility (the Corebridge Facility) as a potential source of liquidity for general corporate purposes. The Corebridge Facility provides for aggregate commitments by the bank syndicate to provide unsecured revolving loans and/or standby letters of credit of up to $2.5 billion without any limits on the type of borrowings and is scheduled to expire on May 12, 2027.

As of September 30, 2022, a total of $2.5 billion remained available for borrowing under the Corebridge Facility.


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ITEM 2 | Liquidity and Capital Resources

Corebridge maintains a 3-Year Delayed Draw Term Loan Agreement (the DDTL Facility) among Corebridge, as borrower, the lenders party thereto and the administrative agent thereto. The DDTL Facility provided Corebridge with committed delayed draw term loan facilities in the aggregate principal amount of $2.5 billion, with no recourse to AIG Parent. On August 25, 2022, in connection with the issuance by Corebridge of its 6.875% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2052, the commitment under the DDTL Facility was reduced from $2.5 billion to $1.5 billion. On September 15, 2022, Corebridge borrowed $1.5 billion under the DDTL Facility, a portion of which was used to repay the remaining amount due to AIG Parent under the Intercompany Note.

As of September 30, 2022, a total of $1.5 billion of borrowings are outstanding under the DDTL Facility.

CONTRACTUAL OBLIGATIONS

As of September 30, 2022, there have been no material changes in our contractual obligations from December 31, 2021, a description of which may be found in Part II, Item 7. MD&A – Liquidity and Capital Resources – Contractual Obligations in the 2021 Annual Report.

OFF-BALANCE SHEET ARRANGEMENTS AND COMMERCIAL COMMITMENTS

As of September 30, 2022, there have been no material changes in our off-balance sheet arrangements and commercial commitments from December 31, 2021, a description of which may be found in Part II, Item 7. MD&A – Liquidity and Capital Resources – Off-Balance Sheet Arrangements and Commercial Commitments in the 2021 Annual Report.

DEBT

AIG expects to service and repay general borrowings through maturing investments and dispositions of invested assets, future cash flows from operations, cash flows generated from invested assets, future debt or preferred stock issuances and other financing arrangements. AIG borrowings supported by assets of AIG include GIAs that are supported by cash and investments held by AIG Parent, certain non-insurance subsidiaries and amounts posted to third parties as collateral for the repayment of those obligations.

For additional information on GIAs and associated collateral posted, see Note 5 to the Condensed Consolidated Financial Statements.

The following table provides the rollforward of AIG’s total debt outstanding:


Nine Months Ended September 30, 2022	Balance, Beginning of Year			Issuances		Maturities and Repayments		Effect of Foreign Exchange		Other Changes			Balance, End of Period
(in millions)
Debt issued or guaranteed by AIG:
AIG general borrowings:
Notes and bonds payable	$	19,633	$	—	$	(7,409)	$	(314)	$	(13)	(d)	$	11,897
Junior subordinated debt		1,164		—		(167)		(11)		1			987
AIG Japan Holdings Kabushiki Kaisha		333		—		—		(62)		—			271
Validus notes and bonds payable		293		—		(14)		—		(9)			270
Total AIG general borrowings		21,423		—		(7,590)		(387)		(21)			13,425
AIG borrowings supported by assets:(a)
AIG notes and bonds payable		—		—		—		—		81	(d)		81
Series AIGFP matched notes and bonds payable		18		—		—		—		—			18
GIAs, at fair value		1,803		22		(58)		—		(172)	(e)		1,595
Notes and bonds payable, at fair value		68		—		(36)		—		(14)	(e)		18
Total AIG borrowings supported by assets		1,889		22		(94)		—		(105)			1,712
Total debt issued or guaranteed by AIG		23,312		22		(7,684)		(387)		(126)			15,137
Corebridge debt:
AIGLH notes and bonds payable(b)		199		—		—		—		1			200
AIGLH junior subordinated debt(b)		227		—		—		—		—			227
Corebridge senior unsecured notes - not guaranteed by AIG		—		6,461		—		—		(10)			6,451
Corebridge junior subordinated debt - not guaranteed by AIG		—		990		—		—		(1)			989
DDTL facility - not guaranteed by AIG		—		1,502		—		—		—			1,502
Total Corebridge debt		426		8,953		—		—		(10)			9,369


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ITEM 2 | Liquidity and Capital Resources


Nine Months Ended September 30, 2022	Balance, Beginning of Year			Issuances		Maturities and Repayments		Effect of Foreign Exchange		Other Changes			Balance, End of Period
(in millions)
Other subsidiaries' notes, bonds, loans and mortgages payable - not guaranteed by AIG		3		—		(1)		—		—			2
Total Short-term and long-term debt	$	23,741	$	8,975	$	(7,685)	$	(387)	$	(136)		$	24,508
Debt of consolidated investment entities - not guaranteed by AIG(c)	$	6,422	$	849	$	(1,112)	$	(75)	$	(160)	(f)	$	5,924

(a)AIG Parent guarantees all such debt, except for Series AIGFP matched notes and bonds payable and AIG notes and bonds payable, which are direct obligations of AIG Parent. Collateral posted to third parties were $1.4 billion at both September 30, 2022 and December 31, 2021, excluding collateral posted to GICs. This collateral primarily consists of securities of the U.S. government and government sponsored entities and generally cannot be repledged or resold by the counterparties.

(b)We have entered into a guarantee reimbursement agreement with Corebridge and AIG Life Holdings, Inc. (AIGLH) which provides that Corebridge and AIGLH will reimburse AIG for the full amount of any payment made by or on behalf of AIG pursuant to AIG’s guarantee of the AIGLH notes and junior subordinated debt. We have also entered into a collateral agreement with Corebridge and AIGLH which provides that in the event of: (i) a ratings downgrade of Corebridge or AIGLH long-term unsecured indebtedness below specified levels or (ii) the failure by AIGLH to pay principal and interest on the AIGLH debt when due, Corebridge and AIGLH must collateralize an amount equal to the sum of: (i) 100 percent of the principal amount outstanding, (ii) accrued and unpaid interest and (iii) 100 percent of the net present value of scheduled interest payments. through the maturity dates of the AIGLH debt.

(c)At September 30, 2022, includes debt of consolidated investment entities primarily related to real estate investments of $1.5 billion and other securitization vehicles of $4.4 billion. At December 31, 2021, includes debt of consolidated investment entities related to real estate investments of $1.9 billion and other securitization vehicles of $4.5 billion.

(d)Includes reclassifications of debt between AIG general borrowings and AIG borrowings supported by assets.

(e)Primarily represents adjustments to the fair value of debt.

(f)Includes the effect of consolidating previously unconsolidated partnerships.

Debt Maturities

The following table summarizes maturing short-term and long-term debt at September 30, 2022 of AIG for the next four quarters:


		Fourth Quarter		First Quarter		Second Quarter		Third Quarter
(in millions)		2022		2023		2023		2023		Total
AIG general borrowings	$	15	$	—	$	525	$	25	$	565
AIG borrowings supported by assets		15		9		115		34		173
DDTL facility*		1,502		—		—		—		1,502
Other subsidiaries' notes, bonds, loans and mortgages payable		—		—		—		1		1
Total	$	1,532	$	9	$	640	$	60	$	2,241

*On October 10, 2022, Corebridge continued this borrowing through November 21, 2022. Corebridge has the ability to further continue this borrowing through February 25, 2025.

The following table presents maturities of short-term and long-term debt (including unamortized original issue discount, hedge accounting valuation adjustments and fair value adjustments, when applicable):


September 30, 2022				Remainder		Year Ending
(in millions)		Total		of 2022		2023		2024		2025		2026		2027		Thereafter
Debt issued or guaranteed by AIG:
AIG general borrowings:
Notes and bonds payable(a)	$	11,897	$	15	$	372	$	459	$	2,016	$	1,528	$	978	$	6,529
Junior subordinated debt		987		—		—		—		—		—		—		987
AIG Japan Holdings Kabushiki Kaisha		271		—		178		—		93		—		—		—
Validus notes and bonds payable		270		—		—		—		—		—		—		270
Total AIG general borrowings		13,425		15		550		459		2,109		1,528		978		7,786
AIG borrowings supported by assets:
AIG notes and bonds payable		81		—		62		—		12		7		—		—
Series AIGFP matched notes and bonds payable		18		—		—		—		—		—		—		18
GIAs, at fair value		1,595		15		123		137		527		89		59		645
Notes and bonds payable, at fair value		18		—		—		—		—		—		—		18
Total AIG borrowings supported by assets		1,712		15		185		137		539		96		59		681
Total debt issued or guaranteed by AIG		15,137		30		735		596		2,648		1,624		1,037		8,467


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ITEM 2 | Liquidity and Capital Resources


















Corebridge debt:
AIGLH notes and bonds payable		200		—		—		—		101		—		—		99
AIGLH junior subordinated debt		227		—		—		—		—		—		—		227
Corebridge senior unsecured notes		6,451		—		—		—		993		—		1,240		4,218
Corebridge junior subordinated debt		989		—		—		—		—		—		—		989
DDTL facility(b)		1,502		1,502		—		—		—		—		—		—
Total Corebridge debt		9,369		1,502		—		—		1,094		—		1,240		5,533
Other subsidiaries notes, bonds, loans and mortgages payable		2		—		2		—		—		—		—		—
Total(c)	$	24,508	$	1,532	$	737	$	596	$	3,742	$	1,624	$	2,277	$	14,000

(b)On October 10, 2022, Corebridge continued this borrowing through November 21, 2022. Corebridge has the ability to further continue this borrowing through February 25, 2025.

(c)Does not reflect $5.9 billion of notes issued by consolidated investment entities, for which recourse is limited to the assets of the respective investment entities and for which there is no recourse to the general credit of AIG.

CREDIT RATINGS

Credit ratings estimate a company’s ability to meet its obligations and may directly affect the cost and availability of financing to that company. The following table presents the credit ratings of AIG and certain of its subsidiaries as of the date of this filing. Figures in parentheses indicate the relative ranking of the ratings within the agency’s rating categories; that ranking refers only to the major rating category and not to the modifiers assigned by the rating agencies.

Short-Term Debt

Senior Long-Term Debt

Moody's

S&P

Moody's(a)

S&P(b)

Fitch(c)

American International Group, Inc.

P-2 (2nd of 4)

A-2 (2nd of 5)

Baa 2 (4th of 9) / Stable

BBB+ (4th of 9) /

Negative

BBB+ (4th of 9) /

Stable

AIG Financial Products Corp.(d)

P-2

A-2

Baa 2 (4th of 9) / Stable

BBB+ /

Negative

Corebridge Financial, Inc.

Baa 2 (4th of 9) / Stable

BBB+ (4th of 9) /

Stable

BBB+ (4th of 9) /
Stable

(a)Moody’s appends numerical modifiers 1, 2 and 3 to the generic rating categories to show relative position within the 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 Inc. (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.

These credit ratings are current opinions of the rating agencies. They may be changed, suspended or withdrawn at any time by the rating agencies as a result of changes in, or unavailability of, information or based on other circumstances. Ratings may also be withdrawn at our request. For a discussion of rating agency actions in response to AIG’s separation of its Life and Retirement business from AIG, see – Rating Agency Actions Related to Corebridge Offerings and Other Recent Actions below.

We are party to some agreements that contain “ratings triggers.” Depending on the ratings maintained by one or more rating agencies, these triggers could result in (i) the termination or limitation of credit availability or a requirement for accelerated repayment, (ii) the termination of business contracts or (iii) a requirement to post collateral for the benefit of counterparties.

In the event of a downgrade of AIG’s long-term senior debt ratings, AIG Financial Products Corp. and related subsidiaries (collectively AIGFP) and certain other AIG entities would be required to post additional collateral under some derivative and other transactions, or certain of the counterparties of AIGFP or of such other AIG entities would be permitted to terminate such transactions early.

The actual amount of collateral that we would be required to post to counterparties in the event of such downgrades, or the aggregate amount of payments that we could be required to make, depends on market conditions, the fair value of outstanding affected transactions and other factors prevailing at the time of the downgrade.

For information regarding the effects of downgrades in our credit ratings see Note 9 to the Condensed Consolidated Financial Statements and Part I, Item 1A. Risk Factors – Liquidity, Capital and Credit – “A downgrade by one or more of the rating agencies in the Insurer Financial Strength ratings of our insurance or reinsurance companies could limit their ability to write or prevent them from writing new business and impair their retention of customers and in-force business, and a downgrade in our credit ratings could adversely affect our business, results of operations, financial condition and liquidity” in the 2021 Annual Report.


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ITEM 2 | Liquidity and Capital Resources

FINANCIAL STRENGTH RATINGS

Financial Strength ratings estimate an insurance company’s ability to pay its obligations under an insurance policy. The following table presents the ratings of our significant insurance subsidiaries as of the date of this filing.

A.M. Best

S&P

Fitch

Moody’s

National Union Fire Insurance Company of Pittsburgh, Pa.

A+

Lexington Insurance Company

A+

American Home Assurance Company

A+

American General Life Insurance Company

A+

The Variable Annuity Life Insurance Company

A+

United States Life Insurance Company in the City of New York

A+

AIG Europe S.A.

A+

American International Group UK Ltd.

A+

AIG General Insurance Co. Ltd.

A+

Validus Reinsurance, Ltd.

A+

These financial strength ratings are current opinions of the rating agencies. They may be changed, suspended or withdrawn at any time by the rating agencies as a result of changes in, or unavailability of, information or based on other circumstances.

For information regarding the effects of downgrades in our financial strength ratings see Note 9 to the Condensed Consolidated Financial Statements and Part I, Item 1A. Risk Factors – Liquidity, Capital and Credit – “A downgrade by one or more of the rating agencies in the Insurer Financial Strength ratings of our insurance or reinsurance companies could limit their ability to write or prevent them from writing new business and impair their retention of customers and in-force business, and a downgrade in our credit ratings could adversely affect our business, results of operations, financial condition and liquidity” in the 2021 Annual Report.

RATING AGENCY ACTIONS RELATED TO COREBRIDGE OFFERINGS AND OTHER RECENT ACTIONS

•On March 29, 2022, Moody’s affirmed ratings on Corebridge entities and revised the outlook from Negative to Stable. On March 31, 2022, Moody’s assigned a Baa2 rating to the senior debt of Corebridge. On August 18, 2022, Moody's assigned a Baa3 (hyb) rating to the junior subordinated debt of Corebridge.

•On March 29, 2022, S&P affirmed the ratings of AIG and subsidiaries and revised the outlook on AIG and General Insurance from CreditWatch Negative to Negative. On March 29, 2022, S&P affirmed the ratings of Corebridge and revised the outlook from CreditWatch Developing to Stable. On March 31, 2022, S&P assigned a rating of BBB+ to the senior debt of Corebridge. On August 18, 2022, S&P assigned a BBB- rating to the junior subordinated debt of Corebridge.

•On March 4, 2022, Fitch affirmed the ratings of AIG and subsidiaries and revised the outlook on General Insurance from Stable to Positive and revised the outlook for AIG senior debt from Rating Watch Negative to Stable. On March 31, 2022, Fitch assigned a rating of BBB+ to the senior debt of Corebridge. On August 18, 2022, Fitch assigned a BBB- rating to the junior subordinated debt of Corebridge.

•On October 7, 2021, A.M. Best affirmed all of the financial strength and issuer credit ratings of AIG and subsidiaries with Stable outlooks.

REGULATION AND SUPERVISION

For a discussion of our regulation and supervision by different regulatory authorities in the United States and abroad, including with respect to our liquidity and capital resources see Part I, Item 1. Business – Regulation and Part I, Item 1A. Risk Factors – Regulation in the 2021 Annual Report, and Regulatory Environment below in this MD&A.


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ITEM 2 | Liquidity and Capital Resources

DIVIDENDS

The following table presents declaration date, record date, payment date and dividends paid per common share on AIG Common Stock in the nine months ended September 30, 2022:


Declaration Date	Record Date	Payment Date	Dividends Paid Per Common Share
August 8, 2022	September 16, 2022	September 30, 2022	$	0.32
May 3, 2022	June 16, 2022	June 30, 2022	0.32
February 16, 2022	March 17, 2022	March 31, 2022	0.32

On November 1, 2022, our Board of Directors declared a cash dividend on AIG Common Stock of $0.32 per share, payable on December 29, 2022 to shareholders of record on December 15, 2022.

Dividends Paid

Declaration Date

Record Date

Payment Date

Per Preferred Share

Per Depositary Share

August 8, 2022

August 31, 2022

September 15, 2022

365.625

0.365625

May 3, 2022

May 31, 2022

June 15, 2022

365.625

0.365625

February 16, 2022

February 28, 2022

March 15, 2022

365.625

0.365625

On November 1, 2022, our Board of Directors declared a cash dividend on AIG's Series A Preferred Stock of $365.625 per share, payable on December 15, 2022 to holders of record on November 30, 2022.

The payment of any future dividends will be at the discretion of our Board of Directors and will depend on various factors, as discussed further in Note 12 to the Condensed Consolidated Financial Statements.

REPURCHASES OF AIG COMMON STOCK

Our Board of Directors has authorized the repurchase of shares of AIG Common Stock through a series of actions. On May 3, 2022, our Board of Directors authorized the repurchase of $6.5 billion of AIG Common Stock (inclusive of the approximately $1.5 billion remaining under the Board’s prior share repurchase authorization). During the nine-month period ended September 30, 2022, AIG Parent repurchased approximately 77 million shares of AIG Common Stock for an aggregate purchase price of $4.4 billion. Pursuant to an Exchange Act Rule 10b5-1 repurchase plan, from October 1, 2022 to October 27, 2022, we repurchased approximately $221 million of additional shares of AIG Common Stock. As of October 27, 2022, $4.4 billion remained under the authorization.

DIVIDEND RESTRICTIONS

Payments of dividends to AIG by its insurance subsidiaries are subject to certain restrictions imposed by regulatory authorities.

For information regarding restrictions on payments of dividends by our subsidiaries see Note 18 to the Consolidated Financial Statements in the 2021 Annual Report.


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ITEM 2 | Enterprise Risk Management

Enterprise Risk Management

Risk management includes the identification and measurement of various forms of risk, the establishment of risk thresholds and the creation of processes intended to maintain risks within these thresholds while optimizing returns. We consider risk management an integral part of managing our core businesses and a key element of our approach to corporate governance.

OVERVIEW

We have an integrated process for managing risks throughout our organization in accordance with our firm-wide risk appetite. Our Board of Directors has oversight responsibility for the management of risk. Our Enterprise Risk Management Department supervises and integrates the risk management functions in each of our business units, providing senior management with a consolidated view of AIG’s major risk positions. Within each business unit, senior leaders and executives approve targeted risk tolerances within the framework provided by ERM. ERM supports our businesses and management by embedding risk management in our key day-to-day business processes and in identifying, assessing, quantifying, monitoring, reporting, and mitigating the risks taken by our businesses and AIG overall. Nevertheless, our risk management efforts may not always be successful and material adverse effects on our business, results of operations, cash flows, liquidity or financial condition may occur.

AIG employs a Three Lines of Defense model. AIG’s business leaders assume full accountability for the risks and controls in their operating units, and ERM performs a review, challenge and oversight function. The third line consists of our Internal Audit Group that provides independent assurance for AIG’s Board of Directors.

For additional information on AIG’s risk management program, see Part II, Item 7. MD&A ─ Enterprise Risk Management in the 2021 Annual Report.

The scope and magnitude of our market risk exposures is managed under a robust framework that contains defined risk limits and minimum standards for managing market risk in a manner consistent with our risk appetite statement. A description of our market risk exposures may be found in Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk in the 2021 Annual Report. See Part I, Item 1A. Risk Factors in the 2021 Annual Report on how difficult conditions in the financial markets and the economy generally may materially adversely affect our business and results of our operations.

Regulatory Environment

OVERVIEW

Our operations around the world are subject to regulation by many different types of regulatory authorities, including insurance, securities, derivatives, investment advisory and thrift regulators in the United States and abroad. The insurance and financial services industries are generally subject to close regulatory scrutiny and supervision.

Our insurance subsidiaries are subject to regulation and supervision by the states and jurisdictions in which they do business. We expect that the domestic and international regulations applicable to us and our regulated entities will continue to evolve for the foreseeable future.

For information regarding sanctions related to the Russia/Ukraine conflict, see Executive Summary – Overview.

For information regarding our regulation and supervision by different regulatory authorities in the United States and abroad, see Part I, Item 1. Business – Regulation and Part I, Item 1A. Risk Factors – Regulation in the 2021 Annual Report.


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Glossary

Glossary

Accident year The annual calendar accounting period in which loss events occurred, regardless of when the losses are actually reported, booked or paid.

Accident year combined ratio, as adjusted (Accident year combined ratio, ex-CAT) The combined ratio excluding catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.

Accident year loss ratio, as adjusted (Accident year loss ratio, ex-CAT) The loss ratio excluding catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.

Acquisition ratio Acquisition costs divided by net premiums earned. Acquisition costs are those costs incurred to acquire new and renewal insurance contracts and also include the amortization of VOBA and DAC. Acquisition costs vary with sales and include, but are not limited to, commissions, premium taxes, direct marketing costs and certain costs of personnel engaged in sales support activities such as underwriting.

Assets under administration include assets under management and Retail Mutual Funds and Group Retirement mutual fund assets that we sell or administer.

Attritional losses are losses recorded in the current accident year, which are not catastrophe losses.

AUM Assets under management include assets in the general and separate accounts of our subsidiaries that support liabilities and surplus related to our life and annuity insurance products and the notional value of stable value wrap contracts.

Base spread Net investment income excluding income from alternative investments and other enhancements, less interest credited excluding amortization of deferred sales inducements.

Base yield Net investment income excluding income from alternative investments and other enhancements, as a percentage of average base invested asset portfolio, which excludes alternative investments, other bond securities and certain other investments for which the fair value option has been elected.

Casualty insurance Insurance that is primarily associated with the losses caused by injuries to third persons, i.e., not the insured, and the legal liability imposed on the insured as a result.

Combined ratio Sum of the loss ratio and the acquisition and general operating expense ratios.

CSA Credit Support Annex A legal document generally associated with an ISDA Master Agreement that provides for collateral postings which could vary depending on ratings and threshold levels.

Credit Valuation Adjustment (CVA)/Non-Performance Risk Adjustment (NPA) The CVA/NPA adjusts the valuation of derivatives to account for nonperformance risk of our counterparty with respect to all net derivative assets positions. Also, the CVA/NPA reflects the fair value movement in AIGFP's asset portfolio that is attributable to credit movements only, without the impact of other market factors such as interest rates and foreign exchange rates. Finally, the CVA/NPA also accounts for our own credit risk in the fair value measurement of all derivative net liability positions and liabilities where AIG has elected the fair value option, when appropriate.

DAC Deferred Policy Acquisition Costs Deferred costs that are incremental and directly related to the successful acquisition of new business or renewal of existing business.


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Glossary

DAC Related to Unrealized Appreciation (Depreciation) of Investments An adjustment to DAC and Reserves for investment-oriented products, equal to the change in DAC and unearned revenue amortization that would have been recorded if fixed maturity securities available for sale at fair value had been sold at their stated aggregate fair value and the proceeds reinvested at current yields. An adjustment to benefit reserves for investment-oriented products is also recognized to reflect the application of the benefit ratio to the accumulated assessments that would have been recorded if fixed maturity securities available for sale at fair value had been sold at their stated aggregate fair value and the proceeds reinvested at current yields.

For long-duration traditional products, significant unrealized appreciation of investments in a sustained low interest rate environment may cause additional future policy benefit liabilities to be recorded.

Deferred gain on retroactive reinsurance Retroactive reinsurance is a reinsurance contract in which an assuming entity agrees to reimburse a ceding entity for liabilities incurred as a result of past insurable events. If the amount of premium paid by the ceding reinsurer is less than the related ceded loss reserves, the resulting gain is deferred and amortized over the settlement period of the reserves. Any related development on the ceded loss reserves recoverable under the contract would increase the deferred gain if unfavorable, or decrease the deferred gain if favorable.

DSI Deferred Sales Inducements Represents enhanced crediting rates or bonus payments to contract holders on certain annuity and investment contract products that meet the criteria to be deferred and amortized over the life of the contract.

Expense ratio Sum of acquisition expenses and general operating expenses, divided by net premiums earned.

General operating expense ratio General operating expenses divided by net premiums earned. General operating expenses are those costs that are generally attributed to the support infrastructure of the organization and include but are not limited to personnel costs, projects and bad debt expenses. General operating expenses exclude losses and loss adjustment expenses incurred, acquisition expenses, and investment expenses.

GIC/GIA Guaranteed Investment Contract/Guaranteed Investment Agreement A contract whereby the seller provides a guaranteed repayment of principal and a fixed or floating interest rate for a predetermined period of time.

IBNR Incurred But Not Reported Estimates of claims that have been incurred but not reported to us.

ISDA Master Agreement An agreement between two counterparties, which may have multiple derivative transactions with each other governed by such agreement, that generally provides for the net settlement of all or a specified group of these derivative transactions, as well as pledged collateral, through a single payment, in a single currency, in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions.

LAE Loss Adjustment Expenses The expenses directly attributed to settling and paying claims of insureds and include, but are not limited to, legal fees, adjuster’s fees and the portion of general expenses allocated to claim settlement costs.

Loan-to-value ratio Principal amount of loan amount divided by appraised value of collateral securing the loan.

Loss ratio Losses and loss adjustment expenses incurred divided by net premiums earned.

Loss reserve development The increase or decrease in incurred losses and loss adjustment expenses related to prior years as a result of the re-estimation of loss reserves at successive valuation dates for a given group of claims.

Loss reserves Liability for unpaid losses and loss adjustment expenses. The estimated ultimate cost of settling claims relating to insured events that have occurred on or before the balance sheet date, whether or not reported to the insurer at that date.

Master netting agreement An agreement between two counterparties who have multiple derivative contracts with each other that provides for the net settlement of all contracts covered by such agreement, as well as pledged collateral, through a single payment, in a single currency, in the event of default on or upon termination of any one such contract.

Natural catastrophe losses are generally weather or seismic events having a net impact on AIG in excess of $10 million each and man-made catastrophe losses, such as terrorism and civil disorders that exceed the $10 million threshold.

Net premiums written represent the sales of an insurer, adjusted for reinsurance premiums assumed and ceded, during a given period. Net premiums earned are the revenue of an insurer for covering risk during a given period. Net premiums written are a measure of performance for a sales period, while net premiums earned are a measure of performance for a coverage period.

Noncontrolling interests The portion of equity ownership in a consolidated subsidiary not attributable to the controlling parent company.

Policy fees An amount added to a policy premium, or deducted from a policy cash value or contract holder account, to reflect the cost of issuing a policy, establishing the required records, sending premium notices and other related expenses.


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Glossary

Pool A reinsurance arrangement whereby all of the underwriting results of the pool members are combined and then shared by each member in accordance with its pool participation percentage.

Premiums and deposits – Life and Retirement includes direct and assumed amounts received and earned on traditional life insurance policies, group benefit policies and life-contingent payout annuities, as well as deposits received on universal life, investment-type annuity contracts, FHLB funding agreements and mutual funds.

Prior year development See Loss reserve development.

RBC Risk-Based Capital A formula designed to measure the adequacy of an insurer’s statutory surplus compared to the risks inherent in its business.

Reinstatement premiums Premiums on an insurance policy over and above the initial premium imposed at the beginning of the policy payable to reinsurers or receivable from insurers to restore coverage limits that have been reduced or exhausted as a result of reinsured losses under certain excess of loss reinsurance contracts.

Reinsurance The practice whereby one insurer, the reinsurer, in consideration of a premium paid to that insurer, agrees to indemnify another insurer, the ceding company, for part or all of the liability of the ceding company under one or more policies or contracts of insurance which it has issued.

Retroactive reinsurance See Deferred gain on retroactive reinsurance.

Subrogation The amount of recovery for claims we have paid our policyholders, generally from a negligent third party or such party’s insurer.

Surrender charge A charge levied against an investor for the early withdrawal of funds from a life insurance or annuity contract, or for the cancellation of the agreement.

Surrender rate represents annualized surrenders and withdrawals as a percentage of average reserves and Group Retirement mutual fund assets under administration.

Unearned premium reserve Liabilities established by insurers and reinsurers to reflect unearned premiums, which are usually refundable to policyholders if an insurance or reinsurance contract is canceled prior to expiration of the contract term.

VOBA Value of Business Acquired Present value of projected future gross profits from in-force policies of acquired businesses.


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Acronyms

Acronyms


A&H	Accident and Health Insurance	GMDB	Guaranteed Minimum Death Benefits
ABS	Asset-Backed Securities	GMWB	Guaranteed Minimum Withdrawal Benefits
APTI	Adjusted pre-tax income	ISDA	International Swaps and Derivatives Association, Inc.
AUM	Assets Under Management	Moody's	Moody's Investors' Service Inc.
CDO	Collateralized Debt Obligations	NAIC	National Association of Insurance Commissioners
CDS	Credit Default Swap	NM	Not Meaningful
CMA	Capital Maintenance Agreement	ORR	Obligor Risk Ratings
CMBS	Commercial Mortgage-Backed Securities	OTC	Over-the-Counter
EGPs	Estimated Gross Profits	RMBS	Residential Mortgage-Backed Securities
FASB	Financial Accounting Standards Board	S&P	Standard & Poor's Financial Services LLC
GAAP	Accounting Principles Generally Accepted in the	SEC	Securities and Exchange Commission
United States of America		URR	Unearned Revenue Reserve
GIA	Guaranteed Investment Agreements	VIE	Variable Interest Entity


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ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk

Included in Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations – Enterprise Risk Management.

ITEM 4 | Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by American International Group, Inc. (AIG) management, with the participation of AIG’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2022. Based on this evaluation, AIG’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2022.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) that have occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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Part II – Other Information

ITEM 1 | Legal Proceedings

For a discussion of legal proceedings see Note 11 to the Condensed Consolidated Financial Statements, which is incorporated herein by reference.

ITEM 1A | Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the following risk factor as well as the other risk factors discussed in Part I, Item 1A. Risk Factors in the 2021 Annual Report.

New and proposed changes to tax laws could increase our corporate taxes or make some of our products less attractive to consumers. The recently enacted Inflation Reduction Act (the IRA), which establishes a new 15 percent corporate alternative minimum tax on adjusted book income (of corporations that have an average adjusted book income in excess of $1 billion over a three tax year period) for tax years beginning after December 31, 2022 may impact AIG’s after-tax earnings or cash flow. AIG may be required to pay tax equal to 15 percent of AIG’s pre-tax financial statement income, as adjusted by the IRA, despite AIG’s U.S. federal net operating loss carryforwards and foreign tax credits.

The IRA also includes a nondeductible 1 percent excise tax on the repurchase of corporate stock for transactions occurring in taxable years after December 31, 2022. The 1 percent excise tax on share repurchases would increase AIG’s cost of share repurchases.

The current United States administration and Congressional leadership have proposed additional changes to the U.S. corporate and international tax systems, as well as increasing the taxation of U.S. individuals, including capital gains taxation.

An increase in the statutory U.S. federal corporate income tax rate will negatively impact AIG’s future after-tax earnings.

The administration and Congressional leadership have also proposed changes to complex provisions in the U.S. international tax system, including the base erosion and anti-abuse tax (BEAT) and global intangible low-taxed income (GILTI). These changes could impact AIG’s after-tax earnings or cash flow. Furthermore, there is the possibility of further regulatory guidance on certain aspects of the BEAT and GILTI, which could impact the amounts recorded with respect to these international provisions, possibly materially.

In addition to changing the taxation of corporations in general, there are proposals for increases in tax rates for individuals, capital gains, and changes to the estate tax. These changes could impact demand in the U.S. for life insurance and annuity contracts.

New tax laws outside the U.S. similar to BEAT and GILTI or enacted in response to proposals by the Organisation for Economic Co-operation and Development could make substantive changes to the global international tax regime. Such changes could impact cross border reinsurance transactions, which could increase our tax costs globally.

Finally, it is possible that tax laws will be further changed either in a technical corrections bill or entirely new legislation. It remains difficult to predict whether or when there will be any tax law changes or further guidance by the authorities in the U.S. or elsewhere in the world having a material adverse effect on our business, consolidated results of operations, liquidity and financial condition, as the impact of proposals on our business can vary substantially depending upon the specific changes or further guidance made and how the changes or guidance are implemented by the authorities.

For additional information, see Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations – U.S. Tax Law Changes.


AIG \| Third Quarter 2022 Form 10-Q			155

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

The following table provides information about purchases made by or on behalf of AIG or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934 (the Exchange Act)) of AIG Common Stock during the three months ended September 30, 2022:


Period	Total Number of Shares Repurchased		Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
July 1-31	9,459,021	$	51.15	9,459,021	$	5,357
August 1-31	9,675,577		54.04	9,675,577		4,834
September 1-30	5,003,822		52.15	5,003,822		4,573
Total	24,138,420	$	52.52	24,138,420	$	4,573

During the three-month period ended September 30, 2022, AIG Parent repurchased approximately 24 million shares of AIG common stock, par value $2.50 per share (AIG Common Stock) for an aggregate purchase price of $1.3 billion.

As of September 30, 2022, approximately $4.6 billion remained under the authorization. From October 1, 2022 to October 27, 2022, we repurchased approximately 4 million shares of AIG Common Stock for an aggregate purchase price of approximately $221 million.

Shares may be repurchased from time to time in the open market, private purchases, through forward, derivative, accelerated repurchase or automatic repurchase transactions or otherwise. Certain of our share repurchases have been and may from time to time be effected through Exchange Act Rule 10b5-1 repurchase plans. The timing of any future share repurchases will depend on market conditions, our business and strategic plans, financial condition, results of operations, liquidity and other factors. The repurchase of AIG Common Stock is also subject to the terms of AIG’s Series A 5.85% Non-Cumulative Preferred Stock (Series A Preferred Stock), pursuant to which AIG may not (other than in limited circumstances) purchase, redeem or otherwise acquire AIG Common Stock unless the full dividends for the latest completed dividend period on all outstanding shares of Series A Preferred Stock have been declared and paid or provided for.

ITEM 4 | Mine Safety Disclosures

Not applicable.


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ITEM 6 | Exhibits

Exhibit Index


Exhibit Number	Description	Location
1	(1) Underwriting Agreement, dated as of September 14, 2022, by and among Corebridge Financial, Inc., American International Group, Inc., J.P. Morgan Securities LLC, as global coordinator, Morgan Stanley & Co. LLC and Piper Sandler & Co., as representatives of the several underwriters named therein.	Filed herewith.
10	(1) Amendment Letter, dated as of August 24, 2022, to the 3-Year Delayed Draw Term Loan Agreement among Corebridge Financial, Inc., the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent.	Filed herewith.
	(2) AIG Long Term Incentive Plan (as amended and restated September 2022)	Filed herewith.
	(3) Separation Agreement, dated as of September 14, 2022, by and between American International Group, Inc. and Corebridge Financial, Inc.	Filed herewith.
	(4) Registration Rights Agreement, dated as of September 14, 2022, by and between American International Group, Inc. and Corebridge Financial, Inc.	Filed herewith.
	(5) Transition Services Agreement, dated as of September 14, 2022, by and between American International Group, Inc. and Corebridge Financial, Inc.	Filed herewith.
	(6) Trademark License Agreement, dated as of September 14, 2022, by and between American International Group, Inc. and Corebridge Financial, Inc.	Filed herewith.
	(7) Intellectual Property Assignment Agreement, dated as of September 14, 2022, by and between American International Group, Inc. and Corebridge Financial, Inc.	Filed herewith.
	(8) Grantback License Agreement, dated as of September 14, 2022, by and between American International Group, Inc. and Corebridge Financial, Inc.	Filed herewith.
	(9) Employee Matters Agreement, dated as of September 14, 2022, by and between American International Group, Inc. and Corebridge Financial, Inc.	Filed herewith.
	(10) Tax Matters Agreement, dated as of September 14, 2022, by and between American International Group, Inc. and Corebridge Financial, Inc.	Filed herewith.
22	Guaranteed Securities	None.
31	Rule 13a-14(a)/15d-14(a) Certifications	Filed herewith.
32	Section 1350 Certifications**	Filed herewith.
101	Interactive data files pursuant to Rule 405 of Regulation S-T formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, (ii) the Condensed Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2022 and 2021, (iii) the Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2022 and 2021, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021, (v) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021 and (vi) the Notes to the Condensed Consolidated Financial Statements	Filed herewith.
104	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)	Filed herewith.

*This exhibit is a management contract or compensatory arrangement.

**This information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.


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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



AMERICAN INTERNATIONAL GROUP, INC.
(Registrant)
/S/ SHANE FITZSIMONS
Shane Fitzsimons
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)




/S/ KATHLEEN CARBONE
Kathleen Carbone
Vice President and
Chief Accounting Officer
(Principal Accounting Officer)

Dated: November 2, 2022


158			AIG \| Third Quarter 2022 Form 10-Q