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Fair Value Measurements

9 Months Ended

Sep. 30, 2023

5. 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.

The following is a description of the valuation methodologies used for instruments carried at fair value. These methodologies are applied to assets and liabilities across the levels discussed above, and the observability of the inputs used determines the appropriate level in the fair value hierarchy for the respective asset or liability.

VALUATION METHODOLOGIES OF FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

There were no material changes to valuation methodologies of financial instruments measured at fair value with the exception of the valuation methodologies listed below which were impacted by the adoption of LDTI. For additional information on valuation methodologies not impacted by the adoption LDTI, see Note 4 to the Consolidated Financial Statements in the 2022 Annual Report.

Market Risk Benefits and Embedded Derivatives within Policyholder Contract Deposits

Certain variable annuity, fixed annuity and fixed index annuity contracts contain MRBs related to guaranteed benefit features that we separate from the host contracts and account for at fair value, with certain changes recognized in earnings. MRBs are contracts or contract features that provide protection to policyholders from other-than-nominal capital market risks and expose the insurance entity to other-than-nominal capital market risks.

The fair value of MRBs contained in certain variable annuity, fixed annuity and fixed index annuity contracts is measured based on policyholder behavior and capital market assumptions related to projected cash flows over the expected lives of the contracts. These discounted cash flow projections primarily include benefits and related fees assessed, when applicable. In some instances, the projected cash flows from fees may exceed projected cash flows related to benefit payments and therefore, at a point in time, the carrying value of the MRBs may be in a net asset position. The projected cash flows incorporate best estimate assumptions for policyholder behavior (including mortality, lapses, withdrawals and benefit utilization), along with an explicit risk margin to reflect a market participant’s estimates of projected cash flows and policyholder behavior. Estimates of future policyholder behavior assumptions are subjective and are based primarily on our historical experience.

Because of the dynamic and complex nature of the projected cash flows with respect to MRBs in our variable annuity, fixed annuity, and fixed index annuity contracts, risk neutral valuations are used, which are calibrated to observable interest rate and equity option prices. Estimating the underlying cash flows for these products involves judgments regarding the capital market assumptions related to expected market rates of return, market volatility, credit spreads, correlations of certain market variables, fund performance and discount rates. Additionally, estimating the underlying cash flows for these products also involves judgments regarding policyholder behavior. The portion of fees attributable to the fair value of expected benefit payments is included within the fair value measurement of these MRBs, and related fees are classified in change in the fair value of MRBs, net, as earned, consistent with other changes in the fair value of these MRBs. Any portion of the fees not attributed to the MRBs is excluded from the fair value measurement and classified in policy fees as earned.

Option pricing models are used to estimate the fair value of embedded derivatives in our fixed index annuity and life contracts, taking into account the capital market assumptions for future index growth rates, volatility of the index, future interest rates, and our ability to adjust the participation rate and the cap on fixed index credited rates in light of market conditions and policyholder behavior assumptions.

Projected cash flows are discounted using the interest rate swap curve (swap curve), which is viewed as being consistent with the credit spreads for highly-rated financial institutions (S&P AA-rated or above). A swap curve shows the fixed-rate leg of a non-complex swap against the floating rate (for example, Secured Overnight Financing Rate (SOFR) or London Inter-Bank Offered Rate) leg of a related tenor. We also incorporate our own risk of non-performance in the valuation of MRBs and embedded derivatives associated with variable annuity, fixed annuity, fixed index annuity and life contracts. The non-performance risk adjustment (NPA) reflects a market participant’s view of our claims-paying ability by incorporating an additional spread to the swap curve used to discount projected benefit cash flows. The NPA is calculated by constructing forward rates based on a weighted average of observable corporate credit indices to approximate the claims-paying ability rating of our insurance companies. The corporate credit indices are observable for the first 30 years. For years 30 to 50, the yield is derived using market observable yields. Yields for years 50 to 100 are extrapolated using a flat forward approach, maintaining a constant forward spread through the period. MRBs are measured using a NPA that is a locked-in estimate of our claims-paying ability at policy issue (locked-in NPA) as well as a NPA that reflects an estimate of our current claims-paying ability (current NPA).

When MRBs are remeasured each period, both the interest rates and current NPA are updated. Changes in the swap curve and the time value accretion of the at-issue NPA are recorded to net income while the difference between the MRBs measured using the at-issue NPA and the current NPA is recorded to OCI. For embedded derivatives, changes in the interest rates and the period-over-period change in the NPA are recorded to net income.

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, 2023		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	$	338	$	5,616	$	—	$	—	$	—	$	5,954
Obligations of states, municipalities and political subdivisions		—		9,681		765		—		—		10,446
Non-U.S. governments		250		11,471		3		—		—		11,724
Corporate debt		—		124,553		1,538		—		—		126,091
RMBS		—		11,185		7,546		—		—		18,731
CMBS		—		12,943		567		—		—		13,510
CLO/ABS		—		13,342		15,142		—		—		28,484
Total bonds available for sale		588		188,791		25,561		—		—		214,940
Other bond securities:

Obligations of states, municipalities and political subdivisions		—		90		1		—		—		91
Non-U.S. governments		—		33		—		—		—		33
Corporate debt		—		2,403		221		—		—		2,624
RMBS		—		109		158		—		—		267
CMBS		—		255		23		—		—		278
CLO/ABS		—		497		1,050		—		—		1,547
Total other bond securities		—		3,387		1,453		—		—		4,840
Equity securities		441		15		59		—		—		515
Other invested assets(b)		—		148		2,228		—		—		2,376
Derivative assets(c):
Interest rate contracts		—		2,715		533		—		—		3,248
Foreign exchange contracts		—		1,779		1		—		—		1,780
Equity contracts		4		1,043		375		—		—		1,422

Credit contracts		—		—		33		—		—		33
Other contracts		—		—		16		—		—		16
Counterparty netting and cash collateral		—		—		—		(3,985)		(2,141)		(6,126)
Total derivative assets		4		5,537		958		(3,985)		(2,141)		373
Short-term investments		2,384		4,075		—		—		—		6,459
Market risk benefit assets		—		—		978		—		—		978
Other assets(c)		—		—		112		—		—		112
Separate account assets		81,567		3,157		—		—		—		84,724
Total(d)	$	84,984	$	205,110	$	31,349	$	(3,985)	$	(2,141)	$	315,317
Liabilities:
Policyholder contract deposits	$	—	$	49	$	6,327	$	—	$	—	$	6,376
Market risk benefit liabilities		—		—		4,519		—		—		4,519
Derivative liabilities(c):
Interest rate contracts		—		5,174		—		—		—		5,174
Foreign exchange contracts		—		648		3		—		—		651
Equity contracts		6		843		4		—		—		853
Credit contracts		—		5		33		—		—		38

Counterparty netting and cash collateral		—		—		—		(3,985)		(2,472)		(6,457)
Total derivative liabilities		6		6,670		40		(3,985)		(2,472)		259
Fortitude Re funds withheld payable		—		—		(3,413)		—		—		(3,413)
Other liabilities		—		—		92		—		—		92
Long-term debt		—		102		—		—		—		102
Total	$	6	$	6,821	$	7,565	$	(3,985)	$	(2,472)	$	7,935


December 31, 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	$	25	$	6,594	$	—	$	—	$	—	$	6,619
Obligations of states, municipalities and political subdivisions		—		11,275		824		—		—		12,099
Non-U.S. governments		158		13,326		1		—		—		13,485
Corporate debt		—		134,992		2,847		—		—		137,839
RMBS		—		11,264		7,553		—		—		18,817
CMBS		—		13,267		926		—		—		14,193
CLO/ABS		—		10,356		12,748		—		—		23,104
Total bonds available for sale		183		201,074		24,899		—		—		226,156
Other bond securities:

Obligations of states, municipalities and political subdivisions		—		111		—		—		—		111
Non-U.S. governments		—		66		—		—		—		66
Corporate debt		—		1,976		416		—		—		2,392
RMBS		—		113		173		—		—		286
CMBS		—		303		28		—		—		331
CLO/ABS		—		389		910		—		—		1,299
Total other bond securities		—		2,958		1,527		—		—		4,485
Equity securities		518		18		39		—		—		575
Other invested assets (b)		—		145		2,075		—		—		2,220
Derivative assets(c):
Interest rate contracts		1		3,410		311		—		—		3,722
Foreign exchange contracts		—		1,844		—		—		—		1,844
Equity contracts		11		132		285		—		—		428
Commodity contracts		—		9		—		—		—		9
Credit contracts		—		—		32		—		—		32
Other contracts		—		—		14		—		—		14
Counterparty netting and cash collateral		—		—		—		(3,895)		(1,640)		(5,535)
Total derivative assets		12		5,395		642		(3,895)		(1,640)		514
Short-term investments		2,821		2,887		—		—		—		5,708
Market risk benefit assets		—		—		796		—		—		796
Other assets(c)		—		—		107		—		—		107
Separate account assets		81,655		3,198		—		—		—		84,853
Total	$	85,189	$	215,675	$	30,085	$	(3,895)	$	(1,640)	$	325,414
Liabilities:
Policyholder contract deposits	$	—	$	41	$	5,367	$	—	$	—	$	5,408
Market risk benefit liabilities		—		—		4,736		—		—		4,736
Derivative liabilities(c):
Interest rate contracts		—		4,838		—		—		—		4,838
Foreign exchange contracts		—		1,138		—		—		—		1,138
Equity contracts		2		10		14		—		—		26
Credit contracts		—		9		32		—		—		41

Counterparty netting and cash collateral		—		—		—		(3,895)		(1,917)		(5,812)
Total derivative liabilities		2		5,995		46		(3,895)		(1,917)		231
Fortitude Re funds withheld payable		—		—		(2,235)		—		—		(2,235)
Other liabilities		—		—		112		—		—		112
Long-term debt		—		56		—		—		—		56
Total	$	2	$	6,092	$	8,026	$	(3,895)	$	(1,917)	$	8,308

(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 $9.6 billion and $9.8 billion as of September 30, 2023 and December 31, 2022, respectively.

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

(d)Excludes $5.4 billion of assets reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets.

CHANGES IN LEVEL 3 RECURRING FAIR VALUE MEASUREMENTS

The following tables present changes during the three and nine months ended September 30, 2023 and 2022 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, 2023 and 2022:


(in millions)		Fair Value Beginning of Period		MRBs and 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, 2023
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	869	$	(3)	$	(78)	$	(23)	$	—	$	—	$	—	$	765	$	—	$	(82)
Non-U.S. governments		6		—		—		(3)		—		—		—		3		—		—
Corporate debt		1,721		(5)		(78)		(76)		176		(200)		—		1,538		—		(83)
RMBS		7,617		101		(82)		(74)		2		(25)		7		7,546		—		(122)
CMBS		553		(3)		(27)		4		65		(25)		—		567		—		(32)
CLO/ABS		14,214		51		(115)		411		553		(46)		74		15,142		—		(121)
Total bonds available for sale		24,980		141		(380)		239		796		(296)		81		25,561		—		(440)
Other bond securities:
Obligations of states, municipalities and political subdivisions		3		—		—		(2)		—		—		—		1		—		—
Corporate Debt		155		1		—		65		—		—		—		221		3		—
RMBS		164		(2)		—		(4)		—		—		—		158		(3)		—
CMBS		26		(3)		—		—		—		—		—		23		(3)		—
CLO/ABS		1,044		1		—		(19)		1		(3)		26		1,050		(11)		—
Total other bond securities		1,392		(3)		—		40		1		(3)		26		1,453		(14)		—
Equity securities		72		1		—		(2)		—		(12)		—		59		1		—
Other invested assets		2,140		(13)		(12)		69		44		—		—		2,228		—		—
Other assets		111		—		—		1		—		—		—		112		—		—
Total(a)	$	28,695	$	126	$	(392)	$	347	$	841	$	(311)	$	107	$	29,413	$	(13)	$	(440)
(in millions)		Fair Value Beginning of Period		MRBs and 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	$	6,813	$	(716)	$	—	$	230	$	—	$	—	$	—	$	6,327	$	972	$	—
Derivative liabilities, net:
Interest rate contracts		(339)		(174)		—		(20)		—		—		—		(533)		181		—
Foreign exchange contracts		2		(1)		—		1		—		—		—		2		—		—
Equity contracts		(645)		411		—		(137)		—		—		—		(371)		(147)		—
Credit contracts		—		1		—		(1)		—		—		—		—		—		—
Other contracts		(15)		(17)		—		16		—		—		—		(16)		17		—
Total derivative liabilities, net(b)		(997)		220		—		(141)		—		—		—		(918)		51		—
Fortitude Re funds withheld payable		(2,118)		(1,137)		—		(158)		—		—		—		(3,413)		1,139		—
Other Liabilities		98		(6)		—		—		—		—		—		92		—		—
Total(c)	$	3,796	$	(1,639)	$	—	$	(69)	$	—	$	—	$	—	$	2,088	$	2,162	$	—


(in millions)		Fair Value Beginning of Period		MRBs and 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)
CLO/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)		—
CLO/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(a)	$	29,622	$	64	$	(936)	$	(42)	$	2,217	$	(571)	$	—	$	30,354	$	(90)	$	(868)
(in millions)		Fair Value Beginning of Period		MRBs and 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	$	4,728	$	(274)	$	—	$	289	$	—	$	—	$	—	$	4,743	$	287	$	—
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(b)		(275)		110		—		(190)		—		6		—		(349)		(42)		—
Fortitude Re funds withheld payable		(638)		(1,757)		—		(110)		—		—		—		(2,505)		1,791		—
Total(c)	$	3,815	$	(1,921)	$	—	$	(11)	$	—	$	6	$	—	$	1,889	$	2,036	$	—


(in millions)		Fair Value Beginning of Year		MRBs and 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, 2023
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	824	$	(2)	$	(26)	$	(31)	$	—	$	—	$	—	$	765	$	—	$	(54)
Non-U.S. governments		1		1		1		(5)		7		(2)		—		3		—		1
Corporate debt		2,847		(101)		(19)		(450)		496		(1,219)		(16)		1,538		—		(61)
RMBS		7,553		315		37		(275)		33		(89)		(28)		7,546		—		(33)
CMBS		926		(25)		(69)		(35)		98		(328)		—		567		—		(114)
CLO/ABS		12,748		112		62		1,641		666		(246)		159		15,142		—		(47)
Total bonds available for sale		24,899		300		(14)		845		1,300		(1,884)		115		25,561		—		(308)
Other bond securities:
Obligations of states, municipalities and political subdivisions		—		—		—		1		—		—		—		1		—		—
Corporate debt		416		3		—		(7)		—		(191)		—		221		2		—
RMBS		173		5		—		(20)		—		—		—		158		(8)		—
CMBS		28		(5)		—		—		—		—		—		23		(4)		—
CLO/ABS		910		29		—		75		5		(48)		79		1,050		(31)		—
Total other bond securities		1,527		32		—		49		5		(239)		79		1,453		(41)		—
Equity securities		39		3		—		27		10		(20)		—		59		2		—
Other invested assets		2,075		(84)		(5)		198		44		—		—		2,228		(84)		—
Other assets		107		—		—		5		—		—		—		112		—		—
Total(a)	$	28,647	$	251	$	(19)	$	1,124	$	1,359	$	(2,143)	$	194	$	29,413	$	(123)	$	(308)
(in millions)		Fair Value Beginning of Year		MRBs and 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	$	5,367	$	94	$	—	$	866	$	—	$	—	$	—	$	6,327	$	296	$	—
Derivative liabilities, net:
Interest rate contracts		(311)		(90)		—		(132)		—		—		—		(533)		146		—
Foreign exchange contracts		—		1		—		1		—		—		—		2		(4)		—
Equity contracts		(271)		362		—		(462)		—		—		—		(371)		(11)		—
Credit contracts		—		—		—		—		—		—		—		—		1		—
Other contracts		(14)		(50)		—		48		—		—		—		(16)		49		—
Total derivative liabilities, net(b)		(596)		223		—		(545)		—		—		—		(918)		181		—
Fortitude Re funds withheld payable		(2,235)		(152)		—		(1,026)		—		—		—		(3,413)		671		—
Other Liabilities		112		(20)		—		—		—		—		—		92		—		—
Total(c)	$	2,648	$	145	$	—	$	(705)	$	—	$	—	$	—	$	2,088	$	1,148	$	—


(in millions)		Fair Value Beginning of Year		MRBs and 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)
CLO/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)		—
CLO/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(a)	$	31,627	$	265	$	(3,601)	$	1,201	$	4,414	$	(3,552)	$	—	$	30,354	$	(140)	$	(2,835)
(in millions)		Fair Value Beginning of Year		MRBs and 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	$	5,572	$	(1,477)	$	—	$	648	$	—	$	—	$	—	$	4,743	$	1,724	$	—

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(b)		(428)		482		—		(327)		(81)		5		—		(349)		(197)		—
Fortitude Re funds withheld payable		5,922		(7,851)		—		(576)		—		—		—		(2,505)		8,107		—
Total(c)	$	11,066	$	(8,846)	$	—	$	(255)	$	(81)	$	5	$	—	$	1,889	$	9,634	$	—

(a)Excludes MRB assets of $978 million at September 30, 2023 and $743 million at September 30, 2022, For additional information, see Note 13.

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

(c)Excludes MRB liabilities of $4.5 billion at September 30, 2023 and $4.6 billion at September 30, 2022. For additional information, see Note 13.

Market risk benefits and 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)		Change in the fair value of market risk benefits, net(c)		Other Income		Total
Three Months Ended September 30, 2023
Assets:
Bonds available for sale	$	202	$	(61)	$	—	$	—	$	141
Other bond securities		(3)		—		—		—		(3)
Equity securities		1		—		—		—		1
Other invested assets		(11)		(2)		—		—		(13)
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
Nine Months Ended September 30, 2023
Assets:
Bonds available for sale	$	385	$	(85)	$	—	$	—	$	300
Other bond securities		32		—		—		—		32
Equity securities		3		—		—		—		3
Other invested assets		(82)		(2)		—		—		(84)
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

(in millions)		Net Investment Income		Net Realized (Gains) Losses		Change in the fair value of market risk benefits, net(c)		Other Income		Total
Three Months Ended September 30, 2023
Liabilities:
Policyholder contract deposits(a)	$	—	$	(716)	$	—	$	—	$	(716)
Market risk benefit liabilities, net(b)		—		(1)		(879)		—		(880)
Derivative liabilities, net		—		415		(180)		(15)		220
Fortitude Re funds withheld payable		—		(1,137)		—		—		(1,137)
Other Liabilities		—		(6)		—		—		(6)
Three Months Ended September 30, 2022
Liabilities:
Policyholder contract deposits(a)	$	—	$	(274)	$	—	$	—	$	(274)
Market risk benefit liabilities, net(b)		—		(2)		(720)		—		(722)
Derivative liabilities, net		—		170		(43)		(17)		110
Fortitude Re funds withheld payable		—		(1,757)		—		—		(1,757)
Nine Months Ended September 30, 2023
Liabilities:
Policyholder contract deposits(a)	$	—	$	94	$	—	$	—	$	94
Market risk benefit liabilities, net(b)		—		(4)		(1,676)		—		(1,680)
Derivative liabilities, net		—		392		(122)		(47)		223
Fortitude Re funds withheld payable		—		(152)		—		—		(152)
Other Liabilities		—		(20)		—		—		(20)
Nine Months Ended September 30, 2022
Liabilities:
Policyholder contract deposits(a)	$	—	$	(1,477)	$	—	$	—	$	(1,477)
Market risk benefit liabilities, net(b)		—		(10)		(1,677)		—		(1,687)
Derivative liabilities, net		—		617		(90)		(45)		482
Fortitude Re funds withheld payable		—		(7,851)		—		—		(7,851)

(a)Primarily embedded derivatives.

(b)Market risk benefit assets and liabilities have been netted in the above table for presentation purposes only.

(c)The portion of the fair value change attributable to own credit risk is recognized in OCI.

The following table presents the gross components of purchases, sales, issuances and settlements, net, shown above, for the three and nine months ended September 30, 2023 and 2022 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, 2023
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	—	$	(23)	$	—	$	(23)
Non-U.S. governments		—		—		(3)		(3)
Corporate debt		197		(30)		(243)		(76)
RMBS		194		(6)		(262)		(74)
CMBS		—		(7)		11		4
CLO/ABS		604		(158)		(35)		411
Total bonds available for sale		995		(224)		(532)		239
Other bond securities:
Obligations of states, municipalities and political subdivisions		—		(2)		—		(2)
Corporate debt		89		—		(24)		65
RMBS		—		—		(4)		(4)

CLO/ABS		35		(10)		(44)		(19)
Total other bond securities		124		(12)		(72)		40
Equity securities		—		(2)		—		(2)
Other invested assets		74		—		(5)		69
Other assets		—		—		1		1
Total	$	1,193	$	(238)	$	(608)	$	347
Liabilities:
Policyholder contract deposits	$	—	$	348	$	(118)	$	230
Derivative liabilities, net		(302)		9		152		(141)
Fortitude Re funds withheld payable		—		—		(158)		(158)
Total	$	(302)	$	357	$	(124)	$	(69)
Three Months Ended September 30, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	5	$	—	$	(34)	$	(29)
Non-U.S. governments		—		—		(1)		(1)
Corporate debt		31		(49)		(82)		(100)
RMBS		56		—		(355)		(299)
CMBS		27		—		(60)		(33)
CLO/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

CLO/ABS		65		(123)		(100)		(158)
Total other bond securities		98		(123)		(41)		(66)
Equity securities		8		—		—		8
Other invested assets		53		—		(98)		(45)

Total	$	859	$	(194)	$	(707)	$	(42)
Liabilities:
Policyholder contract deposits	$	—	$	239	$	50	$	289
Derivative liabilities, net		(243)		3		50		(190)
Fortitude Re funds withheld payable		—		—		(110)		(110)
Total	$	(243)	$	242	$	(10)	$	(11)


(in millions)		Purchases		Sales		Issuances and Settlements(a)		Purchases, Sales, Issuances and Settlements, Net(a)
Nine Months Ended September 30, 2023
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	1	$	(27)	$	(5)	$	(31)
Non-U.S. governments		—		—		(5)		(5)
Corporate debt		219		(30)		(639)		(450)
RMBS		595		(67)		(803)		(275)
CMBS		10		(39)		(6)		(35)
CLO/ABS		1,996		(309)		(46)		1,641
Total bonds available for sale		2,821		(472)		(1,504)		845
Other bond securities:
Obligations of states, municipalities and political subdivisions		3		(2)		—		1
Corporate debt		176		—		(183)		(7)
RMBS		6		—		(26)		(20)

CLO/ABS		162		(10)		(77)		75
Total other bond securities		347		(12)		(286)		49
Equity securities		31		(2)		(2)		27
Other invested assets		226		—		(28)		198
Other assets		—		—		5		5
Total	$	3,425	$	(486)	$	(1,815)	$	1,124
Liabilities:
Policyholder contract deposits	$	—	$	1,076	$	(210)	$	866
Derivative liabilities, net		(752)		18		189		(545)
Fortitude Re funds withheld payable		—		—		(1,026)		(1,026)

Total	$	(752)	$	1,094	$	(1,047)	$	(705)
Nine Months Ended September 30, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	6	$	(64)	$	(36)	$	(94)
Non-U.S. governments		—		—		(1)		(1)
Corporate Debt		54		(49)		(142)		(137)
RMBS		341		—		(1,514)		(1,173)
CMBS		173		—		(89)		84
CLO/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

CLO/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	$	—	$	656	$	(8)	$	648
Derivative liabilities, net		(492)		6		159		(327)
Fortitude Re funds withheld payable		—		—		(576)		(576)
Total	$	(492)	$	662	$	(425)	$	(255)

(a)There were no issuances during the three and nine months ended September 30, 2023 and 2022.

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, 2023 and 2022 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 OCI as shown in the table above excludes $1 million and $9 million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three and nine months ended September 30, 2023, respectively, and includes $(21) million and $(35) million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three and nine months ended September 30, 2023, respectively.

The Net realized and unrealized gains (losses) included in income (loss) or OCI 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 months 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 months ended September 30, 2022, respectively.

Transfers of Level 3 Assets

During the three and nine months ended September 30, 2023 and 2022, transfers into Level 3 assets primarily included certain investments in private placement corporate debt, residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS) and collateralized loan obligations (CLO)/asset-backed securities (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 CLO and certain ABS into Level 3 assets were due to diminished market transparency and liquidity for individual security types.

During the three and nine months ended September 30, 2023 and 2022, transfers out of Level 3 assets primarily included certain investments in private placement corporate debt, RMBS, CMBS and CLO/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 CLO and certain ABS into Level 3 assets were due to diminished market transparency and liquidity for individual security types.

Transfers of Level 3 Liabilities

There were no significant transfers of derivative or other liabilities into or out of Level 3 for the three and nine months ended September 30, 2023. During the nine months ended September 30, 2022, transfers of derivatives into Level 3 were primarily due to increased long-dated European swaption activity with SOFR tenors.

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 CLO/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, 2023		Valuation Technique	Unobservable Input(b)	Range (Weighted Average)(c)
Assets:
Obligations of states, municipalities and political subdivisions	$	743	Discounted cash flow	Yield	5.64% - 6.05% (5.85%)
Corporate debt		1,459	Discounted cash flow	Yield	5.36% - 9.14% (7.25%)
RMBS(a)		4,855	Discounted cash flow	Constant prepayment rate	3.95% - 9.01% (6.48%)
				Loss severity	44.22% - 77.29% (60.75%)
				Constant default rate	0.76% - 2.46% (1.61%)
				Yield	5.38% - 7.34% (6.36%)
CLO/ABS(a)		12,955	Discounted cash flow	Yield	6.31% - 8.57% (7.44%)
CMBS		501	Discounted cash flow	Yield	5.85% - 17.89% (11.87%)
Market risk benefit assets		978	Discounted cash flow	Equity volatility	6.65% - 52.35%
				Base lapse rate	0.16% - 28.80%
				Dynamic lapse multiplier(e)	20.00% - 186.18%
				Mortality multiplier(e)(f)	38.25% - 160.01%
				Utilization(h)	80.00% - 100.00%
				Equity / interest rate correlation	0.00% - 30.00%
				NPA(g)	0.62% - 2.08%


(in millions)	Fair Value at September 30, 2023		Valuation Technique	Unobservable Input(b)	Range (Weighted Average)(c)
Liabilities(d):
Market risk benefit liabilities:
Variable annuities guaranteed benefits		1,835	Discounted cash flow	Equity volatility	6.65% - 52.35%
				Base lapse rate	0.16% - 28.80%
				Dynamic lapse multiplier(e)	20.00% - 186.18%
				Mortality multiplier(e)(f)	38.25% - 160.01%
				Utilization(h)	80.00% - 100.00%
				Equity / interest rate correlation	0.00% - 30.00%
				NPA(g)	0.62% - 2.08%
Fixed annuities guaranteed benefits		824	Discounted cash flow	Base lapse rate	0.20% - 15.75%
				Dynamic lapse multiplier(e)	20.00% - 186.18%
				Mortality multiplier(e)(f)	40.26% - 168.43%
				Utilization(h)	90.00% - 97.50%
				NPA(g)	0.62% - 2.08%
Fixed index annuities guaranteed benefits		1,860	Discounted cash flow	Equity volatility	6.65% - 52.35%
				Base lapse rate	0.20% - 50.00%
				Dynamic lapse multiplier(e)	20.00% - 186.18%
				Mortality multiplier(e)(f)	24.00% - 146.00%
				Utilization(h)	60.00% - 97.50%
				Option budget	0.00% - 6.00%
				Equity / interest rate correlation	0.00% - 30.00%
				NPA(g)	0.62% - 2.08%
Embedded derivatives within Policyholder contract deposits:
Index credits on fixed index annuities(i)		5,573	Discounted cash flow	Equity volatility	6.65% - 52.35%
				Base lapse rate	0.20% - 50.00%
				Dynamic lapse multiplier(e)	20.00% - 186.18%
				Mortality multiplier(e)(f)	24.00% - 146.00%
				Utilization(h)	60.00% - 97.50%
				Option budget	0.00% - 6.00%
				Equity / interest rate correlation	0.00% - 30.00%
				NPA(g)	0.62% - 2.08%
Index life		754	Discounted cash flow	Base lapse rate	0.00% - 37.97%
				Mortality rate	0.00% - 100.00%
				Equity volatility	5.75% - 21.25%
				NPA(g)	0.62% - 2.08%


(in millions)	Fair Value at December 31, 2022		Valuation Technique	Unobservable Input(b)	Range (Weighted Average)(c)
Assets:
Obligations of states, municipalities and political subdivisions	$	799	Discounted cash flow	Yield	5.28% - 5.94% (5.61%)
Corporate debt		2,527	Discounted cash flow	Yield	4.98% - 9.36% (7.17%)
RMBS(a)		5,235	Discounted cash flow	Constant prepayment rate	4.89% - 10.49% (7.69%)
				Loss severity	45.06% - 76.87% (60.97%)
				Constant default rate	0.82% - 2.72% (1.77%)
				Yield	5.98% - 7.75% (6.87%)
CLO/ABS(a)		7,503	Discounted cash flow	Yield	6.00% - 7.97% (6.99%)
CMBS		587	Discounted cash flow	Yield	4.06% - 13.14% (8.60%)
Market risk benefit assets		796	Discounted cash flow	Equity volatility	6.45% - 50.75%
				Base lapse rate	0.16% - 28.80%
				Dynamic lapse multiplier(e)	20.00% - 186.18%
				Mortality multiplier(e)(f)	38.25% - 160.01%
				Utilization(h)	80.00% - 100.00%
				Equity / interest rate correlation	0.00% - 30.00%
				NPA(g)	0.00% - 2.03%


(in millions)	Fair Value at December 31, 2022		Valuation Technique	Unobservable Input(b)	Range (Weighted Average)(c)
Liabilities(d):
Market risk benefit liabilities:
Variable annuities guaranteed benefits		2,358	Discounted cash flow	Equity volatility	6.45% - 50.75%
				Base lapse rate	0.16% - 28.80%
				Dynamic lapse multiplier(e)	20.00% - 186.18%
				Mortality multiplier(e)(f)	38.25% - 160.01%
				Utilization(h)	80.00% - 100.00%
				Equity / interest rate correlation	0.00% - 30.00%
				NPA(g)	0.00% - 2.03%
Fixed annuities guaranteed benefits		680	Discounted cash flow	Base lapse rate	0.20% - 15.75%
				Dynamic lapse multiplier(e)	20.00% - 186.16%
				Mortality multiplier(e)(f)	40.26% - 168.43%
				Utilization(h)	90.00% - 97.50%
				NPA(g)	0.00% - 2.03%
Fixed index annuities guaranteed benefits		1,698	Discounted cash flow	Equity volatility	6.45% - 50.75%
				Base lapse rate	0.20% - 50.00%
				Dynamic lapse multiplier(e)	20.00% - 186.18%
				Mortality multiplier(e)(f)	24.00% - 180.00%
				Utilization(h)	60.00% - 97.50%
				Option budget	0.00% - 5.00%
				Equity / interest rate correlation	0.00% - 30.00%
				NPA(g)	0.00% - 2.03%
Embedded derivatives within Policyholder contract deposits:
Index credits on fixed index annuities(i)		4,657	Discounted cash flow	Equity volatility	6.45% - 50.75%
				Base lapse rate	0.20% - 50.00%
				Dynamic lapse multiplier(e)	20.00% - 186.18%
				Mortality multiplier(e)(f)	24.00% - 180.00%
				Utilization(h)	60.00% - 97.50%
				Option budget	0.00% - 5.00%
				Equity / interest rate correlation	0.00% - 30.00%
				NPA(g)	0.00% - 2.03%
Index life		710	Discounted cash flow	Base lapse rate	0.00% - 37.97%
				Mortality rate	0.00% - 100.00%
				Equity volatility	5.75% - 23.63%
				NPA(g)	0.00% - 2.03%

(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 CLO 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 with policyholder contract deposits and market risk benefits 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 8, 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)The ranges for these inputs vary due to the different guaranteed minimum withdrawal benefits (GMWB) product specification and policyholder characteristics across in-force policies. Policyholder characteristics that affect these ranges include age, policy duration, and gender.

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

(g)The NPA applied as a spread over risk-free curve for discounting.

(h)The partial withdrawal utilization unobservable input range shown applies only to policies with guaranteed minimum withdrawal benefit riders. The total embedded derivative liability at September 30, 2023 and December 31, 2022 was approximately $1.2 billion and $1.1 billion, respectively.

(i)The fixed index annuities embedded derivative associated with index credits related to the contracts with guaranteed product features included in policyholder contract deposits was $1.2 billion and $1.1 billion at September 30, 2023 and December 31, 2022, respectively.

The ranges of reported inputs for Obligations of states, municipalities and political subdivisions, Corporate debt, RMBS, CLO/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.

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.

MRBs and Embedded Derivatives within Policyholder Contract Deposits

For MRBs and embedded derivatives, the assumptions for unobservable inputs vary throughout the period over which cash flows are projected for valuation purposes. The following are applicable unobservable inputs:

•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 and interest rate correlation estimates the relationship between changes in equity returns and interest rates in the economic scenario generator used to value our MRBs. 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. Only our fixed index annuities with a GMWB rider are subject to the equity and interest correlation assumption. Other policies such as accumulation fixed index annuity and life products do not use a correlation assumption.

•Base lapse rate assumptions are determined by company experience and judgment 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 benefit 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 GMWB liability, while lower mortality rate assumptions will generally increase the fair value of the liability because guaranteed withdrawal payments will be made for a longer period of time and generally exceed any decrease in guaranteed death benefits.

•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, which includes partial withdrawal behavior. Increases in assumed utilization rates will generally increase the fair value of the liability.

•Non-performance or “own credit” risk adjustment used in the valuation of MRBs and 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 MRBs and embedded derivatives, resulting in a gain in AOCI or Net realized gains (losses), respectively, and when corporate credit spreads narrow or tighten, the change in the NPA spread generally increases the fair value of the MRBs and embedded derivatives, resulting in a loss in AOCI or Net realized gains (losses), respectively.

•The projected cash flows incorporate best estimate assumptions for policyholder behavior (including mortality, lapses, withdrawals and benefit utilization), along with an explicit risk margin to reflect a market participant’s estimates of projected cash flows and policyholder behavior. Estimates of future policyholder behavior assumptions are subjective and based primarily on our historical experience.

•For embedded derivatives, option budgets estimate the expected long-term cost of options used to hedge exposures associated with index 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.

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, 2023				December 31, 2022
(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	$	3,609	$	2,290	$	3,146	$	2,448
Real assets	Investments in real estate properties, agricultural and infrastructure assets, including power plants and other energy producing assets		1,803		818		1,851		840
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		268		154		272		183
Growth equity	Funds that make investments in established companies for the purpose of growing their businesses		706		77		732		60
Mezzanine	Funds that make investments in the junior debt and equity securities of leveraged companies		294		103		598		142
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		2,099		269		1,829		391
Total private equity funds			8,779		3,711		8,428		4,064
Hedge funds:
Event-driven	Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations		19		—		92		—
Long-short	Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk		634		—		696		—
Macro	Investments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions		100		—		414		—
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		106		—		192		—
Total hedge funds			859		—		1,394		—
Total		$	9,638	$	3,711	$	9,822	$	4,064

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-year or two-year increments.

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)		2023		2022		2023		2022
Assets:
Other bond securities(a)	$	(38)	$	(241)	$	97	$	(915)
Alternative investments(b)		76		(57)		287		174
Liabilities:
Long-term debt(c)		6		69		8		240
Total gain (loss)	$	44	$	(229)	$	392	$	(501)

(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 6. For additional information regarding the funds withheld arrangements with Fortitude Re, see Note 8.

(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, 2023						December 31, 2022
(in millions)		Fair Value		Outstanding Principal Amount		Difference		Fair Value		Outstanding Principal Amount		Difference
Liabilities:
Long-term debt*	$	102	$	99	$	3	$	56	$	45	$	11

*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		2023		2022		2023		2022
September 30, 2023
Other investments	$	—	$	—	$	46	$	46	$	9	$	11	$	9	$	11
Other assets		—		—		—		—		32		—		49		—
Total	$	—	$	—	$	46	$	46	$	41	$	11	$	58	$	11
December 31, 2022
Other investments	$	—	$	—	$	12	$	12

Total	$	—	$	—	$	12	$	12

In addition to the assets presented in the table above, AIG had $163 million of loans held for sale which are carried at fair value at December 31, 2022. There are no loans that were carried at fair value as of September 30, 2023. There are no associated impairment charges.

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, 2023
Assets:
Mortgage and other loans receivable	$	—	$	272	$	46,293	$	46,565	$	50,922
Other invested assets		—		875		6		881		881
Short-term investments(a)		—		6,589		—		6,589		6,589
Cash(b)		1,994		—		—		1,994		1,994
Other assets		35		1		—		36		36
Liabilities:
Policyholder contract deposits associated with investment-type contracts		—		97		132,378		132,475		140,107
Fortitude Re funds withheld payable		—		—		31,104		31,104		31,104
Other liabilities(c)		—		733		—		733		733
Short-term and long-term debt		—		18,719		252		18,971		21,236
Debt of consolidated investment entities		—		36		2,651		2,687		2,717
Separate account liabilities - investment contracts		—		80,907		—		80,907		80,907
December 31, 2022
Assets:
Mortgage and other loans receivable	$	—	$	89	$	45,755	$	45,844	$	49,442
Other invested assets		—		848		6		854		854
Short-term investments		—		6,668		—		6,668		6,668
Cash		2,043		—		—		2,043		2,043
Other assets		24		9		—		33		33
Liabilities:
Policyholder contract deposits associated with investment-type contracts		—		119		129,174		129,293		137,086
Fortitude Re funds withheld payable		—		—		32,618		32,618		32,618
Other liabilities		—		3,101		—		3,101		3,101
Short-term and long-term debt		—		19,328		275		19,603		21,243
Debt of consolidated investment entities		—		3,055		2,478		5,533		5,880
Separate account liabilities - investment contracts		—		80,649		—		80,649		80,649

(a)Excludes $104 million reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets.

(b)Excludes $193 million reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets.

(c)Excludes $34 million reclassified to Liabilities held for sale on the Condensed Consolidated Balance Sheets.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details