In the ordinary course of business, our insurance companies purchase both treaty and facultative reinsurance to limit potential losses, provide additional capacity for growth, minimize exposure to significant risks or to facilitate greater diversification of our businesses. In addition, certain of our General Insurance subsidiaries sell reinsurance to other insurance companies. We determine the portion of our ultimate net loss that will be recoverable under our reinsurance contracts by reference to the terms of the reinsurance protection purchased. This determination involves an estimate of incurred but not reported (IBNR) loss. Reinsurance recoverables for contracts which are accounted for as deposits are subject to similar judgments and uncertainties and reported in Other assets.

Reinsurance assets include the balances due for paid losses and expenses, reserves for losses and expenses reported and outstanding, reserves for IBNR, ceded unearned premiums and ceded future policy benefits for life and accident and health insurance contracts and benefits paid and unpaid. Amounts related to paid and reserved losses and expenses and benefits with respect to these reinsurance agreements are sometimes collateralized. We remain liable to our policyholders regardless of whether our reinsurers meet their obligations under the reinsurance contracts, and as such, we regularly evaluate the financial condition of our reinsurers and monitor concentration of our credit risk. The estimation of the allowance for unrecoverable reinsurance from reinsurers who are unwilling and/or unable to pay amounts due us requires judgment for which key inputs typically include historical collection rates when amounts due are in dispute or where the reinsurer has suffered a credit event as well as specific reviews of balances in dispute or subject to credit impairment. Changes in the allowance for credit losses and disputes on reinsurance assets are reflected in Policyholder benefits and losses incurred within the Condensed Consolidated Statements of Income (Loss).

Assumptions used in estimating reinsurance recoverables related to coinsurance or modco contracts were consistent with those used in estimating the related liabilities and reflected locked-in assumptions, absent a loss recognition event. Amounts recoverable on YRT treaties were recognized when claims were incurred on the reinsured policies.

The reinsurance recoverables for coinsurance and modco contracts, along with amounts recoverable on YRT treaties are determined based on updated net premium ratios, reflecting updated actuarial assumptions using locked-in upper-medium investment instrument yield discount rates with changes recognized as remeasurement gains and losses reported in income. In addition, reinsurance recoverables are remeasured at the balance sheet date using current upper-medium grade discount rates with changes reported in OCI. For reinsurance agreements that reinsure existing, or non-contemporaneous (in-force) traditional and limited payment long-

duration insurance contracts, the reinsurance recoverable is measured using the upper-medium grade fixed-income instrument yield discount rate assumption related to the effective date of the reinsurance contract. Therefore, for non-contemporaneous reinsurance agreements executed after January 1, 2021, the locked-in rate to accrete interest into the income statement related to the reinsurance recoverable would be different from the locked-in rate used for accreting interest on the direct reserve for future policy benefits. Certain reinsured guaranteed benefits previously reported as reinsurance recoverables are classified as Market risk benefit assets in the Condensed Consolidated Balance Sheets and are measured at fair value.


(in millions)	Individual Retirement		Life Insurance		Institutional Markets		Total
Reinsurance assets - other, net of allowance for credit losses and disputes(a)
Pre-adoption, December 31, 2020	$	309	$	2,370	$	28	$	2,707
Reclassification of Cost of Reinsurance(b)	—		416		—		416
Reclassification to Market risk benefits	(35)		—		—		(35)
Change in cash flow assumptions and effect of net premiums exceeding gross premiums	—		9		—		9
Change due to the current upper-medium grade discount rate	—		74		5		79
Post-adoption January 1, 2021	$	274	$	2,869	$	33	$	3,176


(in millions)	Total
Reinsurance assets - Fortitude Re, net of allowance for credit losses and disputes(c)
Pre-adoption, December 31, 2020	$	29,135
Change in cash flow assumptions and effect of net premiums exceeding gross premiums	55
Change due to the current upper-medium grade discount rate	7,611
Post-adoption January 1, 2021	$	36,801

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 OCI). 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.

As of September 30, 2023, approximately $25.9 billion of reserves from our Life and Retirement Run-Off Lines and approximately $3.0 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.


	September 30, 2023				December 31, 2022
(in millions)	Carrying Value			Fair Value	Carrying Value			Fair Value	Corresponding Accounting Policy
Fixed maturity securities - available for sale(a)	$	15,955	$	15,955	$	18,821	$	18,821	Fair value through other comprehensive income (loss)
Fixed maturity securities - fair value option		4,418		4,418		4,182		4,182	Fair value through net investment income
Commercial mortgage loans		4,129		3,822		4,107		3,837	Amortized cost
Real estate investments		122		295		133		348	Amortized cost
Private equity funds / hedge funds		1,856		1,856		1,893		1,893	Fair value through net investment income
Policy loans		335		335		355		355	Amortized cost
Short-term investments		152		152		75		75	Fair value through net investment income
Funds withheld investment assets		26,967		26,833		29,566		29,511
Derivative assets, net(b)		2		2		90		90	Fair value through net realized gains (losses)
Other(c)		856		856		782		782	Amortized cost
Total	$	27,825	$	27,691	$	30,438	$	30,383

(a)The change in the net unrealized gains (losses) on available for sale securities related to the Fortitude Re funds withheld assets was $(740) million ($(585) million after-tax) and $(7.7) billion ($(6.1) billion after-tax), respectively for the nine months ended September 30, 2023 and 2022.

(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 $18 million and $27 million, respectively, as of September 30, 2023. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $192 million and $28 million, respectively, as of December 31, 2022. These derivative assets and liabilities are fully collateralized either by cash or securities.


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)		2023		2022		2023		2022

Net investment income - Fortitude Re funds withheld assets	$	264	$	155	$	1,001	$	634
Net realized gains (losses) on Fortitude Re funds withheld assets:
Net realized losses - Fortitude Re funds withheld assets		(227)		(86)		(396)		(312)
Net realized gains - Fortitude Re funds withheld embedded derivative		1,137		1,757		152		7,851
Net realized gains (losses) on Fortitude Re funds withheld assets		910		1,671		(244)		7,539
Income from continuing operations before income tax expense		1,174		1,826		757		8,173
Income tax expense(a)		247		383		159		1,716
Net income		927		1,443		598		6,457
Change in unrealized depreciation of all other investments(a)		(882)		(1,317)		(585)		(6,111)
Comprehensive income	$	45	$	126	$	13	$	346

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 arrangement and the appreciation (depreciation) of the asset is the primary driver of the comprehensive income (loss) reflected above.

The estimation of reinsurance recoverables involves a significant amount of judgment, particularly for latent exposures, such as asbestos, due to their long-tail nature. 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 on uncollectible reinsurance 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:

•the relative financial health of the reinsurer as classified 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

An estimate of the reinsurance recoverable's 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, 2023 were $69.4 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 89 percent of the reinsurance recoverables were investment grade, of which 49 percent related to General Insurance and 40 percent related to Life and Retirement; (ii) approximately 9 percent of the reinsurance recoverables were non-investment grade, the majority of which related to General Insurance and (iii) approximately 2 percent of the reinsurance recoverables related to entities that were not rated by AIG.

The total reinsurance recoverables as of December 31, 2022 were $71.8 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.


Three Months Ended September 30,		2023						2022
(in millions)	General Insurance		Life and Retirement			Total	General Insurance		Life and Retirement			Total
Balance, beginning of period	$	254	$	66	$	320	$	284	$	107	$	391
Addition to (release of) allowance for expected credit losses and disputes, net		1		4		5		4		1		5
Write-offs charged against the allowance for credit losses and disputes		—		—		—		(1)		—		(1)

Other changes		(1)		—		(1)		(1)		—		(1)
Balance, end of period	$	254	$	70	$	324	$	286	$	108	$	394


Nine Months Ended September 30,		2023						2022
(in millions)	General Insurance		Life and Retirement			Total	General Insurance		Life and Retirement			Total
Balance, beginning of year	$	260	$	84	$	344	$	281	$	101	$	382

Addition to (release of) allowance for expected credit losses and disputes, net		(3)		(14)		(17)		5		7		12
Write-offs charged against the allowance for credit losses and disputes		(1)		—		(1)		(3)		—		(3)
Recoveries of amounts previously written off		—		—		—		2		—		2
Other changes		(2)		—		(2)		1		—		1
Balance, end of period	$	254	$	70	$	324	$	286	$	108	$	394

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.