MRBs are defined as contracts or contract features that both provide protection to the contract holder from other-than-nominal capital market risk and expose AIG to other-than nominal capital market risk. The MRB represents an amount that a policyholder receives in addition to the account balance upon the occurrence of a specific event or circumstance, such as death, annuitization, or periodic withdrawal that involves protection from other-than-nominal capital market risk. Certain contract features, such as GMWBs, GMDBs and guaranteed minimum income benefits (GMIBs) commonly found in variable, fixed index and fixed annuities, are MRBs. MRBs are assessed at contract inception using a non-option method involving attributed fees that results in an initial fair value of zero or an option method that results in a fair value greater than zero.

MRBs are recorded at fair value, and AIG applies a non-option attributed fee valuation method for variable annuity products, and an option-based valuation method (host offset) for both fixed index and fixed products. Under the non-option valuation method, the attributed fee is determined at contract inception; it cannot exceed the total contract fees and assessments collectible from the contract holder and cannot be less than zero. Investment margin is excluded from the attributed fee determination. Under the option-based valuation method, an offset to the host amount related to the MRB amount is established at inception. Changes in the fair value of MRBs are recorded in net income in Changes in the fair value of market risk benefits, net except for the portion of the fair value change attributable to our own credit risk, which is recognized in OCI. MRBs are derecognized when the underlying contract is surrendered, a GMDB is incurred, a GMIB is annuitized, or when the account value is exhausted on a policy with a GMWB. Generally when a policyholder elects to annuitize a GMIB rider or the account value on a policy with a GMWB rider is reduced to zero, the policy is converted to a payout annuity automatically. When a conversion occurs, the policyholder is issued a new payout annuity contract. At this point, the MRB is derecognized and a LFPB is established for the payout annuity.

Assumptions used to determine the MRB asset (including ceded MRBs) or liability generally include mortality rates that are based upon actual experience modified to allow for variations in policy form; lapse rates that are based upon actual experience modified to allow for variations in policy features; and investment returns, based on stochastically generated scenarios. We evaluate at least annually estimates used to determine the MRB asset or liability and adjust the balance, with a related charge or credit to Change in fair value of MRBs, net, if actual experience or other evidence suggests that earlier assumptions should be revised. In addition, MRBs are valued such that the current provision for nonperformance risk is reflected in the claims cash flows of the asset or liability valuation for direct MRBs. The nonperformance risk spread at contract issue is locked-in. The difference between the MRB valued using the at issue nonperformance risk spread and the current nonperformance risk spread is reported through OCI, while changes in the counterparty credit risk related to ceded MRBs are reported in income.

Changes in the fair value of MRBs, net represents changes in the fair value of market risk benefit liabilities and assets (with the exception of our own credit risk changes), and includes attributed rider fees and benefits, net of changes in the fair value of derivative instruments and fixed maturity securities that are used to economically hedge market risk from the variable annuity GMWB riders.


	Individual Retirement		Group Retirement		Total
(in millions)
Pre-adoption December 31, 2020 carrying amount for features now classified as MRBs	$	—	$	—	$	—
Adjustment for the reclassification of the embedded derivative liability from policyholder contract deposits, net of the host adjustment(s)(a)	5,671		576		6,247
Adjustment for the reclassification of additional liabilities from Future policy benefits(b)	1,388		221		1,609
Adjustments for the cumulative effect of the changes to our own credit risk between the original contract issuance date and the Transition Date(c)	2,140		187		2,327

Adjustment for the removal of related balances in Accumulated other comprehensive income (loss) originating from unrealized gains (losses)(d)	(516)		(89)		(605)


Adjustment for the remaining difference (exclusive of our own credit risk change and host contract adjustments) between previous carrying amount and fair value measurement for the MRB(e)	(1,084)		(93)		(1,177)
Post-adoption January 1, 2021 carrying amount for features now classified as MRBs	$	7,599	$	802	$	8,401

(a)Adjustments for the reclassification from Policyholder contract deposits represents certain contract guarantees (e.g., GMWBs) that were previously classified as embedded derivatives, but have been reclassified as MRBs as of January 1, 2021, and the related host impact. The impact on Retained earnings or AOCI resulting from the simultaneous remeasurement of the guarantee as a market risk benefit is reflected in the lines below.

(b)Adjustments for the reclassification from Future policy benefits represents contract guarantees (e.g., GMDBs) that were previously classified as insurance liabilities within Future policy benefits, but have been reclassified as MRBs as of January 1, 2021. The impact on Retained earnings or AOCI resulting from the simultaneous remeasurement of the guarantee as a market risk benefit is reflected in the lines below.


	Individual Retirement		Group Retirement		Total
(in millions)
Market risk benefit in an asset position	$	176	$	—	$	176
Reinsured market risk benefit	162		—		162
Market risk benefit assets, at fair value	338		—		338
Market risk benefit liabilities, at fair value	7,937		802		8,739
Market risk benefit, net, January 1, 2021	$	7,599	$	802	$	8,401


Nine Months Ended September 30, 2023	Individual Retirement		Group Retirement		Total
(in millions, except for attained age of contract holders)
Balance, beginning of year	$	3,738	$	296	$	4,034
Effect of changes in our own credit risk	(441)		(24)		(465)
Balance, beginning of year, before effect of changes in our own credit risk	$	3,297	$	272	$	3,569
Issuances	527		28		555
Interest accrual	122		12		134
Attributed fees	636		49		685
Expected claims	(68)		(2)		(70)
Effect of changes in interest rates	(1,223)		(99)		(1,322)
Effect of changes in interest rate volatility	(7)		2		(5)
Effect of changes in equity markets	(591)		(61)		(652)
Effect of changes in equity index volatility	(27)		(4)		(31)
Actual outcome different from model expected outcome	155		10		165
Effect of changes in future expected policyholder behavior	(1)		(1)		(2)
Effect of changes in other future expected assumptions	(86)		(40)		(126)

Other, including foreign exchange	—		(3)		(3)
Balance, end of period, before effect of changes in our own credit risk	2,734		163		2,897
Effect of changes in our own credit risk	662		53		715

Balance, end of period	3,396		216		3,612


Less: Reinsured MRB, end of period	(71)		—		(71)
Net Liability Balance after reinsurance recoverable	$	3,325	$	216	$	3,541


Nine Months Ended September 30, 2023	Individual Retirement		Group Retirement		Total
(in millions, except for attained age of contract holders)
Net amount at risk
GMDB only	$	1,200	$	257	$	1,457
GMWB only	$	24	$	1	$	25
Combined*	$	1,764	$	28	$	1,792
Weighted average attained age of contract holders	70		64


Nine Months Ended September 30, 2022	Individual Retirement		Group Retirement		Total
(in millions, except for attained age of contract holders)
Balance, beginning of year	$	6,452	$	582	$	7,034
Effect of changes in our own credit risk	(1,934)		(167)		(2,101)
Balance, beginning of year, before effect of changes in our own credit risk	4,518		415		4,933
Issuances	161		17		178
Interest accrual	130		16		146
Attributed fees	637		54		691
Expected claims	(53)		(2)		(55)
Effect of changes in interest rates	(3,929)		(360)		(4,289)
Effect of changes in interest rate volatility	267		17		284
Effect of changes in equity markets	1,923		164		2,087
Effect of changes in equity index volatility	(80)		—		(80)
Actual outcome different from model expected outcome	139		14		153
Effect of changes in future expected policyholder behavior	(2)		(18)		(20)
Effect of changes in other future expected assumptions	(85)		—		(85)

Other, including foreign exchange	4		(12)		(8)
Balance, end of period, before effect of changes in our own credit risk	3,630		305		3,935
Effect of changes in our own credit risk	63		(8)		55

Balance, end of period	3,693		297		3,990


Less: Reinsured MRB, end of period	(98)		—		(98)
Net Liability Balance after reinsurance recoverable	$	3,595	$	297	$	3,892
Net amount at risk
GMDB only	$	2,059	$	558	$	2,617
GMWB only	$	15	$	—	$	15
Combined*	$	2,670	$	16	$	2,686
Weighted average attained age of contract holders	70		64

In 2023, the life insurance companies recognized a favorable impact to net income due to policyholder behavior assumptions. In 2022, the life insurance companies recognized a favorable impact to net income due to an update to the relationship between projected equity growth and interest rates for annuities.

Annuity contracts may include certain contractually guaranteed benefits to the contract holder. These guaranteed features include GMDBs that are payable in the event of death and living benefits that are payable when partial withdrawals exhaust a policy’s account value, in the event of annuitization, or, in other instances, at specified dates during the accumulation period. Living benefits primarily include GMWBs. A variable annuity contract may include more than one type of guaranteed benefit feature; for example, it may have both GMDB and GMWB. However, a policyholder can only receive payout from one guaranteed feature on a contract containing a death benefit and a living benefit, i.e., the features are mutually exclusive (except a surviving spouse who has a rider to potentially collect both GMDB upon their spouse’s death and GMWB during their lifetime). A policyholder cannot purchase more than one living benefit on one contract. The net amount at risk for each feature is calculated irrespective of the existence of other features; as a result, the net amount at risk for each feature is not additive to that of other features.

Depending on the contract, the GMDB feature may provide a death benefit of either (a) total deposits made to the contract, less any partial withdrawals plus a minimum return (and in rare instances, no minimum return), (b) return of premium whereby the benefit is the greater of the current account value or premiums paid less any partial withdrawals, (c) rollups whereby the benefit is the greater of current account value or premiums paid (adjusted for withdrawals) accumulated at contractually specified rates up to specified ages, or (d) the highest contract value attained, typically on any anniversary date less any subsequent withdrawals following the contract anniversary. GMDB is our most widely offered benefit.

Certain of our variable annuity contracts also contain living benefit riders, which include optional GMWBs and, to a lesser extent, GMABs and GMIBs. These living benefits and GMDBs related to variable annuity contracts are accounted for as MRBs measured at fair value, with changes in the fair value (excluding changes in our own credit risk) recorded in Change in the fair value of MRBs, net. The net amount at risk for the GMWB represents benefits in excess of the account value assuming the utilization of all benefits by the contract holders at the balance sheet date. The net amount at risk for the GMDB feature represents the amount of guaranteed benefits in excess of account value if all policyholders died.

Certain of our fixed annuity and fixed index annuity contracts, which are not offered through separate accounts, contain optional GMWBs. With a GMWB, the contract holder can monetize the excess of the guaranteed amount over the account value of the contract through a series of withdrawals that do not exceed a specific percentage per year of the guaranteed amount. Once the account value is exhausted, the contract holder will receive a series of annuity payments equal to the remaining guaranteed amount; for lifetime GMWB products, the annuity payments continue as long as the covered person(s) is living. The liability for GMWBs in fixed annuity and fixed index annuity contracts, which are recorded in MRBs, represents the expected value of benefits in excess of the projected account value, with the excess (excluding changes in our own credit risk) recognized at fair value through Change in the fair value of MRBs, net.