FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2012

FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis

June 30, 2012 (in millions)	Level 1		Level 2		Level 3		Counterparty Netting(a)			Cash Collateral(b)			Total
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	19	$	3,998	$	-	$	-		$	-		$	4,017
Obligations of states, municipalities and political subdivisions		-		36,241		1,013		-			-			37,254
Non-U.S. governments		833		24,535		13		-			-			25,381
Corporate debt		-		145,022		1,306		-			-			146,328
RMBS		-		23,170		10,488		-			-			33,658
CMBS		-		4,148		4,643		-			-			8,791
CDO/ABS		-		2,511		5,074		-			-			7,585
Total bonds available for sale		852		239,625		22,537		-			-			263,014
Bond trading securities:
U.S. government and government sponsored entities		800		6,792		-		-			-			7,592
Obligations of states, municipalities and political subdivisions		-		236		-		-			-			236
Non-U.S. governments		-		34		-		-			-			34
Corporate debt		-		1,057		3		-			-			1,060
RMBS		-		1,158		290		-			-			1,448
CMBS		-		1,676		457		-			-			2,133
CDO/ABS		-		3,769		14,647		-			-			18,416
Total bond trading securities		800		14,722		15,397		-			-			30,919
Equity securities available for sale:
Common stock		2,608		2		41		-			-			2,651
Preferred stock		-		46		139		-			-			185
Mutual funds		73		38		-		-			-			111
Total equity securities available for sale		2,681		86		180		-			-			2,947
Equity securities trading		23		80		-		-			-			103
Mortgage and other loans receivable		-		122		1		-			-			123
Other invested assets(c)		7,747		1,619		7,049		-			-			16,415
Derivative assets:
Interest rate contracts		12		6,649		1,006		-			-			7,667
Foreign exchange contracts		-		53		-		-			-			53
Equity contracts		106		117		38		-			-			261
Commodity contracts		-		181		2		-			-			183
Credit contracts		-		-		64		-			-			64
Other contracts		-		164		68		-			-			232
Counterparty netting and cash collateral		-		-		-		(3,716	)		(991	)		(4,707	)
Total derivative assets		118		7,164		1,178		(3,716	)		(991	)		3,753
Short-term investments(d)		371		6,988		-		-			-			7,359
Separate account assets		51,412		2,853		-		-			-			54,265
Other assets		-		700		-		-			-			700
Total	$	64,004	$	273,959	$	46,342	$	(3,716	)	$	(991	)	$	379,598
Liabilities:
Policyholder contract deposits	$	-	$	-	$	1,188	$	-		$	-		$	1,188
Derivative liabilities:
Interest rate contracts		-		6,663		245		-			-			6,908
Foreign exchange contracts		-		171		-		-			-			171
Equity contracts		2		234		10		-			-			246
Commodity contracts		-		185		-		-			-			185
Credit contracts(e)		-		5		2,651		-			-			2,656
Other contracts		-		65		222		-			-			287
Counterparty netting and cash collateral		-		-		-		(3,716	)		(2,599	)		(6,315	)
Total derivative liabilities		2		7,323		3,128		(3,716	)		(2,599	)		4,138
Other long-term debt(f)		-		8,997		407		-			-			9,404
Other liabilities(g)		24		1,564		-		-			-			1,588
Total	$	26	$	17,884	$	4,723	$	(3,716	)	$	(2,599	)	$	16,318

December 31, 2011 (in millions)	Level 1		Level 2		Level 3		Counterparty Netting(a)			Cash Collateral(b)			Total
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	174	$	5,904	$	-	$	-		$	-		$	6,078
Obligations of states, municipalities and political subdivisions		-		36,538		960		-			-			37,498
Non-U.S. governments		259		25,467		9		-			-			25,735
Corporate debt		-		142,883		1,935		-			-			144,818
RMBS		-		23,727		10,877		-			-			34,604
CMBS		-		3,991		3,955		-			-			7,946
CDO/ABS		-		3,082		4,220		-			-			7,302
Total bonds available for sale		433		241,592		21,956		-			-			263,981
Bond trading securities:
U.S. government and government sponsored entities		100		7,404		-		-			-			7,504
Obligations of states, municipalities and political subdivisions		-		257		-		-			-			257
Non-U.S. governments		-		35		-		-			-			35
Corporate debt		-		809		7		-			-			816
RMBS		-		1,345		303		-			-			1,648
CMBS		-		1,283		554		-			-			1,837
CDO/ABS		-		3,835		8,432		-			-			12,267
Total bond trading securities		100		14,968		9,296		-			-			24,364
Equity securities available for sale:
Common stock		3,294		70		57		-			-			3,421
Preferred stock		-		44		99		-			-			143
Mutual funds		55		5		-		-			-			60
Total equity securities available for sale		3,349		119		156		-			-			3,624
Equity securities trading		43		82		-		-			-			125
Mortgage and other loans receivable		-		106		1		-			-			107
Other invested assets(c)		12,549		1,709		6,618		-			-			20,876
Derivative assets:
Interest rate contracts		2		7,251		1,033		-			-			8,286
Foreign exchange contracts		-		143		2		-			-			145
Equity contracts		92		133		38		-			-			263
Commodity contracts		-		134		2		-			-			136
Credit contracts		-		-		89		-			-			89
Other contracts		29		462		250		-			-			741
Counterparty netting and cash collateral		-		-		-		(3,660	)		(1,501	)		(5,161	)
Total derivative assets		123		8,123		1,414		(3,660	)		(1,501	)		4,499
Short-term investments(d)		2,309		3,604		-		-			-			5,913
Separate account assets		48,502		2,886		-		-			-			51,388
Total	$	67,408	$	273,189	$	39,441	$	(3,660	)	$	(1,501	)	$	374,877

December 31, 2011 (in millions)	Level 1		Level 2		Level 3		Counterparty Netting(a)			Cash Collateral(b)			Total
Liabilities:
Policyholder contract deposits	$	-	$	-	$	918	$	-		$	-		$	918
Derivative liabilities:
Interest rate contracts		-		6,661		248		-			-			6,909
Foreign exchange contracts		-		178		-		-			-			178
Equity contracts		-		198		10		-			-			208
Commodity contracts		-		146		-		-			-			146
Credit contracts(e)		-		4		3,362		-			-			3,366
Other contracts		-		155		217		-			-			372
Counterparty netting and cash collateral		-		-		-		(3,660	)		(2,786	)		(6,446	)
Total derivative liabilities		-		7,342		3,837		(3,660	)		(2,786	)		4,733
Other long-term debt(f)		-		10,258		508		-			-			10,766
Other liabilities(g)		193		714		-		-			-			907
Total	$	193	$	18,314	$	5,263	$	(3,660	)	$	(2,786	)	$	17,324

(a)

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

(b)

Represents cash collateral posted and received. Securities collateral posted for derivative transactions that is reflected in Fixed maturity securities in the Consolidated Balance Sheet, and collateral received, not reflected in the Consolidated Balance Sheet, were $1.6 billion and $115 million, respectively, at June 30, 2012 and $1.8 billion and $100 million, respectively, at December 31, 2011.

(c)

Included in Level 1 are $7.7 billion and $12.4 billion at June 30, 2012 and December 31, 2011, respectively, of AIA ordinary shares publicly traded on the Hong Kong Stock Exchange. Approximately 3 percent of the fair value of the assets recorded as Level 3 relate to various private equity, real estate, hedge fund and fund-of-funds investments that are consolidated by AIG at both June 30, 2012 and December 31, 2011, respectively. AIG's ownership in these funds represented 64.2 percent, or $0.9 billion, of Level 3 assets at June 30, 2012 and 57.3 percent, or $0.7 billion, of Level 3 assets at December 31, 2011.

(d)

Included in Level 2 is the fair value of securities purchased under agreements to resell of $0.7 billion and $0.1 billion at June 30, 2012 and December 31, 2011, respectively.

(e)

Included in Level 3 is the fair value derivative liability of $2.5 billion and $3.2 billion at June 30, 2012 and December 31, 2011, respectively, on the super senior credit default swap portfolio.

(f)

Includes Guaranteed Investment Agreements (GIAs), notes, bonds, loans and mortgages payable.

(g)

Included in Level 2 is the fair value of securities sold under agreements to repurchase and securities and spot commodities sold but not yet purchased, of $1.5 billion and $45 million, respectively, at June 30, 2012. Included in Level 2 is the fair value of securities sold under agreements to repurchase, securities and spot commodities sold but not yet purchased and trust deposits and deposits due to banks and other depositors, of $0.6 billion, $144 million and $6 million, respectively, at December 31, 2011.

Changes in Level 3 recurring fair value measurements

(in millions)	Fair value Beginning of Period(a)			Net Realized and Unrealized Gains (Losses) Included in Income			Accumulated Other Comprehensive Income (Loss)			Purchases, Sales, Issues and Settlements, Net			Gross Transfers in			Gross Transfers out			Fair value End of Period			Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period
Three Months Ended June 30, 2012
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	1,054		$	31		$	(5	)	$	(63	)	$	45		$	(49	)	$	1,013		$	-
Non-U.S. governments		15			-			(7	)		-			5			-			13			-
Corporate debt		1,323			(1	)		(7	)		5			55			(69	)		1,306			-
RMBS		13,240			195			10			(616	)		7			(2,348	)		10,488			-
CMBS		4,173			2			14			492			12			(50	)		4,643			-
CDO/ABS		4,882			26			89			(91	)		168			-			5,074			-
Total bonds available for sale		24,687			253			94			(273	)		292			(2,516	)		22,537			-
Bond trading securities:
Corporate debt		5			-			-			(2	)		-			-			3			-
RMBS		314			(5	)		-			(19	)		-			-			290			(7	)
CMBS		433			16			-			13			4			(9	)		457			78
CDO/ABS		8,416			1,444			-			4,787			-			-			14,647			1,462
Total bond trading securities		9,168			1,455			-			4,779			4			(9	)		15,397			1,533
Equity securities available for sale:
Common stock		50			9			-			(19	)		1			-			41			-
Preferred stock		106			-			(31	)		61			3			-			139			-
Total equity securities available for sale		156			9			(31	)		42			4			-			180			-
Mortgage and other loans receivable		1			-			-			-			-			-			1			-
Other invested assets		7,186			(32	)		66			(68	)		18			(121	)		7,049			-
Total	$	41,198		$	1,685		$	129		$	4,480		$	318		$	(2,646	)	$	45,164		$	1,533
Liabilities:
Policyholder contract deposits	$	(782	)	$	(408	)	$	-		$	2		$	-		$	-		$	(1,188	)	$	244
Derivative liabilities, net:
Interest rate contracts		778			46			-			(63	)		-			-			761			10
Foreign exchange contracts		-			-			-			-			-			-			-			-
Equity contracts		40			(23	)		-			11			-			-			28			-
Commodity contracts		2			-			-			(2	)		-			2			2			(1	)
Credit contracts		(2,705	)		344			-			(226	)		-			-			(2,587	)		(122	)
Other contracts		(37	)		422			(7	)		(490	)		(42	)		-			(154	)		(15	)
Total derivative liabilities, net		(1,922	)		789			(7	)		(770	)		(42	)		2			(1,950	)		(128	)
Other long-term debt(b)		(575	)		(268	)		-			22			-			414			(407	)		(25	)
Total	$	(3,279	)	$	113		$	(7	)	$	(746	)	$	(42	)	$	416		$	(3,545	)	$	91

(in millions)	Fair value Beginning of Period(a)			Net Realized and Unrealized Gains (Losses) Included in Income			Accumulated Other Comprehensive Income (Loss)			Purchases, Sales, Issues and Settlements, Net			Gross Transfers in			Gross Transfers out			Fair value End of Period			Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period
Six Months Ended June 30, 2012
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	960		$	32		$	11		$	37		$	45		$	(72	)	$	1,013		$	-
Non-U.S. governments		9			-			1			(2	)		5			-			13			-
Corporate debt		1,935			(17	)		69			2			346			(1,029	)		1,306			-
RMBS		10,877			125			803			710			355			(2,382	)		10,488			-
CMBS		3,955			(67	)		301			503			43			(92	)		4,643			-
CDO/ABS		4,220			40			266			(21	)		606			(37	)		5,074			-
Total bonds available for sale		21,956			113			1,451			1,229			1,400			(3,612	)		22,537			-
Bond trading securities:
Corporate debt		7			-			-			(4	)		-			-			3			-
RMBS		303			28			-			(38	)		-			(3	)		290			18
CMBS		554			49			-			(122	)		36			(60	)		457			83
CDO/ABS		8,432			3,065			-			3,150			-			-			14,647			2,816
Total bond trading securities		9,296			3,142			-			2,986			36			(63	)		15,397			2,917
Equity securities available for sale:
Common stock		57			23			(12	)		(33	)		6			-			41			-
Preferred stock		99			2			(23	)		69			3			(11	)		139			-
Total equity securities available for sale		156			25			(35	)		36			9			(11	)		180			-
Mortgage and other loans receivable		1			-			-			-			-			-			1			-
Other invested assets		6,618			(179	)		276			33			760			(459	)		7,049			-
Total	$	38,027		$	3,101		$	1,692		$	4,284		$	2,205		$	(4,145	)	$	45,164		$	2,917
Liabilities:
Policyholder contract deposits	$	(918	)	$	(269	)	$	-		$	(1	)	$	-		$	-		$	(1,188	)	$	101
Derivative liabilities, net:
Interest rate contracts		785			46			-			(70	)		-			-			761			(38	)
Foreign exchange contracts		2			-			-			(2	)		-			-			-			-
Equity contracts		28			(11	)		-			13			(2	)		-			28			-
Commodity contracts		2			-			-			(2	)		-			2			2			(3	)
Credit contracts		(3,273	)		201			-			485			-			-			(2,587	)		(642	)
Other contracts		33			12			2			(78	)		(123	)		-			(154	)		24
Total derivative liabilities, net		(2,423	)		248			2			346			(125	)		2			(1,950	)		(659	)
Other long-term debt(b)		(508	)		(378	)		(77	)		136			-			420			(407	)		54
Total	$	(3,849	)	$	(399	)	$	(75	)	$	481		$	(125	)	$	422		$	(3,545	)	$	(504	)

(in millions)	Fair value Beginning of Period(a)			Net Realized and Unrealized Gains (Losses) Included in Income			Accumulated Other Comprehensive Income (Loss)			Purchases, Sales, Issues and Settlements, Net			Gross Transfers In			Gross Transfers Out			Fair value End of Period			Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period
Three Months Ended June 30, 2011
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	702		$	(1	)	$	23		$	62		$	17		$	(3	)	$	800		$	-
Non-U.S. governments		5			-			-			-			-			-			5			-
Corporate debt		1,235			-			15			305			307			(18	)		1,844			-
RMBS		6,868			79			(165	)		3,905			11			(6	)		10,692			-
CMBS		4,316			(7	)		(109	)		-			28			-			4,228			-
CDO/ABS		3,857			12			74			(382	)		374			(10	)		3,925			-
Total bonds available for sale		16,983			83			(162	)		3,890			737			(37	)		21,494			-
Bond trading securities:
Corporate debt		18			-			-			(9	)		-			-			9			-
RMBS		99			(2	)		(7	)		80			-			-			170			(7	)
CMBS		523			28			3			(18	)		80			(133	)		483			34
CDO/ABS		10,461			(877	)		4			(85	)		-			-			9,503			(881	)
Total bond trading securities		11,101			(851	)		-			(32	)		80			(133	)		10,165			(854	)
Equity securities available for sale:
Common stock		63			3			6			(12	)		2			(3	)		59			-
Preferred stock		63			(1	)		1			(1	)		2			-			64			-
Total equity securities available for sale		126			2			7			(13	)		4			(3	)		123			-
Equity securities trading		1			1			-			(1	)		-			-			1			1
Other invested assets		7,070			(17	)		126			(161	)		45			(18	)		7,045			-
Total	$	35,281		$	(782	)	$	(29	)	$	3,683		$	866		$	(191	)	$	38,828		$	(853	)
Liabilities:
Policyholder contract deposits	$	(369	)	$	(33	)	$	-		$	(4	)	$	-		$	-		$	(406	)	$	46
Derivative liabilities, net:
Interest rate contracts		619			138			-			(3	)		-			-			754			(14	)
Foreign exchange contracts		16			(12	)		-			-			-			-			4			1
Equity contracts		34			-			-			-			(7	)		7			34			(1	)
Commodity contracts		15			(1	)		-			(9	)		-			-			5			-
Credit contracts		(3,420	)		94			-			(6	)		-			-			(3,332	)		429
Other contracts		(6	)		(27	)		(51	)		(10	)		32			(7	)		(69	)		(114	)
Total derivatives liabilities, net		(2,742	)		192			(51	)		(28	)		25			-			(2,604	)		301
Other long-term debt(b)		(996	)		(157	)		-			195			-			-			(958	)		(171	)
Total	$	(4,107	)	$	2		$	(51	)	$	163		$	25		$	-		$	(3,968	)	$	176

(in millions)	Fair value Beginning of Period(a)			Net Realized and Unrealized Gains (Losses) Included in Income			Accumulated Other Comprehensive Income (Loss)			Purchases, Sales, Issues and Settlements, Net			Gross Transfers In			Gross Transfers Out			Fair value End of Period			Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period
Six Months Ended June 30, 2011
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	609		$	(1	)	$	27		$	174		$	17		$	(26	)	$	800		$	-
Non-U.S. governments		5			-			-			-			-			-			5			-
Corporate debt		2,262			(3	)		22			272			533			(1,242	)		1,844			-
RMBS		6,367			(2	)		368			3,943			22			(6	)		10,692			-
CMBS		3,604			(34	)		555			72			53			(22	)		4,228			-
CDO/ABS		4,241			32			312			(837	)		446			(269	)		3,925			-
Total bonds available for sale		17,088			(8	)		1,284			3,624			1,071			(1,565	)		21,494			-
Bond trading securities:
Corporate debt		-			-			-			(9	)		18			-			9			-
RMBS		91			-			(7	)		86			-			-			170			(3	)
CMBS		506			66			3			(76	)		161			(177	)		483			68
CDO/ABS		9,431			153			9			(90	)		-			-			9,503			146
Total bond trading securities		10,028			219			5			(89	)		179			(177	)		10,165			211
Equity securities available for sale:
Common stock		61			18			4			(27	)		8			(5	)		59			-
Preferred stock		64			(3	)		1			-			2			-			64			-
Total equity securities available for sale		125			15			5			(27	)		10			(5	)		123			-
Equity securities trading		1			1			-			(1	)		-			-			1			1
Other invested assets		7,414			36			469			(511	)		45			(408	)		7,045			-
Total	$	34,656		$	263		$	1,763		$	2,996		$	1,305		$	(2,155	)	$	38,828		$	212
Liabilities:
Policyholder contract deposits	$	(445	)	$	46		$	-		$	(7	)	$	-		$	-		$	(406	)	$	(63	)
Derivative liabilities, net:
Interest rate contracts		732			22			-			-			-			-			754			(54	)
Foreign exchange contracts		16			(12	)		-			-			-			-			4			1
Equity contracts		22			(7	)		-			38			(7	)		(12	)		34			(7	)
Commodity contracts		23			2			-			(20	)		-			-			5			-
Credit contracts		(3,798	)		476			-			(10	)		-			-			(3,332	)		473
Other contracts		(112	)		(23	)		(26	)		40			32			20			(69	)		(66	)
Total derivatives liabilities, net		(3,117	)		458			(26	)		48			25			8			(2,604	)		347
Other long-term debt(b)		(982	)		(211	)		-			256			(21	)		-			(958	)		(198	)
Total	$	(4,544	)	$	293		$	(26	)	$	297		$	4		$	8		$	(3,968	)	$	86

(a)

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

(b)

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

Schedule of net realized and unrealized gains and losses related to Level 3 items

(in millions)	Net Investment Income			Net Realized Capital Gains (Losses)			Other Income			Total
Three Months Ended June 30, 2012
Bonds available for sale	$	234		$	(9	)	$	28		$	253
Bond trading securities		1,290			-			165			1,455
Equity securities		-			9			-			9
Other invested assets		5			(41	)		4			(32	)
Policyholder contract deposits		-			(408	)		-			(408	)
Derivative liabilities, net		-			72			717			789
Other long-term debt		-			-			(268	)		(268	)
Three Months Ended June 30, 2011
Bonds available for sale	$	159		$	(80	)	$	4		$	83
Bond trading securities		(496	)		-			(355	)		(851	)
Equity securities		1			2			-			3
Other invested assets		(2	)		(37	)		22			(17	)
Policyholder contract deposits		-			(33	)		-			(33	)
Derivative liabilities, net		1			(90	)		281			192
Other long-term debt		-			-			(157	)		(157	)
Six Months Ended June 30, 2012
Bonds available for sale	$	465		$	(384	)	$	32		$	113
Bond trading securities		2,839			-			303			3,142
Equity securities		-			25			-			25
Other invested assets		(9	)		(173	)		3			(179	)
Policyholder contract deposits		-			(269	)		-			(269	)
Derivative liabilities, net		(1	)		61			188			248
Other long-term debt		-			-			(378	)		(378	)
Six Months Ended June 30, 2011
Bonds available for sale	$	240		$	(256	)	$	8		$	(8	)
Bond trading securities		505			-			(286	)		219
Equity securities		1			15			-			16
Other invested assets		44			(52	)		44			36
Policyholder contract deposits		-			46			-			46
Derivative liabilities, net		1			(145	)		602			458
Other long-term debt		-			-			(211	)		(211	)

Gross components of purchases, sales, issuances and settlements, net

(in millions)	Purchases		Sales			Settlements			Purchases, Sales, Issues and Settlements, Net(a)
Three Months Ended June 30, 2012
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	97	$	(158	)	$	(2	)	$	(63	)
Non-U.S. governments		1		(1	)		-			-
Corporate debt		80		(52	)		(23	)		5
RMBS		198		(268	)		(546	)		(616	)
CMBS		596		(69	)		(35	)		492
CDO/ABS		203		-			(294	)		(91	)
Total bonds available for sale		1,175		(548	)		(900	)		(273	)
Bond trading securities:
Corporate debt		-		-			(2	)		(2	)
RMBS		-		-			(19	)		(19	)
CMBS		70		(49	)		(8	)		13
CDO/ABS(b)		5,025		-			(238	)		4,787
Total bond trading securities		5,095		(49	)		(267	)		4,779
Equity securities		56		(19	)		5			42
Other invested assets		134		(29	)		(173	)		(68	)
Total assets	$	6,460	$	(645	)	$	(1,335	)	$	4,480
Liabilities:
Policyholder contract deposits	$	-	$	(8	)	$	10		$	2
Derivative liabilities, net		-		-			(770	)		(770	)
Other long-term debt(c)		-		-			22			22
Total liabilities	$	-	$	(8	)	$	(738	)	$	(746	)
Three Months Ended June 30, 2011
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	63	$	-		$	(1	)	$	62
Non-U.S. governments		1		(1	)		-			-
Corporate debt		412		19			(126	)		305
RMBS		4,307		(9	)		(393	)		3,905
CMBS		99		(20	)		(79	)		-
CDO/ABS		196		-			(578	)		(382	)
Total bonds available for sale		5,078		(11	)		(1,177	)		3,890
Bond trading securities:
Corporate debt		-		-			(9	)		(9	)
RMBS		103		-			(23	)		80
CMBS		60		(49	)		(29	)		(18	)
CDO/ABS		141		(126	)		(100	)		(85	)
Total bond trading securities		304		(175	)		(161	)		(32	)
Equity securities		-		(8	)		(6	)		(14	)
Other invested assets		236		(146	)		(251	)		(161	)
Total assets	$	5,618	$	(340	)	$	(1,595	)	$	3,683
Liabilities:
Policyholder contract deposits	$	-	$	(10	)	$	6		$	(4	)
Derivative liabilities, net		-		-			(28	)		(28	)
Other long-term debt(c)		-		-			195			195
Total liabilities	$	-	$	(10	)	$	173		$	163

(in millions)	Purchases		Sales			Settlements			Purchases, Sales, Issues and Settlements, Net(a)
Six Months Ended June 30, 2012
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	205	$	(166	)	$	(2	)	$	37
Non-U.S. governments		1		(3	)		-			(2	)
Corporate debt		141		(53	)		(86	)		2
RMBS		2,110		(362	)		(1,038	)		710
CMBS		722		(133	)		(86	)		503
CDO/ABS		520		(4	)		(537	)		(21	)
Total bonds available for sale		3,699		(721	)		(1,749	)		1,229
Bond trading securities:
Corporate debt		-		-			(4	)		(4	)
RMBS		-		-			(38	)		(38	)
CMBS		183		(106	)		(199	)		(122	)
CDO/ABS(b)		5,025		(310	)		(1,565	)		3,150
Total bond trading securities		5,208		(416	)		(1,806	)		2,986
Equity securities		67		(33	)		2			36
Other invested assets		400		(33	)		(334	)		33
Total assets	$	9,374	$	(1,203	)	$	(3,887	)	$	4,284
Liabilities:
Policyholder contract deposits	$	-	$	(14	)	$	13		$	(1	)
Derivative liabilities, net		2		-			344			346
Other long-term debt(c)		-		-			136			136
Total liabilities	$	2	$	(14	)	$	493		$	481
Six Months Ended June 30, 2011
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	176	$	-		$	(2	)	$	174
Non-U.S. governments		1		(1	)		-			-
Corporate debt		420		-			(148	)		272
RMBS		4,624		(22	)		(659	)		3,943
CMBS		241		(20	)		(149	)		72
CDO/ABS		261		-			(1,098	)		(837	)
Total bonds available for sale		5,723		(43	)		(2,056	)		3,624
Bond trading securities:
Corporate debt		-		-			(9	)		(9	)
RMBS		103		-			(17	)		86
CMBS		60		(54	)		(82	)		(76	)
CDO/ABS		144		(126	)		(108	)		(90	)
Total bond trading securities		307		(180	)		(216	)		(89	)
Equity securities		-		(23	)		(5	)		(28	)
Other invested assets		350		(158	)		(703	)		(511	)
Total assets	$	6,380	$	(404	)	$	(2,980	)	$	2,996
Liabilities:
Policyholder contract deposits	$	-	$	(19	)	$	12		$	(7	)
Derivative liabilities, net		39		-			9			48
Other long-term debt(c)		-		-			256			256
Total liabilities	$	39	$	(19	)	$	277		$	297

(a)

There were no issuances during the three- and six-month periods ended June 30, 2012 and 2011.

(b)

Includes securities with a fair value of approximately $5.0 billion purchased through the FRBNY's auction of Maiden Lane III LLC (ML III) assets. Subsequent to June 30, 2012 through July 31, 2012, AIG purchased additional securities with a fair value of approximately $2.1 billion in the additional auctions of ML III assets.

(c)

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

Fair value assets measured on nonrecurring basis and impairment charges

									Impairment Charges
	Assets at Fair Value
									Three Months Ended June 30,				Six Months Ended June 30,
	Non-Recurring Basis
(in millions)	Level 1		Level 2		Level 3		Total		2012		2011		2012		2011
June 30, 2012
Investment real estate	$	-	$	-	$	331	$	331	$	-	$	3	$	-	$	15
Other investments		-		-		1,582		1,582		83		239		176		345
Aircraft*		-		-		161		161		75		44		129		158
Other assets		-		-		18		18		-		-		8		-
Total	$	-	$	-	$	2,092	$	2,092	$	158	$	286	$	313	$	518
December 31, 2011
Investment real estate	$	-	$	-	$	457	$	457
Other investments		-		-		2,199		2,199
Aircraft		-		-		1,683		1,683
Other assets		-		-		4		4
Total	$	-	$	-	$	4,343	$	4,343

*

Aircraft impairment charges include fair value adjustments on aircraft where appropriate.

Significant unobservable inputs used for recurring fair value measurements

(in millions)	Fair Value at June 30, 2012		Valuation Technique	Unobservable Input(a)	Range (Weighted Average)(a)
Assets:
Corporate debt	$	793	Discounted cash flow	Yield(b)	2.54% - 17.40% (7.43%)
Residential mortgage backed securities		10,219	Discounted cash flow	Constant prepayment rate(c)	0.00% - 10.57% (4.91%)
				Loss severity(c)	42.97% - 79.60% (61.29%)
				Constant default rate(c)	4.10% - 13.74% (8.92%)
				Yield(c)	4.92% - 11.98% (8.45%)
Certain CDO/ABS		2,053	Discounted cash flow	Constant prepayment rate(c)	0.00% - 47.15% (16.69%)
				Loss severity(c)	0.00% - 7.52% (0.69%)
				Constant default rate(c)	0.00% - 3.69% (0.29%)
				Yield(c)	1.93% - 6.01% (3.97%)
Commercial mortgage backed securities		2,932	Discounted cash flow	Yield(b)	0.00% - 23.66% (11.16%)
CDO/ABS – Direct
Investment book		1,508	Binomial Expansion	Recovery rate(b)	3% - 65% (32%)
			Technique (BET)	Diversity score(b)	5 - 48 (15)
				Weighted average life(b)	1.25 - 9.64 years (4.56 years)
Liabilities:
Policyholder contract deposits – GMWB		893	Discounted cash flow	Equity implied volatility(b)	6.0% - 40.0%
				Base lapse rates(b)	1.0% - 40.0%
				Dynamic lapse rates(b)	0.2% - 60.0%
				Mortality rates(b)	0.5% - 40.0%
				Utilization rates(b)	0.5%-25.0%
Derivative Liabilities – Credit contracts		1,787	BET	Recovery rates(b)	3% - 36% (16%)
				Diversity score(b)	7 - 31 (13)
				Weighted average life(b)	5.08 - 9.19 years (6.08 years)

(a)

The unobservable inputs and ranges for the 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 collateralized debt obligation (CDO) securitization vehicles and not necessarily to the securitization vehicle bonds (tranches) purchased by AIG. The ranges of these inputs do not directly correlate to changes in the fair values of the tranches purchased by AIG because there are other factors relevant to the specific tranches owned by AIG 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 AIG believes would be used by market participants when valuing these assets and liabilities.

(c)

Information received from independent third-party valuation service providers

Investments in Certain Entities Carried at Fair Value Using Net Asset Value per Share

		June 30, 2012				December 31, 2011
(in millions)	Investment Category Includes	Fair Value Using Net Asset Value or its equivalent		Unfunded Commitments		Fair Value Using Net Asset Value 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	$	3,281	$	882	$	3,185	$	945
Non-U.S.	Investments that focus primarily on Asian and European based buyouts, expansion capital, special situations, turnarounds, venture capital, mezzanine and distressed opportunities strategies		177		46		165		57
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		315		34		316		39
Distressed	Securities of companies that are already in default, under bankruptcy protection, or troubled		185		37		182		42
Other	Real estate, energy, multi-strategy, mezzanine, and industry-focused strategies		367		140		252		98
Total private equity funds			4,325		1,139		4,100		1,181
Hedge funds:
Event-driven	Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations		901		2		774		2
Long-short	Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk		1,043		-		927		-
Macro	Investments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions		178		-		173		-
Distressed	Securities of companies that are already in default, under bankruptcy protection or troubled		293		-		272		10
Other	Non-U.S. companies, futures and commodities, relative value, and multi-strategy and industry-focused strategies		577		-		627		-
Total hedge funds			2,992		2		2,773		12
Total		$	7,317	$	1,141	$	6,873	$	1,193

Gains or losses related to the eligible instruments for which AIG elected the fair value option

	Gain (Loss) Three Months Ended June 30,						Gain (Loss) Six Months Ended June 30,
(in millions)	2012			2011			2012			2011
Assets:
Mortgage and other loans receivable	$	9		$	6		$	31		$	1
Bonds and equity securities		263			481			907			1,437
Trading – ML II interest		-			(176	)		246			75
Trading – ML III interest		1,306			(667	)		2,558			77
Retained interest in AIA		(493	)		1,521			1,302			2,583
Short-term investments and other invested assets and Other assets		9			12			13			28
Liabilities:
Other long-term debt(a)		(218	)		(451	)		(664	)		(556	)
Other liabilities		26			(63	)		(22	)		(175	)
Total gain(b)	$	902		$	663		$	4,371		$	3,470

(a)

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

(b)

Excludes discontinued operation gains or losses on instruments that were required to be carried at fair value in 2011. For instruments required to be carried at fair value, AIG recognized losses of $13 million and $105 million for the three months ended June 30, 2012 and 2011, respectively, and gains of $554 million and $921 million for the six months ended June 30, 2012 and 2011, respectively, that were primarily due to changes in the fair value of derivatives, trading securities and certain other invested assets for which the fair value option was not elected.

Difference between fair values and aggregate contractual principal amounts, fair value option

	June 30, 2012							December 31, 2011
(in millions)	Fair Value		Outstanding Principal Amount		Difference			Fair Value		Outstanding Principal Amount		Difference
Assets:
Mortgage and other loans receivable	$	123	$	140	$	(17	)	$	107	$	150	$	(43	)
Liabilities:
Other long-term debt*	$	9,404	$	6,992	$	2,412		$	10,766	$	8,624	$	2,142

*

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

Carrying value and estimated fair value of AIG's financial instruments

	Estimated Fair Value
									Carrying Value
(in millions)	Level 1		Level 2		Level 3		Total
June 30, 2012
Assets:
Mortgage and other loans receivable	$	-	$	542	$	20,434	$	20,976	$	19,265
Other invested assets		-		601		3,037		3,638		4,889
Short-term investments		-		17,007		-		17,007		17,006
Cash		1,232		-		-		1,232		1,232
Liabilities:
Policyholder contract deposits associated with investment-type contracts		-		182		126,390		126,572		107,401
Other liabilities		-		-		3,438		3,438		3,442
Long-term debt		17,369		47,253		2,301		66,923		64,493
December 31, 2011
Assets:
Mortgage and other loans receivable							$	20,494	$	19,382
Other invested assets								3,390		4,701
Short-term investments								16,657		16,659
Cash								1,474		1,474
Liabilities:
Policyholder contract deposits associated with investment-type contracts								122,125		106,950
Other liabilities								896		896
Long-term debt								61,295		64,487