INVESTMENTS (Tables)

6 Months Ended

Jun. 30, 2012

INVESTMENTS

The amortized cost or cost and fair value of AIG's available for sale securities and other invested assets carried at fair value

(in millions)	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Other-Than- Temporary Impairments in AOCI(a)
June 30, 2012
Bonds available for sale:
U.S. government and government sponsored entities	$	3,665	$	355	$	(3	)	$	4,017	$	-
Obligations of states, municipalities and political subdivisions		34,597		2,717		(60	)		37,254		(24	)
Non-U.S. governments		24,245		1,187		(51	)		25,381		-
Corporate debt		133,688		13,577		(937	)		146,328		109
Mortgage-backed, asset-backed and collateralized:
RMBS		32,453		1,920		(715	)		33,658		179
CMBS		8,931		535		(675	)		8,791		(167	)
CDO/ABS		7,211		667		(293	)		7,585		119
Total mortgage-backed, asset-backed and collateralized		48,595		3,122		(1,683	)		50,034		131
Total bonds available for sale(b)		244,790		20,958		(2,734	)		263,014		216
Equity securities available for sale:
Common stock		1,479		1,213		(41	)		2,651		-
Preferred stock		146		39		-			185		-
Mutual funds		108		4		(1	)		111		-
Total equity securities available for sale		1,733		1,256		(42	)		2,947		-
Other invested assets carried at fair value(c)		5,161		1,854		(143	)		6,872		-
Total	$	251,684	$	24,068	$	(2,919	)	$	272,833	$	216
December 31, 2011
Bonds available for sale:
U.S. government and government sponsored entities	$	5,661	$	418	$	(1	)	$	6,078	$	-
Obligations of states, municipalities and political subdivisions		35,017		2,554		(73	)		37,498		(28	)
Non-U.S. governments		24,843		994		(102	)		25,735		-
Corporate debt		134,699		11,844		(1,725	)		144,818		115
Mortgage-backed, asset-backed and collateralized:
RMBS		34,780		1,387		(1,563	)		34,604		(716	)
CMBS		8,449		470		(973	)		7,946		(276	)
CDO/ABS		7,321		454		(473	)		7,302		49
Total mortgage-backed, asset-backed and collateralized		50,550		2,311		(3,009	)		49,852		(943	)
Total bonds available for sale(b)		250,770		18,121		(4,910	)		263,981		(856	)
Equity securities available for sale:
Common stock		1,682		1,839		(100	)		3,421		-
Preferred stock		83		60		-			143		-
Mutual funds		55		6		(1	)		60		-
Total equity securities available for sale		1,820		1,905		(101	)		3,624		-
Other invested assets carried at fair value(c)		5,155		1,611		(269	)		6,497		-
Total	$	257,745	$	21,637	$	(5,280	)	$	274,102	$	(856	)

(a)

Represents the amount of other-than-temporary impairment losses recognized in Accumulated other comprehensive income. Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

(b)

At June 30, 2012 and December 31, 2011, bonds available for sale held by AIG that were below investment grade or not rated totaled $27.4 billion and $24.2 billion, respectively.

(c)

Represents private equity and hedge fund investments carried at fair value for which unrealized gains and losses are required to be recognized in other comprehensive income.

The fair value and gross unrealized losses on AIG's available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position

	Less than 12 Months				12 Months or More				Total
(in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
June 30, 2012
Bonds available for sale:
U.S. government and government sponsored entities	$	625	$	3	$	5	$	-	$	630	$	3
Obligations of states, municipalities and political subdivisions		627		5		338		55		965		60
Non-U.S. governments		1,134		24		424		27		1,558		51
Corporate debt		8,487		307		5,901		630		14,388		937
RMBS		3,098		163		3,296		552		6,394		715
CMBS		1,083		60		1,963		615		3,046		675
CDO/ABS		311		9		1,822		284		2,133		293
Total bonds available for sale		15,365		571		13,749		2,163		29,114		2,734
Equity securities available for sale:
Common stock		274		38		11		3		285		41
Preferred stock		2		-		-		-		2		-
Mutual funds		24		-		2		1		26		1
Total equity securities available for sale		300		38		13		4		313		42
Total	$	15,665	$	609	$	13,762	$	2,167	$	29,427	$	2,776
December 31, 2011
Bonds available for sale:
U.S. government and government sponsored entities	$	142	$	1	$	-	$	-	$	142	$	1
Obligations of states, municipalities and political subdivisions		174		1		669		72		843		73
Non-U.S. governments		3,992		67		424		35		4,416		102
Corporate debt		18,099		937		5,907		788		24,006		1,725
RMBS		10,624		714		4,148		849		14,772		1,563
CMBS		1,697		185		1,724		788		3,421		973
CDO/ABS		1,680		50		1,682		423		3,362		473
Total bonds available for sale		36,408		1,955		14,554		2,955		50,962		4,910
Equity securities available for sale:
Common stock		608		100		-		-		608		100
Preferred stock		6		-		-		-		6		-
Mutual funds		2		1		-		-		2		1
Total equity securities available for sale		616		101		-		-		616		101
Total	$	37,024	$	2,056	$	14,554	$	2,955	$	51,578	$	5,011

The amortized cost and fair value of fixed maturity securities available for sale by contractual maturity

	Total Fixed Maturity Available for Sale Securities				Fixed Maturity Securities in a Loss Position
June 30, 2012 (in millions)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	9,707	$	9,868	$	959	$	947
Due after one year through five years		55,077		57,759		6,685		6,440
Due after five years through ten years		70,238		76,246		5,578		5,219
Due after ten years		61,173		69,107		5,370		4,935
Mortgage-backed, asset-backed and collateralized		48,595		50,034		13,256		11,573
Total	$	244,790	$	263,014	$	31,848	$	29,114

The gross realized gains and gross realized losses from sales of AIG's available for sale securities

	Three Months Ended June 30,								Six Months Ended June 30,
	2012				2011				2012				2011
(in millions)	Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses
Fixed maturities	$	875	$	23	$	662	$	38	$	1,365	$	39	$	850	$	93
Equity securities		14		1		43		6		465		4		148		8
Total	$	889	$	24	$	705	$	44	$	1,830	$	43	$	998	$	101

The fair value of AIG's trading securities

	June 30, 2012					December 31, 2011
(in millions)	Fair Value		Percent of Total			Fair Value		Percent of Total
Fixed Maturities:
U.S. government and government sponsored entities	$	7,592		25	%	$	7,504		31	%
Non-U.S. governments		34		-			35		-
Corporate debt		1,060		3			816		3
State, territories and political subdivisions		236		1			257		1
Mortgage-backed, asset-backed and collateralized:
RMBS		1,448		5			1,648		7
CMBS		2,133		7			1,837		7
CDO/ABS and other collateralized*		10,271		33			5,282		22
Total mortgage-backed, asset-backed and collateralized		13,852		45			8,767		36
ML II		-		-			1,321		5
ML III		8,145		26			5,664		23
Total fixed maturities		30,919		100			24,364		99
Equity securities		103		-			125		1
Total	$	31,022		100	%	$	24,489		100	%

*

Includes securities with a fair value of approximately $5.0 billion purchased through the FRBNY's auction of ML III assets. Subsequent to June 30, 2012 and 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.

Credit impairments recognized in earnings for available for sale fixed maturity securities held by AIG

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2012			2011			2012			2011
Balance, beginning of period	$	6,464		$	6,540		$	6,504		$	6,786
Increases due to:
Credit impairments on new securities subject to impairment losses		35			33			172			85
Additional credit impairments on previously impaired securities		69			85			376			235
Reductions due to:
Credit impaired securities fully disposed for which there was no prior intent or requirement to sell		(248	)		(155	)		(518	)		(325	)
Accretion on securities previously impaired due to credit*		(231	)		(107	)		(453	)		(207	)
Hybrid securities with embedded credit derivatives reclassified to Bond trading securities		-			-			-			(179	)
Other		1			-			9			1
Balance, end of period	$	6,090		$	6,396		$	6,090		$	6,396

*

Represents accretion recognized due to changes in cash flows expected to be collected over the remaining expected term of the credit impaired securities as well as the accretion due to the passage of time.

Schedule of Purchased Credit Impaired (PCI) Securities, at acquisition date

(in millions)	At Date of Acquisition
Contractually required payments (principal and interest)	$	18,469
Cash flows expected to be collected*		14,304
Recorded investment in acquired securities		9,144

*

Represents undiscounted expected cash flows, including both principal and interest.

Schedule of Purchased Credit Impaired (PCI) Securities, at reporting date

(in millions)	June 30, 2012		December 31, 2011
Outstanding principal balance		$        12,519	$	10,119
Amortized cost		7,978		7,006
Fair value		8,041		6,535

Activity for accretable yield on Purchased Credit Impaired (PCI) Securities

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2012			2011			2012			2011
Balance, beginning of period	$	5,146		$	-		$	4,135		$	-
Newly purchased PCI securities		196			2,416			1,418			2,416
Disposals		(121	)		-			(168	)		-
Accretion		(177	)		(77	)		(345	)		(77	)
Effect of changes in interest rate indices		(133	)		(8	)		(161	)		(8	)
Net reclassification (to) from non-accretable difference, including effects of prepayments		39			(23	)		71			(23	)
Balance, end of period	$	4,950		$	2,308		$	4,950		$	2,308