DERIVATIVES AND HEDGE ACCOUNTING (Tables)

3 Months Ended

Mar. 31, 2020

DERIVATIVES AND HEDGE ACCOUNTING

Notional amounts and fair values of derivative instruments

	March 31, 2020								December 31, 2019
	Gross Derivative Assets				Gross Derivative Liabilities				Gross Derivative Assets				Gross Derivative Liabilities
		Notional		Fair		Notional		Fair		Notional		Fair		Notional		Fair
(in millions)		Amount		Value		Amount		Value		Amount		Value		Amount		Value
Derivatives designated as
hedging instruments:(a)
Interest rate contracts	$	735	$	18	$	316	$	11	$	495	$	3	$	410	$	7
Foreign exchange contracts		7,592		843		1,929		88		4,328		342		5,230		162
Derivatives not designated
as hedging instruments:(a)
Interest rate contracts		50,409		6,605		36,573		4,215		52,437		3,197		35,231		2,742
Foreign exchange contracts		12,350		1,495		8,818		944		8,133		698		12,093		863
Equity contracts		22,291		1,240		4,313		77		18,533		769		7,539		139
Credit contracts(b)		7,617		133		923		81		8,457		3		923		89
Other contracts(c)		41,563		15		56		13		40,582		14		56		7
Total derivatives, gross	$	142,557	$	10,349	$	52,928	$	5,429	$	132,965	$	5,026	$	61,482	$	4,009
Counterparty netting(d)				(4,645)				(4,645)				(2,427)				(2,427)
Cash collateral(e)				(4,840)				(147)				(1,806)				(527)
Total derivatives on condensed
consolidated balance sheets(f)			$	864			$	637			$	793			$	1,055

(a)Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.

(b)As of March 31, 2020 and December 31, 2019, included CDSs on super senior multi-sector CDOs with a net notional amount of $146 million and $152 million (fair value liability of $56 million and $48 million), respectively. The net notional amount represents the maximum exposure to loss on the portfolio.

(c)Consists primarily of stable value wraps and contracts with multiple underlying exposures.

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

(e)Represents cash collateral posted and received that is eligible for netting.

(f)Freestanding derivatives only, excludes embedded derivatives. Derivative instrument assets and liabilities are recorded in Other assets and liabilities, respectively. Fair value of assets related to bifurcated embedded derivatives was zero at both March 31, 2020 and December 31, 2019. Fair value of liabilities related to bifurcated embedded derivatives was $8.2 billion and $6.9 billion, respectively, at March 31, 2020 and December 31, 2019. A bifurcated embedded derivative is generally presented with the host contract in the Condensed Consolidated Balance Sheets. Embedded derivatives are primarily related to guarantee features in variable annuity products, which include equity and interest rate components.

Gain (loss) recognized in earnings on AIG's derivative instruments in fair value hedging relationships in the Consolidated Statements of Income

	Gains/(Losses) Recognized in Earnings for:
	Hedging		Excluded		Hedged
(in millions)	Derivatives(a)		Components(b)		Items		Net Impact
Three Months Ended March 31, 2020
Interest rate contracts:
Interest credited to policyholder account balances	$	17	$	-	$	(17)	$	-
Net investment income		(3)		-		3		-
Foreign exchange contracts:
Realized capital gains/(losses)		305		281		(305)		281
Three Months Ended March 31, 2019
Interest rate contracts:
Interest credited to policyholder account balances	$	5	$	-	$	(5)	$	-
Net investment income		(1)		-		1		-
Foreign exchange contracts:
Realized capital gains/(losses)		(8)		(14)		8		(14)

(a)Gains and losses on derivative instruments designated and qualifying in fair value hedges that are included in the assessment of hedge effectiveness.

(b)Gains and losses on derivative instruments designated and qualifying in fair value hedges that are excluded from the assessment of hedge effectiveness and recognized in earnings on a mark-to-market basis.

Effect of AIG's derivative instruments not designated as hedging instruments in the Consolidated Statements of Income

	Gains (Losses)
Three Months Ended March 31,	Recognized in Earnings
(in millions)		2020		2019
By Derivative Type:
Interest rate contracts	$	2,573	$	359
Foreign exchange contracts		1,025		(28)
Equity contracts		1,103		(208)
Credit contracts		122		(8)
Other contracts		10		16
Embedded derivatives		(1,052)		(449)
Total	$	3,781	$	(318)
By Classification:
Policy fees	$	15	$	17
Net investment income		(2)		(5)
Net realized capital gains (losses)		3,752		(334)
Policyholder benefits and claims incurred		16		4
Total	$	3,781	$	(318)