DERIVATIVES AND HEDGE ACCOUNTING (Tables)

6 Months Ended

Jun. 30, 2020

DERIVATIVES AND HEDGE ACCOUNTING

Notional amounts and fair values of derivative instruments

	June 30, 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	$	19	$	294	$	13	$	495	$	3	$	410	$	7
Foreign exchange contracts		5,996		656		3,733		134		4,328		342		5,230		162
Derivatives not designated
as hedging instruments:(a)
Interest rate contracts		67,839		5,661		39,796		4,602		52,437		3,197		35,231		2,742
Foreign exchange contracts		11,100		1,313		10,290		529		8,133		698		12,093		863
Equity contracts		21,898		1,033		7,229		212		18,533		769		7,539		139
Credit contracts(b)		1,765		3		1,007		74		8,457		3		923		89
Other contracts(c)		41,928		13		55		10		40,582		14		56		7
Total derivatives, gross	$	151,261	$	8,698	$	62,404	$	5,574	$	132,965	$	5,026	$	61,482	$	4,009
Counterparty netting(d)				(3,977)				(3,977)				(2,427)				(2,427)
Cash collateral(e)				(3,933)				(1,016)				(1,806)				(527)
Total derivatives on condensed
consolidated balance sheets(f)			$	788			$	581			$	793			$	1,055

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

(b)As of June 30, 2020 and December 31, 2019, included CDSs on super senior multi-sector CDOs with a net notional amount of $139 million and $152 million (fair value liability of $47 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 Other liabilities, respectively. Fair value of assets related to bifurcated embedded derivatives was zero at both June 30, 2020 and December 31, 2019. Fair value of liabilities related to bifurcated embedded derivatives was $13.7 billion and $6.9 billion, respectively, at June 30, 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, and the funds withheld arrangement with Fortitude Re. For additional information see Note 7 herein.

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 June 30, 2020
Interest rate contracts:
Interest credited to policyholder account balances	$	1	$	-	$	(3)	$	(2)
Net investment income		(4)		-		3		(1)
Foreign exchange contracts:
Realized capital gains/(losses)		(132)		(76)		132		(76)
Three Months Ended June 30, 2019
Interest rate contracts:
Interest credited to policyholder account balances	$	9	$	-	$	(9)	$	-
Net investment income		-		-		-		-
Foreign exchange contracts:
Realized capital gains/(losses)		58		57		(58)		57
Six Months Ended June 30, 2020
Interest rate contracts:
Interest credited to policyholder account balances	$	18	$	-	$	(20)	$	(2)
Net investment income		(7)		-		6		(1)
Foreign exchange contracts:
Realized capital gains/(losses)		173		205		(173)		205
Six Months Ended June 30, 2019
Interest rate contracts:
Interest credited to policyholder account balances	$	14	$	-	$	(14)	$	-
Net investment income		(1)		-		1		-
Foreign exchange contracts:
Realized capital gains/(losses)		50		43		(50)		43

(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) Recognized in Earnings
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)		2020		2019		2020		2019
By Derivative Type:
Interest rate contracts	$	(7)	$	615	$	2,566	$	974
Foreign exchange contracts		(124)		231		901		203
Equity contracts		(471)		89		632		(119)
Credit contracts		(66)		17		56		9
Other contracts		16		18		26		34
Embedded derivatives		(1,774)		(832)		(2,826)		(1,281)
Total	$	(2,426)	$	138	$	1,355	$	(180)
By Classification:
Policy fees	$	15	$	18	$	30	$	35
Net investment income		(1)		(50)		(3)		(55)
Net realized capital gains (losses) - excluding
Fortitude Re funds withheld assets		(1,579)		165		2,173		(169)
Net realized capital gains (losses) on Fortitude Re
funds withheld assets		(863)		-		(863)		-
Policyholder benefits and claims incurred		2		5		18		9
Total	$	(2,426)	$	138	$	1,355	$	(180)