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DERIVATIVES AND HEDGE ACCOUNTING (Tables)
 12 Months Ended
Dec. 31, 2020
DERIVATIVES AND HEDGE ACCOUNTING  
Notional amounts and fair values of derivative instruments

 

December 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

$

815

$

16

 

$

356

$

11

 

$

495

$

3

 

$

410

$

7

Foreign exchange contracts

 

3,468

 

256

 

 

7,424

 

379

 

 

4,328

 

342

 

 

5,230

 

162

Derivatives not designated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

as hedging instruments:(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

62,259

 

4,621

 

 

48,732

 

4,425

 

 

52,437

 

3,197

 

 

35,231

 

2,742

Foreign exchange contracts

 

9,518

 

766

 

 

12,860

 

711

 

 

8,133

 

698

 

 

12,093

 

863

Equity contracts

 

22,924

 

1,130

 

 

7,076

 

223

 

 

18,533

 

769

 

 

7,539

 

139

Credit contracts(b)

 

5,797

 

2

 

 

969

 

67

 

 

8,457

 

3

 

 

923

 

89

Other contracts(c)

 

43,441

 

14

 

 

54

 

6

 

 

40,582

 

14

 

 

56

 

7

Total derivatives, gross

$

148,222

$

6,805

 

$

77,471

$

5,822

 

$

132,965

$

5,026

 

$

61,482

$

4,009

Counterparty netting(d)

 

 

 

(3,812)

 

 

 

 

(3,812)

 

 

 

 

(2,427)

 

 

 

 

(2,427)

Cash collateral(e)

 

 

 

(2,219)

 

 

 

 

(1,441)

 

 

 

 

(1,806)

 

 

 

 

(527)

Total derivatives on

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

consolidated balance sheets(f)

 

 

$

774

 

 

 

$

569

 

 

 

$

793

 

 

 

$

1,055

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

(b) As of December 31, 2020 and 2019, included CDSs on super senior multi-sector CDOs with a net notional amount of $137 million and $152 million (fair value liability of $44 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 December 31, 2020 and December 31, 2019. Fair value of liabilities related to bifurcated embedded derivatives was $15.8 billion and $6.9 billion, respectively, at December 31, 2020 and December 31, 2019. A bifurcated embedded derivative is generally presented with the host contract in the 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 8 to the Consolidated Financial Statements.
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

Year ended December 31, 2020

 

 

 

 

 

 

 

 

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

Realized capital gains/(losses)

$

-

$

-

$

-

 

$

-

Interest credited to policyholder account balances

 

14

 

-

 

(14)

 

 

-

Net investment income

 

(6)

 

-

 

5

 

 

(1)

Foreign exchange contracts:

 

 

 

 

 

 

 

 

 

Realized capital gains/(losses)

 

(422)

 

49

 

422

 

 

49

Year ended December 31, 2019

 

 

 

 

 

 

 

 

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

Realized capital gains/(losses)

$

-

$

-

$

-

 

$

-

Interest credited to policyholder account balances

 

16

 

-

 

(16)

 

 

-

Net investment income

 

(1)

 

-

 

1

 

 

-

Foreign exchange contracts:

 

 

 

 

 

 

 

 

 

Realized capital gains/(losses)

 

(31)

 

91

 

31

 

 

91

Year ended December 31, 2018

 

 

 

 

 

 

 

 

 

Interest rate contracts:

 

 

 

 

 

 

 

 

 

Realized capital gains/(losses)

$

(2)

$

-

$

2

 

$

-

Interest credited to policyholder account balances

 

-

 

-

 

-

 

 

-

Net investment income

 

-

 

-

 

-

 

 

-

Foreign exchange contracts:

 

 

 

 

 

 

 

 

 

Realized capital gains/(losses)

 

365

 

106

 

(365)

 

 

106

(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

Years Ended December 31,

Gains (Losses) Recognized in Earnings

(in millions)

 

2020

 

2019

 

2018

By Derivative Type:

 

 

 

 

 

 

Interest rate contracts

$

1,451

$

1,319

$

(509)

Foreign exchange contracts

 

(389)

 

(25)

 

543

Equity contracts

 

211

 

(316)

 

(56)

Credit contracts

 

52

 

61

 

32

Other contracts

 

61

 

64

 

65

Embedded derivatives

 

(4,722)

 

(1,464)

 

629

Total

$

(3,336)

$

(361)

$

704

By Classification:

 

 

 

 

 

 

Policy fees

$

62

$

68

$

67

Net investment income

 

(8)

 

(125)

 

(3)

Net realized capital gains (losses) - excluding Fortitude Re funds withheld assets

 

(508)

 

(316)

 

642

Net realized capital gains (losses) on Fortitude Re funds withheld assets

 

(2,894)

 

-

 

-

Policyholder benefits and claims incurred

 

12

 

12

 

(2)

Total

$

(3,336)

$

(361)

$

704