INVESTMENTS

3 Months Ended

Mar. 31, 2022

INVESTMENTS

INVESTMENTS

5. Investments

Securities Available for Sale

The following table presents the amortized cost and fair value of our available for sale securities:

				Allowance		Gross		Gross
		Amortized		for Credit		Unrealized		Unrealized		Fair
(in millions)		Cost		Losses(a)		Gains		Losses		Value
March 31, 2022
Bonds available for sale:
U.S. government and government sponsored entities	$	7,976	$	-	$	130	$	(239)	$	7,867
Obligations of states, municipalities and political subdivisions		13,105		-		674		(266)		13,513
Non-U.S. governments		15,408		(39)		284		(671)		14,982
Corporate debt		163,889		(137)		5,120		(7,244)		161,628
Mortgage-backed, asset-backed and collateralized:
RMBS		23,644		(13)		1,551		(647)		24,535
CMBS		15,413		-		138		(451)		15,100
CDO/ABS		20,045		(2)		85		(534)		19,594
Total mortgage-backed, asset-backed and collateralized		59,102		(15)		1,774		(1,632)		59,229
Total bonds available for sale(b)	$	259,480	$	(191)	$	7,982	$	(10,052)	$	257,219
December 31, 2021
Bonds available for sale:
U.S. government and government sponsored entities	$	7,874	$	-	$	347	$	(27)	$	8,194
Obligations of states, municipalities and political subdivisions		12,760		-		1,782		(15)		14,527
Non-U.S. governments		15,858		-		719		(247)		16,330
Corporate debt		163,064		(89)		13,892		(1,259)		175,608
Mortgage-backed, asset-backed and collateralized:
RMBS		25,027		(9)		2,422		(153)		27,287
CMBS		15,333		-		555		(79)		15,809
CDO/ABS		19,294		-		276		(123)		19,447
Total mortgage-backed, asset-backed and collateralized		59,654		(9)		3,253		(355)		62,543
Total bonds available for sale(b)	$	259,210	$	(98)	$	19,993	$	(1,903)	$	277,202

(a) Represents the allowance for credit losses that has been recognized. Changes in the allowance for credit losses are recorded through Net realized gains (losses) and are not recognized in Other comprehensive income (loss).

(b) At March 31, 2022 and December 31, 2021, bonds available for sale held by us that were below investment grade or not rated totaled $24.8 billion or 10 percent and $27.0 billion or 10 percent, respectively.

Securities Available for Sale in a Loss Position for Which No Allowance for Credit Loss Has Been Recorded

The following table summarizes the fair value and gross unrealized losses on our available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position for which no allowance for credit loss has been recorded:

	Less than 12 Months				12 Months or More				Total
				Gross				Gross				Gross
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in millions)		Value		Losses		Value		Losses		Value		Losses
March 31, 2022
Bonds available for sale:
U.S. government and government sponsored entities	$	5,488	$	205	$	441	$	34	$	5,929	$	239
Obligations of states, municipalities and political
subdivisions		3,468		248		104		18		3,572		266
Non-U.S. governments		7,062		377		1,915		294		8,977		671
Corporate debt		77,592		5,689		10,362		1,531		87,954		7,220
RMBS		9,499		475		1,650		137		11,149		612
CMBS		9,615		423		220		28		9,835		451
CDO/ABS		15,337		512		394		22		15,731		534
Total bonds available for sale	$	128,061	$	7,929	$	15,086	$	2,064	$	143,147	$	9,993

December 31, 2021
Bonds available for sale:
U.S. government and government sponsored entities	$	3,696	$	14	$	447	$	13	$	4,143	$	27
Obligations of states, municipalities and political
subdivisions		714		11		57		4		771		15
Non-U.S. governments		4,644		115		1,324		132		5,968		247
Corporate debt		31,914		720		8,819		467		40,733		1,187
RMBS		5,362		102		1,154		46		6,516		148
CMBS		3,980		63		153		16		4,133		79
CDO/ABS		8,263		112		339		11		8,602		123
Total bonds available for sale	$	58,573	$	1,137	$	12,293	$	689	$	70,866	$	1,826

At March 31, 2022, we held 26,173 individual fixed maturity securities that were in an unrealized loss position and for which no allowance for credit losses has been recorded (including 3,631 individual fixed maturity securities that were in a continuous unrealized loss position for 12 months or more). At December 31, 2021, we held 15,029 individual fixed maturity securities that were in an unrealized loss position and for which no allowance for credit losses has been recorded (including 2,644 individual fixed maturity securities that were in a continuous unrealized loss position for 12 months or more). We did not recognize the unrealized losses in earnings on these fixed maturity securities at March 31, 2022 because it was determined that such losses were due to non-credit factors. Additionally, we neither intend to sell the securities nor do we believe that it is more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. For fixed maturity securities with significant declines, we performed fundamental credit analyses on a security-by-security basis, which included consideration of credit enhancements, liquidity position, expected defaults, industry and sector analysis, forecasts and available market data.

Contractual Maturities of Fixed Maturity Securities Available for Sale

The following table presents the amortized cost and fair value of fixed maturity securities available for sale by contractual maturity:

	Total Fixed Maturity Securities
	Available for Sale
		Amortized Cost,
(in millions)		Net of Allowance		Fair Value
March 31, 2022
Due in one year or less	$	7,577	$	7,574
Due after one year through five years		50,250		49,857
Due after five years through ten years		47,081		46,347
Due after ten years		95,294		94,212
Mortgage-backed, asset-backed and collateralized		59,087		59,229
Total	$	259,289	$	257,219

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.

The following table presents the gross realized gains and gross realized losses from sales or maturities of our available for sale securities:

Three Months Ended March 31,		2022				2021
		Gross		Gross		Gross		Gross
	Realized		Realized		Realized		Realized
(in millions)		Gains		Losses		Gains		Losses
Fixed maturity securities	$	97	$	236	$	460	$	71

For the three-month periods ended March 31, 2022 and 2021, the aggregate fair value of available for sale securities sold was $4.8 billion and $6.4 billion, respectively, which resulted in net realized gains (losses) of $(139) million and $389 million, respectively. Included within the net realized gains (losses) are $(32) million and $295 million of net realized gains (losses) for the three-month periods ended March 31, 2022 and 2021, respectively, which relate to Fortitude Re funds withheld assets. These net realized gains (losses) are included in Net realized gains (losses) on Fortitude Re funds withheld assets.

Other Securities Measured at Fair Value

The following table presents the fair value of fixed maturity securities measured at fair value based on our election of the fair value option, which are reported in the other bond securities caption in the financial statements, and equity securities measured at fair value:

		March 31, 2022				December 31, 2021
		Fair	Percent			Fair	Percent
(in millions)		Value	of Total			Value	of Total
Fixed maturity securities:
U.S. government and government sponsored entities	$	1,689	23	%	$	1,750	25	%
Obligations of states, municipalities and political subdivisions		98	1			97	1
Non-U.S. governments		85	1			76	1
Corporate debt		1,341	18			1,050	15
Mortgage-backed, asset-backed and collateralized:
RMBS		312	4			411	6
CMBS		317	4			315	4
CDO/ABS and other collateralized		2,740	38			2,579	37
Total mortgage-backed, asset-backed and collateralized		3,369	46			3,305	47
Total fixed maturity securities		6,582	89			6,278	89
Equity securities		695	11			739	11
Total	$	7,277	100	%	$	7,017	100	%

Other Invested Assets

The following table summarizes the carrying amounts of other invested assets:

		March 31,		December 31,
(in millions)		2022		2021
Alternative investments(a) (b)	$	11,583	$	10,951
Investment real estate(c)		2,627		2,727
All other investments(d)		1,976		1,990
Total	$	16,186	$	15,668

(a) At March 31, 2022, included hedge funds of $1.8 billion and private equity funds of $9.7 billion. At December 31, 2021, included hedge funds of $2.0 billion, private equity funds of $8.9 billion.

(b) At March 31, 2022, approximately 67 percent of our hedge fund portfolio is available for redemption in 2022. The remaining 33 percent will be available for redemption between 2023 and 2028.

(c) Represents values net of accumulated depreciation. At March 31, 2022 and December 31, 2021, the accumulated depreciation was $802 million and $778 million, respectively.

(d) Includes AIG’s ownership interest in Fortitude Group Holdings, LLC (FRL), which is recorded using the measurement alternative for equity securities. Our investment in FRL totaled $156 million and $100 million at March 31, 2022 and December 31, 2021, respectively.

Net Investment Income

The following table presents the components of Net investment income:

Three Months Ended March 31,	2022						2021
	Excluding Fortitude		Fortitude Re				Excluding Fortitude		Fortitude Re
	Re Funds		Funds Withheld				Re Funds		Funds Withheld
(in millions)	Withheld Assets		Assets		Total		Withheld Assets		Assets		Total
Available for sale fixed maturity securities,
including short-term investments	$	2,041	$	301	$	2,342	$	2,178	$	377	$	2,555
Other fixed maturity securities(a)		(201)		(118)		(319)		(102)		-		(102)
Equity securities		(27)		-		(27)		22		-		22
Interest on mortgage and other loans		453		46		499		414		47		461
Alternative investments(b)		669		71		740		572		69		641
Real estate		-		-		-		59		-		59
Other investments(c)		157		-		157		140		1		141
Total investment income		3,092		300		3,392		3,283		494		3,777
Investment expenses		146		9		155		112		8		120
Net investment income	$	2,946	$	291	$	3,237	$	3,171	$	486	$	3,657

(a) Included in the three-month periods ended March 31, 2022 and 2021 was income (loss) of $(95) million and $(81) million, respectively, related to fixed maturity securities measured at fair value that economically hedge liabilities described in (c) below.

(b) Included income from hedge funds, private equity funds and affordable housing partnerships. Hedge funds are recorded as of the balance sheet date. Private equity funds are generally reported on a one-quarter lag.

(c) Included in the three-month periods ended March 31, 2022 and 2021 was income (loss) of $91 million and $83 million, respectively, related to liabilities measured at fair value that are economically hedged with fixed maturity securities as described in (a) above.

Net Realized Gains and Losses

The following table presents the components of Net realized gains (losses):

Three Months Ended March 31,	2022						2021
	Excluding		Fortitude Re				Excluding		Fortitude Re
	Fortitude Re			Funds			Fortitude Re			Funds
	Funds		Withheld				Funds		Withheld
(in millions)	Withheld Assets		Assets			Total	Withheld Assets			Assets		Total
Sales of fixed maturity securities	$	(107)	$	(32)	$	(139)	$	94	$	295	$	389
Change in allowance for credit losses on fixed maturity
securities		(53)		(40)		(93)		51		2		53
Change in allowance for credit losses on loans		(19)		(8)		(27)		41		(5)		36
Foreign exchange transactions		(14)		(9)		(23)		(49)		(6)		(55)
Variable annuity embedded derivatives, net of related
hedges		506		-		506		89		-		89
All other derivatives and hedge accounting		939		(56)		883		351		(117)		234
Sales of alternative investments and real estate
investments		16		1		17		26		4		30
Other		(27)		4		(23)		92		-		92
Net realized gains (losses) – excluding Fortitude Re
funds withheld embedded derivative		1,241		(140)		1,101		695		173		868
Net realized gains on Fortitude Re
funds withheld embedded derivative		-		3,318		3,318		-		2,382		2,382
Net realized gains	$	1,241	$	3,178	$	4,419	$	695	$	2,555	$	3,250

Change in Unrealized Appreciation (Depreciation) of Investments

The following table presents the increase (decrease) in unrealized appreciation (depreciation) of our available for sale securities and other investments:

Three Months Ended March 31,
(in millions)		2022		2021
Increase (decrease) in unrealized appreciation (depreciation) of investments:
Fixed maturity securities	$	(20,160)	$	(11,649)
Other investments		(7)		-
Total increase (decrease) in unrealized appreciation (depreciation) of investments	$	(20,167)	$	(11,649)

The following table summarizes the unrealized gains and losses recognized in Net investment income during the reporting period on equity securities and other investments still held at the reporting date:

Three Months Ended March 31,	2022						2021
				Other						Other
				Invested						Invested
(in millions)		Equities		Assets		Total		Equities		Assets		Total
Net gains (losses) recognized during the period on equity securities and
other investments	$	(27)	$	475	$	448	$	22	$	470	$	492
Less: Net gains (losses) recognized during the period on equity
securities and other investments sold during the period		94		(3)		91		(21)		24		3
Unrealized gains (losses) recognized during the reporting period on
equity securities and other investments still held at the reporting date	$	(121)	$	478	$	357	$	43	$	446	$	489

Evaluating Investments for AN ALLOWANCE FOR CREDIT LOSSES

For a discussion of our policy for evaluating investments for an allowance for credit losses, see Note 5 to the Consolidated Financial Statements in the 2021 Annual Report.

Credit Impairments

The following table presents a rollforward of the changes in allowance for credit losses on available for sale fixed maturity securities by major investment category:

Three Months Ended March 31,	2022						2021
				Non-						Non-
(in millions)	Structured		Structured			Total	Structured		Structured			Total
Balance, beginning of period	$	8	$	90	$	98	$	17	$	169	$	186
Additions:
Securities for which allowance for credit losses were not previously recorded		49		128		177		2		13		15
Reductions:
Securities sold during the period		-		(1)		(1)		(1)		(4)		(5)
Addition to (release of) the allowance for credit losses on securities that
had an allowance recorded in a previous period, for which there was
no intent to sell before recovery of amortized cost basis		(42)		(42)		(84)		(4)		(64)		(68)
Write-offs charged against the allowance		-		-		-		-		(6)		(6)
Other		-		1		1		-		-		-
Balance, end of period	$	15	$	176	$	191	$	14	$	108	$	122

Purchased Credit Deteriorated (PCD) Securities

We purchase certain RMBS securities that have experienced more-than-insignificant deterioration in credit quality since origination. These are referred to as PCD assets. At the time of purchase an allowance is recognized for these PCD assets by adding it to the purchase price to arrive at the initial amortized cost. There is no credit loss expense recognized upon acquisition of a PCD asset. When determining the initial allowance for credit losses, management considers the historical performance of underlying assets and available market information as well as bond-specific structural considerations, such as credit enhancement and the priority of payment structure of the security. In addition, the process of estimating future cash flows includes, but is not limited to, the following critical inputs:

• Current delinquency rates;

• Expected default rates and the timing of such defaults;

• Loss severity and the timing of any recovery; and

• Expected prepayment speeds.

Subsequent to the acquisition date, the PCD assets follow the same accounting as other structured securities that are not high credit quality.

We did not purchase securities with more than insignificant credit deterioration since their origination during the three-month periods ended March 31, 2022 and 2021.

Pledged Investments

Secured Financing and Similar Arrangements

We enter into secured financing transactions whereby certain securities are sold under agreements to repurchase (repurchase agreements), in which we transfer securities in exchange for cash, with an agreement by us to repurchase the same or substantially similar securities. Our secured financing transactions also include those that involve the transfer of securities to financial institutions in exchange for cash (securities lending agreements). In all of these secured financing transactions, the securities transferred by us (pledged collateral) may be sold or repledged by the counterparties. These agreements are recorded at their contracted amounts plus accrued interest, other than those that are accounted for at fair value.

Pledged collateral levels are monitored daily and are generally maintained at an agreed-upon percentage of the fair value of the amounts borrowed during the life of the transactions. In the event of a decline in the fair value of the pledged collateral under these secured financing transactions, we may be required to transfer cash or additional securities as pledged collateral under these agreements. At the termination of the transactions, we and our counterparties are obligated to return the amounts borrowed and the securities transferred, respectively.

The following table presents the fair value of securities pledged to counterparties under secured financing transactions, including repurchase and securities lending agreements:

(in millions)		March 31, 2022		December 31, 2021
Fixed maturity securities available for sale	$	3,277	$	3,583
Other bond securities, at fair value	$	31	$	-

At March 31, 2022 and December 31, 2021, amounts borrowed under repurchase and securities lending agreements totaled $3.6 billion and $3.7 billion, respectively.

The following table presents the fair value of securities pledged under our repurchase agreements by collateral type and by remaining contractual maturity:

	Remaining Contractual Maturity of the Agreements
(in millions)	Overnight and Continuous			up to 30 days		31 - 90 days		91 - 364 days		365 days or greater		Total
March 31, 2022
Bonds available for sale:
Non-U.S. governments	$	64	$	-	$	-	$	-	$	-	$	64
Corporate debt		212		73		-		-		-		285
Total	$	276	$	73	$	-	$	-	$	-	$	349
December 31, 2021
Bonds available for sale:
Non-U.S. governments	$	48	$	-	$	-	$	-	$	-	$	48
Corporate debt		128		61		22		-		-		211
Total	$	176	$	61	$	22	$	-	$	-	$	259

The following table presents the fair value of securities pledged under our securities lending agreements by collateral type and by remaining contractual maturity:

	Remaining Contractual Maturity of the Agreements
(in millions)		Overnight and Continuous		up to 30 days		31 - 90 days		91 - 364 days		365 days or greater		Total
March 31, 2022
Bonds available for sale:
Obligations of states, municipalities and political
subdivisions	$	-	$	149	$	-	$	-	$	-	$	149
Non-U.S. governments		-		420		80		-		-		500
Corporate debt		-		1,812		469		-		-		2,281
Other bond securities:
Non-U.S. governments		-		-		9		-		-		9
Corporate debt		-		-		20		-		-		20
Total	$	-	$	2,381	$	578	$	-	$	-	$	2,959
December 31, 2021
Bonds available for sale:
Obligations of states, municipalities and political
subdivisions	$	-	$	-	$	106	$	-	$	-	$	106
Non-U.S. governments		-		-		43		-		-		43
Corporate debt		-		534		2,641		-		-		3,175
Total	$	-	$	534	$	2,790	$	-	$	-	$	3,324

We also enter into agreements in which securities are purchased by us under agreements to resell (reverse repurchase agreements), which are accounted for as secured financing transactions and reported as short-term investments or other assets, depending on their terms. These agreements are recorded at their contracted resale amounts plus accrued interest, other than those that are accounted for at fair value. In all reverse repurchase transactions, we take possession of or obtain a security interest in the related securities, and we have the right to sell or repledge this collateral received.

The following table presents information on the fair value of securities pledged to us under reverse repurchase agreements:

(in millions)		March 31, 2022		December 31, 2021
Securities collateral pledged to us	$	530	$	1,839

At March 31, 2022 and December 31, 2021, the carrying value of reverse repurchase agreements totaled $0.5 billion and $1.9 billion, respectively.

We do not currently offset any secured financing transactions. All such transactions are collateralized and margined on a daily basis consistent with market standards and subject to enforceable master netting arrangements with rights of set off.

Insurance – Statutory and Other Deposits

The total carrying value of cash and securities deposited by our insurance subsidiaries under requirements of regulatory authorities or other insurance-related arrangements, including certain annuity-related obligations and certain reinsurance contracts, was $12.6 billion and $13.5 billion at March 31, 2022 and December 31, 2021, respectively.

Other Pledges and Restrictions

Certain of our subsidiaries are members of Federal Home Loan Banks (FHLBs) and such membership requires the members to own stock in these FHLBs. We owned an aggregate of $212 million and $211 million of stock in FHLBs at March 31, 2022 and December 31, 2021, respectively. In addition, our subsidiaries have pledged securities available for sale and residential loans associated with borrowings and funding agreements from FHLBs, with a fair value of $5.0 billion and $1.5 billion, respectively, at March 31, 2022 and $5.1 billion and $1.5 billion, respectively, at December 31, 2021.

Certain GIAs have provisions that require collateral to be posted or payments to be made by us upon a downgrade of our long-term debt ratings. The actual amount of collateral required to be posted to the counterparties in the event of such downgrades, and the aggregate amount of payments that we could be required to make, depend on market conditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of the downgrade. The fair value of securities pledged as collateral with respect to these obligations was approximately $1.5 billion and $1.4 billion, at March 31, 2022 and December 31, 2021, respectively. This collateral primarily consists of securities of the U.S. government and government sponsored entities and generally cannot be repledged or resold by the counterparties.

Investments held in escrow accounts or otherwise subject to restriction as to their use were $530 million and $514 million, comprised of bonds available for sale and short-term investments at March 31, 2022 and December 31, 2021, respectively.

Reinsurance transactions between AIG and Fortitude Re were structured as modco and loss portfolio transfer arrangements with funds withheld.