VARIABLE INTEREST ENTITIES

3 Months Ended

Mar. 31, 2014

8. VARIABLE INTEREST ENTITIES

We enter into various arrangements with variable interest entities (VIEs) in the normal course of business and consolidate the VIEs when we determine we are the primary beneficiary. This analysis includes a review of the VIE’s capital structure, contractual relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and our involvement with the entity. When assessing the need to consolidate a VIE, we evaluate the design of the VIE as well as the related risks the entity was designed to expose the variable interest holders to.

For VIEs with attributes consistent with that of an investment company or a money market fund, the primary beneficiary is the party or group of related parties that absorbs a majority of the expected losses of the VIE, receives the majority of the expected residual returns of the VIE, or both.

For all other VIEs, the primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of our decision-making ability and our ability to influence activities that significantly affect the economic performance of the VIE.

Balance Sheet Classification and Exposure to Loss

The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the Condensed Consolidated Balance Sheets:

(in millions)		Real Estate and Investment Funds^(c)		Securitization Vehicles		Structured Investment Vehicles		Affordable Housing Partnerships		Other		Total
March 31, 2014
Assets:
Bonds available for sale	$	-	$	11,362	$	-	$	-	$	57	$	11,419
Other bond securities		-		8,002		731		-		113		8,846
Mortgage and other loans receivable		-		1,731		-		-		182		1,913
Other invested assets		654		-		-		1,941		761		3,356
Other assets		48		800		111		45		614		1,618
Total assets^(a)(b)	$	702	$	21,895	$	842	$	1,986	$	1,727	$	27,152
Liabilities:
Long-term debt	$	70	$	1,265	$	98	$	224	$	136	$	1,793
Other liabilities		37		295		1		87		221		641
Total liabilities	$	107	$	1,560	$	99	$	311	$	357	$	2,434
December 31, 2013
Assets:
Bonds available for sale	$	-	$	11,028	$	-	$	-	$	70	$	11,098
Other bond securities		-		7,449		748		-		113		8,310
Mortgage and other loans receivable		-		1,508		-		-		189		1,697
Other invested assets		849		-		-		1,986		793		3,628
Other assets		49		481		93		41		615		1,279
Total assets^(a)(b)	$	898	$	20,466	$	841	$	2,027	$	1,780	$	26,012
Liabilities:
Long-term debt	$	71	$	494	$	87	$	188	$	154	$	994
Other liabilities		31		74		-		83		367		555
Total liabilities	$	102	$	568	$	87	$	271	$	521	$	1,549

(a) The assets of each VIE can be used only to settle specific obligations of that VIE.

(b) At March 31, 2014 and December 31, 2013, includes approximately $21.8 billion and $21.4 billion, respectively, of investment-grade debt securities, loans and other assets held by certain securitization vehicles that issued beneficial interests in these investments. The majority of the beneficial interests issued are held by AIG.

(c) At both March 31, 2014 and December 31, 2013, off-balance sheet exposure, primarily consisting of commitments to real estate and investment funds, was $50.8 million.

We calculate our maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE, (ii) the notional amount of VIE assets or liabilities where we have also provided credit protection to the VIE with the VIE as the referenced obligation, and (iii) other commitments and guarantees to the VIE. Interest holders in VIEs sponsored by us generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to us, except in limited circumstances when we have provided a guarantee to the VIE’s interest holders.

The following table presents total assets of unconsolidated VIEs in which we hold a variable interest, as well as our maximum exposure to loss associated with these VIEs:

			Maximum Exposure to Loss
		Total VIE		On-Balance		Off-Balance
(in millions)		Assets		Sheet^*		Sheet		Total
March 31, 2014
Real estate and investment funds	$	18,334	$	2,446	$	369	$	2,815
Affordable housing partnerships		478		478		-		478
Other		609		29		-		29
Total	$	19,421	$	2,953	$	369	$	3,322
December 31, 2013
Real estate and investment funds	$	17,572	$	2,343	$	289	$	2,632
Affordable housing partnerships		478		477		-		477
Other		708		37		-		37
Total	$	18,758	$	2,857	$	289	$	3,146

* At March 31, 2014 and December 31, 2013, $2.9 billion and $2.8 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.

See Note 10 to the Consolidated Financial Statements in the 2013 Annual Report for additional information on VIEs.