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FAIR VALUE MEASUREMENTS (Tables)
 12 Months Ended
Dec. 31, 2014
FAIR VALUE MEASUREMENTS  
Assets and liabilities measured at fair value on a recurring basis
December 31, 2014 CounterpartyCash
(in millions) Level 1Level 2Level 3Netting(a)CollateralTotal
Assets:
Bonds available for sale:
U.S. government and government sponsored entities$322$2,670$-$-$-$2,992
Obligations of states, municipalities and political subdivisions-25,5002,159--27,659
Non-U.S. governments74220,32330--21,095
Corporate debt-142,5501,883--144,433
RMBS-20,71516,805--37,520
CMBS-10,1892,696--12,885
CDO/ABS-7,1656,110--13,275
Total bonds available for sale1,064229,11229,683--259,859
Other bond securities:
U.S. government and government sponsored entities1305,368---5,498
Obligations of states, municipalities and political subdivisions-122---122
Non-U.S. governments-2---2
Corporate debt-719---719
RMBS-9891,105--2,094
CMBS-708369--1,077
CDO/ABS-2,7517,449--10,200
Total other bond securities13010,6598,923--19,712
Equity securities available for sale:
Common stock3,62621--3,629
Preferred stock25----25
Mutual funds7383---741
Total equity securities available for sale4,38951--4,395
Other equity securities 1,02425---1,049
Mortgage and other loans receivable--6--6
Other invested assets23,7425,650--9,394
Derivative assets:
Interest rate contracts (b)23,72912--3,743
Foreign exchange contracts(b)-8391--840
Equity contracts985851--207
Commodity contracts------
Credit contracts--4--4
Other contracts--31--31
Counterparty netting and cash collateral---(2,102)(1,119)(3,221)
Total derivative assets1004,62699(2,102)(1,119)1,604
Short-term investments5841,100---1,684
Separate account assets73,9396,097---80,036
Other assets------
Total$81,232$255,366$44,362$(2,102)$(1,119)$377,739
Liabilities:
Policyholder contract deposits$-$52$1,509$-$-$1,561
Other policyholder funds-8---8
Derivative liabilities:
Interest rate contracts-3,04786--3,133
Foreign exchange contracts-1,4829--1,491
Equity contracts-984--102
Commodity contracts-6---6
Credit contracts--982--982
Other contracts--90--90
Counterparty netting and cash collateral---(2,102)(1,429)(3,531)
Total derivative liabilities-4,6331,171(2,102)(1,429)2,273
Long-term debt-5,253213--5,466
Other liabilities34316---350
Total$34$10,262$2,893$(2,102)$(1,429)$9,658

December 31, 2013 CounterpartyCash
(in millions) Level 1Level 2Level 3Netting(a)CollateralTotal
Assets:
Bonds available for sale:
U.S. government and government sponsored entities$133$3,062$-$-$-$3,195
Obligations of states, municipalities and political subdivisions-28,3001,080--29,380
Non-U.S. governments50821,98516--22,509
Corporate debt-143,2971,255--144,552
RMBS-21,20714,941--36,148
CMBS-5,7475,735--11,482
CDO/ABS-4,0346,974--11,008
Total bonds available for sale641227,63230,001--258,274
Other bond securities:
U.S. government and government sponsored entities785,645---5,723
Obligations of states, municipalities and political subdivisions-121---121
Non-U.S. governments-2---2
Corporate debt-1,169---1,169
RMBS-1,326937--2,263
CMBS-509844--1,353
CDO/ABS-3,1588,834--11,992
Total other bond securities7811,93010,615--22,623
Equity securities available for sale:
Common stock3,218-1--3,219
Preferred stock-27---27
Mutual funds4082---410
Total equity securities available for sale3,626291--3,656
Other equity securities75084---834
Mortgage and other loans receivable------
Other invested assets12,6675,930--8,598
Derivative assets:
Interest rate contracts143,71641--3,771
Foreign exchange contracts-52---52
Equity contracts15110649--306
Commodity contracts--1--1
Credit contracts--55--55
Other contracts-133--34
Counterparty netting and cash collateral---(1,734)(820)(2,554)
Total derivative assets1653,875179(1,734)(820)1,665
Short-term investments3325,981---6,313
Separate account assets67,7083,351---71,059
Other assets-418---418
Total$73,301$255,967$46,726$(1,734)$(820)$373,440
Liabilities:
Policyholder contract deposits$-$72$312$-$-$384
Derivative liabilities:
Interest rate contracts-3,661141--3,802
Foreign exchange contracts-319---319
Equity contracts-101---101
Commodity contracts-5---5
Credit contracts--1,335--1,335
Other contracts-25142--167
Counterparty netting and cash collateral---(1,734)(1,484)(3,218)
Total derivative liabilities-4,1111,618(1,734)(1,484)2,511
Long-term debt-6,377370--6,747
Other liabilities42891---933
Total$42$11,451$2,300$(1,734)$(1,484)$10,575

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

(b) Effective April 1, 2014, we reclassified cross-currency swaps from Interest Rate contracts to Foreign exchange contracts. This change was applied prospectively.
Changes in Level 3 recurring fair value measurements
Net Changes in
Realized and Unrealized Gains
UnrealizedPurchases, (Losses) Included
Fair ValueGains (Losses)OtherSales,GrossGrossFair Valuein Income on
BeginningIncludedComprehensiveIssues andTransfersTransfersEndInstruments Held
(in millions)of Yearin IncomeIncome (Loss)Settlements, NetInOutof Yearat End of Year
December 31, 2014
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions$1,080$-$233$914$119$(187)$2,159$-
Non-U.S. governments161(1)98(3)30-
Corporate debt1,2551219(257)1,363(509)1,883-
RMBS14,9411,01253796120(117)16,805-
CMBS5,735692438583(3,519)2,696-
CDO/ABS6,97486(38)1,5452,488(4,945)6,110-
Total bonds available for sale30,0011,1805093,0924,181(9,280)29,683-
Other bond securities:
RMBS93740-9751(20)1,105(13)
CMBS844(6)-(141)124(452)369(7)
CDO/ABS8,8341,098-(1,805)271(949)7,449318
Total other bond securities10,6151,132-(1,849)446(1,421)8,923298
Equity securities available for sale:
Common stock1--(1)2(1)1-
Preferred stock--------
Mutual funds----1(1)--
Total equity securities available for sale1--(1)3(2)1-
Mortgage and other loans receivable---6--6-
Other invested assets5,930150398(83)167(912)5,650-
Total$46,547$2,462$907$1,165$4,797$(11,615)$44,263$298
Liabilities:
Policyholder contract deposits$(312)$(1,127)$(54)$(16)$-$-$(1,509)$(218)
Derivative liabilities, net:
Interest rate contracts(100)(10)-39-(3)(74)(10)
Foreign exchange contracts-2-(10)--(8)3
Equity contracts4921-(18)48(53)4713
Commodity contracts1(1)-----(1)
Credit contracts(1,280)263-39--(978)268
Other contracts(109)9953(103)1-(59)82
Total derivative liabilities, net*(1,439)37453(53)49(56)(1,072)355
Long-term debt(370)94-37(70)96(213)15
Total$(2,121)$(659)$(1)$(32)$(21)$40$(2,794)$152

Net Changes in
Realized and Unrealized Gains
UnrealizedPurchases, (Losses) Included
Fair ValueGains (Losses)OtherSales,GrossGrossFair Valuein Income on
BeginningIncludedComprehensiveIssues andTransfersTransfersEndInstruments Held
(in millions)of Yearin IncomeIncome (Loss)Settlements, NetInOutof Yearat End of Year
December 31, 2013
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions$1,024$29$(175)$403$-$(201)$1,080$-
Non-U.S. governments14-(1)31(1)16-
Corporate debt1,4878(19)(176)450(495)1,255-
RMBS11,6628674661,818186(58)14,941-
CMBS5,12424100375161(49)5,735-
CDO/ABS4,84116191,946901(884)6,974-
Total bonds available for sale24,1521,0893804,3691,699(1,688)30,001-
Other bond securities:
Corporate debt--------
RMBS39666-208267-937(2)
CMBS81267-(200)279(114)84429
CDO/ABS8,5361,527-(2,044)843(28)8,834681
Total other bond securities9,7441,660-(2,036)1,389(142)10,615708
Equity securities available for sale:
Common stock247(8)(22)--1-
Preferred stock44-3(47)----
Total equity securities available for sale687(5)(69)--1-
Mortgage and other loans receivable--------
Other invested assets5,38920823764344(312)5,930-
Total$39,353$2,964$612$2,328$3,432$(2,142)$46,547$708
Liabilities:
Policyholder contract deposits$(1,257)$744$(1)$202$-$-$(312)$104
Derivative liabilities, net:
Interest rate contracts73219-(851)--(100)35
Foreign exchange contracts--------
Equity contracts4774-(20)1(53)4930
Commodity contracts1-----1(1)
Credit contracts(1,991)567-144--(1,280)711
Other contracts(162)4215(2)(2)-(109)7
Total derivatives liabilities, net*(1,373)70215(729)(1)(53)(1,439)782
Long-term debt(344)(137)-38(2)75(370)(30)
Total$(2,974)$1,309$14$(489)$(3)$22$(2,121)$856

* Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.
Schedule of net realized and unrealized gains and losses related to Level 3 items
NetNet Realized
InvestmentCapital Other
(in millions)IncomeGains (Losses)IncomeTotal
December 31, 2014
Bonds available for sale$1,236$(107)$51$1,180
Other bond securities95-1,0371,132
Equity securities available for sale----
Other invested assets175(28)3150
Policyholder contract deposits-(1,127)-(1,127)
Derivative liabilities, net688298374
Long-term debt--9494
December 31, 2013
Bonds available for sale$997$(17)$109$1,089
Other bond securities18791,4641,660
Equity securities available for sale-7-7
Other invested assets210(42)40208
Policyholder contract deposits-744-744
Derivative liabilities, net3943620702
Long-term debt--(137)(137)
Gross components of purchases, sales, issues and settlements, net
Purchases,
Sales, Issues and
(in millions)PurchasesSalesSettlementsSettlements, Net(a)
December 31, 2014
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions$1,041$(35)$(92)$914
Non-U.S. governments12-(3)9
Corporate debt148(8)(397)(257)
RMBS3,301(124)(2,381)796
CMBS368(224)(59)85
CDO/ABS2,760(70)(1,145)1,545
Total bonds available for sale7,630(461)(4,077)3,092
Other bond securities:
RMBS211(31)(83)97
CMBS-(16)(125)(141)
CDO/ABS55(21)(1,839)(1,805)
Total other bond securities266(68)(2,047)(1,849)
Equity securities available for sale--(1)(1)
Mortgage and other loans receivable6--6
Other invested assets776(25)(834)(83)
Total assets$8,678$(554)$(6,959)$1,165
Liabilities:
Policyholder contract deposits$-$(149)$133$(16)
Derivative liabilities, net2(3)(52)(53)
Long-term debt(b)--3737
Total liabilities$2$(152)$118$(32)
December 31, 2013
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions$541$(138)$-$403
Non-U.S. governments9-(6)3
Corporate debt487(114)(549)(176)
RMBS4,424(266)(2,340)1,818
CMBS1,023(188)(460)375
CDO/ABS2,662(159)(557)1,946
Total bonds available for sale9,146(865)(3,912)4,369
Other bond securities:
Corporate debt----
RMBS350(12)(130)208
CMBS24(71)(153)(200)
CDO/ABS353(72)(2,325)(2,044)
Total other bond securities727(155)(2,608)(2,036)
Equity securities available for sale58(12)(115)(69)
Other invested assets882(9)(809)64
Total assets$10,813$(1,041)$(7,444)$2,328
Liabilities:
Policyholder contract deposits$-$(26)$228$202
Derivative liabilities, net10(1)(738)(729)
Long-term debt(b)--3838
Total liabilities$10$(27)$(472)$(489)

(a) There were no issuances during the years ended December 31, 2014 and 2013.

(b) Includes GIAs, notes, bonds, loans and mortgages payable.
Significant unobservable inputs used for recurring fair value measurements
Fair Value  at
December 31,ValuationRange
(in millions)2014TechniqueUnobservable Input(a)(Weighted Average )(a)
Assets:
Obligations of states,$1,178Discounted cash flowYield(b)3.9% - 4.62% (4.26%)
municipalities and
political subdivisions
Corporate debt1,145Discounted cash flowYield(b)3.46% - 8.75% (6.10%)
RMBS17,353Discounted cash flowConstant prepayment rate(c)0.59% - 9.35% (4.97%)
Loss severity(c)46.04% - 79.56% (62.80%)
Constant default rate(c)3.67% - 9.96% (6.82%)
Yield(c)2.67% - 6.64% (4.65%)
Certain CDO/ABS5,282Discounted cash flowConstant prepayment rate(c)6.40% - 12.80% (9.20%)
Loss severity(c)42.90% - 60.30% (51.90%)
Constant default rate(c)2.50% - 14.70% (7.80%)
Yield(c)4.70% - 9.70% (7.10%)
CMBS2,687Discounted cash flowYield(b)0.00% - 17.29% (6.06%)
CDO/ABS - DirectBinomial ExpansionRecovery rate(b)7.00% - 36.00% (21.00%)
Investment Book279Technique (BET) Diversity score(b)5 - 27 (12)
Weighted average life(b)0.25 - 10.49 years (3.93 years)
Liabilities:
Policyholder contract
deposits1,509Discounted cash flowEquity implied volatility(b)6.00% - 39.00%
Base lapse rate(b)1.00% - 40.00%
Dynamic lapse rate(b)0.20% - 60.00%
Mortality rate(b)0.10% - 35.00%
Utilization rate(b)0.50% - 30.00%
Total derivative
liabilities, net791BETRecovery rate(b)5.00% - 23.00% (13.00%)
Diversity score(b)8 - 25 (13)
Weighted average life(b)2.67 - 10.49 years (4.65 years)

Fair Value  at
December 31,ValuationRange
(in millions)2013TechniqueUnobservable Input(a)(Weighted Average )(a)
Assets:
Obligations of states,$920Discounted cash flowYield(b)4.94% - 5.86% (5.40%)
municipalities and
political subdivisions
Corporate debt788Discounted cash flowYield(b)0.00% - 14.29% (6.64%)
RMBS14,419Discounted cash flowConstant prepayment rate(c)0.00% - 10.35% (4.97%)
Loss severity(c)42.60% - 79.07% (60.84%)
Constant default rate(c)3.98% - 12.22% (8.10%)
Yield(c)2.54% - 7.40% (4.97%)
Certain CDO/ABS(d)5,414Discounted cash flowConstant prepayment rate(c)5.20% - 10.80% (8.20%)
Loss severity(c)48.60% - 63.40% (56.40%)
Constant default rate(c)3.20% - 16.20% (9.00%)
Yield(c)5.20% - 11.50% (9.40%)
CMBS5,847Discounted cash flowYield(b)0.00% - 14.69% (5.58%)
CDO/ABS - DirectBinomial ExpansionRecovery rate(b)6.00% - 63.00% (25.00%)
Investment Book557Technique (BET) Diversity score(b)5 - 35 (12)
Weighted average life(b)1.07 - 9.47 years (4.86 years)
Liabilities:
Policyholder contract
deposits312Discounted cash flowEquity implied volatility(b)6.00% - 39.00%
Base lapse rate(b)1.00% - 40.00%
Dynamic lapse rate(b)0.20% - 60.00%
Mortality rate(b)0.50% - 40.00%
Utilization rate(b)0.50% - 25.00%
Total derivative
liabilities, net996BETRecovery rate(b)5.00% - 34.00% (17.00%)
Diversity score(b)9 - 32 (13)
Weighted average life(b)4.50 - 9.47 years (5.63 years)

(a) The unobservable inputs and ranges for the constant prepayment rate, loss severity and constant default rate relate to each of the individual underlying mortgage loans that comprise the entire portfolio of securities in the RMBS and CDO securitization vehicles and not necessarily to the securitization vehicle bonds (tranches) purchased by us. The ranges of these inputs do not directly correlate to changes in the fair values of the tranches purchased by us because there are other factors relevant to the fair values of specific tranches owned by us including, but not limited to, purchase price, position in the waterfall, senior versus subordinated position and attachment points.

(b) Represents discount rates, estimates and assumptions that we believe would be used by market participants when valuing these assets and liabilities.

(c) Information received from third-party valuation service providers.
Investments in Certain Entities Carried at Fair Value Using Net Asset Value per Share
December 31, 2014December 31, 2013
Fair Value Using Net Asset Value Per Share (or its equivalent)Fair Value Using Net Asset Value Per Share (or its equivalent)
UnfundedUnfunded
(in millions)Investment Category IncludesCommitmentsCommitments
Investment Category
Private equity funds:
Leveraged buyoutDebt and/or equity investments made as part of a transaction in which assets of mature companies are acquired from the current shareholders, typically with the use of financial leverage$2,275$450$2,544$578
Real Estate / InfrastructureInvestments in real estate properties and infrastructure positions, including power plants and other energy generating facilities38422734686
Venture capitalEarly-stage, high-potential, growth companies expected to generate a return through an eventual realization event, such as an initial public offering or sale of the company1212614013
DistressedSecurities of companies that are in default, under bankruptcy protection, or troubled 1644318334
OtherIncludes multi-strategy, mezzanine, and other strategies216234134238
Total private equity funds3,1609803,347949
Hedge funds:
Event-drivenSecurities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations1,109-9762
Long-shortSecurities that the manager believes are undervalued, with corresponding short positions to hedge market risk2,42811,75911
MacroInvestments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions498-612-
DistressedSecurities of companies that are in default, under bankruptcy protection or troubled 731559415
Emerging marketsInvestments in the financial markets of developing countries308-287-
OtherIncludes multi-strategy, relative value, and other strategies125-157-
Total hedge funds5,19964,38528
Total$8,359$986$7,732$977
Gains or losses related to the eligible instruments for which AIG elected the fair value option
Years Ended December 31,Gain (Loss)
(in millions)201420132012
Assets:
Mortgage and other loans receivable$-$3$47
Bond and equity securities2,0991,6672,339
Other securities – ML II interest--246
Other securities – ML III interest--2,888
Retained interest in AIA--2,069
Alternative investments(a)31336036
Other, including Short-term investments101120
Liabilities:
Long-term debt(b)(269)327(681)
Other liabilities(13)(15)(33)
Total gain$2,140$2,353$6,931

(a) Includes certain hedge funds, private equity funds and other investment partnerships.

(b) Includes GIAs, notes, bonds and mortgages payable.
Difference between fair values and aggregate contractual principal amounts, fair value option
December 31, 2014December 31, 2013
OutstandingOutstanding
(in millions)Fair ValuePrincipal AmountDifferenceFair ValuePrincipal AmountDifference
Assets:
Mortgage and other loans receivable$6$4$2$-$-$-
Liabilities:
Long-term debt*$5,466$4,101$1,365$6,747$5,231$1,516

* Includes GIAs, notes, bonds, loans and mortgages payable.

Fair value assets measured on nonrecurring basis and impairment charges
Assets at Fair ValueImpairment Charges
Non-Recurring BasisDecember 31,
(in millions) Level 1 Level 2 Level 3 Total 201420132012
December 31, 2014
Other investments$-$-$790$790$134$112$151
Investments in life settlements--537537201971309
Other assets--1173111
Total$-$-$1,328$1,328$342$1,114$471
December 31, 2013
Other investments$-$-$1,615$1,615
Investments in life settlements--896896
Other assets-114859
Total$-$11$2,559$2,570
Carrying values and estimated fair values of AIG's financial instruments
Estimated Fair ValueCarrying
(in millions)Level 1Level 2Level 3TotalValue
December 31, 2014
Assets:
Mortgage and other loans receivable$-$449$26,157$26,606$24,984
Other invested assets-5932,8823,4754,352
Short-term investments-9,559-9,5599,559
Cash1,758--1,7581,758
Liabilities:
Policyholder contract deposits associated
with investment-type contracts-244119,268119,512106,395
Other liabilities-1,120-1,1201,120
Long-term debt-24,7492,93227,68125,751
December 31, 2013
Assets:
Mortgage and other loans receivable$-$219$21,418$21,637$20,765
Other invested assets-5292,7053,2344,194
Short-term investments-15,304-15,30415,304
Cash2,241--2,2412,241
Liabilities:
Policyholder contract deposits associated
with investment-type contracts-199114,361114,560105,093
Other liabilities-4,86914,8704,869
Long-term debt-36,2392,39438,63334,946