DERIVATIVES AND HEDGE ACCOUNTING (Tables)

3 Months Ended

Mar. 31, 2015

DERIVATIVES AND HEDGE ACCOUNTING

Notional amounts and fair values of derivative instruments

	March 31, 2015								December 31, 2014
	Gross Derivative Assets				Gross Derivative Liabilities				Gross Derivative Assets				Gross Derivative Liabilities
		Notional		Fair		Notional		Fair		Notional		Fair		Notional		Fair
(in millions)		Amount		Value(a)		Amount		Value(a)		Amount		Value(a)		Amount		Value(a)
Derivatives designated as
hedging instruments:
Interest rate contracts	$	155	$	2	$	25	$	2	$	155	$	-	$	25	$	2
Foreign exchange contracts		1,201		107		1,086		99		611		25		1,794		239
Equity contracts		34		2		92		14		7		1		104		13
Derivatives not designated
as hedging instruments:
Interest rate contracts		77,540		4,819		58,358		4,201		65,070		3,743		45,251		3,183
Foreign exchange contracts		11,847		864		10,426		1,354		13,667		815		8,516		1,251
Equity contracts(b)		7,470		182		42,928		1,926		7,565		206		42,387		1,615
Commodity contracts		13		-		12		6		15		-		11		6
Credit contracts		5		4		1,438		795		5		4		5,288		982
Other contracts(c)		36,221		29		490		88		36,155		31		538		90
Total derivatives not
designated as hedging
instruments		133,096		5,898		113,652		8,370		122,477		4,799		101,991		7,127
Total derivatives, gross	$	134,486	$	6,009	$	114,855	$	8,485	$	123,250	$	4,825	$	103,914	$	7,381

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

(b) Notional amount of derivative assets and fair value of derivative assets were zero at both March 31,2015 and December 31,2014, related to bifurcated embedded derivatives. Notional amount of derivative liabilities and fair value of derivative liabilities include $39.7 billion and $1.9 billion, respectively, at March 31,2015, and $39.3 billion and $1.5 billion, respectively, at December 31,2014, related to bifurcated embedded derivatives. A bifurcated embedded derivative is generally presented with the host contract in the Condensed Consolidated Balance Sheets.

(c)Consists primarily of contracts with multiple underlying exposures.

Fair values of derivative assets and liabilities in the Condensed Consolidated Balance Sheets

	March 31, 2015								December 31, 2014
	Derivative Assets				Derivative Liabilities				Derivative Assets				Derivative Liabilities
		Notional		Fair		Notional		Fair		Notional		Fair		Notional		Fair
(in millions)		Amount		Value		Amount		Value		Amount		Value		Amount		Value
GCM derivatives:
AIG Financial Products	$	21,971	$	2,599	$	22,693	$	3,380	$	23,153	$	2,445	$	27,719	$	3,019
AIG Markets, Inc. (AIG Markets)		67,667		2,984		43,611		2,513		55,005		1,935		29,251		2,136
Total GCM derivatives(a)		89,638		5,583		66,304		5,893		78,158		4,380		56,970		5,155
Non-GCM derivatives(b)		44,848		426		48,551		2,592		45,092		445		46,944		2,226
Total derivatives, gross	$	134,486		6,009	$	114,855		8,485	$	123,250		4,825	$	103,914		7,381
Counterparty netting(c)				(2,476)				(2,476)				(2,102)				(2,102)
Cash collateral(d)				(1,912)				(1,460)				(1,119)				(1,429)
Total derivatives, net				1,621				4,549				1,604				3,850
Less: Bifurcated embedded derivatives				-				1,898				-				1,577
Total derivatives on condensed
consolidated balance sheets			$	1,621			$	2,651			$	1,604			$	2,273

(a) As of March 31,2015 and December 31,2014, includes super senior multi-sector CDOs with a net notional amount of $1.2 billion and $2.6 billion (fair value liability of $554 million and $947 million), respectively. The expected weighted average maturity as of March 31,2015 is six years. Because of long-term maturities of the credit default swaps (CDSs) in the portfolio, we are unable to make reasonable estimates of the periods during which any payments would be made. However, the net notional amount represents the maximum exposure to loss on the portfolio. As of March 31,2015, there were no super senior corporate debt/CLOs remaining. As of December 31,2014, includes super senior corporate debt/CLOs with a net notional amount of $2.5 billion (fair value liability of $7 million).

(b) Represents derivatives used to hedge the interest rate, foreign currency and equity risk associated with derivatives embedded in insurance contracts and stable value wraps. Assets and liabilities include bifurcated embedded derivatives which are recorded in Policyholder contract deposits.

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

(d) Represents cash collateral posted and received that is eligible for netting.

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:				Including Gains/(Losses) Attributable to:
	Hedging		Hedged		Hedge		Excluded
(in millions)	Derivatives(a)		Items		Ineffectiveness		Components		Other(b)
Three Months Ended March 31, 2015
Interest rate contracts:
Realized capital gains/(losses)	$	1	$	(1)	$	-	$	-	$	-
Interest credited to policyholder
account balances		-		-		-		-		-
Other income		-		3		-		-		3
Gain/(Loss) on extinguishment of debt		-		13		-		-		13
Foreign exchange contracts:
Realized capital gains/(losses)		132		(128)		-		1		3
Interest credited to policyholder
account balances		-		(1)		-		-		(1)
Other income		-		6		-		-		6
Gain/(Loss) on extinguishment of debt		-		16		-		-		16
Equity contracts:
Realized capital gains/(losses)		(6)		5		-		(1)		-
Three Months Ended March 31, 2014
Interest rate contracts:
Realized capital gains/(losses)	$	1	$	(2)	$	-	$	-	$	(1)
Interest credited to policyholder
account balances		-		(1)		-		-		(1)
Other income		-		18		-		-		18
Gain/(Loss) on extinguishment of debt		-		50		-		-		50
Foreign exchange contracts:
Realized capital gains/(losses)		24		(32)		-		(8)		-
Interest credited to policyholder
account balances		-		-		-		-		-
Other income		-		-		-		-		-
Gain/(Loss) on extinguishment of debt		-		-		-		-		-
Equity contracts
Realized capital gains/(losses)		1		(1)		-		-		-

(a) The amounts presented do not include the periodic net coupon settlements of the derivative contract or the coupon income (expense) related to the hedged item.

(b) Represents accretion/amortization of opening fair value of the hedged item at inception of hedge relationship, amortization of basis adjustment on hedged item following the discontinuation of hedge accounting, and the release of debt basis adjustment following the repurchase of issued debt that was part of previously-discontinued fair value hedge relationship.

Effect of AIG's derivative instruments not designated as hedging instruments in the Consolidated Statements of Income

	Gains (Losses)
Three Months Ended March 31,	Recognized in Earnings
(in millions)		2015		2014
By Derivative Type:
Interest rate contracts(a)	$	361	$	139
Foreign exchange contracts		322		(14)
Equity contracts(b)		(268)		(428)
Commodity contracts		(1)		1
Credit contracts		147		80
Other contracts		23		15
Total	$	584	$	(207)
By Classification:
Policy fees	$	19	$	15
Net investment income		27		(1)
Net realized capital gains (losses)		171		(275)
Other income		362		49
Policyholder benefits and claims incurred		5		5
Total	$	584	$	(207)

(a) Includes cross currency swaps.

(b) Includes embedded derivative losses of $178 million and $396 million for the three month periods ended March 31,2015 and 2014, respectively.