INVESTMENTS (Tables)

9 Months Ended

Sep. 30, 2016

INVESTMENTS

The amortized cost or cost and fair value of AIG's available for sale securities and other invested assets carried at fair value

										Other-Than-
		Amortized		Gross		Gross				Temporary
		Cost or		Unrealized		Unrealized		Fair		Impairments
(in millions)		Cost		Gains		Losses		Value		in AOCI(a)
September 30, 2016
Bonds available for sale:
U.S. government and government sponsored entities	$	1,974	$	249	$	-	$	2,223	$	-
Obligations of states, municipalities and political subdivisions		24,468		2,139		(29)		26,578		-
Non-U.S. governments		18,515		2,297		(106)		20,706		-
Corporate debt		130,290		11,709		(795)		141,204		(23)
Mortgage-backed, asset-backed and collateralized:
RMBS		35,178		2,963		(326)		37,815		1,204
CMBS		14,244		869		(40)		15,073		54
CDO/ABS		16,746		411		(107)		17,050		39
Total mortgage-backed, asset-backed and collateralized		66,168		4,243		(473)		69,938		1,297
Total bonds available for sale(b)		241,415		20,637		(1,403)		260,649		1,274
Equity securities available for sale:
Common stock		894		356		(18)		1,232		-
Preferred stock		14		4		-		18		-
Mutual funds		259		36		(1)		294		-
Total equity securities available for sale		1,167		396		(19)		1,544		-
Total	$	242,582	$	21,033	$	(1,422)	$	262,193	$	1,274
December 31, 2015
Bonds available for sale:
U.S. government and government sponsored entities	$	1,698	$	155	$	(9)	$	1,844	$	-
Obligations of states, municipalities and political subdivisions		26,003		1,424		(104)		27,323		19
Non-U.S. governments		17,752		805		(362)		18,195		-
Corporate debt		133,513		6,462		(3,987)		135,988		(87)
Mortgage-backed, asset-backed and collateralized:
RMBS		33,878		2,760		(411)		36,227		1,326
CMBS		13,139		561		(129)		13,571		185
CDO/ABS		14,985		360		(248)		15,097		39
Total mortgage-backed, asset-backed and collateralized		62,002		3,681		(788)		64,895		1,550
Total bonds available for sale(b)		240,968		12,527		(5,250)		248,245		1,482
Equity securities available for sale:
Common stock		913		1,504		(16)		2,401		-
Preferred stock		19		3		-		22		-
Mutual funds		447		53		(8)		492		-
Total equity securities available for sale		1,379		1,560		(24)		2,915		-
Total	$	242,347	$	14,087	$	(5,274)	$	251,160	$	1,482

(a) Represents the amount of other-than-temporary impairments recognized in Accumulated other comprehensive income. Amount includes unrealized gains and losses on impaired securities relating to changes in the fair value of such securities subsequent to the impairment measurement date.

(b) At September 30,2016 and December 31,2015, bonds available for sale held by us that were below investment grade or not rated totaled $35.6 billion and $34.9 billion, respectively.

The fair value and gross unrealized losses on AIG's available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position

	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
September 30, 2016
Bonds available for sale:
U.S. government and government sponsored entities	$	18	$	-	$	-	$	-	$	18	$	-
Obligations of states, municipalities and political
subdivisions		967		9		245		20		1,212		29
Non-U.S. governments		984		34		581		72		1,565		106
Corporate debt		6,730		214		6,346		581		13,076		795
RMBS		3,962		70		4,341		256		8,303		326
CMBS		1,044		25		368		15		1,412		40
CDO/ABS		2,906		44		2,571		63		5,477		107
Total bonds available for sale		16,611		396		14,452		1,007		31,063		1,403
Equity securities available for sale:
Common stock		235		18		-		-		235		18
Mutual funds		5		1		-		-		5		1
Total equity securities available for sale		240		19		-		-		240		19
Total	$	16,851	$	415	$	14,452	$	1,007	$	31,303	$	1,422
December 31, 2015
Bonds available for sale:
U.S. government and government sponsored entities	$	483	$	9	$	1	$	-	$	484	$	9
Obligations of states, municipalities and political
subdivisions		2,382		87		268		17		2,650		104
Non-U.S. governments		4,327		203		832		159		5,159		362
Corporate debt		41,317		2,514		5,428		1,473		46,745		3,987
RMBS		7,215		133		4,318		278		11,533		411
CMBS		4,138		108		573		21		4,711		129
CDO/ABS		7,064		104		2,175		144		9,239		248
Total bonds available for sale		66,926		3,158		13,595		2,092		80,521		5,250
Equity securities available for sale:
Common stock		91		16		-		-		91		16
Mutual funds		200		8		-		-		200		8
Total equity securities available for sale		291		24		-		-		291		24
Total	$	67,217	$	3,182	$	13,595	$	2,092	$	80,812	$	5,274

The amortized cost and fair value of fixed maturity securities available for sale by contractual maturity

	Total Fixed Maturity Securities				Fixed Maturity Securities in a Loss
September 30, 2016	Available for Sale				Position Available for Sale
(in millions)		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	8,321	$	8,504	$	695	$	680
Due after one year through five years		51,382		54,984		3,364		3,197
Due after five years through ten years		46,208		49,119		4,839		4,528
Due after ten years		69,336		78,104		7,903		7,466
Mortgage-backed, asset-backed and collateralized		66,168		69,938		15,665		15,192
Total	$	241,415	$	260,649	$	32,466	$	31,063
December 31, 2015
Due in one year or less	$	9,176	$	9,277	$	1,122	$	1,103
Due after one year through five years		47,230		49,196		9,847		9,494
Due after five years through ten years		54,120		54,459		22,296		20,686
Due after ten years		68,440		70,418		26,235		23,755
Mortgage-backed, asset-backed and collateralized		62,002		64,895		26,271		25,483
Total	$	240,968	$	248,245	$	85,771	$	80,521

The gross realized gains and gross realized losses from sales of AIG's available for sale securities

	Three Months Ended September 30,								Nine Months Ended September 30,
		2016				2015			2016					2015
		Gross		Gross		Gross		Gross		Gross		Gross		Gross		Gross
	Realized		Realized		Realized		Realized		Realized		Realized		Realized			Realized
(in millions)		Gains		Losses		Gains		Losses		Gains		Losses		Gains		Losses
Fixed maturity securities	$	189	$	54	$	96	$	112	$	593	$	696		$	439	$	289
Equity securities		54		1		24		8		1,066		15			544		16
Total	$	243	$	55	$	120	$	120	$	1,659	$	711		$	983	$	305

The fair value of AIG's other securities

		September 30, 2016				December 31, 2015
		Fair	Percent			Fair	Percent
(in millions)		Value	of Total			Value	of Total
Fixed maturity securities:
U.S. government and government sponsored entities	$	3,347	22	%	$	3,369	19	%
Obligations of states, municipalities and political subdivisions		-	-			75	-
Non-U.S. governments		54	-			50	-
Corporate debt		1,974	13			2,035	12
Mortgage-backed, asset-backed and collateralized:
RMBS		1,847	12			2,230	13
CMBS		610	4			750	4
CDO/ABS and other collateralized*		6,940	46			8,273	47
Total mortgage-backed, asset-backed and collateralized		9,397	62			11,253	64
Total fixed maturity securities		14,772	97			16,782	95
Equity securities		498	3			921	5
Total	$	15,270	100	%	$	17,703	100	%

* Includes $463 million and $712million of U.S. Government agency-backed ABS at September 30,2016 and December 31,2015, respectively.

Components of other invested assets

		September 30,		December 31,
(in millions)		2016		2015
Alternative investments(a) (b)	$	14,227	$	18,150
Investment real estate(c)		6,494		6,579
Aircraft asset investments(d)		356		477
Investments in life settlements		3,577		3,606
All other investments		1,093		982
Total	$	25,747	$	29,794

(a) At September 30,2016, includes hedge funds of $7.8 billion, private equity funds of $5.8 billion, and affordable housing partnerships of $618million. At December 31, 2015, includes hedge funds of $10.9 billion, private equity funds of $6.5 billion, and affordable housing partnerships of $701million.

(b) Approximately 56 percent of our hedge fund portfolio is available for redemption in 2016, an additional 27 percent and 10 percent will be available in 2017 and 2018, respectively.

(c) Net of accumulated depreciation of $554million and $668 million in September 30,2016 and December 31, 2015, respectively.

(d) Consists of investments in aircraft equipment held in consolidated trusts.

Components of net investment income

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2016		2015		2016		2015
Fixed maturity securities, including short-term investments	$	2,935	$	2,794	$	8,863	$	8,477
Equity securities		25		(5)		(19)		76
Interest on mortgage and other loans		379		360		1,144		1,046
Alternative investments*		365		(18)		309		1,226
Real estate		37		66		125		116
Other investments		157		142		395		331
Total investment income		3,898		3,339		10,817		11,272
Investment expenses		115		133		338		402
Net investment income	$	3,783	$	3,206	$	10,479	$	10,870

* Beginning in the first quarter of 2016, the presentation of income on alternative investments has been refined to include only income from hedge funds, private equity funds and affordable housing partnerships. Prior period disclosures have been reclassified to conform to this presentation.Hedge funds for which we elected the fair value option are recorded as of the balance sheet date. Other hedge funds are generally reported on a one-month lag, while privateequity funds are generally reported on a one-quarter lag.

Components of net realized capital gains (losses)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2016		2015		2016		2015
Sales of fixed maturity securities	$	135	$	(16)	$	(103)	$	150
Sales of equity securities		53		16		1,051		528
Other-than-temporary impairments:
Severity		(10)		(10)		(15)		(12)
Change in intent		(2)		(81)		(35)		(193)
Foreign currency declines		(7)		(5)		(14)		(37)
Issuer-specific credit events		(77)		(176)		(303)		(314)
Adverse projected cash flows		(6)		(1)		(47)		(9)
Provision for loan losses		8		32		8		43
Foreign exchange transactions		(639)		(16)		(1,197)		304
Derivatives and hedge accounting		(226)		13		(129)		509
Impairments on investments in life settlements		(80)		(58)		(329)		(200)
Other*		86		(40)		284		356
Net realized capital gains (losses)	$	(765)	$	(342)	$	(829)	$	1,125

* Includes $107 million of realized gains due to a purchase price adjustment on the sale of Class B shares of Prudential Financial, Inc. for the nine months ended September 30,2016 and $357million of realized gains due to the sale of common shares of SpringLeaf Holdings, $428million of realized gains due to the sale of Class B shares of Prudential Financial, Inc. and $463million of realized losses due to the sale of ordinary shares of AerCap for the nine months ended September 30,2015.

Schedule of increase (decrease) in unrealized appreciation (depreciation) of available for sale securities and other investments

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2016		2015		2016		2015
Increase (decrease) in unrealized appreciation (depreciation) of investments:
Fixed maturity securities	$	1,595	$	(1,180)	$	11,957	$	(5,583)
Equity securities		(19)		(384)		(1,159)		(479)
Other investments		(29)		(85)		(243)		(625)
Total Increase (decrease) in unrealized appreciation (depreciation) of investments*	$	1,547	$	(1,649)	$	10,555	$	(6,687)

* Excludes net unrealized gains attributable to businesses held for sale.

Credit impairments recognized in earnings for available for sale fixed maturity securities

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2016		2015		2016		2015
Balance, beginning of period	$	1,298	$	2,238	$	1,747	$	2,659
Increases due to:
Credit impairments on new securities subject to impairment losses		23		51		146		101
Additional credit impairments on previously impaired securities		37		37		166		84
Reductions due to:
Credit impaired securities fully disposed of for which there was no
prior intent or requirement to sell		(39)		(63)		(282)		(213)
Credit impaired securities for which there is a current intent or
anticipated requirement to sell		-		(1)		-		(1)
Accretion on securities previously impaired due to credit*		(187)		(197)		(645)		(565)
Impairments on securities reclassified to Assets held for sale		(2)		-		(2)		-
Balance, end of period	$	1,130	$	2,065	$	1,130	$	2,065

* Represents both accretion recognized due to changes in cash flows expected to be collected over the remaining expected term of the credit impaired securities and the accretion due to the passage of time.

Schedule of Purchased Credit Impaired (PCI) Securities, at acquisition date

(in millions)	At Date of Acquisition
Contractually required payments (principal and interest)	$	35,665
Cash flows expected to be collected*		29,091
Recorded investment in acquired securities		19,536

*Represents undiscounted expected cash flows, including both principal and interest.

Schedule of Purchased Credit Impaired (PCI) Securities, at reporting date

(in millions)	September 30, 2016		December 31, 2015
Outstanding principal balance	$	17,163	$	16,871
Amortized cost		12,364		12,303
Fair value		13,203		13,164

Activity for accretable yield on Purchased Credit Impaired (PCI) Securities

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2016		2015		2016		2015
Balance, beginning of period	$	7,043	$	6,833	$	6,846	$	6,865
Newly purchased PCI securities		177		136		628		551
Disposals		-		-		-		(13)
Accretion		(214)		(220)		(637)		(661)
Effect of changes in interest rate indices		(196)		4		(435)		(140)
Net reclassification from (to) non-accretable difference,
including effects of prepayments		158		180		566		331
Balance, end of period	$	6,968	$	6,933	$	6,968	$	6,933

Schedule of fair value of securities pledged to counterparties under secured financing transactions

(in millions)		September 30, 2016		December 31, 2015
Fixed maturity securities available for sale	$	2,177	$	1,145
Other bond securities, at fair value	$	1,967	$	1,740

Transfer of Certain Financial Assets Accounted for as Secured Borrowings

	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
September 30, 2016
Other bond securities:
Non-U.S. governments	$	-	$	-	$	54	$	-	$	-	$	54
Corporate debt		-		365		1,111		437		-		1,913
Total	$	-	$	365	$	1,165	$	437	$	-	$	1,967
December 31, 2015
Bonds available for sale:
Non-U.S. governments	$	-	$	50	$	-	$	-	$	-	$	50
Other bond securities:
Non-U.S. governments		-		-		-		49		-		49
Corporate debt		-		33		332		1,326		-		1,691
Total	$	-	$	83	$	332	$	1,375	$	-	$	1,790

	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
September 30, 2016
Bonds available for sale:
Non-U.S. governments	$	-	$	-	$	113	$	-	$	-	$	113
Corporate debt		-		711		1,190		102		-		2,003
CMBS		-		-		-		61		-		61
Total	$	-	$	711	$	1,303	$	163	$	-	$	2,177
December 31, 2015
Bonds available for sale:
Non-U.S. governments	$	-	$	-	$	57	$	-	$	-	$	57
Corporate debt		-		-		914		-		-		914
RMBS		-		-		-		124		-		124
Total	$	-	$	-	$	971	$	124	$	-	$	1,095

Schedule of fair value of securities pledged to the entity under reverse repurchase agreements

(in millions)		September 30, 2016		December 31, 2015
Securities collateral pledged to us	$	1,590	$	1,742