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DERIVATIVES AND HEDGE ACCOUNTING (Tables)
 9 Months Ended
Sep. 30, 2016
DERIVATIVES AND HEDGE ACCOUNTING  
Notional amounts and fair values of derivative instruments
September 30, 2016December 31, 2015
Gross Derivative AssetsGross Derivative LiabilitiesGross Derivative AssetsGross Derivative Liabilities
NotionalFairNotionalFairNotionalFairNotionalFair
(in millions)AmountValueAmountValueAmountValueAmountValue
Derivatives designated as
hedging instruments:(a)
Interest rate contracts$355$2$476$3$301$1$725$2
Foreign exchange contracts4,6863921,795672,90320791456
Equity contracts1139----12123
Derivatives not designated
as hedging instruments:(a)
Interest rate contracts56,8724,28742,0013,71645,8463,16165,7332,197
Foreign exchange contracts10,5747538,1491,3439,4725598,9001,148
Equity contracts12,9943138,36926,6561775,02845
Credit contracts(b)42911347431,289508
Other contracts(c)37,9372219211237,5862320369
Total derivatives, gross$123,535$5,780$61,893$5,590$102,768$4,131$82,913$4,048
Counterparty netting(d)(2,289)(2,289)(1,268)(1,268)
Cash collateral(e)(1,358)(482)(1,554)(760)
Total derivatives on condensed
consolidated balance sheets(f)$2,133$2,819$1,309$2,020

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

(b) As of September 30, 2016 and December 31, 2015, included CDSs on super senior multi-sector CDOs with a net notional amount of $0.8 billion and $1.1 billion (fair value liability of $329 million and $483 million), respectively. The expected weighted average maturity as of September 30, 2016 is six years. Because of long-term maturities of the 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 September 30, 2016 and December 31, 2015, there were no super senior corporate debt/CLOs remaining.

(c) Consists primarily of stable value wraps and contracts with multiple underlying exposures.

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

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

(f) Freestanding derivatives only, excludes Embedded derivatives. Derivative instrument assets and liabilities are recorded in Other Assets and Liabilities, respectively. Fair value of assets related to bifurcated Embedded derivatives was $0 at both September 30, 2016 and December 31, 2015. Fair value of liabilities related to bifurcated Embedded derivatives was $4.1 billion and $2.3 billion, respectively, at September 30, 2016 and December 31, 2015. A bifurcated Embedded derivative is generally presented with the host contract in the Condensed Consolidated Balance Sheets. Embedded derivatives are primarily related to guarantee features in variable annuity products, which include equity and interest rate components.

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:
HedgingHedgedHedgeExcluded
(in millions)Derivatives(a)ItemsIneffectivenessComponentsOther(b)
Three Months Ended September 30, 2016
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-----
Foreign exchange contracts:
Realized capital gains/(losses)(10)(34)-(44)-
Interest credited to policyholder
account balances-----
Other income-3--3
Gain/(Loss) on extinguishment of debt-----
Equity contracts:
Realized capital gains/(losses)8(9)-(1)-
Three Months Ended September 30, 2015
Interest rate contracts:
Realized capital gains/(losses)$1$(1)$-$-$-
Interest credited to policyholder
account balances-----
Other income-2--2
Gain/(Loss) on extinguishment of debt-1--1
Foreign exchange contracts:
Realized capital gains/(losses)81(67)-14-
Interest credited to policyholder
account balances-----
Other income-4--4
Gain/(Loss) on extinguishment of debt-----
Equity contracts:
Realized capital gains/(losses)(4)3-(1)-

Nine Months Ended September 30, 2016
Interest rate contracts:
Realized capital gains/(losses)$-$(6)$-$-$(6)
Interest credited to policyholder
account balances-----
Other income-10--10
Gain/(Loss) on extinguishment of debt-----
Foreign exchange contracts:
Realized capital gains/(losses)413(443)-(30)-
Interest credited to policyholder
account balances-----
Other income-15--15
Gain/(Loss) on extinguishment of debt-----
Equity contracts:
Realized capital gains/(losses)28(28)---
Nine Months Ended September 30, 2015
Interest rate contracts:
Realized capital gains/(losses)$1$(1)$-$-$-
Interest credited to policyholder
account balances-----
Other income-7--7
Gain/(Loss) on extinguishment of debt-14--14
Foreign exchange contracts:
Realized capital gains/(losses)152(123)-272
Interest credited to policyholder
account balances-(1)--(1)
Other income-14--14
Gain/(Loss) on extinguishment of debt-17--17
Equity contracts:
Realized capital gains/(losses)(23)21-(2)-

(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) Recognized in Earnings
Three Months EndedNine Months Ended
September 30,September 30,
(in millions)2016201520162015
By Derivative Type:
Interest rate contracts$91$470$1,464$398
Foreign exchange contracts4951203321
Equity contracts(317)229(589)108
Commodity contracts---(1)
Credit contracts361170171
Other contracts22715860
Embedded derivatives30(816)(1,255)(143)
Total$(89)$16$(49)$914
By Classification:
Policy fees$20$20$60$59
Net investment income261420
Net realized capital gains (losses)(181)20(93)496
Other income (losses)69(36)(43)334
Policyholder benefits and claims incurred16135
Total$(89)$16$(49)$914