VARIABLE INTEREST ENTITIES

9 Months Ended

Sep. 30, 2019

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES

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, related 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.

The primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the entity’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:

		Real Estate and				Affordable
		Investment		Securitization		Housing
(in millions)		Entities(d)		Vehicles(e)		Partnerships		Other		Total
September 30, 2019
Assets:
Bonds available for sale	$	211	$	7,217	$	-	$	-	$	7,428
Other bond securities		-		3,641		-		-		3,641
Mortgage and other loans receivable		-		3,520		-		-		3,520
Other invested assets		5,774		-		3,518		33		9,325
Other(a)		444		1,934		498		49		2,925
Total assets(b)	$	6,429	$	16,312	$	4,016	$	82	$	26,839
Liabilities:
Long-term debt	$	3,194	$	3,720	$	2,121	$	4	$	9,039
Other(c)		400		156		184		23		763
Total liabilities	$	3,594	$	3,876	$	2,305	$	27	$	9,802
December 31, 2018
Assets:
Bonds available for sale	$	-	$	7,662	$	-	$	-	$	7,662
Other bond securities		-		3,923		-		2		3,925
Mortgage and other loans receivable		-		3,693		-		-		3,693
Other invested assets		5,212		-		3,142		24		8,378
Other(a)		580		1,581		394		70		2,625
Total assets(b)	$	5,792	$	16,859	$	3,536	$	96	$	26,283
Liabilities:
Long-term debt	$	2,577	$	3,154	$	1,834	$	4	$	7,569
Other(c)		227		165		159		24		575
Total liabilities	$	2,804	$	3,319	$	1,993	$	28	$	8,144

(a) Comprised primarily of Short-term investments and Other assets at September 30, 2019 and December 31, 2018.

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

(c) Comprised primarily of Other liabilities at September 30, 2019 and December 31, 2018.

(d) At September 30, 2019 and December 31, 2018, off-balance sheet exposure primarily consisting of commitments to real estate and investment entities was $2.7 billion and $1.4 billion, respectively.

(e) At September 30, 2019 and December 31, 2018, $15.5 billion and $16.0 billion, respectively, of the total assets of consolidated securitization vehicles were owed to AIG Parent or its subsidiaries.

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(b)		Sheet			Total
September 30, 2019
Real estate and investment entities(a)	$	278,064	$	6,537	$	3,553		$	10,090
Affordable housing partnerships		3,358		462		-			462
Other		5,387		326		-	(c)		326
Total	$	286,809	$	7,325	$	3,553		$	10,878
December 31, 2018
Real estate and investment entities(a)	$	309,598	$	6,820	$	2,501		$	9,321
Affordable housing partnerships		4,116		607		-			607
Other		2,813		284		1,222	(c)		1,506
Total	$	316,527	$	7,711	$	3,723		$	11,434

(a) Comprised primarily of hedge funds and private equity funds.

(b) At September 30, 2019 and December 31, 2018, $7.0 billion and $7.4 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.

(c) These amounts represent our estimate of the maximum exposure to loss under certain insurance policies issued to VIEs if a hypothetical loss occurred to the extent of the full amount of the insured value. Our insurance policies cover defined risks and our estimate of liability is included in our insurance reserves on the balance sheet.

For additional information on VIEs see Note 10 to the Consolidated Financial Statements in the 2018 Annual Report.