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Fair Value Measurements
 12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurements 4. Fair Value MeasurementsFAIR VALUE MEASUREMENTS ON A RECURRING BASIS
We carry certain of our financial instruments at fair value. We define the fair value of a financial instrument as the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are responsible for the determination of the value of the investments carried at fair value and the supporting methodologies and assumptions.
The degree of judgment used in measuring the fair value of financial instruments generally inversely correlates with the level of observable valuation inputs. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Conversely, financial instruments for which no quoted prices are available have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment. Pricing observability is affected by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction, liquidity and general market conditions.
Fair Value Hierarchy
Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs:
•Level 1: Fair value measurements based on quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.
•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions about the inputs a hypothetical market participant would use to value that asset or liability.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The following is a description of the valuation methodologies used for instruments carried at fair value. These methodologies are applied to assets and liabilities across the levels discussed above, and the observability of the inputs used determines the appropriate level in the fair value hierarchy for the respective asset or liability.
VALUATION METHODOLOGIES OF FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
Incorporation of Credit Risk in Fair Value Measurements
•Our Own Credit Risk. Fair value measurements for certain liabilities incorporate our own credit risk by determining the explicit cost for each counterparty to protect against its net credit exposure to us at the balance sheet date by reference to observable AIG credit default swaps (CDS) or cash bond spreads. We calculate the effect of credit spread changes using discounted cash flow techniques that incorporate current market interest rates. A derivative counterparty’s net credit exposure to us is determined based on master netting agreements, when applicable, which take into consideration all derivative positions with us, as well as collateral we post with the counterparty at the balance sheet date. For a description of how we incorporate our own credit risk in the valuation of embedded derivatives related to certain annuity and life insurance products, see – Embedded Derivatives within Policyholder Contract Deposits below.
•Counterparty Credit Risk. Fair value measurements for freestanding derivatives incorporate counterparty credit by determining the explicit cost for us to protect against our net credit exposure to each counterparty at the balance sheet date by reference to observable counterparty CDS spreads, when available. When not available, other directly or indirectly observable credit spreads will be used to derive the best estimates of the counterparty spreads. Our net credit exposure to a counterparty is determined based on master netting agreements, which take into consideration all derivative positions with the counterparty, as well as collateral posted by the counterparty at the balance sheet date.
Fair values for fixed maturity securities based on observable market prices for identical or similar instruments implicitly incorporate counterparty credit risk. Fair values for fixed maturity securities based on internal models incorporate counterparty credit risk by using discount rates that take into consideration cash issuance spreads for similar instruments or other observable information.
For fair values measured based on internal models, the cost of credit protection is determined under a discounted present value approach considering the market levels for single name CDS spreads for each specific counterparty, the mid-market value of the net exposure (reflecting the amount of protection required) and the weighted average life of the net exposure. CDS spreads are provided to us by an independent third party. We utilize an interest rate based on the appropriate benchmark curve to derive our discount rates.
While this approach does not explicitly consider all potential future behavior of the derivative transactions or potential future changes in valuation inputs, we believe this approach provides a reasonable estimate of the fair value of the assets and liabilities, including consideration of the impact of non-performance risk.
Fixed Maturity Securities
Whenever available, we obtain quoted prices in active markets for identical assets at the balance sheet date to measure fixed maturity securities at fair value. Market price data is generally obtained from dealer markets.
We employ independent third-party valuation service providers to gather, analyze, and interpret market information to derive fair value estimates for individual investments, based upon market-accepted methodologies and assumptions. The methodologies used by these independent third-party valuation service providers are reviewed and understood by management, through periodic discussion with and information provided by the independent third-party valuation service providers. In addition, as discussed further below, control processes designed to ensure the accuracy of these values are applied to the fair values received from independent third-party valuation service providers.
Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of market-accepted valuation methodologies, which may utilize matrix pricing, financial models, accompanying model inputs and various assumptions, provide a single fair value measurement for individual securities. The inputs used by the valuation service providers include, but are not limited to, market prices from completed transactions for identical securities and transactions for comparable securities, benchmark yields, interest rate yield curves, credit spreads, prepayment rates, default rates, recovery assumptions, currency rates, quoted prices for similar securities and other market-observable information, as applicable. If fair value is determined using financial models, these models generally take into account, among other things, market observable information as of the measurement date as well as the specific attributes of the security being valued, including its term, interest rate, credit rating, industry sector, and when applicable, collateral quality and other security or issuer-specific information. When market transactions or other market observable data is limited, the extent to which judgment is applied in determining fair value is greatly increased.
We have control processes designed to ensure that the fair values received from independent third-party valuation service providers are accurately recorded, that their data inputs and valuation techniques are appropriate and consistently applied and that the assumptions used appear reasonable and consistent with the objective of determining fair value. We assess the reasonableness of individual security values received from independent third-party valuation service providers through various analytical techniques, and have procedures to escalate related questions internally and to the independent third-party valuation service providers for resolution. To assess the degree of pricing consensus among various valuation service providers for specific asset types, we conduct comparisons of prices received from available sources. We use these comparisons to establish a hierarchy for the fair values received
from independent third-party valuation service providers to be used for particular security classes. We also validate prices for selected securities through reviews by members of management who have relevant expertise and who are independent of those charged with executing investing transactions.
When our independent third-party valuation service providers are unable to obtain sufficient market observable information upon which to estimate the fair value for a particular security, fair value is determined either by requesting brokers who are knowledgeable about these securities to provide a price quote, which is generally non-binding, or by employing market accepted valuation models internally or via our third party asset managers. Broker prices may be based on an income approach, which converts expected future cash flows to a single present value amount, with specific consideration of inputs relevant to particular security types. For structured securities, such inputs may include ratings, collateral types, geographic concentrations, underlying loan vintages, loan delinquencies and defaults, loss severity assumptions, prepayments, and weighted average coupons and maturities. When the volume or level of market activity for a security is limited, certain inputs used to determine fair value may not be observable in the market. Broker prices may also be based on a market approach that considers recent transactions involving identical or similar securities. Fair values provided by brokers are subject to similar control processes to those noted above for fair values from independent third-party valuation service providers, including management reviews. For those corporate debt instruments (for example, private placements) that are not traded in active markets or that are subject to transfer restrictions, valuations reflect illiquidity and non-transferability, based on available market evidence. When observable price quotations are not available, fair value is determined based on discounted cash flow models using discount rates based on credit spreads, yields or price levels of comparable securities, adjusted for illiquidity and structure. Fair values determined internally or via our third party asset managers are also subject to management review to ensure that valuation models and related inputs are reasonable.
The methodology above is relevant for all fixed maturity securities including residential mortgage backed securities (RMBS), commercial mortgage backed securities (CMBS), collateralized loan obligations (CLO), other asset‑backed securities (ABS) and fixed maturity securities issued by government sponsored entities and corporate entities.
Equity Securities Traded in Active Markets
Whenever available, we obtain quoted prices in active markets for identical assets at the balance sheet date to measure equity securities at fair value. Market price data is generally obtained from exchange or dealer markets.
Mortgage and Other Loans Receivable
We estimate the fair value of mortgage and other loans receivable that are measured at fair value by using dealer quotations, discounted cash flow analyses and/or internal valuation models. The determination of fair value considers inputs such as interest rate, maturity, the borrower’s creditworthiness, collateral, subordination, guarantees, past-due status, yield curves, credit curves, prepayment rates, market pricing for comparable loans and other relevant factors.
Other Invested Assets
We initially estimate the fair value of investments in certain hedge funds, private equity funds and other investment partnerships by reference to the transaction price. Subsequently, we generally obtain the fair value of these investments from net asset value information provided by the general partner or manager of the investments, the financial statements of which are generally audited annually. We consider observable market data and perform certain control procedures to validate the appropriateness of using the net asset value as a fair value measurement. The fair values of other investments carried at fair value, such as direct private equity holdings, are initially determined based on transaction price and are subsequently estimated based on available evidence such as market transactions in similar instruments, other financing transactions of the issuer and other available financial information for the issuer, with adjustments made to reflect illiquidity as appropriate.
Short-term Investments
For short-term investments that are measured at amortized cost, the carrying amounts of these assets approximate fair values because of the relatively short period of time between origination and expected realization, and their limited exposure to credit risk. Securities purchased under agreements to resell (reverse repurchase agreements) are generally treated as collateralized receivables. We report certain receivables arising from securities purchased under agreements to resell as Short-term investments in the Consolidated Balance Sheets. When these receivables are measured at fair value, we use market-observable interest rates to determine fair value.
Separate Account Assets
Separate account assets are composed primarily of registered and unregistered open-end mutual funds that generally trade daily and are measured at fair value in the manner discussed above for equity securities traded in active markets.
Freestanding Derivatives
Derivative assets and liabilities can be exchange-traded or traded over-the-counter (OTC). We generally value exchange-traded derivatives such as futures and options using quoted prices in active markets for identical derivatives at the balance sheet date.
OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market clearing transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. When models are used, the selection of a particular model to value an OTC derivative depends on the contractual terms of, and specific risks inherent in the instrument, as well as the availability of pricing information in the market. We generally use similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices and rates, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs can generally be corroborated by observable market data by correlation or other means, and model selection does not involve significant management judgment.
For certain OTC derivatives that trade in less liquid markets, where we generally do not have corroborating market evidence to support significant model inputs and cannot verify the model to market transactions, the transaction price may provide the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted so the model value at inception equals the transaction price. We will update valuation inputs in these models only when corroborated by evidence such as similar market transactions, independent third-party valuation service providers and/or broker or dealer quotations, or other empirical market data. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used.
We value our super senior credit default swap portfolio using prices obtained from vendors and/or counterparties. The valuation of the super senior credit derivatives is complex because of the limited availability of market observable information due to the lack of trading and price transparency in certain structured finance markets. Our valuation methodologies for the super senior CDS portfolio have evolved over time in response to market conditions and the availability of market observable information. We have sought to calibrate the methodologies to available market information and to review the assumptions of the methodologies on a regular basis.
Embedded Derivatives within Policyholder Contract Deposits
Certain variable annuity and fixed index annuity and life contracts contain embedded derivatives that we bifurcate from the host contracts and account for separately at fair value, with changes in fair value recognized in earnings. These embedded derivatives are classified within Policyholder contract deposits. We have concluded these contracts contain either (i) a written option that guarantees a minimum accumulation value at maturity, (ii) a written option that guarantees annual withdrawals regardless of underlying market performance for a specific period or for life, or (iii) fixed index written options that meet the criteria of derivatives and must be bifurcated.
The fair value of embedded derivatives contained in certain variable annuity and fixed index annuity and life contracts is measured based on policyholder behavior and capital market assumptions related to projected cash flows over the expected lives of the contracts. These discounted cash flow projections primarily include benefits and related fees assessed, when applicable. In some instances, the projected cash flows from fees may exceed projected cash flows related to benefit payments and therefore, at a point in time, the carrying value of the embedded derivative may be in a net asset position. The projected cash flows incorporate best estimate assumptions for policyholder behavior (including mortality, lapses, withdrawals and benefit utilization), along with an explicit risk margin to reflect a market participant’s estimates of projected cash flows and policyholder behavior. Estimates of future policyholder behavior assumptions are subjective and based primarily on our historical experience.
Because of the dynamic and complex nature of the projected cash flows with respect to embedded derivatives in our variable and certain fixed index annuity contracts, risk neutral valuations are used, which are calibrated to observable interest rate and equity option prices. Estimating the underlying cash flows for these products involves judgments regarding the capital market assumptions related to expected market rates of return, market volatility, credit spreads, correlations of certain market variables, fund performance and discount rates. Additionally, estimating the underlying cash flows for these products also involves judgments regarding policyholder behavior. The portion of fees attributable to the fair value of expected benefit payments are included within the fair value measurement of these embedded derivatives, and related fees are classified in net realized gain/loss as earned, consistent with other changes in the fair value of these embedded policy derivatives. Any portion of the fees not attributed to the embedded derivatives are excluded from the fair value measurement and classified in policy fees as earned.
With respect to embedded derivatives in our fixed index annuity and life contracts, option pricing models are used to estimate fair value, taking into account the capital market assumptions for future equity index growth rates, volatility of the equity index, future interest rates, and our ability to adjust the participation rate and the cap on fixed index credited rates in light of market conditions and policyholder behavior assumptions.
Projected cash flows are discounted using the interest rate swap curve (swap curve), which is commonly viewed as being consistent with the credit spreads for highly‑rated financial institutions (S&P AA-rated or above). A swap curve shows the fixed-rate leg of a non-complex swap against the floating rate (for example, LIBOR) leg of a related tenor. We also incorporate our own risk of non-performance in the valuation of the embedded derivatives associated with variable annuity and fixed index annuity and life contracts. The non-performance risk adjustment (NPA) reflects a market participant’s view of our claims-paying ability by incorporating an additional spread to the swap curve used to discount projected benefit cash flows in the valuation of these embedded derivatives. The non-performance risk adjustment is calculated by constructing forward rates based on a weighted average of observable corporate credit indices to approximate the claims-paying ability rating of our Life and Retirement companies.
Fortitude Re funds withheld payable
The reinsurance transactions between AIG and Fortitude Re were structured as modified coinsurance (modco) and loss portfolio transfer arrangements with funds withheld (funds withheld). As a result of the deconsolidation resulting from the Majority Interest Fortitude Sale, AIG has established a funds withheld payable to Fortitude Re while simultaneously establishing a reinsurance asset representing reserves for the insurance coverage that Fortitude Re has assumed. The funds withheld payable contains an embedded derivative and changes in fair value of the embedded derivative related to the funds withheld payable are recognized in earnings through realized gains (losses). This embedded derivative is considered a total return swap with contractual returns that are attributable to various assets and liabilities associated with these reinsurance agreements.
Long-Term Debt
The fair value of non-structured liabilities is generally determined by using market prices from exchange or dealer markets, when available, or discounting expected cash flows using the appropriate discount rate for the applicable maturity. We determine the fair value of structured liabilities and hybrid financial instruments (where performance is linked to structured interest rates, inflation or currency risks) using the appropriate derivative valuation methodology (described above) given the nature of the embedded risk profile. In addition, adjustments are made to the valuations of both non-structured and structured liabilities to reflect our own creditworthiness based on the methodology described under the caption “Incorporation of Credit Risk in Fair Value Measurements – Our Own Credit Risk” above.
Borrowings under obligations of guaranteed investment agreements (GIAs), which are guaranteed by us, are recorded at fair value using discounted cash flow calculations based on interest rates currently being offered for similar contracts and our current market observable implicit credit spread rates with maturities consistent with those remaining for the contracts being valued. Obligations may be called at various times prior to maturity at the option of the counterparty.
Other Liabilities
Other liabilities measured at fair value include certain securities sold under agreements to repurchase and certain securities sold but not yet purchased. Liabilities arising from securities sold under agreements to repurchase are generally treated as collateralized borrowings. We estimate the fair value of liabilities arising under these agreements by using market-observable interest rates. This methodology considers such factors as the coupon rate, yield curves and other relevant factors. Fair values for securities sold but not yet purchased are based on current market prices.
ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:
December 31, 2022Level 1Level 2Level 3
Counterparty Netting(a)
Cash CollateralTotal
(in millions)
Assets:
Bonds available for sale:
U.S. government and government sponsored entities
$25 $6,594 $— $— $— $6,619 
Obligations of states, municipalities and political subdivisions
— 11,275 824 — — 12,099 
Non-U.S. governments158 13,326 1 — — 13,485 
Corporate debt— 134,992 2,847 — — 137,839 
RMBS— 11,264 7,553 — — 18,817 
CMBS— 13,267 926 — — 14,193 
CLO/ABS— 10,356 12,748 — — 23,104 
Total bonds available for sale
183 201,074 24,899 — — 226,156 
Other bond securities:
U.S. government and government sponsored entities— — — — — — 
Obligations of states, municipalities and political subdivisions— 111 — — — 111 
Non-U.S. governments— 66 — — — 66 
Corporate debt— 1,976 416 — — 2,392 
RMBS— 113 173 — — 286 
CMBS— 303 28 — — 331 
CLO/ABS— 389 910 — — 1,299 
Total other bond securities
— 2,958 1,527 — — 4,485 
Equity securities
518 18 39 — — 575 
Other invested assets(b)
— 145 2,075 — — 2,220 
Derivative assets(c):
Interest rate contracts1 3,410 311 — — 3,722 
Foreign exchange contracts
— 1,844 — — — 1,844 
Equity contracts
11 132 285 — — 428 
Commodity contracts
— 9 — — — 9 
Credit contracts
— — 32 — — 32 
Other contracts— — 14 — — 14 
Counterparty netting and cash collateral
— — — (3,895)(1,640)(5,535)
Total derivative assets
12 5,395 642 (3,895)(1,640)514 
Short-term investments
2,821 2,887 — — — 5,708 
Other assets(c)
— — 107 — — 107 
Separate account assets
81,655 3,198 — — — 84,853 
Total$85,189 $215,675 $29,289 $(3,895)$(1,640)$324,618 
Liabilities:
Policyholder contract deposits$— $41 $7,105 $— $— $7,146 
Derivative liabilities(c):
Interest rate contracts
— 4,838 — — — 4,838 
Foreign exchange contracts
— 1,138 — — — 1,138 
Equity contracts
2 10 14 — — 26 
Credit contracts
— 9 32 — — 41 
Counterparty netting and cash collateral
— — — (3,895)(1,917)(5,812)
Total derivative liabilities
2 5,995 46 (3,895)(1,917)231 
Fortitude Re funds withheld payable
— — (2,235)— — (2,235)
Other liabilities
— — 112 — — 112 
Long-term debt
— 56 — — — 56 
Total$2 $6,092 $5,028 $(3,895)$(1,917)$5,310 
December 31, 2021Level 1Level 2Level 3
Counterparty
 Netting(a)
Cash
Collateral		Total
(in millions)
Assets:
Bonds available for sale:
U.S. government and government sponsored entities
$2,553 $5,641 $— $— $— $8,194 
Obligations of states, municipalities and political subdivisions
— 13,096 1,431 — — 14,527 
Non-U.S. governments9 16,314 7 — — 16,330 
Corporate debt— 172,967 2,641 — — 175,608 
RMBS— 16,909 10,378 — — 27,287 
CMBS— 14,619 1,190 — — 15,809 
CLO/ABS— 8,232 11,215 — — 19,447 
Total bonds available for sale
2,562 247,778 26,862 — — 277,202 
Other bond securities:
U.S. government and government sponsored entities— 1,750 — — — 1,750 
Obligations of states, municipalities and political subdivisions— 97 — — — 97 
Non-U.S. governments— 76 — — — 76 
Corporate debt— 916 134 — — 1,050 
RMBS— 215 196 — — 411 
CMBS— 280 35 — — 315 
CLO/ABS— 247 2,332 — — 2,579 
Total other bond securities
— 3,581 2,697 — — 6,278 
Equity securities
669 64 6 — — 739 
Other invested assets (b)
— 138 1,948 — — 2,086 
Derivative assets(c):
Interest rate contracts— 3,873 — — — 3,873 
Foreign exchange contracts
— 1,188 1 — — 1,189 
Equity contracts
7 224 450 — — 681 
Commodity contracts— 4 — — — 4 
Credit contracts
— — 1 — — 1 
Other contracts— — 13 — — 13 
Counterparty netting and cash collateral
— — — (2,779)(2,139)(4,918)
Total derivative assets
7 5,289 465 (2,779)(2,139)843 
Short-term investments
2,584 1,842 — — — 4,426 
Other assets(c)
— — 114 — — 114 
Separate account assets
105,221 3,890 — — — 109,111 
Total$111,043 $262,582 $32,092 $(2,779)$(2,139)$400,799 
Liabilities:
Policyholder contract deposits$— $54 $9,682 $— $— $9,736 
Derivative liabilities(c):
Interest rate contracts
1 3,632 — — — 3,633 
Foreign exchange contracts
— 721 — — — 721 
Equity contracts
1 46 6 — — 53 
Credit contracts
— 16 31 — — 47 
Counterparty netting and cash collateral
— — — (2,779)(1,089)(3,868)
Total derivative liabilities
2 4,415 37 (2,779)(1,089)586 
Fortitude Re funds withheld payable
— — 5,922 — — 5,922 
Long-term debt
— 1,871 — — — 1,871 
Total$2 $6,340 $15,641 $(2,779)$(1,089)$18,115 
(a)Represents netting of derivative exposures covered by qualifying master netting agreements.
(b)Excludes investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent), which totaled $9.8 billion and $8.4 billion as of December 31, 2022 and 2021, respectively.
(c)Presented as part of Other assets and Other liabilities on the Consolidated Balance Sheets.
CHANGES IN LEVEL 3 RECURRING FAIR VALUE MEASUREMENTS
The following tables present changes during the years ended December 31, 2022 and 2021 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) related to the Level 3 assets and liabilities in the Consolidated Balance Sheets at December 31, 2022 and 2021:
(in millions)Fair Value
Beginning
of Year		Net Realized
and
Unrealized
Gains
(Losses)
Included
in Income		Other
Comprehensive
Income (Loss)		Purchases,
Sales,
Issuances
and
Settlements,
Net		Gross
Transfers
In		Gross
Transfers
Out		OtherFair
Value
End of
Year		Changes in
Unrealized
Gains
(Losses)
Included in
Income on
Instruments
Held at End
of Year		Changes in
Unrealized Gains
(Losses)
Included in Other
Comprehensive
Income (Loss) for
Recurring Level 3
Instruments Held
at End of Year
December 31, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions$1,431 $1 $(533)$(104)$40 $(11)$— $824 $— $(223)
Non-U.S. governments7 1 3 (10)3 (3)— 1 — (1)
Corporate debt2,641 37 (238)(87)1,155 (661)— 2,847 — (217)
RMBS10,378 452 (1,319)(1,511)8 (455)— 7,553 — (504)
CMBS1,190 7 (162)137 102 (348)— 926 — (133)
CLO/ABS11,215 114 (1,658)3,279 2,003 (2,205)— 12,748 — (1,605)
Total bonds available for sale26,862 612 (3,907)1,704 3,311 (3,683)— 24,899 — (2,683)
Other bond securities:
Corporate debt134 (5)— 158 334 (205)— 416 (2)— 
RMBS196 (39)— 16 — — — 173 (38)— 
CMBS35 (6)— (1)— — — 28 (4)— 
CLO/ABS2,332 (233)— (1,182)77 (84)— 910 (156)— 
Total other bond securities2,697 (283)— (1,009)411 (289)— 1,527 (200)— 
Equity securities6 (1)— 27 16 (9)— 39 (1)— 
Other invested assets1,948 338 (22)(26)47 (210)— 2,075 355 — 
Other assets114 — — (7)— — — 107 — — 
Total$31,627 $666 $(3,929)$689 $3,785 $(4,191)$— $28,647 $154 $(2,683)
(in millions)Fair Value
Beginning
of Year		Net
Realized
and
Unrealized
(Gains)
Losses
Included
in Income		Other
Comprehensive
Income (Loss)		Purchases,
Sales,
Issuances
and
Settlements,
Net		Gross
Transfers
In		Gross
Transfers
Out		OtherFair
Value
End of
Year		Changes in
Unrealized
Gains
(Losses)
Included in
Income on
Instruments
Held at End
of Year		Changes in
Unrealized Gains
(Losses)
Included in Other
Comprehensive
Income (Loss) for
Recurring Level 3
Instruments Held
at End of Year
Liabilities:
Policyholder contract deposits$9,682 $(3,602)$— $1,025 $— $— $— $7,105 $3,857 $— 
Derivative liabilities, net:
Interest rate contracts— 9 — (245)(81)6 — (311)71 — 
Foreign exchange contracts(1)— — 1 — — — — (1)— 
Equity contracts(444)487 — (313)— (1)— (271)(246)— 
Credit contracts30 3 — (1)— — (32)— (31)— 
Other contracts(13)(65)— 64 — — — (14)65 — 
Total derivative liabilities, net(a)
(428)434 — (494)(81)5 (32)(596)(142)— 
Fortitude Re funds withheld payable5,922 (7,481)— (676)— — — (2,235)7,729 — 
Other Liabilities— — — 112 — — — 112 — — 
Total$15,176 $(10,649)$— $(33)$(81)$5 $(32)$4,386 $11,444 $— 
(in millions)Fair Value
Beginning
of Year		Net Realized
and
Unrealized
Gains
(Losses)
Included
in Income		Other
Comprehensive
Income (Loss)		Purchases,
Sales,
Issuances
and
Settlements,
Net		Gross
Transfers
In		Gross
Transfers
Out		OtherFair
Value
End of
Year		Changes in
Unrealized
Gains
(Losses)
Included in
Income on
Instruments
Held at End
of Year		Changes in
Unrealized Gains
(Losses)
Included in Other
Comprehensive
Income (Loss) for
Recurring Level 3
Instruments Held
at End of Year
December 31, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions$2,105 $15 $(9)$(358)$— $(260)$(62)$1,431 $— $254 
Non-U.S. governments5 — (1)1 5 (3)— 7 — — 
Corporate debt2,349 (20)(31)188 524 (369)— 2,641 — (141)
RMBS11,694 595 (127)(1,163)8 (629)— 10,378 — 790 
CMBS922 25 (49)414 57 (179)— 1,190 — (55)
CLO/ABS9,814 38 (122)1,588 1,138 (1,241)— 11,215 — 315 
Total bonds available for sale26,889 653 (339)670 1,732 (2,681)(62)26,862 — 1,163 
Other bond securities:
Corporate debt— (1)— 135 — — — 134 (1)— 
RMBS139 3 — 54 — — — 196 (87)— 
CMBS47 (3)— (15)6 — — 35 2 — 
CLO/ABS2,512 28 — (208)— — — 2,332 127 — 
Total other bond securities2,698 27 — (34)6 — — 2,697 41 — 
Equity securities51 11 1 (123)77 (11)— 6 3 — 
Other invested assets1,827 641 (14)(570)64 — — 1,948 617 — 
Other assets113 — — 1 — — — 114 — — 
Total$31,578 $1,332 $(352)$(56)$1,879 $(2,692)$(62)$31,627 $661 $1,163 
(in millions)Fair Value
Beginning
of Year		Net
Realized
and
Unrealized
(Gains)
Losses
Included
in Income		Other
Comprehensive
Income (Loss)		Purchases,
Sales,
Issuances
and
Settlements,
Net		Gross
Transfers
In		Gross
Transfers
Out		OtherFair
Value
End of
Year		Changes in
Unrealized
Gains
(Losses)
Included in
Income on
Instruments
Held at End
of Year		Changes in
Unrealized Gains
(Losses)
Included in Other
Comprehensive
Income (Loss) for
Recurring Level 3
Instruments Held
at End of Year
Liabilities:
Policyholder contract deposits$9,798 $(545)$— $484 $— $(55)$— $9,682 $1,860 $— 
Derivative liabilities, net:
Interest rate contracts— (1)— 1 — — — — 1 — 
Foreign exchange contracts(2)— — 1 — — — (1)— — 
Equity contracts(151)(75)— (271)— 53 — (444)32 — 
Credit contracts42 9 — (21)— — — 30 1 — 
Other contracts(8)(66)— 61 — — — (13)66 — 
Total derivative liabilities, net(a)(119)(133)— (229)— 53 — (428)100 — 
Fortitude Re funds withheld payable6,042 603 — (723)— — — 5,922 2,094 — 
Total$15,721 $(75)$— $(468)$— $(2)$— $15,176 $4,054 $— 
(a)Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.
Net realized and unrealized gains and losses included in income related to Level 3 assets and liabilities shown above are reported in the Consolidated Statements of Income (Loss) as follows:
(in millions)Net
Investment
Income		Net Realized
Gains (Losses)		Other
Income		Total
December 31, 2022
Assets:
Bonds available for sale$694 $(82)$— $612 
Other bond securities(283)— — (283)
Equity securities(1)— — (1)
Other invested assets346 (8)— 338 
December 31, 2021
Assets:
Bonds available for sale$654 $(1)$— $653 
Other bond securities27 — — 27 
Equity securities11 — — 11 
Other invested assets630 11 — 641 
(in millions)Net
Investment
Income		Net Realized
(Gains) Losses		Other
Income		Total
December 31, 2022
Liabilities:
Policyholder contract deposits*$— $(3,602)$— $(3,602)
Derivative liabilities, net— 495 (61)434 
Fortitude Re funds withheld payable— (7,481)— (7,481)
December 31, 2021
Liabilities:
Policyholder contract deposits*$— $(545)$— $(545)
Derivative liabilities, net— (74)(59)(133)
Fortitude Re funds withheld payable— 603 — 603 
*Primarily embedded derivatives.
The following table presents the gross components of purchases, sales, issuances and settlements, net, shown above, for the years ended December 31, 2022 and 2021 related to Level 3 assets and liabilities in the Consolidated Balance Sheets:
(in millions)PurchasesSales
Issuances
and
 Settlements(a)
Purchases, Sales,
 Issuances and
Settlements, Net(a)
December 31, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions$6 $(72)$(38)$(104)
Non-U.S. governments— — (10)(10)
Corporate debt143 (79)(151)(87)
RMBS391 (76)(1,826)(1,511)
CMBS195 (17)(41)137 
CLO/ABS3,655 (25)(351)3,279 
Total bonds available for sale4,390 (269)(2,417)1,704 
Other bond securities:
Corporate debt26 — 132 158 
RMBS62 (5)(41)16 
CMBS— (1)— (1)
CLO/ABS750 (1,530)(402)(1,182)
Total other bond securities838 (1,536)(311)(1,009)
Equity securities27 (1)1 27 
Other invested assets682 — (708)(26)
Other assets— — (7)(7)
Total$5,937 $(1,806)$(3,442)$689 
Liabilities:
Policyholder contract deposits$— $1,105 $(80)$1,025 
Derivative liabilities, net(687)12 181 (494)
Fortitude Re funds withheld payable— — (676)(676)
Other Liabilities— — 112 112 
Total$(687)$1,117 $(463)$(33)
December 31, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions$55 $(247)$(166)$(358)
Non-U.S. governments1 — — 1 
Corporate Debt973 (95)(690)188 
RMBS1,567 (280)(2,450)(1,163)
CMBS510 (15)(81)414 
CLO/ABS4,409 70 (2,891)1,588 
Total bonds available for sale7,515 (567)(6,278)670 
Other bond securities:
Corporate debt86 — 49 135 
RMBS54 (10)10 54 
CMBS— (15)— (15)
CLO/ABS320 (39)(489)(208)
Total other bond securities460 (64)(430)(34)
Equity securities2 (3)(122)(123)
Other invested assets578 — (1,148)(570)
Other assets— — 1 1 
Total$8,555 $(634)$(7,977)$(56)
Liabilities:
Policyholder contract deposits
$— $818 $(334)$484 
Derivative liabilities, net(281)6 46 (229)
Fortitude Re funds withheld payable— — (723)(723)
Total$(281)$824 $(1,011)$(468)
(a)There were no issuances during the years ended December 31, 2022 and 2021.
Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at December 31, 2022 and 2021 may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable inputs (e.g., changes in unobservable long-dated volatilities).
Transfers of Level 3 Assets and Liabilities
The Net realized and unrealized gains (losses) included in income (loss) or Other comprehensive income (loss) as shown in the table above excludes $(128) million and $18 million of net gains (losses) related to assets and liabilities transferred into Level 3 during 2022 and 2021, respectively, and includes $(129) million and $7 million of net gains (losses) related to assets and liabilities transferred out of Level 3 during 2022 and 2021, respectively.
Transfers of Level 3 Assets
During the years ended December 31, 2022 and 2021, transfers into Level 3 assets primarily included certain investments in private placement corporate debt, RMBS, CMBS and CLO/ABS. Transfers of private placement corporate debt and certain ABS into Level 3 assets were primarily the result of limited market pricing information that required us to determine fair value for these securities based on inputs that are adjusted to better reflect our own assumptions regarding the characteristics of a specific security or associated market liquidity. The transfers of investments in RMBS, CMBS and CLO and certain ABS into Level 3 assets were due to diminished market transparency and liquidity for individual security types.
During the years ended December 31, 2022 and 2021, transfers out of Level 3 assets primarily included certain investments in private placement corporate debt, RMBS, CMBS and CLO/ABS. Transfers of private placement corporate debt and certain ABS into Level 3 assets were primarily the result of limited market pricing information that required us to determine fair value for these securities based on inputs that are adjusted to better reflect our own assumptions regarding the characteristics of a specific security or associated market liquidity. The transfers of investments in RMBS, CMBS and CLO and certain ABS into Level 3 assets were due to diminished market transparency and liquidity for individual security types.
Transfers of Level 3 Liabilities
During the year ended December 31, 2022, transfers of derivatives into Level 3 were primarily due to increased long-dated European swaption activity with Secured Overnight Financing Rate tenors. There were no significant transfers of derivative or other liabilities into or out of Level 3 for the year ended December 31, 2021.
QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS
The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments, and includes only those instruments for which information about the inputs is reasonably available to us, such as data from independent third-party valuation service providers. Because input information from third-parties with respect to certain Level 3 instruments (primarily CLO/ABS) may not be reasonably available to us, balances shown below may not equal total amounts reported for such Level 3 assets and liabilities:
(in millions)Fair Value at
December 31, 2022		Valuation
 Technique
Unobservable Input(b)
Range
(Weighted Average)(c)
Assets:
Obligations of states, municipalities and political subdivisions$799 Discounted cash flowYield
5.28% - 5.94% (5.61%)
Corporate debt2,527 Discounted cash flowYield
4.98% - 9.36% (7.17%)
RMBS(a)
5,235 Discounted cash flowConstant prepayment rate
4.89% - 10.49% (7.69%)
Loss severity
45.06% - 76.87% (60.97%)
Constant default rate
0.82% - 2.72% (1.77%)
Yield
5.98% - 7.75% (6.87%)
CLO/ABS(a)
7,503 Discounted cash flowYield
6.00% - 7.97% (6.99%)
CMBS587 Discounted cash flowYield
4.06% - 13.14% (8.60%)
Liabilities(d):
Embedded derivatives within Policyholder contract deposits:
Variable annuity guaranteed minimum withdrawal benefits (GMWB)677 Discounted cash flowEquity volatility
6.45% - 50.75%
Base lapse rate
0.16% - 12.60%
Dynamic lapse multiplier
20.00% - 186.00%
Mortality multiplier(e)
38.00% - 147.00%
Utilization
90.00% - 100.00%
Equity / interest rate correlation
10.00% - 30.00%
NPA(f)
0.00% - 2.03%
Fixed Index annuities including certain GMWB5,718 Discounted cash flowBase lapse rate
0.50% - 50.00%
Dynamic lapse multiplier
20.00% - 186.00%
Mortality multiplier(e)
24.00% - 180.00%
Utilization(g)
60.00% - 95.00%
Option budget
0.00% - 5.00%
Equity volatility
6.45% - 50.75%
NPA(f)
0.00% - 2.03%
Indexed life710 Discounted cash flowBase lapse rate
0.00% - 37.97%
Mortality rate
0.00% - 100.00%
Equity volatility
5.75% - 23.63%
NPA(f)
0.00% - 2.03%
(in millions)Fair Value at
December 31, 2021		Valuation
 Technique
Unobservable Input(b)
Range
(Weighted Average)(c)
Assets:
Obligations of states, municipalities and political subdivisions$1,400 Discounted cash flowYield
2.74% - 3.33% (3.06%)
Corporate debt1,561 Discounted cash flowYield
2.23% - 7.69% (4.96%)
RMBS(a)
9,916 Discounted cash flowConstant prepayment rate
5.25% - 17.70% (11.47%)
Loss severity
26.13% - 71.93% (49.03%)
Constant default rate
1.15% - 5.85% (3.50%)
Yield
1.69% - 3.97% (2.83%)
CLO/ABS(a)
8,229 Discounted cash flowYield
1.84% - 4.77% (3.31%)
CMBS580 Discounted cash flowYield
1.50% - 5.01% (3.25%)
Liabilities(d):
Embedded derivatives within Policyholder contract deposits:
GMWB2,472 Discounted cash flowEquity volatility
5.95% - 46.65%
Base lapse rate
0.16% - 12.60%
Dynamic lapse multiplier
20.00% - 186.00%
Mortality multiplier(e)
38.00% - 147.00%
Utilization
90.00% - 100.00%
Equity / interest rate correlation
20.00% - 40.00%
NPA(f)
0.01% - 1.40%
Fixed Index annuities including certain GMWB6,445 Discounted cash flowBase lapse rate
0.50% - 50.00%
Dynamic lapse multiplier
20.00% - 186.00%
Mortality multiplier(e)
24.00% - 180.00%
Utilization(g)
60.00% - 95.00%
Option budget
0.00% - 4.00%
Equity volatility
5.95% - 46.65%
NPA(f)
0.01% - 1.40%
Indexed life765 Discounted cash flowBase lapse rate
0.00% - 37.97%
Mortality rate
0.00% - 100.00%
Equity volatility
7.65% - 20.70%
NPA(f)
0.01% - 1.40%
(a)Information received from third-party valuation service providers. The ranges of the unobservable inputs for 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 CLO 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)The weighted averaging for fixed maturity securities is based on the estimated fair value of the securities. Because the valuation methodology for embedded derivatives within Policyholder contract deposits uses a range of inputs that vary at the contract level over the cash flow projection period, management believes that presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.
(d)The Fortitude Re funds withheld payable has been excluded from the above table. As discussed in Note 7, the Fortitude Re funds withheld payable is created through modco and funds withheld reinsurance arrangements where the investments supporting the reinsurance agreements are withheld by, and continue to reside on AIG’s balance sheet. This embedded derivative is valued as a total return swap with reference to the fair value of the invested assets held by AIG. Accordingly, the unobservable inputs utilized in the valuation of the embedded derivative are a component of the invested assets supporting the reinsurance agreements that are held on AIG’s balance sheet.
(e)Mortality inputs are shown as multipliers of the 2012 Individual Annuity Mortality Basic table.
(f)The non-performance risk adjustment (NPA) applied as a spread over risk-free curve for discounting.
(g)The partial withdrawal utilization unobservable input range shown applies only to policies with guaranteed minimum withdrawal benefit riders that are accounted for as an embedded derivative. The total embedded derivative liability at December 31, 2022 and 2021 was approximately $1.0 billion and $1.2 billion, respectively. The remaining guaranteed minimum riders on the fixed index annuities are valued under the accounting guidance for certain nontraditional long-duration contracts.
The ranges of reported inputs for Obligations of states, municipalities and political subdivisions, Corporate debt, RMBS, CLO/ABS, and CMBS valued using a discounted cash flow technique consist of one standard deviation in either direction from the value‑weighted average. The preceding table does not give effect to our risk management practices that might offset risks inherent in these Level 3 assets and liabilities.
Interrelationships between Unobservable Inputs
We consider unobservable inputs to be those for which market data is not available and that are developed using the best information available to us about the assumptions that market participants would use when pricing the asset or liability. Relevant inputs vary depending on the nature of the instrument being measured at fair value. The following paragraphs provide a general description of significant unobservable inputs along with interrelationships between and among the significant unobservable inputs and their impact on the fair value measurements. In practice, simultaneous changes in assumptions may not always have a linear effect on the inputs discussed below. Interrelationships may also exist between observable and unobservable inputs. Such relationships have not been included in the discussion below. For each of the individual relationships described below, the inverse relationship would also generally apply.
Fixed Maturity Securities
The significant unobservable input used in the fair value measurement of fixed maturity securities is yield. The yield is affected by the market movements in credit spreads and U.S. Treasury yields. The yield may be affected by other factors including constant prepayment rates, loss severity, and constant default rates. In general, increases in the yield would decrease the fair value of investments, and conversely, decreases in the yield would increase the fair value of investments.
Embedded derivatives within Policyholder contract deposits
Embedded derivatives reported within Policyholder contract deposits include interest crediting rates based on market indices within fixed index annuities, indexed life, and GICs as well as GMWB within variable annuity and certain fixed index annuity products. For any given contract, assumptions for unobservable inputs vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. The following unobservable inputs are used for valuing embedded derivatives measured at fair value:
•Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. Increases in assumed volatility will generally increase the fair value of both the projected cash flows from rider fees as well as the projected cash flows related to benefit payments. Therefore, the net change in the fair value of the liability may be either a decrease or an increase, depending on the relative changes in projected rider fees and projected benefit payments.
•Equity / interest rate correlation estimates the relationship between changes in equity returns and interest rates in the economic scenario generator used to value our GMWB embedded derivatives. In general, a higher positive correlation assumes that equity markets and interest rates move in a more correlated fashion, which generally increases the fair value of the liability.
•Base lapse rate assumptions are determined by company experience and are adjusted at the contract level using a dynamic lapse function, which reduces the base lapse rate when the contract is in-the-money (when the contract holder’s guaranteed value, as estimated by the company, is worth more than their underlying account value). Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. Increases in assumed lapse rates will generally decrease the fair value of the liability, as fewer policyholders would persist to collect guaranteed withdrawal amounts.
•Mortality rate assumptions, which vary by age and gender, are based on company experience and include a mortality improvement assumption. Increases in assumed mortality rates will decrease the fair value of the liability, while lower mortality rate assumptions will generally increase the fair value of the liability, because guaranteed payments will be made for a longer period of time.
•Utilization assumptions estimate the timing when policyholders with a GMWB will elect to utilize their benefit and begin taking withdrawals. The assumptions may vary by the type of guarantee, tax-qualified status, the contract’s withdrawal history and the age of the policyholder. Utilization assumptions are based on company experience and other factors, which includes partial withdrawal behavior. Increases in assumed utilization rates will generally increase the fair value of the liability.
•Option budget estimates the expected long-term cost of options used to hedge exposures associated with equity price changes. The level of option budgets determines future costs of the options, which impacts the growth in account value and the valuation of embedded derivatives.
•Non-performance or “own credit” risk adjustment used in the valuation of embedded derivatives, which reflects a market participant’s view of our claims-paying ability by incorporating a different spread (the NPA spread) to the curve used to discount projected benefit cash flows. When corporate credit spreads widen, the change in the NPA spread generally reduces the fair value of the embedded derivative liabilities, resulting in a gain, and when corporate credit spreads narrow or tighten, the change in the NPA spread generally increases the fair value of the embedded derivative liabilities, resulting in a loss. In addition to changes driven by credit market-related movements in the NPA spread, the NPA balance also reflects changes in business activity and in the net amount at risk from the underlying guaranteed living benefits offered by variable and certain fixed index annuities.
Embedded derivatives within reinsurance contracts
The fair value of embedded derivatives associated with funds withheld reinsurance contracts is determined based upon a total return swap technique with reference to the fair value of the investments held by AIG related to AIG’s funds withheld payable. The fair value of the underlying assets is generally based on market observable inputs using industry standard valuation techniques. The valuation also requires certain significant inputs, which are generally not observable and accordingly, the valuation is considered Level 3 in the fair value hierarchy.
INVESTMENTS IN CERTAIN ENTITIES CARRIED AT FAIR VALUE USING NET ASSET VALUE PER SHARE
The following table includes information related to our investments in certain other invested assets, including private equity funds, hedge funds and other alternative investments that calculate net asset value per share (or its equivalent). For these investments, which are measured at fair value on a recurring basis, we use the net asset value per share to measure fair value.
December 31, 2022December 31, 2021
(in millions)Investment Category IncludesFair Value Using NAV Per Share (or its equivalent)Unfunded CommitmentsFair Value Using NAV Per Share (or its equivalent)Unfunded Commitments
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$3,146 $2,448 $2,768 $1,798 
Real assetsInvestments in real estate properties, agricultural and infrastructure assets, including power plants and other energy producing assets1,851 840 904 487 
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 company272 183 252 201 
Growth equityFunds that make investments in established companies for the purpose of growing their businesses732 60 914 82 
MezzanineFunds that make investments in the junior debt and equity securities of leveraged companies598 142 534 354 
OtherIncludes distressed funds that invest in securities of companies that are in default or under bankruptcy protection, as well as funds that have multi- strategy, and other strategies1,829 391 1,216 408 
Total private equity funds8,428 4,064 6,588 3,330 
Hedge funds:
Event-drivenSecurities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations92 — 466 — 
Long-shortSecurities that the manager believes are undervalued, with corresponding short positions to hedge market risk696 — 432 — 
MacroInvestments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions414 — 516 — 
OtherIncludes investments held in funds that are less liquid, as well as other strategies which allow for broader allocation between public and private investments192 — 416 — 
Total hedge funds1,394 — 1,830 — 
Total$9,822 $4,064 $8,418 $3,330 
Private equity fund investments included above are not redeemable, because distributions from the funds will be received when underlying investments of the funds are liquidated. Private equity funds are generally expected to have 10-year lives at their inception, but these lives may be extended at the fund manager’s discretion, typically in one-year or two-year increments.
The hedge fund investments included above, which are carried at fair value, are generally redeemable subject to the redemption notices period. The majority of our hedge fund investments are redeemable monthly or quarterly.
FAIR VALUE OPTION
Under the fair value option, we may elect to measure at fair value financial assets and financial liabilities that are not otherwise required to be carried at fair value. Subsequent changes in fair value for designated items are reported in earnings. We elect the fair value option for certain hybrid securities given the complexity of bifurcating the economic components associated with the embedded derivatives.
For additional information related to embedded derivatives refer to Note 10 herein.
Additionally, we elect the fair value option for certain alternative investments when such investments are eligible for this election. We believe this measurement basis is consistent with the applicable accounting guidance used by the respective investment company funds themselves.
For additional information on securities and other invested assets for which we have elected the fair value option refer to Note 5 herein.
The following table presents the gains or losses recorded related to the eligible instruments for which we elected the fair value option:
Years Ended December 31,Gain (Loss)
(in millions)202220212020
Assets:
Other bond securities(a)
$(822)$(12)$552 
Alternative investments(b)
224 1,650 685 
Liabilities:
Long-term debt(c)
225 66 (176)
Total gain (loss)$(373)$1,704 $1,061 
(a)Includes certain securities supporting the funds withheld arrangements with Fortitude Re. For additional information regarding the gains and losses for Other bond securities, see Note 5. For additional information regarding the funds withheld arrangements with Fortitude Re, see Note 7.
(b)Includes certain hedge funds, private equity funds and other investment partnerships.
(c)Includes guaranteed investment agreements (GIAs), notes, bonds and mortgages payable.
Interest income and dividend income on assets measured under the fair value option are recognized and included in Net investment income in the Consolidated Statements of Income. Interest expense on liabilities measured under the fair value option is reported in Other Income in the Consolidated Statements of Income.
For additional information about our policies for recognition, measurement, and disclosure of interest and dividend income, see Note 5 herein.
We calculate the effect of these credit spread changes using discounted cash flow techniques that incorporate current market interest rates, our observable credit spreads on these liabilities and other factors that mitigate the risk of nonperformance such as cash collateral posted.
The following table presents the difference between fair value and the aggregate contractual principal amount of long-term debt for which the fair value option was elected:
December 31, 2022December 31, 2021
(in millions)Fair ValueOutstanding Principal AmountDifferenceFair ValueOutstanding Principal AmountDifference
Liabilities:
Long-term debt*$56 $45 $11 $1,871 $1,405 $466 
*Includes GIAs, notes, bonds, loans and mortgages payable.
FAIR VALUE MEASUREMENTS ON A NON-RECURRING BASIS
We measure the fair value of certain assets on a non-recurring basis, generally quarterly, annually or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include cost and equity-method investments, commercial mortgage loans and commercial loans, investments in real estate and other fixed assets, goodwill and other intangible assets.
For additional information about how we test various asset classes for impairment, see Notes 5 and 6.
Information regarding the estimation of fair value for financial instruments measured at fair value on a non-recurring basis is discussed below.
Impairments for Other investments primarily relate to real estate investments as well as commercial loans and commercial mortgage loans, the fair value determination for which is discussed above under the heading Valuation Methodologies of Financial Instruments Measured at Fair Value.
The following table presents assets measured at fair value on a non-recurring basis at the time of impairment and the related impairment charges recorded during the periods presented:
Assets at Fair ValueImpairment Charges
Non-Recurring BasisDecember 31,
(in millions)Level 1Level 2Level 3Total202220212020
December 31, 2022
Other investments$— $— $12 $12 $25 $6 $77 
Other assets— — — — 1 67 14 
Total$— $— $12 $12 $26 $73 $91 
December 31, 2021
Other investments$— $— $104 $104 
Total$— $— $104 $104 
In addition to the assets presented in the table above, AIG had $163 million of loans held for sale which are carried at fair value at December 31, 2022. There is no associated impairment charge.
FAIR VALUE INFORMATION ABOUT FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE
Information regarding the estimation of fair value for financial instruments not carried at fair value (excluding insurance contracts and lease contracts) is discussed below:
•Mortgage and other loans receivable: Fair values of loans on commercial real estate and other loans receivable are estimated for disclosure purposes using discounted cash flow calculations based on discount rates that we believe market participants would use in determining the price that they would pay for such assets. For certain loans, our current incremental lending rates for similar types of loans are used as the discount rates, because we believe this rate approximates the rates market participants would use. Fair values of residential mortgage loans are generally determined based on market prices, using market based adjustments for credit and servicing as appropriate. The fair values of policy loans are generally estimated based on unpaid principal amount as of each reporting date. No consideration is given to credit risk because policy loans are effectively collateralized by the cash surrender value of the policies.
•Other invested assets: The majority of the Other invested assets that are not measured at fair value represent time deposits with the original maturity at purchase greater than one year. The fair value of long-term time deposits is determined using the expected discounted future cash flow.
•Cash and short-term investments: The carrying amounts of these assets approximate fair values because of the relatively short period of time between origination and expected realization, and their limited exposure to credit risk.
•Policyholder contract deposits associated with investment-type contracts: Fair values for policyholder contract deposits associated with investment-type contracts not accounted for at fair value are estimated using discounted cash flow calculations based on interest rates currently being offered for similar contracts with maturities consistent with those of the contracts being valued. When no similar contracts are being offered, the discount rate is the appropriate swap rate (if available) or current risk-free interest rate consistent with the currency in which the cash flows are denominated. To determine fair value, other factors include current policyholder account values and related surrender charges and other assumptions include expectations about policyholder behavior and an appropriate risk margin.
•Other liabilities: The majority of Other liabilities that are financial instruments not measured at fair value represent secured financing arrangements, including repurchase agreements. The carrying amounts of these liabilities approximate fair value, because the financing arrangements are short-term and are secured by cash or other liquid collateral.
•Fortitude Re funds withheld payable: The funds withheld payable contains an embedded derivative and the changes in its fair value are recognized in earnings each period. The difference between the total Fortitude Re funds withheld payable and the embedded derivative represents the host contract.
•Short-term and Long-term debt and Debt of consolidated investment entities: Fair values of these obligations were determined by reference to quoted market prices, when available and appropriate, or discounted cash flow calculations based upon our current market‑observable implicit‑credit‑spread rates for similar types of borrowings with maturities consistent with those remaining for the debt being valued.
•Separate Account Liabilities – Investment Contracts: Only the portion of separate account liabilities related to products that are investment contracts are reflected in the table below. Separate account liabilities are recorded at the amount credited to the contract holder, which reflects the change in fair value of the corresponding separate account assets including contract holder deposits less withdrawals and fees; therefore, carrying value approximates fair value.
The following table presents the carrying amounts and estimated fair values of our financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:
Estimated Fair ValueCarrying
Value
(in millions)Level 1Level 2Level 3Total
December 31, 2022
Assets:
Mortgage and other loans receivable$— $89 $45,755 $45,844 $49,442 
Other invested assets— 848 6 854 854 
Short-term investments— 6,668 — 6,668 6,668 
Cash2,043 — — 2,043 2,043 
Other assets24 9 — 33 33 
Liabilities:
Policyholder contract deposits associated with investment-type contracts— 119 131,844 131,963 138,243 
Fortitude Re funds withheld payable— — 32,618 32,618 32,618 
Other liabilities— 3,101 — 3,101 3,101 
Short-term and long-term debt— 19,328 275 19,603 21,243 
Debt of consolidated investment entities— 3,055 2,478 5,533 5,880 
Separate account liabilities - investment contracts— 80,649 — 80,649 80,649 
December 31, 2021
Assets:
Mortgage and other loans receivable$— $82 $47,947 $48,029 $46,033 
Other invested assets— 871 6 877 878 
Short-term investments— 8,931 — 8,931 8,931 
Cash2,198 — — 2,198 2,198 
Other assets21 11 — 32 32 
Liabilities:
Policyholder contract deposits associated with investment-type contracts— 169 142,974 143,143 133,043 
Fortitude Re funds withheld payable— — 34,849 34,849 34,849 
Other liabilities— 3,704 — 3,704 3,704 
Short-term and long-term debt— 24,758 336 25,094 21,870 
Debt of consolidated investment entities— 3,077 3,313 6,390 6,422 
Separate account liabilities - investment contracts— 104,126 — 104,126 104,126