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Fair Value Measurements
 3 Months Ended
Mar. 31, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements
4. Fair Value Measurements
FAIR VALUE MEASUREMENTS ON A RECURRING BASIS
Assets and liabilities recorded at fair value in the Condensed 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
There were no material changes to valuation methodologies of financial instruments measured at fair value with the exception of the valuation methodologies listed below which were impacted by the adoption of LDTI. For additional information on valuation methodologies not impacted by the adoption LDTI, see Note 4 to the Consolidated Financial Statements in the 2022 Annual Report.
Market Risk Benefits and Embedded Derivatives within Policyholder Contract Deposits
Certain variable annuity, fixed annuity and fixed index annuity contracts contain MRBs related to guaranteed benefit features that we separate from the host contracts and account for at fair value, with certain changes recognized in earnings. MRBs are contracts or contract features that provide protection to policyholders from other-than-nominal capital market risks and therefore expose the insurance entity to other-than-nominal capital market risks.
The fair value of MRBs contained in certain variable annuity, fixed annuity and fixed index annuity 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 MRBs 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 are based primarily on our historical experience.
Because of the dynamic and complex nature of the projected cash flows with respect to MRBs in our variable annuity, fixed annuity, and 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 is included within the fair value measurement of these MRBs, and related fees are classified in change in the fair value of MRBs, net, as earned, consistent with other changes in the fair value of these MRBs. Any portion of the fees not attributed to the MRBs is excluded from the fair value measurement and classified in policy fees as earned.
Option pricing models are used to estimate the fair value of embedded derivatives in our fixed index annuity and life contracts, taking into account the capital market assumptions for future index growth rates, volatility of the equity indices, 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 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, Secured Overnight Financing Rate or London Inter-Bank Offered Rate) leg of a related tenor. We also incorporate our own risk of non-performance in the valuation of MRBs and embedded derivatives associated with variable annuity, fixed annuity, 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. 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 insurance companies. MRBs are measured using a non-performance risk adjustment that is a locked-in approximation of our claims-paying ability at policy issue (locked-in NPA) as well as a non-performance risk adjustment that reflects an approximation of our current claims-paying ability (current NPA).
When MRBs are remeasured each period, both the interest rates and current non-performance risk adjustment are updated. Changes in the swap curve and the time value accretion of the at-issue non-performance risk adjustment are recorded to net income while the difference between the MRBs measured using the at-issue non-performance risk adjustment and the current non-performance risk adjustment is recorded to Other comprehensive income. For embedded derivatives, changes in the interest rates and the period-over-period change in the non-performance risk adjustment are recorded to net income.
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:
March 31, 2023Level 1Level 2Level 3
Counterparty
Netting(a)
Cash
Collateral		Total
(in millions)
Assets:
Bonds available for sale:
U.S. government and government sponsored entities
$219 $5,536 $— $— $— $5,755 
Obligations of states, municipalities and political subdivisions
— 10,775 873 — — 11,648 
Non-U.S. governments194 13,229 9 — — 13,432 
Corporate debt— 136,139 2,432 — — 138,571 
RMBS— 12,022 7,581 — — 19,603 
CMBS— 13,936 938 — — 14,874 
CLO/ABS— 11,625 13,889 — — 25,514 
Total bonds available for sale
413 203,262 25,722 — — 229,397 
Other bond securities:
U.S. government and government sponsored entities— 1 — — — 1 
Obligations of states, municipalities and political subdivisions— 139 1 — — 140 
Non-U.S. governments— 60 — — — 60 
Corporate debt— 2,416 130 — — 2,546 
RMBS— 107 166 — — 273 
CMBS— 290 27 — — 317 
CLO/ABS— 415 1,010 — — 1,425 
Total other bond securities
— 3,428 1,334 — — 4,762 
Equity securities
501 16 74 — — 591 
Other invested assets(b)
— 169 2,086 — — 2,255 
Derivative assets(c):
Interest rate contracts— 2,046 356 — — 2,402 
Foreign exchange contracts
— 1,651 1 — — 1,652 
Equity contracts
26 141 516 — — 683 
Commodity contracts
— 7 — — — 7 
Credit contracts
— — 33 — — 33 
Other contracts— — 14 — — 14 
Counterparty netting and cash collateral
— — — (2,382)(1,793)(4,175)
Total derivative assets
26 3,845 920 (2,382)(1,793)616 
Short-term investments
2,484 4,382 — — — 6,866 
Market risk benefit assets— — 830 — — 830 
Other assets(c)
— — 110 — — 110 
Separate account assets
84,202 3,155 — — — 87,357 
Total$87,626 $218,257 $30,246 $(2,382)$(1,793)$331,954 
Liabilities:
Policyholder contract deposits$— $45 $6,064 $— $— $6,109 
Market risk benefit liabilities— — 5,144 — — 5,144 
Derivative liabilities(c):
Interest rate contracts
— 3,045 — — — 3,045 
Foreign exchange contracts
— 802 1 — — 803 
Equity contracts
36 10 14 — — 60 
Credit contracts
— 7 33 — — 40 
Counterparty netting and cash collateral
— — — (2,382)(1,311)(3,693)
Total derivative liabilities
36 3,864 48 (2,382)(1,311)255 
Fortitude Re funds withheld payable
— — (1,863)— — (1,863)
Other liabilities
— — 112 — — 112 
Long-term debt
— 72 — — — 72 
Total$36 $3,981 $9,505 $(2,382)$(1,311)$9,829 
December 31, 2022Level 1Level 2Level 3
Counterparty
Netting(a)
Cash
Collateral		Total
(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:
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 
Market risk benefit assets— — 796 — — 796 
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 $5,367 $— $— $5,408 
Market risk benefit liabilities— — 4,736 — — 4,736 
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 $8,026 $(3,895)$(1,917)$8,308 
(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 $9.9 billion and $9.8 billion as of March 31, 2023 and December 31, 2022, respectively.
(c)Presented as part of Other assets and Other liabilities on the Condensed Consolidated Balance Sheets.
CHANGES IN LEVEL 3 RECURRING FAIR VALUE MEASUREMENTS
The following tables present changes during the three-month periods ended March 31, 2023 and 2022 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 Condensed Consolidated Balance Sheets at March 31, 2023 and 2022:
(in millions)Fair Value
Beginning
of Year		MRBs and
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
Period		Changes in
Unrealized
Gains
(Losses)
Included in
Income on
Instruments
Held at End
of Period		Changes in
Unrealized Gains
(Losses)
Included in Other
Comprehensive
Income (Loss) for
Recurring Level 3
Instruments Held
at End of Period
Three Months Ended March 31, 2023
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions$824 $1 $55 $(7)$— $— $— $873 $— $44 
Non-U.S. governments1 1 — — 7 — — 9 — — 
Corporate debt2,847 (102)51 (201)274 (421)(16)2,432 — 50 
RMBS7,553 109 (70)10 — (21)— 7,581 — (98)
CMBS926 7 (3)1 34 (27)— 938 — (34)
CLO/ABS12,748 50 271 840 58 (102)24 13,889 — 229 
Total bonds available for sale24,899 66 304 643 373 (571)8 25,722 — 191 
Other bond securities:
Obligations of states, municipalities and political subdivisions— — — 1 — — — 1 — — 
Corporate debt416 1 — (96)— (191)— 130 3 — 
RMBS173 5 — (12)— — — 166 (3)— 
CMBS28 (1)— — — — — 27 (1)— 
CLO/ABS910 36 — 18 1 (7)52 1,010 24 — 
Total other bond securities1,527 41 — (89)1 (198)52 1,334 23 — 
Equity securities39 — — 27 8 — — 74 — — 
Other invested assets2,075 (52)5 58 — — — 2,086 (50)— 
Other assets107 — — 3 — — — 110 — — 
Total(a)
$28,647 $55 $309 $642 $382 $(769)$60 $29,326 $(27)$191 
(in millions)Fair Value
Beginning
of Year		MRBs and
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
Period		Changes in
Unrealized
Gains
(Losses)
Included in
Income on
Instruments
Held at End
of Period		Changes in
Unrealized Gains
(Losses)
Included in Other
Comprehensive
Income (Loss) for
Recurring Level 3
Instruments Held
at End of Period
Liabilities:
Policyholder contract deposits$5,367 $381 $— $316 $— $— $— $6,064 $(368)$— 
Derivative liabilities, net:
Interest rate contracts(311)57 — (102)— — — (356)(50)— 
Equity contracts(271)(56)— (175)— — — (502)51 136 
Other contracts(14)(16)— 16 — — — (14)16 — 
Total derivative liabilities, net(b)
(596)(15)— (261)— — — (872)17 136 
Fortitude Re funds withheld payable(2,235)1,165 — (793)— — — (1,863)(759)— 
Other Liabilities112 — — — — — — 112 — — 
Total(c)
$2,648 $1,531 $— $(738)$— $— $— $3,441 $(1,110)$136 
(in millions)Fair Value
Beginning
of Year		MRBs and
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
Period		Changes in
Unrealized
Gains
(Losses)
Included in
Income on
Instruments
Held at End
of Period		Changes in
Unrealized Gains
(Losses)
Included in Other
Comprehensive
Income (Loss) for
Recurring Level 3
Instruments Held
at End of Period
Three Months Ended March 31, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions$1,431 $2 $(285)$(61)$— $— $— $1,087 $— $(273)
Non-U.S. governments7 — — — 1 — — 8 — — 
Corporate debt2,641 (11)(73)177 130 (120)— 2,744 — (69)
RMBS10,378 130 (553)(608)— (422)— 8,925 — (544)
CMBS1,190 8 (67)32 — (299)— 864 — (64)
CLO/ABS11,215 16 (501)545 1,115 (614)— 11,776 — (501)
Total bonds available for sale26,862 145 (1,479)85 1,246 (1,455)— 25,404 — (1,451)
Other bond securities:
Corporate debt134 — — 77 61 (12)— 260 — — 
RMBS196 (5)(1)9 — — — 199 (8)— 
CMBS35 (2)— — — — — 33 (2)— 
CLO/ABS2,332 (114)— 195 57 (2)— 2,468 (161)— 
Total other bond securities2,697 (121)(1)281 118 (14)— 2,960 (171)— 
Equity securities6 — (1)1 — — — 6 — — 
Other invested assets1,948 112 (4)(15)47 (153)— 1,935 121 — 
Other assets114 — — (6)— — — 108 — — 
Total(a)
$31,627 $136 $(1,485)$346 $1,411 $(1,622)$— $30,413 $(50)$(1,451)
(in millions)Fair Value
Beginning
of Year		MRBs and
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
Period		Changes in
Unrealized
Gains
(Losses)
Included in
Income on
Instruments
Held at End
of Period		Changes in
Unrealized Gains
(Losses)
Included in Other
Comprehensive
Income (Loss) for
Recurring Level 3
Instruments Held
at End of Period
Liabilities:
Policyholder contract deposits$5,572 $(658)$— $121 $— $— $— $5,035 $845 $— 
Derivative liabilities, net:
Interest rate contracts— (1)— (3)— — — (4)1 — 
Foreign exchange contracts(1)— — 1 — — — — (1)— 
Equity contracts(444)301 — (35)— — — (178)(241)— 
Credit contracts30 1 — — — — — 31 (1)— 
Other contracts(13)(18)— 17 — — — (14)18 — 
Total derivative liabilities, net(b)
(428)283 — (20)— — — (165)(224)— 
Fortitude Re funds withheld payable5,922 (3,318)— (398)— — — 2,206 3,480 — 
Total(c)
$11,066 $(3,693)$— $(297)$— $— $— $7,076 $4,101 $— 
(a)Excludes MRB assets of $830 million and $666 million for the three-month periods ended March 31, 2023 and 2022, respectively. For additional information, see Note 12.
(b)Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.
(c)Excludes MRB liabilities of $5.1 billion and $6.1 billion for the three-month periods ended March 31, 2023 and 2022, respectively. For additional information, see Note 12.
Market risk benefits and net realized and unrealized gains and losses included in income related to Level 3 assets and liabilities shown above are reported in the Condensed Consolidated Statements of Income (Loss) as follows:
(in millions)Net
Investment
Income		Net Realized
Gains (Losses)
Change in the fair
value of market
risk benefits, net(a)
Other
Income		Total
Three Months Ended March 31, 2023
Assets:
Bonds available for sale$62 $4 $— $— $66 
Other bond securities41 — — — 41 
Other invested assets(51)(1)— — (52)
Three Months Ended March 31, 2022
Assets:
Bonds available for sale$164 $(19)$— $— $145 
Other bond securities(121)— — — (121)
Other invested assets112 — — — 112 
(in millions)Net
Investment
Income		Net Realized
(Gains) Losses
Change in the fair
value of market
risk benefits, net(a)
Other
Income		Total
Three Months Ended March 31, 2023
Liabilities:
Policyholder contract deposits(b)
$— $381 $— $— $381 
Market risk benefit liabilities, net(c)
— — 87 — 87 
Derivative liabilities, net— (88)89 (16)(15)
Fortitude Re funds withheld payable— 1,165 — — 1,165 
Three Months Ended March 31, 2022
Liabilities:
Policyholder contract deposits(b)
$— $(658)$— $— $(658)
Market risk benefit liabilities, net(c)
— (3)(699)— (702)
Derivative liabilities, net— 327 (29)(15)283 
Fortitude Re funds withheld payable— (3,318)— — (3,318)
(a)The portion of the fair value change attributable to own credit risk, is recognized in OCI.
(b)Primarily embedded derivatives.
(c)Market risk benefit assets and liabilities have been netted in the above table for presentation purposes only.
The following table presents the gross components of purchases, sales, issuances and settlements, net, shown above, for the three-month periods ended March 31, 2023 and 2022 related to Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets:
(in millions)PurchasesSales
Issuances
and
 Settlements(a)
Purchases, Sales,
 Issuances and
Settlements, Net(a)
Three Months Ended March 31, 2023
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions$1 $(4)$(4)$(7)
Corporate debt21 — (222)(201)
RMBS290 (19)(261)10 
CMBS10 (6)(3)1 
CLO/ABS897 (3)(54)840 
Total bonds available for sale1,219 (32)(544)643 
Other bond securities:
Obligations of states, municipalities and political subdivisions1 — — 1 
Corporate debt— — (96)(96)
RMBS5 — (17)(12)
CLO/ABS46 (4)(24)18 
Total other bond securities52 (4)(137)(89)
(in millions)PurchasesSales
Issuances
and
 Settlements(a)
Purchases, Sales,
 Issuances and
Settlements, Net(a)
Equity securities29 — (2)27 
Other invested assets72 — (14)58 
Other assets— — 3 3 
Total$1,372 $(36)$(694)$642 
Liabilities:
Policyholder contract deposits$— $326 $(10)$316 
Derivative liabilities, net(260)5 (6)(261)
Fortitude Re funds withheld payable— — (793)(793)
Total$(260)$331 $(809)$(738)
Three Months Ended March 31, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions$1 $(60)$(2)$(61)
Corporate Debt9 — 168 177 
RMBS109 — (717)(608)
CMBS70 — (38)32 
CLO/ABS886 — (341)545 
Total bonds available for sale1,075 (60)(930)85 
Other bond securities:
Corporate debt19 — 58 77 
RMBS17 — (8)9 
CLO/ABS323 — (128)195 
Total other bond securities359 — (78)281 
Equity securities— — 1 1 
Other invested assets258 — (273)(15)
Other assets— — (6)(6)
Total$1,692 $(60)$(1,286)$346 
Liabilities:
Policyholder contract deposits
$— $195 $(74)$121 
Derivative liabilities, net(85)2 63 (20)
Fortitude Re funds withheld payable— — (398)(398)
Total$(85)$197 $(409)$(297)
(a)There were no issuances during the three-month periods ended March 31, 2023 and 2022.
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 March 31, 2023 and 2022 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 $7 million and $(34) million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three-month periods ended March 31, 2023 and 2022, respectively, and includes $(5) million and $(41) million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three-month periods ended March 31, 2023 and 2022, respectively.
Transfers of Level 3 Assets
During the three-month periods ended March 31, 2023 and 2022, transfers into Level 3 assets primarily included certain investments in private placement corporate debt, Residential Mortgage-Backed Securities (RMBS), Commercial Mortgage-Backed Securities (CMBS) and Collateralized Loan Obligations (CLO)/Asset-Backed Securities (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 three-month periods ended March 31, 2023 and 2022, 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
There were no significant transfers of derivative or other liabilities into or out of Level 3 for the three-month periods ended March 31, 2023 and 2022.
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
March 31, 2023		Valuation
 Technique
Unobservable Input(b)
Range
(Weighted Average)(c)
Assets:
Obligations of states, municipalities and political subdivisions$849 Discounted cash flowYield
4.91% - 5.55% (5.23%)
Corporate debt2,034 Discounted cash flowYield
4.76% - 11.60% (7.81%)
RMBS(a)
5,035 Discounted cash flowConstant prepayment rate
4.78% - 10.23% (7.50%)
Loss severity
44.53% - 77.94% (61.24%)
Constant default rate
0.88% - 2.76% (1.82%)
Yield
6.25% - 7.89% (7.07%)
CLO/ABS(a)
9,288 Discounted cash flowYield
5.56% - 7.42% (6.49%)
CMBS605 Discounted cash flowYield
4.28% - 30.14% (13.87%)
Market risk benefit assets830 Discounted cash flowEquity volatility
6.55% - 51.75%
Base lapse rate
0.16% - 28.80%
Dynamic lapse multiplier
20.00% - 186.18%
Mortality multiplier(e)
38.25% - 160.01%
Utilization
80.00% - 100.00%
Equity / interest rate correlation
0.00% - 30.00%
NPA(f)
0.34% - 2.45%
Liabilities(d):
Market risk benefit liabilities:
Variable annuities guaranteed benefits2,381 Discounted cash flowEquity volatility
6.55% - 51.75%
Base lapse rate
0.16% - 28.80%
Dynamic lapse multiplier
20.00% - 186.18%
Mortality multiplier(e)
38.25% - 160.01%
Utilization
80.00% - 100.00%
Equity / interest rate correlation
0.00% - 30.00%
NPA(f)
0.34% - 2.45%
Fixed annuities guaranteed benefits806 Discounted cash flowBase lapse rate
0.20% - 15.75%
Dynamic lapse multiplier
20.00% - 186.18%
Mortality multiplier(e)
40.26% - 168.43%
Utilization(g)
90.00% - 97.50%
NPA(f)
0.34% - 2.45%
Fixed index annuities guaranteed benefits1,957 Discounted cash flowEquity volatility
6.55% - 51.75%
Base lapse rate
0.20% - 50.00%
Dynamic lapse multiplier
20.00% - 186.18%
Mortality multiplier(e)
24.00% - 180.00%
Utilization(g)
60.00% - 97.50%
(in millions)Fair Value at
March 31, 2023		Valuation
 Technique
Unobservable Input(b)
Range
(Weighted Average)(c)
Option budget
0.00% - 6.00%
Equity / interest rate correlation
0.00% - 30.00%
NPA(f)
0.34% - 2.45%
Embedded derivatives within Policyholder contract deposits:
Index credits on fixed index annuities5,269 Discounted cash flowEquity volatility
6.55% - 51.75%
Base lapse rate
0.20% - 50.00%
Dynamic lapse multiplier
20.00% - 186.18%
Mortality multiplier(e)
24.00% - 180.00%
Utilization(g)
60.00% - 97.50%
Option budget
0.00% - 6.00%
Equity / interest rate correlation
0.00% - 30.00%
NPA(f)
0.34% - 2.45%
Index life795 Discounted cash flowBase lapse rate
0.00% - 37.97%
Mortality rate
0.00% - 100.00%
Equity volatility
5.75% - 21.40%
NPA(f)
0.34% - 2.45%
(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%)
Market risk benefit assets796 Discounted cash flowEquity volatility
6.45% - 50.75%
Base lapse rate
0.16% - 28.80%
Dynamic lapse multiplier
20.00% - 186.18%
Mortality multiplier(e)
38.25% - 160.01%
Utilization
80.00% - 100.00%
Equity / interest rate correlation
0.00% - 30.00%
NPA(f)
0.00% - 2.03%
Liabilities(d):
Market risk benefit liabilities:
Variable annuities guaranteed benefits2,358 Discounted cash flowEquity volatility
6.45% - 50.75%
Base lapse rate
0.16% - 28.80%
Dynamic lapse multiplier
20.00% - 186.18%
Mortality multiplier(e)
38.25% - 160.01%
Utilization
80.00% - 100.00%
Equity / interest rate correlation
0.00% - 30.00%
NPA(f)
0.00% - 2.03%
Fixed annuities guaranteed benefits680 Discounted cash flowBase lapse rate
0.20% - 15.75%
Dynamic lapse multiplier
20.00% - 186.16%
Mortality multiplier(e)
40.26% - 168.43%
Utilization(g)
90.00% - 97.50%
NPA(f)
0.00% - 2.03%
Fixed index annuities guaranteed benefits1,698 Discounted cash flowEquity volatility
6.45% - 50.75%
Base lapse rate
0.20% - 50.00%
Dynamic lapse multiplier
20.00% - 186.18%
Mortality multiplier(e)
24.00% - 180.00%
Utilization(g)
60.00% - 97.50%
Option budget
0.00% - 5.00%
(in millions)Fair Value at
December 31, 2022		Valuation
 Technique
Unobservable Input(b)
Range
(Weighted Average)(c)
Equity / interest rate correlation
0.00% - 30.00%
NPA(f)
0.00% - 2.03%
Embedded derivatives within Policyholder contract deposits:
Index credits on fixed index annuities4,657 Discounted cash flowEquity volatility
6.45% - 50.75%
Base lapse rate
0.20% - 50.00%
Dynamic lapse multiplier
20.00% - 186.18%
Mortality multiplier(e)
24.00% - 180.00%
Utilization(g)
60.00% - 97.50%
Option budget
0.00% - 5.00%
Equity / interest rate correlation
0.00% - 30.00%
NPA(f)
0.00% - 2.03%
Index 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%
(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 with policyholder contract deposits and market risk benefits 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. The total embedded derivative liability at March 31, 2023 and December 31, 2022 was approximately $1.2 billion and $1.1 billion, respectively.
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.
MRBs and Embedded Derivatives within Policyholder Contract Deposits
For MRBs and embedded derivatives, the assumptions for unobservable inputs vary throughout the period over which cash flows are projected for valuation purposes. The following are applicable unobservable inputs:
•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 and interest rate correlation estimates the relationship between changes in equity returns and interest rates in the economic scenario generator used to value our MRBs. 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. Only our fixed index annuities with a Guaranteed Minimum Withdrawal Benefits (GMWB) rider are subject to the equity and interest correlation assumption. Other policies such as accumulation fixed index annuity and life products do not use a correlation assumption.
•Base lapse rate assumptions are determined by company experience and judgment 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 benefit 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 GMWB liability, while lower mortality rate assumptions will generally increase the fair value of the liability because guaranteed withdrawal payments will be made for a longer period of time and generally exceed any decrease in guaranteed death benefits.
•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, which includes partial withdrawal behavior. Increases in assumed utilization rates will generally increase the fair value of the liability.
•Non-performance or “own credit” risk adjustment used in the valuation of MRBs and 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 MRBs and embedded derivatives, resulting in a gain in AOCI or Net realized gains (losses), respectively, and when corporate credit spreads narrow or tighten, the change in the NPA spread generally increases the fair value of the MRBs and embedded derivatives, resulting in a loss in AOCI or Net realized gains (losses), respectively.
•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.
•For embedded derivatives, option budgets estimate the expected long-term cost of options used to hedge exposures associated with index 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.
Embedded Derivatives within Reinsurance Contracts
The fair value of embedded derivatives associated with funds withheld reinsurance contracts is determined based upon a total return valuation 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.
March 31, 2023December 31, 2022
(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$3,285 $2,327 $3,146 $2,448 
Real assetsInvestments in real estate properties, agricultural and infrastructure assets, including power plants and other energy producing assets1,820 840 1,851 840 
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 company268 171 272 183 
Growth equityFunds that make investments in established companies for the purpose of growing their businesses715 49 732 60 
MezzanineFunds that make investments in the junior debt and equity securities of leveraged companies592 155 598 142 
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 strategies1,920 389 1,829 391 
Total private equity funds8,600 3,931 8,428 4,064 
Hedge funds:
Event-drivenSecurities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations102 — 92 — 
Long-shortSecurities that the manager believes are undervalued, with corresponding short positions to hedge market risk659 — 696 — 
MacroInvestments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions359 — 414 — 
OtherIncludes investments held in funds that are less liquid, as well as other strategies which allow for broader allocation between public and private investments188 — 192 — 
Total hedge funds1,308 — 1,394 — 
Total$9,908 $3,931 $9,822 $4,064 
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
The following table presents the gains or losses recorded related to the eligible instruments for which we elected the fair value option:
Three Months Ended March 31,Gain (Loss)
(in millions)20232022
Assets:
Other bond securities(a)
$136 $(319)
Alternative investments(b)
77 398 
Liabilities:
Long-term debt(c)
(1)103 
Total gain (loss)$212 $182 
(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.
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:
March 31, 2023December 31, 2022
(in millions)Fair ValueOutstanding Principal AmountDifferenceFair ValueOutstanding Principal AmountDifference
Liabilities:
Long-term debt*$72 $60 $12 $56 $45 $11 
*Includes GIAs, notes, bonds, loans and mortgages payable.
FAIR VALUE MEASUREMENTS ON A NON-RECURRING BASIS
The following table presents assets measured at fair value on a non-recurring basis at the time of impairment and the related impairment charges recorded during the periods presented:
Assets at Fair ValueImpairment Charges
Non-Recurring BasisThree Months Ended March 31,
(in millions)Level 1Level 2Level 3Total20232022
March 31, 2023
Other assets$— $— $11 $11 $9 $— 
Total$— $— $11 $11 $9 $— 
December 31, 2022
Other investments$— $— $12 $12 
Total$— $— $12 $12 
In addition to the assets presented in the table above, AIG had $100 million and $163 million of loans held for sale which are carried at fair value at March 31, 2023 and December 31, 2022, respectively. There are no associated impairment charges.
FAIR VALUE INFORMATION ABOUT FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE
The following table presents the carrying amounts and estimated fair values of our financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:
Estimated Fair ValueCarrying
Value
(in millions)Level 1Level 2Level 3Total
March 31, 2023
Assets:
Mortgage and other loans receivable$— $91 $47,719 $47,810 $50,730 
Other invested assets— 865 6 871 870 
Short-term investments— 6,387 — 6,387 6,387 
Cash1,923 — — 1,923 1,923 
Other assets29 1 — 30 30 
Liabilities:
Policyholder contract deposits associated with investment-type contracts— 115 132,903 133,018 138,269 
Fortitude Re funds withheld payable— — 32,231 32,231 32,231 
Other liabilities— 2,614 — 2,614 2,614 
Short-term and long-term debt— 20,096 284 20,380 22,028 
Debt of consolidated investment entities— 1,265 2,624 3,889 3,944 
Separate account liabilities - investment contracts— 83,452 — 83,452 83,452 
December 31, 2022
Assets:
Mortgage and other loans receivable$— $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— 119 129,174 129,293 137,086 
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