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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8787
American International Group, Inc.
(Exact name of registrant as specified in its charter)
| | | | | |
| Delaware | 13-2592361 |
(State or other jurisdiction of
incorporation or organization) | (I.R.S. Employer
Identification No.) |
| |
1271 Avenue of the Americas, New York, New York | 10020 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 770-7000
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Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| | | | | | | | |
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Common Stock, Par Value $2.50 Per Share | AIG | New York Stock Exchange |
| 4.875% Series A-3 Junior Subordinated Debentures | AIG 67EU | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large accelerated filer ☑ | | | | Accelerated filer ☐ |
| Non-accelerated filer ☐ | | | | Smaller reporting company ☐ |
| | | | Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of July 26, 2024, there were 643,951,434 shares outstanding of the registrant’s common stock.
AMERICAN INTERNATIONAL GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024
TABLE OF CONTENTS
FORM 10-Q
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| Item Number | Description | | Page |
Part I – Financial Information | |
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Part II – Other Information |
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AIG | Second Quarter 2024 Form 10-Q | 1 |
| | | | | | | | | | | | | | |
Part I – Financial Information |
Item 1. | Financial Statements
American International Group, Inc.
Condensed Consolidated Balance Sheets (unaudited)
| | | | | | | | | | | | | | |
| (in millions, except for share data) | June 30,
2024 | December 31, 2023 |
| Assets: | | | | |
| Investments: | | | | |
| Fixed maturity securities: | | | | |
Bonds available for sale, at fair value, net of allowance for credit losses of $33 in 2024 and $34 in 2023 (amortized cost: 2024 - $65,326; 2023 - $68,119)* | $ | 62,333 | | $ | 65,242 | |
Other bond securities, at fair value (See Note 6) | | 766 | | | 663 | |
Equity securities, at fair value (See Note 6) | | 688 | | | 665 | |
Mortgage and other loans receivable, net of allowance for credit losses of $37,799 in 2024 and $37,776 in 2023* | | 4,347 | | | 4,441 | |
Other invested assets (portion measured at fair value: 2024 - $12,386; 2023 - $4,175) | | 14,788 | | | 6,368 | |
Short-term investments, including restricted cash of $3 in 2024 and $1 in 2023 (portion measured at fair value: 2024 - $8,137; 2023 - $9,363)* | | 12,563 | | | 12,865 | |
| Total investments | | 95,485 | | | 90,244 | |
| Cash | | 1,381 | | | 1,540 | |
| Accrued investment income* | | 563 | | | 580 | |
Premiums and other receivables, net of allowance for credit losses and disputes of $126 in 2024 and $138 in 2023 | | 11,669 | | | 9,967 | |
Reinsurance assets - Fortitude Re, net of allowance for credit losses and disputes of $0 in 2024 and $0 in 2023 | | 3,592 | | | 3,839 | |
Reinsurance assets - other, net of allowance for credit losses and disputes of $211 in 2024 and $206 in 2023 | | 37,068 | | | 35,293 | |
| Deferred income tax assets | | 5,568 | | | 6,186 | |
| Deferred policy acquisition costs | | 2,123 | | | 2,117 | |
| Goodwill | | 3,407 | | | 3,422 | |
Deposit accounting assets, net of allowance for credit losses of $49 in 2024 and $49 in 2023 | | 2,132 | | | 1,915 | |
| | | | |
Other assets, including restricted cash of $18 in 2024 and $32 in 2023 (portion measured at fair value: 2024 - $189; 2023 - $374)* | | 4,717 | | | 5,425 | |
| | | | |
| Assets held for sale | | 185 | | | 30 | |
| Assets of discontinued operations | | — | | | 378,748 | |
| Total assets | $ | 167,890 | | $ | 539,306 | |
| Liabilities: | | | | |
Liability for unpaid losses and loss adjustment expenses, including allowance for credit losses of $14 in 2024 and $14 in 2023 | $ | 69,783 | | $ | 70,393 | |
| Unearned premiums | | 18,738 | | | 17,375 | |
| Future policy benefits for life and accident and health insurance contracts | | 1,355 | | | 1,467 | |
| | | | |
| | | | |
| Other policyholder funds | | 435 | | | 495 | |
Fortitude Re funds withheld payable (portion measured at fair value: 2024 - $(154); 2023 - $(148)) | | 3,364 | | | 3,527 | |
| Premiums and other related payables | | 7,729 | | | 6,219 | |
| Deposit accounting liabilities | | 2,782 | | | 2,612 | |
| Commissions and premium taxes payable | | 1,395 | | | 1,351 | |
| Current and deferred income tax liabilities | | 375 | | | 347 | |
Other liabilities (portion measured at fair value: 2024 - $323; 2023 - $482) | | 7,366 | | | 7,496 | |
| Long-term debt | | 9,861 | | | 10,375 | |
| Debt of consolidated investment entities* | | 79 | | | 231 | |
| | | | |
| Liabilities held for sale | | 153 | | | 28 | |
| Liabilities of discontinued operations | | — | | | 366,089 | |
| Total liabilities | | 123,415 | | | 488,005 | |
Contingencies, commitments and guarantees (See Note 13) | | | | |
| AIG shareholders’ equity: | | | | |
Series A non-cumulative preferred stock and additional paid in capital, $5.00 par value; 100,000,000 shares authorized; shares issued: 2024 - 0 and 2023 - 20,000; liquidation preference $500 | | — | | | 485 | |
Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued: 2024 - 1,906,671,492 and 2023 - 1,906,671,492 | | 4,766 | | | 4,766 | |
Treasury stock, at cost; 2024 - 1,256,808,687 shares; 2023 - 1,217,831,721 shares of common stock | | (62,255) | | | (59,189) | |
| Additional paid-in capital | | 75,274 | | | 75,810 | |
| Retained earnings | | 34,225 | | | 37,516 | |
| Accumulated other comprehensive loss | | (7,565) | | | (14,037) | |
| Total AIG shareholders’ equity | | 44,445 | | | 45,351 | |
| Non-redeemable noncontrolling interests | | 30 | | | 5,950 | |
| Total equity | | 44,475 | | | 51,301 | |
| Total liabilities and equity | $ | 167,890 | | $ | 539,306 | |
*See Note 10 for details of balances associated with variable interest entities.
See accompanying Notes to Condensed Consolidated Financial Statements.
| | | | | |
2 | AIG | Second Quarter 2024 Form 10-Q |
American International Group, Inc.
Condensed Consolidated Statements of Income (Loss) (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (dollars in millions, except per common share data) | | 2024 | | 2023 | | | 2024 | | 2023 | | |
| Revenues: | | | | | | | | | | | |
| Premiums | $ | 5,748 | | $ | 6,614 | | | $ | 11,619 | | $ | 12,990 | | | |
| | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | |
| Net investment income - excluding Fortitude Re funds withheld assets | | 957 | | | 812 | | | | 1,897 | | | 1,604 | | | |
| Net investment income - Fortitude Re funds withheld assets | | 33 | | | 25 | | | | 72 | | | 77 | | | |
| Total net investment income | | 990 | | | 837 | | | | 1,969 | | | 1,681 | | | |
| Net realized gains (losses): | | | | | | | | | | | |
| Net realized losses - excluding Fortitude Re funds withheld assets and embedded derivative | | (187) | | | (65) | | | | (246) | | | (382) | | | |
| Net realized losses on Fortitude Re funds withheld assets | | (1) | | | (7) | | | | (20) | | | (61) | | | |
| Net realized gains (losses) on Fortitude Re funds withheld embedded derivative | | 8 | | | 58 | | | | (1) | | | (82) | | | |
| Total net realized losses | | (180) | | | (14) | | | | (267) | | | (525) | | | |
| Other income | | 2 | | | (1) | | | | 2 | | | (1) | | | |
| Total revenues | | 6,560 | | | 7,436 | | | | 13,323 | | | 14,145 | | | |
| Benefits, losses and expenses: | | | | | | | | | | | |
| Losses and loss adjustment expenses incurred | | 3,467 | | | 3,979 | | | | 6,980 | | | 7,883 | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Amortization of deferred policy acquisition costs | | 842 | | | 933 | | | | 1,680 | | | 1,972 | | | |
| General operating and other expenses | | 1,610 | | | 1,494 | | | | 2,848 | | | 2,737 | | | |
| Interest expense | | 125 | | | 129 | | | | 241 | | | 253 | | | |
| Loss on extinguishment of debt | | 1 | | | — | | | | 1 | | | — | | | |
| Net (gain) loss on divestitures and other | | (102) | | | 15 | | | | (102) | | | 12 | | | |
| Total benefits, losses and expenses | | 5,943 | | | 6,550 | | | | 11,648 | | | 12,857 | | | |
| Income from continuing operations before income tax expense | | 617 | | | 886 | | | | 1,675 | | | 1,288 | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Income tax expense | | 142 | | | 45 | | | | 403 | | | 110 | | | |
| Income from continuing operations | | 475 | | | 841 | | | | 1,272 | | | 1,178 | | | |
| Income (loss) from discontinued operations, net of income taxes | | (4,359) | | | 850 | | | | (3,556) | | | 426 | | | |
| Net income (loss) | | (3,884) | | | 1,691 | | | | (2,284) | | | 1,604 | | | |
| Less: Net income (loss) attributable to noncontrolling interests | | 93 | | | 198 | | | | 477 | | | 81 | | | |
| Net income (loss) attributable to AIG | | (3,977) | | | 1,493 | | | | (2,761) | | | 1,523 | | | |
| Less: Dividends on preferred stock and preferred stock redemption premiums | | — | | | 8 | | | | 22 | | | 15 | | | |
| Net income (loss) attributable to AIG common shareholders | $ | (3,977) | | $ | 1,485 | | | $ | (2,783) | | $ | 1,508 | | | |
| Income per common share attributable to AIG common shareholders: | | | | | | | | | | | |
| Basic: | | | | | | | | | | | |
| Income from continuing operations | $ | 0.72 | | $ | 1.15 | | | $ | 1.86 | | $ | 1.59 | | | |
| Income (loss) from discontinued operations | $ | (6.74) | | $ | 0.90 | | | $ | (6.00) | | $ | 0.47 | | | |
| Net income (loss) attributable to AIG common shareholders | $ | (6.02) | | $ | 2.05 | | | $ | (4.14) | | $ | 2.06 | | | |
| Diluted: | | | | | | | | | | | |
| Income from continuing operations | $ | 0.71 | | $ | 1.14 | | | $ | 1.85 | | $ | 1.58 | | | |
| Income (loss) from discontinued operations | $ | (6.67) | | $ | 0.89 | | | $ | (5.96) | | $ | 0.47 | | | |
| Net income (loss) attributable to AIG common shareholders | $ | (5.96) | | $ | 2.03 | | | $ | (4.11) | | $ | 2.05 | | | |
| Weighted average shares outstanding: | | | | | | | | | | | |
| Basic | | 661,092,967 | | | 725,754,549 | | | | 671,834,907 | | | 732,175,533 | | | |
| Diluted | | 666,955,168 | | | 730,547,112 | | | | 677,458,343 | | | 737,290,694 | | | |
See accompanying Notes to Condensed Consolidated Financial Statements.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 3 |
American International Group, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended | |
| June 30, | | June 30, |
| (in millions) | | 2024 | | 2023 | | | 2024 | | 2023 | | |
| Net income (loss) | $ | (3,884) | | $ | 1,691 | | | $ | (2,284) | | $ | 1,604 | | | |
| Other comprehensive income (loss), net of tax | | | | | | | | | | | |
| Change in unrealized appreciation of fixed maturity securities on which allowance for credit losses was taken | | 5 | | | 29 | | | | 26 | | | 17 | | | |
| Change in unrealized appreciation (depreciation) of all other investments | | (160) | | | (591) | | | | (275) | | | 528 | | | |
| | | | | | | | | | | |
| Change in the discount rates used to measure traditional and limited payment long-duration insurance contracts | | (92) | | | (77) | | | | (90) | | | (14) | | | |
| Change in foreign currency translation adjustments | | 35 | | | (64) | | | | (310) | | | (107) | | | |
| Change in retirement plan liabilities adjustment | | 10 | | | 52 | | | | 17 | | | 78 | | | |
| Change in other comprehensive income (loss) related to discontinued operations | | (318) | | | (1,087) | | | | (945) | | | 1,673 | | | |
| Corebridge Deconsolidation | | 7,214 | | | — | | | | 7,214 | | | — | | | |
| | | | | | | | | | | |
| Other comprehensive income (loss) | | 6,694 | | | (1,738) | | | | 5,637 | | | 2,175 | | | |
| Comprehensive income (loss) | | 2,810 | | | (47) | | | | 3,353 | | | 3,779 | | | |
| Comprehensive income (loss) attributable to noncontrolling interests | | 93 | | | (60) | | | | 179 | | | 449 | | | |
| Comprehensive income (loss) attributable to AIG | $ | 2,717 | | $ | 13 | | | $ | 3,174 | | $ | 3,330 | | | |
See accompanying Notes to Condensed Consolidated Financial Statements.
| | | | | |
4 | AIG | Second Quarter 2024 Form 10-Q |
American International Group, Inc.
Condensed Consolidated Statements of Equity (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions, except per share data) | Preferred
Stock and
Additional
Paid-in
Capital | | Common
Stock | | Treasury
Stock | | Additional
Paid-in
Capital | | Retained
Earnings | Accumulated
Other
Comprehensive
Income (Loss) | Total
AIG
Share-
holders'
Equity | Non- redeemable Non-
controlling Interests | | Total
Equity |
| Three Months Ended June 30, 2024 | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | — | | $ | 4,766 | | $ | (60,603) | | $ | 75,625 | | $ | 38,466 | | $ | (14,869) | | $ | 43,385 | | $ | 5,725 | | $ | 49,110 | |
| Common stock issued under stock plans | | — | | | — | | | 25 | | | (15) | | | — | | | — | | | 10 | | | — | | | 10 | |
| Purchase of common stock | | — | | | — | | | (1,677) | | | — | | | — | | | — | | | (1,677) | | | — | | | (1,677) | |
| Net income (loss) attributable to AIG or noncontrolling interests | | — | | | — | | | — | | | — | | | (3,977) | | | — | | | (3,977) | | | 93 | | | (3,884) | |
| | | | | | | | | | | | | | | | | | |
Dividends on common stock ($0.40 per share) | | — | | | — | | | — | | | — | | | (261) | | | — | | | (261) | | | — | | | (261) | |
| Other comprehensive income | | — | | | — | | | — | | | — | | | — | | | 6,694 | | | 6,694 | | | — | | | 6,694 | |
| Net decrease due to divestitures and acquisitions | | — | | | — | | | — | | | (408) | | | — | | | 610 | | | 202 | | | (5,802) | | | (5,600) | |
| Contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 17 | | | 17 | |
| Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2) | | | (2) | |
| Other | | — | | | — | | | — | | | 72 | | | (3) | | | — | | | 69 | | | (1) | | | 68 | |
| Balance, end of period | $ | — | | $ | 4,766 | | $ | (62,255) | | $ | 75,274 | | $ | 34,225 | | $ | (7,565) | | $ | 44,445 | | $ | 30 | | $ | 44,475 | |
| | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2023 | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 485 | | $ | 4,766 | | $ | (56,857) | | $ | 79,562 | | $ | 34,690 | $ | (19,329) | | $ | 43,317 | | $ | 2,989 | | $ | 46,306 | |
| Common stock issued under stock plans | | — | | | — | | | 11 | | | (4) | | | — | | | — | | | 7 | | | — | | | 7 | |
| Purchase of common stock | | — | | | — | | | (562) | | | — | | | — | | | — | | | (562) | | | — | | | (562) | |
| Net income attributable to AIG or noncontrolling interests | | — | | | — | | | — | | | — | | | 1,493 | | | — | | | 1,493 | | | 198 | | | 1,691 | |
Dividends on preferred stock ($365.625 per share) | | — | | | — | | | — | | | — | | | (8) | | | — | | | (8) | | | — | | | (8) | |
Dividends on common stock ($0.36 per share) | | — | | | — | | | — | | | — | | | (260) | | | — | | | (260) | | | — | | | (260) | |
| Other comprehensive loss | | — | | | — | | | — | | | — | | | — | | | (1,480) | | | (1,480) | | | (258) | | | (1,738) | |
| Net increase (decrease) due to divestitures and acquisitions | | — | | | — | | | — | | | (1,913) | | | — | | | 1,827 | | | (86) | | | 1,261 | | | 1,175 | |
| Contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 11 | | | 11 | |
| Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (194) | | | (194) | |
| Other | | — | | | — | | | — | | | 32 | | | 1 | | | — | | | 33 | | | 30 | | | 63 | |
| Balance, end of period | $ | 485 | | $ | 4,766 | | $ | (57,408) | | $ | 77,677 | | $ | 35,916 | | $ | (18,982) | | $ | 42,454 | | $ | 4,037 | | $ | 46,491 | |
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 5 |
American International Group, Inc.
Condensed Consolidated Statements of Equity (unaudited)(continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions, except per share data) | Preferred
Stock and
Additional
Paid-in
Capital | | Common
Stock | | Treasury
Stock | | Additional
Paid-in
Capital | | Retained
Earnings | Accumulated
Other
Comprehensive
Income (Loss) | | Total
AIG
Share-
holders'
Equity | Non- redeemable Non-
controlling Interests | | Total
Equity |
| Six Months Ended June 30, 2024 | | | | | | | | | | | | | | | | | | |
| Balance, beginning of the year | $ | 485 | | $ | 4,766 | | $ | (59,189) | | $ | 75,810 | | $ | 37,516 | | $ | (14,037) | | $ | 45,351 | | $ | 5,950 | | $ | 51,301 | |
| | | | | | | | | | | | | | | | | | |
| Common stock issued under stock plans | | — | | | — | | | 293 | | | (310) | | | — | | | — | | | (17) | | | — | | | (17) | |
| Redemption of preferred stock | | (485) | | | — | | | — | | | — | | | — | | | — | | | (485) | | | — | | | (485) | |
| Purchase of common stock | | — | | | — | | | (3,359) | | | — | | | — | | | — | | | (3,359) | | | — | | | (3,359) | |
| Net income (loss) attributable to AIG or noncontrolling interests | | — | | | — | | | — | | | — | | | (2,761) | | | — | | | (2,761) | | | 477 | | | (2,284) | |
Dividends on preferred stock ($365.625 per share) and preferred stock redemption premiums | | — | | | — | | | — | | | — | | | (22) | | | — | | | (22) | | | — | | | (22) | |
Dividends on common stock ($0.76 per share) | | — | | | — | | | — | | | — | | | (504) | | | — | | | (504) | | | — | | | (504) | |
| Other comprehensive income (loss) | | — | | | — | | | — | | | — | | | — | | | 5,935 | | | 5,935 | | | (298) | | | 5,637 | |
| Net increase (decrease) due to divestitures and acquisitions | | — | | | — | | | — | | | (418) | | | — | | | 537 | | | 119 | | | (6,004) | | | (5,885) | |
| Contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 28 | | | 28 | |
| Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (72) | | | (72) | |
| Other | | — | | | — | | | — | | | 192 | | | (4) | | | — | | | 188 | | | (51) | | | 137 | |
| Balance, end of period | $ | — | | $ | 4,766 | | $ | (62,255) | | $ | 75,274 | | $ | 34,225 | | $ | (7,565) | | $ | 44,445 | | $ | 30 | | $ | 44,475 | |
| | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2023 | | | | | | | | | | | | | | | | | | |
| Balance, beginning of year | $ | 485 | | $ | 4,766 | | $ | (56,473) | | $ | 79,915 | | $ | 34,893 | | $ | (22,616) | | $ | 40,970 | | $ | 2,484 | | $ | 43,454 | |
| | | | | | | | | | | | | | | | | | |
| Common stock issued under stock plans | | — | | | — | | | 230 | | | (370) | | | — | | | — | | | (140) | | | — | | | (140) | |
| Purchase of common stock | | — | | | — | | | (1,165) | | | — | | | — | | | — | | | (1,165) | | | — | | | (1,165) | |
| Net income attributable to AIG or noncontrolling interests | | — | | | — | | | — | | | — | | | 1,523 | | | — | | | 1,523 | | | 81 | | | 1,604 | |
Dividends on preferred stock ($731.25 per share) | | — | | | — | | | — | | | — | | | (15) | | | — | | | (15) | | | — | | | (15) | |
Dividends on common stock ($0.68 per share) | | — | | | — | | | — | | | — | | | (494) | | | — | | | (494) | | | — | | | (494) | |
| Other comprehensive income | | — | | | — | | | — | | | — | | | — | | | 1,807 | | | 1,807 | | | 368 | | | 2,175 | |
| Net increase (decrease) due to divestitures and acquisitions | | — | | | — | | | — | | | (1,913) | | | — | | | 1,827 | | | (86) | | | 1,261 | | | 1,175 | |
| Contributions from noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 27 | | | 27 | |
| Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (252) | | | (252) | |
| Other | | — | | | — | | | — | | | 45 | | | 9 | | | — | | | 54 | | | 68 | | | 122 | |
| Balance, end of period | $ | 485 | | $ | 4,766 | | $ | (57,408) | | $ | 77,677 | | $ | 35,916 | | $ | (18,982) | | $ | 42,454 | | $ | 4,037 | | $ | 46,491 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
See accompanying Notes to Condensed Consolidated Financial Statements.
| | | | | |
6 | AIG | Second Quarter 2024 Form 10-Q |
American International Group, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
| | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| (in millions) | | 2024 | | 2023 | | |
| Cash flows from operating activities: | | | | | | |
| Net income (loss) | $ | (2,284) | | $ | 1,604 | | | |
| (Income) loss from discontinued operations | | 3,556 | | | (426) | | | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | |
| Noncash revenues, expenses, gains and losses included in income (loss): | | | | | | |
| Net losses on sales of securities available for sale and other assets | | 259 | | | 452 | | | |
| Net (gain) loss on divestitures and other | | (102) | | | 12 | | | |
| (Gain) loss on extinguishment of debt | | 1 | | | — | | | |
| Unrealized gains in earnings - net | | (349) | | | (33) | | | |
| | | | | | |
| Equity in (income) loss from equity method investments, net of dividends or distributions | | (46) | | | 18 | | | |
| Depreciation and other amortization | | 1,751 | | | 2,024 | | | |
| Impairments of assets | | 26 | | | 12 | | | |
| Changes in operating assets and liabilities: | | | | | | |
| Insurance reserves | | 2,082 | | | 3,174 | | | |
| Premiums and other receivables and payables - net | | (544) | | | (936) | | | |
| Reinsurance assets, net | | (1,748) | | | (2,551) | | | |
| Capitalization of deferred policy acquisition costs | | (1,803) | | | (2,396) | | | |
| Current and deferred income taxes - net | | (63) | | | (124) | | | |
| Other, net | | 817 | | | 603 | | | |
| Total adjustments | | 281 | | | 255 | | | |
| Net cash provided by operating activities - continuing operations | | 1,553 | | | 1,433 | | | |
| Net cash used in operating activities - discontinued operations | | (104) | | | (322) | | | |
| Net cash provided by operating activities | | 1,449 | | | 1,111 | | | |
| Cash flows from investing activities: | | | | | | |
| Proceeds from (payments for) | | | | | | |
| Sales or distributions of: | | | | | | |
| Available for sale securities | | 5,148 | | | 10,704 | | | |
| Other securities | | 112 | | | 157 | | | |
| Other invested assets | | 763 | | | 407 | | | |
| Divestitures, net | | — | | | 3 | | | |
| Maturities of fixed maturity securities available for sale | | 4,938 | | | 4,376 | | | |
| Principal payments received on and sales of mortgage and other loans receivable | | 266 | | | 587 | | | |
| Purchases of: | | | | | | |
| Available for sale securities | | (7,987) | | | (15,417) | | | |
| Other securities | | (180) | | | (163) | | | |
| Other invested assets | | (218) | | | (338) | | | |
| Mortgage and other loans receivable | | (239) | | | (601) | | | |
| Net change in short-term investments | | 323 | | | 1,138 | | | |
| Other, net | | (51) | | | (662) | | | |
| Net cash provided by investing activities - continuing operations | | 2,875 | | | 191 | | | |
| Net cash used in investing activities - discontinued operations | | (4,171) | | | (832) | | | |
| Net cash used in investing activities | | (1,296) | | | (641) | | | |
| Cash flows from financing activities: | | | | | | |
| Proceeds from (payments for) | | | | | | |
| | | | | | |
| | | | | | |
| Issuance of long-term debt | | 1 | | | 742 | | | |
| | | | | | |
| Repayments of long-term debt | | (464) | | | (451) | | | |
| Repayments of debt of consolidated investment entities | | — | | | (3) | | | |
| | | | | | |
| | | | | | |
| Purchase of common stock | | (3,325) | | | (1,117) | | | |
| Redemption of preferred stock | | (485) | | | — | | | |
| Dividends on preferred stock and preferred stock redemption premiums | | (22) | | | (15) | | | |
| Dividends on common stock | | (504) | | | (494) | | | |
| Other, net | | 242 | | | 723 | | | |
| Net cash used in financing activities - continuing operations | | (4,557) | | | (615) | | | |
| Net cash provided by financing activities - discontinued operations | | 4,409 | | | 500 | | | |
| Net cash used in financing activities | | (148) | | | (115) | | | |
| Effect of exchange rate changes on cash and restricted cash | | (66) | | | 18 | | | |
| Net increase (decrease) in cash and restricted cash | | (61) | | | 373 | | | |
| Cash and restricted cash at beginning of year | | 1,573 | | | 1,571 | | | |
| Cash and restricted cash of held for sale assets | | (110) | | | (384) | | | |
| Cash and restricted cash at end of period | $ | 1,402 | | $ | 1,560 | | | |
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 7 |
American International Group, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)(continued)
Supplementary Disclosure of Condensed Consolidated Cash Flow Information
| | | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| (in millions) | | 2024 | | 2023 | | |
| Cash | | $ | 1,381 | | | $ | 1,531 | | | |
| Restricted cash included in Short-term investments* | | 3 | | | 3 | | | |
| Restricted cash included in Other assets* | | 18 | | | 26 | | | |
| Total cash and restricted cash shown in the Condensed Consolidated Statements of Cash Flows | | $ | 1,402 | | | $ | 1,560 | | | |
| Cash paid during the period for: | | | | | | |
| Interest | | $ | 470 | | | $ | 636 | | | |
| Taxes | | $ | 709 | | | $ | 368 | | | |
| Non-cash investing activities: | | | | | | |
| Fixed maturity securities available for sale received in connection with pension risk transfer transactions | | $ | 1,316 | | | $ | 2,818 | | | |
| Fixed maturity securities and other invested assets received in connection with reinsurance transactions | | $ | 254 | | | $ | — | | | |
| Fixed maturity securities and other invested assets transferred in connection with reinsurance transactions | | $ | (148) | | | $ | (714) | | | |
| | | | | | |
| Non-cash financing activities: | | | | | | |
| Interest credited to policyholder contract deposits included in financing activities | | $ | 2,416 | | | $ | 2,145 | | | |
| Fee income debited to policyholder contract deposits included in financing activities | | $ | (1,426) | | | $ | (1,044) | | | |
*Includes funds held for tax sharing payments to AIG Parent, security deposits, and replacement reserve deposits related to real estate.
See accompanying Notes to Condensed Consolidated Financial Statements.
| | | | | |
8 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 1. Basis of Presentation
1. Basis of Presentation
American International Group, Inc. (AIG) is a leading global insurance organization. AIG provides insurance solutions that help businesses and individuals in approximately 190 countries and jurisdictions protect their assets and manage risks through AIG operations and network partners. Unless the context indicates otherwise, the terms “AIG,” “we,” “us,” “our” or "the Company" mean American International Group, Inc. and its consolidated subsidiaries, and the term “AIG Parent” means American International Group, Inc. and not any of its consolidated subsidiaries.
These unaudited Condensed Consolidated Financial Statements do not include all disclosures that are normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) and should be read in conjunction with the audited Consolidated Financial Statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the 2023 Annual Report). The condensed consolidated financial information as of December 31, 2023 included herein has been derived from the audited Consolidated Financial Statements in the 2023 Annual Report.
In the opinion of management, these Condensed Consolidated Financial Statements contain normal recurring adjustments, including eliminations of material intercompany accounts and transactions, necessary for a fair statement of the results presented herein. Operating results for the six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
We evaluated the need to recognize or disclose events that occurred subsequent to June 30, 2024 and prior to the issuance of these Condensed Consolidated Financial Statements. Prior year Condensed Consolidated Financial Statements have been reclassified for comparative purpose to conform with the captions presented in the current year.
SALES/DISPOSALS OF ASSETS AND BUSINESSES
Global Personal Travel Business
On June 26, 2024, AIG announced that it has entered into a definitive agreement to sell its global individual personal travel insurance and assistance business to Zurich Insurance Group for $600 million in cash plus additional earn-out consideration. The sale is expected to close by the end of 2024, subject to customary closing conditions, including the receipt of regulatory approvals. For further details, see Note 4.
Separation of Life and Retirement Business
For further details, see Note 4.
USE OF ESTIMATES
The preparation of financial statements in accordance with U.S. GAAP requires the application of accounting policies that often involve a significant degree of judgment. Accounting policies that we believe are most dependent on the application of estimates and assumptions are considered our critical accounting estimates and are related to the determination of:
•loss reserves;
•reinsurance assets, including the allowance for credit losses and disputes;
•goodwill impairment;
•allowance for credit losses on certain investments, primarily on loans and available for sale fixed maturity securities;
•fair value measurements of certain financial assets and financial liabilities; and
•income taxes, in particular the recoverability of our deferred tax asset and establishment of provisions for uncertain tax positions.
These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial condition, results of operations and cash flows could be materially affected.
Certain critical accounting estimates were eliminated as a result of the Corebridge deconsolidation. There were no changes to the remaining critical accounting estimates. For further details, see Note 4.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 9 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 2. Summary of Significant Accounting Policies
2. Summary of Significant Accounting Policies
ACCOUNTING STANDARDS ADOPTED DURING 2024
Fair Value Measurement
On June 30, 2022, the Financial Accounting Standards Board (FASB) issued an accounting standards update to address diversity in practice by clarifying that a contractual sale restriction should not be considered in the measurement of the fair value of an equity security. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities. The Company adopted the standard on January 1, 2024, prospectively for entities other than investment companies. The adoption of the standard did not have a material impact on AIG Consolidated Financial Statements.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
Income Tax
In December 2023, the FASB issued an accounting standard update to address improvements to income tax disclosures. The standard requires disaggregated information about a company’s effective tax rate reconciliation as well as information on income taxes paid. The standard is effective for public companies for annual periods beginning after December 15, 2024, with early adoption permitted. The standard should be applied on a prospective basis, but retrospective application is permitted. We are assessing the impact of this standard.
Segment Reporting
In November 2023, the FASB issued an accounting standard update to address improvements to reportable segment disclosures. The standard primarily requires the following disclosure on an annual and interim basis: (i) significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss; and (ii) other segment items and description of its composition. The standard also requires current annual disclosures about a reportable segment's profits or losses and assets to be disclosed in interim periods and the title and position of the CODM with an explanation of how the CODM uses the reported measure(s) of segment profits or losses in assessing segment performance. The guidance is effective for public companies for fiscal years beginning after December 15, 2023 and interim periods in fiscal years within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment will be applied retrospectively to all prior periods presented. We are assessing the impact of this standard.
3. Segment Information
As a result of the Corebridge deconsolidation, we no longer present a Life and Retirement segment and no longer include asset management and Corebridge Life Holdings, Inc. interest and general expenses within the Other Operations segment. Historical results of Other Operations have been revised to reflect these changes. Previously reported results for the General Insurance segment were not impacted by the Corebridge deconsolidation. For further details on the separation of the Life and Retirement business, see Note 4.
As presented herein and reflecting the Corebridge deconsolidation, we report our results of operations consistent with the manner in which our chief operating decision makers review the business to assess performance and allocate resources, as follows:
GENERAL INSURANCE
General Insurance business is presented as two operating segments:
•North America – consists of insurance businesses in the United States, Canada and Bermuda.
•International – consists of regional insurance businesses in Japan, the United Kingdom, Europe, Middle East and Africa (EMEA region), Asia Pacific, Latin America and Caribbean, and China. International also includes the results of Talbot Underwriting Ltd. as well as AIG’s Global Specialty business.
| | | | | |
10 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 3. Segment Information
North America and International operating segments consist of the following products:
–Commercial Lines – consists of Property, Liability, Financial Lines and Specialty.
–Personal Insurance – consists of Accident & Health and Personal Lines.
For further discussion on recent activity in the General Insurance business, see Note 1 and Note 4 herein and Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
OTHER OPERATIONS
Other Operations primarily consists of income and expenses from assets, including AIG's ownership of Corebridge, held by AIG Parent and other corporate subsidiaries, deferred tax assets related to tax attributes, corporate expenses and intercompany eliminations, results of our consolidated investment entities, General Insurance portfolios in run-off as well as the historical results of our legacy insurance lines ceded to Fortitude Reinsurance Company Ltd. (Fortitude Re).
SEGMENT RESULTS
We evaluate segment performance based on adjusted revenues and adjusted pre-tax income (loss). Adjusted revenues and adjusted pre-tax income (loss) are derived by excluding certain items from total revenues and income (loss) from continuing operations before income tax expense (pre-tax income (loss)), respectively. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to our current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and measures that we believe to be common to the industry. Legal entities are attributed to each segment based upon the predominance of activity in that legal entity. For the items excluded from adjusted revenues and adjusted pre-tax income (loss), see the table below.
The following table presents AIG’s continuing operations by operating segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | 2024 | | | 2023 | |
| (in millions) | | Adjusted
Revenues | | Adjusted
Pre-tax
Income
(Loss) | | | | Adjusted
Revenues | | Adjusted
Pre-tax
Income
(Loss) | |
| General Insurance | | | | | | | | | | | |
| North America | $ | 2,470 | | $ | 163 | | (a) | | $ | 3,195 | | $ | 352 | | (a) |
| International | | 3,279 | | | 267 | | (a) | | | 3,302 | | | 242 | | (a) |
| Net investment income | | 746 | | | 746 | | | | | 725 | | | 725 | | |
| Total General Insurance | | 6,495 | | | 1,176 | | | | | 7,222 | | | 1,319 | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Other Operations | | | | | | | | | | | |
| Other Operations before consolidation and eliminations | | 144 | | | (158) | | | | | 173 | | | (270) | | |
| Consolidation and eliminations | | (5) | | | — | | | | | (17) | | | (8) | | |
| Total Other Operations | | 139 | | | (158) | | | | | 156 | | | (278) | | |
| Total | | 6,634 | | | 1,018 | | | | | 7,378 | | | 1,041 | | |
| Reconciling items: | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Changes in the fair values of equity securities and AIG's investment in Corebridge | | 59 | | | 59 | | | | | 41 | | | 41 | | |
| Other income (expense) - net | | 15 | | | — | | | | | 8 | | | — | | |
| Gain (loss) on extinguishment of debt | | — | | | (1) | | | | | — | | | — | | |
| Net investment income on Fortitude Re funds withheld assets | | 33 | | | 33 | | | | | 25 | | | 25 | | |
| Net realized losses on Fortitude Re funds withheld assets | | (1) | | | (1) | | | | | (7) | | | (7) | | |
| Net realized gains on Fortitude Re funds withheld embedded derivative | | 8 | | | 8 | | | | | 58 | | | 58 | | |
Net realized losses(b) | | (188) | | | (186) | | | | | (67) | | | (64) | | |
| Net gain (loss) on divestitures and other | | — | | | 102 | | | | | — | | | (15) | | |
| Non-operating litigation reserves and settlements | | — | | | — | | | | | — | | | (1) | | |
| Favorable prior year development and related amortization changes ceded under retroactive reinsurance agreements | | — | | | 62 | | | | | — | | | 18 | | |
| Net loss reserve discount charge | | — | | | (26) | | | | | — | | | (16) | | |
| Pension expense related to lump sum payments to former employees | | — | | | — | | | | | — | | | (54) | | |
| Integration and transaction costs associated with acquiring or divesting businesses | | — | | | (18) | | | | | — | | | (8) | | |
Restructuring and other costs(c) | | — | | | (426) | | | | | — | | | (125) | | |
| Non-recurring costs related to regulatory or accounting changes | | — | | | (7) | | | | | — | | | (7) | | |
| Revenues and pre-tax income | $ | 6,560 | | $ | 617 | | | | $ | 7,436 | | $ | 886 | | |
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 11 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 3. Segment Information
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | 2024 | | | 2023 | |
| (in millions) | | Adjusted
Revenues | | | | | | Adjusted
Pre-tax
Income
(Loss) | | | | Adjusted
Revenues | | Adjusted
Pre-tax
Income
(Loss) | |
| | | | | | | | | | | | | | | | | |
| General Insurance | | | | | | | | | | | | | | | | | |
| North America | $ | 4,972 | | | | | | | | $ | 387 | | (a) | | $ | 6,175 | | $ | 651 | | (a) |
| International | | 6,563 | | | | | | | | | 639 | | (a) | | | 6,581 | | | 445 | | (a) |
| Net investment income | | 1,508 | | | | | | | | | 1,508 | | | | | 1,471 | | | 1,471 | | |
| Total General Insurance | | 13,043 | | | | | | | | | 2,534 | | | | | 14,227 | | | 2,567 | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Other Operations | | | | | | | | | | | | | | | | | |
| Other Operations before consolidation and eliminations | | 308 | | | | | | | | | (355) | | | | | 319 | | | (544) | | |
| AIG consolidation and eliminations | | (3) | | | | | | | | | (1) | | | | | (39) | | | (13) | | |
| Total Other Operations | | 305 | | | | | | | | | (356) | | | | | 280 | | | (557) | | |
| Total | | 13,348 | | | | | | | | | 2,178 | | | | | 14,507 | | | 2,010 | | |
| Reconciling items: | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Changes in the fair values of equity securities and AIG's investment in Corebridge | | 147 | | | | | | | | | 147 | | | | | 62 | | | 62 | | |
| Other income (expense) - net | | 17 | | | | | | | | | — | | | | | 23 | | | — | | |
| Gain (loss) on extinguishment of debt | | — | | | | | | | | | (1) | | | | | — | | | — | | |
| Net investment income on Fortitude Re funds withheld assets | | 72 | | | | | | | | | 72 | | | | | 77 | | | 77 | | |
| Net realized losses on Fortitude Re funds withheld assets | | (20) | | | | | | | | | (20) | | | | | (61) | | | (61) | | |
| Net realized losses on Fortitude Re funds withheld embedded derivative | | (1) | | | | | | | | | (1) | | | | | (82) | | | (82) | | |
Net realized losses(b) | | (240) | | | | | | | | | (241) | | | | | (386) | | | (383) | | |
| Net gain (loss) on divestitures and other | | — | | | | | | | | | 102 | | | | | — | | | (12) | | |
| Non-operating litigation reserves and settlements | | — | | | | | | | | | — | | | | | 1 | | | — | | |
| (Unfavorable) favorable prior year development and related amortization changes ceded under retroactive reinsurance agreements | | — | | | | | | | | | 60 | | | | | — | | | 37 | | |
| Net loss reserve discount benefit (charge) | | — | | | | | | | | | (102) | | | | | — | | | (80) | | |
| Pension expense related to lump sum payments to former employees | | — | | | | | | | | | — | | | | | — | | | (54) | | |
| Integration and transaction costs associated with acquiring or divesting businesses | | — | | | | | | | | | (15) | | | | | — | | | (8) | | |
| Restructuring and other costs | | — | | | | | | | | | (493) | | | | | — | | | (215) | | |
| Non-recurring costs related to regulatory or accounting changes | | — | | | | | | | | | (11) | | | | | — | | | (15) | | |
Net impact from elimination of international reporting lag(d) | | — | | | | | | | | | — | | | | | 4 | | | 12 | | |
| Revenues and pre-tax income | $ | 13,323 | | | | | | | | $ | 1,675 | | | | $ | 14,145 | | $ | 1,288 | | |
(a)General Insurance North America’s and General Insurance International’s Adjusted pre-tax income does not include Net investment income as the investment portfolio results are managed at the General Insurance level. Net investment income is shown separately as a component of General Insurance’s total Adjusted pre-tax income results.
(b)Includes all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication and net realized gains and losses on Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG (Fortitude Re funds withheld assets).
(c)In the second quarter of 2024, Restructuring and other costs increased primarily as a result of employee-related costs, including severance, and real estate impairment charges.
(d)For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
For the three months ended June 30, 2024, we recorded a severance charge of $285 million and asset impairment of $53 million as a result of restructuring activities.
4. Held-For-Sale Classification & Discontinued Operations Presentation
HELD-FOR-SALE CLASSIFICATION
We report and classify a business or a component of an entity as held-for-sale (Held-For-Sale Business) when management has approved the sale or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the next 12 months and certain other specified criteria are met. A Held-For-Sale Business is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized.
Assets and liabilities related to a Held-For-Sale Business are reported in Assets held for sale and Liabilities held for sale, respectively, in our Condensed Consolidated Balance Sheets beginning in the period in which the business is classified as held-for-sale. At June 30, 2024, businesses and assets reported and classified as held-for-sale primarily consisted of our global individual personal travel insurance and assistance business and did not meet the criteria for discontinued operations.
| | | | | |
12 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Held-For-Sale Classification & Discontinued Operations Presentation
Nippon Sale
On May 16, 2024, AIG entered into a stock purchase agreement with Corebridge Financial, Inc. (Corebridge), the holding company for AIG's Life and Retirement business, and Nippon Life Insurance Company, a mutual company (sougogaisha) organized under the laws of Japan (Nippon), pursuant to which AIG agreed to sell 121,956,256 shares of common stock of Corebridge, representing approximately 20 percent of the issued and outstanding common stock at signing, to Nippon for aggregate consideration of $3.8 billion in cash. The transaction is expected to close in the first quarter of 2025, subject to certain closing conditions, including the receipt of regulatory approvals. As a result, Corebridge met the criteria to be presented as held for sale and discontinued operations. However, on June 9, 2024, AIG met the requirements for the deconsolidation of Corebridge. For further details, see Discontinued Operations Presentation below.
Global Personal Travel Business
On June 26, 2024, AIG entered into a definitive agreement to sell its global individual personal travel insurance and assistance business to Zurich Insurance Group for $600 million in cash plus additional earn-out consideration. The agreement includes the Travel Guard business and its servicing capabilities, excluding our travel insurance businesses in Japan and our AIG joint venture arrangement in India. Travel coverages offered through AIG’s Accident & Health business are also excluded from this agreement. The sale is expected to close by the end of 2024, subject to customary closing conditions, including regulatory approvals. The results of our global individual personal travel insurance and assistance business are reported in General Insurance.
DISCONTINUED OPERATIONS PRESENTATION
We present a business, or a component of an entity, as discontinued operations if a) it meets the held-for-sale criteria, or is disposed of by sale, or is disposed of other than by sale, and b) the disposal of the business, or component of an entity, represents a strategic shift that has (or will have) a major effect on AIG’s financial results.
On June 3, 2024, AIG closed on a secondary offering of 30 million shares of Corebridge common stock. The sale was recorded as an equity transaction as AIG controlled Corebridge as of the transaction date. The aggregate gross proceeds of the offering, before deducting underwriting discounts and commission and other expenses payable by AIG, were $876 million. As a result of the offering, AIG recorded an increase of $261 million in Total AIG shareholders' equity. On July 2, 2024, the underwriters exercised their option to purchase an additional 1.9 million shares which reduced AIG's remaining investment in Corebridge reported in Other invested assets.
In September 2022, AIG closed on the initial public offering of Corebridge. Since September 2022 and through June 9, 2024, AIG sold portions of its interests in Corebridge through secondary public offerings. On June 9, 2024, AIG held 48.4 percent of Corebridge common stock, waived its right to majority representation on the Corebridge Board of Directors and one of AIG's designees resigned from the Corebridge Board of Directors as of June 9, 2024 (Deconsolidation Date). As a result, AIG met the requirements for the deconsolidation of Corebridge. The historical financial results of Corebridge, for all periods presented, are reflected in these Condensed Consolidated Financial Statements as discontinued operations.
Due to share repurchases by Corebridge after the Deconsolidation Date, as of June 30, 2024, AIG held 49.0 percent of the outstanding common stock of Corebridge.
The assets and liabilities of Corebridge are classified as Assets of discontinued operations and Liabilities of discontinued operations in AIG’s Condensed Consolidated Balance Sheets as of December 31, 2023. The results of operations of Corebridge are reported as discontinued operations for all periods presented in the Condensed Consolidated Statement of Income (Loss). AIG recognized a loss of $4.7 billion as a result of the deconsolidation (mainly due to the recognition of accumulated comprehensive loss of $7.2 billion). The loss is recorded as a component of discontinued operations. Corebridge was previously reported in Life and Retirement and Other Operations.
Subsequent to the Deconsolidation Date, AIG has elected the fair value option and will reflect its retained interest in Corebridge as an equity method investment in Other invested assets in AIG's Condensed Consolidated Balance Sheets using Corebridge’s stock price as its fair value. Dividends received from Corebridge and changes in its stock price are recognized in Net investment income in AIG’s Condensed Consolidated Financial Statements.
The following provides financial information related to Corebridge as an equity method investee as if Corebridge was an equity method investee for the periods presented. The “Equity method income (loss) related to Corebridge (based on fair value)” assumes a retained interest in Corebridge of 49.0 percent and is calculated based on the changes in Corebridge’s stock price for the periods presented.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | | 2024 | | 2023 | | 2024 | | 2023 |
| Corebridge pre-tax income | | $ | 361 | | | $ | 980 | | | $ | 1,354 | | | $ | 347 | |
| Equity method income (loss) related to Corebridge (based on fair value) | | $ | 115 | | | $ | 482 | | | $ | 2,195 | | | $ | (706) | |
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 13 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Held-For-Sale Classification & Discontinued Operations Presentation
The following table summarizes the components of assets and liabilities held-for-sale and assets and liabilities of discontinued operations on the Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | June 30, 2024 | | | December 31, 2023 |
| (in millions) | | | | | | Assets and
Liabilities
Held for Sale | | | | | Corebridge
(Assets and
Liabilities of
Discontinued
Operations) | | Assets and
Liabilities
Held for Sale | | |
| Assets: | | | | | | | | | | | | | | | |
| Investments: | | | | | | | | | | | | | | | |
| Fixed maturity securities: | | | | | | | | | | | | | | | |
| Bonds available for sale, at fair value, net of allowance for credit losses | | | | | | $ | 14 | | | | | | $ | 166,657 | | | $ | 14 | | | |
| Other bond securities, at fair value | | | | | | — | | | | | | 4,579 | | | — | | | |
| Equity securities, at fair value | | | | | | — | | | | | | 63 | | | — | | | |
| Mortgage and other loans receivable, net of allowance for credit losses | | | | | | — | | | | | | 46,732 | | | — | | | |
| Other invested assets | | | | | | — | | | | | | 9,916 | | | — | | | |
Short-term investments | | | | | | 15 | | | | | | 4,346 | | | 1 | | | |
| Total investments | | | | | | 29 | | | | | | 232,293 | | | 15 | | | |
| Cash | | | | | | 90 | | | | | | 618 | | | — | | | |
| Accrued investment income | | | | | | — | | | | | | 2,011 | | | — | | | |
| Premiums and other receivables, net of allowance for credit losses and disputes | | | | | | 42 | | | | | | 709 | | | 9 | | | |
| Reinsurance assets - Fortitude Re, net of allowance for credit losses and disputes | | | | | | — | | | | | | 26,772 | | | — | | | |
| Reinsurance assets - other, net of allowance for credit losses and disputes | | | | | | 6 | | | | | | 2,519 | | | 3 | | | |
| Deferred income taxes | | | | | | (10) | | | | | | 8,307 | | | — | | | |
| Deferred policy acquisition costs | | | | | | — | | | | | | 10,782 | | | — | | | |
| Market risk benefit assets, at fair value | | | | | | — | | | | | | 912 | | | — | | | |
Other assets, net of allowance for credit losses(a) | | | | | | 28 | | | | | | 2,820 | | | 3 | | | |
| Separate account assets, at fair value | | | | | | — | | | | | | 91,005 | | | — | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total assets held for sale/assets of discontinued operations | | | | | | $ | 185 | | | | | | $ | 378,748 | | | $ | 30 | | | |
| | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | |
| Liability for unpaid losses and loss adjustment expenses, including allowance for credit losses | | | | | | $ | 24 | | | | | | $ | — | | | $ | 19 | | | |
| Unearned premiums | | | | | | 12 | | | | | | 65 | | | 7 | | | |
| Future policy benefits for life and accident and health insurance contracts | | | | | | — | | | | | | 57,946 | | | — | | | |
| Policyholder contract deposits | | | | | | — | | | | | | 161,979 | | | — | | | |
| Market risk benefit liabilities, at fair value | | | | | | — | | | | | | 5,705 | | | — | | | |
| Other policyholder funds | | | | | | — | | | | | | 2,862 | | | — | | | |
| Fortitude Re funds withheld payable | | | | | | — | | | | | | 25,957 | | | — | | | |
| Other liabilities | | | | | | 117 | | | | | | 8,790 | | | 2 | | | |
| Short-term and long-term debt | | | | | | — | | | | | | 9,420 | | | — | | | |
| Debt of consolidated investment entities | | | | | | — | | | | | | 2,360 | | | — | | | |
| Separate account liabilities | | | | | | — | | | | | | 91,005 | | | — | | | |
| | | | | | | | | | | | | | | |
| Total liabilities held for sale/liabilities of discontinued operations | | | | | | $ | 153 | | | | | | $ | 366,089 | | | $ | 28 | | | |
(a)Other assets, net of allowance for credit losses includes goodwill and other intangibles of $116 million and $3 million, respectively, for Corebridge at December 31, 2023.
The following table presents the amounts related to the operations of Corebridge that have been reflected in Net income from discontinued operations:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | | 2024 | | 2023 | | 2024 | | 2023 |
| Revenues: | | | | | | | | |
| Premiums | | $ | 428 | | | $ | 2,442 | | | $ | 2,723 | | | $ | 4,548 | |
| Policy fees | | 555 | | | 693 | | | 1,269 | | | 1,392 | |
| Net investment income | | 2,314 | | | 2,732 | | | 5,238 | | | 5,420 | |
| Net realized gains (losses) | | (587) | | | (281) | | | (923) | | | (1,680) | |
| Other income | | 155 | | | 193 | | | 372 | | | 375 | |
| Total revenues | | 2,865 | | | 5,779 | | | 8,679 | | | 10,055 | |
| Benefits, losses and expenses: | | | | | | | | |
| Policyholder benefits and losses incurred | | 811 | | | 2,879 | | | 3,618 | | | 5,372 | |
| Change in the fair value of market risk benefits, net | | 20 | | | (262) | | | (350) | | | (66) | |
| Interest credited to policyholder account balances | | 980 | | | 1,063 | | | 2,184 | | | 2,102 | |
| | | | | |
14 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Held-For-Sale Classification & Discontinued Operations Presentation
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | | 2024 | | 2023 | | 2024 | | 2023 |
| Amortization of deferred policy acquisition costs | | 199 | | | 257 | | | 465 | | | 511 | |
| General operating and other expenses | | 574 | | | 772 | | | 1,350 | | | 1,512 | |
| Interest expense | | 106 | | | 149 | | | 249 | | | 331 | |
| Net (gain) loss on divestitures and other | | (186) | | | (59) | | | (191) | | | (54) | |
| Total benefits, losses and expenses | | 2,504 | | | 4,799 | | | 7,325 | | | 9,708 | |
| Income (loss) from discontinued operations before income tax expense (benefit) and loss on disposal of discontinued operations | | 361 | | | 980 | | | 1,354 | | | 347 | |
| Income tax expense (benefit) | | 36 | | | 130 | | | 226 | | | (79) | |
| Income (loss) from discontinued operations, net of income taxes before loss on disposal of discontinued operations | | 325 | | | 850 | | | 1,128 | | | 426 | |
| Loss on disposition of operations, net of tax | | (4,684) | | | — | | | (4,684) | | | — | |
| Income (loss) from discontinued operations, net of income taxes | | (4,359) | | | 850 | | | (3,556) | | | 426 | |
| Less: Net income (loss) from discontinued operations attributable to noncontrolling interests | | 93 | | | 198 | | | 477 | | | 81 | |
| Net income (loss) from discontinued operations attributable to AIG | | $ | (4,452) | | | $ | 652 | | | $ | (4,033) | | | $ | 345 | |
DISCONTINUED OPERATIONS LOSS PRESENTATION
The loss recognized for the deconsolidation of Corebridge includes (i) $8.5 billion of retained investment in Corebridge (Corebridge’s quoted stock price is used for fair value measurement, which is classified as level 1 in the fair value hierarchy), (ii) $817 million of certain other investments (considered level 3 in the fair value hierarchy) which are measured based on valuation techniques (i.e., third party appraisals) that use significant inputs (i.e., terminal capital rate and discount rate), and (iii) $378 million of an unsettled receivable. For details on fair value hierarchy, see Note 5. The loss on deconsolidation of Corebridge is calculated as follows:
| | | | | | |
| (in millions) | | |
Corebridge retained investment (48.4% @28.90 per share at June 9, 2024) | | $ | 8,502 | |
| Retained Interest in certain investment entities and other assets | | 1,195 | |
| | |
| Net fair value of assets retained | | 9,697 | |
| | |
| Corebridge book value at June 9, 2024 | | 12,392 | |
| Less: Noncontrolling interests | | 5,732 | |
| Corebridge book value excluding noncontrolling interest | | 6,660 | |
| | |
| Gain on sale pre-tax | | 3,037 | |
| Tax expense | | 507 | |
| Subtotal: After tax gain | | 2,530 | |
| Reclassification adjustment of Accumulated other comprehensive loss at June 9, 2024 | | (7,214) | |
| Loss on sale of Corebridge - after-tax | | $ | (4,684) | |
5. 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.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 15 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
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.
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | Level 1 | | Level 2 | | Level 3 | Counterparty Netting(a) | Cash
Collateral | | Total |
| (in millions) | | | | |
| Assets: | | | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | | | |
U.S. government and government sponsored entities | $ | 24 | | $ | 4,385 | | $ | — | | $ | — | | $ | — | | $ | 4,409 | |
Obligations of states, municipalities and political subdivisions | | — | | | 4,488 | | | 4 | | | — | | | — | | | 4,492 | |
| Non-U.S. governments | | 161 | | | 7,893 | | | 7 | | | — | | | — | | | 8,061 | |
| Corporate debt | | 1 | | | 30,427 | | | 359 | | | — | | | — | | | 30,787 | |
| RMBS | | — | | | 3,762 | | | 2,016 | | | — | | | — | | | 5,778 | |
| CMBS | | — | | | 4,193 | | | 94 | | | — | | | — | | | 4,287 | |
| CLO/ABS | | — | | | 3,244 | | | 1,275 | | | — | | | — | | | 4,519 | |
Total bonds available for sale | | 186 | | | 58,392 | | | 3,755 | | | — | | | — | | | 62,333 | |
Other bond securities: | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Obligations of states, municipalities and political subdivisions | | — | | | 50 | | | — | | | — | | | — | | | 50 | |
| Non-U.S. governments | | — | | | 25 | | | — | | | — | | | — | | | 25 | |
| Corporate debt | | — | | | 267 | | | 44 | | | — | | | — | | | 311 | |
| RMBS | | — | | | 53 | | | 49 | | | — | | | — | | | 102 | |
| CMBS | | — | | | 42 | | | — | | | — | | | — | | | 42 | |
| CLO/ABS | | — | | | 91 | | | 145 | | | — | | | — | | | 236 | |
Total other bond securities | | — | | | 528 | | | 238 | | | — | | | — | | | 766 | |
Equity securities | | 659 | | | 16 | | | 13 | | | — | | | — | | | 688 | |
Other invested assets(b) | | 8,567 | | | 124 | | | 145 | | | — | | | — | | | 8,836 | |
Derivative assets(c): | | | | | | | | | | | | |
| Interest rate contracts | | — | | | 263 | | | 3 | | | — | | | — | | | 266 | |
Foreign exchange contracts | | — | | | 256 | | | 1 | | | — | | | — | | | 257 | |
Equity contracts | | — | | | — | | | 35 | | | — | | | — | | | 35 | |
| | | | | | | | | | | | |
Credit contracts | | — | | | — | | | 33 | | | — | | | — | | | 33 | |
| Other contracts | | — | | | — | | | 1 | | | — | | | — | | | 1 | |
Counterparty netting and cash collateral | | — | | | — | | | — | | | (245) | | | (288) | | | (533) | |
Total derivative assets | | — | | | 519 | | | 73 | | | (245) | | | (288) | | | 59 | |
Short-term investments | | 3,845 | | | 4,292 | | | — | | | — | | | — | | | 8,137 | |
| | | | | | | | | | | | |
Other assets(c) | | — | | | — | | | 130 | | | — | | | — | | | 130 | |
| | | | | | | | | | | | |
Total(d) | $ | 13,257 | | $ | 63,871 | | $ | 4,354 | | $ | (245) | | $ | (288) | | $ | 80,949 | |
| Liabilities: | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative liabilities(c): | | | | | | | | | | | | |
Interest rate contracts | $ | — | | $ | 291 | | $ | — | | $ | — | | $ | — | | $ | 291 | |
Foreign exchange contracts | | — | | | 324 | | | 1 | | | — | | | — | | | 325 | |
| | | | | | | | | | | | |
Credit contracts | | — | | | — | | | 33 | | | — | | | — | | | 33 | |
| | | | | | | | | | | | |
Counterparty netting and cash collateral | | — | | | — | | | — | | | (245) | | | (180) | | | (425) | |
Total derivative liabilities | | — | | | 615 | | | 34 | | | (245) | | | (180) | | | 224 | |
Fortitude Re funds withheld payable | | — | | | — | | | (154) | | | — | | | — | | | (154) | |
Other liabilities | | — | | | — | | | 99 | | | — | | | — | | | 99 | |
| | | | | | | | | | | | |
| Total | $ | — | | $ | 615 | | $ | (21) | | $ | (245) | | $ | (180) | | $ | 169 | |
| | | | | |
16 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 | | Level 1 | | Level 2 | | Level 3 | Counterparty Netting(a) | Cash
Collateral | | Total |
| (in millions) | | | | |
Assets: | | | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | | | |
U.S. government and government sponsored entities | $ | 15 | | $ | 4,380 | | $ | — | | $ | — | | $ | — | | $ | 4,395 | |
Obligations of states, municipalities and political subdivisions | | — | | | 4,830 | | | 3 | | | — | | | — | | | 4,833 | |
| Non-U.S. governments | | 233 | | | 8,156 | | | 7 | | | — | | | — | | | 8,396 | |
| Corporate debt | | — | | | 32,023 | | | 323 | | | — | | | — | | | 32,346 | |
| RMBS | | — | | | 4,415 | | | 1,792 | | | — | | | — | | | 6,207 | |
| CMBS | | — | | | 4,122 | | | 25 | | | — | | | — | | | 4,147 | |
| CLO/ABS | | — | | | 3,629 | | | 1,289 | | | — | | | — | | | 4,918 | |
Total bonds available for sale | | 248 | | | 61,555 | | | 3,439 | | | — | | | — | | | 65,242 | |
Other bond securities: | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Obligations of states, municipalities and political subdivisions | | — | | | 51 | | | — | | | — | | | — | | | 51 | |
| Non-U.S. governments | | — | | | 24 | | | — | | | — | | | — | | | 24 | |
| Corporate debt | | — | | | 210 | | | 45 | | | — | | | — | | | 255 | |
| RMBS | | — | | | 42 | | | 51 | | | — | | | — | | | 93 | |
| CMBS | | — | | | 33 | | | — | | | — | | | — | | | 33 | |
| CLO/ABS | | — | | | 69 | | | 138 | | | — | | | — | | | 207 | |
Total other bond securities | | — | | | 429 | | | 234 | | | — | | | — | | | 663 | |
Equity securities | | 612 | | | 39 | | | 14 | | | — | | | — | | | 665 | |
Other invested assets (b) | | — | | | 155 | | | 221 | | | — | | | — | | | 376 | |
Derivative assets(c): | | | | | | | | | | | | |
| Interest rate contracts | | — | | | 335 | | | 406 | | | — | | | — | | | 741 | |
Foreign exchange contracts | | — | | | 450 | | | 1 | | | — | | | — | | | 451 | |
Equity contracts | | — | | | 18 | | | 48 | | | — | | | — | | | 66 | |
| | | | | | | | | | | | |
Credit contracts | | — | | | — | | | 33 | | | — | | | — | | | 33 | |
| Other contracts | | — | | | — | | | 1 | | | — | | | — | | | 1 | |
Counterparty netting and cash collateral | | — | | | — | | | — | | | (450) | | | (711) | | | (1,161) | |
Total derivative assets | | — | | | 803 | | | 489 | | | (450) | | | (711) | | | 131 | |
Short-term investments | | 2,613 | | | 6,750 | | | — | | | — | | | — | | | 9,363 | |
| | | | | | | | | | | | |
Other assets(c) | | — | | | — | | | 243 | | | — | | | — | | | 243 | |
| | | | | | | | | | | | |
Total(d) | $ | 3,473 | | $ | 69,731 | | $ | 4,640 | | $ | (450) | | $ | (711) | | $ | 76,683 | |
| Liabilities: | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative liabilities(c): | | | | | | | | | | | | |
Interest rate contracts | $ | — | | $ | 352 | | $ | — | | $ | — | | $ | — | | $ | 352 | |
Foreign exchange contracts | | — | | | 561 | | | 3 | | | — | | | — | | | 564 | |
| | | | | | | | | | | | |
Credit contracts | | — | | | 3 | | | 33 | | | — | | | — | | | 36 | |
| | | | | | | | | | | | |
Counterparty netting and cash collateral | | — | | | — | | | — | | | (450) | | | (249) | | | (699) | |
Total derivative liabilities | | — | | | 916 | | | 36 | | | (450) | | | (249) | | | 253 | |
Fortitude Re funds withheld payable | | — | | | — | | | (148) | | | — | | | — | | | (148) | |
| Other liabilities | | — | | | 107 | | | 122 | | | — | | | — | | | 229 | |
| | | | | | | | | | | | |
| Total | $ | — | | $ | 1,023 | | $ | 10 | | $ | (450) | | $ | (249) | | $ | 334 | |
(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 $3.6 billion and $3.8 billion as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024, includes AIG's ownership interest in Corebridge of $8.6 billion on which AIG elected the fair value option.
(c)Presented as part of Other assets and Other liabilities on the Condensed Consolidated Balance Sheets.
(d)Excludes $22 million and $15 million as of June 30, 2024 and December 31, 2023, respectively, of assets reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 17 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
CHANGES IN LEVEL 3 RECURRING FAIR VALUE MEASUREMENTS
The following tables present changes during the three and six months ended June 30, 2024 and 2023 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 June 30, 2024 and 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Fair Value
Beginning
of Period | | 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 | | Other | | Fair
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 June 30, 2024 | | | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | | | | | | | | | | | |
| Obligations of states, municipalities and political subdivisions | $ | 4 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 4 | | $ | — | | $ | — | |
Non-U.S. governments | | 7 | | | — | | | — | | | — | | | — | | | — | | | — | | | 7 | | | — | | | — | |
Corporate debt | | 383 | | | — | | | (2) | | | (22) | | | 36 | | | (36) | | | — | | | 359 | | | — | | | (2) | |
RMBS | | 1,766 | | | 24 | | | (29) | | | (75) | | | 287 | | | (1) | | | 44 | | | 2,016 | | | — | | | (30) | |
CMBS | | 43 | | | (4) | | | 6 | | | (18) | | | 68 | | | (1) | | | — | | | 94 | | | — | | | — | |
| CLO/ABS | | 1,284 | | | 3 | | | 3 | | | (47) | | | 44 | | | (12) | | | — | | | 1,275 | | | — | | | 3 | |
Total bonds available for sale | | 3,487 | | | 23 | | | (22) | | | (162) | | | 435 | | | (50) | | | 44 | | | 3,755 | | | — | | | (29) | |
Other bond securities: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Corporate Debt | | 46 | | | 1 | | | — | | | — | | | — | | | — | | | (3) | | | 44 | | | — | | | — | |
| RMBS | | 53 | | | — | | | — | | | (2) | | | — | | | (2) | | | — | | | 49 | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| CLO/ABS | | 144 | | | 1 | | | — | | | (3) | | | 2 | | | — | | | 1 | | | 145 | | | 1 | | | — | |
Total other bond securities | | 243 | | | 2 | | | — | | | (5) | | | 2 | | | (2) | | | (2) | | | 238 | | | 1 | | | — | |
Equity securities | | 13 | | | — | | | — | | | — | | | — | | | — | | | — | | | 13 | | | — | | | — | |
Other invested assets | | 183 | | | (4) | | | — | | | (36) | | | — | | | — | | | 2 | | | 145 | | | (1) | | | — | |
Other assets | | 129 | | | — | | | — | | | 1 | | | — | | | — | | | — | | | 130 | | | — | | | — | |
Total | $ | 4,055 | | $ | 21 | | $ | (22) | | $ | (202) | | $ | 437 | | $ | (52) | | $ | 44 | | $ | 4,281 | | $ | — | | $ | (29) | |
| (in millions) | | Fair Value
Beginning
of Period | | 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 | | Other | | Fair
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: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Derivative liabilities, net: | | | | | | | | | | | | | | | | | | | | |
Interest rate contracts | $ | (128) | | $ | (8) | | $ | — | | $ | 133 | | $ | — | | $ | — | | $ | — | | $ | (3) | | $ | — | | $ | — | |
Foreign exchange contracts | | 2 | | | (2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Equity contracts | | (56) | | | (2) | | | — | | | 23 | | | — | | | — | | | — | | | (35) | | | 2 | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Other contracts | | (1) | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | 1 | | | — | |
Total derivative liabilities, net(a) | | (183) | | | (12) | | | — | | | 156 | | | — | | | — | | | — | | | (39) | | | 3 | | | — | |
| Fortitude Re funds withheld payable | | (119) | | | (8) | | | — | | | (27) | | | — | | | — | | | — | | | (154) | | | 33 | | | — | |
| Other Liabilities | | 92 | | | 28 | | | — | | | (21) | | | — | | | — | | | — | | | 99 | | | — | | | — | |
| Total | $ | (210) | | $ | 8 | | $ | — | | $ | 108 | | $ | — | | $ | — | | $ | — | | $ | (94) | | $ | 36 | | $ | — | |
| | | | | |
18 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Fair Value
Beginning
of Period | | 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 | | Other | | Fair
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 June 30, 2023 | | | | | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | | | | | | | | | | | |
| Obligations of states, municipalities and political subdivisions | $ | 15 | | $ | — | | $ | 1 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 16 | | $ | — | | $ | — | |
| Non-U.S. governments | | 9 | | | — | | | 1 | | | (2) | | | — | | | (2) | | | — | | | 6 | | | — | | | 1 | |
| Corporate debt | | 728 | | | (4) | | | 10 | | | (131) | | | 1 | | | (186) | | | — | | | 418 | | | — | | | 4 | |
| RMBS | | 1,896 | | | 30 | | | 56 | | | (36) | | | — | | | (43) | | | (35) | | | 1,868 | | | — | | | 56 | |
| CMBS | | 220 | | | (22) | | | (2) | | | — | | | — | | | (148) | | | — | | | 48 | | | — | | | (4) | |
| CLO/ABS | | 1,524 | | | (15) | | | 3 | | | (99) | | | 6 | | | (32) | | | 9 | | | 1,396 | | | — | | | (9) | |
| Total bonds available for sale | | 4,392 | | | (11) | | | 69 | | | (268) | | | 7 | | | (411) | | | (26) | | | 3,752 | | | — | | | 48 | |
| Other bond securities: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Corporate debt | | — | | | — | | | — | | | 44 | | | — | | | — | | | — | | | 44 | | | — | | | — | |
| RMBS | | 52 | | | 2 | | | — | | | (2) | | | — | | | — | | | — | | | 52 | | | (4) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| CLO/ABS | | 176 | | | (3) | | | — | | | (19) | | | — | | | — | | | — | | | 154 | | | (25) | | | — | |
| Total other bond securities | | 228 | | | (1) | | | — | | | 23 | | | — | | | — | | | — | | | 250 | | | (29) | | | — | |
| Equity securities | | 25 | | | 2 | | | — | | | — | | | 2 | | | (1) | | | — | | | 28 | | | 2 | | | — | |
| Other invested assets | | 235 | | | 1 | | | — | | | (9) | | | — | | | — | | | — | | | 227 | | | (3) | | | — | |
| Other assets | | 110 | | | — | | | — | | | 1 | | | — | | | — | | | — | | | 111 | | | — | | | — | |
Total | $ | 4,990 | | $ | (9) | | $ | 69 | | $ | (253) | | $ | 9 | | $ | (412) | | $ | (26) | | $ | 4,368 | | $ | (30) | | $ | 48 | |
| (in millions) | | Fair Value
Beginning
of Period | | 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 | | Other | | Fair
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: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Derivative liabilities, net: | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | $ | (355) | | $ | 26 | | $ | — | | $ | (10) | | $ | — | | $ | — | | $ | — | | $ | (339) | | $ | — | | $ | (21) | |
| Foreign exchange contracts | | — | | | 2 | | | — | | | — | | | — | | | — | | | — | | | 2 | | | — | | | (2) | |
| Equity contracts | | (328) | | | 2 | | | — | | | (73) | | | — | | | — | | | — | | | (399) | | | 4 | | | — | |
| Credit contracts | | — | | | (1) | | | — | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | |
| Other contracts | | (1) | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | 1 | | | — | |
| Total derivative liabilities, net(a) | | (684) | | | 29 | | | — | | | (82) | | | — | | | — | | | — | | | (737) | | | 5 | | | (23) | |
| Fortitude Re funds withheld payable | | (167) | | | (58) | | | — | | | (44) | | | — | | | — | | | — | | | (269) | | | 78 | | | — | |
| Other liabilities | | 112 | | | (14) | | | — | | | — | | | — | | | — | | | — | | | 98 | | | — | | | — | |
| Total | $ | (739) | | $ | (43) | | $ | — | | $ | (126) | | $ | — | | $ | — | | $ | — | | $ | (908) | | $ | 83 | | $ | (23) | |
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 19 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 | | Other | | Fair
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 |
| Six Months Ended June 30, 2024 | | | | | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | | | | | | | | | | | |
| Obligations of states, municipalities and political subdivisions | $ | 3 | | $ | — | | $ | — | | $ | 1 | | $ | — | | $ | — | | $ | — | | $ | 4 | | $ | — | | $ | — | |
| Non-U.S. governments | | 7 | | | — | | | — | | | — | | | — | | | — | | | — | | | 7 | | | — | | | — | |
| Corporate debt | | 323 | | | 1 | | | (2) | | | (60) | | | 134 | | | (37) | | | — | | | 359 | | | — | | | (1) | |
| RMBS | | 1,792 | | | 47 | | | (2) | | | (150) | | | 287 | | | (2) | | | 44 | | | 2,016 | | | — | | | (2) | |
| CMBS | | 25 | | | (4) | | | 6 | | | (18) | | | 85 | | | — | | | — | | | 94 | | | — | | | 1 | |
| CLO/ABS | | 1,289 | | | (12) | | | 32 | | | (66) | | | 44 | | | (12) | | | — | | | 1,275 | | | — | | | 29 | |
| Total bonds available for sale | | 3,439 | | | 32 | | | 34 | | | (293) | | | 550 | | | (51) | | | 44 | | | 3,755 | | | — | | | 27 | |
| Other bond securities: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Corporate debt | | 45 | | | 1 | | | — | | | — | | | — | | | — | | | (2) | | | 44 | | | — | | | — | |
| RMBS | | 51 | | | — | | | — | | | — | | | — | | | (2) | | | — | | | 49 | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| CLO/ABS | | 138 | | | — | | | — | | | 5 | | | 2 | | | — | | | — | | | 145 | | | (1) | | | — | |
| Total other bond securities | | 234 | | | 1 | | | — | | | 5 | | | 2 | | | (2) | | | (2) | | | 238 | | | (1) | | | — | |
| Equity securities | | 14 | | | — | | | — | | | — | | | — | | | (1) | | | — | | | 13 | | | 1 | | | — | |
| Other invested assets | | 221 | | | (13) | | | — | | | (39) | | | — | | | (13) | | | (11) | | | 145 | | | (12) | | | — | |
| Other assets | | 243 | | | — | | | — | | | (113) | | | — | | | — | | | — | | | 130 | | | — | | | — | |
Total | $ | 4,151 | | $ | 20 | | $ | 34 | | $ | (440) | | $ | 552 | | $ | (67) | | $ | 31 | | $ | 4,281 | | $ | (12) | | $ | 27 | |
| (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 | | Other | | Fair
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: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Derivative liabilities, net: | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | $ | (406) | | $ | 61 | | $ | — | | $ | 342 | | $ | — | | $ | — | | $ | — | | $ | (3) | | $ | (3) | | $ | — | |
| Foreign exchange contracts | | 2 | | | (2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Equity contracts | | (48) | | | (18) | | | — | | | 31 | | | — | | | — | | | — | | | (35) | | | 10 | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| Other contracts | | (1) | | | (1) | | | — | | | 1 | | | — | | | — | | | — | | | (1) | | | 1 | | | — | |
Total derivative liabilities, net(a) | | (453) | | | 40 | | | — | | | 374 | | | — | | | — | | | — | | | (39) | | | 8 | | | — | |
| Fortitude Re funds withheld payable | | (148) | | | 1 | | | — | | | (7) | | | — | | | — | | | — | | | (154) | | | 47 | | | — | |
| Other Liabilities | | 122 | | | (2) | | | — | | | (21) | | | — | | | — | | | — | | | 99 | | | — | | | — | |
| Total | $ | (479) | | $ | 39 | | $ | — | | $ | 346 | | $ | — | | $ | — | | $ | — | | $ | (94) | | $ | 55 | | $ | — | |
| | | | | |
20 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 | | Other | | Fair
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 |
| Six Months Ended June 30, 2023 | | | | | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | | | | | | | | | | | |
| Obligations of states, municipalities and political subdivisions | $ | 20 | | $ | — | | $ | 1 | | $ | (5) | | $ | — | | $ | — | | $ | — | | $ | 16 | | $ | — | | $ | 1 | |
| Non-U.S. governments | | 2 | | | — | | | 1 | | | (2) | | | 7 | | | (2) | | | — | | | 6 | | | — | | | 1 | |
| Corporate debt | | 879 | | | (4) | | | 17 | | | (347) | | | 108 | | | (235) | | | — | | | 418 | | | — | | | 3 | |
| RMBS | | 1,884 | | | 59 | | | 26 | | | (18) | | | — | | | (48) | | | (35) | | | 1,868 | | | — | | | 24 | |
| CMBS | | 207 | | | (22) | | | (1) | | | 1 | | | 11 | | | (148) | | | — | | | 48 | | | — | | | (12) | |
| CLO/ABS | | 1,483 | | | (12) | | | 20 | | | (83) | | | 17 | | | (42) | | | 13 | | | 1,396 | | | — | | | 12 | |
| Total bonds available for sale | | 4,475 | | | 21 | | | 64 | | | (454) | | | 143 | | | (475) | | | (22) | | | 3,752 | | | — | | | 29 | |
| Other bond securities: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Corporate debt | | — | | | — | | | — | | | 44 | | | — | | | — | | | — | | | 44 | | | — | | | — | |
| RMBS | | 65 | | | 2 | | | — | | | (15) | | | — | | | — | | | — | | | 52 | | | (9) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| CLO/ABS | | 158 | | | 1 | | | — | | | (13) | | | — | | | (3) | | | 11 | | | 154 | | | (23) | | | — | |
| Total other bond securities | | 223 | | | 3 | | | — | | | 16 | | | — | | | (3) | | | 11 | | | 250 | | | (32) | | | — | |
| Equity securities | | 13 | | | 2 | | | — | | | 4 | | | 10 | | | (1) | | | — | | | 28 | | | 2 | | | — | |
| Other invested assets | | 244 | | | (7) | | | — | | | (10) | | | — | | | — | | | — | | | 227 | | | (10) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| Other assets | | 107 | | | — | | | — | | | 4 | | | — | | | — | | | — | | | 111 | | | — | | | — | |
Total | $ | 5,062 | | $ | 19 | | $ | 64 | | $ | (440) | | $ | 153 | | $ | (479) | | $ | (11) | | $ | 4,368 | | $ | (40) | | $ | 29 | |
| (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 | | Other | | Fair
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: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Derivative liabilities, net: | | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | $ | (311) | | $ | 84 | | $ | — | | $ | (112) | | $ | — | | $ | — | | $ | — | | $ | (339) | | $ | — | | $ | (29) | |
| Foreign exchange contracts | | — | | | 2 | | | — | | | — | | | — | | | — | | | — | | | 2 | | | — | | | (2) | |
| Equity contracts | | (271) | | | (69) | | | — | | | (59) | | | — | | | — | | | — | | | (399) | | | 63 | | | — | |
| Credit contracts | | — | | | (1) | | | — | | | 1 | | | — | | | — | | | — | | | — | | | — | | | — | |
| Other contracts | | (1) | | | (1) | | | — | | | 1 | | | — | | | — | | | — | | | (1) | | | 1 | | | — | |
Total derivative liabilities, net(a) | | (583) | | | 15 | | | — | | | (169) | | | — | | | — | | | — | | | (737) | | | 64 | | | (31) | |
| Fortitude Re funds withheld payable | | (41) | | | 82 | | | — | | | (310) | | | — | | | — | | | — | | | (269) | | | (48) | | | — | |
| Other liabilities | | 112 | | | (14) | | | — | | | — | | | — | | | — | | | — | | | 98 | | | — | | | — | |
Total | $ | (512) | | $ | 83 | | $ | — | | $ | (479) | | $ | — | | $ | — | | $ | — | | $ | (908) | | $ | 16 | | $ | (31) | |
(a)Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 21 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
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) | | | | Total |
| Three Months Ended June 30, 2024 | | | | | | | |
| Assets: | | | | | | | |
| Bonds available for sale | $ | 25 | | | $ | (2) | | | | $ | 23 | |
| Other bond securities | 2 | | | — | | | | 2 | |
| | | | | | | |
| Other invested assets | (4) | | | — | | | | (4) | |
| Three Months Ended June 30, 2023 | | | | | | | |
| Assets: | | | | | | | |
| Bonds available for sale | $ | 4 | | | $ | (15) | | | | | $ | (11) | |
| Other bond securities | (1) | | | — | | | | | (1) | |
| Equity securities | 2 | | | — | | | | | 2 | |
| Other invested assets | 1 | | | — | | | | | 1 | |
| Six Months Ended June 30, 2024 | | | | | | | |
| Assets: | | | | | | | |
| Bonds available for sale | $ | 40 | | | $ | (8) | | | | | $ | 32 | |
| Other bond securities | 1 | | | — | | | | | 1 | |
| | | | | | | |
| Other invested assets | (13) | | | — | | | | | (13) | |
| Six Months Ended June 30, 2023 | | | | | | | |
| Assets: | | | | | | | |
| Bonds available for sale | $ | 37 | | | $ | (16) | | | | | $ | 21 | |
| Other bond securities | 3 | | | — | | | | | 3 | |
| Equity securities | 2 | | | — | | | | | 2 | |
| Other invested assets | (7) | | | — | | | | | (7) | |
| | | | | | | |
| (in millions) | Net
Investment
Income | | Net Realized
(Gains) Losses | | | | Total |
| Three Months Ended June 30, 2024 | | | | | | | |
| Liabilities: | | | | | | | |
| | | | | | | |
| | | | | | | |
| Derivative liabilities, net | $ | — | | | $ | (12) | | | | | $ | (12) | |
| Fortitude Re funds withheld payable | — | | | (8) | | | | | (8) | |
| Other Liabilities | — | | | 28 | | | | | 28 | |
| Three Months Ended June 30, 2023 | | | | | | | |
| Liabilities: | | | | | | | |
| | | | | | | |
| | | | | | | |
| Derivative liabilities, net | $ | — | | | $ | 29 | | | | | $ | 29 | |
| Fortitude Re funds withheld payable | — | | | (58) | | | | | (58) | |
| Other Liabilities | — | | | (14) | | | | | (14) | |
| Six Months Ended June 30, 2024 | | | | | | | |
| Liabilities: | | | | | | | |
| | | | | | | |
| | | | | | | |
| Derivative liabilities, net | $ | — | | | $ | 40 | | | | | $ | 40 | |
| Fortitude Re funds withheld payable | — | | | 1 | | | | | 1 | |
| Other Liabilities | — | | | (2) | | | | | (2) | |
| Six Months Ended June 30, 2023 | | | | | | | |
| Liabilities: | | | | | | | |
| | | | | | | |
| | | | | | | |
| Derivative liabilities, net | $ | — | | | $ | 15 | | | | | $ | 15 | |
| Fortitude Re funds withheld payable | — | | | 82 | | | | | 82 | |
| Other Liabilities | — | | | (14) | | | | | (14) | |
| | | | | |
22 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
The following table presents the gross components of purchases, sales, issuances and settlements, net, shown above, for the three and six months ended June 30, 2024 and 2023 related to Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets:
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Purchases | | Sales | | Issuances and Settlements(a) | | Purchases, Sales, Issuances and Settlements, Net(a) |
| Three Months Ended June 30, 2024 | | | | | | | |
| Assets: | | | | | | | |
| Bonds available for sale: | | | | | | | |
| | | | | | | |
| Non-U.S. governments | $ | 4 | | | $ | — | | | $ | (4) | | | $ | — | |
| Corporate debt | 5 | | | — | | | (27) | | | (22) | |
| RMBS | — | | | — | | | (75) | | | (75) | |
| CMBS | — | | | — | | | (18) | | | (18) | |
| CLO/ABS | 6 | | | — | | | (53) | | | (47) | |
| Total bonds available for sale | 15 | | | — | | | (177) | | | (162) | |
| Other bond securities: | | | | | | | |
| | | | | | | |
| | | | | | | |
| RMBS | — | | | (1) | | | (1) | | | (2) | |
| | | | | | | |
| CLO/ABS | — | | | — | | | (3) | | | (3) | |
| Total other bond securities | — | | | (1) | | | (4) | | | (5) | |
| | | | | | | |
| Other invested assets | — | | | — | | | (36) | | | (36) | |
| Other assets | — | | | — | | | 1 | | | 1 | |
| Total | $ | 15 | | | $ | (1) | | | $ | (216) | | | $ | (202) | |
| Liabilities: | | | | | | | |
| | | | | | | |
| Derivative liabilities, net | $ | — | | | $ | — | | | $ | 156 | | | $ | 156 | |
| Fortitude Re funds withheld payable | — | | | — | | | (27) | | | (27) | |
| Other liabilities | — | | | — | | | (21) | | | (21) | |
| Total | $ | — | | | $ | — | | | $ | 108 | | | $ | 108 | |
| Three Months Ended June 30, 2023 | | | | | | | |
| Assets: | | | | | | | |
| Bonds available for sale: | | | | | | | |
| | | | | | | |
| Non-U.S. governments | $ | — | | | $ | — | | | $ | (2) | | | $ | (2) | |
| Corporate debt | — | | | — | | | (131) | | | (131) | |
| RMBS | 46 | | | — | | | (82) | | | (36) | |
| CMBS | — | | | (5) | | | 5 | | | — | |
| CLO/ABS | 77 | | | (148) | | | (28) | | | (99) | |
| Total bonds available for sale | 123 | | | (153) | | | (238) | | | (268) | |
| Other bond securities: | | | | | | | |
| | | | | | | |
| Corporate debt | 20 | | | — | | | 24 | | | 44 | |
| RMBS | — | | | — | | | (2) | | | (2) | |
| | | | | | | |
| CLO/ABS | — | | | 4 | | | (23) | | | (19) | |
| Total other bond securities | 20 | | | 4 | | | (1) | | | 23 | |
| | | | | | | |
| Other invested assets | (1) | | | — | | | (8) | | | (9) | |
| Other assets | — | | | — | | | 1 | | | 1 | |
| Total | $ | 142 | | | $ | (149) | | | $ | (246) | | | $ | (253) | |
| Liabilities: | | | | | | | |
| | | | | | | |
| Derivative liabilities, net | $ | (105) | | | $ | 1 | | | $ | 22 | | | $ | (82) | |
| Fortitude Re funds withheld payable | — | | | — | | | (44) | | | (44) | |
| Total | $ | (105) | | | $ | 1 | | | $ | (22) | | | $ | (126) | |
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 23 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Purchases | | Sales | | Issuances and Settlements(a) | | Purchases, Sales, Issuances and Settlements, Net(a) |
| Six Months Ended June 30, 2024 | | | | | | | |
| Assets: | | | | | | | |
| Bonds available for sale: | | | | | | | |
| Obligations of states, municipalities and political subdivisions | $ | 1 | | | $ | — | | | $ | — | | | $ | 1 | |
| Non-U.S. governments | 4 | | | — | | | (4) | | | — | |
| Corporate debt | 11 | | | (3) | | | (68) | | | (60) | |
| RMBS | — | | | (1) | | | (149) | | | (150) | |
| CMBS | — | | | — | | | (18) | | | (18) | |
| CLO/ABS | 66 | | | (2) | | | (130) | | | (66) | |
| Total bonds available for sale | 82 | | | (6) | | | (369) | | | (293) | |
| Other bond securities: | | | | | | | |
| | | | | | | |
| | | | | | | |
| RMBS | 3 | | | (1) | | | (2) | | | — | |
| | | | | | | |
| CLO/ABS | 11 | | | — | | | (6) | | | 5 | |
| Total other bond securities | 14 | | | (1) | | | (8) | | | 5 | |
| | | | | | | |
| Other invested assets | 1 | | | — | | | (40) | | | (39) | |
| Other assets | — | | | — | | | (113) | | | (113) | |
| Total | $ | 97 | | | $ | (7) | | | $ | (530) | | | $ | (440) | |
| Liabilities: | | | | | | | |
| | | | | | | |
| Derivative liabilities, net | $ | — | | | $ | — | | | $ | 374 | | | $ | 374 | |
| Fortitude Re funds withheld payable | — | | | — | | | (7) | | | (7) | |
| Other Liabilities | — | | | — | | | (21) | | | (21) | |
| Total | $ | — | | | $ | — | | | $ | 346 | | | $ | 346 | |
| Six Months Ended June 30, 2023 | | | | | | | |
| Assets: | | | | | | | |
| Bonds available for sale: | | | | | | | |
| Obligations of states, municipalities and political subdivisions | $ | 1 | | | $ | (4) | | | $ | (2) | | | $ | (5) | |
| Non-U.S. governments | — | | | — | | | (2) | | | (2) | |
| Corporate Debt | 8 | | | — | | | (355) | | | (347) | |
| RMBS | 170 | | | (19) | | | (169) | | | (18) | |
| CMBS | 1 | | | (5) | | | 5 | | | 1 | |
| CLO/ABS | 107 | | | (151) | | | (39) | | | (83) | |
| Total bonds available for sale | 287 | | | (179) | | | (562) | | | (454) | |
| Other bond securities: | | | | | | | |
| | | | | | | |
| Corporate debt | 20 | | | — | | | 24 | | | 44 | |
| RMBS | — | | | — | | | (15) | | | (15) | |
| | | | | | | |
| CLO/ABS | 14 | | | — | | | (27) | | | (13) | |
| Total other bond securities | 34 | | | — | | | (18) | | | 16 | |
| Equity securities | 5 | | | — | | | (1) | | | 4 | |
| Other invested assets | 1 | | | — | | | (11) | | | (10) | |
| Other assets | — | | | — | | | 4 | | | 4 | |
| Total | $ | 327 | | | $ | (179) | | | $ | (588) | | | $ | (440) | |
Liabilities: | | | | | | | |
| | | | | | | |
| Derivative liabilities, net | $ | (316) | | | $ | 4 | | | $ | 143 | | | $ | (169) | |
| Fortitude Re funds withheld payable | — | | | — | | | (310) | | | (310) | |
| | | | | | | |
| Total | $ | (316) | | | $ | 4 | | | $ | (167) | | | $ | (479) | |
(a)There were no issuances during the three and six months ended June 30, 2024 and 2023.
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 June 30, 2024 and 2023 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).
| | | | | |
24 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
Transfers of Level 3 Assets and Liabilities
The Net realized and unrealized gains (losses) included in income (loss) or Other comprehensive income (loss) (OCI) as shown in the table above excludes $(24) million and $(27) million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three and six months ended June 30, 2024, respectively, and includes $1 million and $1 million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three and six months ended June 30, 2024, respectively.
The Net realized and unrealized gains (losses) included in income (loss) or OCI as shown in the table above excludes $0 million and $1 million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three and six months ended June 30, 2023, respectively, and includes $(9) million and $(9) million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three and six months ended June 30, 2023, respectively.
Transfers of Level 3 Assets
During the three and six months ended June 30, 2024 and 2023, transfers into Level 3 assets primarily included certain investments in private placement corporate debt, commercial mortgage-backed securities (CMBS), residential mortgage-backed securities (RMBS) 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 CMBS, RMBS, CLO and certain ABS into Level 3 assets were due to diminished market transparency and liquidity for individual security types.
During the three and six months ended June 30, 2024 and 2023, transfers out of Level 3 assets primarily included certain investments in private placement corporate debt and CMBS. Transfers of private placement corporate debt out of Level 3 assets were based on consideration of market liquidity as well as related transparency of pricing and associated observable inputs for these investments. Transfers of certain investments in private placement corporate debt out of Level 3 assets were primarily the result of using observable pricing information that reflects the fair value of those securities without the need for adjustment based on our own assumptions regarding the characteristics of a specific security or the current liquidity in the market.
Transfers of Level 3 Liabilities
There were no significant transfers of derivative or other liabilities into or out of Level 3 for the three and six months ended June 30, 2024 and 2023.
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
June 30, 2024 | Valuation
Technique | Unobservable Input(b) | Range (Weighted Average)(c) |
| Assets: | | | | | | |
| Obligations of states, municipalities and political subdivisions | $ | 4 | | Discounted cash flow | Yield | 5.09% - 5.47% (5.28%) |
| Corporate debt | | 306 | | Discounted cash flow | Yield | 5.69% - 10.38% (8.04%) |
RMBS(a) | | | 1,268 | | Discounted cash flow | Constant prepayment rate | 4.58% - 10.68% (7.63%) |
| | | | | Loss severity | 41.73% - 76.79% (59.26%) |
| | | | | Constant default rate | 0.77% - 2.62% (1.70%) |
| | | | | Yield | 6.30% - 7.61% (6.96%) |
CLO/ABS(a) | | | 1,163 | | Discounted cash flow | Yield | 5.47% - 8.82% (7.15%) |
| CMBS | | | 14 | | Discounted cash flow | Yield | 7.22% - 15.19% (11.20%) |
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 25 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | Fair Value at
December 31, 2023 | Valuation
Technique | Unobservable Input(b) | Range (Weighted Average)(c) |
| Assets: | | | | | |
| Obligations of states, municipalities and political subdivisions | $ | 3 | | Discounted cash flow | Yield | 5.00% - 5.50% (5.23%) |
| Corporate debt | | 332 | | Discounted cash flow | Yield | 5.16% - 9.62% (7.39%) |
RMBS(a) | | | 1,341 | | Discounted cash flow | Constant prepayment rate | 4.43% - 10.30% (7.36%) |
| | | | | Loss severity | 43.21% - 76.65% (59.93%) |
| | | | | Constant default rate | 0.82% - 2.64% (1.73%) |
| | | | | Yield | 6.18% - 7.42% (6.80%) |
CLO/ABS(a) | | | 1,100 | | Discounted cash flow | Yield | 5.31% - 8.56% (6.94%) |
| CMBS | | | 22 | | Discounted cash flow | Yield | 9.84% - 17.24% (13.54%) |
(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.
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.
| | | | | |
26 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | June 30, 2024 | | | December 31, 2023 |
| (in millions) | Investment Category Includes | | Fair Value Using NAV Per Share (or its equivalent) | | Unfunded Commitments | | | Fair Value Using NAV Per Share (or its equivalent) | | Unfunded Commitments |
| Investment Category | | | | | | | | | | |
| Private equity funds: | | | | | | | | | | |
| Leveraged buyout | Debt 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 | $ | 1,212 | | $ | 479 | | | $ | 1,171 | | $ | 558 | |
| Real assets | Investments in real estate properties, agricultural and infrastructure assets, including power plants and other energy producing assets | | 839 | | | 308 | | | | 870 | | | 344 | |
| Venture capital | Early-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 company | | 77 | | | 45 | | | | 67 | | | 50 | |
| Growth equity | Funds that make investments in established companies for the purpose of growing their businesses | | 204 | | | 13 | | | | 196 | | | 9 | |
| Mezzanine | Funds that make investments in the junior debt and equity securities of leveraged companies | | 129 | | | 54 | | | | 140 | | | 56 | |
| Other | Includes 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 strategies | | 901 | | | 60 | | | | 944 | | | 64 | |
| Total private equity funds | | 3,362 | | | 959 | | | | 3,388 | | | 1,081 | |
| Hedge funds: | | | | | | | | | | |
| Event-driven | Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations | | 13 | | | — | | | | 13 | | | — | |
| Long-short | Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk | | 168 | | | — | | | | 389 | | | — | |
| Macro | Investments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions | | — | | | — | | | | — | | | — | |
| Other | Includes investments held in funds that are less liquid, as well as other strategies which allow for broader allocation between public and private investments | | 7 | | | — | | | | 9 | | | — | |
| Total hedge funds | | | 188 | | | — | | | | 411 | | | — | |
| Total | | $ | 3,550 | | $ | 959 | | | $ | 3,799 | | $ | 1,081 | |
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 majority of our hedge fund investments are redeemable upon a single month or quarter’s notice, though redemption terms vary from single, immediate withdrawals, to withdrawals staggered up to eight quarters. Some of the portfolio consists of illiquid run-off or “side-pocket” positions whose liquidation horizons are uncertain and likely beyond a year after submission of the redemption notice.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 27 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gain (Loss) Three Months
Ended June 30, | | Gain (Loss) Six Months
Ended June 30, |
| (in millions) | | 2024 | | 2023 | | | 2024 | | 2023 | | |
| | | | | | | | | | | |
Other bond securities(a) | $ | 5 | | $ | (11) | | | $ | 7 | | $ | 9 | | | |
Alternative investments(b) | | 28 | | | 54 | | | | 108 | | | 130 | | | |
All other investments(c) | | 65 | | | — | | | | 65 | | | — | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total gain (loss) | $ | 98 | | $ | 43 | | | $ | 180 | | $ | 139 | | | |
(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 6. For additional information regarding the funds withheld arrangements with Fortitude Re, see Note 8.
(b)Includes certain hedge funds, private equity funds and real estate investments.
(c)Represents the impact of changes in Corebridge stock price on the value of AIG's ownership interest in Corebridge.
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.
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 Value | | Carrying
Value |
| (in millions) | | Level 1 | | Level 2 | | Level 3 | | Total | |
| June 30, 2024 | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Mortgage and other loans receivable | $ | — | | $ | 341 | | $ | 3,871 | | $ | 4,212 | | $ | 4,347 | |
| Other invested assets | | — | | | 591 | | | 6 | | | 597 | | | 597 | |
Short-term investments(a) | | — | | | 4,426 | | | — | | | 4,426 | | | 4,426 | |
Cash(b) | | 1,381 | | | — | | | — | | | 1,381 | | | 1,381 | |
| Other assets | | 18 | | | — | | | — | | | 18 | | | 18 | |
| Liabilities: | | | | | | | | | | |
| | | | | | | | | | |
| Fortitude Re funds withheld payable | | — | | | — | | | 3,518 | | | 3,518 | | | 3,518 | |
| | | | | | | | | | |
| Long-term debt | | — | | | 8,867 | | | 235 | | | 9,102 | | | 9,861 | |
| Debt of consolidated investment entities | | — | | | — | | | 79 | | | 79 | | | 79 | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Estimated Fair Value | | Carrying
Value |
| (in millions) | | Level 1 | | Level 2 | | Level 3 | | Total | |
| December 31, 2023 | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Mortgage and other loans receivable | $ | — | | $ | 242 | | $ | 4,113 | | $ | 4,355 | | $ | 4,441 | |
| Other invested assets | | — | | | 645 | | | 6 | | | 651 | | | 651 | |
Short-term investments | | — | | | 3,502 | | | — | | | 3,502 | | | 3,502 | |
| Cash | | 1,540 | | | — | | | — | | | 1,540 | | | 1,540 | |
| Other assets | | 32 | | | — | | | — | | | 32 | | | 32 | |
| Liabilities: | | | | | | | | | | |
| | | | | | | | | | |
| Fortitude Re funds withheld payable | | — | | | — | | | 3,675 | | | 3,675 | | | 3,675 | |
| | | | | | | | | | |
| Long-term debt | | — | | | 9,623 | | | 267 | | | 9,890 | | | 10,375 | |
| Debt of consolidated investment entities | | — | | | — | | | 231 | | | 231 | | | 231 | |
| | | | | | | | | | |
(a)Excludes $7 million at June 30, 2024 reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets.
(b)Excludes $90 million at June 30, 2024 reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets.
| | | | | |
28 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments
6. Investments
SECURITIES AVAILABLE FOR SALE
The following table presents the amortized cost and fair value of our available for sale securities:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Amortized Cost | | Allowance for Credit Losses(a) | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| June 30, 2024 | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | |
| U.S. government and government sponsored entities | $ | 4,511 | | $ | — | | $ | 15 | | $ | (117) | | $ | 4,409 | |
| Obligations of states, municipalities and political subdivisions | | 4,635 | | | — | | | 32 | | | (175) | | | 4,492 | |
| Non-U.S. governments | | 8,649 | | | — | | | 67 | | | (655) | | | 8,061 | |
| Corporate debt | | 32,503 | | | (24) | | | 481 | | | (2,173) | | | 30,787 | |
| Mortgage-backed, asset-backed and collateralized: | | | | | | | | | | |
| RMBS | | 6,041 | | | (5) | | | 197 | | | (455) | | | 5,778 | |
| CMBS | | 4,431 | | | (4) | | | 19 | | | (159) | | | 4,287 | |
| CLO/ABS | | 4,556 | | | — | | | 36 | | | (73) | | | 4,519 | |
| Total mortgage-backed, asset-backed and collateralized | | 15,028 | | | (9) | | | 252 | | | (687) | | | 14,584 | |
Total bonds available for sale(b) | $ | 65,326 | | $ | (33) | | $ | 847 | | $ | (3,807) | | $ | 62,333 | |
| December 31, 2023 | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | |
| U.S. government and government sponsored entities | $ | 4,444 | | $ | — | | $ | 40 | | $ | (89) | | $ | 4,395 | |
| Obligations of states, municipalities and political subdivisions | | 4,930 | | | — | | | 60 | | | (157) | | | 4,833 | |
| Non-U.S. governments | | 8,973 | | | (1) | | | 94 | | | (670) | | | 8,396 | |
| Corporate debt | | 34,013 | | | (20) | | | 606 | | | (2,253) | | | 32,346 | |
| Mortgage-backed, asset-backed and collateralized: | | | | | | | | | | |
| RMBS | | 6,423 | | | (9) | | | 219 | | | (426) | | | 6,207 | |
| CMBS | | 4,326 | | | (4) | | | 23 | | | (198) | | | 4,147 | |
| CLO/ABS | | 5,010 | | | — | | | 31 | | | (123) | | | 4,918 | |
| Total mortgage-backed, asset-backed and collateralized | | 15,759 | | | (13) | | | 273 | | | (747) | | | 15,272 | |
Total bonds available for sale(b) | $ | 68,119 | | $ | (34) | | $ | 1,073 | | $ | (3,916) | | $ | 65,242 | |
(a)Represents the allowance for credit losses that has been recognized. Changes in the allowance for credit losses are recorded through Net realized gains (losses) and are not recognized in OCI.
(b)At June 30, 2024 and December 31, 2023, the fair value of bonds available for sale held by us that were below investment grade or not rated totaled $4.8 billion or 8 percent and $5.2 billion or 8 percent, respectively.
Securities Available for Sale in a Loss Position for Which No Allowance for Credit Loss Has Been Recorded
The following table summarizes the fair value and gross unrealized losses on our available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position for which no allowance for credit loss has been recorded:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Less than 12 Months | | 12 Months or More | | Total |
| (in millions) | | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| June 30, 2024 | | | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | | | |
| U.S. government and government sponsored entities | $ | 2,137 | | $ | 20 | | $ | 1,274 | | $ | 97 | | $ | 3,411 | | $ | 117 | |
| Obligations of states, municipalities and political subdivisions | | 1,529 | | | 31 | | | 1,904 | | | 144 | | | 3,433 | | | 175 | |
| Non-U.S. governments | | 1,492 | | | 44 | | | 4,504 | | | 611 | | | 5,996 | | | 655 | |
| Corporate debt | | 5,683 | | | 112 | | | 16,911 | | | 2,050 | | | 22,594 | | | 2,162 | |
| RMBS | | 1,114 | | | 48 | | | 2,752 | | | 398 | | | 3,866 | | | 446 | |
| CMBS | | 999 | | | 17 | | | 1,991 | | | 136 | | | 2,990 | | | 153 | |
| CLO/ABS | | 932 | | | 19 | | | 782 | | | 54 | | | 1,714 | | | 73 | |
| Total bonds available for sale | $ | 13,886 | | $ | 291 | | $ | 30,118 | | $ | 3,490 | | $ | 44,004 | | $ | 3,781 | |
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 29 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Less than 12 Months | | 12 Months or More | | Total |
| (in millions) | | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| December 31, 2023 | | | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | | | |
| U.S. government and government sponsored entities | $ | 1,027 | | $ | 10 | | $ | 804 | | $ | 79 | | $ | 1,831 | | $ | 89 | |
| Obligations of states, municipalities and political subdivisions | | 850 | | | 24 | | | 1,602 | | | 133 | | | 2,452 | | | 157 | |
| Non-U.S. governments | | 1,431 | | | 87 | | | 4,503 | | | 583 | | | 5,934 | | | 670 | |
| Corporate debt | | 4,089 | | | 171 | | | 18,612 | | | 2,070 | | | 22,701 | | | 2,241 | |
| RMBS | | 1,456 | | | 114 | | | 2,385 | | | 300 | | | 3,841 | | | 414 | |
| CMBS | | 1,024 | | | 54 | | | 1,622 | | | 137 | | | 2,646 | | | 191 | |
| CLO/ABS | | 1,371 | | | 33 | | | 1,509 | | | 90 | | | 2,880 | | | 123 | |
| Total bonds available for sale | $ | 11,248 | | $ | 493 | | $ | 31,037 | | $ | 3,392 | | $ | 42,285 | | $ | 3,885 | |
At June 30, 2024, we held 13,477 individual fixed maturity securities that were in an unrealized loss position and for which no allowance for credit losses has been recorded (including 9,923 individual fixed maturity securities that were in a continuous unrealized loss position for 12 months or more). At December 31, 2023, we held 13,052 individual fixed maturity securities that were in an unrealized loss position and for which no allowance for credit losses has been recorded (including 10,027 individual fixed maturity securities that were in a continuous unrealized loss position for 12 months or more). We did not recognize the unrealized losses in earnings on these fixed maturity securities at June 30, 2024 because it was determined that such losses were due to non-credit factors. Additionally, we neither intend to sell the securities nor do we believe that it is more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. For fixed maturity securities with significant declines, we performed fundamental credit analyses on a security-by-security basis, which included consideration of credit enhancements, liquidity position, expected defaults, industry and sector analysis, forecasts and available market data.
Contractual Maturities of Fixed Maturity Securities Available for Sale
The following table presents the amortized cost and fair value of fixed maturity securities available for sale by contractual maturity:
| | | | | | | | | | | | | | |
| June 30, 2024 | | Total Fixed Maturity Securities
Available for Sale |
| (in millions) | | Amortized Cost,
Net of Allowance | | Fair Value |
| | | | |
| Due in one year or less | $ | 4,441 | | $ | 4,383 | |
| Due after one year through five years | | 24,968 | | | 24,177 | |
| Due after five years through ten years | | 16,122 | | | 15,111 | |
| Due after ten years | | 4,743 | | | 4,078 | |
| Mortgage-backed, asset-backed and collateralized | | 15,019 | | | 14,584 | |
| Total | $ | 65,293 | | $ | 62,333 | |
Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.
The following table presents the gross realized gains and gross realized losses from sales or maturities of our available for sale securities:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 | | |
| (in millions) | | Gross
Realized
Gains | | Gross
Realized
Losses | | | Gross
Realized
Gains | | Gross
Realized
Losses | | | Gross
Realized
Gains | | Gross
Realized
Losses | | | Gross
Realized
Gains | | Gross
Realized
Losses | | | | | |
| Fixed maturity securities | $ | 28 | $ | 197 | | $ | 24 | $ | 119 | | $ | 43 | $ | 313 | | $ | 118 | $ | 577 | | | | | |
For the three and six months ended June 30, 2024, the aggregate fair value of available for sale securities sold was $2.6 billion and $5.0 billion, respectively, which resulted in net realized gains (losses) of $(169) million and $(270) million, respectively. Included within the net realized gains (losses) are $(1) million and $(16) million of net realized gains (losses) for the three and six months ended June 30, 2024, respectively, which relate to Fortitude Re funds withheld assets. These net realized gains (losses) are included in Net realized gains (losses) on Fortitude Re funds withheld assets.
| | | | | |
30 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments
For the three and six months ended June 30, 2023, the aggregate fair value of available for sale securities sold was $2.6 billion and $10.7 billion, respectively, which resulted in net realized gains (losses) of $(95) million and $(459) million, respectively. Included within the net realized gains (losses) are $(7) million and $(59) million of net realized gains (losses) for the three and six months ended June 30, 2023, respectively, which relate to Fortitude Re funds withheld assets. These net realized gains (losses) are included in Net realized gains (losses) on Fortitude Re funds withheld assets.
OTHER SECURITIES MEASURED AT FAIR VALUE
The following table presents the fair value of fixed maturity securities measured at fair value based on our election of the fair value option, which are reported in the other bond securities caption in the financial statements, and equity securities measured at fair value:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | June 30, 2024 | | | | December 31, 2023 | |
| Fair
Value | | Percent
of Total | | | | Fair
Value | | Percent
of Total | |
| Fixed maturity securities: | | | | | | | | | | | |
| | | | | | | | | | | |
| Obligations of states, municipalities and political subdivisions | $ | 50 | | | 3 | | % | | $ | 51 | | | 4 | | % |
| Non-U.S. governments | | 25 | | | 2 | | | | | 24 | | | 2 | | |
| Corporate debt | | 311 | | | 21 | | | | | 255 | | | 19 | | |
| Mortgage-backed, asset-backed and collateralized: | | | | | | | | | | | |
| RMBS | | 102 | | | 7 | | | | | 93 | | | 7 | | |
| CMBS | | 42 | | | 3 | | | | | 33 | | | 2 | | |
| CLO/ABS and other collateralized securities | | 236 | | | 16 | | | | | 207 | | | 16 | | |
Total mortgage-backed, asset-backed and collateralized | | 380 | | | 26 | | | | | 333 | | | 25 | | |
| Total fixed maturity securities | | 766 | | | 52 | | | | | 663 | | | 50 | | |
| Equity securities | | 688 | | | 48 | | | | | 665 | | | 50 | | |
| Total | $ | 1,454 | | | 100 | | % | | $ | 1,328 | | | 100 | | % |
OTHER INVESTED ASSETS
The following table summarizes the carrying amounts of other invested assets:
| | | | | | | | | | | |
| (in millions) | June 30, 2024 | | December 31, 2023 |
Alternative investments(a)(b) | $ | 4,283 | | | $ | 4,345 | |
| | | |
| Retained investment in Corebridge using fair value option | 8,567 | | | — | |
All other investments | 1,938 | | | 2,023 | |
| Total | $ | 14,788 | | | $ | 6,368 | |
(a)At June 30, 2024, included hedge funds of $188 million and private equity funds of $3.9 billion. At December 31, 2023, included hedge funds of $411 million and private equity funds of $3.7 billion. Includes investments in real estate, net of accumulated depreciation. At June 30, 2024 and December 31, 2023, the accumulated depreciation was $162 million and $161 million, respectively.
(b)The majority of our hedge fund investments are redeemable upon a single month or quarter’s notice, though redemption terms vary from single, immediate withdrawals, to withdrawals staggered up to six quarters. Some of the portfolio consists of illiquid run-off or “side-pocket” positions whose liquidation horizons are uncertain and likely beyond a year after submission of the redemption notice.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 31 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments
NET INVESTMENT INCOME
The following table presents the components of Net investment income:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | 2024 | | 2023 |
| (in millions) | Excluding Fortitude
Re Funds
Withheld Assets | Fortitude Re
Funds Withheld
Assets | | Total | | Excluding Fortitude
Re Funds
Withheld Assets | Fortitude Re
Funds Withheld
Assets | | Total |
| Available for sale fixed maturity securities, including short-term investments | $ | 723 | | $ | 20 | | $ | 743 | | | $ | 714 | | $ | 24 | | $ | 738 | |
Other fixed maturity securities | | 1 | | | 4 | | | 5 | | | | (1) | | | (10) | | | (11) | |
| Equity securities | | (4) | | | — | | | (4) | | | | 41 | | | — | | | 41 | |
| Interest on mortgage and other loans | | 65 | | | 8 | | | 73 | | | | 73 | | | 9 | | | 82 | |
Alternative investments(a) | | 32 | | | — | | | 32 | | | | 44 | | | — | | | 44 | |
| | | | | | | | | | | | | |
Other investments(b) | | 177 | | | 1 | | | 178 | | | | (6) | | | 2 | | | (4) | |
| Total investment income | | 994 | | | 33 | | | 1,027 | | | | 865 | | | 25 | | | 890 | |
| Investment expenses | | 37 | | | — | | | 37 | | | | 53 | | | — | | | 53 | |
| Net investment income | $ | 957 | | $ | 33 | | $ | 990 | | | $ | 812 | | $ | 25 | | $ | 837 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | 2024 | | 2023 | | |
| (in millions) | Excluding Fortitude
Re Funds
Withheld Assets | Fortitude Re
Funds Withheld
Assets | Total | | Excluding Fortitude
Re Funds
Withheld Assets | Fortitude Re
Funds Withheld
Assets | Total | | | | |
| Available for sale fixed maturity securities, including short-term investments | $ | 1,488 | | $ | 42 | | $ | 1,530 | | | $ | 1,354 | | $ | 50 | | $ | 1,404 | | | | | | | | |
Other fixed maturity securities | | (4) | | | 11 | | | 7 | | | | 2 | | | 7 | | | 9 | | | | | | | | |
| Equity securities | | 84 | | | — | | | 84 | | | | 62 | | | — | | | 62 | | | | | | | | |
| Interest on mortgage and other loans | | 133 | | | 17 | | | 150 | | | | 139 | | | 18 | | | 157 | | | | | | | | |
Alternative investments(a) | | 87 | | | (1) | | | 86 | | | | 139 | | | — | | | 139 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Other investments(b) | | 199 | | | 3 | | | 202 | | | | 8 | | | 2 | | | 10 | | | | | | | | |
| Total investment income | | 1,987 | | | 72 | | | 2,059 | | | | 1,704 | | | 77 | | | 1,781 | | | | | | | | |
| Investment expenses | | 90 | | | — | | | 90 | | | | 100 | | | — | | | 100 | | | | | | | | |
| Net investment income | $ | 1,897 | | $ | 72 | | $ | 1,969 | | | $ | 1,604 | | $ | 77 | | $ | 1,681 | | | | | | | | |
(a)Included income from hedge funds, private equity funds and real estate investments. Hedge funds are recorded as of the balance sheet date. Private equity funds are generally reported on a one-quarter lag.
(b)Includes dividends received from Corebridge and changes in its stock price of $68 million and $65 million, respectively, for both three and six months ended June 30, 2024.
NET REALIZED GAINS AND LOSSES
The following table presents the components of Net realized gains (losses):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | 2024 | | | 2023 |
| (in millions) | Excluding
Fortitude
Re Funds
Withheld
Assets | Fortitude
Re
Funds
Withheld
Assets | | Total | | Excluding
Fortitude
Re Funds
Withheld
Assets | Fortitude
Re
Funds
Withheld
Assets | | Total |
| Sales of fixed maturity securities | $ | (168) | | $ | (1) | | $ | (169) | | | $ | (88) | | $ | (7) | | $ | (95) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Change in allowance for credit losses on fixed maturity securities | | (18) | | | — | | | (18) | | | | (30) | | | — | | | (30) | |
| Change in allowance for credit losses on loans | | (12) | | | 3 | | | (9) | | | | 1 | | | 1 | | | 2 | |
| Foreign exchange transactions | | 52 | | | — | | | 52 | | | | 123 | | | 2 | | | 125 | |
| | | | | | | | | | | | | |
| All other derivatives and hedge accounting | | (21) | | | — | | | (21) | | | | (89) | | | (3) | | | (92) | |
| Sales of alternative investments | | 4 | | | — | | | 4 | | | | — | | | — | | | — | |
| Other | | (24) | | | (3) | | | (27) | | | | 18 | | | — | | | 18 | |
| Net realized losses – excluding Fortitude Re funds withheld embedded derivative | | (187) | | | (1) | | | (188) | | | | (65) | | | (7) | | | (72) | |
| Net realized gains on Fortitude Re funds withheld embedded derivative | | — | | | 8 | | | 8 | | | | — | | | 58 | | | 58 | |
| Net realized gains (losses) | $ | (187) | | $ | 7 | | $ | (180) | | | $ | (65) | | $ | 51 | | $ | (14) | |
| | | | | |
32 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | 2024 | | 2023 | | |
| (in millions) | Excluding
Fortitude
Re Funds
Withheld
Assets | Fortitude
Re
Funds
Withheld
Assets | | Total | | Excluding
Fortitude
Re Funds
Withheld
Assets | Fortitude
Re
Funds
Withheld
Assets | | Total | | | | | |
| Sales of fixed maturity securities | $ | (254) | | $ | (16) | | $ | (270) | | | $ | (400) | | $ | (59) | | $ | (459) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Change in allowance for credit losses on fixed maturity securities | | (19) | | | — | | | (19) | | | | (24) | | | — | | | (24) | | | | | | | | |
| Change in allowance for credit losses on loans | | (20) | | | 1 | | | (19) | | | | (7) | | | (1) | | | (8) | | | | | | | | |
| Foreign exchange transactions | | 111 | | | (3) | | | 108 | | | | 155 | | | 5 | | | 160 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| All other derivatives and hedge accounting | | (69) | | | 2 | | | (67) | | | | (113) | | | (6) | | | (119) | | | | | | | | |
| Sales of alternative investments | | 14 | | | (1) | | | 13 | | | | 1 | | | — | | | 1 | | | | | | | | |
| Other | | (9) | | | (3) | | | (12) | | | | 6 | | | — | | | 6 | | | | | | | | |
| Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative | | (246) | | | (20) | | | (266) | | | | (382) | | | (61) | | | (443) | | | | | | | | |
| Net realized losses on Fortitude Re funds withheld embedded derivative | | — | | | (1) | | | (1) | | | | — | | | (82) | | | (82) | | | | | | | | |
| Net realized gains (losses) | $ | (246) | | $ | (21) | | $ | (267) | | | $ | (382) | | $ | (143) | | $ | (525) | | | | | | | | |
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS
The following table presents the increase (decrease) in unrealized appreciation (depreciation) of our available for sale securities and other investments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| | | | | | | | | |
| (in millions) | | 2024 | | 2023 | | | 2024 | | 2023 |
| Increase (decrease) in unrealized appreciation (depreciation) of investments: | | | | | | | | | |
| Fixed maturity securities | $ | 15 | | $ | (180) | | | $ | (117) | | $ | 829 | |
| Other investments | | (39) | | | — | | | | (39) | | | — | |
| Total increase (decrease) in unrealized appreciation (depreciation) of investments* | $ | (24) | | $ | (180) | | | $ | (156) | | $ | 829 | |
*Excludes net unrealized gains and losses attributable to businesses held for sale or reclassified to discontinued operations at June 30, 2024 and 2023.
The following table summarizes the unrealized gains and losses recognized in Net investment income during the reporting period on equity securities and other investments still held at the reporting date:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | 2024 | | | 2023 |
| | | | | | | | | | | | | |
| (in millions) | | Equities | | Other Invested Assets* | | | | Total | | | Equities | | Other Invested Assets | | | | Total |
| Net gains (losses) recognized during the period on equity securities and other investments | | $ | (4) | | | $ | 109 | | | | | $ | 105 | | | | $ | 41 | | | $ | 64 | | | | | $ | 105 | |
| Less: Net gains (losses) recognized during the period on equity securities and other investments sold during the period | | 3 | | | 25 | | | | | 28 | | | | (12) | | | 8 | | | | | (4) | |
| Unrealized gains (losses) recognized during the reporting period on equity securities and other investments still held at the reporting date | | $ | (7) | | | $ | 84 | | | | | $ | 77 | | | | $ | 53 | | | $ | 56 | | | | | $ | 109 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | 2024 | | | 2023 |
| | | | | | | | | | | | | |
| (in millions) | | Equities | | Other Invested Assets* | | | | Total | | | Equities | | Other Invested Assets | | | | Total |
| Net gains recognized during the period on equity securities and other investments | | $ | 84 | | | $ | 192 | | | | | $ | 276 | | | | $ | 62 | | | $ | 143 | | | | | $ | 205 | |
| Less: Net gains recognized during the period on equity securities and other investments sold during the period | | 43 | | | 24 | | | | | 67 | | | | 76 | | | 9 | | | | | 85 | |
| Unrealized gains (losses) recognized during the reporting period on equity securities and other investments still held at the reporting date | | $ | 41 | | | $ | 168 | | | | | $ | 209 | | | | $ | (14) | | | $ | 134 | | | | | $ | 120 | |
*Includes unrealized gain on AIG’s ownership interest in Corebridge of $65 million in the three and six months ended June 30, 2024.
EVALUATING INVESTMENTS FOR AN ALLOWANCE FOR CREDIT LOSSES AND IMPAIRMENTS
For a discussion of our policy for evaluating investments for an allowance for credit losses, see Note 6 to the Consolidated Financial Statements in the 2023 Annual Report.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 33 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments
Credit Impairments
The following table presents a rollforward of the changes in allowance for credit losses on available for sale fixed maturity securities by major investment category:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | 2024 | | | 2023 |
| (in millions) | Structured | Non-
Structured | | Total | | Structured | Non-
Structured | | Total |
| Balance, beginning of period | $ | 3 | | $ | 25 | | $ | 28 | | | $ | 16 | | $ | 12 | | $ | 28 |
| Additions: | | | | | | | | | | | | | |
| Securities for which allowance for credit losses were not previously recorded | | 1 | | | 5 | | | 6 | | | | 1 | | | 23 | | | 24 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Reductions: | | | | | | | | | | | | | |
| Securities sold during the period | | — | | | (1) | | | (1) | | | | (2) | | | (1) | | | (3) | |
| Addition to (release of) the allowance for credit losses on securities that had an allowance recorded in a previous period, for which there was no intent to sell before recovery of amortized cost basis | | 2 | | | 10 | | | 12 | | | | 1 | | | 5 | | | 6 | |
| Write-offs charged against the allowance | | — | | | (14) | | | (14) | | | | (10) | | (11) | | | (21) | |
| Other | | — | | | 2 | | | 2 | | | | 1 | | (1) | | | — | |
| Balance, end of period | $ | 6 | | $ | 27 | | $ | 33 | | | $ | 7 | | $ | 27 | | $ | 34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | 2024 | | 2023 | | |
| (in millions) | Structured | Non-
Structured | | Total | | Structured | Non-
Structured | | Total | | | | | |
| Balance, beginning of year | $ | 13 | | $ | 21 | | $ | 34 | | | $ | 20 | | $ | 17 | | $ | 37 | | | | | | | | |
| Additions: | | | | | | | | | | | | | | | | | | | | |
| Securities for which allowance for credit losses were not previously recorded | | 1 | | | 9 | | | 10 | | | | 2 | | | 28 | | | 30 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Reductions: | | | | | | | | | | | | | | | | | | | | |
| Securities sold during the period | | — | | | — | | | — | | | | (2) | | | (3) | | | (5) | | | | | | | | |
| Addition to (release of) the allowance for credit losses on securities that had an allowance recorded in a previous period, for which there was no intent to sell before recovery of amortized cost basis | | (8) | | | 17 | | | 9 | | | | (3) | | | (3) | | | (6) | | | | | | | | |
| Write-offs charged against the allowance | | — | | | (22) | | | (22) | | | | (10) | | | (11) | | | (21) | | | | | | | | |
| Other | | — | | | 2 | | | 2 | | | | — | | | (1) | | | (1) | | | | | | | | |
| Balance, end of period | $ | 6 | | $ | 27 | | $ | 33 | | | $ | 7 | | $ | 27 | | $ | 34 | | | | | | | | |
Purchased Credit Deteriorated Securities
We purchase certain RMBS securities that have experienced more-than-insignificant deterioration in credit quality since origination. These are referred to as PCD assets. At the time of purchase an allowance is recognized for these PCD assets by adding it to the purchase price to arrive at the initial amortized cost. There is no credit loss expense recognized upon acquisition of a PCD asset. When determining the initial allowance for credit losses, management considers the historical performance of underlying assets and available market information as well as bond-specific structural considerations, such as credit enhancement and the priority of payment structure of the security. In addition, the process of estimating future cash flows includes, but is not limited to, the following critical inputs:
•Current delinquency rates;
•Expected default rates and the timing of such defaults;
•Loss severity and the timing of any recovery; and
•Expected prepayment speeds.
Subsequent to the acquisition date, the PCD assets follow the same accounting as other structured securities that are not high credit quality.
We did not purchase securities with more than insignificant credit deterioration since their origination during the six months ended June 30, 2024 and 2023.
PLEDGED INVESTMENTS
Secured Financing and Similar Arrangements
We enter into secured financing transactions whereby certain securities are sold under agreements to repurchase (repurchase agreements), in which we transfer securities in exchange for cash, with an agreement by us to repurchase the same or substantially similar securities. Our secured financing transactions also include those that involve the transfer of securities to financial institutions in exchange for cash (securities lending agreements). In all of these secured financing transactions, the securities transferred by us
| | | | | |
34 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments
(pledged collateral) may be sold or repledged by the counterparties. These agreements are recorded at their contracted amounts plus accrued interest, other than those that are accounted for at fair value.
Pledged collateral levels are monitored daily and are generally maintained at an agreed-upon percentage of the fair value of the amounts borrowed during the life of the transactions. In the event of a decline in the fair value of the pledged collateral under these secured financing transactions, we may be required to transfer cash or additional securities as pledged collateral under these agreements. At the termination of the transactions, we and our counterparties are obligated to return the amounts borrowed and the securities transferred, respectively.
The following table presents the fair value of securities pledged to counterparties under secured financing transactions, including repurchase and securities lending agreements:
| | | | | | | | | | | | | | |
| (in millions) | | June 30, 2024 | | December 31, 2023 |
| Fixed maturity securities available for sale | $ | — | $ | 106 |
| | | | |
At June 30, 2024 and December 31, 2023, amounts borrowed under repurchase and securities lending agreements totaled $0 million and $107 million, respectively.
The following table presents the fair value of securities pledged under our repurchase agreements by collateral type and by remaining contractual maturity:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Remaining Contractual Maturity of the Agreements |
| (in millions) | | Overnight
and
Continuous | | up to
30 days | | 31 - 90
days | | 91 - 364
days | | 365 days
or greater | | Total |
| December 31, 2023 | | | | | | | | | | | | |
| Bonds available for sale: | | | | | | | | | | | | |
| Non-U.S. governments | | $ | — | | | $ | 106 | | | $ | — | | | $ | — | | | $ | — | | | $ | 106 | |
| Corporate debt | | — | | | — | | | — | | | — | | | — | | | — | |
| Total | | $ | — | | | $ | 106 | | | $ | — | | | $ | — | | | $ | — | | | $ | 106 | |
We also enter into agreements in which securities are purchased by us under agreements to resell (reverse repurchase agreements), which are accounted for as secured financing transactions and reported as short-term investments or other assets, depending on their terms. These agreements are recorded at their contracted resale amounts plus accrued interest, other than those that are accounted for at fair value. In all reverse repurchase transactions, we take possession of or obtain a security interest in the related securities, and we have the right to sell or repledge this collateral received.
The following table presents information on the fair value of securities pledged to us under reverse repurchase agreements:
| | | | | | | | | | | | | | |
| (in millions) | | June 30, 2024 | | December 31, 2023 |
| Securities collateral pledged to us | $ | 1,700 | | $ | 1,200 | |
At June 30, 2024 and December 31, 2023, the carrying value of reverse repurchase agreements totaled $1.7 billion and $1.1 billion, respectively.
All secured financing transactions are collateralized and margined on a daily basis consistent with market standards and subject to enforceable master netting arrangements with rights of set off. We do not currently offset any such transactions.
Insurance – Statutory and Other Deposits
The total carrying value of cash and securities deposited by our insurance subsidiaries under requirements of regulatory authorities or other insurance-related arrangements, including certain annuity-related obligations and certain reinsurance contracts, was $8.5 billion and $8.4 billion at June 30, 2024 and December 31, 2023, respectively.
Other Pledges and Restrictions
Certain of our subsidiaries are members of Federal Home Loan Banks (FHLBs) and such membership requires the members to own stock in these FHLBs. We owned an aggregate of $14 million and $15 million of stock in FHLBs at June 30, 2024 and December 31, 2023, respectively. In addition, our subsidiaries have pledged securities available for sale with a fair value of $1.7 billion at June 30, 2024 and $1.7 billion at December 31, 2023.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 35 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments
Investments held in escrow accounts or otherwise subject to restriction as to their use were $164 million and $164 million, comprised of bonds available for sale and short-term investments at June 30, 2024 and December 31, 2023, respectively.
Reinsurance transactions between AIG and Fortitude Re were structured as modified coinsurance (modco) and loss portfolio transfer arrangements with funds withheld.
7. Lending Activities
The following table presents the composition of Mortgage and other loans receivable, net:
| | | | | | | | | | | |
| (in millions) | June 30, 2024 | | December 31, 2023 |
Commercial mortgages(a) | $ | 3,728 | | | $ | 3,836 | |
| | | |
| Life insurance policy loans | 6 | | | 7 | |
Commercial loans, other loans and notes receivable(b) | 776 | | | 738 | |
Total mortgage and other loans receivable(c) | 4,510 | | | 4,581 | |
Allowance for credit losses(c)(d) | (163) | | | (140) | |
Mortgage and other loans receivable, net(c) | $ | 4,347 | | | $ | 4,441 | |
(a)Commercial mortgages primarily represent loans for apartments, offices and retail properties, with exposures in California and New York representing the largest geographic concentrations (aggregating approximately 12 percent and 10 percent, respectively, at June 30, 2024 and 13 percent and 10 percent, respectively, at December 31, 2023).
(b)There were no loans that were held for sale carried at lower of cost or market as of June 30, 2024 and December 31, 2023.
(c)Excludes $37.6 billion at both June 30, 2024 and December 31, 2023 of loans receivable from AIG Financial Products Corp. (AIGFP), which has a full allowance for credit losses, recognized upon the deconsolidation of AIGFP. For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
(d)Does not include allowance for credit losses of $5 million and $9 million, respectively, at June 30, 2024 and December 31, 2023, in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities.
Interest income is not accrued when payment of contractual principal and interest is not expected. Any cash received on impaired loans is generally recorded as a reduction of the current carrying amount of the loan. Accrual of interest income is generally resumed when delinquent contractual principal and interest is repaid or when a portion of the delinquent contractual payments are made and the ongoing required contractual payments have been made for an appropriate period. As of June 30, 2024 and December 31, 2023, $241 million and $73 million, respectively, of commercial mortgage loans were placed on nonaccrual status.
Accrued interest is presented separately and is included in Accrued investment income on the Condensed Consolidated Balance Sheets. As of June 30, 2024 and December 31, 2023, accrued interest receivable was $20 million and $21 million, respectively, associated with commercial mortgage loans.
A significant majority of commercial mortgages in the portfolio are non-recourse loans and, accordingly, the only guarantees are for specific items that are exceptions to the non-recourse provisions. It is therefore extremely rare for us to have cause to enforce the provisions of a guarantee on a commercial real estate or mortgage loan.
Nonperforming loans are generally those loans where payment of contractual principal or interest is more than 90 days past due. Nonperforming loans were not significant for any of the periods presented.
CREDIT QUALITY OF COMMERCIAL MORTGAGES
The following table presents debt service coverage ratios(a) for commercial mortgages by year of vintage:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | Total |
| (in millions) | | | | | | | |
| >1.2X | $ | 33 | | $ | 460 | | $ | 183 | | $ | 407 | | $ | 102 | | $ | 1,719 | | $ | 2,904 | |
| 1.00 - 1.20X | | 19 | | | 33 | | | 48 | | | 285 | | | 56 | | | 247 | | | 688 | |
| <1.00X | | — | | | — | | | 11 | | | — | | | — | | | 125 | | | 136 | |
| Total commercial mortgages | $ | 52 | | $ | 493 | | $ | 242 | | $ | 692 | | $ | 158 | | $ | 2,091 | | $ | 3,728 | |
| | | | | |
36 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 7. Lending Activities
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Total |
| (in millions) | | | | | | | |
| >1.2X | $ | 398 | | $ | 167 | | $ | 394 | | $ | 135 | | $ | 156 | | $ | 1,784 | | $ | 3,034 | |
| 1.00 - 1.20X | | 5 | | | 71 | | | 254 | | | 56 | | | 21 | | | 298 | | | 705 | |
| <1.00X | | — | | | 11 | | | — | | | — | | | — | | | 86 | | | 97 | |
| Total commercial mortgages | $ | 403 | | $ | 249 | | $ | 648 | | $ | 191 | | $ | 177 | | $ | 2,168 | | $ | 3,836 | |
The following table presents loan-to-value ratios(b) for commercial mortgages by year of vintage:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | | Total |
| (in millions) | | | | | | | |
| Less than 65% | $ | 33 | | $ | 357 | | $ | 154 | | $ | 506 | | $ | 150 | | $ | 1,400 | | $ | 2,600 | |
| 65% to 75% | | 19 | | | 81 | | | 46 | | | 134 | | | — | | | 302 | | | 582 | |
| 76% to 80% | | — | | | — | | | — | | | — | | | — | | | 62 | | | 62 | |
| Greater than 80% | | — | | | 55 | | | 42 | | | 52 | | | 8 | | | 327 | | | 484 | |
| Total commercial mortgages | $ | 52 | | $ | 493 | | $ | 242 | | $ | 692 | | $ | 158 | | $ | 2,091 | | $ | 3,728 | |
| | | | | | | | | | | | | | |
| December 31, 2023 | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Total |
| (in millions) | | | | | | | |
| Less than 65% | $ | 359 | | $ | 159 | | $ | 492 | | $ | 177 | | $ | 156 | | $ | 1,385 | | $ | 2,728 | |
| 65% to 75% | | 10 | | | 15 | | | 137 | | | — | | | 21 | | | 367 | | | 550 | |
| 76% to 80% | | — | | | 32 | | | 10 | | | — | | | — | | | — | | | 42 | |
| Greater than 80% | | 34 | | | 43 | | | 9 | | | 14 | | | — | | | 416 | | | 516 | |
| Total commercial mortgages | $ | 403 | | $ | 249 | | $ | 648 | | $ | 191 | | $ | 177 | | $ | 2,168 | | $ | 3,836 | |
(a)The debt service coverage ratio compares a property’s net operating income to its debt service payments, including principal and interest. Our weighted average debt service coverage ratio was 1.8x at both periods ended June 30, 2024 and December 31, 2023. The debt service coverage ratios are updated when additional relevant information becomes available.
(b)The loan-to-value ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan. Our weighted average loan-to-value ratio was 64 percent and 62 percent at June 30, 2024 and December 31, 2023, respectively. The loan-to-value ratios have been updated within the last three months to reflect the current carrying values of the loans. We update the valuations of collateral properties by obtaining independent appraisals, generally at least once per year.
The following table presents supplementary credit quality information related to commercial mortgages:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number
of
Loans | | Class | | | Percent
of
Total | |
| (dollars in millions) | | Apartments | | Offices | | Retail | | Industrial | | Hotel | | Others | | Total | |
| June 30, 2024 | | | | | | | | | | | | | | | | | |
| Past Due Status: | | | | | | | | | | | | | | | | | |
| In good standing | 206 | $ | 1,241 | | $ | 1,073 | | $ | 422 | | $ | 446 | | $ | 243 | | $ | 120 | | $ | 3,545 | | 95 | | % |
| | | | | | | | | | | | | | | | | |
90 days or less delinquent | 1 | | — | | | 112 | | | — | | | — | | | — | | | — | | | 112 | | 3 | | |
| >90 days delinquent or in process of foreclosure | 3 | | — | | | 10 | | | 61 | | | — | | | — | | | — | | | 71 | | 2 | | |
Total* | 210 | $ | 1,241 | | $ | 1,195 | | $ | 483 | | $ | 446 | | $ | 243 | | $ | 120 | | $ | 3,728 | | 100 | | % |
| Allowance for credit losses | | $ | 6 | | $ | 99 | | $ | 34 | | $ | 9 | | $ | 12 | | $ | 2 | | $ | 162 | | 4 | | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number
of
Loans | | Class | | | Percent
of
Total | |
| (dollars in millions) | | Apartments | | Offices | | Retail | | Industrial | | Hotel | | Others | | Total | |
| December 31, 2023 | | | | | | | | | | | | | | | | | |
| Past Due Status: | | | | | | | | | | | | | | | | | |
| In good standing | 211 | $ | 1,267 | | $ | 1,212 | | $ | 476 | | $ | 460 | | $ | 247 | | $ | 121 | | $ | 3,783 | | 99 | | % |
| | | | | | | | | | | | | | | | | |
| 90 days or less delinquent | 1 | | — | | | 11 | | | — | | | — | | | — | | | — | | | 11 | | — | | |
| >90 days delinquent or in process of foreclosure | 1 | | — | | | — | | | 42 | | | — | | | — | | | — | | | 42 | | 1 | | |
Total* | 213 | $ | 1,267 | | $ | 1,223 | | $ | 518 | | $ | 460 | | $ | 247 | | $ | 121 | | $ | 3,836 | | 100 | | % |
| Allowance for credit losses | | $ | 9 | | $ | 75 | | $ | 36 | | $ | 7 | | $ | 9 | | $ | 2 | | $ | 138 | | 4 | | % |
*Does not reflect allowance for credit losses.
METHODOLOGY USED TO ESTIMATE THE ALLOWANCE FOR CREDIT LOSSES
For a discussion of our accounting policy for evaluating Mortgage and other loans receivable for impairment, see Note 7 to the Consolidated Financial Statements in the 2023 Annual Report.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 37 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 7. Lending Activities
The following table presents a rollforward of the changes in the allowance for credit losses on Mortgage and other loans receivable(a):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | 2024(b) | | | 2023 |
| (in millions) | | Commercial
Mortgages | | Other
Loans | | Total | | | Commercial
Mortgages | | Other
Loans | | Total |
| Allowance, beginning of period | | $ | 150 | | | $ | 3 | | | $ | 153 | | | | $ | 119 | | | $ | 8 | | | $ | 127 | |
| Loans charged off | | — | | | — | | | — | | | | (2) | | | — | | | (2) | |
| | | | | | | | | | | | | |
| Net charge-offs | | — | | | — | | | — | | | | (2) | | | — | | | (2) | |
| Addition to (release of) allowance for loan losses | | 12 | | | (2) | | | 10 | | | | (1) | | | (5) | | | (6) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Allowance, end of period | | $ | 162 | | | $ | 1 | | | $ | 163 | | | | $ | 116 | | | $ | 3 | | | $ | 119 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | 2024(b) | | | 2023 | | | |
| (in millions) | | Commercial
Mortgages | | Other
Loans | | Total | | | Commercial
Mortgages | | Other
Loans | | Total | | | | | | | |
| Allowance, beginning of year | | $ | 138 | | | $ | 2 | | | $ | 140 | | | | $ | 109 | | | $ | 8 | | | $ | 117 | | | | | | | | |
| Loans charged off | | — | | | — | | | — | | | | (2) | | | — | | | (2) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Net charge-offs | | — | | | — | | | — | | | | (2) | | | — | | | (2) | | | | | | | | |
| Addition to (release of) allowance for loan losses | | 24 | | | (1) | | | 23 | | | | 9 | | | (5) | | | 4 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Allowance, end of period | | $ | 162 | | | $ | 1 | | | $ | 163 | | | | $ | 116 | | | $ | 3 | | | $ | 119 | | | | | | | | |
(a)Does not include allowance for credit losses of $5 million and $13 million, respectively, at June 30, 2024 and 2023 in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities.
(b)Excludes $37.6 billion at both June 30, 2024 and December 31, 2023, of loan receivable from AIGFP, which has a full allowance for credit losses, recognized upon the deconsolidation of AIGFP. For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
Our expectations and models used to estimate the allowance for losses on commercial and residential mortgage loans are regularly updated to reflect the current economic environment.
LOAN MODIFICATIONS
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. We use a probability of default/loss given default model to determine the allowance for credit losses for our commercial and residential mortgage loans. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses utilizing the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification.
When modifications are executed, they often will be in the form of principal forgiveness, term extensions, interest rate reductions, or some combination of any of these concessions. When principal is forgiven, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.
We assess whether a borrower is experiencing financial difficulty based on a variety of factors, including the borrower’s current default on any of its outstanding debt, the probability of a default on any of its debt in the foreseeable future without the modification, the insufficiency of the borrower’s forecasted cash flows to service any of its outstanding debt (including both principal and interest), and the borrower’s inability to access alternative third party financing at an interest rate that would be reflective of current market conditions for a non-troubled debtor.
During the six months ended June 30, 2024, commercial mortgage loans with an amortized cost of $5 million supporting the funds withheld arrangements with Fortitude Re were granted term extensions.
There were no loans that had defaulted during the six months ended June 30, 2024 and 2023, that had been previously modified with borrowers experiencing financial difficulties.
AIG closely monitors the performance of the loans modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. All loans with borrowers experiencing financial difficulty that have been modified in the 12 months prior to June 30, 2024 are current and performing in conjunction with their modified terms.
| | | | | |
38 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 8. Reinsurance
8. Reinsurance
FORTITUDE RE
Fortitude Re is the reinsurer of the majority of AIG’s run-off operations. The reinsurance transactions are structured as modco and loss portfolio transfer arrangements with funds withheld (funds withheld). In modco and funds withheld arrangements, the investments supporting the reinsurance agreements, and which reflect the majority of the consideration that would be paid to the reinsurer for entering into the transaction, are withheld by, and therefore continue to reside on the balance sheet of, the ceding company (i.e., AIG) thereby creating an obligation for the ceding company to pay the reinsurer (i.e., Fortitude Re) at a later date. Additionally, as AIG maintains ownership of these investments, AIG will maintain its existing accounting for these assets (e.g., the changes in fair value of available for sale securities will be recognized within OCI). 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 Net 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.
As of June 30, 2024, $3.6 billion of reserves related to business written by multiple wholly-owned AIG subsidiaries, had been ceded to Fortitude Re under these reinsurance transactions.
There is a diverse pool of assets supporting the funds withheld arrangements with Fortitude Re. The following summarizes the composition of the pool of assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 | |
| (in millions) | Carrying
Value | | Fair
Value | | Carrying
Value | | Fair
Value | Corresponding Accounting Policy |
Fixed maturity securities - available for sale(a) | $ | 1,997 | | $ | 1,997 | | | $ | 2,180 | | $ | 2,180 | | Fair value through other comprehensive income (loss) |
| Fixed maturity securities - fair value option | | 761 | | | 761 | | | | 655 | | | 655 | | Fair value through net investment income |
| Commercial mortgage loans | | 474 | | | 461 | | | | 543 | | | 528 | | Amortized cost |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Short-term investments | | 18 | | | 18 | | | | 46 | | | 46 | | Fair value through net investment income |
| Funds withheld investment assets | | 3,250 | | | 3,237 | | | | 3,424 | | | 3,409 | | |
Derivative assets, net(b) | | 1 | | | 1 | | | | — | | | — | | Fair value through net realized gains (losses) |
Other(c) | | 126 | | | 126 | | | | 118 | | | 118 | | Amortized cost |
| Total | $ | 3,377 | | $ | 3,364 | | | $ | 3,542 | | $ | 3,527 | | |
(a)The change in the net unrealized gains (losses) on available for sale securities related to the Fortitude Re funds withheld assets was $(53) million ($(42) million after-tax) and $21 million ($16 million after-tax), respectively for the six months ended June 30, 2024 and 2023.
(b)The derivative assets and liabilities have been presented net of cash collateral. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $3 million and $27 million, respectively, as of June 30, 2024. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $1 million and $28 million, respectively, as of December 31, 2023. These derivative assets and liabilities are fully collateralized either by cash or securities.
(c)Primarily comprised of Cash and Accrued investment income.
The impact of the funds withheld arrangements with Fortitude Re was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, | | |
| (in millions) | | 2024 | | 2023 | | | 2024 | | 2023 | | |
| | | | | | | | | | | |
| Net investment income - Fortitude Re funds withheld assets | $ | 33 | | $ | 25 | | | $ | 72 | | $ | 77 | | | |
| Net realized gains (losses) on Fortitude Re funds withheld assets: | | | | | | | | | | | |
| Net realized losses - Fortitude Re funds withheld assets | | (1) | | | (7) | | | | (20) | | | (61) | | | |
| Net realized gains (losses) - Fortitude Re funds withheld embedded derivative | | 8 | | | 58 | | | | (1) | | | (82) | | | |
| Net realized gains (losses) on Fortitude Re funds withheld assets | | 7 | | | 51 | | | | (21) | | | (143) | | | |
| Income (loss) from continuing operations before income tax expense (benefit) | | 40 | | | 76 | | | | 51 | | | (66) | | | |
Income tax expense (benefit)(a) | | 9 | | | 16 | | | | 11 | | | (14) | | | |
Net income (loss) | | 31 | | | 60 | | | | 40 | | | (52) | | | |
Change in unrealized appreciation (depreciation) of all other investments(a) | | (34) | | | (58) | | | | (42) | | | 16 | | | |
| Comprehensive income (loss) | $ | (3) | | $ | 2 | | | $ | (2) | | $ | (36) | | | |
(a)The income tax expense (benefit) and the tax impact in Accumulated other comprehensive income (loss) (AOCI) was computed using AIG’s U.S. statutory tax rate of 21 percent.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 39 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 8. Reinsurance
Various assets supporting the Fortitude Re funds withheld arrangements are reported at amortized cost, and as such, changes in the fair value of these assets are not reflected in the financial statements. However, changes in the fair value of these assets are included in the embedded derivative in the Fortitude Re funds withheld arrangement and the appreciation (depreciation) of the asset is the primary driver of the comprehensive income (loss) reflected above.
REINSURANCE – CREDIT LOSSES
The estimation of reinsurance recoverables involves a significant amount of judgment, particularly for latent exposures, such as asbestos, due to their long-tail nature. We assess the collectability of reinsurance recoverable balances in each reporting period, through either historical trends of disputes and credit events or financial analysis of the credit quality of the reinsurer. We record adjustments to reflect the results of these assessments through an allowance for credit losses and disputes on uncollectible reinsurance that reduces the carrying amount of reinsurance and deposit accounting assets on the consolidated balance sheets (collectively, reinsurance recoverables). This estimate requires significant judgment for which key considerations include:
•paid and unpaid amounts recoverable;
•whether the balance is in dispute or subject to legal collection;
•the relative financial health of the reinsurer as classified by the Obligor Risk Ratings (ORRs) we assign to each reinsurer based upon our financial reviews; reinsurers that are financially troubled (i.e., in run-off, have voluntarily or involuntarily been placed in receivership, are insolvent, are in the process of liquidation or otherwise subject to formal or informal regulatory restriction) are assigned ORRs that will generate a significant allowance; and
•whether collateral and collateral arrangements exist.
An estimate of the reinsurance recoverable's lifetime expected credit losses is established utilizing a probability of default and loss given default method, which reflects the reinsurer’s ORR. The allowance for credit losses excludes disputed amounts. An allowance for disputes is established for a reinsurance recoverable using the losses incurred model for contingencies.
The total reinsurance recoverables as of June 30, 2024 were $43.1 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 82 percent of the reinsurance recoverables were investment grade; (ii) approximately 15 percent of the reinsurance recoverables were non-investment grade and (iii) approximately 3 percent of the reinsurance recoverables related to entities that were not rated by AIG.
The total reinsurance recoverables as of December 31, 2023 were $41.4 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 83 percent of the reinsurance recoverables were investment grade; (ii) approximately 15 percent of the reinsurance recoverables were non-investment grade; (iii) approximately 2 percent of the reinsurance recoverables related to entities that were not rated by AIG.
As of June 30, 2024 and December 31, 2023, approximately 78 percent and 85 percent, respectively, of our non-investment grade reinsurance exposure related to captive insurers. These arrangements are typically collateralized by letters of credit, funds withheld or trust agreements.
Reinsurance Recoverable Allowance
The following table presents a rollforward of the reinsurance recoverable allowance:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, | | |
| (in millions) | | 2024 | | | 2023 | | | 2024 | | | 2023 | | | |
| Balance, beginning of period | $ | 255 | | | $ | 253 | | | $ | 255 | | | $ | 260 | | | | |
| Addition to (release of) allowance for expected credit losses and disputes, net | | (1) | | | | (1) | | | | — | | | | (4) | | | | |
| Write-offs charged against the allowance for credit losses and disputes | | — | | | | — | | | | (1) | | | | (1) | | | | |
| | | | | | | | | | | | | | |
| Other changes | | 6 | | | | 2 | | | | 6 | | | | (1) | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Balance, end of period | $ | 260 | | | $ | 254 | | | $ | 260 | | | $ | 254 | | | | |
Past-Due Status
We consider a reinsurance asset to be past due when it is 90 days past due. The allowance for credit losses is estimated excluding disputed amounts. An allowance for disputes is established using the losses incurred method for contingencies. Past due balances on claims that are not in dispute were not material for any of the periods presented.
| | | | | |
40 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 9. Deferred Policy Acquisition Costs
9. Deferred Policy Acquisition Costs
DAC represent those costs that are incremental and directly related to the successful acquisition of new or renewal of existing insurance contracts. We defer incremental costs that result directly from, and are essential to, the acquisition or renewal of an insurance contract. Such DAC generally include agent or broker commissions and bonuses, premium taxes, and medical and inspection fees that would not have been incurred if the insurance contract had not been acquired or renewed. Each cost is analyzed to assess whether it is fully deferrable. We partially defer costs, including certain commissions, when we do not believe that the entire cost is directly related to the acquisition or renewal of insurance contracts. Commissions that are not deferred to DAC are recorded in General operating and other expenses in the Condensed Consolidated Statements of Income (Loss).
We also defer a portion of employee total compensation and payroll-related fringe benefits directly related to time spent performing specific acquisition or renewal activities, including costs associated with the time spent on underwriting, policy issuance and processing, and sales force contract selling. The amounts deferred are derived based on successful efforts for each distribution channel and/or cost center from which the cost originates.
The following table presents a rollforward of DAC:
| | | | | | | | | | | | | |
| Six Months Ended June 30, | | | | | |
| (in millions) | 2024 | | 2023 | | |
| Balance, beginning of year | $ | 2,117 | | | $ | 2,343 | | | |
| Capitalization | 1,803 | | | 2,396 | | | |
| Amortization expense | (1,680) | | | (1,972) | | | |
| Other, including foreign exchange | (117) | | | (23) | | | |
| | | | | |
| | | | | |
| Reclassified to held for sale | — | | | (712) | | | |
| | | | | |
| Balance, end of period | $ | 2,123 | | | $ | 2,032 | | | |
10. Variable Interest Entities
We enter into various arrangements with Variable Interest Entities (VIEs) in the normal course of business and consolidate the VIEs when we determine we are the primary beneficiary. This analysis includes a review of the VIE’s capital structure, related contractual relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and our involvement with the entity. When assessing the need to consolidate a VIE, we evaluate the design of the VIE as well as the related risks to which the entity was designed to expose the variable interest holders.
The primary beneficiary is the entity that has both (i) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (ii) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of our decision-making ability and our ability to influence activities that significantly affect the economic performance of the VIE.
BALANCE SHEET CLASSIFICATION AND EXPOSURE TO LOSS
Creditors or beneficial interest holders of VIEs for which AIG is the primary beneficiary generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to AIG, except in limited circumstances when AIG has provided a guarantee to the VIE’s interest holders. The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the Condensed Consolidated Balance Sheets:
| | | | | | | | | | | | | | | | | |
| (in millions) | | June 30, 2024 | | | December 31, 2023 |
| | | | | |
| Assets: | | | | | |
| Bonds available for sale | $ | 30 | | | $ | 72 | |
| | | | | |
| | | | | |
Mortgage and other loans receivable | | — | | | | 122 | |
| | | | | |
| | | | | |
| | | | | |
| Short-term investments | | — | | | | 5 | |
| | | | | |
| Accrued investment income | | 1 | | | | 2 | |
Other assets | | 1 | | | | 1 | |
| Total* | $ | 32 | | | $ | 202 | |
| Liabilities: | | | | | |
| Debt of consolidated investment entities | $ | — | | | $ | 38 | |
| | | | | |
| Total | $ | — | | | $ | 38 | |
*The assets of each VIE can be used only to settle specific obligations of that VIE.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 41 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 10. Variable Interest Entities
We calculate our maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE, (ii) the notional amount of VIE assets or liabilities where we have also provided credit protection to the VIE with the VIE as the referenced obligation, and (iii) other commitments and guarantees to the VIE.
The following table presents total assets of unconsolidated VIEs in which we hold a variable interest, as well as our maximum exposure to loss associated with these VIEs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Maximum Exposure to Loss |
| (in millions) | | Total VIE
Assets | | | On-Balance
Sheet(c) | | | Off-Balance
Sheet | | | Total |
| June 30, 2024 | | | | | | | | | | | |
Real estate and investment entities(a) | $ | 361,397 | | | $ | 3,686 | | | $ | 1,306 | | (d) | $ | 4,992 | |
Other(b) | | 1,027 | | | | — | | | | 748 | | (e) | | 748 | |
| Total | $ | 362,424 | | | $ | 3,686 | | | $ | 2,054 | | | $ | 5,740 | |
| December 31, 2023 | | | | | | | | | | | |
Real estate and investment entities(a) | $ | 355,003 | | | $ | 4,107 | | | $ | 1,492 | | (d) | $ | 5,599 | |
Other(b) | | 1,027 | | | | — | | | | 748 | | (e) | | 748 | |
| Total | $ | 356,030 | | | $ | 4,107 | | | $ | 2,240 | | | $ | 6,347 | |
(a)Comprised primarily of hedge funds and private equity funds.
(b)At June 30, 2024 and December 31, 2023, excludes approximately $1,948 million and $1,971 million, respectively, of VIE assets related to AIGFP and its consolidated subsidiaries, with maximum off-balance sheet exposure to loss of $1,918 million and $1,941 million, respectively. For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
(c)At June 30, 2024 and December 31, 2023, $3.7 billion and $4.1 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.
(d)These amounts represent our unfunded commitments to invest in private equity funds and hedge funds.
(e)These amounts represent our estimate of the maximum exposure to loss under certain insurance policies issued to VIEs if a hypothetical loss occurred to the extent of the full amount of the insured value. Our insurance policies cover defined risks and our estimate of liability is included in our insurance reserves on the balance sheet.
For additional information on VIEs, see Note 10 to the Consolidated Financial Statements in the 2023 Annual Report.
11. Derivatives and Hedge Accounting
We use derivatives and other financial instruments as part of our financial risk management programs and as part of our investment operations. Interest rate derivatives (such as interest rate swaps) are used to manage interest rate risk associated with embedded derivatives contained in insurance contract liabilities, fixed maturity securities, outstanding medium- and long-term notes as well as other interest rate sensitive assets and liabilities. Foreign exchange derivatives (principally foreign exchange forwards and swaps) are used to economically mitigate risk associated with non-U.S. dollar denominated debt, net capital exposures, foreign currency transactions, and foreign denominated investments. Equity derivatives are used to economically mitigate financial risk associated with embedded derivatives. We use credit derivatives to manage our credit exposures. Commodity derivatives are used to hedge exposures within reinsurance contracts. The derivatives are effective economic hedges of the exposures that they are meant to offset. As part of our strategy to enhance investment income, in addition to hedging activities, we also enter into derivative contracts with respect to investment operations, which may include, among other things, credit default swaps (CDSs), total return swaps and purchases of investments with embedded derivatives, such as equity-linked notes and convertible bonds.
The following table presents the notional amounts of our derivatives and the fair value of derivative assets and liabilities in the Condensed Consolidated Balance Sheets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| Gross Derivative Assets | | Gross Derivative Liabilities | | Gross Derivative Assets | | Gross Derivative Liabilities |
| (in millions) | | Notional
Amount | | Fair
Value | | | Notional
Amount | | Fair
Value | | | Notional
Amount | | Fair
Value | | | Notional
Amount | | Fair
Value |
Derivatives designated as hedging instruments:(a) | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Foreign exchange contracts | $ | 625 | | $ | 42 | | | $ | 947 | | $ | 157 | | | $ | 933 | | $ | 58 | | | $ | 1,296 | | $ | 164 | |
Derivatives not designated as hedging instruments:(a) | | | | | | | | | | | | | | | | | | | |
| Interest rate contracts | | 1,799 | | | 266 | | | | 937 | | | 291 | | | | 14,657 | | | 741 | | | | 1,165 | | | 352 | |
| Foreign exchange contracts | | 2,408 | | | 215 | | | | 2,350 | | | 168 | | | | 4,019 | | | 393 | | | | 8,008 | | | 400 | |
| Equity contracts | | 81 | | | 35 | | | | — | | | — | | | | 36,045 | | | 66 | | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | |
Credit contracts(b) | | 1,803 | | | 33 | | | | 207 | | | 33 | | | | 1,804 | | | 33 | | | | 504 | | | 36 | |
Other contracts(c) | | 2,123 | | | 1 | | | | — | | | — | | | | 2,131 | | | 1 | | | | — | | | — | |
| | | | | |
42 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Derivatives and Hedge Accounting
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
| Gross Derivative Assets | | Gross Derivative Liabilities | | Gross Derivative Assets | | Gross Derivative Liabilities |
| (in millions) | | Notional
Amount | | Fair
Value | | | Notional
Amount | | Fair
Value | | | Notional
Amount | | Fair
Value | | | Notional
Amount | | Fair
Value |
| Total derivatives, gross | $ | 8,839 | | $ | 592 | | | $ | 4,441 | | $ | 649 | | | $ | 59,589 | | $ | 1,292 | | | $ | 10,973 | | $ | 952 | |
Counterparty netting(d) | | | | (245) | | | | | | (245) | | | | | | (450) | | | | | | (450) | |
Cash collateral(e) | | | | (288) | | | | | | (180) | | | | | | (711) | | | | | | (249) | |
Total derivatives on Condensed Consolidated Balance Sheets(f) | | | $ | 59 | | | | | $ | 224 | | | | | $ | 131 | | | | | $ | 253 | |
(a)Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.
(b)As of June 30, 2024 and December 31, 2023, included CDSs on super senior multi-sector CLO with a net notional amount of $48 million and $50 million (fair value liability of $32 million and $32 million, respectively). The net notional amount represents the maximum exposure to loss on the portfolio.
(c)Consists primarily of stable value wraps and contracts with multiple underlying exposures.
(d)Represents netting of derivative exposures covered by a qualifying master netting agreement.
(e)Represents cash collateral posted and received that is eligible for netting.
(f)Freestanding derivatives only, excludes embedded derivatives. Derivative instrument assets and liabilities are recorded in Other assets and Other liabilities, respectively. Fair value of assets related to bifurcated embedded derivatives was $154 million at June 30, 2024 and $3.4 billion at December 31, 2023. Fair value of liabilities related to bifurcated embedded derivatives was zero at both June 30, 2024 and December 31, 2023. A bifurcated embedded derivative is generally presented with the host contract in the Condensed Consolidated Balance Sheets. Embedded derivatives are primarily related to guarantee features in fixed index annuities, index universal life products, and bonds available for sale, which include equity and interest rate components, and the funds withheld arrangement with Fortitude Re. For additional information, see Note 8.
COLLATERAL
We engage in derivative transactions that are not subject to a clearing requirement directly with unaffiliated third parties, in most cases, under International Swaps and Derivatives Association, Inc. (ISDA) Master Agreements. Many of the ISDA Master Agreements also include Credit Support Annex provisions, which provide for collateral postings that may vary at various ratings and threshold levels. We attempt to reduce our risk with certain counterparties by entering into agreements that enable collateral to be obtained from a counterparty on an upfront or contingent basis. We minimize the risk that counterparties might be unable to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value and generally requiring additional collateral to be posted upon the occurrence of certain events or circumstances. In addition, certain derivative transactions have provisions that require collateral to be posted by us upon a downgrade of our long-term debt ratings or give the counterparty the right to terminate the transaction. In the case of some of the derivative transactions, upon a downgrade of our long-term debt ratings, as an alternative to posting collateral and subject to certain conditions, we may assign the transaction to an obligor with higher debt ratings or arrange for a substitute guarantee of our obligations by an obligor with higher debt ratings or take other similar action. The actual amount of collateral required to be posted to counterparties in the event of such downgrades, or the aggregate amount of payments that we could be required to make, depends on market conditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of the downgrade.
Collateral posted by us to third parties for derivative transactions was $437 million and $593 million at June 30, 2024 and December 31, 2023, respectively. In the case of collateral posted under derivative transactions that are not subject to clearing, this collateral can generally be repledged or resold by the counterparties. Collateral provided to us from third parties for derivative transactions was $370 million and $856 million at June 30, 2024 and December 31, 2023, respectively. In the case of collateral provided to us under derivative transactions that are not subject to clearing, we generally can repledge or resell collateral.
OFFSETTING
We have elected to present all derivative receivables and derivative payables, and the related cash collateral received and paid, on a net basis on our Condensed Consolidated Balance Sheets when a legally enforceable ISDA Master Agreement exists between us and our derivative counterparty. An ISDA Master Agreement is an agreement governing multiple derivative transactions between two counterparties. The ISDA Master Agreement generally provides for the net settlement of all, or a specified group, of these derivative transactions, as well as transferred collateral, through a single payment, and in a single currency, as applicable. The net settlement provisions apply in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions governed by the ISDA Master Agreement.
HEDGE ACCOUNTING
We designated certain derivatives entered into with third parties as fair value hedges of available for sale investment securities held by our insurance subsidiaries. The fair value hedges include foreign currency forwards and cross currency swaps designated as hedges of the change in fair value of foreign currency denominated available for sale securities attributable to changes in foreign exchange rates. We also designated certain interest rate swaps entered into with third parties as fair value hedges of fixed rate guaranteed investment contracts attributable to changes in benchmark interest rates.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 43 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Derivatives and Hedge Accounting
We use foreign currency denominated debt and cross-currency swaps as hedging instruments in net investment hedge relationships to mitigate the foreign exchange risk associated with our non-U.S. dollar functional currency foreign subsidiaries. For net investment hedge relationships where issued debt is used as a hedging instrument, we assess the hedge effectiveness and measure the amount of ineffectiveness based on changes in spot rates. For net investment hedge relationships that use derivatives as hedging instruments, we assess hedge effectiveness and measure hedge ineffectiveness using changes in forward rates. For the three and six months ended June 30, 2024, we recognized gains (losses) of $9 million and $34 million, respectively, and for the three and six months ended June 30, 2023, we recognized gains (losses) of $(7) million and $(31) million, respectively, included in Change in foreign currency translation adjustments in OCI related to the net investment hedge relationships.
A qualitative methodology is utilized to assess hedge effectiveness for net investment hedges, while regression analysis is employed for all other hedges.
The following table presents the gain (loss) recognized in income on our derivative instruments in fair value hedging relationships in the Condensed Consolidated Statements of Income (Loss):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Gains/(Losses) Recognized in Income for: | | |
| (in millions) | | Hedging Derivatives(a) | | Excluded Components(b) | | Hedged
Items | | Net Impact |
| Three Months Ended June 30, 2024 | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Foreign exchange contracts: | | | | | | | | |
| Net realized gains/(losses) | | $ | (57) | | | $ | (15) | | | $ | 57 | | | $ | (15) | |
| Three Months Ended June 30, 2023 | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Foreign exchange contracts: | | | | | | | | |
| Net realized gains/(losses) | | $ | (141) | | | $ | (2) | | | $ | 141 | | | $ | (2) | |
| Six Months Ended June 30, 2024 | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Foreign exchange contracts: | | | | | | | | |
| Net realized gains/(losses) | | $ | (115) | | | $ | (27) | | | $ | 115 | | | $ | (27) | |
| Six Months Ended June 30, 2023 | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Foreign exchange contracts: | | | | | | | | |
| Net realized gains/(losses) | | $ | (191) | | | $ | (2) | | | $ | 191 | | | $ | (2) | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(a)Gains and losses on derivative instruments designated and qualifying in fair value hedges that are included in the assessment of hedge effectiveness.
(b)Gains and losses on derivative instruments designated and qualifying in fair value hedges that are excluded from the assessment of hedge effectiveness and recognized in income on a mark-to-market basis.
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
The following table presents the effect of derivative instruments not designated as hedging instruments in the Condensed Consolidated Statements of Income (Loss):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gains (Losses) Recognized in Income |
| Three Months Ended
June 30, | | Six Months Ended
June 30, | | |
| (in millions) | | 2024 | | 2023 | | | 2024 | | 2023 | | |
| By Derivative Type: | | | | | | | | | | | |
| Interest rate contracts | $ | — | | $ | (3) | | | $ | (2) | | $ | (2) | | | |
| Foreign exchange contracts | | (26) | | | (92) | | | | (65) | | | (126) | | | |
| Equity contracts | | — | | | 1 | | | | — | | | 1 | | | |
| Commodity contracts | | — | | | 1 | | | | — | | | 8 | | | |
| Credit contracts | | (1) | | | — | | | | — | | | (1) | | | |
| | | | | | | | | | | |
| Embedded derivatives | | 8 | | | 58 | | | | (1) | | | (82) | | | |
| Total | $ | (19) | | $ | (35) | | | $ | (68) | | $ | (202) | | | |
| By Classification: | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net investment income - Fortitude Re funds withheld assets | | — | | | (1) | | | | — | | | (1) | | | |
Net realized losses - excluding Fortitude Re funds withheld assets | | (27) | | | (89) | | | | (69) | | | (113) | | | |
Net realized gains (losses) on Fortitude Re funds withheld assets* | | 8 | | | 55 | | | | 1 | | | (88) | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total | $ | (19) | | $ | (35) | | | $ | (68) | | $ | (202) | | | |
*Includes over-the-counter derivatives supporting the funds withheld arrangements with Fortitude Re and the embedded derivative contained within the funds withheld payable with Fortitude Re.
| | | | | |
44 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Derivatives and Hedge Accounting
CREDIT RISK-RELATED CONTINGENT FEATURES
We estimate that at June 30, 2024, based on our outstanding financial derivative transactions, a downgrade of our long-term senior debt ratings to BBB or BBB– by Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc., and/or a downgrade to Baa2 or Baa3 by Moody’s Investors’ Service, Inc. would permit counterparties to make additional collateral calls and permit certain counterparties to elect early termination of contracts, resulting in corresponding collateral postings and termination payments in the total amount of up to approximately $6 million. The aggregate fair value of our derivatives that were in a net liability position and that contain such credit risk-related contingencies which can be triggered below our long-term senior debt ratings of BBB+ or Baa1 was approximately $32 million and $32 million at June 30, 2024 and December 31, 2023, respectively. The aggregate fair value of assets posted as collateral under these contracts at June 30, 2024 and December 31, 2023, was approximately $33 million and $34 million, respectively.
HYBRID SECURITIES WITH EMBEDDED CREDIT DERIVATIVES
We invest in hybrid securities (such as credit-linked notes) with the intent of generating income and not specifically to acquire exposure to embedded derivative risk. As is the case with our other investments in RMBS, CMBS, CLO and ABS, our investments in these hybrid securities are exposed to losses only up to the amount of our initial investment in the hybrid security. Other than our initial investment in the hybrid securities, we have no further obligation to make payments on the embedded credit derivatives in the related hybrid securities.
We elect to account for our investments in these hybrid securities with embedded written credit derivatives at fair value, with changes in fair value recognized in Net investment income. Our investments in these hybrid securities are reported as Other bond securities in the Condensed Consolidated Balance Sheets. The fair value of these hybrid securities was under $1 million at both June 30, 2024 and December 31, 2023, respectively. These securities have par amounts of $17 million at both June 30, 2024 and December 31, 2023, respectively, and have remaining stated maturity dates that extend to 2052.
12. Insurance Liabilities
LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (LOSS RESERVES)
Loss reserves represent the accumulation of estimates of unpaid claims, including estimates for claims incurred but not reported and loss adjustment expenses, less applicable discount. We regularly review and update the methods used to determine loss reserve estimates. Any adjustments resulting from this review are reflected currently in pre-tax income, except to the extent such adjustment impacts a deferred gain under a retroactive reinsurance agreement, in which case the ceded portion would be amortized into pre-tax income in subsequent periods. Because these estimates are subject to the outcome of future events, changes in estimates are common given that loss trends vary and time is often required for changes in trends to be recognized and confirmed. Reserve changes that increase previous estimates of ultimate cost are referred to as unfavorable or adverse development or reserve strengthening. Reserve changes that decrease previous estimates of ultimate cost are referred to as favorable development or reserve releases.
Our gross loss reserves before reinsurance and discount are net of contractual deductible recoverable amounts due from policyholders of approximately $12.3 billion and $12.1 billion at June 30, 2024 and December 31, 2023, respectively. These recoverable amounts are related to certain policies with high deductibles (in excess of high dollar amounts retained by the insured through self-insured retentions, deductibles, retrospective programs, or captive arrangements, each referred to generically as “deductibles”), primarily for U.S. Commercial casualty business. With respect to the deductible portion of the claim, we manage and pay the entire claim on behalf of the insured and are reimbursed by the insured for the deductible portion of the claim. Thus, these recoverable amounts represent a credit exposure to us. At June 30, 2024 and December 31, 2023 we held collateral of approximately $8.7 billion and $8.7 billion, respectively, for these deductible recoverable amounts, consisting primarily of letters of credit and funded trust agreements. Allowance for credit losses for the unsecured portion of these recoverable amounts was $14 million at both June 30, 2024 and December 31, 2023.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 45 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities
The following table presents the rollforward of activity in loss reserves:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, | | |
| (in millions) | | 2024 | | 2023 | | | 2024 | | 2023 | | |
| Liability for unpaid loss and loss adjustment expenses, beginning of period | $ | 70,060 | | $ | 75,793 | | | $ | 70,393 | | $ | 75,167 | | | |
| Reinsurance recoverable | | (30,169) | | | (32,366) | | | | (30,289) | | | (32,102) | | | |
| Net Liability for unpaid loss and loss adjustment expenses, beginning of period | | 39,891 | | | 43,427 | | | | 40,104 | | | 43,065 | | | |
| Losses and loss adjustment expenses incurred: | | | | | | | | | | | |
| Current year | | 3,546 | | | 3,945 | | | | 6,911 | | | 7,729 | | | |
| Prior years, excluding discount and amortization of deferred gain | | (108) | | | (107) | | | | (108) | | | (134) | | | |
| Prior years, discount charge (benefit) | | 62 | | | 54 | | | | 168 | | | 148 | | | |
Prior years, amortization of deferred gain on retroactive reinsurance(a) | | (33) | | | (25) | | | | (65) | | | (85) | | | |
| Total losses and loss adjustment expenses incurred | | 3,467 | | | 3,867 | | | | 6,906 | | | 7,658 | | | |
| Losses and loss adjustment expenses paid: | | | | | | | | | | | |
| Current year | | (855) | | | (881) | | | | (1,141) | | | (1,170) | | | |
| Prior years | | (2,597) | | | (2,994) | | | | (5,454) | | | (6,543) | | | |
| Total losses and loss adjustment expenses paid | | (3,452) | | | (3,875) | | | | (6,595) | | | (7,713) | | | |
| Other changes: | | | | | | | | | | | |
| Foreign exchange effect | | (158) | | | (25) | | | | (654) | | | 372 | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Retroactive reinsurance adjustment (net of discount)(b) | | 186 | | | 47 | | | | 178 | | | 59 | | | |
| | | | | | | | | | | |
Reclassified to held for sale, net of reinsurance recoverables(c) | | — | | | (3,383) | | | | (5) | | | (3,383) | | | |
| Total other changes | | 28 | | | (3,361) | | | | (481) | | | (2,952) | | | |
| Liability for unpaid loss and loss adjustment expenses, end of period: | | | | | | | | | | | |
| Net liability for unpaid losses and loss adjustment expenses | | 39,934 | | | 40,058 | | | | 39,934 | | | 40,058 | | | |
Reinsurance recoverable(d) | | 29,849 | | | 30,226 | | | | 29,849 | | | 30,226 | | | |
| Total | $ | 69,783 | | $ | 70,284 | | | $ | 69,783 | | $ | 70,284 | | | |
(a)Includes $39 million and $6 million for the retroactive reinsurance agreement with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc. (Berkshire), covering U.S. asbestos exposures for the three months ended June 30, 2024 and 2023, respectively, and $44 million and $13 million for the six months ended June 30, 2024 and 2023, respectively.
(b)Includes benefit (charge) from change in discount on retroactive reinsurance in the amount of $23 million and $26 million for the three months ended June 30, 2024 and 2023 respectively, and $78 million and $96 million for the six months ended June 30, 2024 and 2023, respectively.
(c)Represents change in loss reserves included in Liabilities held for sale for the six months ended June 30, 2024. For additional information, see Note 4.
(d)Excludes $1.5 billion of Reinsurance recoverable reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets at June 30, 2023.
On January 20, 2017, we entered into an adverse development reinsurance agreement with NICO, under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the paid losses on subject business paid on or after January 1, 2016 in excess of $25 billion of net paid losses, up to an aggregate limit of $25 billion. At NICO’s 80 percent share, NICO’s limit of liability under the contract is $20 billion. We account for this transaction as retroactive reinsurance. We paid total consideration, including interest, of $10.2 billion. The consideration was placed into a collateral trust account as security for NICO’s claim payment obligations, and Berkshire has provided a parental guarantee to secure the obligations of NICO under the agreement.
Prior Year Development
During the three and six months ended June 30, 2024, we recognized favorable prior year loss reserve development of $108 million excluding discount and amortization of deferred gain. The development in this period was largely driven by favorable development on our loss sensitive U.S. Workers' Compensation business along with favorable development in U.S. Other Casualty, offset by adverse development in U.S. Excess Casualty.
During the three months ended June 30, 2023, we recognized favorable prior year loss reserve development of $107 million excluding discount and amortization of deferred gain. The development in this period was largely driven by favorable development on our loss sensitive U.S. Workers' Compensation business, U.S. Other Casualty and U.S. Property & Special Risks including prior year catastrophes, partially offset by unfavorable development on European Casualty. During the six months ended June 30, 2023, we recognized favorable prior year loss reserve development of $134 million excluding discount and amortization of deferred gain. The development in this period was largely driven by favorable development on our loss sensitive U.S. Workers' Compensation business, U.S. Other Casualty and U.S. Property & Special Risks, partially offset by unfavorable development on European Casualty.
| | | | | |
46 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities
Discounting of Loss Reserves
At June 30, 2024 and December 31, 2023, the loss reserves reflect a net loss reserve discount of $1.2 billion and $1.2 billion, respectively, including tabular and non-tabular calculations based upon the following assumptions:
•The non-tabular workers’ compensation discount is calculated separately for companies domiciled in New York, Pennsylvania and Delaware, and follows the statutory regulations (prescribed or permitted) for each state.
–For New York companies, the discount is based on a 5 percent interest rate and the companies’ own payout patterns.
–The Pennsylvania and Delaware regulators approved use of a consistent benchmark discount rate and spread (U.S. Treasury rate plus a liquidity premium) to all of our workers’ compensation reserves in our Pennsylvania domiciled and Delaware domiciled companies, as well as our use of updated payout patterns specific to our primary and excess workers compensation portfolios. In 2020, the regulators also approved that the discount rate will be updated on an annual basis.
•The tabular workers’ compensation discount is calculated based on the mortality rate used in the 2007 U.S. Life table and interest rates prescribed or permitted by each state (i.e. New York is based on 5 percent interest rate and Pennsylvania and Delaware are based on U.S. Treasury rate plus a liquidity premium). In the case that applying this tabular discount factor to our nominal reserves produces a tabular discount that is greater than the indemnity portion of our case reserves, the tabular discount is capped at our estimate of the indemnity portion of our cases reserves (45 percent).
The discount for asbestos reserves has been fully accreted.
At June 30, 2024 and December 31, 2023, the discount consists of $288 million and $294 million of tabular discount, respectively, and $921 million and $939 million of non-tabular discount for workers’ compensation, respectively. During the six months ended June 30, 2024 and 2023, the benefit / (charge) from changes in discount of $(102) million and $(80) million, respectively, were recorded as part of Policyholder benefits and losses incurred in the Condensed Consolidated Statements of Income (Loss).
The following table presents the components of the loss reserve discount discussed above:
| | | | | | | | | | | | | | |
| (in millions) | | June 30, 2024 | | December 31, 2023 |
| U.S. workers' compensation | $ | 2,235 | | $ | 2,337 | |
| Retroactive reinsurance | | (1,026) | | | (1,104) | |
Total reserve discount(a)(b) | $ | 1,209 | | $ | 1,233 | |
(a)Excludes $196 million and $196 million of discount related to certain long-tail liabilities in the UK at June 30, 2024 and December 31, 2023, respectively.
(b)Includes gross discount of $673 million and $687 million, which was 100 percent ceded to Fortitude Re at June 30, 2024 and December 31, 2023, respectively.
The following table presents the net loss reserve discount benefit (charge):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (in millions) | | 2024 | | 2023 | | | 2024 | | 2023 | | |
| Current accident year | $ | 36 | | $ | 38 | | | $ | 66 | | $ | 68 | | | |
| Accretion and other adjustments to prior year discount | | (62) | | | (54) | | | | (168) | | | (148) | | | |
| | | | | | | | | | | |
| Net reserve discount benefit (charge) | | (26) | | | (16) | | | | (102) | | | (80) | | | |
| Change in discount on loss reserves ceded under retroactive reinsurance | | 23 | | | 26 | | | | 78 | | | 96 | | | |
| Net change in total reserve discount* | $ | (3) | | $ | 10 | | | $ | (24) | | $ | 16 | | | |
*Excludes $2 million and $4 million discount related to certain long-tail liabilities in the UK for the three months ended June 30, 2024 and 2023, respectively, and excludes $0 million and $8 million discount related to certain long-tail liabilities in the UK for the six months ended June 30, 2024 and 2023, respectively.
Amortization of Deferred Gain on Retroactive Reinsurance
Amortization of the deferred gain on retroactive reinsurance includes $(6) million and $19 million related to the adverse development reinsurance cover with NICO for the three months ended June 30, 2024 and 2023, respectively, and $21 million and $72 million related to the adverse development reinsurance cover with NICO for the six months ended June 30, 2024 and 2023, respectively.
Amounts recognized reflect the amortization of the initial deferred gain at inception, as amended for subsequent changes in the deferred gain due to changes in subject reserves.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 47 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities
FUTURE POLICY BENEFITS
Future policy benefits primarily include reserves for traditional life and annuity payout contracts, which represent an estimate of the present value of future benefits less the present value of future net premiums. Included in Future policy benefits are liabilities for annuities issued in structured settlement arrangements whereby a claimant receives life contingent payments over their lifetime. Also included are pension risk transfer arrangements whereby an upfront premium is received in exchange for guaranteed retirement benefits. All payments under these arrangements are fixed and determinable with respect to their amounts and dates. Structured settlement or other annuitization elections (e.g., certain single premium immediate annuities) that do not involve life contingent payments, but rather payments for a stated period are included in Policyholder contract deposits.
For traditional and limited pay long-duration products, benefit reserves are accrued and benefit expense is recognized using a net premium ratio methodology for each annual cohort of business.
The following tables present the balances and changes in the liability for future policy benefits and a reconciliation of the net liability for future policy benefits to the liability for future policy benefits in the Condensed Consolidated Balance Sheets:
| | | | | | | | | | | |
| Six Months Ended June 30, | | | |
| (in millions, except for liability durations) | 2024 | | 2023 |
| Present value of expected net premiums | | | |
| Balance, beginning of year | $ | 1,702 | | | $ | 1,929 | |
| Effect of changes in discount rate assumptions (AOCI) | 339 | | | 262 | |
| Beginning balance at original discount rate | 2,041 | | | 2,191 | |
| | | |
| Effect of actual variances from expected experience | (7) | | | (26) | |
| Adjusted beginning of year balance | 2,034 | | | 2,165 | |
| Issuances | 54 | | | 67 | |
| Interest accrual | 21 | | | 21 | |
| Net premium collected | (208) | | | (117) | |
| Foreign exchange impact | (155) | | | (88) | |
| | | |
| Ending balance at original discount rate | 1,746 | | | 2,048 | |
| Effect of changes in discount rate assumptions (AOCI) | (246) | | | (330) | |
| Balance, end of period | $ | 1,500 | | | $ | 1,718 | |
| | | |
| Present value of expected future policy benefits | | | |
| Balance, beginning of year | $ | 2,149 | | | $ | 2,380 | |
| Effect of changes in discount rate assumptions (AOCI) | 441 | | | 362 | |
| Beginning balance at original discount rate | 2,590 | | | 2,742 | |
| | | |
Effect of actual variances from expected experience(a) | (8) | | | (16) | |
| Adjusted beginning of year balance | 2,582 | | | 2,726 | |
| Issuances | 56 | | | 70 | |
| Interest accrual | 26 | | | 26 | |
| Benefit payments | (212) | | | (122) | |
| Foreign exchange impact | (203) | | | (121) | |
| | | |
| Ending balance at original discount rate | 2,249 | | | 2,579 | |
| Effect of changes in discount rate assumptions (AOCI) | (329) | | | (423) | |
| Balance, end of period | $ | 1,920 | | | $ | 2,156 | |
| Net liability for future policy benefits, end of period | $ | 420 | | | $ | 438 | |
| | | |
| | | |
| Deferred profit liability | 1 | | | 1 | |
Other reconciling items(b) | 934 | | | 963 | |
Future policy benefits for life and accident and health insurance contracts | 1,355 | | | 1,402 | |
| Less: Reinsurance recoverable | (761) | | | (754) | |
| Net liability for future policy benefits after reinsurance recoverable | $ | 594 | | | $ | 648 | |
| | | |
Weighted average liability duration of the liability for future policy benefits(c) | 9.0 | | 9.9 |
(a)Effect of changes in cash flow assumptions and variances from actual experience are partially offset by changes in the deferred profit liability.
(b)Other reconciling items primarily include Accident and Health (short-duration) contracts and $724 million and $713 million at June 30, 2024 and 2023, respectively, of certain long-duration contracts that are 100 percent ceded.
(c)The weighted average liability durations are calculated as the modified duration using projected future net liability cash flows that are aggregated at the segment level, utilizing the segment level weighted average interest rates and current discount rate, which can be found in the table below.
| | | | | |
48 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities
The following table presents the amount of undiscounted expected future benefit payments and undiscounted and discounted expected gross premiums for future policy benefits for nonparticipating contracts:
| | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | | | | | |
| (in millions) | | 2024 | | 2023 | | |
| Undiscounted expected future benefits and expense | | $ | 2,760 | | | $ | 3,165 | | | |
| Undiscounted expected future gross premiums | | 3,791 | | | 4,383 | | | |
| Discounted expected future gross premiums (at current discount rate) | | 2,737 | | | 3,109 | | | |
The following table presents the amount of revenue and interest recognized in the Condensed Consolidated Statements of Income (Loss) for future policy benefits for nonparticipating contracts:
| | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | | | | | | | | | | | |
| | | | | | | | | | |
| (in millions) | | | | | | | | | 2024 | | 2023 | | | | | |
| Gross Premiums | | | | | | | | | $ | 209 | | | $ | 232 | | | | | | |
| Interest Accretion | | | | | | | | | $ | 4 | | | $ | 4 | | | | | | |
The following table presents the weighted-average interest rate for future policy benefits for nonparticipating contracts:
| | | | | | | | | | | |
| Six Months Ended June 30, | 2024 | | 2023 |
| Weighted-average interest rate, original discount rate | 1.86 | % | | 1.81 | % |
| Weighted-average interest rate, current discount rate | 3.56 | % | | 3.59 | % |
| | | |
| | | |
| | | |
| | | |
The weighted average interest rates are calculated using projected future net liability cash flows that are aggregated to the segment level, and are represented as an annual rate.
13. Contingencies, Commitments and Guarantees
In the normal course of business, various contingent liabilities and commitments are entered into by AIG and our subsidiaries. In addition, AIG Parent guarantees various obligations of certain subsidiaries.
Although AIG cannot currently quantify its ultimate liability for unresolved litigation and investigation matters, including those referred to below, it is possible that such liability could have a material adverse effect on AIG’s consolidated financial condition or its consolidated results of operations or consolidated cash flows for an individual reporting period.
LEGAL CONTINGENCIES
Overview
In the normal course of business, AIG and our subsidiaries are subject to regulatory and government investigations and actions, and litigation and other forms of dispute resolution in a large number of proceedings pending in various domestic and foreign jurisdictions. Certain of these matters involve potentially significant risk of loss due to potential for significant jury awards and settlements, punitive damages or other penalties. Many of these matters are also highly complex and may seek recovery on behalf of a class or similarly large number of plaintiffs. It is therefore inherently difficult to predict the size or scope of potential future losses arising from these matters. In our insurance and reinsurance operations, litigation and arbitration concerning the scope of coverage under insurance and reinsurance contracts, and litigation and arbitration in which our subsidiaries defend or indemnify their insureds under insurance contracts, are generally considered in the establishment of our loss reserves. Separate and apart from the foregoing matters involving insurance and reinsurance coverage, AIG, our subsidiaries and their respective officers and directors are subject to a variety of additional types of legal proceedings brought by holders of AIG securities, customers, employees and others, alleging, among other things, breach of contractual or fiduciary duties, bad faith, indemnification and violations of federal and state statutes and regulations. With respect to these other categories of matters not arising out of claims for insurance or reinsurance coverage, we establish reserves for loss contingencies when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. In many instances, we are unable to determine whether a loss is probable or to reasonably estimate the amount of such a loss and, therefore, the potential future losses arising from legal proceedings may exceed the amount of liabilities that we have recorded in our financial statements covering these matters. While such potential future charges could be material, based on information currently known to management, management does not believe that any such charges are likely to have a material adverse effect on our financial position or results of operation.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 49 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 13. Contingencies, Commitments and Guarantees
Additionally, from time to time, various regulatory and governmental agencies review the transactions and practices of AIG and our subsidiaries in connection with industry-wide and other inquiries or examinations into, among other matters, the business practices of current and former operating insurance subsidiaries. Such investigations, inquiries or examinations could develop into administrative, civil or criminal proceedings or enforcement actions, in which remedies could include fines, penalties, restitution or alterations in our business practices, and could result in additional expenses, limitations on certain business activities and reputational damage.
OTHER COMMITMENTS
In the normal course of business, we enter into commitments to invest in limited partnerships, private equity funds and hedge funds and to purchase and develop real estate in the U.S. and abroad. These commitments totaled $1.6 billion and $1.7 billion at June 30, 2024 and December 31, 2023, respectively.
GUARANTEES
Subsidiaries
We have issued unconditional guarantees with respect to the prompt payment, when due, of all present and future payment obligations and liabilities of AIGFP and certain of its subsidiaries. We have also issued guarantees of all present and future payment obligations and liabilities of AIG Markets, Inc.
Due to the deconsolidation of AIGFP and its subsidiaries, as of June 30, 2024, a $100 million guarantee related to the obligations of AIGFP and certain of its subsidiaries was recognized, and is reported in Other liabilities.
We continue to guarantee certain policyholder contracts issued by Corebridge subsidiaries as well as certain debt issued by Corebridge Life Holdings, Inc. (CRBGLH). Pursuant to the Separation Agreement entered in by AIG and Corebridge on September 14, 2022, Corebridge must indemnify, defend and hold us harmless from and against any liability related to these guarantees. Also, under a collateral agreement, in the event of: (i) a ratings downgrade of Corebridge or the guaranteed debt below specified levels or (ii) the failure by CRBGLH to pay principal and interest on the guaranteed debt when due, Corebridge must collateralize an amount equal to the sum of: (i) 100 percent of the principal amount outstanding, (ii) accrued and unpaid interest and (iii) 100 percent of the net present value of scheduled interest payments through the maturity dates of the debt.
Business and Asset Dispositions
We are subject to financial guarantees and indemnity arrangements in connection with the completed sales of businesses and assets. The various arrangements may be triggered by, among other things, declines in asset values, the occurrence of specified business contingencies, the realization of contingent liabilities, developments in litigation or breaches of representations, warranties or covenants provided by us. These arrangements are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential obligation is subject to contractual limitations, while in other cases such limitations are not specified or are not applicable.
We are unable to develop a reasonable estimate of the maximum potential payout under certain of these arrangements. Overall, we believe the likelihood that we will have to make any material payments related to completed sales under these arrangements is remote, and no material liabilities related to these arrangements have been recorded in the Condensed Consolidated Balance Sheets.
Other
•For additional information on commitments and guarantees associated with VIEs, see Note 10.
•For additional information on derivatives, see Note 11.
14. Equity
SHARES OUTSTANDING
Preferred Stock
On March 14, 2019, we issued 20,000 shares of Series A 5.85% Non-Cumulative Perpetual Preferred Stock (Series A Preferred Stock) (equivalent to 20,000,000 Depositary Shares (the Depositary Shares), each representing a 1/1,000th interest in a share of Series A Preferred Stock), $5.00 par value and $25,000 liquidation preference per share (equivalent to $25 per Depositary Share). After underwriting discounts and expenses, we received net proceeds of approximately $485 million.
| | | | | |
50 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 14. Equity
On March 15, 2024, we redeemed all 20,000 outstanding shares of our Series A Preferred Stock and all 20,000,000 of the corresponding Depositary Shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock, for a redemption price of $25,000 per share (equivalent to $25.00 per Depositary Share) for an aggregate redemption price of $500 million, paid in cash. The $15 million difference between the aggregate redemption price and the outstanding par and additional paid in capital amount of $485 million was recorded as a reduction of retained earnings and is presented on Dividends on preferred stock and preferred stock redemption premiums on the Condensed Consolidated Statements of Income.
Common Stock
The following table presents a rollforward of outstanding shares:
| | | | | | | | | | | |
| |
Six Months Ended June 30, 2024 | Common
Stock Issued | Treasury
Stock | Common Stock
Outstanding |
| (in millions) |
| Shares, beginning of year | 1,906.7 | | (1,217.9) | | 688.8 | |
| Shares issued | — | | 6.1 | | 6.1 | |
| Shares repurchased | — | | (45.1) | | (45.1) | |
| Shares, end of period | 1,906.7 | | (1,256.9) | | 649.8 | |
Dividends
Dividends are payable on AIG common stock, par value $2.50 per share (AIG Common Stock) only when, as and if declared by our Board of Directors in its discretion, from funds legally available for this purpose. In considering whether to pay a dividend on or purchase shares of AIG Common Stock, our Board of Directors considers a number of factors, including, but not limited to: the capital resources available to support our insurance operations and business strategies, AIG’s funding capacity and capital resources in comparison to internal benchmarks, expectations for capital generation, rating agency expectations for capital, regulatory standards for capital and capital distributions, and such other factors as our Board of Directors may deem relevant.
Subsidiary Dividend Restrictions
Payments of dividends to us by our insurance subsidiaries are subject to certain restrictions imposed by regulatory authorities. With respect to our domestic insurance subsidiaries, the payment of any dividend requires formal notice to the insurance department in which the particular insurance subsidiary is domiciled. For example, unless permitted by the Superintendent of Financial Services, property casualty companies domiciled in New York generally may not pay dividends to shareholders that, in any 12-month period, exceed the lesser of 10 percent of such company’s statutory policyholders’ surplus or 100 percent of its “adjusted net investment income,” for the previous year, as defined. Generally, less severe restrictions applicable to both property and casualty insurance companies exist in most of the other states in which our insurance subsidiaries are domiciled. Under state insurance laws, an insurer may pay a dividend without prior approval of the insurance regulator when the amount of the dividend is below certain regulatory thresholds. Other foreign jurisdictions may restrict the ability of our foreign insurance subsidiaries to pay dividends. Various other regulatory restrictions also limit cash loans and advances to us by our subsidiaries.
Largely as a result of these restrictions, approximately $28.7 billion and $28.5 billion of the statutory capital and surplus of our consolidated insurance subsidiaries were restricted from transfer to AIG Parent without prior approval of state insurance regulators at June 30, 2024 and December 31, 2023, respectively.
Repurchase of AIG Common Stock
Shares may be repurchased from time to time in the open market, private purchases, through forward, derivative, accelerated repurchase or automatic repurchase transactions or otherwise. Certain of our share repurchases have been and may from time to time be effected through the Securities Exchange Act of 1934, as amended (the Exchange Act) Rule 10b5-1 repurchase plans. On April 30, 2024, the Board of Directors authorized the repurchase of $10.0 billion of AIG Common Stock (inclusive of the approximately $3.9 billion remaining under the Board's prior share repurchase authorization).
The timing of any future repurchases will depend on market conditions, our business and strategic plans, financial condition, results of operations, liquidity and other factors.
Pursuant to an Exchange Act Rule 10b5-1 repurchase plan, from July 1, 2024 to July 26, 2024, we repurchased approximately 6 million shares of AIG Common Stock for an aggregate purchase price of approximately $459 million.
DIVIDENDS DECLARED
On July 31, 2024, our Board of Directors declared a cash dividend on AIG Common Stock of $0.40 per share, payable on September 30, 2024 to shareholders of record on September 16, 2024.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 51 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 14. Equity
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents a rollforward of Accumulated other comprehensive income (loss):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Unrealized
Appreciation
(Depreciation)
of Fixed Maturity
Securities on Which
Allowance for Credit
Losses Was Taken | Unrealized
Appreciation
(Depreciation)
of All Other
Investments | Change in Fair
Value of Market
Risk Benefits
Attributable to
Changes in
Our Own
Credit Risk | Change in the
discount rates
used to measure
traditional and
limited payment
long-duration
insurance contracts | Foreign
Currency
Translation
Adjustments | Retirement
Plan
Liabilities
Adjustment | | | Total |
| Balance, March 31, 2024, net of tax | $ | (66) | | $ | (11,702) | | $ | (493) | | $ | 1,535 | | $ | (3,329) | | $ | (814) | | | | $ | (14,869) | |
Change in unrealized appreciation (depreciation) of investments* | | (19) | | | (1,036) | | | — | | | — | | | — | | | — | | | | | (1,055) | |
| Change in other | | — | | | (9) | | | — | | | — | | | — | | | — | | | | | (9) | |
| Change in fair value of market risk benefits, net | | — | | | — | | | 159 | | | — | | | — | | | — | | | | | 159 | |
| Change in discount rates | | — | | | — | | | — | | | 262 | | | — | | | — | | | | | 262 | |
Change in future policy benefits | | — | | | 67 | | | — | | | — | | | — | | | — | | | | | 67 | |
Change in foreign currency translation adjustments | | — | | | — | | | — | | | — | | | 85 | | | — | | | | | 85 | |
Change in net actuarial loss | | — | | | — | | | — | | | — | | | — | | | 10 | | | | | 10 | |
Change in prior service cost | | — | | | — | | | — | | | — | | | — | | | 1 | | | | | 1 | |
Change in deferred tax asset (liability) | | 3 | | | 52 | | | (34) | | | (72) | | | 13 | | | (2) | | | | | (40) | |
| Corebridge deconsolidation, net of tax | | 42 | | | 8,513 | | | 330 | | | (1,583) | | | (88) | | | — | | | | | 7,214 | |
| | | | | | | | | | | | | | | | |
| Total other comprehensive income | 26 | | | 7,587 | | | 455 | | | (1,393) | | | 10 | | | 9 | | | | | 6,694 | |
| Corebridge noncontrolling interests | | 2 | | | 693 | | | 38 | | | (120) | | | (3) | | | — | | | | | 610 | |
| | | | | | | | | | | | | | | | |
| Balance, June 30, 2024, net of tax | $ | (38) | | $ | (3,422) | | $ | — | | $ | 22 | | $ | (3,322) | | $ | (805) | | | | $ | (7,565) | |
| | | | | | | | | | | | | | | | |
| Balance, March 31, 2023, net of tax | $ | (134) | | $ | (17,129) | | $ | (226) | | $ | 2,150 | | $ | (3,094) | | $ | (896) | | | | $ | (19,329) | |
Change in unrealized appreciation (depreciation) of investments* | | 104 | | | (2,383) | | | — | | | — | | | — | | | — | | | | | (2,279) | |
| Change in other | | — | | | (159) | | | — | | | — | | | — | | | — | | | | | (159) | |
| Change in fair value of market risk benefits, net | | — | | | — | | | (241) | | | — | | | — | | | — | | | | | (241) | |
| Change in discount rates | | — | | | — | | | — | | | 531 | | | — | | | — | | | | | 531 | |
Change in future policy benefits | | — | | | 137 | | | — | | | — | | | — | | | — | | | | | 137 | |
Change in foreign currency translation adjustments | | — | | | — | | | — | | | — | | | (25) | | | — | | | | | (25) | |
Change in net actuarial loss | | — | | | — | | | — | | | — | | | — | | | 78 | | | | | 78 | |
Change in prior service cost | | — | | | — | | | — | | | — | | | — | | | 2 | | | | | 2 | |
Change in deferred tax asset (liability) | | (20) | | | 407 | | | 51 | | | (158) | | | (34) | | | (28) | | | | | 218 | |
| | | | | | | | | | | | | | | | |
| Total other comprehensive income (loss) | 84 | | | (1,998) | | | (190) | | | 373 | | | (59) | | | 52 | | | | | (1,738) | |
| Corebridge noncontrolling interests | | 4 | | | 2,125 | | | 54 | | | (345) | | | (10) | | | (1) | | | | | 1,827 | |
| Noncontrolling interests | | 14 | | | (347) | | | (47) | | | 111 | | | 11 | | | — | | | | | (258) | |
| Balance, June 30, 2023, net of tax | $ | (60) | | $ | (16,655) | | $ | (315) | | $ | 2,067 | | $ | (3,174) | | $ | (845) | | | | $ | (18,982) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Unrealized
Appreciation
(Depreciation)
of Fixed Maturity
Securities on Which
Allowance for Credit
Losses Was Taken | Unrealized
Appreciation
(Depreciation)
of All Other
Investments | Change in Fair
Value of Market
Risk Benefits
Attributable to
Changes in
Our Own
Credit Risk | Change in the
discount rates
used to measure
traditional and
limited payment
long-duration
insurance contracts | Foreign
Currency
Translation
Adjustments | Retirement
Plan
Liabilities
Adjustment | | | Total |
| Balance, December 31, 2023, net of tax | $ | (106) | | $ | (10,888) | | $ | (476) | | $ | 1,233 | | $ | (2,979) | | $ | (821) | | | | $ | (14,037) | |
Change in unrealized appreciation (depreciation) of investments* | | 53 | | | (2,310) | | | — | | | — | | | — | | | — | | | | | (2,257) | |
| Change in other | | — | | | (4) | | | — | | | — | | | — | | | — | | | | | (4) | |
| Change in fair value of market risk benefits, net | | — | | | — | | | 130 | | | — | | | — | | | — | | | | | 130 | |
| Change in discount rates | | — | | | — | | | — | | | 959 | | | — | | | — | | | | | 959 | |
| Change in future policy benefits | | — | | | (59) | | | — | | | — | | | — | | | — | | | | | (59) | |
| Change in foreign currency translation adjustments | | — | | | — | | | — | | | — | | | (254) | | | — | | | | | (254) | |
| Change in net actuarial loss | | — | | | — | | | — | | | — | | | — | | | 17 | | | | | 17 | |
| Change in prior service cost | | — | | | — | | | — | | | — | | | — | | | 3 | | | | | 3 | |
| Change in deferred tax asset (liability) | | (12) | | | 157 | | | (28) | | | (224) | | | (1) | | | (4) | | | | | (112) | |
| Corebridge deconsolidation, net of tax | | 42 | | | 8,513 | | | 330 | | | (1,583) | | | (88) | | | — | | | | | 7,214 | |
| | | | | | | | | | | | | | | | |
| Total other comprehensive income (loss) | 83 | | | 6,297 | | | 432 | | | (848) | | | (343) | | | 16 | | | | | 5,637 | |
| Corebridge noncontrolling interests | | 2 | | | 610 | | | 33 | | | (105) | | | (3) | | | — | | | | | 537 | |
| Noncontrolling interests | | 17 | | | (559) | | | (11) | | | 258 | | | (3) | | | — | | | | | (298) | |
| Balance, June 30, 2024, net of tax | $ | (38) | | $ | (3,422) | | $ | — | | $ | 22 | | $ | (3,322) | | $ | (805) | | | | $ | (7,565) | |
| | | | | |
52 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 14. Equity
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Unrealized
Appreciation
(Depreciation)
of Fixed Maturity
Securities on Which
Allowance for Credit
Losses Was Taken | Unrealized
Appreciation
(Depreciation)
of All Other
Investments | Change in Fair
Value of Market
Risk Benefits
Attributable to
Changes in
Our Own
Credit Risk | Change in the
discount rates
used to measure
traditional and
limited payment
long-duration
insurance contracts | Foreign
Currency
Translation
Adjustments | Retirement
Plan
Liabilities
Adjustment | | | Total |
| Balance, December 31, 2022, net of tax | $ | (136) | | $ | (20,675) | | $ | (284) | | $ | 2,459 | | $ | (3,056) | | $ | (924) | | | | $ | (22,616) | |
| Change in unrealized appreciation (depreciation) of investments* | | 113 | | | 2,613 | | | — | | | — | | | — | | | — | | | | | 2,726 | |
| Change in other | | — | | | (53) | | | — | | | — | | | — | | | — | | | | | (53) | |
| Change in fair value of market risk benefits, net | | — | | | — | | | (146) | | | — | | | — | | | — | | | | | (146) | |
| Change in discount rates | | — | | | — | | | — | | | 4 | | | — | | | — | | | | | 4 | |
| Change in future policy benefits | | — | | | 37 | | | — | | | — | | | — | | | — | | | | | 37 | |
| Change in foreign currency translation adjustments | | — | | | — | | | — | | | — | | | (44) | | | — | | | | | (44) | |
| Change in net actuarial loss | | — | | | — | | | — | | | — | | | — | | | 105 | | | | | 105 | |
| Change in prior service cost | | — | | | — | | | — | | | — | | | — | | | 2 | | | | | 2 | |
| Change in deferred tax asset (liability) | | (23) | | | (343) | | | 31 | | | (51) | | | (43) | | | (27) | | | | | (456) | |
| | | | | | | | | | | | | | | | |
| Total other comprehensive income (loss) | 90 | | | 2,254 | | | (115) | | | (47) | | | (87) | | | 80 | | | | | 2,175 | |
| Corebridge noncontrolling interests | | 4 | | | 2,125 | | | 54 | | | (345) | | | (10) | | | (1) | | | | | 1,827 | |
| Noncontrolling interests | | 18 | | | 359 | | | (30) | | | — | | | 21 | | | — | | | | | 368 | |
| Balance, June 30, 2023, net of tax | $ | (60) | | $ | (16,655) | | $ | (315) | | $ | 2,067 | | $ | (3,174) | | $ | (845) | | | | $ | (18,982) | |
*Includes net unrealized gains and losses attributable to businesses held for sale or reclassified to discontinued operations at June 30, 2024 and 2023.
The following table presents the other comprehensive income (loss) reclassification adjustments for the three and six months ended June 30, 2024 and 2023, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Unrealized
Appreciation
(Depreciation)
of Fixed Maturity
Securities on Which
Allowance for Credit
Losses Was Taken | Unrealized
Appreciation
(Depreciation)
of All Other
Investments | Change in Fair
Value of Market
Risk Benefits
Attributable to
Changes in Our
Own Credit Risk | Change in the
discount rates
used to measure
traditional and
limited payment
long-duration
insurance contracts | Foreign
Currency
Translation
Adjustments | Retirement
Plan
Liabilities
Adjustment | | | Total |
| Three Months Ended June 30, 2024 | | | | | | | | | | | | | | |
| Unrealized change arising during period | $ | (13) | | $ | (811) | | $ | 159 | | $ | 262 | | $ | 85 | | $ | 3 | | | | $ | (315) | |
| Less: Reclassification adjustments included in net income | | (36) | | | (8,346) | | | (330) | | | 1,583 | | | 88 | | | (8) | | | | | (7,049) | |
| Total other comprehensive income (loss), before income tax expense (benefit) | | 23 | | | 7,535 | | | 489 | | | (1,321) | | | (3) | | | 11 | | | | | 6,734 | |
| Less: Income tax expense (benefit) | | (3) | | | (52) | | | 34 | | | 72 | | | (13) | | | 2 | | | | | 40 | |
| Total other comprehensive income (loss), net of income tax expense (benefit) | $ | 26 | | $ | 7,587 | | $ | 455 | | $ | (1,393) | | $ | 10 | | $ | 9 | | | | $ | 6,694 | |
| | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2023 | | | | | | | | | | | | | | | | |
| Unrealized change arising during period | $ | 97 | | $ | (2,739) | | $ | (241) | | $ | 531 | | $ | (25) | | $ | 72 | | | | $ | (2,305) | |
| Less: Reclassification adjustments included in net income | | (7) | | | (334) | | | — | | | — | | | — | | | (8) | | | | | (349) | |
| Total other comprehensive income (loss), before income tax expense (benefit) | | 104 | | | (2,405) | | | (241) | | | 531 | | | (25) | | | 80 | | | | | (1,956) | |
| Less: Income tax expense (benefit) | | 20 | | | (407) | | | (51) | | | 158 | | | 34 | | | 28 | | | | | (218) | |
| Total other comprehensive income (loss), net of income tax expense (benefit) | $ | 84 | | $ | (1,998) | | $ | (190) | | $ | 373 | | $ | (59) | | $ | 52 | | | | $ | (1,738) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Unrealized
Appreciation
(Depreciation)
of Fixed Maturity
Securities on Which
Allowance for Credit
Losses Was Taken | Unrealized
Appreciation
(Depreciation)
of All Other
Investments | Change in Fair
Value of Market
Risk Benefits
Attributable to
Changes in Our
Own Credit Risk | Change in the
discount rates
used to measure
traditional and
limited payment
long-duration
insurance contracts | Foreign
Currency
Translation
Adjustments | Retirement
Plan
Liabilities
Adjustment | | | Total |
| Six Months Ended June 30, 2024 | | | | | | | | | | | | | | |
| Unrealized change arising during period | $ | 53 | | $ | (2,643) | | $ | 130 | | $ | 959 | | $ | (254) | | $ | 5 | | | | $ | (1,750) | |
| Less: Reclassification adjustments included in net income | | (42) | | | (8,783) | | | (330) | | | 1,583 | | | 88 | | | (15) | | | | | (7,499) | |
| Total other comprehensive income (loss), before of income tax expense (benefit) | | 95 | | | 6,140 | | | 460 | | | (624) | | | (342) | | | 20 | | | | | 5,749 | |
| Less: Income tax expense (benefit) | | 12 | | | (157) | | | 28 | | | 224 | | | 1 | | | 4 | | | | | 112 | |
| Total other comprehensive income (loss), net of income tax expense (benefit) | $ | 83 | | $ | 6,297 | | $ | 432 | | $ | (848) | | $ | (343) | | $ | 16 | | | | $ | 5,637 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2023 | | | | | | | | | | | | | | | | |
| Unrealized change arising during period | $ | 90 | | $ | 1,827 | | $ | (146) | | $ | 4 | | $ | (44) | | $ | 90 | | | | $ | 1,821 | |
| Less: Reclassification adjustments included in net income | | (23) | | | (770) | | | — | | | — | | | — | | | (17) | | | | | (810) | |
| Total other comprehensive income (loss), before income tax expense (benefit) | | 113 | | | 2,597 | | | (146) | | | 4 | | | (44) | | | 107 | | | | | 2,631 | |
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 53 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 14. Equity
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Unrealized
Appreciation
(Depreciation)
of Fixed Maturity
Securities on Which
Allowance for Credit
Losses Was Taken | Unrealized
Appreciation
(Depreciation)
of All Other
Investments | Change in Fair
Value of Market
Risk Benefits
Attributable to
Changes in Our
Own Credit Risk | Change in the
discount rates
used to measure
traditional and
limited payment
long-duration
insurance contracts | Foreign
Currency
Translation
Adjustments | Retirement
Plan
Liabilities
Adjustment | | | Total |
| Less: Income tax expense (benefit) | | 23 | | | 343 | | | (31) | | | 51 | | | 43 | | | 27 | | | | | 456 | |
| Total other comprehensive income (loss), net of income tax expense (benefit) | $ | 90 | | $ | 2,254 | | $ | (115) | | $ | (47) | | $ | (87) | | $ | 80 | | | | $ | 2,175 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The following table presents the effect of the reclassification of significant items out of AOCI on the respective line items in the Condensed Consolidated Statements of Income (Loss)(a):
| | | | | | | | | | | | | | | | | | | | | | |
| Amount Reclassified from AOCI | | Affected Line Item in the |
| Three Months Ended June 30, | | Condensed Consolidated |
| (in millions) | | 2024 | | 2023 | | | | Statements of Income (Loss) |
| Unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken | | | | | | | | |
| Investments | $ | 6 | | $ | (7) | | | | | Net realized gains (losses) |
| Total | | 6 | | | (7) | | | | | |
| Unrealized appreciation (depreciation) of all other investments | | | | | | | | |
| Investments | | 167 | | | (334) | | | | | Net realized gains (losses) |
| Total | | 167 | | | (334) | | | | | |
| Change in retirement plan liabilities adjustment | | | | | | | | |
| Prior-service credit | | (1) | | | — | | | | | (b) |
| Actuarial losses | | (7) | | | (8) | | | | | (b) |
| Total | | (8) | | | (8) | | | | | |
| Corebridge deconsolidation, net of tax | | (7,214) | | | — | | | | | (c) |
| Total reclassifications for the period | $ | (7,049) | | $ | (349) | | | | | |
| Amount Reclassified from AOCI | | Affected Line Item in the |
| Six Months Ended June 30, | | Condensed Consolidated |
| (in millions) | | 2024 | | 2023 | | | | Statements of Income (Loss) |
| Unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken | | | | | | | | |
| Investments | $ | — | | $ | (23) | | | | | Net realized gains (losses) |
| Total | | — | | | (23) | | | | | |
| Unrealized appreciation (depreciation) of all other investments | | | | | | | | |
| Investments | | (270) | | | (770) | | | | | Net realized gains (losses) |
| Total | | (270) | | | (770) | | | | | |
| Change in retirement plan liabilities adjustment | | | | | | | | |
| Prior-service credit | | (1) | | | (1) | | | | | (b) |
| Actuarial losses | | (14) | | | (16) | | | | | (b) |
| Total | | (15) | | | (17) | | | | | |
| Corebridge deconsolidation, net of tax | | (7,214) | | | — | | | | | (c) |
| Total reclassifications for the period | $ | (7,499) | | $ | (810) | | | | | |
(a)The following items are not reclassified out of AOCI and included in the Condensed Consolidated Statements of Income (Loss) and thus have been excluded from the table: (a) Change in fair value of market risk benefits attributable to changes in our own credit risk (b) Change in the discount rates used to measure traditional and limited-payment long-duration insurance contracts, and (c) Fair value of liabilities under fair value option attributable to changes in own credit risk.
(b)These AOCI components are included in the computation of net periodic pension cost.
(c)Represents adjustments related to the deconsolidation of Corebridge which is reflected in Income (loss) from discontinued operations, net of taxes. See the rollforward of Accumulated other comprehensive income (loss) above for further details.
| | | | | |
54 | AIG | Second Quarter 2024 Form 10-Q |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 15. Earnings Per Common Share (EPS)
15. Earnings Per Common Share (EPS)
The basic EPS computation is based on the weighted average number of common shares outstanding, adjusted to reflect all stock dividends and stock splits. The diluted EPS computation is based on those shares used in the basic EPS computation plus common shares that would have been outstanding assuming issuance of common shares for all dilutive potential common shares outstanding and adjusted to reflect all stock dividends and stock splits, using the treasury stock method or the if-converted method, as applicable.
The following table presents the computation of basic and diluted EPS:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | Three Months Ended
June 30, | | | Six Months Ended
June 30, | | |
| (dollars in millions, except per common share data) | | 2024 | | 2023 | | | 2024 | | 2023 | | |
| Numerator for EPS: | | | | | | | | | | | |
| Income from continuing operations | | $ | 475 | | | $ | 841 | | | | $ | 1,272 | | | $ | 1,178 | | | |
| | | | | | | | | | | |
| Less: Preferred stock dividends and preferred stock redemption premiums | | — | | | 8 | | | | 22 | | | 15 | | | |
| Income attributable to AIG common shareholders from continuing operations | | 475 | | | 833 | | | | 1,250 | | | 1,163 | | | |
| | | | | | | | | | | |
| Income (loss) from discontinued operations, net of income tax expense | | (4,359) | | | 850 | | | | (3,556) | | | 426 | | | |
| Less: Net income attributable to noncontrolling interests | | 93 | | | 198 | | | | 477 | | | 81 | | | |
| Income (loss) from discontinued operations, net of noncontrolling interest | | (4,452) | | | 652 | | | | (4,033) | | | 345 | | | |
| Net income (loss) attributable to AIG common shareholders | | $ | (3,977) | | | $ | 1,485 | | | | $ | (2,783) | | | $ | 1,508 | | | |
| Denominator for EPS: | | | | | | | | | | | |
| Weighted average common shares outstanding - basic | | 661,092,967 | | | 725,754,549 | | | | 671,834,907 | | | 732,175,533 | | | |
| Dilutive common shares | | 5,862,201 | | | 4,792,563 | | | | 5,623,436 | | | 5,115,161 | | | |
Weighted average common shares outstanding - diluted(a) | | 666,955,168 | | | 730,547,112 | | | | 677,458,343 | | | 737,290,694 | | | |
Income (loss) per common share attributable to AIG common shareholders: | | | | | | | | | | | |
| Basic: | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.72 | | | $ | 1.15 | | | | $ | 1.86 | | | $ | 1.59 | | | |
| Income (loss) from discontinued operations | | $ | (6.74) | | | $ | 0.90 | | | | $ | (6.00) | | | $ | 0.47 | | | |
| Income (loss) attributable to AIG common shareholders | | $ | (6.02) | | | $ | 2.05 | | | | $ | (4.14) | | | $ | 2.06 | | | |
| Diluted: | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.71 | | | $ | 1.14 | | | | $ | 1.85 | | | $ | 1.58 | | | |
| Income (loss) from discontinued operations | | $ | (6.67) | | | $ | 0.89 | | | | $ | (5.96) | | | $ | 0.47 | | | |
| Income (loss) attributable to AIG common shareholders | | $ | (5.96) | | | $ | 2.03 | | | | $ | (4.11) | | | $ | 2.05 | | | |
(a)Potential dilutive common shares include our share-based employee compensation plans. The number of potential common shares excluded from diluted shares outstanding was 0.1 million and 0.1 million for the three and six months ended June 30, 2024, respectively, and 6.6 million and 5.5 million for the three and six months ended June 30, 2023, respectively, because the effect of including those common shares in the calculation would have been anti-dilutive.
For information regarding our repurchases of AIG Common Stock, see Note 14.
| | | | | |
AIG | Second Quarter 2024 Form 10-Q | 55 |
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited)
