Reinsurance

3 Months Ended

Mar. 31, 2026

7. 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, 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 March 31, 2026, $3.1 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:


	March 31, 2026				December 31, 2025
(in millions)	Carrying Value			Fair Value	Carrying Value			Fair Value	Corresponding Accounting Policy
Fixed maturity securities - available for sale(a)	$	1,697	$	1,697	$	1,780	$	1,780	Fair value through other comprehensive income (loss)
Fixed maturity securities - fair value option		670		670		734		734	Fair value through net investment income
Commercial mortgage and other loans		345		336		359		344	Amortized cost
Short-term investments		155		155		43		43	Fair value through net investment income
Funds withheld investment assets		2,867		2,858		2,916		2,901
Derivative assets, net(b)		1		1		—		—	Fair value through net realized gains (losses)
Other(c)		101		101		137		137	Amortized cost
Total	$	2,969	$	2,960	$	3,053	$	3,038

(a)The change in the net unrealized gains (losses) on available for sale securities related to the Fortitude Re funds withheld assets was $(17) million ($(13) million after-tax) and $85 million ($67 million after-tax), respectively, for the three months ended March 31, 2026 and for the year ended December 31, 2025.

(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 $2 million and $27 million, respectively, as of March 31, 2026. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $1 million and $31 million, respectively, as of December 31, 2025. 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 March 31,
(in millions)		2026		2025

Net investment income - Fortitude Re funds withheld assets	$	23	$	40
Net realized gains (losses) on Fortitude Re funds withheld assets:
Net realized losses - Fortitude Re funds withheld assets		(13)		(2)
Net realized gains (losses) - Fortitude Re funds withheld embedded derivative		10		(41)
Net realized losses on Fortitude Re funds withheld assets		(3)		(43)
Income (loss) before income tax expense (benefit)		20		(3)
Income tax expense (benefit)(a)		4		(1)
Net income (loss)		16		(2)
Change in unrealized depreciation on available for sale securities(a)		(13)		(2)
Comprehensive income (loss)	$	3	$	(4)

(a)The income tax expense (benefit) and the tax impact in Accumulated other comprehensive income (loss) (AOCI) were computed using AIG’s U.S. statutory tax rate of 21 percent.

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 total reinsurance recoverables as of March 31, 2026 were $41.9 billion. As of that date, utilizing AIG’s Obligor Risk Ratings (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, 2025 were $40.7 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 80 percent of the reinsurance recoverables were investment grade; (ii) approximately 17 percent of the reinsurance recoverables were non-investment grade; (iii) approximately 3 percent of the reinsurance recoverables related to entities that were not rated by AIG.

As of March 31, 2026 and December 31, 2025, approximately 87 percent and 87 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.

For additional information, see Note 8 to the Consolidated Financial Statements in the 2025 Annual Report.

Reinsurance Recoverable Allowance

The following table presents a rollforward of the reinsurance recoverable allowance:


Three Months Ended March 31,

(in millions)		2026		2025
Balance, beginning of year	$	297	$	269
Addition to (release of) allowance for expected credit losses and disputes, net		(1)		3
Write-offs charged against the allowance for credit losses and disputes		(1)		—

Other changes		—		7
Balance, end of year	$	295	$	279

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.