INVESTMENTS (Tables)

3 Months Ended

Mar. 31, 2012

INVESTMENTS

The amortized cost or cost and fair value of AIG's available for sale securities and other invested assets carried at fair value

(in millions)	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Other-Than- Temporary Impairments in AOCI(a)
March 31, 2012
Bonds available for sale:
U.S. government and government sponsored entities	$	4,456	$	332	$	(2	)	$	4,786	$	-
Obligations of states, municipalities and political subdivisions		35,096		2,657		(71	)		37,682		(25	)
Non-U.S. governments		25,106		1,066		(50	)		26,122		-
Corporate debt		135,350		12,040		(910	)		146,480		134
Mortgage-backed, asset-backed and collateralized:
RMBS		33,956		1,865		(770	)		35,051		191
CMBS		8,274		470		(681	)		8,063		(151	)
CDO/ABS		7,926		568		(316	)		8,178		103
Total mortgage-backed, asset-backed and collateralized		50,156		2,903		(1,767	)		51,292		143
Total bonds available for sale(b)		250,164		18,998		(2,800	)		266,362		252
Equity securities available for sale:
Common stock		1,636		1,268		(99	)		2,805		-
Preferred stock		87		67		-			154		-
Mutual funds		59		8		-			67		-
Total equity securities available for sale		1,782		1,343		(99	)		3,026		-
Other invested assets carried at fair value(c)		5,220		1,783		(157	)		6,846		-
Total	$	257,166	$	22,124	$	(3,056	)	$	276,234	$	252

(in millions)	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Other-Than- Temporary Impairments in AOCI(a)
December 31, 2011
Bonds available for sale:
U.S. government and government sponsored entities	$	5,661	$	418	$	(1	)	$	6,078	$	-
Obligations of states, municipalities and political subdivisions		35,017		2,554		(73	)		37,498		(28	)
Non-U.S. governments		24,843		994		(102	)		25,735		-
Corporate debt		134,699		11,844		(1,725	)		144,818		115
Mortgage-backed, asset-backed and collateralized:
RMBS		34,780		1,387		(1,563	)		34,604		(716	)
CMBS		8,449		470		(973	)		7,946		(276	)
CDO/ABS		7,321		454		(473	)		7,302		49
Total mortgage-backed, asset-backed and collateralized		50,550		2,311		(3,009	)		49,852		(943	)
Total bonds available for sale(b)		250,770		18,121		(4,910	)		263,981		(856	)
Equity securities available for sale:
Common stock		1,682		1,839		(100	)		3,421		-
Preferred stock		83		60		-			143		-
Mutual funds		55		6		(1	)		60		-
Total equity securities available for sale		1,820		1,905		(101	)		3,624		-
Other invested assets carried at fair value(c)		5,155		1,611		(269	)		6,497		-
Total	$	257,745	$	21,637	$	(5,280	)	$	274,102	$	(856	)

(a)

Represents the amount of other-than-temporary impairment losses recognized in Accumulated other comprehensive income. Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

(b)

At March 31, 2012 and December 31, 2011, bonds available for sale held by AIG that were below investment grade or not rated totaled $27.8 billion and $24.2 billion, respectively.

(c)

Represents private equity and hedge fund investments carried at fair value for which unrealized gains and losses are required to be recognized in other comprehensive income.

The fair value and gross unrealized losses on AIG's available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position

	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
March 31, 2012
Bonds available for sale:
U.S. government and government sponsored entities	$	159	$	1	$	5	$	1	$	164	$	2
Obligations of states, municipalities and political subdivisions		996		24		276		47		1,272		71
Non-U.S. governments		2,366		20		333		30		2,699		50
Corporate debt		11,962		378		5,015		532		16,977		910
RMBS		4,322		242		2,933		528		7,255		770
CMBS		1,527		187		1,373		494		2,900		681
CDO/ABS		1,052		43		1,681		273		2,733		316
Total bonds available for sale		22,384		895		11,616		1,905		34,000		2,800
Equity securities available for sale:
Common stock		646		99		-		-		646		99
Preferred stock		2		-		-		-		2		-
Mutual funds		3		-		-		-		3		-
Total equity securities available for sale		651		99		-		-		651		99
Total	$	23,035	$	994	$	11,616	$	1,905	$	34,651	$	2,899
December 31, 2011
Bonds available for sale:
U.S. government and government sponsored entities	$	142	$	1	$	-	$	-	$	142	$	1
Obligations of states, municipalities and political subdivisions		174		1		669		72		843		73
Non-U.S. governments		3,992		67		424		35		4,416		102
Corporate debt		18,099		937		5,907		788		24,006		1,725
RMBS		10,624		714		4,148		849		14,772		1,563
CMBS		1,697		185		1,724		788		3,421		973
CDO/ABS		1,680		50		1,682		423		3,362		473
Total bonds available for sale		36,408		1,955		14,554		2,955		50,962		4,910
Equity securities available for sale:
Common stock		608		100		-		-		608		100
Preferred stock		6		-		-		-		6		-
Mutual funds		2		1		-		-		2		1
Total equity securities available for sale		616		101		-		-		616		101
Total	$	37,024	$	2,056	$	14,554	$	2,955	$	51,578	$	5,011

The amortized cost and fair value of fixed maturity securities available for sale by contractual maturity

	Total Fixed Maturity Available for Sale Securities				Fixed Maturity Securities in a Loss Position
March 31, 2012 (in millions)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	10,047	$	10,207	$	1,299	$	1,287
Due after one year through five years		57,759		60,423		7,061		6,818
Due after five years through ten years		69,670		74,753		7,245		6,917
Due after ten years		62,532		69,687		6,540		6,090
Mortgage-backed, asset-backed and collateralized		50,156		51,292		14,655		12,888
Total	$	250,164	$	266,362	$	36,800	$	34,000

The gross realized gains and gross realized losses from sales of AIG's available for sale securities

	2012				2011
Three Months Ended March 31, (in millions)	Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses
Fixed maturities	$	490	$	16	$	188	$	55
Equity securities		451		3		105		2
Total	$	941	$	19	$	293	$	57

The fair value of AIG's trading securities

	March 31, 2012					December 31, 2011
(in millions)	Fair Value		Percent of Total			Fair Value		Percent of Total
Fixed Maturities:
U.S. government and government sponsored entities	$	7,456		30	%	$	7,504		31	%
Non-U.S. governments		36		-			35		-
Corporate debt		1,093		4			816		3
State, territories and political subdivisions		236		1			257		1
Mortgage-backed, asset-backed and collateralized:
RMBS		1,653		7			1,648		7
CMBS		1,713		7			1,837		7
CDO/ABS and other collateralized		5,378		22			5,282		22
Total mortgage-backed, asset-backed and collateralized		8,744		36			8,767		36
ML II		-		-			1,321		5
ML III		6,916		28			5,664		23
Total fixed maturities		24,481		99			24,364		99
Equity securities		123		1			125		1
Total	$	24,604		100	%	$	24,489		100	%

Credit impairments recognized in earnings for available for sale fixed maturity securities held by AIG

Three Months Ended March 31, (in millions)	2012			2011
Balance, beginning of year	$	6,504		$	6,786
Increases due to:
Credit impairments on new securities subject to impairment losses		137			52
Additional credit impairments on previously impaired securities		307			150
Reductions due to:
Credit impaired securities fully disposed for which there was no prior intent or requirement to sell		(270	)		(170	)
Accretion on securities previously impaired due to credit*		(222	)		(100	)
Hybrid securities with embedded credit derivatives reclassified to Bond trading securities		-			(179	)
Other		8			1
Balance, end of period	$	6,464		$	6,540

*

Represents accretion recognized due to changes in cash flows expected to be collected over the remaining expected term of the credit impaired securities as well as the accretion due to the passage of time.

Schedule of Purchased Credit Impaired (PCI) Securities, at acquisition date

(in millions)	At Date of Acquisition
Contractually required payments (principal and interest)	$	18,379
Cash flows expected to be collected*		14,198
Recorded investment in acquired securities		9,080

*

Represents undiscounted expected cash flows, including both principal and interest.

Schedule of Purchased Credit Impaired (PCI) Securities, at reporting date

(in millions)	March 31, 2012		December 31, 2011
Outstanding principal balance	$	12,823	$	10,119
Amortized cost		8,170		7,006
Fair value		8,294		6,535

Activity for accretable yield on Purchased Credit Impaired (PCI) Securities

Three Months Ended March 31, 2012 (in millions)
Balance, beginning of period	$	4,135
Newly purchased PCI securities		1,222
Disposals		(47	)
Accretion		(168	)
Effect of changes in interest rate indices		(28	)
Net reclassification from non-accretable difference, including effects of prepayments		32
Balance, end of period	$	5,146