INVESTMENTS (Tables)

12 Months Ended

Dec. 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)
December 31, 2012
Bonds available for sale:
U.S. government and government sponsored entities	$	3,161	$	323	$	(1	)	$	3,483	$	–
Obligations of states, municipalities and political subdivisions		33,042		2,685		(22	)		35,705		2
Non-U.S. governments		25,449		1,395		(44	)		26,800		–
Corporate debt		135,728		15,848		(464	)		151,112		115
Mortgage-backed, asset-backed and collateralized:
RMBS		31,330		3,379		(317	)		34,392		1,330
CMBS		9,699		811		(376	)		10,134		(54	)
CDO/ABS		7,740		765		(172	)		8,333		57
Total mortgage-backed, asset-backed and collateralized		48,769		4,955		(865	)		52,859		1,333
Total bonds available for sale(b)		246,149		25,206		(1,396	)		269,959		1,450
Equity securities available for sale:
Common stock		1,492		1,574		(37	)		3,029		–
Preferred stock		55		23		–			78		–
Mutual funds		93		12		–			105		–
Total equity securities available for sale		1,640		1,609		(37	)		3,212		–
Total	$	247,789	$	26,815	$	(1,433	)	$	273,171	$	1,450
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		–
Total	$	252,590	$	20,026	$	(5,011	)	$	267,605	$	(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 December 31, 2012 and December 31, 2011, bonds available for sale held by us that were below investment grade or not rated totaled $29.6 billion and $24.2 billion, respectively.

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
December 31, 2012
Bonds available for sale:
U.S. government and government sponsored entities	$	153	$	1	$	–	$	–	$	153	$	1
Obligations of states, municipalities and political subdivisions		692		11		114		11		806		22
Non-U.S. governments		1,555		19		442		25		1,997		44
Corporate debt		8,483		201		3,229		263		11,712		464
RMBS		597		28		1,661		289		2,258		317
CMBS		406		11		1,595		365		2,001		376
CDO/ABS		391		1		1,510		171		1,901		172
Total bonds available for sale		12,277		272		8,551		1,124		20,828		1,396
Equity securities available for sale:
Common stock		247		36		18		1		265		37
Preferred stock		–		–		–		–		–		–
Mutual funds		3		–		–		–		3		–
Total equity securities available for sale		250		36		18		1		268		37
Total	$	12,527	$	308	$	8,569	$	1,125	$	21,096	$	1,433
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 Securities Available for Sale				Fixed Maturity Securities in a Loss Position Available for Sale
December 31, 2012 (in millions)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	11,801	$	12,001	$	717	$	713
Due after one year through five years		51,646		54,918		3,239		3,162
Due after five years through ten years		72,091		79,531		4,641		4,510
Due after ten years		61,842		70,650		6,602		6,283
Mortgage-backed, asset-backed and collateralized		48,769		52,859		7,025		6,160
Total	$	246,149	$	269,959	$	22,224	$	20,828

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

	Years Ended December 31,
	2012				2011				2010
(in millions)	Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses
Fixed maturity securities	$	2,778	$	171	$	2,042	$	129	$	2,138	$	292
Equity securities		515		31		199		35		811		86
Total	$	3,293	$	202	$	2,241	$	164	$	2,949	$	378

The fair value of AIG's trading securities

	December 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	$	6,794		27	%	$	6,462		26	%
Obligations of states, territories and political subdivisions		–		–			257		1
Non-U.S. governments		2		–			35		–
Corporate debt		1,320		5			816		3
Mortgage-backed, asset-backed and collateralized:
RMBS		1,727		7			1,648		7
CMBS		2,236		9			1,837		8
CDO/ABS and other collateralized*		12,497		50			6,324		26
Total mortgage-backed, asset-backed and collateralized		16,460		66			9,809		41
ML II		–		–			1,321		5
ML III		8		–			5,664		23
Total fixed maturities		24,584		98			24,364		99
Equity securities		662		2			125		1
Total	$	25,246		100	%	$	24,489		100	%

* Includes $0.9 billion of U.S. Government agency backed ABS.

Components of other invested assets

December 31, (in millions)	2012		2011
Alternative investments(a)	$	18,990	$	18,793
Mutual funds		128		258
Investment real estate(b)		3,195		2,778
Aircraft asset investments(c)		984		1,100
Life settlement contracts		4,357		4,006
Retained interest in AIA		–		12,367
All other investments		1,463		1,442
Total	$	29,117	$	40,744

(a)     Includes hedge funds, private equity funds, affordable housing partnerships and other investment partnerships.

(b)     Net of accumulated depreciation of $469 million and $428 million in 2012 and 2011, respectively.

(c)     Consist primarily of AIG Life and Retirement investments in aircraft equipment held in trusts.

The carrying value and ownership percentage of AIA and equity method investments

	2012				2011
(in millions, except percentages)	Carrying Value		Ownership Percentage		Carrying Value		Ownership Percentage
AIA	$	–	–	%	$	12,367		33	%
All other equity method investments		11,544	Various			9,026		Various
Total	$	11,544			$	21,393

Schedule of information regarding life settlement contracts

	December 31, 2012
(dollars in millions)	Number of Contracts		Carrying Value		Face Value(Death Benefits)
Remaining Life Expectancy of Insureds:
0 - 1 year		1	$	3	$	8
1 - 2 years		29		19		35
2 - 3 years		90		138		269
3 - 4 years		234		250		554
4 - 5 years		296		283		723
Thereafter		5,023		3,509		16,067
Total		5,673	$	4,202	$	17,656

Components of net investment income

Years Ended December 31, (in millions)	2012		2011			2010
Fixed maturity securities, including short-term investments	$	12,592	$	11,814		$	14,445
Change in fair value of ML II		246		42			513
Change in fair value of ML III		2,888		(646	)		1,792
Change in fair value of AIA securities including realized gain in 2012		2,069		1,289			(638	)
Change in the fair value of MetLife securities prior to their sale		–		(157	)		665
Equity securities		162		92			234
Interest on mortgage and other loans		1,083		1,065			1,268
Alternative investments*		1,769		1,622			1,957
Real estate		127		107			126
Other investments		11		36			177
Total investment income before policyholder income and trading gains		20,947		15,264			20,539
Policyholder investment income and trading gains		–		–			886
Total investment income		20,947		15,264			21,425
Investment expenses		604		509			491
Net investment income	$	20,343	$	14,755		$	20,934

* Includes hedge funds, private equity funds, affordable housing partnerships and other investment partnerships.

Components of net realized capital gains (losses) and the increase (decrease) in unrealized appreciation

Years Ended December 31, (in millions)	2012			2011			2010
Sales of fixed maturity securities	$	2,607		$	1,913		$	1,846
Sales of equity securities		484			164			725
Other-than-temporary impairments:
Severity		(44	)		(51	)		(73	)
Change in intent		(62	)		(12	)		(441	)
Foreign currency declines		(8	)		(32	)		(63	)
Issuer-specific credit events		(1,048	)		(1,165	)		(2,457	)
Adverse projected cash flows		(5	)		(20	)		(5	)
Provision for loan losses		104			48			(304	)
Change in the fair value of MetLife securities prior to their sale		–			(191	)		315
Foreign exchange transactions		(234	)		(93	)		191
Derivative instruments		(684	)		448			(416	)
Other		(181	)		(308	)		(34	)
Net realized capital gains (losses)	$	929		$	701		$	(716	)
Increase in unrealized appreciation of investments:
Fixed maturities	$	10,599		$	5,578		$	8,677
Equity securities		(232	)		(206	)		473
Other investments		343			146			156
Increase in unrealized appreciation*	$	10,710		$	5,518		$	9,306

* Excludes net unrealized gains attributable to businesses held for sale.

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

Years Ended December 31, (in millions)	2012			2011			2010
Balance, beginning of year	$	6,504		$	6,786		$	7,803
Increases due to:
Credit impairments on new securities subject to impairment losses		194			235			627
Additional credit impairments on previously impaired securities		483			735			1,294
Reductions due to:
Credit impaired securities fully disposed for which there was no prior intent or requirement to sell		(1,105	)		(529	)		(1,039	)
Credit impaired securities for which there is a current intent or anticipated requirement to sell		(5	)		–			(503	)
Accretion on securities previously impaired due to credit*		(915	)		(544	)		(332	)
Hybrid securities with embedded credit derivatives reclassified to Bond trading securities		–			(179	)		(748	)
Other		8			–			(316	)
Balance, end of year	$	5,164		$	6,504		$	6,786

* 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)	$	18,708
Cash flows expected to be collected*		14,626
Recorded investment in acquired securities		9,379

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

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

(in millions)	December 31, 2012		December 31, 2011
Outstanding principal balance	$	11,791	$	10,119
Amortized cost		7,718		7,006
Fair value		8,823		6,535

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

Years Ended December 31, (in millions)	2012			2011
Balance, beginning of year	$	4,135		$	–
Newly purchased PCI securities		1,620			3,943
Disposals		(298	)		–
Accretion		(672	)		(324	)
Effect of changes in interest rate indices		(213	)		(62	)
Net reclassification from non-accretable difference, including effects of prepayments		194			578
Balance, end of year	$	4,766		$	4,135

AIA

Investments

Summarized financial information of AIG's equity method investees

Year Ended December 31, (in millions)	2011
Operating results:
Total revenues	$	13,802
Total expenses		(12,436	)
Net income	$	1,366

At December 31, (in millions)	2011
Balance sheet:
Total assets	$	112,673
Total liabilities	$	(90,894	)

Other equity method investees

Investments

Summarized financial information of AIG's equity method investees

Years Ended December 31, (in millions)	2012			2011			2010
Operating results:
Total revenues	$	9,438		$	12,749		$	14,079
Total expenses		(5,183	)		(3,530	)		(3,812	)
Net income	$	4,255		$	9,219		$	10,267

At December 31, (in millions)	2012			2011
Balance sheet:
Total assets	$	139,681		$	95,749
Total liabilities	$	(26,529	)	$	(22,379	)