INVESTMENTS (Tables)

3 Months Ended

Mar. 31, 2013

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, 2013
Bonds available for sale:
U.S. government and government sponsored entities	$	3,194	$	303	$	(1	)	$	3,496	$	–
Obligations of states, municipalities and political subdivisions		32,683		2,473		(45	)		35,111		2
Non-U.S. governments		24,251		1,222		(98	)		25,375		–
Corporate debt		136,299		14,579		(572	)		150,306		107
Mortgage-backed, asset-backed and collateralized:
RMBS		32,568		3,777		(219	)		36,126		1,708
CMBS		9,841		785		(215	)		10,411		6
CDO/ABS		8,756		819		(149	)		9,426		63
Total mortgage-backed, asset-backed and collateralized		51,165		5,381		(583	)		55,963		1,777
Total bonds available for sale(b)		247,592		23,958		(1,299	)		270,251		1,886
Equity securities available for sale:
Common stock		1,382		1,559		(19	)		2,922		–
Preferred stock		55		27		–			82		–
Mutual funds		92		12		–			104		–
Total equity securities available for sale		1,529		1,598		(19	)		3,108		–
Total	$	249,121	$	25,556	$	(1,318	)	$	273,359	$	1,886
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

(a)     Represents the amount of other-than-temporary impairments 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, 2013 and December 31, 2012, bonds available for sale held by us that were below investment grade or not rated totaled $30.7 billion and $29.6 billion, respectively.

The fair value and gross unrealized losses on AIG's available for sale securities in a loss position, 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, 2013
Bonds available for sale:
U.S. government and government sponsored entities	$	130	$	1	$	–	$	–	$	130	$	1
Obligations of states, municipalities and political subdivisions		1,146		38		71		7		1,217		45
Non-U.S. governments		2,812		77		216		21		3,028		98
Corporate debt		13,205		374		2,465		198		15,670		572
RMBS		1,771		14		1,290		205		3,061		219
CMBS		1,524		33		1,227		182		2,751		215
CDO/ABS		563		5		1,387		144		1,950		149
Total bonds available for sale		21,151		542		6,656		757		27,807		1,299
Equity securities available for sale:
Common stock		129		19		–		–		129		19
Total	$	21,280	$	561	$	6,656	$	757	$	27,936	$	1,318
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
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

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
March 31, 2013 (in millions)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	11,697	$	11,910	$	647	$	642
Due after one year through five years		51,101		54,428		3,516		3,441
Due after five years through ten years		72,503		79,391		6,958		6,800
Due after ten years		61,126		68,559		9,640		9,162
Mortgage-backed, asset-backed and collateralized		51,165		55,963		8,345		7,762
Total	$	247,592	$	270,251	$	29,106	$	27,807

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

	Three Months Ended March 31,
	2013				2012
(in millions)	Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses
Fixed maturity securities	$	371	$	71	$	490	$	16
Equity securities		37		3		451		3
Total	$	408	$	74	$	941	$	19

The fair value of AIG's trading securities

	March 31, 2013					December 31, 2012
(in millions)	Fair Value		Percent of Total			Fair Value		Percent of Total
Fixed maturity securities:
U.S. government and government sponsored entities	$	6,339		26	%	$	6,794		27	%
Obligations of states, territories and political subdivisions		183		1			–		–
Non-U.S. governments		2		–			2		–
Corporate debt		1,138		5			1,320		5
Mortgage-backed, asset-backed and collateralized:
RMBS		1,969		8			1,727		7
CMBS		1,919		8			2,236		9
CDO/ABS and other collateralized*		12,297		50			12,497		50
Total mortgage-backed, asset-backed and collateralized		16,185		66			16,460		66
Other		8		–			8		–
Total fixed maturity securities		23,855		98			24,584		98
Equity securities		696		2			662		2
Total	$	24,551		100	%	$	25,246		100	%

*     Includes $0.8 billion of U.S. Government agency backed ABS.

Components of net investment income

Three Months Ended March 31, (in millions)	2013		2012
Fixed maturity securities, including short-term investments	$	3,045	$	3,104
Change in fair value of ML II		–		246
Change in fair value of ML III		–		1,252
Change in fair value of AIA securities including realized gain		–		1,795
Equity securities		37		11
Interest on mortgage and other loans		280		265
Alternative investments*		866		505
Real estate		31		26
Other investments		53		23
Total investment income		4,312		7,227
Investment expenses		148		122
Net investment income	$	4,164	$	7,105

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

Components of net realized capital gains (losses)

Three Months Ended March 31, (in millions)	2013			2012
Sales of fixed maturity securities	$	300		$	474
Sales of equity securities		34			448
Other-than-temporary impairments:
Severity		(2	)		(4	)
Change in intent		(3	)		(20	)
Foreign currency declines		–			(5	)
Issuer-specific credit events		(63	)		(586	)
Adverse projected cash flows		(6	)		(3	)
Provision for loan losses		(3	)		2
Foreign exchange transactions		329			(232	)
Derivative instruments		(271	)		(262	)
Other		(15	)		(63	)
Net realized capital gains (losses)	$	300		$	(251	)

Schedule of components of increase (decrease) in unrealized appreciation of available for sale securities

Three Months Ended March 31, (in millions)	2013			2012
Increase (decrease) in unrealized appreciation of investments:
Fixed maturities	$	(1,152	)	$	2,987
Equity securities		7			(560	)
Other investments		(48	)		284
Total Increase (decrease) in unrealized appreciation of investments	$	(1,193	)	$	2,711

Credit impairments recognized in earnings for available for sale fixed maturity securities

Three Months Ended March 31, (in millions)	2013			2012
Balance, beginning of period	$	5,164		$	6,504
Increases due to:
Credit impairments on new securities subject to impairment losses		17			137
Additional credit impairments on previously impaired securities		18			307
Reductions due to:
Credit impaired securities fully disposed for which there was no prior intent or requirement
to sell		(391	)		(270	)
Accretion on securities previously impaired due to credit*		(205	)		(222	)
Other		–			8
Balance, end of period	$	4,603		$	6,464

*     Represents both accretion recognized due to changes in cash flows expected to be collected over the remaining expected term of the credit impaired securities and 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)	$	19,807
Cash flows expected to be collected*		15,543
Recorded investment in acquired securities		10,011

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

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

(in millions)	March 31, 2013		December 31, 2012
Outstanding principal balance	$	12,257	$	11,791
Amortized cost		8,122		7,718
Fair value		9,551		8,823

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

	Three Months Ended March 31,
(in millions)	2013			2012
Balance, beginning of period	$	4,766		$	4,135
Newly purchased PCI securities		345			1,222
Disposals		(60	)		(47	)
Accretion		(160	)		(168	)
Effect of changes in interest rate indices		84			(28	)
Net reclassification from non-accretable difference, including effects of prepayments		139			32
Balance, end of period	$	5,114		$	5,146

Schedule of fair value of securities pledged to counterparties under secured financing transactions

(in millions)	March 31, 2013		December 31, 2012
Securities available for sale	$	5,289	$	8,180
Trading securities		2,809		2,985

Schedule of fair value of securities pledged to the entity under reverse repurchase agreements

(in millions)	March 31, 2013		December 31, 2012
Securities collateral pledged to us	$	10,974	$	11,039
Amount repledged by us		18		33