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DERIVATIVES AND HEDGE ACCOUNTING (Tables)
 3 Months Ended
Mar. 31, 2021
DERIVATIVES AND HEDGE ACCOUNTING  
Notional amounts and fair values of derivative instruments

 

March 31, 2021

 

December 31, 2020

 

Gross Derivative Assets

 

Gross Derivative Liabilities

 

Gross Derivative Assets

 

Gross Derivative Liabilities

 

 

Notional

 

Fair

 

 

Notional

 

Fair

 

 

Notional

 

Fair

 

 

Notional

 

Fair

(in millions)

 

Amount

 

Value

 

 

Amount

 

Value

 

 

Amount

 

Value

 

 

Amount

 

Value

Derivatives designated as

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

hedging instruments:(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

$

877

$

16

 

$

295

$

6

 

$

815

$

16

 

$

356

$

11

Foreign exchange contracts

 

6,232

 

380

 

 

4,135

 

293

 

 

3,468

 

256

 

 

7,424

 

379

Derivatives not designated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

as hedging instruments:(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

49,790

 

3,608

 

 

47,401

 

4,898

 

 

62,259

 

4,621

 

 

48,732

 

4,425

Foreign exchange contracts

 

13,476

 

689

 

 

7,258

 

561

 

 

9,518

 

766

 

 

12,860

 

711

Equity contracts

 

23,163

 

580

 

 

7,830

 

85

 

 

22,924

 

1,130

 

 

7,076

 

223

Credit contracts(b)

 

4,796

 

1

 

 

958

 

65

 

 

5,797

 

2

 

 

969

 

67

Other contracts(c)

 

43,030

 

13

 

 

55

 

4

 

 

43,441

 

14

 

 

54

 

6

Total derivatives, gross

$

141,364

$

5,287

 

$

67,932

$

5,912

 

$

148,222

$

6,805

 

$

77,471

$

5,822

Counterparty netting(d)

 

 

 

(3,080)

 

 

 

 

(3,080)

 

 

 

 

(3,812)

 

 

 

 

(3,812)

Cash collateral(e)

 

 

 

(1,314)

 

 

 

 

(2,129)

 

 

 

 

(2,219)

 

 

 

 

(1,441)

Total derivatives on Condensed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets(f)

 

 

$

893

 

 

 

$

703

 

 

 

$

774

 

 

 

$

569

(a) Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.

(b) As of March 31, 2021 and December 31, 2020, included CDSs on super senior multi-sector CDOs with a net notional amount of $125 million and $137 million (fair value liability of $44 million and $44 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 zero at both March 31, 2021 and December 31, 2020. Fair value of liabilities related to bifurcated embedded derivatives was $11.1 billion and $15.8 billion, respectively, at March 31, 2021 and December 31, 2020. 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 variable annuity products, which include equity and interest rate components, and the funds withheld arrangement with Fortitude Re. For additional information see Note 7 to the Condensed Consolidated Financial Statements.
Gain (loss) recognized in earnings on AIG's derivative instruments in fair value hedging relationships in the Consolidated Statements of Income

 

Gains/(Losses) Recognized in Earnings for:

 

 

 

Hedging

Excluded

Hedged

 

 

(in millions)

Derivatives(a)

Components(b)

Items

Net Impact

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

Interest rate contracts:

 

 

 

 

 

 

 

 

Interest credited to policyholder account balances

$

(4)

$

-

$

6

$

2

Net investment income (loss)

 

8

 

-

 

(7)

 

1

Foreign exchange contracts:

 

 

 

 

 

 

 

 

Realized capital gains/(losses)

 

32

 

(29)

 

(32)

 

(29)

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

Interest rate contracts:

 

 

 

 

 

 

 

 

Interest credited to policyholder account balances

$

17

$

-

$

(17)

$

-

Net investment income (loss)

 

(3)

 

-

 

3

 

-

Foreign exchange contracts:

 

 

 

 

 

 

 

 

Realized capital gains/(losses)

 

305

 

281

 

(305)

 

281

(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 earnings on a mark-to-market basis.
Effect of AIG's derivative instruments not designated as hedging instruments in the Consolidated Statements of Income

 

 

 

Gains (Losses)

Three Months Ended March 31,

 

 

Recognized in Earnings

(in millions)

 

 

 

2021

 

2020

By Derivative Type:

 

 

 

 

 

 

Interest rate contracts

 

 

$

(1,545)

$

2,573

Foreign exchange contracts

 

 

 

(87)

 

1,025

Equity contracts

 

 

 

(519)

 

1,103

Credit contracts

 

 

 

(5)

 

122

Other contracts

 

 

 

15

 

10

Embedded derivatives

 

 

 

4,839

 

(1,052)

Total

 

 

$

2,698

$

3,781

By Classification:

 

 

 

 

 

 

Policy fees

 

 

$

15

$

15

Net investment income

 

 

 

(12)

 

(2)

Net realized capital gains - excluding Fortitude Re funds withheld assets

 

440

 

3,752

Net realized capital gains on Fortitude Re funds withheld assets

 

 

 

2,265

 

-

Policyholder benefits and claims incurred

 

 

 

(10)

 

16

Total

 

 

$

2,698

$

3,781