FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2021

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

4. Fair Value Measurements

Fair Value Measurements on a Recurring Basis

Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs:

 Level 1: Fair value measurements based on quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.

 Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

 Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions about the inputs a hypothetical market participant would use to value that asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:

June 30, 2021							Counterparty		Cash
(in millions)		Level 1		Level 2		Level 3		Netting(a)	Collateral			Total
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	-	$	4,501	$	-	$	-	$	-	$	4,501
Obligations of states, municipalities and political subdivisions		-		13,240		1,939		-		-		15,179
Non-U.S. governments		55		15,956		10		-		-		16,021
Corporate debt		-		172,780		2,773		-		-		175,553
RMBS		-		17,499		11,085		-		-		28,584
CMBS		-		14,382		1,082		-		-		15,464
CDO/ABS		-		8,450		9,318		-		-		17,768
Total bonds available for sale		55		246,808		26,207		-		-		273,070
Other bond securities:
U.S. government and government sponsored entities		-		1,778		-		-		-		1,778
Non-U.S. governments		-		-		-		-		-		-
Corporate debt		-		12		-		-		-		12
RMBS		-		221		113		-		-		334
CMBS		-		254		46		-		-		300
CDO/ABS		-		163		2,279		-		-		2,442
Total other bond securities		-		2,428		2,438		-		-		4,866
Equity securities		1,029		46		4		-		-		1,079
Other invested assets(b)		-		103		2,099		-		-		2,202
Derivative assets(c):
Interest rate contracts		-		3,677		1		-		-		3,678
Foreign exchange contracts		-		1,156		1		-		-		1,157
Equity contracts		7		356		368		-		-		731
Commodity contracts		-		6		-		-		-		6
Credit contracts		-		-		1		-		-		1
Other contracts		-		-		13		-		-		13
Counterparty netting and cash collateral		-		-		-		(2,833)		(1,721)		(4,554)
Total derivative assets		7		5,195		384		(2,833)		(1,721)		1,032
Short-term investments		2,839		2,684		-		-		-		5,523
Other assets		-		-		113		-		-		113
Separate account assets		103,402		3,904		-		-		-		107,306
Total	$	107,332	$	261,168	$	31,245	$	(2,833)	$	(1,721)	$	395,191
Liabilities:
Policyholder contract deposits	$	-	$	-	$	9,020	$	-	$	-	$	9,020
Derivative liabilities(c):
Interest rate contracts		2		3,878		-		-		-		3,880
Foreign exchange contracts		-		747		-		-		-		747
Equity contracts		4		57		11		-		-		72
Credit contracts		-		19		44		-		-		63
Other contracts		-		-		3		-		-		3
Counterparty netting and cash collateral		-		-		-		(2,833)		(1,201)		(4,034)
Total derivative liabilities		6		4,701		58		(2,833)		(1,201)		731
Fortitude Re funds withheld payable		-		-		5,317		-		-		5,317
Other liabilities		-		10		-		-		-		10
Long-term debt		-		1,974		-		-		-		1,974
Total	$	6	$	6,685	$	14,395	$	(2,833)	$	(1,201)	$	17,052

December 31, 2020							Counterparty		Cash
(in millions)		Level 1		Level 2		Level 3		Netting(a)		Collateral		Total
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	73	$	4,053	$	-	$	-	$	-	$	4,126
Obligations of states, municipalities and political subdivisions		-		14,019		2,105		-		-		16,124
Non-U.S. governments		28		15,312		5		-		-		15,345
Corporate debt		-		166,949		2,349		-		-		169,298
RMBS		-		19,771		11,694		-		-		31,465
CMBS		-		15,211		922		-		-		16,133
CDO/ABS		-		9,191		9,814		-		-		19,005
Total bonds available for sale		101		244,506		26,889		-		-		271,496
Other bond securities:
U.S. government and government sponsored entities		-		1,845		-		-		-		1,845
Non-U.S. governments		-		-		-		-		-		-
Corporate debt		-		12		-		-		-		12
RMBS		-		290		139		-		-		429
CMBS		-		273		47		-		-		320
CDO/ABS		-		173		2,512		-		-		2,685
Total other bond securities		-		2,593		2,698		-		-		5,291
Equity securities		929		76		51		-		-		1,056
Other invested assets(b)		-		102		1,827		-		-		1,929
Derivative assets(c):
Interest rate contracts		-		4,637		-		-		-		4,637
Foreign exchange contracts		-		1,020		2		-		-		1,022
Equity contracts		9		923		198		-		-		1,130
Credit contracts		-		-		2		-		-		2
Other contracts		-		-		14		-		-		14
Counterparty netting and cash collateral		-		-		-		(3,812)		(2,219)		(6,031)
Total derivative assets		9		6,580		216		(3,812)		(2,219)		774
Short-term investments		2,379		3,589		-		-		-		5,968
Other assets		-		-		113		-		-		113
Separate account assets		96,560		3,730		-		-		-		100,290
Total	$	99,978	$	261,176	$	31,794	$	(3,812)	$	(2,219)	$	386,917
Liabilities:
Policyholder contract deposits	$	-	$	-	$	9,798	$	-	$	-	$	9,798
Derivative liabilities(c):
Interest rate contracts		1		4,435		-		-		-		4,436
Foreign exchange contracts		-		1,090		-		-		-		1,090
Equity contracts		14		162		47		-		-		223
Credit contracts		-		23		44		-		-		67
Other contracts		-		-		6		-		-		6
Counterparty netting and cash collateral		-		-		-		(3,812)		(1,441)		(5,253)
Total derivative liabilities		15		5,710		97		(3,812)		(1,441)		569
Fortitude Re funds withheld payable		-		-		6,042		-		-		6,042
Other liabilities		-		1		-		-		-		1
Long-term debt		-		2,097		-		-		-		2,097
Total	$	15	$	7,808	$	15,937	$	(3,812)	$	(1,441)	$	18,507

(a)Represents netting of derivative exposures covered by qualifying master netting agreements.

(b) Excludes investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent), which totaled $7.4 billion and $6.5 billion as of June 30, 2021 and December 31, 2020, respectively.

(c) Presented as part of Other assets and Other liabilities on the Condensed Consolidated Balance Sheets.

Changes in Level 3 Recurring Fair Value Measurements

The following tables present changes during the three- and six-month periods ended June 30, 2021 and 2020 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) related to the Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets at June 30, 2021 and 2020:

				Net																Changes in
				Realized																Unrealized Gains
				and				Purchases,										Changes in		(Losses) Included in
				Unrealized				Sales,										Unrealized Gains		Other Comprehensive
				Gains				Issuances										(Losses) Included		Income (Loss) for
		Fair Value		(Losses)		Other		and		Gross		Gross			Fair Value			in Income on		Recurring Level 3
		Beginning		Included	Comprehensive		Settlements,		Transfers		Transfers			Divested		End		Instruments Held		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		In		Out	Businesses		of Period			at End of Period		at End of Period
Three Months Ended June 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions	$	1,896	$	5	$	128	$	(65)	$	-	$	(25)	$	-	$	1,939	$	-	$	244
Non-U.S. governments		6		-		(1)		1		4		-		-		10		-		-
Corporate debt		2,570		14		17		31		208		(67)		-		2,773		-		50
RMBS		11,464		150		(39)		(460)		-		(30)		-		11,085		-		957
CMBS		1,104		7		23		85		-		(137)		-		1,082		-		18
CDO/ABS		9,602		(1)		44		(374)		384		(337)		-		9,318		-		403
Total bonds available for sale		26,642		175		172		(782)		596		(596)		-		26,207		-		1,672
Other bond securities:
RMBS		126		1		-		(14)		-		-		-		113		12		-
CMBS		46		-		-		-		-		-		-		46		6		-
CDO/ABS		2,346		45		-		(112)		-		-		-		2,279		253		-
Total other bond securities		2,518		46		-		(126)		-		-		-		2,438		271		-
Equity securities		128		-		(3)		(112)		1		(10)		-		4		-		-
Other invested assets		1,897		114		(1)		89		-		-		-		2,099		122		-
Other assets		113		-		-		-		-		-		-		113		-		-
Total	$	31,298	$	335	$	168	$	(931)	$	597	$	(606)	$	-	$	30,861	$	393	$	1,672
				Net																Changes in
				Realized																Unrealized Gains
				and				Purchases,										Changes in		(Losses) Included in
				Unrealized				Sales,										Unrealized Gains		Other Comprehensive
				(Gains)				Issuances										(Losses) Included		Income (Loss) for
		Fair Value	Losses			Other		and		Gross		Gross			Fair Value			in Income on		Recurring Level 3
		Beginning		Included	Comprehensive		Settlements,		Transfers		Transfers			Divested		End		Instruments Held		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		In		Out	Businesses		of Period			at End of Period		at End of Period
Liabilities:
Policyholder contract deposits	$	7,617	$	1,363	$	-	$	40	$	-	$	-	$	-	$	9,020	$	(1,018)	$	-
Derivative liabilities, net:
Interest rate contracts		-		(2)		-		1		-		-		-		(1)		1		-
Foreign exchange contracts		-		-		-		(1)		-		-		-		(1)		(1)		-
Equity contracts		(222)		(71)		-		(69)		-		5		-		(357)		85		-
Credit contracts		44		2		-		(3)		-		-		-		43		(1)		-
Other contracts		(9)		(16)		-		15		-		-		-		(10)		17		-
Total derivative liabilities, net(a)		(187)		(87)		-		(57)		-		5		-		(326)		101		-
Fortitude Re funds withheld
payable		3,487		2,056		-		(226)		-		-		-		5,317		(1,452)		-
Total	$	10,917	$	3,332	$	-	$	(243)	$	-	$	5	$	-	$	14,011	$	(2,369)	$	-

				Net																Changes in
				Realized																Unrealized Gains
				and				Purchases,										Changes in		(Losses) Included in
				Unrealized				Sales,										Unrealized Gains		Other Comprehensive
				Gains				Issuances										(Losses) Included		Income (Loss) for
		Fair Value		(Losses)		Other		and		Gross		Gross			Fair Value			in Income on		Recurring Level 3
		Beginning		Included	Comprehensive		Settlements,		Transfers		Transfers			Divested		End		Instruments Held		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		In		Out	Businesses		of Period			at End of Period		at End of Period
Six Months Ended June 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions	$	2,105	$	8	$	(31)	$	(118)	$	-	$	(25)	$	-	$	1,939	$	-	$	234
Non-U.S. governments		5		-		(1)		1		5		-		-		10		-		-
Corporate debt		2,349		13		7		208		395		(199)		-		2,773		-		(109)
RMBS		11,694		317		25		(891)		-		(60)		-		11,085		-		943
CMBS		922		16		(33)		258		56		(137)		-		1,082		-		(38)
CDO/ABS		9,814		15		30		(538)		838		(841)		-		9,318		-		467
Total bonds available for sale		26,889		369		(3)		(1,080)		1,294		(1,262)		-		26,207		-		1,497
Other bond securities:
RMBS		139		4		-		(30)		-		-		-		113		(86)		-
CMBS		47		(1)		-		(6)		6		-		-		46		4		-
CDO/ABS		2,512		34		-		(267)		-		-		-		2,279		255		-
Total other bond securities		2,698		37		-		(303)		6		-		-		2,438		173		-
Equity securities		51		11		-		(123)		76		(11)		-		4		3		-
Other invested assets		1,827		256		(7)		23		-		-		-		2,099		245		-
Other assets		113		-		-		-		-		-		-		113		-		-
Total	$	31,578	$	673	$	(10)	$	(1,483)	$	1,376	$	(1,273)	$	-	$	30,861	$	421	$	1,497
				Net																Changes in
				Realized																Unrealized Gains
				and				Purchases,										Changes in		(Losses) Included in
				Unrealized				Sales,										Unrealized Gains		Other Comprehensive
				(Gains)				Issuances										(Losses) Included		Income (Loss) for
		Fair Value		Losses		Other		and		Gross		Gross				Fair Value		in Income on		Recurring Level 3
		Beginning		Included	Comprehensive		Settlements,		Transfers		Transfers			Divested		End		Instruments Held		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		In		Out	Businesses			of Period		at End of Period		at End of Period
Liabilities:
Policyholder contract deposits	$	9,798	$	(897)	$	-	$	119	$	-	$	-	$	-	$	9,020	$	1,553	$	-
Derivative liabilities, net:
Interest rate contracts		-		(2)		-		1		-		-		-		(1)		2		-
Foreign exchange contracts		(2)		1		-		-		-		-		-		(1)		(1)		-
Equity contracts		(151)		(97)		-		(154)		-		45		-		(357)		13		-
Credit contracts		42		7		-		(6)		-		-		-		43		(1)		-
Other contracts		(8)		(33)		-		31		-		-		-		(10)		33		-
Total derivative liabilities, net(a)		(119)		(124)		-		(128)		-		45		-		(326)		46		-
Fortitude Re funds withheld
payable		6,042		(326)		-		(399)		-		-		-		5,317		1,503		-
Total	$	15,721	$	(1,347)	$	-	$	(408)	$	-	$	45	$	-	$	14,011	$	3,102	$	-

				Net																Changes in
				Realized																Unrealized Gains
				and				Purchases,										Changes in		(Losses) Included in
				Unrealized				Sales,										Unrealized Gains		Other Comprehensive
				Gains				Issuances										(Losses) Included		Income (Loss) for
		Fair Value		(Losses)		Other		and		Gross		Gross				Fair Value		in Income on		Recurring Level 3
		Beginning		Included	Comprehensive		Settlements,		Transfers		Transfers			Divested		End		Instruments Held		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		In		Out	Businesses			of Period		at End of Period		at End of Period
Three Months Ended June 30, 2020
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions	$	2,102	$	-	$	254	$	20	$	-	$	(97)	$	-	$	2,279	$	-	$	244
Non-U.S. governments		6		-		-		5		-		(6)		-		5		-		-
Corporate debt		1,215		(1)		72		113		519		(18)		-		1,900		-		50
RMBS		11,687		208		947		(171)		7		-		-		12,678		-		957
CMBS		1,146		4		15		(16)		-		-		-		1,149		-		18
CDO/ABS		8,768		3		432		108		334		(184)		-		9,461		-		403
Total bonds available for sale		24,924		214		1,720		59		860		(305)		-		27,472		-		1,672
Other bond securities:
RMBS		149		14		-		5		-		-		-		168		13		-
CMBS		42		6		-		(1)		-		-		-		47		6		-
CDO/ABS		2,378		274		-		(121)		-		-		-		2,531		253		-
Total other bond securities		2,569		294		-		(117)		-		-		-		2,746		272		-
Equity securities		19		-		-		-		25		(1)		-		43		-		-
Other invested assets		1,467		(59)		-		78		-		-		-		1,486		-		-
Other assets		91		-		-		54		-		-		(34)		111		-		-
Total	$	29,070	$	449	$	1,720	$	74	$	885	$	(306)	$	(34)	$	31,858	$	272	$	1,672
				Net																Changes in
				Realized																Unrealized Gains
				and				Purchases,										Changes in		(Losses) Included in
				Unrealized				Sales,										Unrealized Gains		Other Comprehensive
				(Gains)				Issuances										(Losses) Included		Income (Loss) for
		Fair Value		Losses		Other		and		Gross		Gross				Fair Value		in Income on		Recurring Level 3
		Beginning		Included	Comprehensive		Settlements,		Transfers		Transfers			Divested		End		Instruments Held		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		In		Out		Businesses		of Period		at End of Period		at End of Period
Liabilities:
Policyholder contract deposits	$	8,153	$	1,060	$	-	$	20	$	-	$	-	$	-	$	9,233	$	(825)	$	-
Derivative liabilities, net:
Interest rate contracts		-		(1)		-		1		-		-		-		-		-		-
Foreign exchange contracts		3		1		-		(5)		-		-		-		(1)		-		-
Equity contracts		(143)		36		-		54		-		-		-		(53)		(15)		-
Credit contracts		(76)		64		-		57		-		-		-		45		9		-
Other contracts		(2)		(17)		-		16		-		-		-		(3)		17		-
Total derivative liabilities, net(a)		(218)		83		-		123		-		-		-		(12)		11		-
Fortitude Re funds withheld
payable		-		837		-		-		-		-		3,673		4,510		663		-
Total	$	7,935	$	1,980	$	-	$	143	$	-	$	-	$	3,673	$	13,731	$	(151)	$	-

				Net																Changes in
				Realized															Unrealized Gains
				and				Purchases,										Changes in	(Losses) Included in
				Unrealized				Sales,										Unrealized Gains	Other Comprehensive
				Gains				Issuances										(Losses) Included		Income (Loss) for
		Fair Value		(Losses)		Other		and		Gross		Gross			Fair Value			in Income on		Recurring Level 3
		Beginning		Included	Comprehensive		Settlements,		Transfers		Transfers			Divested		End		Instruments Held		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		In		Out	Businesses			of Period		at End of Period		at End of Period
Six Months Ended June 30, 2020
Assets:
Bonds available for sale:
Obligations of states, municipalities
and political subdivisions	$	2,121	$	5	$	199	$	157	$	27	$	(230)	$	-	$	2,279	$	-	$	193
Non-U.S. governments		-		-		-		5		6		(6)		-		5		-		-
Corporate debt		1,663		(68)		(9)		120		622		(428)		-		1,900		-		21
RMBS		13,408		340		(676)		(394)		26		(26)		-		12,678		-		(548)
CMBS		1,053		11		34		28		23		-		-		1,149		-		39
CDO/ABS		7,686		20		(125)		155		1,937		(212)		-		9,461		-		(134)
Total bonds available for sale		25,931		308		(577)		71		2,641		(902)		-		27,472		-		(429)
Other bond securities:
RMBS		143		-		-		25		-		-		-		168		(1)		-
CMBS		50		(1)		-		(2)		-		-		-		47		(2)		-
CDO/ABS		3,545		101		-		(1,115)		-		-		-		2,531		(9)		-
Total other bond securities		3,738		100		-		(1,092)		-		-		-		2,746		(12)		-
Equity securities		8		(1)		1		10		26		(1)		-		43		-		-
Other invested assets		1,192		(63)		-		207		150		-		-		1,486		(48)		-
Other assets		89		-		-		59		-		-		(37)		111		-		-
Total	$	30,958	$	344	$	(576)	$	(745)	$	2,817	$	(903)	$	(37)	$	31,858	$	(60)	$	(429)
				Net																Changes in
				Realized															Unrealized Gains
				and				Purchases,										Changes in	(Losses) Included in
				Unrealized				Sales,										Unrealized Gains	Other Comprehensive
				(Gains)				Issuances										(Losses) Included		Income (Loss) for
		Fair Value		Losses		Other		and		Gross		Gross			Fair Value			in Income on		Recurring Level 3
		Beginning		Included	Comprehensive		Settlements,		Transfers		Transfers			Divested		End		Instruments Held		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		In		Out	Businesses			of Period		at End of Period		at End of Period
Liabilities:
Policyholder contract deposits	$	6,910	$	2,231	$	-	$	92	$	-	$	-	$	-	$	9,233	$	(1,709)	$	-
Derivative liabilities, net:
Interest rate contracts		-		(1)		-		1		-		-		-		-		1		-
Foreign exchange contracts		(6)		4		-		1		-		-		-		(1)		1		-
Equity contracts		(151)		10		-		88		-		-		-		(53)		(64)		-
Credit contracts		62		(60)		-		43		-		-		-		45		6		-
Other contracts		(7)		(27)		-		31		-		-		-		(3)		27		-
Total derivative liabilities, net(a)		(102)		(74)		-		164		-		-		-		(12)		(29)		-
Fortitude Re funds withheld
payable		-		837		-		-		-		-		3,673		4,510		663		-
Total	$	6,808	$	2,994	$	-	$	256	$	-	$	-	$	3,673	$	13,731	$	(1,075)	$	-

(a)Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.

Net realized and unrealized gains and losses included in income related to Level 3 assets and liabilities shown above are reported in the Condensed Consolidated Statements of Income (Loss) as follows:

		Net
		Investment		Net Realized		Other
(in millions)		Income	Gains (Losses)			Income		Total
Three Months Ended June 30, 2021
Assets:
Bonds available for sale	$	163	$	12	$	-	$	175
Other bond securities		47		(1)		-		46
Equity securities		-		-		-		-
Other invested assets		99		15		-		114
Six Months Ended June 30, 2021
Assets:
Bonds available for sale	$	348	$	21	$	-	$	369
Other bond securities		16		21		-		37
Equity securities		11		-		-		11
Other invested assets		241		15		-		256
Three Months Ended June 30, 2020
Assets:
Bonds available for sale	$	182	$	32	$	-	$	214
Other bond securities		294		-		-		294
Equity securities		-		-		-		-
Other invested assets		(59)		-		-		(59)
Six Months Ended June 30, 2020
Assets:
Bonds available for sale	$	380	$	(72)	$	-	$	308
Other bond securities		(168)		268		-		100
Equity securities		-		(1)		-		(1)
Other invested assets		(63)		-		-		(63)
		Net
		Investment		Net Realized		Other
(in millions)		Income	(Gains) Losses			Income		Total
Three Months Ended June 30, 2021
Liabilities:
Policyholder contract deposits*	$	-	$	1,363	$	-	$	1,363
Derivative liabilities, net		-		(72)		(15)		(87)
Fortitude Re funds withheld payable		-		2,056		-		2,056
Six Months Ended June 30, 2021
Liabilities:
Policyholder contract deposits*	$	-	$	(897)	$	-	$	(897)
Derivative liabilities, net		-		(95)		(29)		(124)
Fortitude Re funds withheld payable		-		(326)		-		(326)
Three Months Ended June 30, 2020
Liabilities:
Policyholder contract deposits*	$	-	$	1,060	$	-	$	1,060
Derivative liabilities, net		-		97		(14)		83
Fortitude Re funds withheld payable		-		837		-		837
Six Months Ended June 30, 2020
Liabilities:
Policyholder contract deposits*	$	-	$	2,231	$	-	$	2,231
Derivative liabilities, net		-		(46)		(28)		(74)
Fortitude Re funds withheld payable		-		837		-		837

*Primarily embedded derivatives.

The following table presents the gross components of purchases, sales, issuances and settlements, net, shown above, for the three- and six-month periods ended June 30, 2021 and 2020 related to Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets:

						Issuances		Purchases, Sales,
						and		Issuances and
(in millions)		Purchases		Sales		Settlements(a)		Settlements, Net(a)
Three Months Ended June 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	3	$	(23)	$	(45)	$	(65)
Non-U.S. governments		1		-		-		1
Corporate debt		212		(32)		(149)		31
RMBS		318		(115)		(663)		(460)
CMBS		97		-		(12)		85
CDO/ABS		780		119		(1,273)		(374)
Total bonds available for sale		1,411		(51)		(2,142)		(782)
Other bond securities:
RMBS		1		(9)		(6)		(14)
CMBS		-		-		-		-
CDO/ABS		-		-		(112)		(112)
Total other bond securities		1		(9)		(118)		(126)
Equity securities		-		(3)		(109)		(112)
Other invested assets		194		-		(105)		89
Other assets		-		-		-		-
Total assets	$	1,606	$	(63)	$	(2,474)	$	(931)
Liabilities:
Policyholder contract deposits	$	-	$	202	$	(162)	$	40
Derivative liabilities, net		(71)		1		13		(57)
Fortitude Re funds withheld payable		-		-		(226)		(226)
Total liabilities	$	(71)	$	203	$	(375)	$	(243)
Three Months Ended June 30, 2020
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	22	$	-	$	(2)	$	20
Non-U.S. governments		5		-		-		5
Corporate debt		121		-		(8)		113
RMBS		365		-		(536)		(171)
CMBS		1		(5)		(12)		(16)
CDO/ABS		256		(3)		(145)		108
Total bonds available for sale		770		(8)		(703)		59
Other bond securities:
RMBS		12		-		(7)		5
CMBS		-		-		(1)		(1)
CDO/ABS		-		-		(121)		(121)
Total other bond securities		12		-		(129)		(117)
Equity securities		-		-		-		-
Other invested assets		78		-		-		78
Other assets		55		-		(1)		54
Total assets	$	915	$	(8)	$	(833)	$	74
Liabilities:
Policyholder contract deposits	$	-	$	122	$	(102)	$	20
Derivative liabilities, net		(9)		-		132		123
Fortitude Re funds withheld payable		-		-		-		-
Total liabilities	$	(9)	$	122	$	30	$	143

						Issuances		Purchases, Sales,
						and		Issuances and
(in millions)		Purchases		Sales		Settlements(a)		Settlements, Net(a)
Six Months Ended June 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	11	$	(43)	$	(86)	$	(118)
Non-U.S. governments		1		-		-		1
Corporate debt		953		(33)		(712)		208
RMBS		482		(115)		(1,258)		(891)
CMBS		290		-		(32)		258
CDO/ABS		1,156		70		(1,764)		(538)
Total bonds available for sale		2,893		(121)		(3,852)		(1,080)
Other bond securities:
RMBS		1		(9)		(22)		(30)
CMBS		-		(6)		-		(6)
CDO/ABS		-		(39)		(228)		(267)
Total other bond securities		1		(54)		(250)		(303)
Equity securities		-		(3)		(120)		(123)
Other invested assets		392		-		(369)		23
Other assets		-		-		-		-
Total assets	$	3,286	$	(178)	$	(4,591)	$	(1,483)
Liabilities:
Policyholder contract deposits	$	-	$	393	$	(274)	$	119
Derivative liabilities, net		(123)		2		(7)		(128)
Fortitude Re funds withheld payable		-		-		(399)		(399)
Total liabilities	$	(123)	$	395	$	(680)	$	(408)
Six Months Ended June 30, 2020
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	167	$	(2)	$	(8)	$	157
Non-U.S. governments		5		-		-		5
Corporate debt		233		(5)		(108)		120
RMBS		701		-		(1,095)		(394)
CMBS		54		(7)		(19)		28
CDO/ABS		481		(25)		(301)		155
Total bonds available for sale		1,641		(39)		(1,531)		71
Other bond securities:
RMBS		37		-		(12)		25
CMBS		-		-		(2)		(2)
CDO/ABS		35		(579)		(571)		(1,115)
Total other bond securities		72		(579)		(585)		(1,092)
Equity securities		10		-		-		10
Other invested assets		252		-		(45)		207
Other assets		55		-		4		59
Total assets	$	2,030	$	(618)	$	(2,157)	$	(745)
Liabilities:
Policyholder contract deposits	$	-	$	344	$	(252)	$	92
Derivative liabilities, net		(24)		8		180		164
Fortitude Re funds withheld payable		-		-		-		-
Total liabilities	$	(24)	$	352	$	(72)	$	256

(a)There were no issuances during the three- and six-month periods ended June 30, 2021 and 2020.

Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at June 30, 2021 and 2020 may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable inputs (e.g., changes in unobservable long-dated volatilities).

Transfers of Level 3 Assets and Liabilities

The Net realized and unrealized gains (losses) included in income (loss) or Other comprehensive income (loss) as shown in the table above excludes $9 million and $28 million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three- and six-month periods ended June 30, 2021, respectively, and includes $1 million and $(4) million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three- and six-month periods ended June 30, 2021, respectively.

The Net realized and unrealized gains (losses) included in income (loss) or Other comprehensive income (loss) as shown in the table above excludes $28 million and $(128) million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three- and six-month periods ended June 30, 2020, respectively, and includes $24 million and $(31) million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three- and six-month periods ended June 30, 2020, respectively.

Transfers of Level 3 Assets

During the three- and six-month periods ended June 30, 2021 and 2020, transfers into Level 3 assets primarily included certain investments in private placement corporate debt, RMBS, CMBS and CDO/ABS. Transfers of private placement corporate debt and certain ABS into Level 3 assets were primarily the result of limited market pricing information that required us to determine fair value for these securities based on inputs that are adjusted to better reflect our own assumptions regarding the characteristics of a specific security or associated market liquidity. The transfers of investments in RMBS, CMBS and CDO and certain ABS into Level 3 assets were due to diminished market transparency and liquidity for individual security types.

During the three- and six-month periods ended June 30, 2021 and 2020, transfers out of Level 3 assets primarily included private placement and other corporate debt, CMBS, RMBS, CDO/ABS and certain investments in municipal securities. Transfers of corporate debt, RMBS, CMBS, CDO/ABS and certain investments in municipal securities out of Level 3 assets were based on consideration of market liquidity as well as related transparency of pricing and associated observable inputs for these investments. Transfers of certain investments in private placement corporate debt and certain ABS out of Level 3 assets were primarily the result of using observable pricing information that reflects the fair value of those securities without the need for adjustment based on our own assumptions regarding the characteristics of a specific security or the current liquidity in the market.

Transfers of Level 3 Liabilities

There were no significant transfers of derivative or other liabilities into or out of Level 3 for the three- and six-month periods ended June 30, 2021 and 2020.

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments, and includes only those instruments for which information about the inputs is reasonably available to us, such as data from independent third-party valuation service providers. Because input information from third-parties with respect to certain Level 3 instruments (primarily CDO/ABS) may not be reasonably available to us, balances shown below may not equal total amounts reported for such Level 3 assets and liabilities:

	Fair Value at
	June 30,		Valuation		Range
(in millions)	2021		Technique	Unobservable Input(b)	(Weighted Average)(c)
Assets:
Obligations of states, municipalities
and political subdivisions	$	1,588	Discounted cash flow	Yield	2.89% - 3.39% (3.14%)
Corporate debt		1,939	Discounted cash flow	Yield	1.85% - 17.19% (7.64%)
RMBS(a)		10,393	Discounted cash flow	Constant prepayment rate	4.75% - 17.06% (10.90%)
				Loss severity	29.46% - 74.55% (52.00%)
				Constant default rate	1.42% - 6.22% (3.82%)
				Yield	1.57% - 4.10% (2.83%)
CDO/ABS(a)		8,011	Discounted cash flow	Yield	1.51% - 4.53% (3.02%)
CMBS		579	Discounted cash flow	Yield	0.90% - 5.42% (3.16%)
Liabilities(d):
Embedded derivatives within
Policyholder contract deposits:
Variable annuity guaranteed minimum withdrawal benefits (GMWB)		2,484	Discounted cash flow	Equity volatility	6.55% - 51.55%
				Base lapse rate	0.16% - 12.60%
				Dynamic lapse multiplier	50.00% - 143.00%
				Mortality multiplier(e)	38.00% - 147.00%
				Utilization	90.00% - 100.00%
				Equity / interest rate correlation	20.00% - 40.00%
				NPA(f)	0.07% - 1.38%
Index annuities including certain GMWB		5,788	Discounted cash flow	Lapse rate	0.38% - 50.00%
				Mortality multiplier(e)	24.00% - 180.00%
				Utilization(g)	80.00% - 100.00%
				Option budget	0.00% - 4.00%
				NPA(f)	0.07% - 1.38%
Indexed life		701	Discounted cash flow	Base lapse rate	0.00% - 37.97%
				Mortality rate	0.00% - 100.00%
				NPA(f)	0.07% - 1.38%

		Fair Value at
		December 31,	Valuation		Range
(in millions)		2020	Technique	Unobservable Input(b)	(Weighted Average)(c)
Assets:
Obligations of states, municipalities
and political subdivisions	$	1,670	Discounted cash flow	Yield	2.82% - 3.39% (3.11%)
Corporate debt		1,591	Discounted cash flow	Yield	2.13% - 7.82% (4.97%)
RMBS(a)		11,297	Discounted cash flow	Constant prepayment rate	3.90% - 11.99% (7.94%)
				Loss severity	30.08% - 78.49% (54.29%)
				Constant default rate	1.45% - 6.19% (3.82%)
				Yield	1.69% - 4.25% (2.97%)
CDO/ABS(a)		8,324	Discounted cash flow	Yield	1.93% - 4.85% (3.39%)
CMBS		541	Discounted cash flow	Yield	0.92% - 5.89% (3.40%)
Liabilities(d):
Embedded derivatives within
Policyholder contract deposits:
GMWB		3,572	Discounted cash flow	Equity volatility	6.45% - 50.85%
				Base lapse rate	0.16% - 12.60%
				Dynamic lapse multiplier	50.00% - 143.00%
				Mortality multiplier(e)	38.00% - 147.00%
				Utilization	90.00% - 100.00%
				Equity / interest rate correlation	20.00% - 40.00%
				NPA(f)	0.06% - 1.48%
Index annuities including certain
GMWB		5,538	Discounted cash flow	Lapse rate	0.38% - 50.00%
				Mortality multiplier(e)	24.00% - 180.00%
				Utilization(g)	80.00% - 100.00%
				Option budget	0.00% - 4.00%
				NPA(f)	0.06% - 1.48%
Indexed life		649	Discounted cash flow	Base lapse rate	0.00% - 37.97%
				Mortality rate	0.00% - 100.00%
				NPA(f)	0.06% - 1.48%

(a) Information received from third-party valuation service providers. The ranges of the unobservable inputs for constant prepayment rate, loss severity and constant default rate relate to each of the individual underlying mortgage loans that comprise the entire portfolio of securities in the RMBS and CDO securitization vehicles and not necessarily to the securitization vehicle bonds (tranches) purchased by us. The ranges of these inputs do not directly correlate to changes in the fair values of the tranches purchased by us, because there are other factors relevant to the fair values of specific tranches owned by us including, but not limited to, purchase price, position in the waterfall, senior versus subordinated position and attachment points.

(b) Represents discount rates, estimates and assumptions that we believe would be used by market participants when valuing these assets and liabilities.

(c) The weighted averaging for fixed maturity securities is based on the estimated fair value of the securities. Because the valuation methodology for embedded derivatives within Policyholder contract deposits uses a range of inputs that vary at the contract level over the cash flow projection period, management believes that presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(d) The Fortitude Re funds withheld payable has been excluded from the above table. As discussed in Note 7, the Fortitude Re funds withheld payable is created through modified coinsurance (modco) and funds withheld reinsurance arrangements where the investments supporting the reinsurance agreements are withheld by, and continue to reside on AIG’s balance sheet. This embedded derivative is valued as a total return swap with reference to the fair value of the invested assets held by AIG. Accordingly, the unobservable inputs utilized in the valuation of the embedded derivative are a component of the invested assets supporting the reinsurance agreements that are held on AIG’s balance sheet.

(e) Mortality inputs are shown as multipliers of the 2012 Individual Annuity Mortality Basic table.

(f) The non-performance risk adjustment (NPA) applied as a spread over risk-free curve for discounting.

(g) The partial withdrawal utilization unobservable input range shown applies only to policies with guaranteed minimum withdrawal benefit riders that are accounted for as an embedded derivative. The total embedded derivative liability at June 30, 2021 and December 31, 2020 was approximately $860 million and $726 million, respectively. The remaining guaranteed minimum riders on the index annuities are valued under the accounting guidance for certain nontraditional long-duration contracts.

The ranges of reported inputs for Obligations of states, municipalities and political subdivisions, Corporate debt, RMBS, CDO/ABS, and CMBS valued using a discounted cash flow technique consist of one standard deviation in either direction from the value-weighted average. The preceding table does not give effect to our risk management practices that might offset risks inherent in these Level 3 assets and liabilities.

Interrelationships between Unobservable Inputs

We consider unobservable inputs to be those for which market data is not available and that are developed using the best information available to us about the assumptions that market participants would use when pricing the asset or liability. Relevant inputs vary depending on the nature of the instrument being measured at fair value. The following paragraphs provide a general description of significant unobservable inputs along with interrelationships between and among the significant unobservable inputs and their impact on the fair value measurements. In practice, simultaneous changes in assumptions may not always have a linear effect on the inputs discussed below. Interrelationships may also exist between observable and unobservable inputs. Such relationships have not been included in the discussion below. For each of the individual relationships described below, the inverse relationship would also generally apply.

Fixed Maturity Securities

The significant unobservable input used in the fair value measurement of fixed maturity securities is yield. The yield is affected by the market movements in credit spreads and U.S. Treasury yields. The yield may be affected by other factors including constant prepayment rates, loss severity, and constant default rates. In general, increases in the yield would decrease the fair value of investments, and conversely, decreases in the yield would increase the fair value of investments.

Embedded derivatives within Policyholder contract deposits

Embedded derivatives reported within Policyholder contract deposits include interest crediting rates based on market indices within index annuities, indexed life, and GICs as well as GMWB within variable annuity and certain index annuity products. For any given contract, assumptions for unobservable inputs vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. The following unobservable inputs are used for valuing embedded derivatives measured at fair value:

 Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. Increases in assumed volatility will generally increase the fair value of both the projected cash flows from rider fees as well as the projected cash flows related to benefit payments. Therefore, the net change in the fair value of the liability may be either a decrease or an increase, depending on the relative changes in projected rider fees and projected benefit payments.

 Equity / interest rate correlation estimates the relationship between changes in equity returns and interest rates in the economic scenario generator used to value our GMWB embedded derivatives. In general, a higher positive correlation assumes that equity markets and interest rates move in a more correlated fashion, which generally increases the fair value of the liability.

 Base lapse rate assumptions are determined by company experience and are adjusted at the contract level using a dynamic lapse function, which reduces the base lapse rate when the contract is in-the-money (when the contract holder’s guaranteed value, as estimated by the company, is worth more than their underlying account value). Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. Increases in assumed lapse rates will generally decrease the fair value of the liability, as fewer policyholders would persist to collect guaranteed withdrawal amounts.

 Mortality rate assumptions, which vary by age and gender, are based on company experience and include a mortality improvement assumption. Increases in assumed mortality rates will decrease the fair value of the liability, while lower mortality rate assumptions will generally increase the fair value of the liability, because guaranteed payments will be made for a longer period of time.

 Utilization assumptions estimate the timing when policyholders with a GMWB will elect to utilize their benefit and begin taking withdrawals. The assumptions may vary by the type of guarantee, tax-qualified status, the contract’s withdrawal history and the age of the policyholder. Utilization assumptions are based on company experience, which includes partial withdrawal behavior. Increases in assumed utilization rates will generally increase the fair value of the liability.

 Option budget estimates the expected long-term cost of options used to hedge exposures associated with equity price changes. The level of option budgets determines future costs of the options, which impacts the growth in account value and the valuation of embedded derivatives.

Embedded derivatives within reinsurance contracts

The fair value of embedded derivatives associated with funds withheld reinsurance contracts is determined based upon a total return swap technique with reference to the fair value of the investments held by AIG related to AIG’s funds withheld payable. The fair value of the underlying assets is generally based on market observable inputs using industry standard valuation techniques. The valuation also requires certain significant inputs, which are generally not observable and accordingly, the valuation is considered Level 3 in the fair value hierarchy.

Investments in Certain Entities Carried at Fair Value Using Net Asset Value Per Share

The following table includes information related to our investments in certain other invested assets, including private equity funds, hedge funds and other alternative investments that calculate net asset value per share (or its equivalent). For these investments, which are measured at fair value on a recurring basis, we use the net asset value per share to measure fair value.

		June 30, 2021				December 31, 2020
			Fair Value			Fair Value
			Using NAV			Using NAV
			Per Share (or		Unfunded	Per Share (or			Unfunded
(in millions)	Investment Category Includes		its equivalent)	Commitments		its equivalent)		Commitments
Investment Category
Private equity funds:
Leveraged buyout	Debt and/or equity investments made as part of a transaction in which assets of mature companies are acquired from the current shareholders, typically with the use of financial leverage	$	2,217	$	1,796	$	1,752	$	1,960
Real assets	Investments in real estate properties, agricultural and infrastructure assets, including power plants and other energy producing assets		946		542		908		445
Venture capital	Early-stage, high-potential, growth companies expected to generate a return through an eventual realization event, such as an initial public offering or sale of the company		235		214		167		171
Growth equity	Funds that make investments in established companies for the purpose of growing their businesses		844		140		703		55
Mezzanine	Funds that make investments in the junior debt and equity securities of leveraged companies		460		421		400		155
Other	Includes distressed funds that invest in securities of companies that are in default or under bankruptcy protection, as well as funds that have multi-strategy, and other strategies		878		476		683		365
Total private equity funds			5,580		3,589		4,613		3,151
Hedge funds:
Event-driven	Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations		436		-		411		-
Long-short	Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk		344		-		361		-
Macro	Investments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions		673		-		807		-
Other	Includes investments held in funds that are less liquid, as well as other strategies which allow for broader allocation between public and private investments		345		-		301		1
Total hedge funds			1,798		-		1,880		1
Total		$	7,378	$	3,589	$	6,493	$	3,152

Private equity fund investments included above are not redeemable, because distributions from the funds will be received when underlying investments of the funds are liquidated. Private equity funds are generally expected to have 10-year lives at their inception, but these lives may be extended at the fund manager’s discretion, typically in one or two-year increments.

The hedge fund investments included above, which are carried at fair value, are generally redeemable subject to the redemption notices period. The majority of our hedge fund investments are redeemable monthly or quarterly.

Fair Value Option

The following table presents the gains or losses recorded related to the eligible instruments for which we elected the fair value option:

	Gain (Loss) Three Months Ended June 30,				Gain (Loss) Six Months Ended June 30,
(in millions)		2021		2020		2021		2020
Assets:
Bond and equity securities	$	96	$	374	$	(3)	$	314
Alternative investments(a)		428		(26)		845		(165)
Liabilities:
Long-term debt(b)		(38)		(18)		33		(221)
Total gain (loss)	$	486	$	330	$	875	$	(72)

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

(b) Includes guaranteed investment agreements (GIAs), notes, bonds and mortgages payable.

We calculate the effect of these credit spread changes using discounted cash flow techniques that incorporate current market interest rates, our observable credit spreads on these liabilities and other factors that mitigate the risk of nonperformance such as cash collateral posted.

The following table presents the difference between fair value and the aggregate contractual principal amount of long-term debt for which the fair value option was elected:

	June 30, 2021						December 31, 2020
			Outstanding						Outstanding
(in millions)	Fair Value		Principal Amount		Difference		Fair Value		Principal Amount		Difference
Liabilities:
Long-term debt*	$	1,974	$	1,401	$	573	$	2,097	$	1,479	$	618

*Includes GIAs, notes, bonds, loans and mortgages payable.

FAIR VALUE MEASUREMENTS ON A NON-RECURRING BASIS

The following table presents assets measured at fair value on a non-recurring basis at the time of impairment and the related impairment charges recorded during the periods presented:

	Assets at Fair Value								Impairment Charges
	Non-Recurring Basis								Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	Level 1		Level 2		Level 3			Total		2021		2020		2021		2020
June 30, 2021
Other investments	$	-	$	-	$	89	$	89	$	-	$	37	$	6	$	48
Other assets		-		-		-		-		-		-		-		12
Total	$	-	$	-	$	89	$	89	$	-	$	37	$	6	$	60
December 31, 2020
Other investments	$	-	$	-	$	376	$	376
Other assets		-		-		28		28
Total	$	-	$	-	$	404	$	404

FAIR VALUE INFORMATION ABOUT FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE

The following table presents the carrying amounts and estimated fair values of our financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:

	Estimated Fair Value									Carrying
(in millions)		Level 1		Level 2		Level 3		Total		Value
June 30, 2021
Assets:
Mortgage and other loans receivable	$	-	$	89	$	47,619	$	47,708	$	45,216
Other invested assets		-		844		6		850		850
Short-term investments		-		9,646		-		9,646		9,646
Cash		2,760		-		-		2,760		2,760
Other assets		229		13		-		242		242
Liabilities:
Policyholder contract deposits associated
with investment-type contracts		-		189		143,620		143,809		132,367
Fortitude Re funds withheld payable		-		-		36,086		36,086		36,086
Other liabilities		-		3,692		-		3,692		3,692
Long-term debt		-		27,506		346		27,852		24,187
Debt of consolidated investment entities		-		2,359		7,251		9,610		9,566
Separate account liabilities - investment contracts		-		102,392		-		102,392		102,392
December 31, 2020
Assets:
Mortgage and other loans receivable	$	-	$	95	$	48,541	$	48,636	$	45,562
Other invested assets		-		837		6		843		843
Short-term investments		-		12,235		-		12,235		12,235
Cash		2,827		-		-		2,827		2,827
Other assets		209		14		-		223		223
Liabilities:
Policyholder contract deposits associated
with investment-type contracts		-		214		144,357		144,571		130,435
Fortitude Re funds withheld payable		-		-		37,018		37,018		37,018
Other liabilities		-		3,695		-		3,695		3,695
Long-term debt		-		30,310		365		30,675		26,006
Debt of consolidated investment entities		-		1,746		7,965		9,711		9,431
Separate account liabilities - investment contracts		-		95,610		-		95,610		95,610