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VARIABLE INTEREST ENTITIES

6 Months Ended

Jun. 30, 2021

8. Variable Interest Entities

We enter into various arrangements with variable interest entities (VIEs) in the normal course of business and consolidate the VIEs when we determine we are the primary beneficiary. This analysis includes a review of the VIE’s capital structure, related contractual relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and our involvement with the entity. When assessing the need to consolidate a VIE, we evaluate the design of the VIE as well as the related risks to which the entity was designed to expose the variable interest holders.

The primary beneficiary is the entity that has both (i) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (ii) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of our decision-making ability and our ability to influence activities that significantly affect the economic performance of the VIE.

Balance Sheet Classification and Exposure to Loss

Creditors or beneficial interest holders of VIEs for which AIG is the primary beneficiary generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to AIG, except in limited circumstances when AIG has provided a guarantee to the VIE’s interest holders. The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the Condensed Consolidated Balance Sheets:

		Real Estate and				Affordable
		Investment		Securitization		Housing
(in millions)		Entities^(d)		Vehicles		Partnerships		Other		Total
June 30, 2021
Assets:
Bonds available for sale	$	-	$	4,863	$	-	$	-	$	4,863
Other bond securities		-		2,081		-		-		2,081
Equity securities		498		-		-		-		498
Mortgage and other loans receivable		-		2,662		-		-		2,662
Other invested assets
Alternative investments^(a)		3,243		-		-		-		3,243
Investment real estate		3,173		-		3,774		-		6,947
Short-term investments		89		139		-		20		248
Cash		122		-		261		-		383
Accrued investment income		-		20		-		-		20
Other assets		130		53		257		-		440
Other		25		-		-		2		27
Total assets^(b)	$	7,280	$	9,818	$	4,292	$	22	$	21,412
Liabilities:
Debt of consolidated investment entities	$	2,374	$	4,054	$	2,514	$	-	$	8,942
Other^(c)		168		241		187		9		605
Total liabilities	$	2,542	$	4,295	$	2,701	$	9	$	9,547
December 31, 2020
Assets:
Bonds available for sale	$	-	$	6,089	$	-	$	-	$	6,089
Other bond securities		-		2,367		-		-		2,367
Equity securities		507		-		-		-		507
Mortgage and other loans receivable		-		3,135		-		-		3,135
Other invested assets
Alternative investments^(a)		2,689		-		-		-		2,689
Investment real estate		3,378		-		3,558		-		6,936
Short-term investments		365		1,534		-		27		1,926
Cash		129		-		203		-		332
Accrued investment income		-		38		-		-		38
Other assets		166		120		243		-		529
Other		3		-		-		2		5
Total assets^(b)	$	7,237	$	13,283	$	4,004	$	29	$	24,553
Liabilities:
Debt of consolidated investment entities	$	2,559	$	3,961	$	2,287	$	2	$	8,809
Other^(c)		180		187		187		10		564
Total liabilities	$	2,739	$	4,148	$	2,474	$	12	$	9,373

(a)Comprised primarily of investments in real estate joint ventures at June 30, 2021 and December 31, 2020.

(b) The assets of each VIE can be used only to settle specific obligations of that VIE.

(c) Comprised primarily of Other liabilities at June 30, 2021 and December 31, 2020.

(d) At June 30, 2021 and December 31, 2020, off-balance sheet exposure primarily consisting of our insurance companies’ commitments to real estate and investment entities were $2.1 billion and $2.4 billion, respectively, of which commitments to external parties were $0.7 billion and $0.7 billion, respectively.

We calculate our maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE, (ii) the notional amount of VIE assets or liabilities where we have also provided credit protection to the VIE with the VIE as the referenced obligation, and (iii) other commitments and guarantees to the VIE.

Under the terms of six transactions entered into between 2012 and 2014, securitized portfolios of certain debt securities previously owned by AIG and its affiliates, an indirectly wholly-owned subsidiary of AIG was obligated to make certain capital contributions to such a securitization VIE in the event that the VIE was unable to redeem any rated notes it had in issue on the relevant redemption date. AIG had provided a guarantee to the six securitization VIEs of the obligations of its indirectly wholly-owned subsidiary to make such capital contributions when due. At June 30, 2021, all six transactions had been terminated. In aggregate, the termination of these six transactions resulted in a reduction of debt of consolidated investment entities of $175 million. There were no amounts paid related to the guarantees provided.

SunAmerica Affordable Housing Partners, Inc. (SAAHP) provides a Base Internal Rate of Return (Base IRR) guarantee to its third party investors, so that on a specified date if the investor has not received distributions of cash and allocations of certain tax benefits required to achieve their Base IRR as provided for in the partnership agreement, SAAHP shall distribute cash to effectively generate the Base IRR to the investor. In addition, SAAHP has from time to time guaranteed certain debt issued by third parties related to its business activities. As of June 30, 2021, the off-balance sheet amount of that guarantee was approximately $3 million.

The following table presents total assets of unconsolidated VIEs in which we hold a variable interest, as well as our maximum exposure to loss associated with these VIEs:

			Maximum Exposure to Loss
		Total VIE		On-Balance			Off-Balance
(in millions)		Assets		Sheet	^(b)		Sheet			Total
June 30, 2021
Real estate and investment entities^(a)	$	355,969	$	6,920		$	3,629	^(d)	$	10,549
Affordable housing partnerships		2,445		295	^(c)		3			298
Other		1,710		209			480	^(e)		689
Total	$	360,124	$	7,424		$	4,112		$	11,536
December 31, 2020
Real estate and investment entities^(a)	$	321,716	$	6,420		$	3,273	^(d)	$	9,693
Affordable housing partnerships		2,801		368	^(c)		4			372
Other		1,733		195			546	^(e)		741
Total	$	326,250	$	6,983		$	3,823		$	10,806

(a)Comprised primarily of hedge funds and private equity funds.

(b) At June 30, 2021 and December 31, 2020, $7.2 billion and $6.8 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.

(c) At June 30, 2021, primarily included alternative equity investments of $196 million and other loans receivables of $83 million. At December 31, 2020, primarily included alternative equity investments of $257 million and other loans receivables of $97 million.

(d) These amounts represent our unfunded commitments to invest in private equity funds and hedge funds.

(e) These amounts represent our estimate of the maximum exposure to loss under certain insurance policies issued to VIEs if a hypothetical loss occurred to the extent of the full amount of the insured value. Our insurance policies cover defined risks and our estimate of liability is included in our insurance reserves on the balance sheet.

For additional information on VIEs see Note 10 to the Consolidated Financial Statements in the 2020 Annual Report.