DERIVATIVES AND HEDGE ACCOUNTING (Tables)

6 Months Ended

Jun. 30, 2021

DERIVATIVES AND HEDGE ACCOUNTING

Notional amounts and fair values of derivative instruments

	June 30, 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	$	12	$	445	$	5	$	815	$	16	$	356	$	11
Foreign exchange contracts		7,557		430		3,613		239		3,468		256		7,424		379
Derivatives not designated
as hedging instruments:(a)
Interest rate contracts		48,284		3,666		42,669		3,875		62,259		4,621		48,732		4,425
Foreign exchange contracts		12,423		727		6,125		508		9,518		766		12,860		711
Equity contracts		24,456		731		6,736		72		22,924		1,130		7,076		223
Commodity contracts		193		6		583		-		-		-		-		-
Credit contracts(b)		4,742		1		955		63		5,797		2		969		67
Other contracts(c)		42,502		13		54		3		43,441		14		54		6
Total derivatives, gross	$	141,034	$	5,586	$	61,180	$	4,765	$	148,222	$	6,805	$	77,471	$	5,822
Counterparty netting(d)				(2,833)				(2,833)				(3,812)				(3,812)
Cash collateral(e)				(1,721)				(1,201)				(2,219)				(1,441)
Total derivatives on Condensed
Consolidated Balance Sheets(f)			$	1,032			$	731			$	774			$	569

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

(b) As of June 30, 2021 and December 31, 2020, included CDSs on super senior multi-sector CDOs with a net notional amount of $117 million and $137 million (fair value liability of $43 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 June 30, 2021 and December 31, 2020. Fair value of liabilities related to bifurcated embedded derivatives was $14.3 billion and $15.8 billion, respectively, at June 30, 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 Income for:
	Hedging		Excluded		Hedged
(in millions)	Derivatives(a)		Components(b)		Items		Net Impact
Three Months Ended June 30, 2021
Interest rate contracts:
Interest credited to policyholder account balances	$	(3)	$	-	$	1	$	(2)
Net investment income		(1)		-		-		(1)
Foreign exchange contracts:
Net realized gains/(losses)		(36)		107		36		107
Three Months Ended June 30, 2020
Interest rate contracts:
Interest credited to policyholder account balances	$	1	$	-	$	(3)	$	(2)
Net investment income		(4)		-		3		(1)
Foreign exchange contracts:
Net realized gains/(losses)		(132)		(76)		132		(76)
Six Months Ended June 30, 2021
Interest rate contracts:
Interest credited to policyholder account balances	$	(7)	$	-	$	7	$	-
Net investment income		7		-		(7)		-
Foreign exchange contracts:
Net realized gains/(losses)		(4)		78		4		78
Six Months Ended June 30, 2020
Interest rate contracts:
Interest credited to policyholder account balances	$	18	$	-	$	(20)	$	(2)
Net investment income		(7)		-		6		(1)
Foreign exchange contracts:
Net realized gains/(losses)		173		205		(173)		205

(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) Recognized in Income
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)		2021		2020		2021		2020
By Derivative Type:
Interest rate contracts	$	856	$	(7)	$	(689)	$	2,566
Foreign exchange contracts		48		(124)		(39)		901
Equity contracts		(32)		(471)		(551)		632
Commodity contracts		1		-		1		-
Credit contracts		(4)		(66)		(9)		56
Other contracts		17		16		32		26
Embedded derivatives		(3,242)		(1,774)		1,597		(2,826)
Total	$	(2,356)	$	(2,426)	$	342	$	1,355
By Classification:
Policy fees	$	15	$	15	$	30	$	30
Net investment income		7		(1)		(5)		(3)
Net realized gains (losses) - excluding Fortitude Re funds withheld assets		(388)		(1,579)		52		2,173
Net realized gains (losses) on Fortitude Re funds withheld assets(a)		(1,996)		(863)		269		(863)
Policyholder benefits and claims incurred		6		2		(4)		18
Total	$	(2,356)	$	(2,426)	$	342	$	1,355

(a)Includes over-the-counter derivatives supporting the funds withheld arrangements with Fortitude Re and the embedded derivative contained within the funds withheld payable with Fortitude Re.