AIG 10-Q Quarter ended Sept. 30, 2022

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American International Group, Inc. (AIG) is a leading global insurance organization serving customers in approximately 70 countries and jurisdictions. AIG companies serve commercial and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG Common Stock, par value $ 2.50 per share (AIG Common Stock), is listed on the New York Stock Exchange (NYSE: AIG). Unless the context indicates otherwise, the terms “AIG,” “we,” “us”, “our” or "the Company" mean American International Group, Inc. and its consolidated subsidiaries and the term “AIG Parent” means American International Group, Inc. and not any of its consolidated subsidiaries.

These unaudited Condensed Consolidated Financial Statements do not include all disclosures that are normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) and should be read in conjunction with the audited Consolidated Financial Statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the 2021 Annual Report). The condensed consolidated financial information as of December 31, 2021 included herein has been derived from the audited Consolidated Financial Statements in the 2021 Annual Report.

Certain of our foreign subsidiaries included in the Condensed Consolidated Financial Statements report on the basis of a fiscal year ending November 30. The effect on our consolidated financial condition and results of operations of all material events occurring at these subsidiaries through the date of each of the periods presented in these Condensed Consolidated Financial Statements has been considered for adjustment and/or disclosure. In the opinion of management, these Condensed Consolidated Financial Statements contain normal recurring adjustments, including eliminations of material intercompany accounts and transactions, necessary for a fair statement of the results presented herein. Operating results for the nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

We evaluated the need to recognize or disclose events that occurred subsequent to September 30, 2022 and prior to the issuance of these Condensed Consolidated Financial Statements.

SALES/DISPOSALS OF ASSETS AND BUSINESSES

Separation of Life and Retirement Business and Relationship with Blackstone Inc.

On September 19, 2022, AIG closed on the initial public offering (IPO) of 80 million shares of Corebridge Financial, Inc. (Corebridge) common stock at a public offering price of $ 21.00 per share, representing 12.4 percent of Corebridge's common stock. Corebridge is the holding company for AIG’s Life and Retirement business. The aggregate gross proceeds of the offering to AIG, before deducting underwriting discounts and commissions and other expenses payable by AIG, were approximately $ 1.7 billion. After consideration of underwriting discounts, commissions and other related expenses payable by AIG, AIG recorded $ 608 million as an increase in AIG’s shareholder’s equity.

In November 2021, AIG and Blackstone Inc. (Blackstone) completed the acquisition by Blackstone of a 9.9 percent equity stake in Corebridge. Blackstone is required to hold its ownership interest in Corebridge following the completion of the separation of the Life and Retirement business, subject to exceptions permitting Blackstone to sell 25 percent, 67 percent and 75 percent of its shares after the first, second and third anniversaries, respectively, of Corebridge IPO (which will be September 19, 2023, 2024 and 2025, respectively), with the transfer restrictions terminating in full on the fifth anniversary of the IPO (September 19, 2027). In the event that the IPO of Corebridge was not completed prior to November 2, 2023, Blackstone had the right to require AIG to undertake the IPO, and in the event that the IPO had not been completed prior to November 2, 2024, Blackstone had the right to exchange all or a portion of its ownership interest in Corebridge for shares of AIG's common stock. As a result of the consummation of the IPO on September 19, 2022, this exchange right of Blackstone was terminated. Also in November 2021, Corebridge declared a dividend payable to AIG Parent in the amount of $ 8.3 billion. In connection with such dividend, Corebridge issued a promissory note to AIG Parent in the amount of $ 8.3 billion (the Intercompany Note). The Intercompany Note was repaid to AIG Parent prior to the IPO of Corebridge with the proceeds of (i) the issuance by Corebridge, on April 5, 2022, of senior unsecured notes in the aggregate principal amount of $ 6.5 billion, (ii) the issuance by Corebridge, on August 23, 2022, of $ 1.0 billion aggregate principal amount of 6.875 % Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2052, and (iii) a portion of the $ 1.5 billion borrowing under Corebridge's $ 1.5 billion 3 -Year Delayed Draw Term Loan Agreement.

Following the IPO, AIG owns 77.7 percent of the outstanding common stock of Corebridge and continues to consolidate the assets, liabilities, and results of operations of Corebridge in AIG’s Condensed Consolidated Financial Statements. The portion of equity interest of Corebridge that AIG does not own is reflected as noncontrolling interest in AIG’s Condensed Consolidated Financial Statements.

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On December 15, 2021, AIG and Blackstone Real Estate Income Trust (BREIT), a long-term, perpetual capital vehicle affiliated with Blackstone, completed the acquisition by BREIT of AIG’s interests in a U.S. affordable housing portfolio. The historical results of the U.S. affordable housing portfolio were reported in our Life and Retirement operating segments.

Our Investment Management Agreements with BlackRock

On March 28, 2022, we announced entry into a binding letter of intent with BlackRock pursuant to which certain of our insurance company subsidiaries would enter into separate investment management agreements with BlackRock. Since that date, certain of our insurance company subsidiaries have entered into such investment management agreements, with the expectation that certain additional insurance company subsidiaries will enter into such investment management agreements over the coming months. We are in the process of transferring the management of up to $ 150 billion of our investments in liquid fixed income and certain private placement assets, including up to $ 90 billion of the Corebridge investment portfolio, to BlackRock under such investment management agreements, and anticipate completing the transfer of a majority of such assets by the end of 2022.

Sale of Certain AIG Life and Retirement Retail Mutual Funds Business

On February 8, 2021, AIG announced the execution of a definitive agreement with Touchstone Investments (Touchstone), an indirect wholly-owned subsidiary of Western & Southern Financial Group, to sell certain assets of Life and Retirement’s Retail Mutual Funds business. This sale consisted of the reorganization of twelve of the retail mutual funds managed by SunAmerica Asset Management, LLC (SAAMCo), a Life and Retirement entity, into certain Touchstone funds. The transaction closed on July 16, 2021, at which time we received initial proceeds and the twelve retail mutual funds managed by SAAMCo, with $ 6.8 billion in assets, were reorganized into Touchstone funds. Additional consideration may be earned over a three-year period based on asset levels in certain reorganized funds. Six retail mutual funds managed by SAAMCo and not included in the transaction were liquidated. We will retain our fund management platform and capabilities dedicated to our variable annuity insurance products.

DEBT CASH TENDER OFFERS AND REDEMPTIONS

In the nine months ended September 30, 2022, we repurchased, through cash tender offers, and redeemed $ 7.6 billion aggregate principal amount of certain notes and debentures issued or guaranteed by AIG, for an aggregate purchase price of $ 7.8 billion, resulting in a total loss on extinguishment of debt of $ 299 million.

USE OF ESTIMATES

The preparation of financial statements in accordance with U.S. GAAP requires the application of accounting policies that often involve a significant degree of judgment. Accounting policies that we believe are most dependent on the application of estimates and assumptions are considered our critical accounting estimates and are related to the determination of:

• loss reserves;

• future policy benefit reserves for life and accident and health insurance contracts;

• liabilities for guaranteed benefit features of variable annuity, fixed annuity and fixed index annuity products;

• embedded derivative liabilities for fixed index annuity and life products;

• estimated gross profits to value deferred acquisition costs and unearned revenue for investment-oriented products;

• reinsurance assets, including the allowance for credit losses and disputes;

• goodwill impairment;

• allowance for credit losses on certain investments, primarily on loans and available for sale fixed maturity securities;

• legal contingencies;

• fair value measurements of certain financial assets and financial liabilities; and

• income taxes, in particular the recoverability of our deferred tax asset and establishment of provisions for uncertain tax positions.

These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial condition, results of operations and cash flows could be materially affected.

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ACCOUNTING STANDARDS ADOPTED

Reference Rate Reform

On March 12, 2020, the FASB issued an accounting standard that provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The standard allows us to account for certain contract modifications that result from the discontinuation of the London Inter-Bank Offered Rate (LIBOR) or another reference rate as a continuation of the existing contract without additional analysis. This standard may be elected and applied prospectively over time from March 12, 2020 through December 31, 2022 as reference rate reform activities occur.

Where permitted by the guidance, we have accounted for contract modifications stemming from the discontinuation of LIBOR or another reference rate as a continuation of the existing contract. As part of our implementation efforts, we have and will continue to assess our operational readiness and current and alternative reference rates’ merits, limitations, risks and suitability for our investment and insurance processes. The adoption of the standard has not had, and is not expected to have, a material impact on our reported consolidated financial condition, results of operations, cash flows and required disclosures.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the FASB issued an accounting standard update with the objective of making targeted improvements to the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity.

The Company will adopt the standard on January 1, 2023. We continue to evaluate and expect the adoption of this standard will impact our financial condition, results of operations, statement of cash flows and disclosures, as well as systems, processes and controls.

The Company will adopt the standard using the modified retrospective transition method relating to liabilities for traditional and limited payment contracts and deferred policy acquisition costs associated therewith. The Company will adopt the standard in relation to market risk benefits (MRBs) on a retrospective basis. Based upon this transition method, the Company currently estimates that the January 1, 2021 transition date (Transition Date) impact from adoption is likely to result in a decrease in AIG’s equity between approximately $ 1.0 billion and $ 3.0 billion in AIG’s Life and Retirement business. The most significant drivers of the transition adjustment are expected to be (1) changes related to market risk benefits in our Individual Retirement and Group Retirement segments, including the impact of non-performance adjustments (2) changes to the discount rate which will most significantly impact our Life Insurance and Institutional Markets segments and (3) the removal of balances recorded in accumulated other comprehensive income (loss) (AOCI) related to changes in unrealized appreciation (depreciation) on investments.

Market risk benefits: The standard requires the measurement of all MRBs associated with deposit (or account balance) contracts at fair value at each reporting period. Changes in fair value compared to prior periods will be recorded and presented separately within the income statement, with the exception of instrument-specific credit risk changes (non-performance adjustments), which will be recognized in other comprehensive income. MRBs will impact both retained earnings and AOCI upon transition.

As MRBs are required to be accounted for at fair value, the quarterly valuation of these items will result in variability and volatility in the Company’s results following adoption.

Discount rate assumption: The standard requires the discount rate assumption for the liability for future policy benefits to be updated at the end of each reporting period using an upper-medium grade (low credit risk) fixed income instrument yield that maximizes the use of observable market inputs. Upon transition, the Company currently estimates an adjustment to AOCI due to the fact that the market upper-medium grade (low credit risk) interest rates as of the Transition Date differ from reserve interest accretion rates. Lower interest rates result in a higher liability for future policy benefits, and are anticipated to more significantly impact our Life Insurance and Institutional Markets segments.

Following adoption, the impact of changes to discount rates will be recognized through other comprehensive income. Changes resulting from unlocking the discount rate each reporting period will primarily impact term life insurance and other traditional life insurance products, as well as pension risk transfer and structured settlement products.

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Removal of balances related to changes in unrealized appreciation (depreciation) on investments: Under the standard, the majority of balances recorded in AOCI related to changes in unrealized appreciation (depreciation) on investments will be eliminated.

In addition to the above, the standard also:

• Requires the review and if necessary, update of future policy benefit assumptions at least annually for traditional and limited pay long duration contracts, with the recognition and separate presentation of any resulting re-measurement gain or loss (except for discount rate changes as noted above) in the income statement.

• Simplifies the amortization of DAC to a constant level basis over the expected term of the related contracts with adjustments for unexpected terminations, but no longer requires an impairment test.

• Increased disclosures of disaggregated roll-forwards of several balances, including: liabilities for future policy benefits, deferred acquisition costs, account balances, market risk benefits, separate account liabilities and information about significant inputs, judgments and methods used in measurement and changes thereto and impact of those changes.

We expect that the accounting for Fortitude Reinsurance Company Ltd. (Fortitude Re) will continue to remain largely unchanged. With respect to Fortitude Re, the reinsurance assets, including the discount rates, will continue to be calculated using the same methodology and assumptions as the direct policies. Accounting for modified coinsurance (modco) remains unchanged.

The Company has created a governance framework and a plan to support implementation of the updated standard. As part of its implementation plan, the Company has also advanced the modernization of its actuarial technology platform to enhance its modeling, data management, experience study and analytical capabilities, increase the end-to-end automation of key reporting and analytical processes and optimize its control framework. The Company has designed and begun implementation and testing of internal controls related to the new processes created as part of implementing the updated standard and will continue to refine these internal controls until the formal implementation in the first quarter of 2023.

Troubled Debt Restructuring and Vintage Disclosures

In March 2022, the FASB issued an accounting standard update that eliminates the accounting guidance for troubled debt restructurings for creditors and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The standard also updates the requirements for accounting for credit losses by adding enhanced disclosures for creditors related to loan refinancings and restructurings for borrowers experiencing financial difficulty. Because the Company has already adopted the current expected credit loss model, the amendments in this standard are effective for fiscal years beginning after December 15, 2022, including interim periods within those years. We do not expect the standard to have a material impact on our reported consolidated financial condition, results of operations, cash flows or required disclosures.

Fair Value Measurement

On June 30, 2022, the FASB issued an accounting standards update to address diversity in practice by clarifying that a contractual sale restriction should not be considered in the measurement of the fair value of an equity security. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities. The guidance is effective for public companies for fiscal years beginning after December 15, 2023 and interim period within those years, with early adoption permitted. For entities other than investment companies, the accounting standards update applies prospectively, with any adjustments resulting from adoption recognized in earnings on the date of adoption. We are assessing the impact of this standard.

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3. Segment Information

We report our results of operations consistent with the manner in which our chief operating decision makers review the business to assess performance and allocate resources, as follows:

GENERAL INSURANCE

General Insurance business is presented as two operating segments:

• North America – consists of insurance businesses in the United States, Canada and Bermuda, and our global reinsurance business, AIG Re.

• International – consists of regional insurance businesses in Japan, the United Kingdom, Europe, Middle East and Africa (EMEA region), Asia Pacific, Latin America and Caribbean, and China. International also includes the results of Talbot Holdings, Ltd. as well as AIG’s Global Specialty business.

North America and International operating segments consist of the following products:

– Commercial Lines – consists of Property, Liability, Financial Lines, and Specialty.

– Personal Insurance – consists of Accident & Health and Personal Lines.

LIFE AND RETIREMENT

Life and Retirement business is presented as four operating segments:

• Individual Retirement – consists of fixed annuities, fixed index annuities, variable annuities and retail mutual funds.

• Group Retirement – consists of record-keeping, plan administrative and compliance services, financial planning and advisory solutions offered to employer-defined contribution plan participants, along with proprietary and non-proprietary annuities and advisory and brokerage products offered outside of plans.

• Life Insurance – primary products in the U.S. include term life and universal life insurance. International operations primarily include distribution of life and health products in the UK and Ireland.

• Institutional Markets – consists of stable value wrap products, structured settlement and pension risk transfer annuities, corporate- and bank-owned life insurance, high net worth products and guaranteed investment contracts (GICs).

OTHER OPERATIONS

Other Operations primarily consists of income from assets held by AIG Parent and other corporate subsidiaries, deferred tax assets related to tax attributes, corporate expenses and intercompany eliminations, our institutional asset management business and results of our consolidated investment entities, General Insurance portfolios in run-off as well as the historical results of our legacy insurance lines ceded to Fortitude Re.

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The following table presents AIG’s continuing operations by operating segment:

Three Months Ended September 30,			2022																		2021
(in millions)						Adjusted Revenues						Adjusted Pre-tax Income (Loss)												Adjusted Revenues						Adjusted Pre-tax Income (Loss)
General Insurance
North America			$			3,140			$			( 439 )			(a)						$			2,907			$			( 166 )			(a)
International						3,267						607			(a)									3,516						186			(a)
Net investment income						582						582												791						791
Total General Insurance						6,989						750												7,214						811
Life and Retirement
Individual Retirement						1,312						200												1,560						292
Group Retirement						680						183												832						316
Life Insurance						1,234						123												1,211						134
Institutional Markets						1,110						83												841						135
Total Life and Retirement						4,336						589												4,444						877
Other Operations
Other Operations before consolidation and eliminations						126						( 467 )												301						( 370 )
Consolidation and eliminations						( 152 )						( 147 )												( 206 )						( 192 )
Total Other Operations						( 26 )						( 614 )												95						( 562 )
Total						11,299						725												11,753						1,126
Reconciling items:
Changes in fair value of securities used to hedge guaranteed living benefits						14						6												14						26
Changes in benefit reserves and DAC, VOBA and DSI related to net realized gains (losses)						—						( 28 )												—						9
Changes in the fair value of equity securities						16						16												( 45 )						( 45 )
Other income (expense) - net						( 7 )						—												( 6 )						—
Loss on extinguishment of debt						—						—												—						( 51 )
Net investment income on Fortitude Re funds withheld assets						155						155												495						495
Net realized gains (losses) on Fortitude Re funds withheld assets						( 86 )						( 86 )												190						190
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative						1,757						1,757												( 209 )						( 209 )
Net realized gains (b)						1,446						1,449												643						652
Net gain on divestitures						—						6												—						102
Non-operating litigation reserves and settlements						8						3												—						( 3 )
Favorable prior year development and related amortization changes ceded under retroactive reinsurance agreements						—						62												—						115
Net loss reserve discount charge						—						( 10 )												—						( 72 )
Pension expense related to a one-time lump sum payment to former employees						—						—												—						( 27 )
Integration and transaction costs associated with acquiring or divesting businesses						—						( 52 )												—						( 11 )
Restructuring and other costs						—						( 147 )												—						( 104 )
Non-recurring costs related to regulatory or accounting changes						—						( 9 )												—						( 17 )
Revenues and pre-tax income			$			14,602			$			3,847									$			12,835			$			2,176

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Nine Months Ended September 30,			2022																		2021
(in millions)						Adjusted Revenues						Adjusted Pre-tax Income (Loss)												Adjusted Revenues						Adjusted Pre-tax Income (Loss)
General Insurance
North America			$			8,901			$			223			(a)						$			7,980			$			( 199 )			(a)
International						10,148						1,190			(a)									10,524						755			(a)
Net investment income						1,805						1,805												2,294						2,294
Total General Insurance						20,854						3,218												20,798						2,850
Life and Retirement
Individual Retirement						3,985						788												4,556						1,441
Group Retirement						2,106						572												2,458						970
Life Insurance						3,820						231												3,839						114
Institutional Markets						2,445						285												2,617						417
Total Life and Retirement						12,356						1,876												13,470						2,942
Other Operations
Other Operations before consolidation and eliminations						627						( 1,086 )												884						( 1,240 )
AIG consolidation and eliminations						( 424 )						( 410 )												( 511 )						( 462 )
Total Other Operations						203						( 1,496 )												373						( 1,702 )
Total						33,413						3,598												34,641						4,090
Reconciling items:
Changes in fair value of securities used to hedge guaranteed living benefits						41						29												46						61
Changes in benefit reserves and DAC, VOBA and DSI related to net realized gains (losses)						—						( 429 )												—						( 74 )
Changes in the fair value of equity securities						( 41 )						( 41 )												( 36 )						( 36 )
Other income (expense) - net						( 23 )						—												( 14 )						—
Loss on extinguishment of debt						—						( 299 )												—						( 149 )
Net investment income on Fortitude Re funds withheld assets						634						634												1,488						1,488
Net realized gains (losses) on Fortitude Re funds withheld assets						( 312 )						( 312 )												536						536
Net realized gains on Fortitude Re funds withheld embedded derivative						7,851						7,851												117						117
Net realized gains (b)						3,242						3,257												1,192						1,220
Net gain on divestitures						—						45												—						108
Non-operating litigation reserves and settlements						46						41												—						( 3 )
Favorable prior year development and related amortization changes ceded under retroactive reinsurance agreements						—						206												—						199
Net loss reserve discount charge						—						( 4 )												—						( 62 )
Pension expense related to a one-time lump sum payment to former employees						—						—												—						( 27 )
Integration and transaction costs associated with acquiring or divesting businesses						—						( 136 )												—						( 55 )
Restructuring and other costs						—						( 415 )												—						( 304 )
Non-recurring costs related to regulatory or accounting changes						—						( 22 )												—						( 58 )
Revenues and pre-tax income			$			44,851			$			14,003									$			37,970			$			7,051

(a) General Insurance North America’s and General Insurance International’s Adjusted pre-tax income does not include Net investment income as the investment portfolio results are managed at the General Insurance level. Net investment income is shown separately as a component of General Insurance’s total Adjusted pre-tax income results.

(b) Includes all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication and net realized gains and losses on Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG (Fortitude Re funds withheld assets).

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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.

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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:

September 30, 2022						Level 1						Level 2						Level 3			Counterparty Netting (a)						Cash Collateral									Total
(in millions)
Assets:
Bonds available for sale:
U.S. government and government sponsored entities			$			5			$			7,945			$			—			$			—			$			—			$			7,950
Obligations of states, municipalities and political subdivisions						—						11,077						814						—						—						11,891
Non-U.S. governments						111						12,887						9						—						—						13,007
Corporate debt						—						129,419						3,917						—						—						133,336
RMBS						—						10,626						7,881						—						—						18,507
CMBS						—						13,125						806						—						—						13,931
CDO/ABS						—						9,362						11,783						—						—						21,145
Total bonds available for sale						116						194,441						25,210						—						—						219,767
Other bond securities:
U.S. government and government sponsored entities						—						1,565						—						—						—						1,565
Obligations of states, municipalities and political subdivisions						—						111						—						—						—						111
Non-U.S. governments						—						64						—						—						—						64
Corporate debt						—						1,485						549						—						—						2,034
RMBS						—						130						211						—						—						341
CMBS						—						362						29						—						—						391
CDO/ABS						—						369						2,256						—						—						2,625
Total other bond securities						—						4,086						3,045						—						—						7,131
Equity securities						481						93						34						—						—						608
Other invested assets (b)						—						130						1,958						—						—						2,088
Derivative assets (c) :
Interest rate contracts						4						3,142						210						—						—						3,356
Foreign exchange contracts						—						2,788						—						—						—						2,788
Equity contracts						14						392						159						—						—						565
Commodity contracts						—						18						—						—						—						18
Credit contracts						—						—						1						—						—						1
Other contracts						—						—						16						—						—						16
Counterparty netting and cash collateral						—						—						—						( 3,170 )						( 3,181 )						( 6,351 )
Total derivative assets						18						6,340						386						( 3,170 )						( 3,181 )						393
Short-term investments						3,405						1,939						—						—						—						5,344
Other assets (c)						—						—						107						—						—						107
Separate account assets						77,683						3,619						—						—						—						81,302
Total			$			81,703			$			210,648			$			30,740			$			( 3,170 )			$			( 3,181 )			$			316,740
Liabilities:
Policyholder contract deposits			$			—			$			37			$			6,348			$			—			$			—			$			6,385
Derivative liabilities (c) :
Interest rate contracts						—						4,856						—						—						—						4,856
Foreign exchange contracts						—						726						1						—						—						727
Equity contracts						4						76						4						—						—						84
Credit contracts						—						10						32						—						—						42
Counterparty netting and cash collateral						—						—						—						( 3,170 )						( 2,263 )						( 5,433 )
Total derivative liabilities						4						5,668						37						( 3,170 )						( 2,263 )						276
Fortitude Re funds withheld payable						—						—						( 2,505 )						—						—						( 2,505 )
Long-term debt						—						1,613						—						—						—						1,613
Total			$			4			$			7,318			$			3,880			$			( 3,170 )			$			( 2,263 )			$			5,769

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December 31, 2021						Level 1						Level 2						Level 3			Counterparty Netting (a)						Cash Collateral									Total
(in millions)
Assets:
Bonds available for sale:
U.S. government and government sponsored entities			$			2,553			$			5,641			$			—			$			—			$			—			$			8,194
Obligations of states, municipalities and political subdivisions						—						13,096						1,431						—						—						14,527
Non-U.S. governments						9						16,314						7						—						—						16,330
Corporate debt						—						172,967						2,641						—						—						175,608
RMBS						—						16,909						10,378						—						—						27,287
CMBS						—						14,619						1,190						—						—						15,809
CDO/ABS						—						8,232						11,215						—						—						19,447
Total bonds available for sale						2,562						247,778						26,862						—						—						277,202
Other bond securities:
U.S. government and government sponsored entities						—						1,750						—						—						—						1,750
Obligations of states, municipalities and political subdivisions						—						97						—						—						—						97
Non-U.S. governments						—						76						—						—						—						76
Corporate debt						—						916						134						—						—						1,050
RMBS						—						215						196						—						—						411
CMBS						—						280						35						—						—						315
CDO/ABS						—						247						2,332						—						—						2,579
Total other bond securities						—						3,581						2,697						—						—						6,278
Equity securities						669						64						6						—						—						739
Other invested assets (b)						—						138						1,948						—						—						2,086
Derivative assets (c) :
Interest rate contracts						—						3,873						—						—						—						3,873
Foreign exchange contracts						—						1,188						1						—						—						1,189
Equity contracts						7						224						450						—						—						681
Commodity contracts						—						4						—						—						—						4
Credit contracts						—						—						1						—						—						1
Other contracts						—						—						13						—						—						13
Counterparty netting and cash collateral						—						—						—						( 2,779 )						( 2,139 )						( 4,918 )
Total derivative assets						7						5,289						465						( 2,779 )						( 2,139 )						843
Short-term investments						2,584						1,842						—						—						—						4,426
Other assets (c)						—						—						114						—						—						114
Separate account assets						105,221						3,890						—						—						—						109,111
Total			$			111,043			$			262,582			$			32,092			$			( 2,779 )			$			( 2,139 )			$			400,799
Liabilities:
Policyholder contract deposits			$			—			$			54			$			9,682			$			—			$			—			$			9,736
Derivative liabilities (c) :
Interest rate contracts						1						3,632						—						—						—						3,633
Foreign exchange contracts						—						721						—						—						—						721
Equity contracts						1						46						6						—						—						53
Credit contracts						—						16						31						—						—						47
Counterparty netting and cash collateral						—						—						—						( 2,779 )						( 1,089 )						( 3,868 )
Total derivative liabilities						2						4,415						37						( 2,779 )						( 1,089 )						586
Fortitude Re funds withheld payable						—						—						5,922						—						—						5,922
Long-term debt						—						1,871						—						—						—						1,871
Total			$			2			$			6,340			$			15,641			$			( 2,779 )			$			( 1,089 )			$			18,115

(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 $ 9.8 billion and $ 8.4 billion as of September 30, 2022 and December 31, 2021, respectively.

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

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The following tables present changes during the three- and nine-month periods ended September 30, 2022 and 2021 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 September 30, 2022 and 2021:

(in millions)						Fair Value Beginning of Period						Net Realized and Unrealized Gains (Losses) Included in Income						Other Comprehensive Income (Loss)						Purchases, Sales, Issuances and Settlements, Net						Gross Transfers In						Gross Transfers Out						Other						Fair Value End of Period						Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period						Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Three Months Ended September 30, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions			$			957			$			( 1 )			$			( 106 )			$			( 29 )			$			—			$			( 7 )			$			—			$			814			$			—			$			( 167 )
Non-U.S. governments						9						—						—						( 1 )						1						—						—						9						—						—
Corporate debt						2,483						( 31 )						( 53 )						( 100 )						1,781						( 163 )						—						3,917						—						( 55 )
RMBS						8,352						101						( 267 )						( 299 )						2						( 8 )						—						7,881						—						( 39 )
CMBS						871						( 1 )						( 31 )						( 33 )						12						( 12 )						—						806						—						( 50 )
CDO/ABS						11,696						( 25 )						( 454 )						523						366						( 323 )						—						11,783						—						( 557 )
Total bonds available for sale						24,368						43						( 911 )						61						2,162						( 513 )						—						25,210						—						( 868 )
Other bond securities:
Corporate Debt						461						( 5 )						—						66						28						( 1 )						—						549						( 7 )						—
RMBS						192						( 7 )						—						26						—						—						—						211						( 8 )						—
CMBS						32						( 3 )						—						—						—						—						—						29						( 3 )						—
CDO/ABS						2,442						( 25 )						—						( 158 )						12						( 15 )						—						2,256						( 92 )						—
Total other bond securities						3,127						( 40 )						—						( 66 )						40						( 16 )						—						3,045						( 110 )						—
Equity securities						12						( 1 )						—						8						15						—						—						34						—						—
Other invested assets						2,008						62						( 25 )						( 45 )						—						( 42 )						—						1,958						20						—
Other assets						107						—						—						—						—						—						—						107						—						—
Total			$			29,622			$			64			$			( 936 )			$			( 42 )			$			2,217			$			( 571 )			$			—			$			30,354			$			( 90 )			$			( 868 )
(in millions)						Fair Value Beginning of Period						Net Realized and Unrealized (Gains) Losses Included in Income						Other Comprehensive Income (Loss)						Purchases, Sales, Issuances and Settlements, Net						Gross Transfers In						Gross Transfers Out						Other						Fair Value End of Period						Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period						Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Liabilities:
Policyholder contract deposits			$			6,957			$			( 936 )			$			—			$			327			$			—			$			—			$			—			$			6,348			$			949			$			—
Derivative liabilities, net:
Interest rate contracts						( 143 )						37						—						( 110 )						—						6						—						( 210 )						30						—
Foreign exchange contracts						1						—						—						—						—						—						—						1						—						—
Equity contracts						( 149 )						88						—						( 94 )						—						—						—						( 155 )						( 89 )						—
Credit contracts						32						1						—						( 2 )						—						—						—						31						—						—
Other contracts						( 16 )						( 16 )						—						16						—						—						—						( 16 )						17						—
Total derivative liabilities, net (a)						( 275 )						110						—						( 190 )						—						6						—						( 349 )						( 42 )						—
Fortitude Re funds withheld payable						( 638 )						( 1,757 )						—						( 110 )						—						—						—						( 2,505 )						1,791						—
Total			$			6,044			$			( 2,583 )			$			—			$			27			$			—			$			6			$			—			$			3,494			$			2,698			$			—

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(in millions)						Fair Value Beginning of Period						Net Realized and Unrealized Gains (Losses) Included in Income						Other Comprehensive Income (Loss)						Purchases, Sales, Issuances and Settlements, Net						Gross Transfers In						Gross Transfers Out						Other						Fair Value End of Period						Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period						Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Nine Months Ended September 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions			$			2,105			$			14			$			( 40 )			$			( 125 )			$			—			$			( 86 )			$			( 62 )			$			1,806			$			—			$			225
Non-U.S. governments						5						—						( 1 )						1						5						( 3 )						—						7						—						—
Corporate debt						2,349						12						9						35						452						( 211 )						—						2,646						—						( 106 )
RMBS						11,694						435						17						( 977 )						8						( 79 )						—						11,098						—						934
CMBS						922						20						( 39 )						245						56						( 179 )						—						1,025						—						( 45 )
CDO/ABS						9,814						37						( 11 )						( 358 )						902						( 1,197 )						—						9,187						—						425
Total bonds available for sale						26,889						518						( 65 )						( 1,179 )						1,423						( 1,755 )						( 62 )						25,769						—						1,433
Other bond securities:
RMBS						139						6						—						( 38 )						—						—						—						107						( 86 )						—
CMBS						47						( 2 )						—						( 15 )						6						—						—						36						2						—
CDO/ABS						2,512						74						—						( 401 )						—						—						—						2,185						235						—
Total other bond securities						2,698						78						—						( 454 )						6						—						—						2,328						151						—
Equity securities						51						11						1						( 124 )						77						( 11 )						—						5						3						—
Other invested assets						1,827						417						( 10 )						( 328 )						—						—						—						1,906						386						—
Other assets						113						—						—						1						—						—						—						114						—						—
Total			$			31,578			$			1,024			$			( 74 )			$			( 2,084 )			$			1,506			$			( 1,766 )			$			( 62 )			$			30,122			$			540			$			1,433
(in millions)						Fair Value Beginning of Period						Net Realized and Unrealized (Gains) Losses Included in Income						Other Comprehensive Income (Loss)						Purchases, Sales, Issuances and Settlements, Net						Gross Transfers In						Gross Transfers Out						Other						Fair Value End of Period						Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period						Changes in Unrealized Gains (Losses) Included in Other Comprehensive Income (Loss) for Recurring Level 3 Instruments Held at End of Period
Liabilities:
Policyholder contract deposits			$			9,798			$			( 923 )			$			—			$			398			$			—			$			—			$			—			$			9,273			$			1,914			$			—
Derivative liabilities, net:
Interest rate contracts						—						( 4 )						—						3						—						—						—						( 1 )						4						—
Foreign exchange contracts						( 2 )						—						—						1						—						—						—						( 1 )						—						—
Equity contracts						( 151 )						2						—						( 204 )						—						46						—						( 307 )						( 58 )						—
Credit contracts						42						7						—						( 8 )						—						—						—						41						2						—
Other contracts						( 8 )						( 50 )						—						47						—						—						—						( 11 )						50						—
Total derivative liabilities, net(a)						( 119 )						( 45 )						—						( 161 )						—						46						—						( 279 )						( 2 )						—
Fortitude Re funds withheld payable						6,042						( 117 )						—						( 492 )						—						—						—						5,433						1,917						—
Total			$			15,721			$			( 1,085 )			$			—			$			( 255 )			$			—			$			46			$			—			$			14,427			$			3,829			$			—

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

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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:

(in millions)						Net Investment Income						Net Realized Gains (Losses)						Other Income						Total
Three Months Ended September 30, 2022
Assets:
Bonds available for sale			$			106			$			( 63 )			$			—			$			43
Other bond securities						( 40 )						—						—						( 40 )
Equity securities						( 1 )						—						—						( 1 )
Other invested assets						62						—						—						62
Three Months Ended September 30, 2021
Assets:
Bonds available for sale			$			155			$			( 6 )			$			—			$			149
Other bond securities						41						—						—						41
Other invested assets						165						( 4 )						—						161
Nine Months Ended September 30, 2022
Assets:
Bonds available for sale			$			412			$			( 139 )			$			—			$			273
Other bond securities						( 314 )						—						—						( 314 )
Equity securities						( 1 )						—						—						( 1 )
Other invested assets						307						—						—						307
Nine Months Ended September 30, 2021
Assets:
Bonds available for sale			$			503			$			15			$			—			$			518
Other bond securities						78						—						—						78
Equity securities						11						—						—						11
Other invested assets						406						11						—						417
(in millions)						Net Investment Income						Net Realized (Gains) Losses						Other Income						Total
Three Months Ended September 30, 2022
Liabilities:
Policyholder contract deposits*			$			—			$			( 936 )			$			—			$			( 936 )
Derivative liabilities, net						—						127						( 17 )						110
Fortitude Re funds withheld payable						—						( 1,757 )						—						( 1,757 )
Three Months Ended September 30, 2021
Liabilities:
Policyholder contract deposits*			$			—			$			( 26 )			$			—			$			( 26 )
Derivative liabilities, net						—						93						( 14 )						79
Fortitude Re funds withheld payable						—						209						—						209
Nine Months Ended September 30, 2022
Liabilities:
Policyholder contract deposits*			$			—			$			( 4,055 )			$			—			$			( 4,055 )
Derivative liabilities, net						—						527						( 45 )						482
Fortitude Re funds withheld payable						—						( 7,851 )						—						( 7,851 )
Nine Months Ended September 30, 2021
Liabilities:
Policyholder contract deposits*			$			—			$			( 923 )			$			—			$			( 923 )
Derivative liabilities, net						—						( 2 )						( 43 )						( 45 )
Fortitude Re funds withheld payable						—						( 117 )						—						( 117 )

* Primarily embedded derivatives.

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The following table presents the gross components of purchases, sales, issuances and settlements, net, shown above, for the three- and nine-month periods ended September 30, 2022 and 2021 related to Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets:

(in millions)						Purchases						Sales						Issuances and Settlements (a)						Purchases, Sales, Issuances and Settlements, Net (a)
Three Months Ended September 30, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions			$			5			$			—			$			( 34 )			$			( 29 )
Corporate debt						31						( 49 )						( 82 )						( 100 )
RMBS						56						—						( 355 )						( 299 )
CMBS						27						—						( 60 )						( 33 )
CDO/ABS						581						( 22 )						( 36 )						523
Total bonds available for sale						700						( 71 )						( 568 )						61
Other bond securities:
Corporate debt						2						—						64						66
RMBS						31						—						( 5 )						26
CDO/ABS						65						( 123 )						( 100 )						( 158 )
Total other bond securities						98						( 123 )						( 41 )						( 66 )
Equity securities						8						—						—						8
Other invested assets						53						—						( 98 )						( 45 )
Other assets						—						—						—						—
Total			$			859			$			( 194 )			$			( 707 )			$			( 42 )
Liabilities:
Policyholder contract deposits			$			—			$			294			$			33			$			327
Derivative liabilities, net						( 243 )						3						50						( 190 )
Fortitude Re funds withheld payable						—						—						( 110 )						( 110 )
Total			$			( 243 )			$			297			$			( 27 )			$			27
Three Months Ended September 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions			$			40			$			( 16 )			$			( 31 )			$			( 7 )
Non-U.S. governments						—						—						—						—
Corporate debt						23						( 61 )						( 135 )						( 173 )
RMBS						704						( 164 )						( 626 )						( 86 )
CMBS						7						( 3 )						( 17 )						( 13 )
CDO/ABS						849						—						( 669 )						180
Total bonds available for sale						1,623						( 244 )						( 1,478 )						( 99 )
Other bond securities:
RMBS						—						( 2 )						( 6 )						( 8 )
CMBS						—						( 9 )						—						( 9 )
CDO/ABS						—						—						( 134 )						( 134 )
Total other bond securities						—						( 11 )						( 140 )						( 151 )
Equity securities						—						—						( 1 )						( 1 )
Other invested assets						32						—						( 383 )						( 351 )
Other assets						—						—						1						1
Total			$			1,655			$			( 255 )			$			( 2,001 )			$			( 601 )
Liabilities:
Policyholder contract deposits			$			—			$			214			$			65			$			279
Derivative liabilities, net						( 75 )						2						40						( 33 )
Fortitude Re funds withheld payable						—						—						( 93 )						( 93 )
Total			$			( 75 )			$			216			$			12			$			153

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(in millions)						Purchases						Sales						Issuances and Settlements (a)						Purchases, Sales, Issuances and Settlements, Net (a)
Nine Months Ended September 30, 2022
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions			$			6			$			( 64 )			$			( 36 )			$			( 94 )
Corporate debt						54						( 49 )						( 142 )						( 137 )
RMBS						341						—						( 1,514 )						( 1,173 )
CMBS						173						—						( 89 )						84
CDO/ABS						2,712						( 22 )						( 516 )						2,174
Total bonds available for sale						3,286						( 135 )						( 2,298 )						853
Other bond securities:
Corporate debt						26						—						164						190
RMBS						62						—						( 22 )						40
CDO/ABS						681						( 123 )						( 364 )						194
Total other bond securities						769						( 123 )						( 222 )						424
Equity securities						13						—						1						14
Other invested assets						570						—						( 653 )						( 83 )
Other assets						—						—						( 7 )						( 7 )
Total			$			4,638			$			( 258 )			$			( 3,179 )			$			1,201
Liabilities:
Policyholder contract deposits			$			—			$			761			$			( 40 )			$			721
Derivative liabilities, net						( 492 )						6						159						( 327 )
Fortitude Re funds withheld payable						—						—						( 576 )						( 576 )
Total			$			( 492 )			$			767			$			( 457 )			$			( 182 )
Nine Months Ended September 30, 2021
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions			$			51			$			( 59 )			$			( 117 )			$			( 125 )
Non-U.S. governments						1						—						—						1
Corporate Debt						976						( 94 )						( 847 )						35
RMBS						1,186						( 279 )						( 1,884 )						( 977 )
CMBS						297						( 3 )						( 49 )						245
CDO/ABS						2,005						70						( 2,433 )						( 358 )
Total bonds available for sale						4,516						( 365 )						( 5,330 )						( 1,179 )
Other bond securities:
RMBS						1						( 11 )						( 28 )						( 38 )
CMBS						—						( 15 )						—						( 15 )
CDO/ABS						—						( 39 )						( 362 )						( 401 )
Total other bond securities						1						( 65 )						( 390 )						( 454 )
Equity securities						—						( 3 )						( 121 )						( 124 )
Other invested assets						424						—						( 752 )						( 328 )
Other assets						—						—						1						1
Total			$			4,941			$			( 433 )			$			( 6,592 )			$			( 2,084 )
Liabilities:
Policyholder contract deposits			$			—			$			607			$			( 209 )			$			398
Derivative liabilities, net						( 198 )						4						33						( 161 )
Fortitude Re funds withheld payable						—						—						( 492 )						( 492 )
Total			$			( 198 )			$			611			$			( 668 )			$			( 255 )

(a) There were no issuances during the three- and nine-month periods ended September 30, 2022 and 2021.

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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 September 30, 2022 and 2021 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 $( 25 ) million and $( 98 ) million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three- and nine-month periods ended September 30, 2022, respectively, and includes $( 36 ) million and $( 122 ) million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three- and nine-month periods ended September 30, 2022, respectively.

The Net realized and unrealized gains (losses) included in income (loss) or Other comprehensive income (loss) as shown in the table above excludes $ 1 million and $ 28 million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three- and nine-month periods ended September 30, 2021, respectively, and includes $ 10 million and $ 7 million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three- and nine-month periods ended September 30, 2021, respectively.

Transfers of Level 3 Assets

During the three- and nine-month periods ended September 30, 2022 and 2021, 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 nine-month periods ended September 30, 2022 and 2021, transfers out of Level 3 assets primarily included certain investments in private placement corporate debt, RMBS, CMBS, 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.

Transfers of Level 3 Liabilities

During the nine-month period ended September 30, 2022, transfers of derivatives into Level 3 were primarily due to increased long-dated European swaption activity with Secured Overnight Financing Rate tenors. There were no significant transfers of derivative or other liabilities into or out of Level 3 for the three- and nine-month periods ended September 30, 2021.

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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:

(in millions)						Fair Value at September 30, 2022						Valuation Technique			Unobservable Input (b)			Range (Weighted Average) (c)
Assets:
Obligations of states, municipalities and political subdivisions						$			815			Discounted cash flow			Yield			5.08 % - 6.07 % ( 5.57 %)
Corporate debt									2,059			Discounted cash flow			Yield			3.42 % - 14.51 % ( 7.92 %)
RMBS (a)									5,530			Discounted cash flow			Constant prepayment rate			4.78 % - 10.05 % ( 7.42 %)
															Loss severity			44.65 % - 76.04 % ( 60.35 %)
															Constant default rate			0.87 % - 2.79 % ( 1.83 %)
															Yield			5.58 % - 7.22 % ( 6.40 %)
CDO/ABS (a)									8,802			Discounted cash flow			Yield			5.72 % - 7.99 % ( 6.85 %)
CMBS									553			Discounted cash flow			Yield			5.16 % - 9.47 % ( 7.31 %)
Liabilities (d) :
Embedded derivatives within Policyholder contract deposits:
Variable annuity guaranteed minimum withdrawal benefits (GMWB)									698			Discounted cash flow			Equity volatility			6.05 % - 48.05 %
															Base lapse rate			0.16 % - 12.60 %
															Dynamic lapse multiplier			20.00 % - 186.00 %
															Mortality multiplier (e)			38.00 % - 147.00 %
															Utilization			90.00 % - 100.00 %
															Equity / interest rate correlation			10.00 % - 30.00 %
															NPA (f)			0.13 % - 2.29 %
Fixed Index annuities including certain GMWB									5,095			Discounted cash flow			Base lapse rate			0.50 % - 50.00 %
															Dynamic lapse multiplier			20.00 % - 186.00 %
															Mortality multiplier (e)			24.00 % - 180.00 %
															Utilization (g)			60.00 % - 95.00 %
															Option budget			0.00 % - 5.00 %
															Equity volatility			6.05 % - 48.05 %
															NPA (f)			0.13 % - 2.29 %
Indexed life									555			Discounted cash flow			Base lapse rate			0.00 % - 37.97 %
															Mortality rate			0.00 % - 100.00 %
															Equity volatility			6.20 % - 26.11 %
															NPA (f)			0.13 % - 2.29 %

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(in millions)						Fair Value at December 31, 2021						Valuation Technique			Unobservable Input (b)			Range (Weighted Average) (c)
Assets:
Obligations of states, municipalities and political subdivisions						$			1,400			Discounted cash flow			Yield			2.74 % - 3.33 % ( 3.06 %)
Corporate debt									1,561			Discounted cash flow			Yield			2.23 % - 7.69 % ( 4.96 %)
RMBS (a)									9,916			Discounted cash flow			Constant prepayment rate			5.25 % - 17.70 % ( 11.47 %)
															Loss severity			26.13 % - 71.93 % ( 49.03 %)
															Constant default rate			1.15 % - 5.85 % ( 3.50 %)
															Yield			1.69 % - 3.97 % ( 2.83 %)
CDO/ABS (a)									8,229			Discounted cash flow			Yield			1.84 % - 4.77 % ( 3.31 %)
CMBS									580			Discounted cash flow			Yield			1.50 % - 5.01 % ( 3.25 %)
Liabilities (d) :
Embedded derivatives within Policyholder contract deposits:
GMWB									2,472			Discounted cash flow			Equity volatility			5.95 % - 46.65 %
															Base lapse rate			0.16 % - 12.60 %
															Dynamic lapse multiplier			20.00 % - 186.00 %
															Mortality multiplier (e)			38.00 % - 147.00 %
															Utilization			90.00 % - 100.00 %
															Equity / interest rate correlation			20.00 % - 40.00 %
															NPA (f)			0.01 % - 1.40 %
Fixed Index annuities including certain GMWB									6,445			Discounted cash flow			Base lapse rate			0.50 % - 50.00 %
															Dynamic lapse multiplier			20.00 % - 186.00 %
															Mortality multiplier (e)			24.00 % - 180.00 %
															Utilization (g)			60.00 % - 95.00 %
															Option budget			0.00 % - 4.00 %
															Equity volatility			5.95 % - 46.65 %
															NPA (f)			0.01 % - 1.40 %
Indexed life									765			Discounted cash flow			Base lapse rate			0.00 % - 37.97 %
															Mortality rate			0.00 % - 100.00 %
															Equity volatility			7.65 % - 20.70 %
															NPA (f)			0.01 % - 1.40 %

(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 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 September 30, 2022 and December 31, 2021 was approximately $ 920 million and $ 1.2 billion, respectively. The remaining guaranteed minimum riders on the fixed 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.

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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 fixed index annuities, indexed life, and GICs as well as GMWB within variable annuity and certain fixed 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 and other factors, 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.

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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.

									September 30, 2022															December 31, 2021
(in millions)			Investment Category Includes						Fair Value Using NAV Per Share (or its equivalent)						Unfunded Commitments									Fair Value Using NAV Per Share (or its equivalent)						Unfunded 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			$			3,114			$			2,534						$			2,768			$			1,798
Real assets			Investments in real estate properties, agricultural and infrastructure assets, including power plants and other energy producing assets						1,870						778									904						487
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						265						189									252						201
Growth equity			Funds that make investments in established companies for the purpose of growing their businesses						774						63									914						82
Mezzanine			Funds that make investments in the junior debt and equity securities of leveraged companies						577						230									534						354
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						1,626						384									1,216						408
Total private equity funds									8,226						4,178									6,588						3,330
Hedge funds:
Event-driven			Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations						282						—									466						—
Long-short			Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk						383						—									432						—
Macro			Investments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions						443						—									516						—
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						417						5									416						—
Total hedge funds									1,525						5									1,830						—
Total						$			9,751			$			4,183						$			8,418			$			3,330

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.

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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 September 30,															Gain (Loss) Nine Months Ended September 30,
(in millions)						2022						2021									2022						2021
Assets:
Other bond securities (a)			$			( 241 )			$			35						$			( 915 )			$			32
Alternative investments (b)						( 57 )						403									174						1,248
Liabilities:
Long-term debt (c)						69						6									240						39
Total gain (loss)			$			( 229 )			$			444						$			( 501 )			$			1,319

(a) Includes certain securities supporting the funds withheld arrangements with Fortitude Re. For additional information regarding the gains and losses for Other bond securities, see Note 5. For additional information regarding the funds withheld arrangements with Fortitude Re, see Note 7.

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

(c) 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:

						September 30, 2022																					December 31, 2021
(in millions)						Fair Value						Outstanding Principal Amount						Difference									Fair Value						Outstanding Principal Amount						Difference
Liabilities:
Long-term debt*			$			1,613			$			1,451			$			162						$			1,871			$			1,405			$			466

* 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 September 30,															Nine Months Ended September 30,
(in millions)						Level 1						Level 2						Level 3						Total									2022						2021									2022						2021
September 30, 2022
Other investments			$			—			$			—			$			17			$			17						$			11			$			—						$			11			$			6
Other assets						—						—						—						—									—						13									—						13
Total			$			—			$			—			$			17			$			17						$			11			$			13						$			11			$			19
December 31, 2021
Other investments			$			—			$			—			$			104			$			104
Total			$			—			$			—			$			104			$			104

In addition to the assets presented in the table above, AIG had $ 170 million of loans held for sale which are carried at fair value at September 30, 2022. There is no associated impairment charge.

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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 Value
(in millions)						Level 1						Level 2						Level 3						Total
September 30, 2022
Assets:
Mortgage and other loans receivable			$			—			$			56			$			44,341			$			44,397			$			47,954
Other invested assets						—						869						6						875						871
Short-term investments						—						9,319						—						9,319						9,319
Cash						2,294						—						—						2,294						2,294
Other assets						57						12						—						69						69
Liabilities:
Policyholder contract deposits associated with investment-type contracts						—						132						138,398						138,530						138,255
Fortitude Re funds withheld payable						—						—						32,929						32,929						32,929
Other liabilities						—						207						—						207						207
Short-term and long-term debt						—						19,054						273						19,327						22,895
Debt of consolidated investment entities						—						3,039						2,713						5,752						5,924
Separate account liabilities - investment contracts						—						77,070						—						77,070						77,070
December 31, 2021
Assets:
Mortgage and other loans receivable			$			—			$			82			$			47,947			$			48,029			$			46,033
Other invested assets						—						871						6						877						878
Short-term investments						—						8,931						—						8,931						8,931
Cash						2,198						—						—						2,198						2,198
Other assets						21						11						—						32						32
Liabilities:
Policyholder contract deposits associated with investment-type contracts						—						169						142,974						143,143						133,043
Fortitude Re funds withheld payable						—						—						34,849						34,849						34,849
Other liabilities						—						3,704						—						3,704						3,704
Short-term and long-term debt						—						24,758						336						25,094						21,870
Debt of consolidated investment entities						—						3,077						3,313						6,390						6,422
Separate account liabilities - investment contracts						—						104,126						—						104,126						104,126

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SECURITIES AVAILABLE FOR SALE

The following table presents the amortized cost and fair value of our available for sale securities:

(in millions)						Amortized Cost						Allowance for Credit Losses (a)						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
September 30, 2022
Bonds available for sale:
U.S. government and government sponsored entities			$			8,609			$			—			$			20			$			( 679 )			$			7,950
Obligations of states, municipalities and political subdivisions						13,072						—						75						( 1,256 )						11,891
Non-U.S. governments						14,866						( 9 )						92						( 1,942 )						13,007
Corporate debt						157,955						( 75 )						1,024						( 25,568 )						133,336
Mortgage-backed, asset-backed and collateralized:
RMBS						19,174						( 30 )						908						( 1,545 )						18,507
CMBS						15,272						—						12						( 1,353 )						13,931
CDO/ABS						23,035						( 1 )						57						( 1,946 )						21,145
Total mortgage-backed, asset-backed and collateralized						57,481						( 31 )						977						( 4,844 )						53,583
Total bonds available for sale (b)			$			251,983			$			( 115 )			$			2,188			$			( 34,289 )			$			219,767
December 31, 2021
Bonds available for sale:
U.S. government and government sponsored entities			$			7,874			$			—			$			347			$			( 27 )			$			8,194
Obligations of states, municipalities and political subdivisions						12,760						—						1,782						( 15 )						14,527
Non-U.S. governments						15,858						—						719						( 247 )						16,330
Corporate debt						163,064						( 89 )						13,892						( 1,259 )						175,608
Mortgage-backed, asset-backed and collateralized:
RMBS						25,027						( 9 )						2,422						( 153 )						27,287
CMBS						15,333						—						555						( 79 )						15,809
CDO/ABS						19,294						—						276						( 123 )						19,447
Total mortgage-backed, asset-backed and collateralized						59,654						( 9 )						3,253						( 355 )						62,543
Total bonds available for sale (b)			$			259,210			$			( 98 )			$			19,993			$			( 1,903 )			$			277,202

(a) Represents the allowance for credit losses that has been recognized. Changes in the allowance for credit losses are recorded through Net realized gains (losses) and are not recognized in Other comprehensive income (loss).

(b) At September 30, 2022 and December 31, 2021, bonds available for sale held by us that were below investment grade or not rated totaled $ 22.4 billion or 10 percent and $ 27.0 billion or 10 percent, respectively.

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Securities Available for Sale in a Loss Position for Which No Allowance for Credit Loss Has Been Recorded

The following table summarizes the fair value and gross unrealized losses on our available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position for which no allowance for credit loss has been recorded:

						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
September 30, 2022
Bonds available for sale:
U.S. government and government sponsored entities			$			6,560			$			588			$			947			$			91			$			7,507			$			679
Obligations of states, municipalities and political subdivisions						9,854						1,225						144						31						9,998						1,256
Non-U.S. governments						8,824						1,387						2,382						529						11,206						1,916
Corporate debt						110,817						22,151						11,263						3,345						122,080						25,496
RMBS						10,909						1,362						513						96						11,422						1,458
CMBS						13,068						1,312						335						41						13,403						1,353
CDO/ABS						19,110						1,788						1,030						158						20,140						1,946
Total bonds available for sale			$			179,142			$			29,813			$			16,614			$			4,291			$			195,756			$			34,104
December 31, 2021
Bonds available for sale:
U.S. government and government sponsored entities			$			3,696			$			14			$			447			$			13			$			4,143			$			27
Obligations of states, municipalities and political subdivisions						714						11						57						4						771						15
Non-U.S. governments						4,644						115						1,324						132						5,968						247
Corporate debt						31,914						720						8,819						467						40,733						1,187
RMBS						5,362						102						1,154						46						6,516						148
CMBS						3,980						63						153						16						4,133						79
CDO/ABS						8,263						112						339						11						8,602						123
Total bonds available for sale			$			58,573			$			1,137			$			12,293			$			689			$			70,866			$			1,826

At September 30, 2022, we held 36,267 individual fixed maturity securities that were in an unrealized loss position and for which no allowance for credit losses has been recorded (including 5,241 individual fixed maturity securities that were in a continuous unrealized loss position for 12 months or more). At December 31, 2021, we held 15,029 individual fixed maturity securities that were in an unrealized loss position and for which no allowance for credit losses has been recorded (including 2,644 individual fixed maturity securities that were in a continuous unrealized loss position for 12 months or more). We did not recognize the unrealized losses in earnings on these fixed maturity securities at September 30, 2022 because it was determined that such losses were due to non-credit factors. Additionally, we neither intend to sell the securities nor do we believe that it is more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. For fixed maturity securities with significant declines, we performed fundamental credit analyses on a security-by-security basis, which included consideration of credit enhancements, liquidity position, expected defaults, industry and sector analysis, forecasts and available market data.

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Contractual Maturities of Fixed Maturity Securities Available for Sale

The following table presents the amortized cost and fair value of fixed maturity securities available for sale by contractual maturity:

						Total Fixed Maturity Securities Available for Sale
(in millions)						Amortized Cost, Net of Allowance						Fair Value
September 30, 2022
Due in one year or less			$			8,048			$			7,972
Due after one year through five years						50,823						48,051
Due after five years through ten years						44,127						38,775
Due after ten years						91,420						71,386
Mortgage-backed, asset-backed and collateralized						57,450						53,583
Total			$			251,868			$			219,767

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.

The following table presents the gross realized gains and gross realized losses from sales or maturities of our available for sale securities:

			Three Months Ended September 30,																														Nine Months Ended September 30,
			2022															2021															2022															2021
(in millions)						Gross Realized Gains						Gross Realized Losses									Gross Realized Gains						Gross Realized Losses									Gross Realized Gains						Gross Realized Losses									Gross Realized Gains						Gross Realized Losses
Fixed maturity securities			$			123			$			254						$			348			$			123						$			406			$			1,280						$			1,098			$			349

For the three- and nine-month periods ended September 30, 2022, the aggregate fair value of available for sale securities sold was $ 2.0 billion and $ 16.0 billion, respectively, which resulted in net realized gains (losses) of $( 131 ) million and $( 874 ) million, respectively. Included within the net realized gains (losses) are $( 64 ) million and $( 218 ) million of net realized gains (losses) for the three- and nine-month periods ended September 30, 2022, respectively, which relate to Fortitude Re funds withheld assets. These net realized gains (losses) are included in Net realized gains (losses) on Fortitude Re funds withheld assets.

For the three- and nine-month periods ended September 30, 2021, the aggregate fair value of available for sale securities sold was $ 6.7 billion and $ 19.1 billion, respectively, which resulted in net realized gains (losses) of $ 225 million and $ 749 million, respectively. Included within the net realized gains (losses) are $ 159 million and $ 549 million of net realized gains (losses) for the three- and nine-month periods ended September 30, 2021, respectively, which relate to Fortitude Re funds withheld assets. These net realized gains (losses) are included in Net realized gains (losses) on Fortitude Re funds withheld assets.

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OTHER SECURITIES MEASURED AT FAIR VALUE

The following table presents the fair value of fixed maturity securities measured at fair value based on our election of the fair value option, which are reported in the other bond securities caption in the financial statements, and equity securities measured at fair value:

(in millions)									September 30, 2022																		December 31, 2021
									Fair Value						Percent of Total												Fair Value						Percent of Total
Fixed maturity securities:
U.S. government and government sponsored entities						$			1,565						20			%						$			1,750						25			%
Obligations of states, municipalities and political subdivisions									111						1												97						1
Non-U.S. governments									64						1												76						1
Corporate debt									2,034						26												1,050						15
Mortgage-backed, asset-backed and collateralized:
RMBS									341						4												411						6
CMBS									391						5												315						4
CDO/ABS and other collateralized									2,625						34												2,579						37
Total mortgage-backed, asset-backed and collateralized									3,357						43												3,305						47
Total fixed maturity securities									7,131						91												6,278						89
Equity securities									608						9												739						11
Total						$			7,739						100			%						$			7,017						100			%

OTHER INVESTED ASSETS

The following table summarizes the carrying amount of other invested assets:

(in millions)						September 30, 2022						December 31, 2021
Alternative investments (a)(b)			$			11,625			$			10,951
Investment real estate (c)						2,205						2,727
All other investments (d)						1,964						1,990
Total			$			15,794			$			15,668

(a) At September 30, 2022, included hedge funds of $ 1.5 billion and private equity funds of $ 10.1 billion. At December 31, 2021, included hedge funds of $ 2.0 billion, private equity funds of $ 8.9 billion.

(b) At September 30, 2022, approximately 56 percent of our hedge fund portfolio is available for redemption in 2022. The remaining 44 percent will be available for redemption between 2023 and 2028.

(c) Represents values net of accumulated depreciation. At September 30, 2022 and December 31, 2021, the accumulated depreciation was $ 774 million and $ 778 million, respectively.

(d) Includes AIG's ownership interest in Fortitude Group Holdings, LLC (FRL), which is recorded using the measurement alternative for equity securities. Our investment in FRL totaled $ 156 million and $ 100 million at September 30, 2022 and December 31, 2021, respectively.

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NET INVESTMENT INCOME

The following table presents the components of Net investment income:

Three Months Ended September 30,			2022																					2021
(in millions)			Excluding Fortitude Re Funds Withheld Assets						Fortitude Re Funds Withheld Assets									Total						Excluding Fortitude Re Funds Withheld Assets						Fortitude Re Funds Withheld Assets									Total
Available for sale fixed maturity securities, including short-term investments			$			2,150			$			256			$			2,406						$			2,173			$			374			$			2,547
Other fixed maturity securities (a)						( 73 )						( 168 )						( 241 )									32						3						35
Equity securities						16						—						16									( 45 )						—						( 45 )
Interest on mortgage and other loans						515						53						568									435						50						485
Alternative investments (b)						( 49 )						11						( 38 )									616						77						693
Real estate						14						—						14									99						—						99
Other investments (c)						83						11						94									41						1						42
Total investment income						2,656						163						2,819									3,351						505						3,856
Investment expenses						143						8						151									131						10						141
Net investment income			$			2,513			$			155			$			2,668						$			3,220			$			495			$			3,715

Nine Months Ended September 30,			2022																					2021
(in millions)			Excluding Fortitude Re Funds Withheld Assets						Fortitude Re Funds Withheld Assets						Total									Excluding Fortitude Re Funds Withheld Assets						Fortitude Re Funds Withheld Assets						Total
Available for sale fixed maturity securities, including short-term investments			$			6,338			$			824			$			7,162						$			6,481			$			1,112			$			7,593
Other fixed maturity securities (a)						( 449 )						( 466 )						( 915 )									23						9						32
Equity securities						( 41 )						—						( 41 )									( 36 )						—						( 36 )
Interest on mortgage and other loans						1,428						150						1,578									1,295						154						1,449
Alternative investments (b)						729						138						867									1,767						238						2,005
Real estate						46						—						46									215						—						215
Other investments (c)						277						14						291									162						3						165
Total investment income						8,328						660						8,988									9,907						1,516						11,423
Investment expenses						453						26						479									348						28						376
Net investment income			$			7,875			$			634			$			8,509						$			9,559			$			1,488			$			11,047

(a) Included in the three- and nine-month periods ended September 30, 2022 were income (loss) of $( 57 ) million and $( 208 ) million, respectively, related to fixed maturity securities measured at fair value that economically hedge liabilities described in (c) below. Included in the three- and nine-month periods ended September 30, 2021 were income (loss) of $( 3 ) million and $( 49 ) million, respectively, related to fixed maturity securities measured at fair value that economically hedge liabilities described in (c) below.

(b) Included income from hedge funds, private equity funds and affordable housing partnerships. Hedge funds are recorded as of the balance sheet date. Private equity funds are generally reported on a one-quarter lag.

(c) Included in the three- and nine-month periods ended September 30, 2022 were income (loss) of $ 62 million and $ 194 million, respectively, related to liabilities measured at fair value that are economically hedged with fixed maturity securities as described in (a) above. Included in the three- and nine-month periods ended September 30, 2021 were income (loss) of $ 9 million and $ 52 million, respectively, related to liabilities measured at fair value that are economically hedged with fixed maturity securities as described in (a) above.

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NET REALIZED GAINS AND LOSSES

The following table presents the components of Net realized gains (losses):

Three Months Ended September 30,						2022																					2021
(in millions)			Excluding Fortitude Re Funds Withheld Assets						Fortitude Re Funds Withheld Assets									Total						Excluding Fortitude Re Funds Withheld Assets						Fortitude Re Funds Withheld Assets									Total
Sales of fixed maturity securities			$			( 67 )			$			( 64 )			$			( 131 )						$			66			$			159			$			225
Change in allowance for credit losses on fixed maturity securities						( 1 )						7						6									3						1						4
Change in allowance for credit losses on loans						( 26 )						( 24 )						( 50 )									22						3						25
Foreign exchange transactions						( 244 )						( 22 )						( 266 )									( 127 )						( 9 )						( 136 )
Variable annuity embedded derivatives, net of related hedges						441						—						441									( 39 )						—						( 39 )
All other derivatives and hedge accounting						1,240						( 13 )						1,227									317						( 15 )						302
Sales of alternative investments and real estate investments						137						32						169									336						52						388
Other						24						( 2 )						22									101						( 1 )						100
Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative						1,504						( 86 )						1,418									679						190						869
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative						—						1,757						1,757									—						( 209 )						( 209 )
Net realized gains (losses)			$			1,504			$			1,671			$			3,175						$			679			$			( 19 )			$			660

Nine Months Ended September 30,			2022																					2021
(in millions)			Excluding Fortitude Re Funds Withheld Assets						Fortitude Re Funds Withheld Assets									Total						Excluding Fortitude Re Funds Withheld Assets						Fortitude Re Funds Withheld Assets									Total
Sales of fixed maturity securities			$			( 656 )			$			( 218 )			$			( 874 )						$			200			$			549			$			749
Change in allowance for credit losses on fixed maturity securities						( 101 )						( 34 )						( 135 )									64						7						71
Change in allowance for credit losses on loans						( 21 )						( 26 )						( 47 )									130						6						136
Foreign exchange transactions						( 489 )						( 46 )						( 535 )									( 37 )						( 6 )						( 43 )
Variable annuity embedded derivatives, net of related hedges						1,401						—						1,401									( 3 )						—						( 3 )
All other derivatives and hedge accounting						3,149						( 21 )						3,128									332						( 72 )						260
Sales of alternative investments and real estate investments						160						35						195									393						53						446
Other						4						( 2 )						2									252						( 1 )						251
Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative						3,447						( 312 )						3,135									1,331						536						1,867
Net realized gains on Fortitude Re funds withheld embedded derivative						—						7,851						7,851									—						117						117
Net realized gains			$			3,447			$			7,539			$			10,986						$			1,331			$			653			$			1,984

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CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS

The following table presents the increase (decrease) in unrealized appreciation (depreciation) of our available for sale securities and other investments:

						Three Months Ended September 30,															Nine Months Ended September 30,
(in millions)						2022						2021									2022						2021
Increase (decrease) in unrealized appreciation (depreciation) of investments:
Fixed maturity securities			$			( 12,134 )			$			( 2,065 )						$			( 50,191 )			$			( 7,863 )
Other investments						—						—									( 14 )						( 5 )
Total increase (decrease) in unrealized appreciation (depreciation) of investments			$			( 12,134 )			$			( 2,065 )						$			( 50,205 )			$			( 7,868 )

The following table summarizes the unrealized gains and losses recognized in Net investment income during the reporting period on equity securities and other investments still held at the reporting date:

Three Months Ended September 30,						2022																					2021
(in millions)						Equities						Other Invested Assets						Total									Equities						Other Invested Assets						Total
Net gains (losses) recognized during the period on equity securities and other investments			$			16			$			( 98 )			$			( 82 )						$			( 45 )			$			471			$			426
Less: Net gains recognized during the period on equity securities and other investments sold during the period						26						13						39									8						23						31
Unrealized gains (losses) recognized during the reporting period on equity securities and other investments still held at the reporting date			$			( 10 )			$			( 111 )			$			( 121 )						$			( 53 )			$			448			$			395

Nine Months Ended September 30,						2022																					2021
(in millions)						Equities						Other Invested Assets						Total									Equities						Other Invested Assets						Total
Net gains (losses) recognized during the period on equity securities and other investments			$			( 41 )			$			306			$			265						$			( 36 )			$			1,484			$			1,448
Less: Net gains (losses) recognized during the period on equity securities and other investments sold during the period						119						( 23 )						96									( 192 )						38						( 154 )
Unrealized gains (losses) recognized during the reporting period on equity securities and other investments still held at the reporting date			$			( 160 )			$			329			$			169						$			156			$			1,446			$			1,602

EVALUATING INVESTMENTS FOR AN ALLOWANCE FOR CREDIT LOSSES

For a discussion of our policy for evaluating investments for an allowance for credit losses, see Note 5 to the Consolidated Financial Statements in the 2021 Annual Report.

Credit Impairments

The following table presents a rollforward of the changes in allowance for credit losses on available for sale fixed maturity securities by major investment category:

Three Months Ended September 30,						2022																					2021
(in millions)			Structured						Non- Structured									Total						Structured						Non- Structured									Total
Balance, beginning of period			$			26			$			149			$			175						$			10			$			87			$			97
Additions:
Securities for which allowance for credit losses were not previously recorded						6						25						31									—						20						20
Reductions:
Securities sold during the period						( 1 )						( 45 )						( 46 )									—						( 21 )						( 21 )
Addition to (release of) the allowance for credit losses on securities that had an allowance recorded in a previous period, for which there was no intent to sell before recovery of amortized cost basis						—						( 37 )						( 37 )									( 3 )						( 21 )						( 24 )
Write-offs charged against the allowance						—						( 7 )						( 7 )									—						( 6 )						( 6 )
Other						( 1 )						—						( 1 )									—						—						—
Balance, end of period			$			30			$			85			$			115						$			7			$			59			$			66

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Purchased Credit Deteriorated (PCD) Securities

We purchase certain RMBS securities that have experienced more-than-insignificant deterioration in credit quality since origination. These are referred to as PCD assets. At the time of purchase an allowance is recognized for these PCD assets by adding it to the purchase price to arrive at the initial amortized cost. There is no credit loss expense recognized upon acquisition of a PCD asset. When determining the initial allowance for credit losses, management considers the historical performance of underlying assets and available market information as well as bond-specific structural considerations, such as credit enhancement and the priority of payment structure of the security. In addition, the process of estimating future cash flows includes, but is not limited to, the following critical inputs:

• Current delinquency rates;

• Expected default rates and the timing of such defaults;

• Loss severity and the timing of any recovery; and

• Expected prepayment speeds.

Subsequent to the acquisition date, the PCD assets follow the same accounting as other structured securities that are not high credit quality.

We did not purchase securities with more than insignificant credit deterioration since their origination during the nine-month periods ended September 30, 2022 and 2021.

PLEDGED INVESTMENTS

Secured Financing and Similar Arrangements

We enter into secured financing transactions whereby certain securities are sold under agreements to repurchase (repurchase agreements), in which we transfer securities in exchange for cash, with an agreement by us to repurchase the same or substantially similar securities. Our secured financing transactions also include those that involve the transfer of securities to financial institutions in exchange for cash (securities lending agreements). In all of these secured financing transactions, the securities transferred by us (pledged collateral) may be sold or repledged by the counterparties. These agreements are recorded at their contracted amounts plus accrued interest, other than those that are accounted for at fair value.

Pledged collateral levels are monitored daily and are generally maintained at an agreed-upon percentage of the fair value of the amounts borrowed during the life of the transactions. In the event of a decline in the fair value of the pledged collateral under these secured financing transactions, we may be required to transfer cash or additional securities as pledged collateral under these agreements. At the termination of the transactions, we and our counterparties are obligated to return the amounts borrowed and the securities transferred, respectively.

The following table presents the fair value of securities pledged to counterparties under secured financing transactions, including repurchase and securities lending agreements:

(in millions)						September 30, 2022						December 31, 2021
Fixed maturity securities available for sale			$			321			$			3,583

At September 30, 2022 and December 31, 2021, amounts borrowed under repurchase and securities lending agreements totaled $ 408 million and $ 3.7 billion, respectively.

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The following table presents the fair value of securities pledged under our repurchase agreements by collateral type and by remaining contractual maturity:

						Remaining Contractual Maturity of the Agreements
(in millions)						Overnight and Continuous						up to 30 days						31 - 90 days						91 - 364 days						365 days or greater						Total
September 30, 2022
Bonds available for sale:
U.S. government and government sponsored entities			$			—			$			26			$			50			$			14			$			—			$			90
Non-U.S. governments						28						—						—						28						—						56
Corporate debt						175						—						—						—						—						175
Total			$			203			$			26			$			50			$			42			$			—			$			321

December 31, 2021
Bonds available for sale:
Non-U.S. governments			$			48			$			—			$			—			$			—			$			—			$			48
Corporate debt						128						61						22						—						—						211
Total			$			176			$			61			$			22			$			—			$			—			$			259

The following table presents the fair value of securities pledged under our securities lending agreements by collateral type and by remaining contractual maturity:

Remaining Contractual Maturity of the Agreements

(in millions)

Overnight and Continuous

up to 30 days

31 - 90 days

91 - 364 days

365 days or greater

Total

September 30, 2022

Bonds available for sale:

Obligations of states, municipalities and political subdivisions

$

—

$

—

$

—

$

—

$

—

$

—

Non-U.S. governments

—

—

—

—

—

—

Total

$

—

$

—

$

—

$

—

$

—

$

—

December 31, 2021
Bonds available for sale:
Obligations of states, municipalities and political subdivisions			$			—			$			—			$			106			$			—			$			—			$			106
Non-U.S. governments						—						—						43						—						—						43
Corporate debt						—						534						2,641						—						—						3,175
Total			$			—			$			534			$			2,790			$			—			$			—			$			3,324

We also enter into agreements in which securities are purchased by us under agreements to resell (reverse repurchase agreements), which are accounted for as secured financing transactions and reported as short-term investments or other assets, depending on their terms. These agreements are recorded at their contracted resale amounts plus accrued interest, other than those that are accounted for at fair value. In all reverse repurchase transactions, we take possession of or obtain a security interest in the related securities, and we have the right to sell or repledge this collateral received.

The following table presents information on the fair value of securities pledged to us under reverse repurchase agreements:

(in millions)						September 30, 2022						December 31, 2021
Securities collateral pledged to us			$			265			$			1,839

At September 30, 2022 and December 31, 2021, the carrying value of reverse repurchase agreements totaled $ 270 million and $ 1.9 billion, respectively.

We do not currently offset any secured financing transactions. All such transactions are collateralized and margined on a daily basis consistent with market standards and subject to enforceable master netting arrangements with rights of set off.

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Insurance – Statutory and Other Deposits

The total carrying value of cash and securities deposited by our insurance subsidiaries under requirements of regulatory authorities or other insurance-related arrangements, including certain annuity-related obligations and certain reinsurance contracts, was $ 11.4 billion and $ 13.5 billion at September 30, 2022 and December 31, 2021, respectively.

Other Pledges and Restrictions

Certain of our subsidiaries are members of Federal Home Loan Banks (FHLBs) and such membership requires the members to own stock in these FHLBs. We owned an aggregate of $ 239 million and $ 211 million of stock in FHLBs at September 30, 2022 and December 31, 2021, respectively. In addition, our subsidiaries have pledged securities available for sale and residential loans associated with borrowings and funding agreements from FHLBs, with a fair value of $ 5.5 billion and $ 1.8 billion, respectively, at September 30, 2022 and $ 5.1 billion and $ 1.5 billion, respectively, at December 31, 2021.

Certain GIAs have provisions that require collateral to be posted or payments to be made by us upon a downgrade of our long-term debt ratings. The actual amount of collateral required to be posted to the counterparties in the event of such downgrades, and the aggregate amount of payments that we could be required to make, depend on market conditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of the downgrade. The fair value of securities pledged as collateral with respect to these obligations was approximately $ 1.5 billion and $ 1.4 billion, at September 30, 2022 and December 31, 2021, respectively. This collateral primarily consists of securities of the U.S. government and government sponsored entities and generally cannot be repledged or resold by the counterparties.

Investments held in escrow accounts or otherwise subject to restriction as to their use were $ 594 million and $ 514 million, comprised of bonds available for sale and short-term investments at September 30, 2022 and December 31, 2021, respectively.

Reinsurance transactions between AIG and Fortitude Re were structured as modco and loss portfolio transfer arrangements with funds withheld.

6. Lending Activities

The following table presents the composition of Mortgage and other loans receivable, net:

(in millions)						September 30, 2022						December 31, 2021
Commercial mortgages (a)			$			35,824			$			35,665
Residential mortgages						5,640						5,492
Life insurance policy loans						1,773						1,843
Commercial loans, other loans and notes receivable (b)						5,542						3,677
Total mortgage and other loans receivable						48,779						46,677
Allowance for credit losses (c)						( 655 )						( 629 )
Mortgage and other loans receivable, net			$			48,124			$			46,048

(a) Commercial mortgages primarily represent loans for apartments, offices and retail properties, with exposures in New York and California representing the largest geographic concentrations (aggregating approximately 19 percent and 12 percent, respectively, at September 30, 2022 and 21 percent and 10 percent, respectively, at December 31, 2021).

(b) Includes loans held for sale which are carried at lower of cost or market and are collateralized primarily by apartments. As of September 30, 2022 and December 31, 2021, the net carrying value of these loans were $ 176 million and $ 15 million, respectively.

(c) Does not include allowance for credit losses of $ 87 million and $ 71 million, respectively, at September 30, 2022 and December 31, 2021, in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities.

Interest income is not accrued when payment of contractual principal and interest is not expected. Any cash received on impaired loans is generally recorded as a reduction of the current carrying amount of the loan. Accrual of interest income is generally resumed when delinquent contractual principal and interest is repaid or when a portion of the delinquent contractual payments are made and the ongoing required contractual payments have been made for an appropriate period. As of September 30, 2022, $ 6 million and $ 772 million of residential mortgage loans and commercial mortgage loans, respectively, were placed on nonaccrual status. As of December 31, 2021, $ 7 million and $ 226 million of residential mortgage loans and commercial mortgage loans, respectively, were placed on nonaccrual status.

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Accrued interest is presented separately and is included in Accrued investment income on the Condensed Consolidated Balance Sheets. As of September 30, 2022, accrued interest receivable was $ 13 million and $ 132 million associated with residential mortgage loans and commercial mortgage loans, respectively. As of December 31, 2021, accrued interest receivable was $ 12 million and $ 126 million associated with residential mortgage loans and commercial mortgage loans, respectively.

A significant majority of commercial mortgages in the portfolio are non-recourse loans and, accordingly, the only guarantees are for specific items that are exceptions to the non-recourse provisions. It is therefore extremely rare for us to have cause to enforce the provisions of a guarantee on a commercial real estate or mortgage loan.

Nonperforming loans are generally those loans where payment of contractual principal or interest is more than 90 days past due. Nonperforming loans were not significant for any of the periods presented.

CREDIT QUALITY OF COMMERCIAL MORTGAGES

The following table presents debt service coverage ratios (a) for commercial mortgages by year of vintage:

September 30, 2022						2022						2021						2020						2019						2018						Prior						Total
(in millions)
>1.2X			$			4,521			$			2,318			$			1,885			$			5,056			$			3,936			$			11,491			$			29,207
1.00 - 1.20X						425						712						504						424						382						1,443						3,890
<1.00X						—						—						21						52						1,026						1,628						2,727
Total commercial mortgages			$			4,946			$			3,030			$			2,410			$			5,532			$			5,344			$			14,562			$			35,824
December 31, 2021						2021						2020						2019						2018						2017						Prior						Total
(in millions)
>1.2X			$			2,245			$			1,662			$			5,126			$			3,926			$			3,557			$			10,796			$			27,312
1.00 - 1.20X						574						1,019						700						1,138						136						1,929						5,496
<1.00X						1						27						71						925						41						1,792						2,857
Total commercial mortgages			$			2,820			$			2,708			$			5,897			$			5,989			$			3,734			$			14,517			$			35,665

The following table presents loan-to-value ratios (b) for commercial mortgages by year of vintage:

September 30, 2022						2022						2021						2020						2019						2018						Prior						Total
(in millions)
Less than 65%			$			4,225			$			2,464			$			2,171			$			4,048			$			3,667			$			10,418			$			26,993
65% to 75%						721						329						213						1,484						1,359						2,854						6,960
76% to 80%						—						237						—						—						—						99						336
Greater than 80%						—						—						26						—						318						1,191						1,535
Total commercial mortgages			$			4,946			$			3,030			$			2,410			$			5,532			$			5,344			$			14,562			$			35,824
December 31, 2021						2021						2020						2019						2018						2017						Prior						Total
(in millions)
Less than 65%			$			2,286			$			2,272			$			4,149			$			4,815			$			2,892			$			9,902			$			26,316
65% to 75%						372						410						1,748						1,174						406						3,490						7,600
76% to 80%						—						—						—						—						188						274						462
Greater than 80%						162						26						—						—						248						851						1,287
Total commercial mortgages			$			2,820			$			2,708			$			5,897			$			5,989			$			3,734			$			14,517			$			35,665

(a) The debt service coverage ratio compares a property’s net operating income to its debt service payments, including principal and interest. Our weighted average debt service coverage ratio was 2.0 X at period ended September 30, 2022 and 1.9 X at period ended December 31, 2021. The debt service coverage ratios have been updated within the last three months. The debt service coverage ratios are updated when additional relevant information becomes available.

(b) The loan-to-value ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan. Our weighted average loan-to-value ratio was 57 percent at both September 30, 2022 and December 31, 2021. The loan-to-value ratios have been updated within the last three months.

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The following table presents the credit quality performance indicators for commercial mortgages:

			Number of Loans						Class																																							Percent of Total
(dollars in millions)									Apartments						Offices						Retail						Industrial						Hotel						Others						Total
September 30, 2022
Credit Quality Performance Indicator:
In good standing			620			$			13,472			$			9,785			$			3,631			$			5,597			$			2,008			$			368			$			34,861			98			%
Restructured (a)			11						—						456						140						—						137						—						733			2
90 days or less delinquent			1						—						157						—						—						—						—						157			—
>90 days delinquent or in process of foreclosure			3						—						30						43						—						—						—						73			—
Total (b)			635			$			13,472			$			10,428			$			3,814			$			5,597			$			2,145			$			368			$			35,824			100			%
Allowance for credit losses						$			94			$			275						84						72						30						9			$			564			2			%

December 31, 2021
Credit Quality Performance Indicator:
In good standing			636			$			14,267			$			9,695			$			4,778			$			3,858			$			1,985			$			432			$			35,015			98			%
Restructured (a)			8						—						354						25						—						136						—						515			2
90 days or less delinquent			—						—						—						—						—						—						—						—			—
>90 days delinquent or in process of foreclosure			5						—						81						54						—						—						—						135			—
Total (b)			649			$			14,267			$			10,130			$			4,857			$			3,858			$			2,121			$			432			$			35,665			100			%
Allowance for credit losses						$			109			$			247			$			103			$			47			$			31			$			8			$			545			2			%

(a) Loans that have been modified in troubled debt restructurings and are performing according to their restructured terms. For additional discussion of troubled debt restructurings, see Note 6 to the Consolidated Financial Statements in the 2021 Annual Report.

(b) Does not reflect allowance for credit losses.

The following table presents credit quality performance indicators for residential mortgages by year of vintage:

September 30, 2022									2022						2021						2020						2019						2018						Prior						Total
(in millions)
FICO*:
780 and greater						$			205			$			2,233			$			663			$			237			$			80			$			574			$			3,992
720 - 779									219						737						171						76						32						171						1,406
660 - 719									13						81						29						16						9						62						210
600 - 659									—						4						2						2						2						14						24
Less than 600									—						—						—						1						—						7						8
Total residential mortgages						$			437			$			3,055			$			865			$			332			$			123			$			828			$			5,640
December 31, 2021									2021						2020						2019						2018						2017						Prior						Total
(in millions)
FICO*:
780 and greater						$			1,601			$			691			$			297			$			107			$			192			$			501			$			3,389
720 - 779									1,306						230						86						44						58						154						1,878
660 - 719									48						42						22						12						20						49						193
600 - 659									1						1						2						3						2						12						21
Less than 600									—						—						1						1						2						7						11
Total residential mortgages						$			2,956			$			964			$			408			$			167			$			274			$			723			$			5,492

* Fair Isaac Corporation (FICO) is the credit quality indicator used to evaluate consumer credit risk for residential mortgage loan borrowers and have been updated within the last twelve months.

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METHODOLOGY USED TO ESTIMATE THE ALLOWANCE FOR CREDIT LOSSES

For a discussion of our accounting policy for evaluating Mortgage and other loans receivable for impairment see Note 6 to the Consolidated Financial Statements in the 2021 Annual Report.

The following table presents a rollforward of the changes in the allowance for credit losses on Mortgage and other loans receivable (a) :

Three Months Ended September 30,						2022																					2021
(in millions)						Commercial Mortgages						Other Loans						Total									Commercial Mortgages						Other Loans						Total
Allowance, beginning of period			$			525			$			78			$			603						$			587			$			114			$			701
Loans charged off						—						—						—									( 2 )						—						( 2 )
Net charge-offs						—						—						—									( 2 )						—						( 2 )
Addition to (release of) allowance for loan losses						39						13						52									( 28 )						1						( 27 )
Reclassified to held for sale (b)						—						—						—									—						( 31 )						( 31 )
Allowance, end of period			$			564			$			91			$			655						$			557			$			84			$			641
Nine Months Ended September 30,						2022																					2021
(in millions)						Commercial Mortgages						Other Loans						Total									Commercial Mortgages						Other Loans						Total
Allowance, beginning of year			$			545			$			84			$			629						$			685			$			129			$			814
Loans charged off						( 4 )						—						( 4 )									( 2 )						—						( 2 )
Net charge-offs						( 4 )						—						( 4 )									( 2 )						—						( 2 )
Addition to (release of) allowance for loan losses						23						7						30									( 126 )						( 14 )						( 140 )
Reclassified to held for sale (b)						—						—						—									—						( 31 )						( 31 )
Allowance, end of period			$			564			$			91			$			655						$			557			$			84			$			641

(a) Does not include allowance for credit losses of $ 87 million and $ 83 million, respectively, at September 30, 2022 and 2021 in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities.

(b) Reported in Other assets in the Condensed Consolidated Balance Sheets.

Our expectations and models used to estimate the allowance for losses on commercial and residential mortgage loans are regularly updated to reflect the current economic environment. The full impact of COVID-19 on real estate valuations remains uncertain and we will continue to review our valuations as further information becomes available.

TROUBLED DEBT RESTRUCTURINGS

We modify loans to optimize their returns and improve their collectability, among other things. When we undertake such a modification with a borrower that is experiencing financial difficulty and the modification involves us granting a concession to the troubled debtor, the modification is a troubled debt restructuring (TDR). We assess whether a borrower is experiencing financial difficulty based on a variety of factors, including the borrower’s current default on any of its outstanding debt, the probability of a default on any of its debt in the foreseeable future without the modification, the insufficiency of the borrower’s forecasted cash flows to service any of its outstanding debt (including both principal and interest), and the borrower’s inability to access alternative third-party financing at an interest rate that would be reflective of current market conditions for a non-troubled debtor. Concessions granted may include extended maturity dates, interest rate changes, principal or interest forgiveness, payment deferrals and easing of loan covenants.

During the nine-month periods ended September 30, 2022 and 2021, loans with a carrying value of $ 220 million and $ 45 million, respectively, were modified in TDRs.

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7. Reinsurance

FORTITUDE RE

Fortitude Re is the reinsurer of the majority of AIG’s run-off operations. The reinsurance transactions are structured as modco and loss portfolio transfer arrangements with funds withheld (funds withheld). In modco and funds withheld arrangements, the investments supporting the reinsurance agreements, and which reflect the majority of the consideration that would be paid to the reinsurer for entering into the transaction, are withheld by, and therefore continue to reside on the balance sheet of, the ceding company (i.e., AIG) thereby creating an obligation for the ceding company to pay the reinsurer (i.e., Fortitude Re) at a later date. Additionally, as AIG maintains ownership of these investments, AIG will maintain its existing accounting for these assets (e.g., the changes in fair value of available for sale securities will be recognized within Other comprehensive income (loss)). As a result of the deconsolidation resulting from the sale of our majority interest in Fortitude Group Holdings, LLC, AIG has established a funds withheld payable to Fortitude Re while simultaneously establishing a reinsurance asset representing reserves for the insurance coverage that Fortitude Re has assumed. The funds withheld payable contains an embedded derivative and changes in fair value of the embedded derivative related to the funds withheld payable are recognized in earnings through Net realized gains (losses). This embedded derivative is considered a total return swap with contractual returns that are attributable to various assets and liabilities associated with these reinsurance agreements.

For additional information on Fortitude Re see Note 7 to the Consolidated Financial Statements in the 2021 Annual Report.

There is a diverse pool of assets supporting the funds withheld arrangements with Fortitude Re. The following summarizes the composition of the pool of assets:

			September 30, 2022															December 31, 2021
(in millions)			Carrying Value									Fair Value						Carrying Value									Fair Value			Corresponding Accounting Policy
Fixed maturity securities - available for sale (a)			$			19,247			$			19,247						$			31,815			$			31,815			Fair value through other comprehensive income (loss)
Fixed maturity securities - fair value option						3,800						3,800									1,983						1,983			Fair value through net investment income
Commercial mortgage loans						4,076						3,830									3,637						3,859			Amortized cost
Real estate investments						139						364									201						395			Amortized cost
Private equity funds / hedge funds						1,861						1,861									1,606						1,606			Fair value through net investment income
Policy loans						357						357									380						380			Amortized cost
Short-term investments						160						160									50						50			Fair value through net investment income
Funds withheld investment assets						29,640						29,619									39,672						40,088
Derivative assets, net (b)						97						97									81						81			Fair value through net realized gains (losses)
Other (c)						708						708									602						602			Amortized cost
Total			$			30,445			$			30,424						$			40,355			$			40,771

(a) The change in the net unrealized gains (losses) on available for sale securities related to the Fortitude Re funds withheld assets was $( 7.7 ) billion ($( 6.1 ) billion after-tax) and $( 2.1 ) billion ($( 1.6 ) billion after-tax), respectively for the nine months ended September 30, 2022 and 2021.

(b) The derivative assets and liabilities have been presented net of cash collateral. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $ 366 million and $ 19 million, respectively, as of September 30, 2022. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $ 389 million and $ 10 million, respectively, as of December 31, 2021. These derivative assets and liabilities are fully collateralized either by cash or securities.

(c) Primarily comprised of Cash and Accrued investment income.

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The impact of the funds withheld arrangements with Fortitude Re was as follows:

			Three Months Ended September 30,															Nine Months Ended September 30,
(in millions)						2022						2021									2022						2021
Net underwriting income			$			—			$			—						$			—			$			—
Net investment income - Fortitude Re funds withheld assets						155						495									634						1,488
Net realized gains (losses) on Fortitude Re funds withheld assets:
Net realized gains (losses) - Fortitude Re funds withheld assets						( 86 )						190									( 312 )						536
Net realized gains (losses) - Fortitude Re embedded derivative						1,757						( 209 )									7,851						117
Net realized gains (losses) on Fortitude Re funds withheld assets						1,671						( 19 )									7,539						653
Income from continuing operations before income tax expense						1,826						476									8,173						2,141
Income tax expense (a)						383						99									1,716						449
Net income						1,443						377									6,457						1,692
Change in unrealized depreciation of all other investments (a)						( 1,317 )						( 360 )									( 6,111 )						( 1,645 )
Comprehensive income			$			126			$			17						$			346			$			47

(a) The income tax expense (benefit) and the tax impact in AOCI was computed using AIG’s U.S. statutory tax rate of 21 percent.

Various assets supporting the Fortitude Re funds withheld arrangements are reported at amortized cost, and as such, changes in the fair value of these assets are not reflected in the financial statements. However, changes in the fair value of these assets are included in the embedded derivative in the Fortitude Re funds withheld arrangements and the appreciation of these assets is the primary driver of the comprehensive income (loss) reflected above.

REINSURANCE – CREDIT LOSSES

The estimation of reinsurance recoverables involves a significant amount of judgment, particularly for latent exposures, such as asbestos, due to their long-tail nature. Reinsurance assets include reinsurance recoverables on unpaid losses and loss adjustment expenses that are estimated as part of our loss reserving process and, consequently, are subject to similar judgments and uncertainties as the estimation of gross loss reserves. Similarly, Other assets include reinsurance recoverables for contracts which are accounted for as deposits.

We assess the collectability of reinsurance recoverable balances in each reporting period, through either historical trends of disputes and credit events or financial analysis of the credit quality of the reinsurer. We record adjustments to reflect the results of these assessments through an allowance for credit losses and disputes that reduces the carrying amount of reinsurance and other assets on the consolidated balance sheets (collectively, reinsurance recoverables). This estimate requires significant judgment for which key considerations include:

• paid and unpaid amounts recoverable;

• whether the balance is in dispute or subject to legal collection;

• the relative financial health of the reinsurer as determined by the Obligor Risk Ratings (ORRs) we assign to each reinsurer based upon our financial reviews; reinsurers that are financially troubled (i.e., in run-off, have voluntarily or involuntarily been placed in receivership, are insolvent, are in the process of liquidation or otherwise subject to formal or informal regulatory restriction) are assigned ORRs that will generate a significant allowance; and

• whether collateral and collateral arrangements exist.

An estimate of the reinsurance recoverables lifetime expected credit losses is established utilizing a probability of default and loss given default method, which reflects the reinsurer’s ORR. The allowance for credit losses excludes disputed amounts. An allowance for disputes is established for a reinsurance recoverable using the losses incurred model for contingencies.

The total reinsurance recoverables as of September 30, 2022 were $ 75.7 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 92 percent of the reinsurance recoverables were investment grade, of which 53 percent related to General Insurance and 39 percent related to Life and Retirement; (ii) approximately 7 percent of the reinsurance recoverables were non-investment grade, the majority of which related to General Insurance; (iii) less than one percent of the non-investment grade reinsurance recoverables related to Life and Retirement and (iv) approximately one percent of the reinsurance recoverables related to entities that were not rated by AIG.

The total reinsurance recoverables as of December 31, 2021 were $ 76.3 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 92 percent of the reinsurance recoverables were investment grade, of which 52 percent related to General Insurance and 40 percent related to Life and Retirement; (ii) approximately 7 percent of the reinsurance recoverables were non-investment grade, the majority of which related to General Insurance; (iii) less than one percent of the non-investment grade reinsurance recoverables related to Life and Retirement and (iv) approximately one percent of the reinsurance recoverables related to entities that were not rated by AIG.

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As of September 30, 2022 and December 31, 2021, approximately 73 percent and 71 percent, respectively, of our non-investment grade reinsurance exposure related to captive insurers. These arrangements are typically collateralized by letters of credit, funds withheld or trust agreements.

Reinsurance Recoverable Allowance

The following table presents a rollforward of the reinsurance recoverable allowance :

Three Months Ended September 30,						2022																					2021
(in millions)			General Insurance						Life and Retirement									Total						General Insurance						Life and Retirement									Total
Balance, beginning of period			$			284			$			107			$			391						$			287			$			87			$			374
Addition to (release of) allowance for expected credit losses and disputes, net						4						1						5									5						15						20
Write-offs charged against the allowance for credit losses and disputes						( 1 )						—						( 1 )									( 8 )						—						( 8 )
Recoveries of amounts previously written off						—						—						—									—						—						—
Other changes						( 1 )						—						( 1 )									2						—						2
Balance, end of period			$			286			$			108			$			394						$			286			$			102			$			388
Nine Months Ended September 30,						2022																					2021
(in millions)			General Insurance						Life and Retirement									Total						General Insurance						Life and Retirement									Total
Balance, beginning of year			$			281			$			101			$			382						$			292			$			83			$			375
Addition to (release of) allowance for expected credit losses and disputes, net						5						7						12									5						19						24
Write-offs charged against the allowance for credit losses and disputes						( 3 )						—						( 3 )									( 15 )						—						( 15 )
Recoveries of amounts previously written off						2						—						2									—						—						—
Other changes						1						—						1									4						—						4
Balance, end of period			$			286			$			108			$			394						$			286			$			102			$			388

There were no material recoveries of credit losses previously written off for the three- and nine-month periods ended September 30, 2021.

Past-Due Status

We consider a reinsurance asset to be past due when it is 90 days past due. The allowance for credit losses is estimated excluding disputed amounts. An allowance for disputes is established using the losses incurred method for contingencies. Past due balances on claims that are not in dispute were not material for any of the periods presented.

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.

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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:

(in millions)						Real Estate and Investment Entities (d)						Securitization Vehicles																		Total
September 30, 2022
Assets:
Bonds available for sale			$			—			$			3,613															$			3,613
Other bond securities						—						1,345																		1,345
Equity securities						60						—																		60
Mortgage and other loans receivable						—						2,341																		2,341
Other invested assets
Alternative investments (a)						2,572						—																		2,572
Investment real estate						1,785						—																		1,785
Short-term investments						172						170																		342
Cash						82						—																		82
Accrued investment income						—						8																		8
Other assets						95						75																		170
Total (b)			$			4,766			$			7,552															$			12,318
Liabilities:
Debt of consolidated investment entities			$			1,359			$			4,378															$			5,737
Other (c)						85						37																		122
Total			$			1,444			$			4,415															$			5,859
December 31, 2021
Assets:
Bonds available for sale			$			—			$			5,543															$			5,543
Other bond securities						—						1,852																		1,852
Equity securities						223						—																		223
Mortgage and other loans receivable						—						2,523																		2,523
Other invested assets
Alternative investments (a)						3,017						—																		3,017
Investment real estate						2,257						—																		2,257
Short-term investments						487						151																		638
Cash						96						—																		96
Accrued investment income						—						17																		17
Other assets						190						558																		748
Total (b)			$			6,270			$			10,644															$			16,914
Liabilities:
Debt of consolidated investment entities			$			1,743			$			4,504															$			6,247
Other (c)						122						722																		844
Total			$			1,865			$			5,226															$			7,091

(a) Comprised primarily of investments in real estate joint ventures at September 30, 2022 and December 31, 2021.

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

(c) Comprised primarily of Other liabilities at September 30, 2022 and December 31, 2021.

(d) At September 30, 2022 and December 31, 2021, off-balance sheet exposure primarily consisting of our insurance companies’ commitments to real estate and investment entities were $ 2.3 billion and $ 2.2 billion, respectively, of which commitments to external parties were $ 0.5 billion and $ 0.6 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.

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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
(in millions)						Total VIE Assets						On-Balance Sheet (b)									Off-Balance Sheet									Total
September 30, 2022
Real estate and investment entities (a)			$			493,750			$			8,468						$			4,107			(c)			$			12,575
Other						1,732						265									747			(d)						1,012
Total			$			495,482			$			8,733						$			4,854						$			13,587
December 31, 2021
Real estate and investment entities (a)			$			457,335			$			7,650						$			3,448			(c)			$			11,098
Other						1,738						237									528			(d)						765
Total			$			459,073			$			7,887						$			3,976						$			11,863

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

(b) At September 30, 2022 and December 31, 2021, $ 8.7 billion and $ 7.8 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.

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

(d) 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 9 to the Consolidated Financial Statements in the 2021 Annual Report .

9. Derivatives and Hedge Accounting

We use derivatives and other financial instruments as part of our financial risk management programs and as part of our investment operations. Interest rate derivatives (such as interest rate swaps) are used to manage interest rate risk associated with embedded derivatives contained in insurance contract liabilities, fixed maturity securities, outstanding medium- and long-term notes as well as other interest rate sensitive assets and liabilities. Foreign exchange derivatives (principally foreign exchange forwards and swaps) are used to economically mitigate risk associated with non-U.S. dollar denominated debt, net capital exposures, foreign currency transactions, and foreign denominated investments. Equity derivatives are used to mitigate financial risk embedded in certain insurance liabilities and economically hedge certain investments. We use credit derivatives to manage our credit exposures. Commodity derivatives are used to hedge exposures within reinsurance contracts. The derivatives are effective economic hedges of the exposures that they are meant to offset. In addition to hedging activities, we also enter into derivative contracts with respect to investment operations, which may include, among other things, credit default swaps (CDSs), total return swaps and purchases of investments with embedded derivatives, such as equity-linked notes and convertible bonds.

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The following table presents the notional amounts of our derivatives and the fair value of derivative assets and liabilities in the Condensed Consolidated Balance Sheets:

			September 30, 2022																														December 31, 2021
			Gross Derivative Assets															Gross Derivative Liabilities															Gross Derivative Assets															Gross Derivative Liabilities
(in millions)						Notional Amount						Fair Value									Notional Amount						Fair Value									Notional Amount						Fair Value									Notional Amount						Fair Value
Derivatives designated as
hedging instruments: (a)
Interest rate contracts			$			318			$			230						$			1,696			$			72						$			265			$			5						$			895			$			11
Foreign exchange contracts						6,972						1,036									1,742						214									5,431						467									5,828						197
Derivatives not designated
as hedging instruments: (a)
Interest rate contracts						29,749						3,126									34,068						4,784									47,499						3,868									42,113						3,622
Foreign exchange contracts						11,711						1,752									3,740						513									7,905						722									9,997						524
Equity contracts						29,587						565									3,431						84									27,423						681									5,091						53
Commodity contracts						324						18									66						—									303						4									219						—
Credit contracts (b)						1,776						1									932						42									3,790						1									936						47
Other contracts (c)						45,889						16									—						—									43,892						13									51						—
Total derivatives, gross			$			126,326			$			6,744						$			45,675			$			5,709						$			136,508			$			5,761						$			65,130			$			4,454
Counterparty netting (d)												( 3,170 )															( 3,170 )															( 2,779 )															( 2,779 )
Cash collateral (e)												( 3,181 )															( 2,263 )															( 2,139 )															( 1,089 )
Total derivatives on Condensed
Consolidated Balance Sheets (f)									$			393												$			276												$			843												$			586

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

(b) As of September 30, 2022 and December 31, 2021, included CDSs on super senior multi-sector CDOs with a net notional amount of $ 79 million and $ 97 million (fair value liability of $ 32 million and $ 30 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 $ 2.5 billion at September 30, 2022 and zero at December 31, 2021. Fair value of liabilities related to bifurcated embedded derivatives was $ 6.4 billion and $ 14.5 billion, respectively, at September 30, 2022 and December 31, 2021. 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.

COLLATERAL

We engage in derivative transactions that are not subject to a clearing requirement directly with unaffiliated third parties, in most cases, under International Swaps and Derivatives Association, Inc. (ISDA) Master Agreements. Many of the ISDA Master Agreements also include Credit Support Annex provisions, which provide for collateral postings that may vary at various ratings and threshold levels. We attempt to reduce our risk with certain counterparties by entering into agreements that enable collateral to be obtained from a counterparty on an upfront or contingent basis. We minimize the risk that counterparties might be unable to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value and generally requiring additional collateral to be posted upon the occurrence of certain events or circumstances. In addition, certain derivative transactions have provisions that require collateral to be posted by us upon a downgrade of our long-term debt ratings or give the counterparty the right to terminate the transaction. In the case of some of the derivative transactions, upon a downgrade of our long-term debt ratings, as an alternative to posting collateral and subject to certain conditions, we may assign the transaction to an obligor with higher debt ratings or arrange for a substitute guarantee of our obligations by an obligor with higher debt ratings or take other similar action. The actual amount of collateral required to be posted to counterparties in the event of such downgrades, or the aggregate amount of payments that we could be required to make, depends on market conditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of the downgrade.

Collateral posted by us to third parties for derivative transactions was $ 3.3 billion at September 30, 2022 and $ 2.7 billion at December 31, 2021. In the case of collateral posted under derivative transactions that are not subject to clearing, this collateral can generally be repledged or resold by the counterparties. Collateral provided to us from third parties for derivative transactions was $ 3.8 billion and $ 2.4 billion at September 30, 2022 and December 31, 2021, respectively. In the case of collateral provided to us under derivative transactions that are not subject to clearing, we generally can repledge or resell collateral.

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OFFSETTING

We have elected to present all derivative receivables and derivative payables, and the related cash collateral received and paid, on a net basis on our Condensed Consolidated Balance Sheets when a legally enforceable ISDA Master Agreement exists between us and our derivative counterparty. An ISDA Master Agreement is an agreement governing multiple derivative transactions between two counterparties. The ISDA Master Agreement generally provides for the net settlement of all, or a specified group, of these derivative transactions, as well as transferred collateral, through a single payment, and in a single currency, as applicable. The net settlement provisions apply in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions governed by the ISDA Master Agreement.

HEDGE ACCOUNTING

We designated certain derivatives entered into with third parties as fair value hedges of available for sale investment securities held by our insurance subsidiaries. The fair value hedges include foreign currency forwards and cross currency swaps designated as hedges of the change in fair value of foreign currency denominated available for sale securities attributable to changes in foreign exchange rates. We also designated certain interest rate swaps entered into with third parties as fair value hedges of fixed rate GICs attributable to changes in benchmark interest rates.

We use foreign currency denominated debt and cross-currency swaps as hedging instruments in net investment hedge relationships to mitigate the foreign exchange risk associated with our non-U.S. dollar functional currency foreign subsidiaries. For net investment hedge relationships where issued debt is used as a hedging instrument, we assess the hedge effectiveness and measure the amount of ineffectiveness based on changes in spot rates. For net investment hedge relationships that use derivatives as hedging instruments, we assess hedge effectiveness and measure hedge ineffectiveness using changes in forward rates. For the three- and nine-month periods ended September 30, 2022, we recognized gains (losses) of $ 137 million and $ 444 million, respectively, and for the three- and nine-month periods ende d September 30, 2021, we recognized gains (losses) of $ 57 million and $ 163 million, respectively, included in Change in foreign currency translation adjustments in Other comprehensive income (loss) related to the net investment hedge relationships.

A qualitative methodology is utilized to assess hedge effectiveness for net investment hedges, while regression analysis is employed for all other hedges.

The following table presents the gain (loss) recognized in income on our derivative instruments in fair value hedging relationships in the Condensed Consolidated Statements of Income (Loss):

						Gains/(Losses) Recognized in Income for:
(in millions)						Hedging Derivatives (a)						Excluded Components (b)						Hedged Items						Net Impact
Three Months Ended September 30, 2022
Interest rate contracts:
Interest credited to policyholder account balances			$			( 62 )			$			—			$			62			$			—
Net investment income (loss)						25						—						( 24 )						1
Foreign exchange contracts:
Net realized gains/(losses)						455						122						( 455 )						122
Three Months Ended September 30, 2021
Interest rate contracts:
Interest credited to policyholder account balances			$			( 3 )			$			—			$			6			$			3
Net investment income (loss)						1						—						( 2 )						( 1 )
Foreign exchange contracts:
Net realized gains/(losses)						205						30						( 205 )						30
Nine Months Ended September 30, 2022
Interest rate contracts:
Interest credited to policyholder account balances			$			( 90 )			$			—			$			93			$			3
Net investment income (loss)						26						—						( 25 )						1
Foreign exchange contracts:
Net realized gains/(losses)						889						262						( 889 )						262
Nine Months Ended September 30, 2021
Interest rate contracts:
Interest credited to policyholder account balances			$			( 10 )			$			—			$			13			$			3
Net investment income (loss)						8						—						( 9 )						( 1 )

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Foreign exchange contracts:
Net realized gains/(losses)						201						108						( 201 )						108

(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 income on a mark-to-market basis.

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

The following table presents the effect of derivative instruments not designated as hedging instruments in the Condensed Consolidated Statements of Income (Loss):

			Gains (Losses) Recognized in Income
			Three Months Ended September 30,															Nine Months Ended September 30,
(in millions)						2022						2021									2022						2021
By Derivative Type:
Interest rate contracts			$			( 528 )			$			( 172 )						$			( 2,010 )			$			( 861 )
Foreign exchange contracts						1,010						310									1,976						271
Equity contracts						19						( 55 )									( 107 )						( 606 )
Commodity contracts						4						( 5 )									( 3 )						( 4 )
Credit contracts						( 3 )						—									( 4 )						( 9 )
Other contracts						42						17									73						49
Embedded derivatives						2,899						( 28 )									12,490						1,569
Total			$			3,443			$			67						$			12,415			$			409
By Classification:
Policy fees			$			17			$			16						$			47			$			46
Net investment income						8						( 1 )									10						( 6 )
Net realized gains - excluding Fortitude Re funds withheld assets						1,679						277									4,547						329
Net realized gains (losses) on Fortitude Re funds withheld assets (a)						1,744						( 224 )									7,830						45
Policyholder benefits and claims incurred						( 5 )						( 1 )									( 19 )						( 5 )
Total			$			3,443			$			67						$			12,415			$			409

(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.

CREDIT RISK-RELATED CONTINGENT FEATURES

We estimate that at September 30, 2022, based on our outstanding financial derivative transactions, a downgrade of our long-term senior debt ratings to BBB or BBB– by Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc., and/or a downgrade to Baa2 or Baa3 by Moody’s Investors’ Service, Inc. would permit counterparties to make additional collateral calls and permit certain counterparties to elect early termination of contracts, resulting in corresponding collateral postings and termination payments in the total amount of up to approximately $ 6 million. The aggregate fair value of our derivatives that were in a net liability position and that contain such credit risk-related contingencies which can be triggered below our long-term senior debt ratings of BBB+ or Baa1 was approximately $ 32 million and $ 206 million at September 30, 2022 and December 31, 2021, respectively. The aggregate fair value of assets posted as collateral under these contracts at September 30, 2022 and December 31, 2021, was approximately $ 33 million and $ 239 million, respectively.

HYBRID SECURITIES WITH EMBEDDED CREDIT DERIVATIVES

We invest in hybrid securities (such as credit-linked notes) with the intent of generating income and not specifically to acquire exposure to embedded derivative risk. As is the case with our other investments in RMBS, CMBS, CDOs and ABS, our investments in these hybrid securities are exposed to losses only up to the amount of our initial investment in the hybrid security. Other than our initial investment in the hybrid securities, we have no further obligation to make payments on the embedded credit derivatives in the related hybrid securities.

We elect to account for our investments in these hybrid securities with embedded written credit derivatives at fair value, with changes in fair value recognized in Net investment income. Our investments in these hybrid securities are reported as Other bond securities in the Condensed Consolidated Balance Sheets. The fair values of these hybrid securities were $ 1.3 billion and $ 2.0 billion at September 30, 2022 and December 31, 2021, respectively. These securities have par amounts of $ 3.5 billion and $ 4.6 billion at September 30, 2022 and December 31, 2021, respectively, and have remaining stated maturity dates that extend to 2052.

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10. Insurance Liabilities

LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (LOSS RESERVES)

Loss reserves represent the accumulation of estimates of unpaid claims, including estimates for claims incurred but not reported and loss adjustment expenses, less applicable discount. We regularly review and update the methods used to determine loss reserve estimates. Because these estimates are subject to the outcome of future events, changes in estimates are common given that loss trends vary and time is often required for changes in trends to be recognized and confirmed. Any adjustments resulting from this review are reflected currently in pre-tax income, except to the extent such adjustment impacts a deferred gain under a retroactive reinsurance agreement, in which case the ceded portion would be amortized into pre-tax income in subsequent periods. Reserve changes that increase previous estimates of ultimate cost are referred to as unfavorable or adverse development or reserve strengthening. Reserve changes that decrease previous estimates of ultimate cost are referred to as favorable development or reserve releases.

Our gross loss reserves before reinsurance and discount are net of contractual deductible recoverable amounts due from policyholders of approximately $ 12.4 billion and $ 12.3 billion at September 30, 2022 and December 31, 2021, respectively. These recoverable amounts are related to certain policies with high deductibles (in excess of high dollar amounts retained by the insured through self-insured retentions, deductibles, retrospective programs, or captive arrangements, each referred to generically as “deductibles”), primarily for U.S. Commercial casualty business. With respect to the deductible portion of the claim, we manage and pay the entire claim on behalf of the insured and are reimbursed by the insured for the deductible portion of the claim. Thus, these recoverable amounts represent a credit exposure to us. At September 30, 2022 and December 31, 2021, we held collateral of approximately $ 8.6 billion and $ 8.6 billion, respectively, for these deductible recoverable amounts, consisting primarily of letters of credit and funded trust agreements. Allowance for credit losses for the unsecured portion of these recoverable amounts was $ 14 million at both September 30, 2022 and December 31, 2021.

The following table presents the rollforward of activity in loss reserves:

			Three Months Ended September 30,															Nine Months Ended September 30,
(in millions)						2022						2021									2022						2021
Liability for unpaid loss and loss adjustment expenses, beginning of period			$			76,739			$			78,981						$			79,026			$			77,720
Reinsurance recoverable						( 33,583 )						( 34,866 )									( 35,213 )						( 34,431 )
Net Liability for unpaid loss and loss adjustment expenses, beginning of period						43,156						44,115									43,813						43,289
Losses and loss adjustment expenses incurred:
Current year						4,373						4,467									12,020						12,262
Prior years, excluding discount and amortization of deferred gain						( 112 )						( 153 )									( 537 )						( 166 )
Prior years, discount charge (benefit)						36						83									78						99
Prior years, amortization of deferred gain on retroactive reinsurance (a)						( 23 )						( 13 )									( 37 )						( 107 )
Total losses and loss adjustment expenses incurred						4,274						4,384									11,524						12,088
Losses and loss adjustment expenses paid:
Current year						( 1,132 )						( 1,147 )									( 2,289 )						( 2,370 )
Prior years						( 2,673 )						( 2,449 )									( 8,844 )						( 8,653 )
Total losses and loss adjustment expenses paid						( 3,805 )						( 3,596 )									( 11,133 )						( 11,023 )
Other changes:
Foreign exchange effect						( 1,031 )						( 414 )									( 1,827 )						( 57 )
Retroactive reinsurance adjustment (net of discount) (b)						101						159									318						351
Total other changes						( 930 )						( 255 )									( 1,509 )						294
Liability for unpaid loss and loss adjustment expenses, end of period:
Net liability for unpaid losses and loss adjustment expenses						42,695						44,648									42,695						44,648
Reinsurance recoverable						32,824						34,626									32,824						34,626
Total			$			75,519			$			79,274						$			75,519			$			79,274

(a) Includes $ 5 million and $ 5 million for the retroactive reinsurance agreement with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc. (Berkshire), covering U.S. asbestos exposures for the three-month periods ended September 30, 2022 and 2021, respectively, and $ 15 million and $ 23 million for the nine-month periods ended September 30, 2022 and 2021.

(b) Includes benefit (charge) from change in discount on retroactive reinsurance in the amount of $ 17 million and $ 22 million for the three-month periods ended September 30, 2022 and 2021 respectively, and $ 74 million and $ 78 million for the nine-month periods ended September 30, 2022 and 2021 respectively.

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Prior Year Development

During the three-month period ended September 30, 2022, we recognized favorable prior year loss reserve development of $ 112 million excluding discount and amortization of deferred gain. During the nine-month period ended September 30, 2022, we recognized favorable prior year loss reserve development of $ 537 million excluding discount and amortization of deferred gain. The development in these periods was largely driven by favorable development on U.S. Workers Compensation, U.S. Other Casualty, Global Specialty and International Personal Lines led by Japan, with unfavorable development in Financial Lines (U.S. and International) and International Casualty Lines.

During the three-month period ended September 30, 2021, we recognized favorable prior year loss reserve development of $ 153 million excluding discount and amortization of deferred gain. During the nine-month period ended September 30, 2021, we recognized favorable prior year loss reserve development of $ 166 million excluding discount and amortization of deferred gain. The development in these periods was primarily driven by favorable development on U.S. Workers Compensation, global short-tailed Commercial Lines and Personal Insurance, including catastrophes, partially offset by unfavorable development in Financial Lines (U.S. and International).

Discounting of Loss Reserves

At September 30, 2022 and December 31, 2021, the loss reserves reflect a net loss reserve discount of $ 946 million and $ 876 million, respectively, including tabular and non-tabular calculations based upon the following assumptions:

• The non-tabular workers’ compensation discount is calculated separately for companies domiciled in New York, Pennsylvania and Delaware, and follows the statutory regulations (prescribed or permitted) for each state.

– For New York companies, the discount is based on a 5 percent interest rate and the companies’ own payout patterns.

– The Pennsylvania and Delaware regulators approved use of a consistent benchmark discount rate and spread (U.S. Treasury rate plus a liquidity premium) to all of our workers’ compensation reserves in our Pennsylvania domiciled and Delaware domiciled companies, as well as our use of updated payout patterns specific to our primary and excess workers compensation portfolios. In 2020, the regulators also approved that the discount rate will be updated on an annual basis.

• The tabular workers’ compensation discount is calculated based on the mortality rate used in the 2007 U.S. Life table and interest rates prescribed or permitted by each state (i.e. New York is based on 5 percent interest rate and Pennsylvania and Delaware are based on U.S. Treasury rate plus a liquidity premium). In the case that applying this tabular discount factor to our nominal reserves produces a tabular discount that is greater than the indemnity portion of our case reserves, the tabular discount is capped at our estimate of the indemnity portion of our cases reserves ( 45 percent).

The discount for asbestos reserves has been fully accreted.

At September 30, 2022 and December 31, 2021, the discount consists of $ 266 million and $ 260 million of tabular discount, respectively, and $ 680 million and $ 616 million of non-tabular discount for workers’ compensation, respectively. During the nine-month periods ended September 30, 2022 and 2021, the benefit / (charge) from changes in discount of $( 4 ) million and $( 62 ) million, respectively, were recorded as part of the policyholder benefits and losses incurred in the Condensed Consolidated Statements of Income (Loss).

The following table presents the components of the loss reserve discount discussed above:

(in millions)						September 30, 2022						December 31, 2021
U.S. workers' compensation			$			1,825			$			1,829
Retroactive reinsurance						( 879 )						( 953 )
Total reserve discount (a)(b)			$			946			$			876

(a) Excludes $ 131 million and $ 116 million of discount related to certain long-tail liabilities in the UK at September 30, 2022 and December 31, 2021, respectively.

(b) Includes gross discount of $ 480 million and $ 500 million, which was 100 percent ceded to Fortitude Re at September 30, 2022 and December 31, 2021, respectively.

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The following table presents the net loss reserve discount benefit (charge):

			Three Months Ended September 30,															Nine Months Ended September 30,
(in millions)						2022						2021									2022						2021
Current accident year			$			26			$			11						$			74			$			37
Accretion and other adjustments to prior year discount						( 36 )						( 83 )									( 78 )						( 99 )
Net reserve discount benefit (charge)						( 10 )						( 72 )									( 4 )						( 62 )
Change in discount on loss reserves ceded under retroactive reinsurance						17						22									74						78
Net change in total reserve discount*			$			7			$			( 50 )						$			70			$			16

* Excludes $ 20 million and $( 39 ) million discount related to certain long-tail liabilities in the UK for the three-month periods ended September 30, 2022 and 2021, respectively, and excludes $ 15 million and $( 30 ) million discount related to certain long-tail liabilities in the UK for the nine-month periods ended September 30, 2022 and 2021, respectively.

Amortization of Deferred Gain on Retroactive Reinsurance

Amortization of the deferred gain on retroactive reinsurance includes $ 18 million and $ 8 million related to the adverse development reinsurance cover with NICO for the three-month periods ended September 30, 2022 and 2021, respectively, and $ 22 million and $ 84 million related to the adverse development reinsurance cover with NICO for the nine-month periods ended September 30, 2022 and 2021, respectively.

Amounts recognized reflect the amortization of the initial deferred gain at inception, as amended for subsequent changes in the deferred gain due to changes in subject reserves.

11. Contingencies, Commitments and Guarantees

In the normal course of business, various contingent liabilities and commitments are entered into by AIG and our subsidiaries. In addition, AIG Parent guarantees various obligations of certain subsidiaries.

Although AIG cannot currently quantify its ultimate liability for unresolved litigation and investigation matters, including those referred to below, it is possible that such liability could have a material adverse effect on AIG’s consolidated financial condition or its consolidated results of operations or consolidated cash flows for an individual reporting period.

LEGAL CONTINGENCIES

Overview

In the normal course of business, AIG and our subsidiaries are subject to regulatory and government investigations and actions, and litigation and other forms of dispute resolution in a large number of proceedings pending in various domestic and foreign jurisdictions. Certain of these matters involve potentially significant risk of loss due to potential for significant jury awards and settlements, punitive damages or other penalties. Many of these matters are also highly complex and may seek recovery on behalf of a class or similarly large number of plaintiffs. It is therefore inherently difficult to predict the size or scope of potential future losses arising from these matters. In our insurance and reinsurance operations, litigation and arbitration concerning the scope of coverage under insurance and reinsurance contracts, and litigation and arbitration in which our subsidiaries defend or indemnify their insureds under insurance contracts, are generally considered in the establishment of our loss reserves. Separate and apart from the foregoing matters involving insurance and reinsurance coverage, AIG, our subsidiaries and their respective officers and directors are subject to a variety of additional types of legal proceedings brought by holders of AIG securities, customers, employees and others, alleging, among other things, breach of contractual or fiduciary duties, bad faith, indemnification and violations of federal and state statutes and regulations. With respect to these other categories of matters not arising out of claims for insurance or reinsurance coverage, we establish reserves for loss contingencies when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. In many instances, we are unable to determine whether a loss is probable or to reasonably estimate the amount of such a loss and, therefore, the potential future losses arising from legal proceedings may exceed the amount of liabilities that we have recorded in our financial statements covering these matters. While such potential future charges could be material, based on information currently known to management, management does not believe, other than as may be discussed below, that any such charges are likely to have a material adverse effect on our financial position or results of operation.

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Additionally, from time to time, various regulatory and governmental agencies review the transactions and practices of AIG and our subsidiaries in connection with industry- wide and other inquiries or examinations into, among other matters, the business practices of current and former operating insurance subsidiaries. Such investigations, inquiries or examinations could develop into administrative, civil or criminal proceedings or enforcement actions, in which remedies could include fines, penalties, restitution or alterations in our business practices, and could result in additional expenses, limitations on certain business activities and reputational damage.

Moriarty Litigation

Effective January 1, 2013, the California legislature enacted AB 1747 (the Act), which amended the Insurance Code to mandate that life insurance policies issued and delivered in California contain a 60-day grace period during which time the policies must remain in force after a premium payment is missed, and that life insurers provide both a 30-day minimum notification of lapse and the right of policy owners to designate a secondary recipient for lapse and termination notices. Following guidance from the California Department of Insurance and certain industry trade groups, American General Life Insurance Company (AGL) interpreted the Act to be prospective in nature, applying only to policies issued and delivered on or after the Act’s January 1, 2013, effective date. On July 18, 2017, AGL was sued in a putative class action captioned Moriarty v. American General Life Insurance Company, No. 17-cv-1709 (S.D. Cal.), challenging AGL’s prospective application of the Act. Plaintiff’s complaint, which is similar to complaints filed against other insurers, argues that policies issued and delivered prior to January 1, 2013, like the $ 1 million policy issued to Plaintiff’s husband do not lapse—despite nonpayment of premiums—if the insurer has not complied with the Act’s terms. On August 30, 2021, the California Supreme Court issued an opinion in McHugh v. Protective Life Insurance, 12 Cal. 5th 213 (2021), ruling that the Act applies to all policies in force on January 1, 2013, regardless of when the policies were issued. On February 7, 2022, Plaintiff filed motions for summary judgment and class certification; AGL opposed both motions and filed its own motion for partial summary judgment. On July 26, 2022, the District Court granted in part and denied in part AGL’s motion for partial summary judgment, and on September 7, 2022, the District Court denied Plaintiff's motion for summary judgment. In the summary judgment decisions, the District Court declined to adopt Plaintiff's theory that a failure to comply with the Act necessitates payment of policy benefits or to make a pre-trial determination as to AGL’s liability. On September 27, 2022, the District Court denied Plaintiff’s motion for class certification without prejudice and thereafter set a trial date for February 7, 2023. The District Court declined to certify Plaintiff's proposed class consisting of claims for monetary damages and equitable relief, but indicated that Plaintiff could seek the certification of a narrower class consisting only of claims for monetary damages. The District Court indicated, however, that it has "substantial concerns" as to whether individual issues such as actual damages and causation would predominate, precluding class certification. Proceedings are ongoing in other California cases that raise similar industry-wide issues, including in the McHugh case on remand from the California Supreme Court, in which the California Court of Appeal rendered an unpublished opinion on October 10, 2022 that also declined to hold that failure to comply with the Act automatically necessitates payment of policy benefits. We have accrued our current estimate of probable loss with respect to this litigation.

OTHER COMMITMENTS

In the normal course of business, we enter into commitments to invest in limited partnerships, private equity funds and hedge funds and to purchase and develop real estate in the U.S. and abroad. These commitments totaled $ 7.1 billion and $ 7.3 billion at September 30, 2022 and December 31, 2021, respectively.

GUARANTEES

Subsidiaries

We have issued unconditional guarantees with respect to the prompt payment, when due, of all present and future payment obligations and liabilities of AIG Financial Products Corp. and related subsidiaries (collectively AIGFP) and of AIG Markets, Inc. arising from transactions entered into by AIG Markets, Inc.

In connection with AIGFP’s business activities, AIGFP has issued, in a limited number of transactions, standby letters of credit or similar facilities to equity investors of structured leasing transactions in an amount equal to the termination value owing to the equity investor by the lessee in the event of a lessee default (the equity termination value). The total amount outstanding at September 30, 2022 was $ 69 million. In those transactions, AIGFP has agreed to pay such amount if the lessee fails to pay. The amount payable by AIGFP is, in certain cases, partially offset by amounts payable under other instruments typically equal to the present value of scheduled payments to be made by AIGFP. In the event that AIGFP is required to make a payment to the equity investor, the lessee is unconditionally obligated to reimburse AIGFP. To the extent that the equity investor is paid the equity termination value from the standby letter of credit and/or other sources, including payments by the lessee, AIGFP takes an assignment of the equity investor’s rights under the lease of the underlying property. Because the obligations of the lessee under the lease transactions are generally economically defeased, lessee bankruptcy is the most likely circumstance in which AIGFP would be required to pay without reimbursement.

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Business and Asset Dispositions

We are subject to financial guarantees and indemnity arrangements in connection with the completed sales of businesses and assets. The various arrangements may be triggered by, among other things, declines in asset values, the occurrence of specified business contingencies, the realization of contingent liabilities, developments in litigation or breaches of representations, warranties or covenants provided by us. These arrangements are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential obligation is subject to contractual limitations, while in other cases such limitations are not specified or are not applicable.

We are unable to develop a reasonable estimate of the maximum potential payout under certain of these arrangements. Overall, we believe the likelihood that we will have to make any material payments related to completed sales under these arrangements is remote, and no material liabilities related to these arrangements have been recorded in the Condensed Consolidated Balance Sheets.

Other

• For additional information on commitments and guarantees associated with VIEs, see Note 8.

• For additional information on derivatives, see Note 9.

12. Equity

SHARES OUTSTANDING

Preferred Stock

On March 14, 2019, we issued 20,000 shares of Series A 5.85 % Non-Cumulative Perpetual Preferred Stock (Series A Preferred Stock) (equivalent to 20,000,000 Depositary Shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock), $ 5.00 par value and $ 25,000 liquidation preference per share (equivalent to $ 25 per Depositary Share). After underwriting discounts and expenses, we received net proceeds of approximately $ 485 million.

The following table presents declaration date, record date, payment date and dividends paid per preferred share and per depository share on the Series A Preferred Stock in the nine months ended September 30, 2022 and 2021:

									Dividends Paid
Declaration Date			Record Date			Payment Date			Per Preferred Share			Per Depositary Share
August 8, 2022			August 31, 2022			September 15, 2022			$	365.625		$	0.365625
May 3, 2022			May 31, 2022			June 15, 2022			365.625			0.365625
February 16, 2022			February 28, 2022			March 15, 2022			365.625			0.365625
August 5, 2021			August 31, 2021			September 15, 2021			$	365.625		$	0.365625
May 6, 2021			May 31, 2021			June 15, 2021			365.625			0.365625
February 16, 2021			February 26, 2021			March 15, 2021			365.625			0.365625

Common Stock

The following table presents a rollforward of outstanding shares:

Nine Months Ended September 30, 2022			Common Stock Issued			Treasury Stock			Common Stock Outstanding
Shares, beginning of year			1,906,671,492			( 1,087,984,129 )			818,687,363
Shares issued			—			5,209,573			5,209,573
Shares repurchased			—			( 76,681,026 )			( 76,681,026 )
Shares, end of period			1,906,671,492			( 1,159,455,582 )			747,215,910

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Dividends

Dividends are payable on AIG Common Stock only when, as and if declared by our Board of Directors in its discretion, from funds legally available for this purpose. In considering whether to pay a dividend on or purchase shares of AIG Common Stock, our Board of Directors considers a number of factors, including, but not limited to: the capital resources available to support our insurance operations and business strategies, AIG’s funding capacity and capital resources in comparison to internal benchmarks, expectations for capital generation, rating agency expectations for capital, regulatory standards for capital and capital distributions, and such other factors as our Board of Directors may deem relevant. The payment of dividends is also subject to the terms of AIG’s outstanding Series A Preferred Stock, pursuant to which no dividends may be declared or paid on any AIG Common Stock unless the full dividends for the latest completed dividend period on all outstanding shares of Series A Preferred Stock have been declared and paid or provided for.

The following table presents declaration date, record date, payment date and dividends paid per common share on AIG Common Stock in the nine months ended September 30, 2022 and 2021:

Declaration Date

Record Date

Payment Date

Dividends Paid Per Common Share

August 8, 2022

September 16, 2022

September 30, 2022

$

0.32

May 3, 2022

June 16, 2022

June 30, 2022

0.32

February 16, 2022

March 17, 2022

March 31, 2022

0.32

August 5, 2021

September 16, 2021

September 30, 2021

$

0.32

May 6, 2021

June 15, 2021

June 29, 2021

0.32

February 16, 2021

March 16, 2021

March 30, 2021

0.32

For a discussion of restrictions on payments of dividends to AIG Parent by its subsidiaries see Note 18 to the Consolidated Financial Statements in the 2021 Annual Report.

Repurchase of AIG Common Stock

Shares may be repurchased from time to time in the open market, private purchases, through forward, derivative, accelerated repurchase or automatic repurchase transactions or otherwise. Certain of our share repurchases have been and may from time to time be effected through Securities Exchange Act of 1934 (Exchange Act) Rule 10b5-1 repurchase plans. On May 3, 2022, the Board of Directors authorized the repurchase of $ 6.5 billion of AIG Common Stock (inclusive of the approximately $ 1.5 billion of expected remaining authorization upon expiration of the then-current 10b5-1 Plan as of May 20, 2022).

The timing of any future repurchases will depend on market conditions, our business and strategic plans, financial condition, results of operations, liquidity and other factors. The repurchase of AIG Common Stock is also subject to the terms of AIG’s outstanding Series A Preferred Stock, pursuant to which AIG may not (other than in limited circumstances) purchase, redeem or otherwise acquire AIG Common Stock unless the full dividends for the latest completed dividend period on all outstanding shares of Series A Preferred Stock have been declared and paid or provided for.

The following table presents repurchases of AIG Common Stock:

Nine Months Ended September 30,
(in millions)						2022						2021
Aggregate repurchases of common stock *			$			4,370			$			1,651
Total number of common shares repurchased						77						32

* For the nine months ended September 30, 2021, approximately $ 92 million of these share repurchases were funded with proceeds received from warrant exercises that occurred prior to the expiration of warrants to purchase shares of AIG Common Stock on January 19, 2021.

Pursuant to an Exchange Act Rule 10b5-1 repurchase plan from October 1, 2022 to October 27, 2022, we repurchased approximately 4 million shares of AIG Common Stock for an aggregate purchase price of approximately $ 221 million.

DIVIDENDS DECLARED

On November 1, 2022, our Board of Directors declared a cash dividend on AIG Common Stock of $ 0.32 per share, payable on December 29, 2022 to shareholders of record on December 15, 2022. On November 1, 2022, our Board of Directors declared a cash dividend on AIG’s Series A Preferred Stock of $ 365.625 per share, payable on December 15, 2022 to holders of record on November 30, 2022.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents a rollforward of Accumulated other comprehensive income (loss):

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The following table presents the other comprehensive income (loss) reclassification adjustments for the three- and nine-month periods ended September 30, 2022 and 2021 , respectively:

(in millions)			Unrealized Appreciation (Depreciation) of Fixed Maturity Securities on Which Allowance for Credit Losses Was Taken									Unrealized Appreciation (Depreciation) of All Other Investments						Foreign Currency Translation Adjustments						Retirement Plan Liabilities Adjustment						Fair Value of Liabilities Under Fair Value Option Attributable to Changes in Own Credit Risk						Total
Three Months Ended September 30, 2022
Unrealized change arising during period			$			( 75 )			$			( 10,215 )			$			( 589 )			$			10			$			—			$			( 10,869 )
Less: Reclassification adjustments included in net income						17						( 148 )						—						( 8 )						—						( 139 )
Total other comprehensive income (loss), before income tax expense (benefit)						( 92 )						( 10,067 )						( 589 )						18						—						( 10,730 )
Less: Income tax expense (benefit)						( 19 )						( 1,743 )						2						3						—						( 1,757 )
Total other comprehensive income (loss), net of income tax expense (benefit)			$			( 73 )			$			( 8,324 )			$			( 591 )			$			15			$			—			$			( 8,973 )
Three Months Ended September 30, 2021
Unrealized change arising during period			$			21			$			( 1,657 )			$			( 132 )			$			30			$			—			$			( 1,738 )
Less: Reclassification adjustments included in net income						6						219						—						( 11 )						—						214
Total other comprehensive income (loss), before income tax expense (benefit)						15						( 1,876 )						( 132 )						41						—						( 1,952 )
Less: Income tax expense (benefit)						3						( 366 )						3						10						—						( 350 )
Total other comprehensive income (loss), net of income tax expense (benefit)			$			12			$			( 1,510 )			$			( 135 )			$			31			$			—			$			( 1,602 )
Nine Months Ended September 30, 2022
Unrealized change arising during period			$			( 91 )			$			( 41,552 )			$			( 794 )			$			16			$			( 4 )			$			( 42,425 )
Less: Reclassification adjustments included in net income						9						( 883 )						—						( 23 )						—						( 897 )
Total other comprehensive income (loss), before of income tax expense (benefit)						( 100 )						( 40,669 )						( 794 )						39						( 4 )						( 41,528 )
Less: Income tax expense (benefit)						( 22 )						( 6,200 )						83						( 1 )						—						( 6,140 )
Total other comprehensive income (loss), net of income tax expense (benefit)			$			( 78 )			$			( 34,469 )			$			( 877 )			$			40			$			( 4 )			$			( 35,388 )
Nine Months Ended September 30, 2021
Unrealized change arising during period			$			62			$			( 5,512 )			$			63			$			22			$			( 1 )			$			( 5,366 )
Less: Reclassification adjustments included in net income						—						749						—						( 34 )						—						715
Total other comprehensive income (loss), before income tax expense (benefit)						62						( 6,261 )						63						56						( 1 )						( 6,081 )
Less: Income tax expense (benefit)						13						( 1,262 )						59						14						—						( 1,176 )
Total other comprehensive income (loss), net of income tax expense (benefit)			$			49			$			( 4,999 )			$			4			$			42			$			( 1 )			$			( 4,905 )

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The following table presents the effect of the reclassification of significant items out of AOCI on the respective line items in the Condensed Consolidated Statements of Income (Loss):

						Amount Reclassified from AOCI												Affected Line Item in the
						Three Months Ended September 30,												Condensed Consolidated
(in millions)						2022						2021						Statements of Income (Loss)
Unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken
Investments			$			17			$			6						Net realized gains (losses)
Total						17						6
Unrealized appreciation (depreciation) of all other investments
Investments						( 148 )						219						Net realized gains (losses)
Total						( 148 )						219
Change in retirement plan liabilities adjustment
Prior-service credit						( 1 )						( 1 )						*
Actuarial losses						( 7 )						( 10 )						*
Total						( 8 )						( 11 )
Total reclassifications for the period			$			( 139 )			$			214
						Amount Reclassified from AOCI												Affected Line Item in the
						Nine Months Ended September 30,												Condensed Consolidated
(in millions)						2022						2021						Statements of Income (Loss)
Unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken
Investments			$			9			$			—						Net realized gains (losses)
Total						9						—
Unrealized appreciation (depreciation) of all other investments
Investments						( 883 )						749						Net realized gains (losses)
Total						( 883 )						749
Change in retirement plan liabilities adjustment
Prior-service credit						( 2 )						( 3 )
Actuarial losses						( 21 )						( 31 )
Total						( 23 )						( 34 )
Total reclassifications for the period			$			( 897 )			$			715

* These AOCI components are included in the computation of net periodic pension cost.

NON-CONTROLLING INTEREST

On September 19, 2022, AIG sold a 12.4 percent equity interest in Corebridge in the IPO, reducing its equity ownership to 77.7 percent.

For additional information on the Corebridge IPO see Note 1.

The following table presents the effect of changes in our ownership interest in Corebridge on our equity as of September 19, 2022:

Nine Months Ended September 30,
(in millions)						2022
Net income attributable to AIG common shareholders			$			9,983
Changes in AIG equity for sale of 12.4 % interest in Corebridge						608
Change from Net income attributable to AIG common shareholders and changes in AIG's ownership interests			$			10,591

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13. Earnings Per Common Share (EPS)

The basic EPS computation is based on the weighted average number of common shares outstanding, adjusted to reflect all stock dividends and stock splits. The diluted EPS computation is based on those shares used in the basic EPS computation plus common shares that would have been outstanding assuming issuance of common shares for all dilutive potential common shares outstanding and adjusted to reflect all stock dividends and stock splits, using the treasury stock method or the if-converted method, as applicable.

The following table presents the computation of basic and diluted EPS:

						Three Months Ended September 30,															Nine Months Ended September 30,
(dollars in millions, except per common share data)						2022						2021									2022						2021
Numerator for EPS:
Income from continuing operations			$			3,041			$			1,737						$			11,090			$			5,817
Less: Net income from continuing operations attributable to noncontrolling interests						332						70									1,084						175
Less: Preferred stock dividends						7						7									22						22
Income attributable to AIG common shareholders from continuing operations						2,702						1,660									9,984						5,620
Income (loss) from discontinued operations, net of income tax expense						—						—									( 1 )						—
Net income attributable to AIG common shareholders			$			2,702			$			1,660						$			9,983			$			5,620
Denominator for EPS:
Weighted average common shares outstanding - basic						763,051,482						852,765,263									789,888,322						861,211,983
Dilutive common shares						8,080,919						11,254,231									9,204,234						9,790,035
Weighted average common shares outstanding - diluted (a)						771,132,401						864,019,494									799,092,556						871,002,018
Income per common share attributable to AIG common shareholders:
Basic:
Income from continuing operations			$			3.54			$			1.95						$			12.64			$			6.53
Income from discontinued operations			$			—			$			—						$			—			$			—
Income attributable to AIG common shareholders			$			3.54			$			1.95						$			12.64			$			6.53
Diluted:
Income from continuing operations			$			3.50			$			1.92						$			12.49			$			6.45
Income from discontinued operations			$			—			$			—						$			—			$			—
Income attributable to AIG common shareholders			$			3.50			$			1.92						$			12.49			$			6.45

(a) Potential dilutive common shares include our share-based employee compensation plans, a weighted average portion of the 10 -year warrants issued to AIG shareholders as part of AIG’s recapitalization in January 2011, which expired in January 2021 and an option for Blackstone to exchange all or a portion of its ownership interest in Corebridge for AIG common shares in the event an IPO did not occur prior to 2024. As a result of the consummation of the IPO on September 19, 2022, this exchange right of Blackstone was terminated. The number of common shares excluded from diluted shares outstanding was 6.0 million and 30.8 million for the three- and nine-month periods ended September 30, 2022, respectively, and 5.2 million and 6.6 million for the three- and nine-month periods ended September 30, 2021, respectively, because the effect of including those common shares in the calculation would have been anti-dilutive.

For information regarding the Blackstone option to exchange all or a portion of its ownership interest in Corebridge for AIG common shares, see Note 1. For information regarding our repurchases of AIG Common Stock, see Note 12.

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14. Income Taxes

U.S. TAX LAW CHANGES

On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) of 2022 (H.R. 5376), which finances climate and energy provisions and an extension of enhanced subsidies under the Affordable Care Act. Key provisions include a 15 percent corporate alternative minimum tax (CAMT) on adjusted financial statement income for corporations with average profits over $1 billion over a three-year period, a 1 percent stock buyback tax, increased IRS enforcement funding, and Medicare's new ability to negotiate prescription drug prices. CAMT and the stock buyback tax are effective for tax years beginning after December 31, 2022. The tax provisions of IRA are not expected to have a material impact on AIG’s financial results. However, the CAMT may impact our U.S. cash tax liabilities.

BASIS OF PRESENTATION

We file a consolidated U.S. federal income tax return with our eligible U.S. subsidiaries. Income earned by subsidiaries operating outside the U.S. is taxed, and income tax expense is recorded, based on applicable U.S. and foreign laws.

Following the IPO of Corebridge on September 19, 2022, AIG’s remaining ownership in Corebridge decreased below 80 percent, resulting in tax deconsolidation of Corebridge parent and its subsidiaries from the AIG consolidated U.S. federal income tax group as well as certain state and local jurisdictions where unitary returns are filed.

Subsequent to the tax deconsolidation from AIG, due to the application of relevant U.S. tax laws, American General Corporation and its directly owned life insurance subsidiaries (the AGC Group) will not be permitted to join in the filing of a consolidated U.S. federal income tax return with Corebridge parent and its non-life-insurance subsidiaries for a period of five years. Corebridge’s net operating losses and tax credit carryforwards that have not been utilized prior to tax deconsolidation from AIG will remain with the relevant Corebridge entities and will be available for utilization by the respective Corebridge U.S. federal income tax groups. The realizability of the deferred tax assets related to such carryforwards is based on the positive and negative evidence applicable to each U.S. federal income tax group.

TAX ACCOUNTING POLICIES

We use an item-by-item approach to release the stranded or disproportionate income tax effects in AOCI related to our available-for-sale securities. Under this approach, a portion of the disproportionate tax effects is assigned to each individual security lot at the date the amount becomes lodged. When the individual securities are sold, mature, or are otherwise impaired on an other-than-temporary basis, the assigned portion of the disproportionate tax effect is reclassified from AOCI to income (loss) from continuing operations.

We consider our foreign earnings with respect to certain operations in Canada, South Africa, Japan, Latin America, Bermuda as well as the European, Asia Pacific and Middle East regions to be indefinitely reinvested. These earnings relate to ongoing operations and have been reinvested in active business operations. A deferred tax liability has not been recorded for those foreign subsidiaries whose earnings are considered to be indefinitely reinvested. If recorded, such deferred tax liability would not be material to our consolidated financial condition. Deferred taxes, if necessary, have been provided on earnings of non-U.S. affiliates whose earnings are not indefinitely reinvested.

Global Intangible Low-Taxed Income (GILTI) imposes U.S. taxes on the excess of a deemed return on tangible assets of certain foreign subsidiaries. Consistent with accounting guidance, we have made an accounting policy election to treat GILTI taxes as a period tax charge in the period the tax is incurred.

INTERIM TAX CALCULATION METHOD

We use the estimated annual effective tax rate method in computing our interim tax provision. Certain items, including those deemed to be unusual, infrequent or that cannot be reliably estimated, are excluded from the estimated annual effective tax rate. In these cases, the actual tax expense or benefit is reported in the same period as the related item. Certain tax effects are also not reflected in the estimated annual effective tax rate, primarily certain changes in uncertain tax positions and realizability of deferred tax assets, and are recorded in the period in which the change occurs.

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INTERIM TAX EXPENSE (BENEFIT)

For the three-month period ended September 30, 2022, the effective tax rate on income from continuing operations was 21.0 percent. While the effective tax rate on income from continuing operations does not differ from the statutory tax rate of 21 percent, we recognized tax benefits associated with tax exempt income and reclassifications from AOCI to income from continuing operations related to the disposal of available for sale securities, offset by tax charges associated with the effect of foreign operations, state and local income taxes, and non-deductible transfer pricing charges. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.

For the nine-month period ended September 30, 2022, the effective tax rate on income from continuing operations was 20.8 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax benefits associated with tax exempt income, reclassifications from AOCI to income from continuing operations related to the disposal of available for sale securities, excess tax benefits related to share based compensation payments recorded through the income statement and tax adjustments related to prior year returns. These tax benefits were partially offset by tax charges associated with the effect of foreign operations, state and local income taxes, and non-deductible transfer pricing charges. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.

For the three-month period ended September 30, 2021, the effective tax rate on income from continuing operations was 20.2 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax benefits associated with tax adjustments related to prior year returns, tax exempt income, and reclassifications from AOCI to income from continuing operations related to the disposal of available for sale securities. These tax benefits were partially offset by tax charges associated with the effect of foreign operations, valuation allowance activity related to certain foreign subsidiaries, state and local income taxes, and non-deductible transfer pricing charges. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.

For the nine-month period ended September 30, 2021, the effective tax rate on income from continuing operations was 17.5 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax benefits associated with the release of reserves for uncertain tax positions, penalties and interest related to the recent completion of audit activity by the IRS, release of reserves for uncertain tax positions and interest related to a New York State tax settlement based on the completion of recent audit activity, tax adjustments related to prior year returns, tax exempt income, remeasurement of deferred taxes as a result of an increase in the UK corporate income tax rate enacted during the second quarter, and reclassifications from AOCI to income from continuing operations related to the disposal of available for sale securities. These tax benefits were partially offset by tax charges associated with the establishment of U.S. federal valuation allowance related to certain tax attribute carryforwards, the effect of foreign operations, excess tax charges related to share based compensation payments recorded through the income statement, state and local income taxes, and non-deductible transfer pricing charges. We also recognized a tax charge associated with reduction of net operating loss deferred tax assets in certain foreign jurisdictions, with a corresponding decrease in the related deferred tax asset valuation allowance. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.

ASSESSMENT OF DEFERRED TAX ASSET VALUATION ALLOWANCE

The evaluation of the recoverability of our deferred tax asset and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax asset will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed.

Recent events, including changes in target interest rates by the Board of Governors of the Federal Reserve System, and significant market volatility, continue to impact actual and projected results of our business operations as well as our views on potential effectiveness of certain prudent and feasible tax planning strategies. In order to demonstrate the predictability and sufficiency of future taxable income necessary to support the realizability of the net operating losses and foreign tax credit carryforwards, we have considered forecasts of future income for each of our businesses, including assumptions about future macro-economic and AIG-specific conditions and events, and any impact these conditions and events may have on our prudent and feasible tax planning strategies. We also subjected the forecasts to a variety of stresses of key assumptions and evaluated the effect on tax attribute utilization.

The carryforward period of our foreign tax credit carryforwards runs through 2023. Carryforward periods for our net operating losses extend from 2028 forward. However, utilization of a portion of our net operating losses is limited under separate return limitation year rules.

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To the extent that the valuation allowance is attributed to changes in forecast of current year taxable income, the impact is included in our estimated annualized effective tax rate. A valuation allowance related to changes in forecasts of income in future periods as well as other items not related to the current year is recorded discretely.

Although tax deconsolidation of Corebridge from the AIG consolidated U.S. federal income tax group resulted in the formation of new federal tax filing groups requiring separate deferred tax asset realizability assessments, there was no overall change to the total deferred tax asset valuation allowance recorded as of September 30, 2022. After factoring in multiple data points and assessing relative weight of all positive and negative evidence, we concluded that a valuation allowance of $ 850 million is still necessary. Accordingly, as of September 30, 2022, the balance sheet reflects a valuation allowance of $ 850 million, of which $ 705 million and $ 145 million was recorded by AIG Parent and Corebridge, respectively. The valuation allowance at AIG Parent relates to a portion of our U.S. consolidated federal income tax group tax attribute carryforwards that are no longer more-likely-than-not to be realized. The valuation allowance at Corebridge relates to a portion of both tax attribute carryforwards and certain other deferred tax assets of the Corebridge non-life insurance group that are not more-likely-than-not to be realized.

For the nine-month period ended September 30, 2022, recent changes in market conditions, including rising interest rates, impacted the unrealized tax gains and losses in the available for sale securities portfolios of both our U.S. Life Insurance and non-life insurance companies, resulting in deferred tax assets related to net unrealized tax capital losses. The deferred tax assets relate to the unrealized tax capital losses for which the carryforward period has not yet begun, and as such, when assessing recoverability, we consider our ability and intent to hold the underlying securities to recovery. As of September 30, 2022, based on all available evidence, we concluded that a valuation allowance should be established on a portion of the deferred tax assets related to unrealized tax capital losses that are not more-likely-than-not to be realized. For the nine-month period ended September 30, 2022, we established $ 1.6 billion of valuation allowance associated with the unrealized tax capital losses in the U.S. Life Insurance Companies’ available for sale securities portfolio and $ 991 million of valuation allowance associated with the unrealized tax capital losses in the non-life insurance companies’ available for sale securities portfolio. For the three-month period ended September 30, 2022, we recorded an increase in valuation allowance of $ 75 million associated with the unrealized tax capital losses in the U.S. Life Insurance Companies’ available for sale securities portfolio and $ 361 million associated with the unrealized tax capital losses in the non-life insurance companies’ available for sale securities portfolio. The valuation allowance establishment was allocated to other comprehensive income.

For the nine-month period ended September 30, 2022, we recognized a net $ 15 million decrease in deferred tax asset valuation allowance associated with certain foreign and state jurisdictions, primarily attributable to current year activity.

TAX EXAMINATIONS AND LITIGATION

We are currently under examination by the IRS for the tax years 2011 through 2019.

In September 2020, we received the IRS Revenue Agent Report containing agreed and disagreed issues for the audit of tax years 2007-2010. In October 2020, we filed a protest of the disagreed issues with the IRS Independent Office of Appeals (IRS Appeals). In March 2021, the IRS audit team issued their rebuttal to the protest of disagreed issues to IRS Appeals. We had an IRS Appeals conference in October 2021 and are continuing to engage in the Appeals process.

In 2009, after paying amounts due on a statutory notice of deficiency related to the disallowance of foreign tax credits associated with cross border financing transactions, we filed a refund lawsuit in the Southern District of New York (Southern District) with respect to tax year 1997. In 2020, the parties executed a binding settlement agreement with respect to the underlying issues in the lawsuit. On October 22, 2020, the Southern District dismissed the case based upon the settlement reached between AIG and the government. In March 2022, interest amounts due on the settlement of items challenged by the IRS during the audit of AIG's 2006 and prior years were agreed to between AIG and the IRS, thus concluding this matter.

ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES

At both September 30, 2022 and December 31, 2021, our unrecognized tax benefits, excluding interest and penalties, were $ 1.2 billion. At September 30, 2022 and December 31, 2021, our unrecognized tax benefits related to tax positions that, if recognized, would not affect the effective tax rate because they relate to such factors as the timing, rather than the permissibility, of the deduction were $ 2 million and $ 22 million, respectively. Accordingly, at September 30, 2022 and December 31, 2021, the amounts of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate were $ 1.2 billion and $ 1.1 billion, respectively.

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Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At September 30, 2022 and December 31, 2021, we had accrued liabilities of $ 61 million and $ 69 million, respectively for the payment of interest (net of the federal benefit) and penalties. For the nine-month period ended September 30, 2022, we accrued benefit of $ 8 million for the payment of interest and penalties. The interest activity related to unrecognized tax benefits for the nine-month period ended September 30, 2022 was due to the completion of audit activity and expiration of a certain statute related to foreign operations. For the nine-month period ended September 30, 2021, we accrued benefit of $ 203 million for the payment of interest and penalties. The activity for the nine-month period ended September 30, 2021 primarily related to the completion of audit activity by the IRS and New York State.

Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next 12 months, based on the information currently available, we do not expect any change to be material to our consolidated financial condition.

15. Subsequent Events

DEBT REDEMPTIONS

On October 24, 2022, AIG redeemed (i) $ 750 million aggregate principal amount of our 3.900 % Notes Due 2026 for a redemption price of 100 percent of the principal amount, plus accrued and unpaid interest, (ii) approximately $ 522 million aggregate principal amount of our 3.750 % Notes Due 2025 for a redemption price of 100 percent of the principal amount, plus accrued and unpaid interest and (iii) $ 500 million aggregate principal amount of our 2.500 % Notes Due 2025 for a redemption price of 100 percent of the principal amount, plus accrued and unpaid interest.

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