AIG(US:AIG)2023-05-04 16:00markdown [Filing Information](index=1&type=section&id=Filing%20Information) [FORM 10-Q Details](index=1&type=section&id=FORM%2010-Q) This Quarterly Report on Form 10-Q for AIG covers the period ended March 31, 2023, with **723,752,512 shares** outstanding - The filing is a Quarterly Report on Form 10-Q for the period ended March 31, 2023[2](index=2&type=chunk) Registrant Name | Registrant Name | American International Group, Inc. | |---|---| | State of Incorporation | Delaware | | IRS Employer Identification No. | 13-2592361 | | Principal Executive Offices | 1271 Avenue of the Americas, New York, New York 10020 | | Telephone Number | (212) 770-7000 | | Common Stock Trading Symbol | AIG | | Common Stock Exchange | New York Stock Exchange | | Shares Outstanding (as of April 28, 2023) | 723,752,512 | | Filer Status | Large accelerated filer | [Part I – Financial Information](index=3&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) AIG's unaudited condensed consolidated financial statements for Q1 2023 show total assets of **$536,627 million** and a **net loss of $87 million** Condensed Consolidated Balance Sheets (in millions) | Item | March 31, 2023 | December 31, 2022 | |---|---|---| | Total Assets | $536,627 | $522,228 | | Total Liabilities | $490,321 | $478,774 | | Total Equity | $46,306 | $43,454 | Condensed Consolidated Statements of Income (Loss) (in millions) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |---|---|---| | Total Revenues | $10,984 | $14,944 | | Total Benefits, Losses and Expenses | $11,215 | $9,230 | | Income (loss) from continuing operations before income tax expense (benefit) | $(231) | $5,714 | | Income tax expense (benefit) | $(144) | $1,154 | | Net income (loss) | $(87) | $4,560 | | Net income (loss) attributable to AIG common shareholders | $23 | $4,166 | | Basic EPS | $0.03 | $5.10 | | Diluted EPS | $0.03 | $5.04 | Condensed Consolidated Statements of Cash Flows (in millions) | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |---|---|---| | Net cash provided by operating activities | $497 | $39 | | Net cash provided by (used in) investing activities | $(1,474) | $853 | | Net cash provided by (used in) financing activities | $817 | $(577) | | Net increase (decrease) in cash and restricted cash | $(158) | $302 | | Cash and restricted cash at end of period | $2,058 | $2,729 | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) [Condensed Consolidated Statements of Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) [Condensed Consolidated Statements of Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) [Supplementary Disclosure of Condensed Consolidated Cash Flow Information](index=10&type=section&id=Supplementary%20Disclosure%20of%20Condensed%20Consolidated%20Cash%20Flow%20Information) [Note 1. Basis of Presentation](index=11&type=section&id=Note%201.%20Basis%20of%20Presentation) This note outlines the basis for AIG's unaudited financial statements, highlighting the adoption of LDTI and the Corebridge IPO - AIG adopted targeted improvements to the accounting for long-duration contracts (LDTI) on January 1, 2023, with a transition date of January 1, 2021, updating prior period financial statements[25](index=25&type=chunk) - AIG closed the IPO of Corebridge Financial, Inc. on September 19, 2022, selling **12.4%** of common stock for approximately **$1.7 billion** gross proceeds. AIG's ownership decreased to **77.3%** by March 31, 2023, but AIG continues to consolidate Corebridge's financial results[26](index=26&type=chunk) - AIG Financial Products Corp. (AIGFP) filed for Chapter 11 reorganization on December 14, 2022, leading to its deconsolidation from AIG's results and a **pre-tax loss of $114 million** for the twelve months ended December 31, 2022. This reorganization is not expected to have a material impact on AIG's consolidated balance sheets[28](index=28&type=chunk) - Critical accounting estimates include loss reserves, valuation of future policy benefit liabilities, market risk benefits (MRBs), embedded derivative liabilities, reinsurance assets, goodwill impairment, allowance for credit losses on investments, fair value measurements, and income taxes[29](index=29&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=13&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note details AIG's accounting policies, emphasizing the significant impact of LDTI adoption on MRBs, discount rates, and DAC amortization - The adoption of LDTI on January 1, 2023, with a transition date of January 1, 2021, led to a **net decrease of $2.2 billion** in beginning AOCI and a **net increase of $933 million** in beginning Retained Earnings[35](index=35&type=chunk) - LDTI requires MRBs to be measured at fair value, with changes in fair value (excluding own credit risk) recognized in the income statement. The discount rate for future policy benefits must be updated quarterly using upper-medium grade fixed income instrument yields, with changes recognized in OCI[35](index=35&type=chunk) - LDTI simplifies DAC amortization to a constant level basis over the expected contract term, with adjustments for unexpected terminations, and eliminates the impairment test[35](index=35&type=chunk) Impact of LDTI Adoption on Condensed Consolidated Balance Sheets (January 1, 2021, in millions) | Item | Pre-Adoption, Dec 31, 2020 | Cumulative Effect Adjustment | Updated Balances Post Adoption | |---|---|---|---| | Reinsurance assets - Fortitude Re | $34,578 | $7,666 | $42,244 | | Deferred policy acquisition costs | $9,805 | $3,150 | $12,955 | | Market risk benefit assets | — | $338 | $338 | | Future policy benefits | $56,878 | $10,486 | $67,364 | | Policyholder contract deposits | $154,470 | $(6,247) | $148,223 | | Market risk benefit liabilities | — | $8,739 | $8,739 | | Retained earnings | $15,504 | $933 | $16,437 | | Accumulated other comprehensive income (loss) | $13,511 | $(2,197) | $11,314 | Impact of LDTI Adoption on Condensed Consolidated Statements of Income (Loss) (Three Months Ended March 31, 2022, in millions) | Item | As Previously Reported | Effect of Change | Updated Balances Post Adoption | |---|---|---|---| | Premiums | $7,110 | $10 | $7,120 | | Policy fees | $764 | $(34) | $730 | | Total net realized gains (losses) | $4,419 | $(840) | $3,579 | | Policyholder benefits and losses incurred | $5,255 | $(195) | $5,060 | | Change in the fair value of market risk benefits, net | — | $(233) | $(233) | | Amortization of deferred acquisition costs | $1,437 | $(300) | $1,137 | | Net income (loss) attributable to AIG common shareholders | $4,253 | $(87) | $4,166 | [Note 3. Segment Information](index=18&type=section&id=Note%203.%20Segment%20Information) AIG reports operations across General Insurance, Life and Retirement, and Other Operations, with segment performance evaluated by adjusted revenues and pre-tax income - AIG's business is structured into three main segments: General Insurance (North America, International), Life and Retirement (Individual Retirement, Group Retirement, Life Insurance, Institutional Markets), and Other Operations[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - Segment performance is assessed using adjusted revenues and adjusted pre-tax income (loss), which exclude items like legacy matters, certain fair value adjustments, and non-industry-common measures[52](index=52&type=chunk) Adjusted Pre-tax Income (Loss) by Segment (Three Months Ended March 31, in millions) | Segment | 2023 | 2022 | |---|---|---| | General Insurance | | | | North America | $299 | $256 | | International | $203 | $190 | | Net investment income | $746 | $765 | | **Total General Insurance** | **$1,248** | **$1,211** | | Life and Retirement | | | | Individual Retirement | $533 | $466 | | Group Retirement | $187 | $241 | | Life Insurance | $82 | $113 | | Institutional Markets | $84 | $114 | | **Total Life and Retirement** | **$886** | **$934** | | Other Operations | $(491) | $(421) | | **Total Adjusted Pre-tax Income (Loss)** | **$1,643** | **$1,724** | [Note 4. Fair Value Measurements](index=20&type=section&id=Note%204.%20Fair%20Value%20Measurements) This note details AIG's fair value measurement practices, classifying assets and liabilities into a three-level hierarchy, with **$331,954 million** in assets measured at fair value - Fair value measurements are classified into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[56](index=56&type=chunk) - Valuation methodologies for Market Risk Benefits (MRBs) and embedded derivatives were impacted by the adoption of LDTI, requiring fair value measurement based on policyholder behavior and capital market assumptions, including a non-performance risk adjustment (NPA)[58](index=58&type=chunk)[60](index=60&type=chunk) Assets and Liabilities Measured at Fair Value on a Recurring Basis (March 31, 2023, in millions) | Item | Level 1 | Level 2 | Level 3 | Total | |---|---|---|---|---| | **Assets:** | | | | | | Bonds available for sale | $413 | $203,262 | $25,722 | $229,397 | | Other bond securities | — | $3,428 | $1,334 | $4,762 | | Equity securities | $501 | $16 | $74 | $591 | | Derivative assets | $26 | $3,845 | $920 | $616 | | Short-term investments | $2,484 | $4,382 | — | $6,866 | | Market risk benefit assets | — | — | $830 | $830 | | Separate account assets | $84,202 | $3,155 | — | $87,357 | | **Total Assets** | **$87,626** | **$218,257** | **$30,246** | **$331,954** | | **Liabilities:** | | | | | | Policyholder contract deposits | — | $45 | $6,064 | $6,109 | | Market risk benefit liabilities | — | — | $5,144 | $5,144 | | Derivative liabilities | $36 | $3,864 | $48 | $255 | | Fortitude Re funds withheld payable | — | — | $(1,863) | $(1,863) | | **Total Liabilities** | **$36** | **$3,981** | **$9,505** | **$9,829** | Gains (Losses) from Fair Value Option Election (Three Months Ended March 31, in millions) | Item | 2023 Gain (Loss) | 2022 Gain (Loss) | |---|---|---| | Other bond securities | $136 | $(319) | | Alternative investments | $77 | $398 | | Long-term debt | $(1) | $103 | | **Total gain (loss)** | **$212** | **$182** | [Note 5. Investments](index=36&type=section&id=Note%205.%20Investments) This note details AIG's investment portfolio, with **$229,397 million** in AFS bonds and a significant decrease in net realized gains due to embedded derivatives Bonds Available for Sale (March 31, 2023, in millions) | Item | Amortized Cost | Allowance for Credit Losses | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |---|---|---|---|---|---| | U.S. government and government sponsored entities | $5,995 | — | $49 | $(289) | $5,755 | | Obligations of states, municipalities and political subdivisions | $12,344 | — | $161 | $(857) | $11,648 | | Non-U.S. governments | $14,928 | $(10) | $109 | $(1,595) | $13,432 | | Corporate debt | $157,227 | $(81) | $1,542 | $(20,117) | $138,571 | | Mortgage-backed, asset-backed and collateralized | $63,685 | $(45) | $865 | $(4,514) | $59,991 | | **Total bonds available for sale** | **$254,179** | **$(136)** | **$2,726** | **$(27,372)** | **$229,397** | - At March 31, 2023, AIG held **34,040** individual fixed maturity securities in an unrealized loss position, totaling **$27,225 million** in gross unrealized losses, for which no allowance for credit loss was recorded due to non-credit factors and no intent to sell[113](index=113&type=chunk) Net Investment Income (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | |---|---|---| | Net investment income - excluding Fortitude Re funds withheld assets | $3,087 | $2,946 | | Net investment income - Fortitude Re funds withheld assets | $446 | $291 | | **Total net investment income** | **$3,533** | **$3,237** | Net Realized Gains (Losses) (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | |---|---|---| | Net realized gains (losses) - excluding Fortitude Re funds withheld assets and embedded derivative | $(713) | $401 | | Net realized losses on Fortitude Re funds withheld assets | $(31) | $(140) | | Net realized gains (losses) on Fortitude Re funds withheld embedded derivative | $(1,165) | $3,318 | | **Total net realized gains (losses)** | **$(1,909)** | **$3,579** | - The change in net unrealized appreciation (depreciation) of investments for fixed maturity securities was a gain of **$5,005 million** for the three months ended March 31, 2023, compared to a loss of **$(20,160) million** in the prior year, primarily due to lower interest rates[131](index=131&type=chunk) Allowance for Credit Losses on Available for Sale Fixed Maturity Securities (in millions) | Item | March 31, 2023 | December 31, 2022 | |---|---|---| | Balance, beginning of year | $186 | $98 | | Additions | $24 | $177 | | Reductions | $(69) | $(83) | | Other | $(5) | $1 | | **Balance, end of period** | **$136** | **$186** | [Note 6. Lending Activities](index=44&type=section&id=Note%206.%20Lending%20Activities) This note details AIG's lending activities, with **$50,830 million** in net mortgage and other loans receivable and an increased allowance for credit losses Mortgage and Other Loans Receivable, Net (in millions) | Item | March 31, 2023 | December 31, 2022 | |---|---|---| | Commercial mortgages | $37,779 | $37,128 | | Residential mortgages | $6,899 | $6,130 | | Life insurance policy loans | $1,747 | $1,758 | | Commercial loans, other loans and notes receivable | $5,191 | $5,305 | | Total mortgage and other loans receivable | $51,616 | $50,321 | | Allowance for credit losses | $(786) | $(716) | | **Mortgage and other loans receivable, net** | **$50,830** | **$49,605** | - Commercial mortgages have the largest geographic concentrations in New York (**19%**) and California (**11%**) as of March 31, 2023[148](index=148&type=chunk) Rollforward of Allowance for Credit Losses on Mortgage and Other Loans Receivable (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | |---|---|---| | Allowance, beginning of year | $716 | $629 | | Addition to (release of) allowance for loan losses | $70 | $(8) | | **Allowance, end of period** | **$786** | **$617** | - No loans were modified to borrowers experiencing financial difficulty in Q1 2023. In Q1 2022, loans with a carrying value of **$115 million** were modified as troubled debt restructurings[161](index=161&type=chunk) [Note 7. Reinsurance](index=47&type=section&id=Note%207.%20Reinsurance) This note details AIG's reinsurance activities, including the impact of LDTI on recoverables and **$75.2 billion** in total reinsurance recoverables - Subsequent to LDTI adoption, reinsurance recoverables are recognized consistent with underlying liabilities, using updated net premium ratios and current upper-medium grade discount rates, with changes reported in OCI[165](index=165&type=chunk) - Fortitude Re reinsures the majority of AIG's run-off operations. As of March 31, 2023, approximately **$28.0 billion** of Life and Retirement Run-Off Lines and **$3.2 billion** of General Insurance Run-Off Lines reserves were ceded to Fortitude Re[169](index=169&type=chunk) Impact of Fortitude Re Funds Withheld Arrangements (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | |---|---|---| | Net investment income - Fortitude Re funds withheld assets | $446 | $291 | | Net realized losses - Fortitude Re funds withheld assets | $(31) | $(140) | | Net realized gains (losses) - Fortitude Re funds withheld embedded derivative | $(1,165) | $3,318 | | **Net realized gains (losses) on Fortitude Re funds withheld assets** | **$(1,196)** | **$3,178** | | Income (loss) from continuing operations before income tax expense (benefit) | $(750) | $3,469 | | Net income (loss) | $(592) | $2,741 | | Change in unrealized appreciation (depreciation) of all other investments | $556 | $(2,638) | | **Comprehensive income (loss)** | **$(36)** | **$103** | - As of March 31, 2023, **total reinsurance recoverables were $75.2 billion**, with approximately **93%** being investment grade. Non-investment grade exposure (**7%**) primarily related to captive insurers, typically collateralized[175](index=175&type=chunk)[176](index=176&type=chunk) Rollforward of Reinsurance Recoverable Allowance (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | |---|---|---| | Balance, beginning of year | $344 | $382 | | Addition to (release of) allowance for expected credit losses and disputes, net | $(13) | $9 | | Write-offs charged against the allowance | $(1) | $(2) | | Other changes | $(3) | $2 | | **Balance, end of period** | **$327** | **$391** | [Note 8. Deferred Policy Acquisition Costs](index=51&type=section&id=Note%208.%20Deferred%20Policy%20Acquisition%20Costs) This note details AIG's DAC and DSI accounting, highlighting LDTI's impact on amortization, with total DAC at **$13,304 million** - Post-LDTI adoption, DAC for all long-duration contracts (except certain investment contracts) is amortized on a constant level basis over the expected term, with prospective adjustments for changes in future assumptions. DAC is no longer subject to recoverability testing[184](index=184&type=chunk) Rollforward of Deferred Policy Acquisition Costs (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | |---|---|---| | Balance, beginning of year | $12,857 | $13,001 | | Capitalization | $1,689 | $1,402 | | Amortization expense | $(1,293) | $(1,137) | | Other, including foreign exchange | $51 | $(47) | | **Balance, end of period** | **$13,304** | **$13,219** | - Deferred Sales Inducements (DSI) are deferred and amortized on a constant level basis over the contract life, consistent with DAC, following LDTI adoption[191](index=191&type=chunk) Rollforward of Deferred Sales Inducements (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | |---|---|---| | Balance, beginning of year | $558 | $619 | | Capitalization | $2 | $2 | | Amortization expense | $(17) | $(17) | | **Balance, end of period** | **$543** | **$604** | [Note 9. Variable Interest Entities](index=54&type=section&id=Note%209.%20Variable%20Interest%20Entities) This note details AIG's involvement with VIEs, consolidating those where it is the primary beneficiary, with **$9,037 million** in consolidated VIE assets - AIG consolidates VIEs where it is the primary beneficiary, defined by having both the power to direct significant activities and the obligation to absorb losses or right to receive benefits[196](index=196&type=chunk) Consolidated VIEs: Total Assets and Liabilities (in millions) | Item | March 31, 2023 | December 31, 2022 | |---|---|---| | Total Assets | $9,037 | $11,241 | | Total Liabilities | $3,883 | $5,826 | - During Q1 2023, the sale of AIG Credit Management, LLC led to the deconsolidation of certain investment entities, decreasing assets by **$2.1 billion** and liabilities by **$1.9 billion**, resulting in a **$5 million** pre-tax loss[200](index=200&type=chunk) Unconsolidated VIEs: Total Assets and Maximum Exposure to Loss (in millions) | Item | March 31, 2023 | December 31, 2022 | |---|---|---| | Total VIE Assets | $502,728 | $505,521 | | Maximum Exposure to Loss (Total) | $14,015 | $14,077 | | - On-Balance Sheet | $9,372 | $9,392 | | - Off-Balance Sheet | $4,643 | $4,685 | [Note 10. Derivatives and Hedge Accounting](index=56&type=section&id=Note%2010.%20Derivatives%20and%20Hedge%20Accounting) This note details AIG's derivative use for risk management, with **$117,066 million** in gross notional amount and a **$(1,610) million** loss from non-hedging derivatives - AIG uses various derivatives (interest rate, foreign exchange, equity, credit, commodity) for financial risk management and investment operations[205](index=205&type=chunk) Notional Amounts and Fair Value of Derivatives (March 31, 2023, in millions) | Derivative Type | Gross Notional Amount | Assets Fair Value | Liabilities Fair Value | |---|---|---|---| | **Derivatives designated as hedging instruments:** | | | | | Interest rate contracts | $671 | $388 | $44 | | Foreign exchange contracts | $4,500 | $573 | $230 | | **Derivatives not designated as hedging instruments:** | | | | | Interest rate contracts | $25,756 | $2,014 | $3,001 | | Foreign exchange contracts | $10,505 | $1,079 | $573 | | Equity contracts | $27,092 | $683 | $60 | | Commodity contracts | $80 | $7 | — | | Credit contracts | $1,810 | $33 | $40 | | Other contracts | $46,652 | $14 | — | | **Total derivatives, gross** | **$117,066** | **$4,791** | **$3,948** | | Counterparty netting | | $(2,382) | $(2,382) | | Cash collateral | | $(1,793) | $(1,311) | | **Total derivatives on Condensed Consolidated Balance Sheets** | | **$616** | **$255** | - Collateral posted by AIG for derivative transactions was **$2.5 billion** at March 31, 2023, and collateral received was **$2.2 billion**[209](index=209&type=chunk) Gains (Losses) from Derivatives Not Designated as Hedging Instruments (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | |---|---|---| | Interest rate contracts | $95 | $(613) | | Foreign exchange contracts | $(101) | $236 | | Equity contracts | $(78) | $(204) | | Commodity contracts | $7 | $(4) | | Credit contracts | $(1) | $(1) | | Other contracts | $16 | $18 | | Embedded derivatives | $(1,548) | $3,979 | | **Total** | **$(1,610)** | **$3,411** | - A downgrade of AIG's long-term senior debt ratings to BBB or BBB– by S&P and/or Baa2 or Baa3 by Moody's could trigger additional collateral calls and early termination rights, totaling up to approximately **$6 million**[219](index=219&type=chunk) [Note 11. Insurance Liabilities](index=59&type=section&id=Note%2011.%20Insurance%20Liabilities) This note details AIG's insurance liabilities, including **$75,793 million** in loss reserves and **$157,896 million** in policyholder contract deposits, impacted by LDTI adoption Rollforward of Loss Reserves (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | |---|---|---| | Liability for unpaid loss and loss adjustment expenses, beginning of year | $75,167 | $79,026 | | Reinsurance recoverable, beginning of year | $(32,102) | $(35,213) | | Net Liability for unpaid loss and loss adjustment expenses, beginning of year | $43,065 | $43,813 | | Total losses and loss adjustment expenses incurred | $3,791 | $3,793 | | Total losses and loss adjustment expenses paid | $(3,838) | $(3,765) | | Total other changes | $409 | $21 | | **Total Liability for unpaid loss and loss adjustment expenses, end of year** | **$75,793** | **$78,183** | - AIG recognized **$27 million** in favorable prior year loss reserve development (excluding discount and amortization of deferred gain) for the three months ended March 31, 2023, primarily from U.S. Workers Compensation and Other product lines[226](index=226&type=chunk) - Post-LDTI adoption, future policy benefits for traditional and limited pay long-duration products use a net premiums ratios (NPR) methodology, with periodic retrospective revisions. The discount rate is updated quarterly, with changes reflected in Other Comprehensive Income (OCI)[237](index=237&type=chunk) Policyholder Contract Deposits Account Balances (March 31, 2023, in millions) | Segment | Account Balance, End of Period | |---|---| | Individual Retirement | $91,070 | | Group Retirement | $42,903 | | Life Insurance | $10,220 | | Institutional Markets | $12,294 | | Other | $3,516 | | **Total Policyholder Contract Deposits Account Balance** | **$160,003** | - The weighted average crediting rate for policyholder contract deposits was **2.52%** at March 31, 2023[267](index=267&type=chunk) Policyholder Contract Deposits Account Balance by Guaranteed Minimum Crediting Rates (March 31, 2023, in millions) | Range of Guaranteed Minimum Credited Rate | At Guaranteed Minimum | 1-50 Basis Points Above Minimum | More than 50 Points Above Guarantee | Total | |---|---|---|---|---| | **Individual Retirement** | | | | | | <=1% | $7,776 | $2,562 | $23,263 | $33,601 | | >1% - 2% | $3,994 | $24 | $2,163 | $6,181 | | >2% - 3% | $9,155 | $1 | $390 | $9,546 | | >3% - 4% | $7,359 | $40 | $6 | $7,405 | | >4% - 5% | $452 | — | $4 | $456 | | >5% | $32 | — | $4 | $36 | | **Total Individual Retirement** | **$28,768** | **$2,627** | **$25,830** | **$57,225** | | **Group Retirement** | | | | | | <=1% | $2,063 | $2,713 | $6,049 | $10,825 | | >1% - 2% | $5,005 | $908 | $353 | $6,266 | | >2% - 3% | $13,561 | $40 | — | $13,601 | | >3% - 4% | $658 | — | — | $658 | | >4% - 5% | $6,821 | — | — | $6,821 | | >5% | $153 | — | — | $153 | | **Total Group Retirement** | **$28,261** | **$3,661** | **$6,402** | **$38,324** | | **Life Insurance** | | | | | | >1% - 2% | — | $131 | $349 | $480 | | >2% - 3% | $28 | $862 | $1,079 | $1,969 | | >3% - 4% | $1,417 | $118 | $198 | $1,733 | | >4% - 5% | $2,946 | — | — | $2,946 | | >5% | $222 | — | — | $222 | | **Total Life Insurance** | **$4,613** | **$1,111** | **$1,626** | **$7,350** | | **Total All Segments** | **$61,642** | **$7,399** | **$33,858** | **$102,899** | [Note 12. Market Risk Benefits](index=72&type=section&id=Note%2012.%20Market%20Risk%20Benefits) This note defines MRBs as contract features protecting policyholders from capital market risk, with net MRB liabilities of **$4,314 million** as of March 31, 2023 - MRBs are contract features that provide protection to policyholders from other-than-nominal capital market risk and expose AIG to such risk, measured at fair value[279](index=279&type=chunk) - LDTI adoption reclassified certain contract guarantees (e.g., GMWBs, GMDBs) as MRBs, impacting Retained Earnings and AOCI. The fair value changes attributable to AIG's own credit risk are recognized in OCI[282](index=282&type=chunk) Balances of and Changes in Market Risk Benefits (Three Months Ended March 31, 2023, in millions) | Item | Individual Retirement | Group Retirement | Total | |---|---|---|---| | Balance, beginning of year | $3,738 | $296 | $4,034 | | Issuances | $191 | $9 | $200 | | Attributed fees | $235 | $17 | $252 | | Effect of changes in interest rates | $478 | $46 | $524 | | Effect of changes in equity markets | $(391) | $(36) | $(427) | | Effect of changes in our own credit risk | $339 | $32 | $371 | | **Balance, end of period** | **$4,084** | **$319** | **$4,403** | | Less: Reinsured MRB, end of period | $(89) | — | $(89) | | **Net Liability Balance after reinsurance recoverable** | **$3,995** | **$319** | **$4,314** | Net Amount at Risk for Annuity Guarantees (Three Months Ended March 31, 2023, in millions) | Item | Individual Retirement | Group Retirement | Total | |---|---|---|---| | GMDB only | $1,307 | $266 | $1,573 | | GMWB only | $63 | $5 | $68 | | Combined | $1,726 | $31 | $1,757 | [Note 13. Separate Account Assets and Liabilities](index=76&type=section&id=Note%2013.%20Separate%20Account%20Assets%20and%20Liabilities) This note describes AIG's separate account assets and liabilities, totaling **$87,357 million**, where investment income and risk accrue to contract holders - Separate account assets and liabilities are legally segregated, with investment income and risk accruing directly to contract holders for variable contracts[294](index=294&type=chunk) Separate Account Assets and Liabilities (in millions) | Item | March 31, 2023 | December 31, 2022 | |---|---|---| | Total Separate Account Assets | $87,357 | $84,853 | | Total Separate Account Liabilities | $87,357 | $84,853 | Balances and Changes in Separate Account Liabilities (Three Months Ended March 31, in millions) | Item | 2023 | 2022 | |---|---|---| | Balance, beginning of year | $84,853 | $109,111 | | Premiums and deposits | $846 | $1,238 | | Policy charges | $(490) | $(486) | | Surrenders and withdrawals | $(1,923) | $(1,656) | | Benefit payments | $(400) | $(406) | | Investment performance | $4,469 | $(6,870) | | Net transfers from (to) general account | $1 | $(82) | | Other charges | $1 | $1 | | **Balance, end of period** | **$87,357** | **$100,850** | [Note 14. Contingencies, Commitments and Guarantees](index=77&type=section&id=Note%2014.%20Contingencies,%20Commitments%20and%20Guarantees) This note addresses AIG's contingent liabilities, legal proceedings, and **$4.8 billion** in commitments to various investment funds - AIG and its subsidiaries are subject to regulatory and government investigations, litigation, and other disputes, with potential for significant jury awards, settlements, or penalties[302](index=302&type=chunk) - Management accrues for probable losses where amounts can be reasonably estimated and does not believe current matters are likely to have a material adverse effect on financial position, beyond what is already accrued[302](index=302&type=chunk) - Other commitments include **$4.8 billion** to invest in limited partnerships, private equity funds, hedge funds, and real estate as of March 31, 2023[305](index=305&type=chunk) - AIG Parent guarantees payment obligations of AIGFP and AIG Markets, Inc. A **$112 million** guarantee related to AIGFP was recognized upon its deconsolidation[306](index=306&type=chunk) - AIG is subject to financial guarantees and indemnity arrangements from business dispositions, but the likelihood of material payouts is considered remote[307](index=307&type=chunk)[308](index=308&type=chunk) [Note 15. Equity](index=79&type=section&id=Note%2015.%20Equity) This note details AIG's equity structure, including **727.6 million** common shares outstanding, dividends, and **$0.6 billion** in share repurchases in Q1 2023 Common Stock Outstanding Rollforward (Three Months Ended March 31, 2023, in millions) | Item | Common Stock Issued | Treasury Stock | Common Stock Outstanding | |---|---|---|---| | Shares, beginning of year | 1,906.7 | (1,172.6) | 734.1 | | Shares issued | — | 4.6 | 4.6 | | Shares repurchased | — | (11.1) | (11.1) | | **Shares, end of period** | **1,906.7** | **(1,179.1)** | **727.6** | - On May 4, 2023, AIG's Board declared a cash dividend of **$0.36** per common share (a **12.5%** increase) and **$365.625** per Series A Preferred Stock share[316](index=316&type=chunk)[569](index=569&type=chunk) - AIG repurchased approximately **11 million** common shares for **$0.6 billion** in Q1 2023. As of March 31, 2023, approximately **$3.2 billion** remained under the share repurchase authorization[314](index=314&type=chunk)[570](index=570&type=chunk) Rollforward of Accumulated Other Comprehensive Income (Loss) (in millions, net of tax) | Item | Dec 31, 2022 | Change in Q1 2023 | March 31, 2023 | |---|---|---|---| | Unrealized Appreciation (Depreciation) of Fixed Maturity Securities | $(136) | $6 | $(134) | | Unrealized Appreciation (Depreciation) of All Other Investments | $(20,675) | $4,252 | $(17,129) | | Change in Fair Value of Market Risk Benefits Related to Our Own Credit Risk | $(284) | $75 | $(226) | | Change in discount used to measure traditional and limited payment long-duration insurance contracts | $2,459 | $(420) | $2,150 | | Foreign Currency Translation Adjustments | $(3,056) | $(28) | $(3,094) | | Retirement Plan Liabilities Adjustment | $(924) | $28 | $(896) | | **Total** | **$(22,616)** | **$3,913** | **$(19,329)** | [Note 16. Earnings Per Common Share (EPS)](index=82&type=section&id=Note%2016.%20Earnings%20Per%20Common%20Share%20(EPS)) This note presents AIG's basic and diluted EPS, both **$0.03** for Q1 2023, a significant decrease from the prior year due to lower net income Computation of Basic and Diluted EPS (Three Months Ended March 31, in millions, except per common share data) | Item | 2023 | 2022 | |---|---|---| | Net income (loss) attributable to AIG common shareholders | $23 | $4,166 | | Weighted average common shares outstanding - basic | 738,661,428 | 816,314,273 | | Dilutive common shares | 5,437,758 | 9,698,337 | | Weighted average common shares outstanding - diluted | 744,099,186 | 826,012,610 | | **Basic EPS** | **$0.03** | **$5.10** | | **Diluted EPS** | **$0.03** | **$5.04** | - Potential dilutive common shares excluded from diluted EPS were **4.5 million** in Q1 2023 and **39.9 million** in Q1 2022 due to their anti-dilutive effect[324](index=324&type=chunk) [Note 17. Income Taxes](index=83&type=section&id=Note%2017.%20Income%20Taxes) This note outlines AIG's income tax policies, including the **15%** CAMT under the IRA and a **$880 million** valuation allowance as of March 31, 2023 - AIG is subject to the **15%** Corporate Alternative Minimum Tax (CAMT) under the Inflation Reduction Act (IRA) of 2022 for 2023[327](index=327&type=chunk) - Following the Corebridge IPO, Corebridge and its subsidiaries are tax deconsolidated from the AIG consolidated U.S. federal income tax group[328](index=328&type=chunk) - The **effective tax rate on loss from continuing operations was 62.3%** for Q1 2023, compared to **20.2%** on income for Q1 2022, primarily due to tax-exempt income, share-based compensation benefits, and prior year adjustments, partially offset by foreign operations and valuation allowance changes[332](index=332&type=chunk) - A **valuation allowance of $880 million** was deemed necessary as of March 31, 2023, with **$713 million** for AIG's U.S. federal consolidated income tax group and **$167 million** for Corebridge[333](index=333&type=chunk) - AIG released **$131 million** and **$234 million** of valuation allowance associated with unrealized tax capital losses in U.S. Life Insurance and non-life insurance companies' available-for-sale securities portfolios, respectively, in Q1 2023[335](index=335&type=chunk) - Unrecognized tax benefits, excluding interest and penalties, were **$1.3 billion** at March 31, 2023, with **$1.2 billion** favorably affecting the effective tax rate if recognized[337](index=337&type=chunk) [Part II – Other Information](index=86&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=86&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a comprehensive analysis of AIG's financial condition and results for Q1 2023, highlighting the impact of LDTI and market conditions [Cautionary Statement Regarding Forward-Looking Information and Factors That May Affect Future Results](index=86&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Information%20and%20Factors%20That%20May%20Affect%20Future%20Results) [Use of Non-GAAP Measures](index=89&type=section&id=Use%20of%20Non-GAAP%20Measures) [Critical Accounting Estimates](index=91&type=section&id=Critical%20Accounting%20Estimates) [Executive Summary](index=94&type=section&id=Executive%20Summary) [Consolidated Results of Operations](index=99&type=section&id=Consolidated%20Results%20of%20Operations) [Business Segment Operations](index=103&type=section&id=Business%20Segment%20Operations) [Investments](index=123&type=section&id=Investments) [Insurance Reserves](index=132&type=section&id=Insurance%20Reserves) [Liquidity and Capital Resources](index=138&type=section&id=Liquidity%20and%20Capital%20Resources) [Enterprise Risk Management](index=140&type=section&id=Enterprise%20Risk%20Management) [Glossary](index=141&type=section&id=Glossary) [Acronyms](index=143&type=section&id=Acronyms) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=150&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk disclosures are incorporated by reference from the Enterprise Risk Management section of the MD&A - Market risk disclosures are incorporated by reference from the Enterprise Risk Management section of the MD&A[582](index=582&type=chunk) [ITEM 4. Controls and Procedures](index=150&type=section&id=ITEM%204.%20Controls%20and%20Procedures) AIG's disclosure controls were effective as of March 31, 2023, with internal control changes due to LDTI adoption - AIG's disclosure controls and procedures were effective as of March 31, 2023[583](index=583&type=chunk) - Changes in internal control over financial reporting occurred in Q1 2023 due to the adoption of the LDTI standard, which required updates to processes, systems, and controls for long-duration contracts[584](index=584&type=chunk) [ITEM 1. Legal Proceedings](index=151&type=section&id=ITEM%201.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 14 to the Condensed Consolidated Financial Statements - Legal proceedings information is incorporated by reference from Note 14 to the Condensed Consolidated Financial Statements[585](index=585&type=chunk) [ITEM 1A. Risk Factors](index=151&type=section&id=ITEM%201A.%20Risk%20Factors) Readers should refer to the 2022 Annual Report for a comprehensive discussion of risk factors - Readers should refer to Part I, Item 1A. Risk Factors in the 2022 Annual Report for a comprehensive discussion of risk factors[586](index=586&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=151&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details AIG's common stock repurchases, totaling **11.16 million shares** for **$603 million** in Q1 2023 Common Stock Repurchases (Three Months Ended March 31, 2023) | Period | Total Number of Shares Repurchased | Average Price Paid per Share | Dollar Value May Yet Be Purchased Under the Plans (in millions) | |---|---|---|---| | January 1-31 | — | — | $3,794 | | February 1-28 | 2,756,691 | $60.46 | $3,628 | | March 1-31 | 8,405,903 | $51.93 | $3,191 | | **Total** | **11,162,594** | **$54.04** | **$3,191** | - As of March 31, 2023, approximately **$3.2 billion** remained under the share repurchase authorization. An additional **4 million** shares were repurchased for **$200 million** between April 1 and April 28, 2023[588](index=588&type=chunk) [ITEM 6. Exhibits](index=152&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including indentures, settlement agreements, and certifications - Exhibits include a Forty-Second Supplemental Indenture (March 27, 2023), a Settlement Agreement and Release (January 29, 2023), Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and Interactive Data Files in iXBRL format[590](index=590&type=chunk) [Signatures](index=153&type=section&id=Signatures) The report was duly signed by Sabra Purtill (Interim CFO) and Kathleen Carbone (Chief Accounting Officer) on May 5, 2023 - The report was signed by Sabra Purtill (Interim CFO) and Kathleen Carbone (Chief Accounting Officer) on May 5, 2023[593](index=593&type=chunk)