AMERICAN INTERNATIONAL GROUP, INC. 10-Q

ITEM 5 Other Information 125 ITEM 6 Exhibits 125 Signatures 126 AIG | First Quarter 2024 Form 10-Q 1 TABLE OF CONTENTS Part I – Financial Information Item 1. | Financial Statements American International Group, Inc. Condensed Consolidated Balance Sheets (unaudited) (in millions, except for share data) March 31, 2024 December 31, 2023 Assets: Investments: Fixed maturity securities: Bonds available for sale, at fair value, net of allowance for credit losses of $ 125 in 2024 and $ 162 in 2023 (amortized cost: 2024 - $ 255,067 ; 2023 - $ 253,035 )* $ 232,487 $ 231,733 Other bond securities, at fair value (See Note 6)* 5,403 5,241 Equity securities, at fair value (See Note 6)* 797 728 Mortgage and other loans receivable, net of allowance for credit losses of $ 38,501 in 2024 and $ 38,473 in 2023* 52,475 51,553 Other invested assets (portion measured at fair value: 2024 - $ 11,510 ; 2023 - $ 11,733 )* 15,977 16,217 Short-term investments, including restricted cash of $ 4 in 2024 and $ 4 in 2023 (portion measured at fair value: 2024 - $ 8,487 ; 2023 - $ 10,772 )* 15,077 17,200 Total investments 322,216 322,672 Cash* 1,816 2,155 Accrued investment income* 2,698 2,588 Premiums and other receivables, net of allowance for credit losses and disputes of $ 134 in 2024 and $ 139 in 2023 11,293 10,561 Reinsurance assets - Fortitude Re, net of allowance for credit losses and disputes of $ 0 in 2024 and $ 0 in 2023 29,732 30,612 Reinsurance assets - other, net of allowance for credit losses and disputes of $ 224 in 2024 and $ 236 in 2023 38,833 36,914 Deferred income taxes 14,376 14,445 Deferred policy acquisition costs 12,111 12,085 Market risk benefit assets, at fair value 1,172 912 Other assets, net of allowance for credit losses of $ 49 in 2024 and $ 49 in 2023, including restricted cash of $ 43 in 2024 and $ 45 in 2023 (portion measured at fair value: 2024 - $ 705 ; 2023 - $ 754 )* 12,313 13,089 Separate account assets, at fair value 95,173 91,005 Assets held for sale 2,388 2,268 Total assets $ 544,121 $ 539,306 Liabilities: Liability for unpaid losses and loss adjustment expenses, including allowance for credit losses of $ 14 in 2024 and $ 14 in 2023 $ 70,060 $ 70,393 Unearned premiums 17,831 17,387 Future policy benefits for life and accident and health insurance contracts 58,985 58,576 Policyholder contract deposits (portion measured at fair value: 2024 - $ 8,613 ; 2023 - $ 7,997 ) 163,698 161,979 Market risk benefit liabilities, at fair value 5,167 5,705 Other policyholder funds 3,315 3,356 Fortitude Re funds withheld payable (portion measured at fair value: 2024 - $( 1,364 ); 2023 - $( 1,226 )) 28,789 29,484 Other liabilities (portion measured at fair value: 2024 - $ 493 ; 2023 - $ 624 )* 28,245 25,958 Short-term and long-term debt, of which $ 250 and $ 250 is short-term debt in 2024 and 2023 (portion measured at fair value: 2024 - $ 68 ; 2023 - $ 53 ) 19,318 19,796 Debt of consolidated investment entities* 2,617 2,591 Separate account liabilities 95,173 91,005 Liabilities held for sale 1,813 1,775 Total liabilities 495,011 488,005 Contingencies, commitments and guarantees (See Note 15) AIG shareholders’ equity: Series A non-cumulative preferred stock and additional paid in capital, $ 5.00 par value; 100,000,000 shares authorized; shares issued: 2024 - 0 and 2023 - 20,000 ; liquidation preference $ 500 — 485 Common stock, $ 2.50 par value; 5,000,000,000 shares authorized; shares issued: 2024 - 1,906,671,492 and 2023 - 1,906,671,492 4,766 4,766 Treasury stock, at cost; 2024 - 1,235,652,452 shares; 2023 - 1,217,831,721 shares of common stock ( 60,603 ) ( 59,189 ) Additional paid-in capital 75,625 75,810 Retained earnings 38,466 37,516 Accumulated other comprehensive loss ( 14,869 ) ( 14,037 ) Total AIG shareholders’ equity 43,385 45,351 Non-redeemable noncontrolling interests 5,725 5,950 Total equity 49,110 51,301 Total liabilities and equity $ 544,121 $ 539,306 * See Note 10 for details of balances associated with variable interest entities. See accompanying Notes to Condensed Consolidated Financial Statements. 2 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS American International Group, Inc. Condensed Consolidated Statements of Income (Loss) (unaudited) Three Months Ended March 31, (dollars in millions, except per common share data) 2024 2023 Revenues: Premiums $ 8,167 $ 8,481 Policy fees 714 698 Net investment income: Net investment income - excluding Fortitude Re funds withheld assets 3,535 3,087 Net investment income - Fortitude Re funds withheld assets 369 446 Total net investment income 3,904 3,533 Net realized gains (losses): Net realized losses - excluding Fortitude Re funds withheld assets and embedded derivative ( 258 ) ( 713 ) Net realized losses on Fortitude Re funds withheld assets ( 179 ) ( 31 ) Net realized gains (losses) on Fortitude Re funds withheld embedded derivative 13 ( 1,165 ) Total net realized losses ( 424 ) ( 1,909 ) Other income 217 181 Total revenues 12,578 10,984 Benefits, losses and expenses: Policyholder benefits and losses incurred (including remeasurement losses of $ 100 and $ 64 for the three months ended March 31, 2024, and 2023, respectively) 6,320 6,397 Change in the fair value of market risk benefits, net ( 369 ) 196 Interest credited to policyholder account balances 1,204 1,040 Amortization of deferred policy acquisition costs 1,104 1,293 General operating and other expenses 2,014 1,980 Interest expense 260 307 Net (gain) loss on divestitures and other ( 6 ) 2 Total benefits, losses and expenses 10,527 11,215 Income (loss) from continuing operations before income tax expense (benefit) 2,051 ( 231 ) Income tax expense (benefit) 451 ( 144 ) Income (loss) from continuing operations 1,600 ( 87 ) Income (loss) from discontinued operations, net of income taxes — — Net income (loss) 1,600 ( 87 ) Less: Net income (loss) from continuing operations attributable to noncontrolling interests 384 ( 117 ) Net income (loss) attributable to AIG 1,216 30 Less: Dividends on preferred stock and preferred stock redemption premiums 22 7 Net income (loss) attributable to AIG common shareholders $ 1,194 $ 23 Income per common share attributable to AIG common shareholders: Basic: Income (loss) from continuing operations $ 1.75 $ 0.03 Income from discontinued operations $ — $ — Net income (loss) attributable to AIG common shareholders $ 1.75 $ 0.03 Diluted: Income (loss) from continuing operations $ 1.74 $ 0.03 Income from discontinued operations $ — $ — Net income (loss) attributable to AIG common shareholders $ 1.74 $ 0.03 Weighted average shares outstanding: Basic 682,576,848 738,661,428 Diluted 687,961,518 744,099,186 See accompanying Notes to Condensed Consolidated Financial Statements. AIG | First Quarter 2024 Form 10-Q 3 TABLE OF CONTENTS American International Group, Inc. Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three Months Ended March 31, (in millions) 2024 2023 Net income (loss) $ 1,600 $ ( 87 ) Other comprehensive income (loss), net of tax Change in unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken 57 6 Change in unrealized appreciation (depreciation) of all other investments ( 1,290 ) 4,252 Change in fair value of market risk benefits attributable to changes in our own credit risk ( 23 ) 75 Change in the discount rates used to measure traditional and limited payment long-duration insurance contracts 545 ( 420 ) Change in foreign currency translation adjustments ( 353 ) ( 28 ) Change in retirement plan liabilities adjustment 7 28 Other comprehensive income (loss) ( 1,057 ) 3,913 Comprehensive income (loss) 543 3,826 Comprehensive income (loss) attributable to noncontrolling interests 86 509 Comprehensive income (loss) attributable to AIG $ 457 $ 3,317 See accompanying Notes to Condensed Consolidated Financial Statements. 4 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS American International Group, Inc. Condensed Consolidated Statements of Equity (unaudited) (in millions, except per share data) Preferred Stock and Additional Paid-in Capital Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total AIG Share- holders' Equity Non- redeemable Non- controlling Interests Total Equity Three Months Ended March 31, 2024 Balance, beginning of the year $ 485 $ 4,766 $ ( 59,189 ) $ 75,810 $ 37,516 $ ( 14,037 ) $ 45,351 $ 5,950 $ 51,301 Common stock issued under stock plans — — 268 ( 295 ) — — ( 27 ) — ( 27 ) Redemption of preferred stock ( 485 ) — — — — — ( 485 ) — ( 485 ) Purchase of common stock — — ( 1,682 ) — — — ( 1,682 ) — ( 1,682 ) Net income attributable to AIG or noncontrolling interests — — — — 1,216 — 1,216 384 1,600 Dividends on preferred stock ($ 365.625 per share) and preferred stock redemption premiums — — — — ( 22 ) — ( 22 ) — ( 22 ) Dividends on common stock ($ 0.36 per share) — — — — ( 243 ) — ( 243 ) — ( 243 ) Other comprehensive loss — — — — — ( 759 ) ( 759 ) ( 298 ) ( 1,057 ) Net decrease due to divestitures and acquisitions — — — ( 10 ) — ( 73 ) ( 83 ) ( 202 ) ( 285 ) Contributions from noncontrolling interests — — — — — — — 11 11 Distributions to noncontrolling interests — — — — — — — ( 70 ) ( 70 ) Other — — — 120 ( 1 ) — 119 ( 50 ) 69 Balance, end of period $ — $ 4,766 $ ( 60,603 ) $ 75,625 $ 38,466 $ ( 14,869 ) $ 43,385 $ 5,725 $ 49,110 Three Months Ended March 31, 2023 Balance, beginning of year $ 485 $ 4,766 $ ( 56,473 ) $ 79,915 $ 34,893 $ ( 22,616 ) $ 40,970 $ 2,484 $ 43,454 Common stock issued under stock plans — — 219 ( 366 ) — — ( 147 ) — ( 147 ) Purchase of common stock — — ( 603 ) — — — ( 603 ) — ( 603 ) Net income (loss) attributable to AIG or noncontrolling interests — — — — 30 — 30 ( 117 ) ( 87 ) Dividends on preferred stock ($ 365.625 per share) — — — — ( 7 ) — ( 7 ) — ( 7 ) Dividends on common stock ($ 0.32 per share) — — — — ( 234 ) — ( 234 ) — ( 234 ) Other comprehensive income — — — — — 3,287 3,287 626 3,913 Contributions from noncontrolling interests — — — — — — — 16 16 Distributions to noncontrolling interests — — — — — — — ( 58 ) ( 58 ) Other — — — 13 8 — 21 38 59 Balance, end of period $ 485 $ 4,766 $ ( 56,857 ) $ 79,562 $ 34,690 $ ( 19,329 ) $ 43,317 $ 2,989 $ 46,306 See accompanying Notes to Condensed Consolidated Financial Statements. AIG | First Quarter 2024 Form 10-Q 5 TABLE OF CONTENTS American International Group, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) Three Months Ended March 31, (in millions) 2024 2023 Cash flows from operating activities: Net income (loss) $ 1,600 $ ( 87 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Noncash revenues, expenses, gains and losses included in income (loss): Net losses on sales of securities available for sale and other assets 452 450 Net (gain) loss on divestitures and other ( 6 ) 2 Unrealized (gains) losses in earnings - net 403 ( 112 ) Change in the fair value of market risk benefits in earnings, net ( 891 ) 316 Equity in (income) loss from equity method investments, net of dividends or distributions 13 ( 12 ) Depreciation and other amortization 913 1,186 Impairments of assets 26 11 Changes in operating assets and liabilities: Insurance reserves 1,352 3,015 Premiums and other receivables and payables - net 29 641 Reinsurance assets, net ( 1,710 ) ( 2,561 ) Capitalization of deferred policy acquisition costs ( 1,221 ) ( 1,689 ) Current and deferred income taxes - net 367 ( 200 ) Other, net ( 808 ) ( 463 ) Total adjustments ( 1,081 ) 584 Net cash provided by operating activities 519 497 Cash flows from investing activities: Proceeds from (payments for) Sales or distributions of: Available for sale securities 5,595 10,676 Other securities 207 313 Other invested assets 561 413 Divestitures, net — 32 Maturities of fixed maturity securities available for sale 4,957 4,130 Principal payments received on and sales of mortgage and other loans receivable 1,095 957 Purchases of: Available for sale securities ( 11,287 ) ( 13,607 ) Other securities ( 308 ) ( 481 ) Other invested assets ( 317 ) ( 443 ) Mortgage and other loans receivable ( 2,239 ) ( 2,009 ) Net change in short-term investments 2,135 ( 1,152 ) Other, net ( 91 ) ( 303 ) Net cash provided by (used in) investing activities 308 ( 1,474 ) Cash flows from financing activities: Proceeds from (payments for) Policyholder contract deposits 8,504 8,226 Policyholder contract withdrawals ( 7,150 ) ( 6,468 ) Issuance of long-term debt — 743 Issuance of debt of consolidated investment entities 57 36 Repayments of long-term debt ( 461 ) ( 1 ) Repayments of debt of consolidated investment entities ( 121 ) ( 127 ) Purchase of common stock ( 1,640 ) ( 577 ) Redemption of preferred stock ( 485 ) — Dividends on preferred stock and preferred stock redemption premiums ( 22 ) ( 7 ) Dividends on common stock ( 243 ) ( 234 ) Other, net 420 ( 774 ) Net cash provided by (used in) financing activities ( 1,141 ) 817 Effect of exchange rate changes on cash and restricted cash ( 29 ) 2 Net decrease in cash and restricted cash ( 343 ) ( 158 ) Cash and restricted cash at beginning of year 2,204 2,216 Cash and restricted cash of held for sale assets 2 — Cash and restricted cash at end of period $ 1,863 $ 2,058 6 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS American International Group, Inc. Condensed Consolidated Statements of Cash Flows (unaudited)(continued) Supplementary Disclosure of Condensed Consolidated Cash Flow Information Three Months Ended March 31, (in millions) 2024 2023 Cash $ 1,816 $ 1,923 Restricted cash included in Short-term investments* 4 105 Restricted cash included in Other assets* 43 30 Total cash and restricted cash shown in the Condensed Consolidated Statements of Cash Flows $ 1,863 $ 2,058 Cash paid during the period for: Interest $ 181 $ 165 Taxes $ 84 $ 56 Non-cash investing activities: Fixed maturity securities available for sale received in connection with pension risk transfer transactions $ 1,316 $ 1,424 Fixed maturity securities and other invested assets received in connection with reinsurance transactions $ 40 $ — Fixed maturity securities and other invested assets transferred in connection with reinsurance transactions $ ( 163 ) $ ( 680 ) Non-cash financing activities: Interest credited to policyholder contract deposits included in financing activities $ 1,146 $ 1,107 Fee income debited to policyholder contract deposits included in financing activities $ ( 529 ) $ ( 524 ) * Includes funds held for tax sharing payments to AIG Parent, security deposits, and replacement reserve deposits related to real estate. See accompanying Notes to Condensed Consolidated Financial Statements. AIG | First Quarter 2024 Form 10-Q 7 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 1. Basis of Presentation 1. Basis of Presentation American International Group, Inc. (AIG) is a leading global insurance organization. AIG provides insurance solutions that help businesses and individuals in approximately 190 countries and jurisdictions protect their assets and manage risks through AIG operations and network partners. 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, 2023 (the 2023 Annual Report). The condensed consolidated financial information as of December 31, 2023 included herein has been derived from the audited Consolidated Financial Statements in the 2023 Annual Report. 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 three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. We evaluated the need to recognize or disclose events that occurred subsequent to March 31, 2024 and prior to the issuance of these Condensed Consolidated Financial Statements. SALES/DISPOSALS OF ASSETS AND BUSINESSES AIG Life Limited On April 8, 2024, Corebridge Financial, Inc. (Corebridge) completed the sale of AIG Life Limited (AIG Life) to Aviva plc and received gross proceeds of £ 453 million ($ 569 million). For further details on this transaction, see Note 4. Separation of Life and Retirement Business and Relationship with Blackstone Inc. AIG owns 52.7 percent of the outstanding common stock of Corebridge as of March 31, 2024. Corebridge is the holding company for AIG’s Life and Retirement business. AIG continues to consolidate 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. In the three months ended March 31, 2024, Corebridge repurchased 9.5 million shares of Corebridge common stock for an aggregate purchase price of $ 243 million. As a result, AIG recorded a decrease of $ 83 million in Total AIG shareholders' equity. Blackstone Inc. (Blackstone) owns a 10.1 percent equity stake in Corebridge as of March 31, 2024. Blackstone is required to hold its ownership interest in Corebridge, subject to exceptions currently permitting Blackstone to sell 67 percent and 75 percent of its ownership interest after September 19, 2024 and 2025, respectively, with the transfer restrictions terminating in full on September 19, 2027. 8 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 1. Basis of Presentation 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; • valuation of future policy benefit liabilities and recognition of measurement gains and losses; • valuation of market risk benefits (MRBs) related to guaranteed benefit features of variable annuity, fixed annuity and fixed index annuity products; • valuation of embedded derivative liabilities for fixed index annuity and index universal life 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; • 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. 2. Summary of Significant Accounting Policies ACCOUNTING STANDARDS ADOPTED DURING 2024 Fair Value Measurement On June 30, 2022, the Financial Accounting Standards Board (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 Company adopted the standard on January 1, 2024, prospectively for entities other than investment companies. The adoption of the standard did not have a material impact to AIG consolidated financial statements. FUTURE APPLICATION OF ACCOUNTING STANDARDS Income Tax In December 2023, the FASB issued an accounting standard update to address improvements to income tax disclosures. The standard requires disaggregated information about a company’s effective tax rate reconciliation as well as information on income taxes paid. The standard is effective for public companies for annual periods beginning after December 15, 2024, with early adoption permitted. The standard will be applied on a prospective basis with the option to apply the standard retrospectively. We are assessing the impact of this standard. Segment Reporting In November 2023, the FASB issued an accounting standard update to address improvements to reportable segment disclosures. The standard primarily requires the following disclosure on an annual and interim basis: (i) significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss; and (ii) other segment items and description of its composition. The standard also requires current annual disclosures about a reportable segment's profits or losses and assets to be disclosed in interim periods and the title and position of the CODM with an explanation of how the CODM uses the reported measure(s) of segment profits or losses in assessing segment performance. The guidance is effective for public companies for fiscal years beginning after December 15, 2023 and interim periods in fiscal years within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment is applied retrospectively to all prior periods presented. We are assessing the impact of this standard. AIG | First Quarter 2024 Form 10-Q 9 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 3. Segment Information 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. • 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 Underwriting 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. For further discussion on recent activity in the General Insurance business, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report. LIFE AND RETIREMENT Life and Retirement business is presented as four operating segments: • Individual Retirement – consists of fixed annuities, fixed index annuities and variable annuities. • Group Retirement – consists of recordkeeping, plan administration and compliance services, financial planning and advisory solutions offered to employer-defined contribution plan participants, along with proprietary and limited 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. Corebridge previously announced agreements to sell Laya Healthcare Limited (Laya) and AIG Life. The sale of Laya closed on October 31, 2023 and the AIG Life sale closed on April 8, 2024. • 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). For further discussion on the ongoing separation of the Life and Retirement business from AIG and other recent activity, see Note 1. 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. SEGMENT RESULTS We evaluate segment performance based on adjusted revenues and adjusted pre-tax income (loss). Adjusted revenues and adjusted pre-tax income (loss) are derived by excluding certain items from total revenues and pre-tax income (loss), respectively. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to our current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and measures that we believe to be common to the industry. Legal entities are attributed to each segment based upon the predominance of activity in that legal entity. For the items excluded from adjusted revenues and adjusted pre-tax income (loss), see the table below. 10 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 3. Segment Information The following table presents AIG’s continuing operations by operating segment: Three Months Ended March 31, 2024 2023 (in millions) Adjusted Revenues Adjusted Pre-tax Income (Loss) Adjusted Revenues Adjusted Pre-tax Income (Loss) General Insurance North America $ 2,502 $ 224 (a) $ 2,980 $ 299 (a) International 3,284 372 (a) 3,279 203 (a) Net investment income 762 762 746 746 Total General Insurance 6,548 1,358 7,005 1,248 Life and Retirement Individual Retirement 1,686 622 1,484 533 Group Retirement 689 199 683 187 Life Insurance 1,214 58 1,249 82 Institutional Markets 2,332 112 1,955 84 Total Life and Retirement 5,921 991 5,371 886 Other Operations Other Operations before consolidation and eliminations 57 ( 438 ) 132 ( 434 ) AIG consolidation and eliminations 39 30 ( 64 ) ( 57 ) Total Other Operations 96 ( 408 ) 68 ( 491 ) Total 12,565 1,941 12,444 1,643 Reconciling items: Changes in fair value of securities used to hedge guaranteed living benefits 17 ( 2 ) 13 ( 3 ) Change in the fair value of market risk benefits, net (b) — 369 — ( 196 ) Changes in benefit reserves related to net realized gains (losses) — 2 — 6 Changes in the fair value of equity securities 99 99 51 51 Other income (expense) - net 7 — ( 7 ) — Net investment income on Fortitude Re funds withheld assets 369 369 446 446 Net realized losses on Fortitude Re funds withheld assets ( 179 ) ( 179 ) ( 31 ) ( 31 ) Net realized gains (losses) on Fortitude Re funds withheld embedded derivative 13 13 ( 1,165 ) ( 1,165 ) Net realized losses (c) ( 313 ) ( 307 ) ( 772 ) ( 766 ) Net gain (loss) on divestitures and other — 6 — ( 2 ) Non-operating litigation reserves and settlements — — 1 1 (Unfavorable) favorable prior year development and related amortization changes ceded under retroactive reinsurance agreements — ( 2 ) — 19 Net loss reserve discount benefit (charge) — ( 76 ) — ( 64 ) Integration and transaction costs associated with acquiring or divesting businesses — ( 64 ) — ( 52 ) Restructuring and other costs — ( 114 ) — ( 117 ) Non-recurring costs related to regulatory or accounting changes — ( 4 ) — ( 13 ) Net impact from elimination of international reporting lag (d) — — 4 12 Revenues and pre-tax income (loss) $ 12,578 $ 2,051 $ 10,984 $ ( 231 ) (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 realized gains and losses on certain derivative instruments used for non-qualifying (economic) hedging. (c) 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). (d) For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report. AIG | First Quarter 2024 Form 10-Q 11 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 4. Held-For-Sale Classification 4. Held-For-Sale Classification HELD-FOR-SALE CLASSIFICATION We report and classify a business as held-for-sale (Held-For-Sale Business) when management has approved the sale or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the next 12 months and certain other specified criteria are met. A Held-For-Sale Business is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized. Assets and liabilities related to a Held-For-Sale Business are reported in Assets held for sale and Liabilities held for sale, respectively, in our Condensed Consolidated Balance Sheets beginning in the period in which the business is classified as held-for-sale. At March 31, 2024, the following businesses and assets were reported and classified as held-for-sale: AIG Life Limited On April 8, 2024, Corebridge completed the sale of AIG Life to Aviva plc and received gross proceeds of £ 453 million ($ 569 million). The results of AIG Life are reported in Life and Retirement. Other Other primarily consists of real estate. The following table summarizes the components of assets and liabilities held-for-sale on the Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023 after elimination of intercompany balances: March 31, 2024 December 31, 2023 (in millions) AIG Life Other Total AIG Life Other Total Assets: Bonds available for sale $ 160 $ 15 $ 175 $ 167 $ 14 $ 181 Other invested assets — 167 167 — 67 67 Short-term investments 24 1 25 11 1 12 Cash — 1 1 3 — 3 Accrued investment income 3 1 4 3 — 3 Premiums and other receivables, net of allowance for credit losses and disputes 131 14 145 116 9 125 Reinsurance assets - other, net of allowance for credit losses and disputes 882 5 887 899 3 902 Deferred income taxes 47 — 47 47 — 47 Deferred policy acquisition costs 841 1 842 814 — 814 Other assets, net of allowance for credit losses (a) 82 13 95 83 31 114 Total assets held for sale $ 2,170 $ 218 $ 2,388 $ 2,143 $ 125 $ 2,268 Liabilities: Liability for unpaid losses and loss adjustment expenses, including allowance for credit losses $ — $ 24 $ 24 $ — $ 19 $ 19 Unearned premiums 62 11 73 54 7 61 Future policy benefits for life and accident and health insurance contracts 842 — 842 838 — 838 Other liabilities 869 5 874 854 3 857 Total liabilities held for sale $ 1,773 $ 40 $ 1,813 $ 1,746 $ 29 $ 1,775 (a) Other assets, net of allowance for credit losses includes goodwill and other intangibles of $ 23 million and $ 3 million, respectively, for AIG Life at March 31, 2024 and $ 23 million and $ 3 million, respectively, at December 31, 2023. 12 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements 5. Fair Value Measurements FAIR VALUE MEASUREMENTS ON A RECURRING BASIS Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs: • Level 1: Fair value measurements based on quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments. • Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. • Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions about the inputs a hypothetical market participant would use to value that asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. AIG | First Quarter 2024 Form 10-Q 13 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements 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: March 31, 2024 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 $ 25 $ 5,764 $ — $ — $ — $ 5,789 Obligations of states, municipalities and political subdivisions — 9,260 833 — — 10,093 Non-U.S. governments 163 11,798 7 — — 11,968 Corporate debt — 133,861 1,957 — — 135,818 RMBS — 13,308 8,113 — — 21,421 CMBS — 13,898 590 — — 14,488 CLO/ABS — 14,864 18,046 — — 32,910 Total bonds available for sale 188 202,753 29,546 — — 232,487 Other bond securities: Obligations of states, municipalities and political subdivisions — 89 1 — — 90 Non-U.S. governments — 39 — — — 39 Corporate debt — 2,775 222 — — 2,997 RMBS — 113 160 — — 273 CMBS — 266 17 — — 283 CLO/ABS — 560 1,161 — — 1,721 Total other bond securities — 3,842 1,561 — — 5,403 Equity securities 727 12 58 — — 797 Other invested assets (b) — 134 1,854 — — 1,988 Derivative assets (c) : Interest rate contracts — 3,074 410 — — 3,484 Foreign exchange contracts — 1,235 1 — — 1,236 Equity contracts — 1,805 1,073 — — 2,878 Credit contracts — 78 33 — — 111 Other contracts — — 13 — — 13 Counterparty netting and cash collateral — — — ( 4,545 ) ( 2,601 ) ( 7,146 ) Total derivative assets — 6,192 1,530 ( 4,545 ) ( 2,601 ) 576 Short-term investments 2,969 5,518 — — — 8,487 Market risk benefit assets — — 1,172 — — 1,172 Other assets (c) — — 129 — — 129 Separate account assets 91,859 3,314 — — — 95,173 Total (d) $ 95,743 $ 221,765 $ 35,850 $ ( 4,545 ) $ ( 2,601 ) $ 346,212 Liabilities: Policyholder contract deposits $ — $ 63 $ 8,550 $ — $ — $ 8,613 Market risk benefit liabilities — — 5,167 — — 5,167 Derivative liabilities (c) : Interest rate contracts — 3,379 — — — 3,379 Foreign exchange contracts — 624 3 — — 627 Equity contracts — 1,175 54 — — 1,229 Credit contracts — 3 33 — — 36 Other contracts — — 1 — — 1 Counterparty netting and cash collateral — — — ( 4,545 ) ( 326 ) ( 4,871 ) Total derivative liabilities — 5,181 91 ( 4,545 ) ( 326 ) 401 Fortitude Re funds withheld payable — — ( 1,364 ) — — ( 1,364 ) Other liabilities — — 92 — — 92 Long-term debt — 68 — — — 68 Total $ — $ 5,312 $ 12,536 $ ( 4,545 ) $ ( 326 ) $ 12,977 14 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements December 31, 2023 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 $ 35 $ 5,581 $ — $ — $ — $ 5,616 Obligations of states, municipalities and political subdivisions — 9,816 847 — — 10,663 Non-U.S. governments 233 12,213 7 — — 12,453 Corporate debt — 136,753 1,679 — — 138,432 RMBS — 12,804 7,640 — — 20,444 CMBS — 13,495 633 — — 14,128 CLO/ABS — 13,959 16,038 — — 29,997 Total bonds available for sale 268 204,621 26,844 — — 231,733 Other bond securities: Obligations of states, municipalities and political subdivisions — 90 1 — — 91 Non-U.S. governments — 37 — — — 37 Corporate debt — 2,697 211 — — 2,908 RMBS — 105 158 — — 263 CMBS — 244 17 — — 261 CLO/ABS — 512 1,169 — — 1,681 Total other bond securities — 3,685 1,556 — — 5,241 Equity securities 632 40 56 — — 728 Other invested assets (b) — 155 2,070 — — 2,225 Derivative assets (c) : Interest rate contracts — 2,826 460 — — 3,286 Foreign exchange contracts — 1,235 1 — — 1,236 Equity contracts 7 1,187 825 — — 2,019 Credit contracts — 8 33 — — 41 Other contracts — — 13 — — 13 Counterparty netting and cash collateral — — — ( 3,864 ) ( 2,220 ) ( 6,084 ) Total derivative assets 7 5,256 1,332 ( 3,864 ) ( 2,220 ) 511 Short-term investments 2,635 8,137 — — — 10,772 Market risk benefit assets — — 912 — — 912 Other assets (c) — — 243 — — 243 Separate account assets 87,814 3,191 — — — 91,005 Total (d) $ 91,356 $ 225,085 $ 33,013 $ ( 3,864 ) $ ( 2,220 ) $ 343,370 Liabilities: Policyholder contract deposits $ — $ 55 $ 7,942 $ — $ — $ 7,997 Market risk benefit liabilities — — 5,705 — — 5,705 Derivative liabilities (c) : Interest rate contracts — 3,631 — — — 3,631 Foreign exchange contracts — 891 3 — — 894 Equity contracts 2 680 63 — — 745 Credit contracts — 4 33 — — 37 Other contracts — — 2 — — 2 Counterparty netting and cash collateral — — — ( 3,864 ) ( 1,050 ) ( 4,914 ) Total derivative liabilities 2 5,206 101 ( 3,864 ) ( 1,050 ) 395 Fortitude Re funds withheld payable — — ( 1,226 ) — — ( 1,226 ) Other liabilities — 107 122 — — 229 Long-term debt — 53 — — — 53 Total $ 2 $ 5,421 $ 12,644 $ ( 3,864 ) $ ( 1,050 ) $ 13,153 (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 $ 9.5 billion and $ 9.5 billion as of March 31, 2024 and December 31, 2023, respectively. (c) Presented as part of Other assets and Other liabilities on the Condensed Consolidated Balance Sheets. (d) Excludes $ 176 million and $ 182 million as of March 31, 2024 and December 31, 2023, respectively, of assets reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets. AIG | First Quarter 2024 Form 10-Q 15 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements CHANGES IN LEVEL 3 RECURRING FAIR VALUE MEASUREMENTS The following tables present changes during the three months ended March 31, 2024 and 2023 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 March 31, 2024 and 2023: (in millions) Fair Value Beginning of Year MRBs and 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 March 31, 2024 Assets: Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 847 $ — $ ( 14 ) $ — $ — $ — $ — $ 833 $ — $ ( 16 ) Non-U.S. governments 7 — — — — — — 7 — — Corporate debt 1,679 2 1 ( 29 ) 342 ( 38 ) — 1,957 — ( 4 ) RMBS 7,640 90 93 329 — ( 39 ) — 8,113 — 89 CMBS 633 ( 5 ) 46 ( 103 ) 144 ( 125 ) — 590 — 11 CLO/ABS 16,038 55 168 1,274 677 ( 166 ) — 18,046 — 164 Total bonds available for sale 26,844 142 294 1,471 1,163 ( 368 ) — 29,546 — 244 Other bond securities: Obligations of states, municipalities and political subdivisions 1 — — — — — — 1 — — Corporate debt 211 8 — — 3 — — 222 8 — RMBS 158 3 — ( 1 ) — — — 160 2 — CMBS 17 — — — — — — 17 — — CLO/ABS 1,169 14 — ( 20 ) — ( 2 ) — 1,161 3 — Total other bond securities 1,556 25 — ( 21 ) 3 ( 2 ) — 1,561 13 — Equity securities 56 3 — — — ( 1 ) — 58 3 — Other invested assets 2,070 ( 92 ) ( 8 ) ( 33 ) — ( 57 ) ( 26 ) 1,854 ( 90 ) — Other assets 243 — — ( 114 ) — — — 129 — — Total (a) $ 30,769 $ 78 $ 286 $ 1,303 $ 1,166 $ ( 428 ) $ ( 26 ) $ 33,148 $ ( 74 ) $ 244 (in millions) Fair Value Beginning of Year MRBs and 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 $ 7,942 $ 452 $ — $ 156 $ — $ — $ — $ 8,550 $ ( 3 ) $ — Derivative liabilities, net: Interest rate contracts ( 460 ) 103 — ( 53 ) — — — ( 410 ) 193 — Foreign exchange contracts 2 — — — — — — 2 — — Equity contracts ( 762 ) ( 192 ) — ( 65 ) — — — ( 1,019 ) 187 — Other contracts ( 11 ) ( 16 ) — 15 — — — ( 12 ) 16 — Total derivative liabilities, net (b) ( 1,231 ) ( 105 ) — ( 103 ) — — — ( 1,439 ) 396 — Fortitude Re funds withheld payable ( 1,226 ) ( 13 ) — ( 125 ) — — — ( 1,364 ) 209 — Other Liabilities 122 ( 30 ) — — — — — 92 — — Total (c) $ 5,607 $ 304 $ — $ ( 72 ) $ — $ — $ — $ 5,839 $ 602 $ — 16 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements (in millions) Fair Value Beginning of Year MRBs and 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 March 31, 2023 Assets: Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 824 $ 1 $ 55 $ ( 7 ) $ — $ — $ — $ 873 $ — $ 44 Non-U.S. governments 1 1 — — 7 — — 9 — — Corporate debt 2,847 ( 102 ) 51 ( 201 ) 274 ( 421 ) ( 16 ) 2,432 — 50 RMBS 7,553 109 ( 70 ) 10 — ( 21 ) — 7,581 — ( 98 ) CMBS 926 7 ( 3 ) 1 34 ( 27 ) — 938 — ( 34 ) CLO/ABS 12,748 50 271 840 58 ( 102 ) 24 13,889 — 229 Total bonds available for sale 24,899 66 304 643 373 ( 571 ) 8 25,722 — 191 Other bond securities: Obligations of states, municipalities and political subdivisions — — — 1 — — — 1 — — Corporate debt 416 1 — ( 96 ) — ( 191 ) — 130 3 — RMBS 173 5 — ( 12 ) — — — 166 ( 3 ) — CMBS 28 ( 1 ) — — — — — 27 ( 1 ) — CLO/ABS 910 36 — 18 1 ( 7 ) 52 1,010 24 — Total other bond securities 1,527 41 — ( 89 ) 1 ( 198 ) 52 1,334 23 — Equity securities 39 — — 27 8 — — 74 — — Other invested assets 2,075 ( 52 ) 5 58 — — — 2,086 ( 50 ) — Other assets 107 — — 3 — — — 110 — — Total (a) $ 28,647 $ 55 $ 309 $ 642 $ 382 $ ( 769 ) $ 60 $ 29,326 $ ( 27 ) $ 191 (in millions) Fair Value Beginning of Year MRBs and 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 $ 5,367 $ 381 $ — $ 316 $ — $ — $ — $ 6,064 $ ( 368 ) $ — Derivative liabilities, net: Interest rate contracts ( 311 ) 57 — ( 102 ) — — — ( 356 ) ( 50 ) — Equity contracts ( 271 ) ( 56 ) — ( 175 ) — — — ( 502 ) 51 136 Other contracts ( 14 ) ( 16 ) — 16 — — — ( 14 ) 16 — Total derivative liabilities, net (b) ( 596 ) ( 15 ) — ( 261 ) — — — ( 872 ) 17 136 Fortitude Re funds withheld payable ( 2,235 ) 1,165 — ( 793 ) — — — ( 1,863 ) ( 759 ) — Other liabilities 112 — — — — — — 112 — — Total (c) $ 2,648 $ 1,531 $ — $ ( 738 ) $ — $ — $ — $ 3,441 $ ( 1,110 ) $ 136 (a) Excludes MRB assets of $ 1.2 billion at March 31, 2024 and $ 830 million at March 31, 2023. For additional information, see Note 13. (b) Total Level 3 derivative exposures have been netted in these tables for presentation purposes only. (c) Excludes MRB liabilities of $ 5.2 billion at March 31, 2024 and $ 5.1 billion at March 31, 2023. For additional information, see Note 13. AIG | First Quarter 2024 Form 10-Q 17 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements Market risk benefits and 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) Change in the fair value of market risk benefits, net (c) Other Income Total Three Months Ended March 31, 2024 Assets: Bonds available for sale $ 174 $ ( 32 ) $ — $ — $ 142 Other bond securities 25 — — — 25 Equity securities 3 — — — 3 Other invested assets ( 91 ) ( 1 ) — — ( 92 ) Three Months Ended March 31, 2023 Assets: Bonds available for sale $ 62 $ 4 $ — $ — $ 66 Other bond securities 41 — — — 41 Other invested assets ( 51 ) ( 1 ) — — ( 52 ) (in millions) Net Investment Income Net Realized (Gains) Losses Change in the fair value of market risk benefits, net (c) Other Income Total Three Months Ended March 31, 2024 Liabilities: Policyholder contract deposits (a) $ — $ 452 $ — $ — $ 452 Market risk benefit liabilities, net (b) — ( 2 ) ( 1,069 ) — ( 1,071 ) Derivative liabilities, net — ( 152 ) 62 ( 15 ) ( 105 ) Fortitude Re funds withheld payable — ( 13 ) — — ( 13 ) Other Liabilities — ( 30 ) — — ( 30 ) Three Months Ended March 31, 2023 Liabilities: Policyholder contract deposits (a) $ — $ 381 $ — $ — $ 381 Market risk benefit liabilities, net (b) — — 87 — 87 Derivative liabilities, net — ( 88 ) 89 ( 16 ) ( 15 ) Fortitude Re funds withheld payable — 1,165 — — 1,165 (a) Primarily embedded derivatives. (b) Market risk benefit assets and liabilities have been netted in the above table for presentation purposes only. (c) The portion of the fair value change attributable to own credit risk is recognized in Other comprehensive income (loss) (OCI) . The following table presents the gross components of purchases, sales, issuances and settlements, net, shown above, for the three months ended March 31, 2024 and 2023 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 March 31, 2024 Assets: Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 1 $ — $ ( 1 ) $ — Corporate debt 8 ( 3 ) ( 34 ) ( 29 ) RMBS 574 ( 1 ) ( 244 ) 329 CMBS — ( 30 ) ( 73 ) ( 103 ) CLO/ABS 1,894 ( 56 ) ( 564 ) 1,274 Total bonds available for sale 2,477 ( 90 ) ( 916 ) 1,471 Other bond securities: RMBS 3 — ( 4 ) ( 1 ) CLO/ABS 41 — ( 61 ) ( 20 ) Total other bond securities 44 — ( 65 ) ( 21 ) Other invested assets 63 — ( 96 ) ( 33 ) Other assets — — ( 114 ) ( 114 ) Total $ 2,584 $ ( 90 ) $ ( 1,191 ) $ 1,303 18 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements (in millions) Purchases Sales Issuances and Settlements (a) Purchases, Sales, Issuances and Settlements, Net (a) Liabilities: Policyholder contract deposits $ — $ 332 $ ( 176 ) $ 156 Derivative liabilities, net ( 194 ) 6 85 ( 103 ) Fortitude Re funds withheld payable — — ( 125 ) ( 125 ) Total $ ( 194 ) $ 338 $ ( 216 ) $ ( 72 ) Three Months Ended March 31, 2023 Assets: Bonds available for sale: Obligations of states, municipalities and political subdivisions $ 1 $ ( 4 ) $ ( 4 ) $ ( 7 ) Corporate Debt 21 — ( 222 ) ( 201 ) RMBS 290 ( 19 ) ( 261 ) 10 CMBS 10 ( 6 ) ( 3 ) 1 CLO/ABS 897 ( 3 ) ( 54 ) 840 Total bonds available for sale 1,219 ( 32 ) ( 544 ) 643 Other bond securities: Obligations of states, municipalities and political subdivisions 1 — — 1 Corporate debt — — ( 96 ) ( 96 ) RMBS 5 — ( 17 ) ( 12 ) CLO/ABS 46 ( 4 ) ( 24 ) 18 Total other bond securities 52 ( 4 ) ( 137 ) ( 89 ) Equity securities 29 — ( 2 ) 27 Other invested assets 72 — ( 14 ) 58 Other assets — — 3 3 Total $ 1,372 $ ( 36 ) $ ( 694 ) $ 642 Liabilities: Policyholder contract deposits $ — $ 326 $ ( 10 ) $ 316 Derivative liabilities, net ( 260 ) 5 ( 6 ) ( 261 ) Fortitude Re funds withheld payable — — ( 793 ) ( 793 ) Total $ ( 260 ) $ 331 $ ( 809 ) $ ( 738 ) (a) There were no issuances during the three months ended March 31, 2024 and 2023. 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 March 31, 2024 and 2023 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 OCI as shown in the table above excludes $( 11 ) million and $ 7 million of net gains (losses) related to assets and liabilities transferred into Level 3 during the three months ended March 31, 2024 and 2023, respectively, and includes $ 4 million and $( 5 ) million of net gains (losses) related to assets and liabilities transferred out of Level 3 during the three months ended March 31, 2024 and 2023, respectively. Transfers of Level 3 Assets During the three months ended March 31, 2024 and 2023, transfers into Level 3 assets primarily included certain investments in private placement corporate debt, commercial mortgage-backed securities (CMBS) and collateralized loan obligations (CLO)/asset-backed securities (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 CMBS and CLO and certain ABS into Level 3 assets were due to diminished market transparency and liquidity for individual security types. During the three months ended March 31, 2024 and 2023, transfers out of Level 3 assets primarily included certain investments in private placement corporate debt, residential mortgage-backed securities (RMBS), CMBS and CLO/ABS. Transfers of private placement corporate debt and certain ABS out of Level 3 assets were based on consideration of market liquidity as well as related transparency of pricing and associated observable inputs for these investments. Transfers of certain investments in private placement corporate debt and certain ABS out of Level 3 assets were primarily the result of using observable pricing information that reflects the AIG | First Quarter 2024 Form 10-Q 19 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements fair value of those securities without the need for adjustment based on our own assumptions regarding the characteristics of a specific security or the current liquidity in the market. Transfers of Level 3 Liabilities There were no significant transfers of derivative or other liabilities into or out of Level 3 for the three months ended March 31, 2024 and 2023. 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 CLO/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 March 31, 2024 Valuation Technique Unobservable Input (b) Range (Weighted Average) (c) Assets: Obligations of states, municipalities and political subdivisions $ 809 Discounted cash flow Yield 5.10 % - 5.39 % ( 5.24 %) Corporate debt 1,945 Discounted cash flow Yield 4.94 % - 10.81 % ( 7.65 %) RMBS (a) 4,672 Discounted cash flow Constant prepayment rate 4.40 % - 10.02 % ( 7.21 %) Loss severity 35.81 % - 84.47 % ( 60.14 %) Constant default rate 0.78 % - 2.56 % ( 1.67 %) Yield 5.66 % - 7.02 % ( 6.34 %) CLO/ABS (a) 16,371 Discounted cash flow Yield 5.81 % - 7.89 % ( 6.85 %) CMBS 547 Discounted cash flow Yield 5.22 % - 18.38 % ( 11.41 %) Market risk benefit assets 1,172 Discounted cash flow Equity volatility 6.35 % - 49.95 % Base lapse rate 0.16 % - 28.80 % Dynamic lapse multiplier (e) 20.00 % - 186.18 % Mortality multiplier (e)(f) 38.25 % - 160.01 % Utilization (g) 80.00 % - 100.00 % Equity / interest rate correlation 0.00 % - 30.00 % NPA (h) 0.06 % - 2.33 % Liabilities (d) : Market risk benefit liabilities: Variable annuities guaranteed benefits 1,675 Discounted cash flow Equity volatility 6.35 % - 49.95 % Base lapse rate 0.16 % - 28.80 % Dynamic lapse multiplier (e) 20.00 % - 186.18 % Mortality multiplier (e)(f) 38.25 % - 160.01 % Utilization (g) 80.00 % - 100.00 % Equity / interest rate correlation 0.00 % - 30.00 % NPA (h) 0.06 % - 2.33 % Fixed annuities guaranteed benefits 1,130 Discounted cash flow Base lapse rate 0.20 % - 15.75 % Dynamic lapse multiplier (e) 20.00 % - 186.18 % Mortality multiplier (e)(f) 40.26 % - 168.43 % Utilization (g) 90.00 % - 97.50 % NPA (h) 0.06 % - 2.33 % Fixed index annuities guaranteed benefits 2,362 Discounted cash flow Equity volatility 6.35 % - 49.95 % Base lapse rate 0.20 % - 50.00 % Dynamic lapse multiplier (e) 20.00 % - 186.18 % Mortality multiplier (e)(f) 24.00 % - 146.00 % Utilization (g) 60.00 % - 97.50 % Option budget 0.00 % - 6.00 % Equity / interest rate correlation 0.00 % - 30.00 % NPA (h) 0.06 % - 2.33 % 20 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements (in millions) Fair Value at March 31, 2024 Valuation Technique Unobservable Input (b) Range (Weighted Average) (c) Embedded derivatives within Policyholder contract deposits: Index credits on fixed index annuities (i) 7,603 Discounted cash flow Equity volatility 6.35 % - 49.95 % Base lapse rate 0.20 % - 50.00 % Dynamic lapse multiplier (e) 20.00 % - 186.18 % Mortality multiplier (e)(f) 24.00 % - 146.00 % Utilization (g) 60.00 % - 97.50 % Option budget 0.00 % - 6.00 % Equity / interest rate correlation 0.00 % - 30.00 % NPA (h) 0.06 % - 2.33 % Index universal life 947 Discounted cash flow Base lapse rate 0.00 % - 37.97 % Mortality rate 0.00 % - 100.00 % Equity volatility 5.85 % - 19.95 % NPA (h) 0.06 % - 2.33 % (in millions) Fair Value at December 31, 2023 Valuation Technique Unobservable Input (b) Range (Weighted Average) (c) Assets: Obligations of states, municipalities and political subdivisions $ 824 Discounted cash flow Yield 4.97 % - 5.31 % ( 5.14 %) Corporate debt 1,803 Discounted cash flow Yield 5.19 % - 8.48 % ( 6.83 %) RMBS (a) 4,656 Discounted cash flow Constant prepayment rate 4.34 % - 9.99 % ( 7.17 %) Loss severity 33.56 % - 87.59 % ( 60.57 %) Constant default rate 0.76 % - 2.56 % ( 1.66 %) Yield 6.13 % - 7.41 % ( 6.77 %) CLO/ABS (a) 14,242 Discounted cash flow Yield 5.62 % - 7.89 % ( 6.76 %) CMBS 587 Discounted cash flow Yield 5.62 % - 17.85 % ( 11.73 %) Market risk benefit assets 912 Discounted cash flow Equity volatility 6.25 % - 49.75 % Base lapse rate 0.16 % - 28.80 % Dynamic lapse multiplier (e) 20.00 % - 186.18 % Mortality multiplier (e)(f) 38.25 % - 160.01 % Utilization (g) 80.00 % - 100.00 % Equity / interest rate correlation 0.00 % - 30.00 % NPA (h) 0.00 % - 2.29 % Liabilities (d) : Market risk benefit liabilities: Variable annuities guaranteed benefits 2,174 Discounted cash flow Equity volatility 6.25 % - 49.75 % Base lapse rate 0.16 % - 28.80 % Dynamic lapse multiplier (e) 20.00 % - 186.18 % Mortality multiplier (e)(f) 38.25 % - 160.01 % Utilization (g) 80.00 % - 100.00 % Equity / interest rate correlation 0.00 % - 30.00 % NPA (h) 0.00 % - 2.29 % Fixed annuities guaranteed benefits 1,111 Discounted cash flow Base lapse rate 0.20 % - 15.75 % Dynamic lapse multiplier (e) 20.00 % - 186.18 % Mortality multiplier (e)(f) 40.26 % - 168.43 % Utilization (g) 90.00 % - 97.50 % NPA (h) 0.00 % - 2.29 % Fixed index annuities guaranteed benefits 2,420 Discounted cash flow Equity volatility 6.25 % - 49.75 % Base lapse rate 0.20 % - 50.00 % Dynamic lapse multiplier (e) 20.00 % - 186.18 % Mortality multiplier (e)(f) 24.00 % - 146.00 % Utilization (g) 60.00 % - 97.50 % Option budget 0.00 % - 6.00 % Equity / interest rate correlation 0.00 % - 30.00 % NPA (h) 0.00 % - 2.29 % AIG | First Quarter 2024 Form 10-Q 21 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements (in millions) Fair Value at December 31, 2023 Valuation Technique Unobservable Input (b) Range (Weighted Average) (c) Embedded derivatives within Policyholder contract deposits: Index credits on fixed index annuities (i) 6,953 Discounted cash flow Equity volatility 6.25 % - 49.75 % Base lapse rate 0.20 % - 50.00 % Dynamic lapse multiplier (e) 20.00 % - 186.18 % Mortality multiplier (e)(f) 24.00 % - 146.00 % Utilization (g) 60.00 % - 97.50 % Option budget 0.00 % - 6.00 % Equity / interest rate correlation 0.00 % - 30.00 % NPA (h) 0.00 % - 2.29 % Index universal life 989 Discounted cash flow Base lapse rate 0.00 % - 37.97 % Mortality rate 0.00 % - 100.00 % Equity volatility 5.85 % - 20.36 % NPA (h) 0.00 % - 2.29 % (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 CLO 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 with policyholder contract deposits and market risk benefits 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 8, the Fortitude Re funds withheld payable is created through modified coinsurance (modco) and funds withheld reinsurance arrangements where the investments supporting the reinsurance agreements are withheld by, and continue to reside on AIG’s balance sheet. This embedded derivative is valued as a total return swap with reference to the fair value of the invested assets held by AIG. Accordingly, the unobservable inputs utilized in the valuation of the embedded derivative are a component of the invested assets supporting the reinsurance agreements that are held on AIG’s balance sheet. (e) The ranges for these inputs vary due to the different guaranteed minimum withdrawal benefits (GMWB) product specification and policyholder characteristics across in-force policies. Policyholder characteristics that affect these ranges include age, policy duration, and gender. (f) Mortality inputs are shown as multipliers of the 2012 Individual Annuity Mortality Basic table. (g) The partial withdrawal utilization unobservable input range shown applies only to policies with GMWB riders. (h) The non-performance risk adjustment (NPA) applied as a spread over risk-free curve for discounting. (i) The fixed index annuities embedded derivative associated with index credits related to the contracts with guaranteed product features included in policyholder contract deposits was $ 1.7 billion and $ 1.5 billion at March 31, 2024 and December 31, 2023, respectively. The ranges of reported inputs for Obligations of states, municipalities and political subdivisions, Corporate debt, RMBS, CLO/ABS, and CMBS valued using a discounted cash flow technique consist of one standard deviation in either direction from the value‑weighted average. The preceding table does not give effect to our risk management practices that might offset risks inherent in these Level 3 assets and liabilities. Interrelationships Between Unobservable Inputs We consider unobservable inputs to be those for which market data is not available and that are developed using the best information available to us about the assumptions that market participants would use when pricing the asset or liability. Relevant inputs vary depending on the nature of the instrument being measured at fair value. The following paragraphs provide a general description of significant unobservable inputs along with interrelationships between and among the significant unobservable inputs and their impact on the fair value measurements. In practice, simultaneous changes in assumptions may not always have a linear effect on the inputs discussed below. Interrelationships may also exist between observable and unobservable inputs. Such relationships have not been included in the discussion below. For each of the individual relationships described below, the inverse relationship would also generally apply. Fixed Maturity Securities The significant unobservable input used in the fair value measurement of fixed maturity securities is yield. The yield is affected by the market movements in credit spreads and U.S. Treasury yields. The yield may be affected by other factors including constant prepayment rates, loss severity, and constant default rates. In general, increases in the yield would decrease the fair value of investments, and conversely, decreases in the yield would increase the fair value of investments. 22 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements MRBs and Embedded Derivatives within Policyholder Contract Deposits For MRBs and embedded derivatives, the assumptions for unobservable inputs vary throughout the period over which cash flows are projected for valuation purposes. The following are applicable unobservable inputs: • 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 and interest rate correlation estimates the relationship between changes in equity returns and interest rates in the economic scenario generator used to value our MRBs. 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. Only our fixed index annuities with a GMWB rider are subject to the equity and interest correlation assumption. Other policies such as accumulation fixed index annuity and life products do not use a correlation assumption. • Base lapse rate assumptions are determined by company experience and judgment 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 benefit 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 GMWB liability, while lower mortality rate assumptions will generally increase the fair value of the liability because guaranteed withdrawal payments will be made for a longer period of time and generally exceed any decrease in guaranteed death benefits. • Utilization assumptions estimate the timing when policyholders with a GMWB will elect to utilize their benefit and begin taking withdrawals. The assumptions may vary by the type of guarantee, tax-qualified status, the contract’s withdrawal history and the age of the policyholder. Utilization assumptions are based on company experience, which includes partial withdrawal behavior. Increases in assumed utilization rates will generally increase the fair value of the liability. • Non-performance or “own credit” risk adjustment used in the valuation of MRBs and embedded derivatives, which reflects a market participant’s view of our claims-paying ability by incorporating a different spread (the NPA spread) to the curve used to discount projected benefit cash flows. When corporate credit spreads widen, the change in the NPA spread generally reduces the fair value of the MRBs and embedded derivatives, resulting in a gain in AOCI or Net realized gains (losses), respectively, and when corporate credit spreads narrow or tighten, the change in the NPA spread generally increases the fair value of the MRBs and embedded derivatives, resulting in a loss in AOCI or Net realized gains (losses), respectively. • The projected cash flows incorporate best estimate assumptions for policyholder behavior (including mortality, lapses, withdrawals and benefit utilization), along with an explicit risk margin to reflect a market participant’s estimates of the fair value of projected cash flows and policyholder behavior. Estimates of future policyholder behavior assumptions are subjective and based primarily on our historical experience. • For embedded derivatives, option budgets estimate the expected long-term cost of options used to hedge exposures associated with index price changes. The level of option budgets determines future costs of the options, which impacts the growth in account value and the valuation of embedded derivatives. Embedded Derivatives within Reinsurance Contracts The fair value of embedded derivatives associated with funds withheld reinsurance contracts is determined based upon a total return swap technique with reference to the fair value of the investments held by AIG related to AIG’s funds withheld payable. The fair value of the underlying assets is generally based on market observable inputs using industry standard valuation techniques. The valuation also requires certain significant inputs, which are generally not observable, and accordingly, the valuation is considered Level 3 in the fair value hierarchy. AIG | First Quarter 2024 Form 10-Q 23 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements 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. March 31, 2024 December 31, 2023 (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 $ 3,736 $ 2,278 $ 3,617 $ 2,313 Real assets Investments in real estate properties, agricultural and infrastructure assets, including power plants and other energy producing assets 1,712 824 1,814 782 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 266 136 270 141 Growth equity Funds that make investments in established companies for the purpose of growing their businesses 690 112 680 117 Mezzanine Funds that make investments in the junior debt and equity securities of leveraged companies 263 94 292 98 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 2,168 257 2,125 297 Total private equity funds 8,835 3,701 8,798 3,748 Hedge funds: Event-driven Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations 17 — 18 — Long-short Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk 565 — 549 — Macro Investments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions 37 — 69 — 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 68 — 74 — Total hedge funds 687 — 710 — Total $ 9,522 $ 3,701 $ 9,508 $ 3,748 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-year or two-year increments. The majority of our hedge fund investments are redeemable upon a single month or quarter’s notice, though redemption terms vary from single, immediate withdrawals, to withdrawals staggered up to eight quarters. Some of the portfolio consists of illiquid run-off or “side-pocket” positions whose liquidation horizons are uncertain and likely beyond a year after submission of the redemption notice. 24 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements 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: Three Months Ended March 31, Gain (Loss) (in millions) 2024 2023 Assets: Other bond securities (a) $ 78 $ 136 Alternative investments (b) 130 77 Liabilities: Long-term debt (c) 1 ( 1 ) Total gain (loss) $ 209 $ 212 (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 6. For additional information regarding the funds withheld arrangements with Fortitude Re, see Note 8. (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: March 31, 2024 December 31, 2023 (in millions) Fair Value Outstanding Principal Amount Difference Fair Value Outstanding Principal Amount Difference Long-term debt* $ 68 $ 60 $ 8 $ 53 $ 44 $ 9 * 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 March 31, (in millions) Level 1 Level 2 Level 3 Total 2024 2023 March 31, 2024 Other investments $ — $ — $ 98 $ 98 $ 25 $ — Other assets — — — — 1 9 Total $ — $ — $ 98 $ 98 $ 26 $ 9 December 31, 2023 Other investments $ — $ — $ 80 $ 80 Total $ — $ — $ 80 $ 80 AIG | First Quarter 2024 Form 10-Q 25 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements 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 March 31, 2024 Assets: Mortgage and other loans receivable $ — $ 322 $ 48,810 $ 49,132 $ 52,475 Other invested assets — 896 6 902 902 Short-term investments (a) — 6,590 — 6,590 6,590 Cash (b) 1,816 — — 1,816 1,816 Other assets 43 — — 43 43 Liabilities: Policyholder contract deposits associated with investment-type contracts — 86 136,106 136,192 141,851 Fortitude Re funds withheld payable — — 30,153 30,153 30,153 Other liabilities (c) — 3,585 — 3,585 3,585 Short-term and long-term debt — 17,928 249 18,177 19,250 Debt of consolidated investment entities — 67 2,527 2,594 2,617 Separate account liabilities - investment contracts — 91,243 — 91,243 91,243 December 31, 2023 Assets: Mortgage and other loans receivable $ — $ 272 $ 48,264 $ 48,536 $ 51,553 Other invested assets — 913 6 919 919 Short-term investments (a) — 6,428 — 6,428 6,428 Cash (b) 2,155 — — 2,155 2,155 Other assets 45 — — 45 45 Liabilities: Policyholder contract deposits associated with investment-type contracts — 90 130,094 130,184 140,652 Fortitude Re funds withheld payable — — 30,710 30,710 30,710 Other liabilities (c) — 2,467 — 2,467 2,467 Short-term and long-term debt — 18,595 267 18,862 19,743 Debt of consolidated investment entities — 43 2,526 2,569 2,591 Separate account liabilities - investment contracts — 87,215 — 87,215 87,215 (a) Excludes $ 25 million and $ 11 million at March 31, 2024 and December 31, 2023, respectively, reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets. (b) Excludes $ 1 million and $ 3 million at March 31, 2024 and December 31, 2023, respectively, reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets. (c) Excludes $ 52 million and $ 45 million at March 31, 2024 and December 31, 2023, respectively, reclassified to Liabilities held for sale on the Condensed Consolidated Balance Sheets. 26 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments 6. Investments 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 (b) Gross Unrealized Losses (b) Fair Value March 31, 2024 Bonds available for sale: U.S. government and government sponsored entities $ 6,157 $ — $ 23 $ ( 391 ) $ 5,789 Obligations of states, municipalities and political subdivisions 10,894 — 85 ( 886 ) 10,093 Non-U.S. governments 13,310 — 109 ( 1,451 ) 11,968 Corporate debt 153,436 ( 84 ) 1,598 ( 19,132 ) 135,818 Mortgage-backed, asset-backed and collateralized: RMBS 21,841 ( 24 ) 849 ( 1,245 ) 21,421 CMBS 15,563 ( 17 ) 68 ( 1,126 ) 14,488 CLO/ABS 33,866 — 234 ( 1,190 ) 32,910 Total mortgage-backed, asset-backed and collateralized 71,270 ( 41 ) 1,151 ( 3,561 ) 68,819 Total bonds available for sale (c) $ 255,067 $ ( 125 ) $ 2,966 $ ( 25,421 ) $ 232,487 December 31, 2023 Bonds available for sale: U.S. government and government sponsored entities $ 5,885 $ — $ 58 $ ( 327 ) $ 5,616 Obligations of states, municipalities and political subdivisions 11,387 — 118 ( 842 ) 10,663 Non-U.S. governments 13,668 ( 3 ) 137 ( 1,349 ) 12,453 Corporate debt 154,674 ( 90 ) 1,898 ( 18,050 ) 138,432 Mortgage-backed, asset-backed and collateralized: RMBS 20,875 ( 35 ) 821 ( 1,217 ) 20,444 CMBS 15,379 ( 34 ) 46 ( 1,263 ) 14,128 CLO/ABS 31,167 — 183 ( 1,353 ) 29,997 Total mortgage-backed, asset-backed and collateralized 67,421 ( 69 ) 1,050 ( 3,833 ) 64,569 Total bonds available for sale (c) $ 253,035 $ ( 162 ) $ 3,261 $ ( 24,401 ) $ 231,733 (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 OCI. (b) At March 31, 2024, includes mark to market movement relating to embedded derivatives. (c) At March 31, 2024 and December 31, 2023, the fair value of bonds available for sale held by us that were below investment grade or not rated totaled $ 16.9 billion or 7 percent and $ 17.1 billion or 7 percent, respectively. AIG | First Quarter 2024 Form 10-Q 27 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments 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* March 31, 2024 Bonds available for sale: U.S. government and government sponsored entities $ 2,600 $ 33 $ 1,486 $ 358 $ 4,086 $ 391 Obligations of states, municipalities and political subdivisions 2,150 134 5,187 752 7,337 886 Non-U.S. governments 2,007 148 7,424 1,302 9,431 1,450 Corporate debt 16,567 2,141 91,020 16,952 107,587 19,093 RMBS 4,044 189 7,877 1,025 11,921 1,214 CMBS 1,678 70 8,664 1,050 10,342 1,120 CLO/ABS 6,593 154 12,577 1,036 19,170 1,190 Total bonds available for sale $ 35,639 $ 2,869 $ 134,235 $ 22,475 $ 169,874 $ 25,344 December 31, 2023 Bonds available for sale: U.S. government and government sponsored entities $ 1,046 $ 12 $ 1,550 $ 315 $ 2,596 $ 327 Obligations of states, municipalities and political subdivisions 1,994 133 5,218 709 7,212 842 Non-U.S. governments 1,901 168 7,483 1,175 9,384 1,343 Corporate debt 15,483 1,936 93,649 16,076 109,132 18,012 RMBS 4,154 288 7,246 880 11,400 1,168 CMBS 2,864 219 8,192 1,027 11,056 1,246 CLO/ABS 6,965 202 13,436 1,151 20,401 1,353 Total bonds available for sale $ 34,407 $ 2,958 $ 136,774 $ 21,333 $ 171,181 $ 24,291 * At March 31, 2024, includes mark to market movement relating to embedded derivatives. At March 31, 2024, we held 27,875 individual fixed maturity securities that were in an unrealized loss position and for which no allowance for credit losses has been recorded (including 22,726 individual fixed maturity securities that were in a continuous unrealized loss position for 12 months or more). At December 31, 2023, we held 27,930 individual fixed maturity securities that were in an unrealized loss position and for which no allowance for credit losses has been recorded (including 22,663 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 March 31, 2024 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. 28 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments 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: March 31, 2024 Total Fixed Maturity Securities Available for Sale (in millions) Amortized Cost, Net of Allowance Fair Value Due in one year or less $ 8,347 $ 8,235 Due after one year through five years 47,710 46,259 Due after five years through ten years 39,506 36,657 Due after ten years 88,150 72,517 Mortgage-backed, asset-backed and collateralized 71,229 68,819 Total $ 254,942 $ 232,487 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 March 31, 2024 2023 (in millions) Gross Realized Gains Gross Realized Losses Gross Realized Gains Gross Realized Losses Fixed maturity securities $ 20 $ 463 $ 146 $ 598 For the three months ended March 31, 2024 and 2023, the aggregate fair value of available for sale securities sold was $ 4.9 billion and $ 10.8 billion, respectively, which resulted in net realized gains (losses) of $( 443 ) million and $( 452 ) million, respectively. Included within the net realized gains (losses) are $( 37 ) million and $( 65 ) million of net realized gains (losses) for the three months ended March 31, 2024 and 2023, 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. 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) March 31, 2024 December 31, 2023 Fair Value Percent of Total Fair Value Percent of Total Fixed maturity securities: Obligations of states, municipalities and political subdivisions $ 90 1 % $ 91 2 % Non-U.S. governments 39 1 37 1 Corporate debt 2,997 48 2,908 49 Mortgage-backed, asset-backed and collateralized: RMBS 273 4 263 4 CMBS 283 5 261 4 CLO/ABS and other collateralized 1,721 28 1,681 28 Total mortgage-backed, asset-backed and collateralized 2,277 37 2,205 36 Total fixed maturity securities 5,403 87 5,241 88 Equity securities 797 13 728 12 Total $ 6,200 100 % $ 5,969 100 % AIG | First Quarter 2024 Form 10-Q 29 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments OTHER INVESTED ASSETS The following table summarizes the carrying amounts of other invested assets: (in millions) March 31, 2024 December 31, 2023 Alternative investments (a)(b) $ 11,195 $ 11,320 Investment real estate (c) 2,159 2,237 All other investments (d) 2,623 2,660 Total $ 15,977 $ 16,217 (a) At March 31, 2024, included hedge funds of $ 0.7 billion and private equity funds of $ 10.5 billion. At December 31, 2023, included hedge funds of $ 0.7 billion and private equity funds of $ 10.6 billion. (b) The majority of our hedge fund investments are redeemable upon a single month or quarter’s notice, though redemption terms vary from single, immediate withdrawals, to withdrawals staggered up to six quarters. Some of the portfolio consists of illiquid run-off or “side-pocket” positions whose liquidation horizons are uncertain and likely beyond a year after submission of the redemption notice. (c) Represents values net of accumulated depreciation. At March 31, 2024 and December 31, 2023, the accumulated depreciation was $ 834 million and $ 853 million, respectively. (d) Includes AIG's ownership interest in Fortitude Group Holdings, LLC (FRL), and DaVinciRe Holdings Ltd, Class D (DVRH), which are recorded using the measurement alternative for equity securities. Our investment in FRL totaled $ 156 million and $ 156 million at March 31, 2024 and December 31, 2023, respectively. Our investment in DVRH totaled $ 300 million and $ 300 million at March 31, 2024 and December 31, 2023, respectively. NET INVESTMENT INCOME The following table presents the components of Net investment income: Three Months Ended March 31, 2024 2023 (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 $ 2,946 $ 216 $ 3,162 $ 2,546 $ 243 $ 2,789 Other fixed maturity securities 9 71 80 12 123 135 Equity securities 99 — 99 51 — 51 Interest on mortgage and other loans 649 57 706 567 59 626 Alternative investments (a) 8 33 41 76 31 107 Real estate 5 ( 7 ) ( 2 ) 3 — 3 Other investments 33 7 40 28 ( 1 ) 27 Total investment income 3,749 377 4,126 3,283 455 3,738 Investment expenses 214 8 222 196 9 205 Net investment income $ 3,535 $ 369 $ 3,904 $ 3,087 $ 446 $ 3,533 (a) 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. 30 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments NET REALIZED GAINS AND LOSSES The following table presents the components of Net realized gains (losses): Three Months Ended March 31, 2024 2023 (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 $ ( 406 ) $ ( 37 ) $ ( 443 ) $ ( 387 ) $ ( 65 ) $ ( 452 ) Intent to sell ( 16 ) ( 32 ) ( 48 ) — — — Change in allowance for credit losses on fixed maturity securities ( 62 ) ( 6 ) ( 68 ) ( 16 ) — ( 16 ) Change in allowance for credit losses on loans ( 23 ) 1 ( 22 ) ( 42 ) ( 21 ) ( 63 ) Foreign exchange transactions 14 ( 14 ) — 114 16 130 Index-linked interest credited embedded derivatives, net of related hedges 90 — 90 ( 178 ) — ( 178 ) All other derivatives and hedge accounting* 123 ( 90 ) 33 ( 217 ) 38 ( 179 ) Sales of alternative investments and real estate investments 30 ( 1 ) 29 4 1 5 Other ( 8 ) — ( 8 ) 9 — 9 Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative ( 258 ) ( 179 ) ( 437 ) ( 713 ) ( 31 ) ( 744 ) Net realized gains (losses) on Fortitude Re funds withheld embedded derivative — 13 13 — ( 1,165 ) ( 1,165 ) Net realized gains (losses) $ ( 258 ) $ ( 166 ) $ ( 424 ) $ ( 713 ) $ ( 1,196 ) $ ( 1,909 ) * Derivative activity related to hedging MRBs is recorded in Change in the fair value of MRBs, net. For additional disclosures about MRBs, see Note 13. 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 March 31, (in millions) 2024 2023 Increase (decrease) in unrealized appreciation (depreciation) of investments: Fixed maturity securities $ ( 1,214 ) $ 5,005 Total increase (decrease) in unrealized appreciation (depreciation) of investments* $ ( 1,214 ) $ 5,005 * Excludes net unrealized gains and losses attributable to businesses held for sale at March 31, 2024. 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 March 31, 2024 2023 (in millions) Equities Other Invested Assets Total Equities Other Invested Assets Total Net gains recognized during the period on equity securities and other investments $ 99 $ 153 $ 252 $ 51 $ 110 $ 161 Less: Net gains recognized during the period on equity securities and other investments sold during the period 67 2 69 153 1 154 Unrealized gains (losses) recognized during the reporting period on equity securities and other investments still held at the reporting date $ 32 $ 151 $ 183 $ ( 102 ) $ 109 $ 7 EVALUATING INVESTMENTS FOR AN ALLOWANCE FOR CREDIT LOSSES AND IMPAIRMENTS For a discussion of our policy for evaluating investments for an allowance for credit losses, see Note 6 to the Consolidated Financial Statements in the 2023 Annual Report. AIG | First Quarter 2024 Form 10-Q 31 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments 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 March 31, 2024 2023 (in millions) Structured Non- Structured Total Structured Non- Structured Total Balance, beginning of year $ 69 $ 93 $ 162 $ 46 $ 140 $ 186 Additions: Securities for which allowance for credit losses were not previously recorded 13 20 33 2 22 24 Reductions: Securities sold during the period ( 15 ) ( 8 ) ( 23 ) ( 1 ) ( 10 ) ( 11 ) 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 12 23 35 ( 4 ) ( 4 ) ( 8 ) Write-offs charged against the allowance ( 39 ) ( 44 ) ( 83 ) — ( 50 ) ( 50 ) Other 1 — 1 2 ( 7 ) ( 5 ) Balance, end of period $ 41 $ 84 $ 125 $ 45 $ 91 $ 136 Purchased Credit Deteriorated 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 three months ended March 31, 2024 and 2023. 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. 32 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments The following table presents the fair value of securities pledged to counterparties under secured financing transactions, including repurchase and securities lending agreements: (in millions) March 31, 2024 December 31, 2023 Fixed maturity securities available for sale $ 3,651 $ 2,723 At March 31, 2024 and December 31, 2023, amounts borrowed under repurchase and securities lending agreements totaled $ 3.6 billion and $ 2.6 billion, respectively. 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 March 31, 2024 Bonds available for sale: Non-U.S. governments $ — $ 51 $ — $ — $ — $ 51 Corporate debt 14 3,586 — — — 3,600 Total $ 14 $ 3,637 $ — $ — $ — $ 3,651 December 31, 2023 Bonds available for sale: Non-U.S. governments $ — $ 277 $ — $ — $ — $ 277 Corporate debt 38 2,408 — — — 2,446 Total $ 38 $ 2,685 $ — $ — $ — $ 2,723 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) March 31, 2024 December 31, 2023 Securities collateral pledged to us $ 934 $ 1,200 At March 31, 2024 and December 31, 2023, the carrying value of reverse repurchase agreements totaled $ 927 million and $ 1.1 billion, respectively. All secured financing 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. We do not currently offset any such transactions. 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 $ 18.5 billion and $ 16.5 billion at March 31, 2024 and December 31, 2023, 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 $ 288 million and $ 283 million of stock in FHLBs at March 31, 2024 and December 31, 2023, 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 $ 6.2 billion and $ 3.1 billion, respectively, at March 31, 2024 and $ 6.5 billion and $ 3.0 billion, respectively, at December 31, 2023. AIG | First Quarter 2024 Form 10-Q 33 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 6. Investments 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 $ 77 million and $ 63 million, at March 31, 2024 and December 31, 2023, 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 $ 164 million and $ 164 million, comprised of bonds available for sale and short-term investments at March 31, 2024 and December 31, 2023, respectively. Reinsurance transactions between AIG and Fortitude Re were structured as modco and loss portfolio transfer arrangements with funds withheld. 7. Lending Activities The following table presents the composition of Mortgage and other loans receivable, net: (in millions) March 31, 2024 December 31, 2023 Commercial mortgages (a) $ 38,478 $ 38,009 Residential mortgages 9,241 8,689 Life insurance policy loans 1,753 1,753 Commercial loans, other loans and notes receivable (b) 3,869 3,940 Total mortgage and other loans receivable (c) 53,341 52,391 Allowance for credit losses (c) (d) ( 866 ) ( 838 ) Mortgage and other loans receivable, net (c) $ 52,475 $ 51,553 (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 18 percent and 10 percent, respectively, at March 31, 2024 and 18 percent and 11 percent, respectively, at December 31, 2023). (b) There were no loans that were held for sale carried at lower of cost or market as of March 31, 2024 and December 31, 2023. (c) Excludes $ 37.6 billion at both March 31, 2024 and December 31, 2023 of loan receivable from AIG Financial Products Corp. (AIGFP), which has a full allowance for credit losses, recognized upon the deconsolidation of AIGFP. For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report. (d) Does not include allowance for credit losses of $ 55 million and $ 67 million, respectively, at March 31, 2024 and December 31, 2023, 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 March 31, 2024, $ 32 million and $ 656 million of residential mortgage loans and commercial mortgage loans, respectively, were placed on nonaccrual status. As of December 31, 2023, $ 27 million and $ 492 million of residential mortgage loans and commercial mortgage loans, respectively, were placed on nonaccrual status. Accrued interest is presented separately and is included in Accrued investment income on the Condensed Consolidated Balance Sheets. As of March 31, 2024, accrued interest receivable was $ 34 million and $ 187 million associated with residential mortgage loans and commercial mortgage loans, respectively. As of December 31, 2023, accrued interest receivable was $ 20 million and $ 183 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. 34 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 7. Lending Activities CREDIT QUALITY OF COMMERCIAL MORTGAGES The following table presents debt service coverage ratios (a) for commercial mortgages by year of vintage: March 31, 2024 2024 2023 2022 2021 2020 Prior Total (in millions) >1.2X $ 659 $ 2,388 $ 6,371 $ 2,577 $ 1,412 $ 17,872 $ 31,279 1.00 - 1.20X 90 420 1,148 1,528 368 2,773 6,327 <1.00X — — 50 — — 822 872 Total commercial mortgages $ 749 $ 2,808 $ 7,569 $ 4,105 $ 1,780 $ 21,467 $ 38,478 December 31, 2023 2023 2022 2021 2020 2019 Prior Total (in millions) >1.2X $ 2,555 $ 6,209 $ 2,349 $ 1,387 $ 4,969 $ 13,459 $ 30,928 1.00 - 1.20X 295 1,149 1,574 369 177 2,632 6,196 <1.00X — 50 — — — 835 885 Total commercial mortgages $ 2,850 $ 7,408 $ 3,923 $ 1,756 $ 5,146 $ 16,926 $ 38,009 The following table presents loan-to-value ratios (b) for commercial mortgages by year of vintage: March 31, 2024 2024 2023 2022 2021 2020 Prior Total (in millions) Less than 65% $ 749 $ 2,520 $ 4,716 $ 2,858 $ 1,329 $ 13,730 $ 25,902 65% to 75% — 288 2,225 798 286 5,204 8,801 76% to 80% — — — 99 — 836 935 Greater than 80% — — 628 350 165 1,697 2,840 Total commercial mortgages $ 749 $ 2,808 $ 7,569 $ 4,105 $ 1,780 $ 21,467 $ 38,478 December 31, 2023 2023 2022 2021 2020 2019 Prior Total (in millions) Less than 65% $ 2,446 $ 4,629 $ 2,741 $ 1,303 $ 2,832 $ 11,571 $ 25,522 65% to 75% 290 1,763 794 288 1,937 3,220 8,292 76% to 80% — 375 99 — 377 340 1,191 Greater than 80% 114 641 289 165 — 1,795 3,004 Total commercial mortgages $ 2,850 $ 7,408 $ 3,923 $ 1,756 $ 5,146 $ 16,926 $ 38,009 (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 1.9 x at both periods ended March 31, 2024 and December 31, 2023. 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 60 percent at both periods ended March 31, 2024 and December 31, 2023. The loan-to-value ratios have been updated within the last three months to reflect the current carrying values of the loans. We update the valuations of collateral properties by obtaining independent appraisals, generally at least once per year. The following table presents supplementary credit quality information related to commercial mortgages: Number of Loans Class Percent of Total (dollars in millions) Apartments Offices Retail Industrial Hotel Others Total March 31, 2024 Past Due Status: In good standing 610 $ 15,268 $ 9,573 $ 4,172 $ 6,572 $ 2,039 $ 523 $ 38,147 99 % 90 days or less delinquent (a) 2 — 61 200 — — — 261 1 >90 days delinquent or in process of foreclosure 2 — 29 41 — — — 70 — Total (b) 614 $ 15,268 $ 9,663 $ 4,413 $ 6,572 $ 2,039 $ 523 $ 38,478 100 % Allowance for credit losses $ 82 $ 441 $ 113 $ 98 $ 43 $ 7 $ 784 2 % AIG | First Quarter 2024 Form 10-Q 35 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 7. Lending Activities Number of Loans Class Percent of Total (dollars in millions) Apartments Offices Retail Industrial Hotel Others Total December 31, 2023 Past Due Status: In good standing 610 $ 15,129 $ 9,679 $ 4,263 $ 6,367 $ 2,053 $ 446 $ 37,937 100 % 90 days or less delinquent 1 — 29 — — — — 29 — >90 days delinquent or in process of foreclosure 1 — — 43 — — — 43 — Total (b) 612 $ 15,129 $ 9,708 $ 4,306 $ 6,367 $ 2,053 $ 446 $ 38,009 100 % Allowance for credit losses $ 94 $ 415 $ 109 $ 90 $ 38 $ 6 $ 752 2 % (a) Includes $ 61 million of Office loans and $ 20 million of Retail loans supporting the Fortitude Re funds withheld arrangements, 90 days or less delinquent, at March 31, 2024. (b) Does not reflect allowance for credit losses. The following table presents credit quality performance indicators for residential mortgages by year of vintage: March 31, 2024 2024 2023 2022 2021 2020 Prior Total (in millions) FICO*: 780 and greater $ 55 $ 699 $ 594 $ 2,295 $ 643 $ 845 $ 5,131 720 - 779 198 1,134 539 543 151 345 2,910 660 - 719 69 364 232 131 40 168 1,004 600 - 659 — 12 34 18 10 59 133 Less than 600 — 2 18 9 5 29 63 Total residential mortgages $ 322 $ 2,211 $ 1,417 $ 2,996 $ 849 $ 1,446 $ 9,241 December 31, 2023 2023 2022 2021 2020 2019 Prior Total (in millions) FICO*: 780 and greater $ 514 $ 589 $ 2,283 $ 622 $ 240 $ 608 $ 4,856 720 - 779 1,121 625 560 169 99 243 2,817 660 - 719 313 257 113 40 37 128 888 600 - 659 2 20 11 8 9 53 103 Less than 600 — 1 2 2 4 16 25 Total residential mortgages $ 1,950 $ 1,492 $ 2,969 $ 841 $ 389 $ 1,048 $ 8,689 * Fair Isaac Corporation (FICO) is the credit quality indicator used to evaluate consumer credit risk for residential mortgage loan borrowers and scores have been updated within the last twelve months. FICO scores for residential mortgage investor loans to corporate entities are those of the guarantor at time of purchase. On March 31, 2024 and December 31, 2023 residential loans direct to consumers totaled $ 2.3 billion and $ 1.7 billion, respectively. 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 7 to the Consolidated Financial Statements in the 2023 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 March 31, 2024 (b) 2023 (in millions) Commercial Mortgages Other Loans Total Commercial Mortgages Other Loans Total Allowance, beginning of year $ 752 $ 86 $ 838 $ 640 $ 76 $ 716 Loans charged off — ( 6 ) ( 6 ) — — — Net charge-offs — ( 6 ) ( 6 ) — — — Addition to (release of) allowance for loan losses 32 2 34 66 4 70 Allowance, end of period $ 784 $ 82 $ 866 $ 706 $ 80 $ 786 (a) Does not include allowance for credit losses of $ 55 million and $ 62 million, respectively, at March 31, 2024 and 2023 in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities. (b) Excludes $ 37.6 billion at both March 31, 2024 and December 31, 2023, of loan receivable from AIGFP, which has a full allowance for credit losses, recognized upon the deconsolidation of AIGFP. For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report. 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. 36 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 7. Lending Activities LOAN MODIFICATIONS The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. We use a probability of default/loss given default model to determine the allowance for credit losses for our commercial and residential mortgage loans. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses utilizing the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. When modifications are executed, they often will be in the form of principal forgiveness, term extensions, interest rate reductions, or some combination of any of these concessions. When principal is forgiven, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. 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. During the three months ended March 31, 2024, commercial mortgage loans with an amortized cost of $ 17 million supporting the funds withheld arrangements with Fortitude Re and commercial loans, other loans and notes receivable with an amortized cost of $ 168 million (none of which were supporting the funds withheld arrangements with Fortitude Re, and $ 168 million of which is related to the loans previously modified in 2023) were granted term extensions. The modified loans represent less than 1 percent and 4 percent, respectively, of these portfolio segments. These modifications added less than one year to the weighted average life of loans in each of these two portfolio segments. There were no loans that had defaulted during the three months ended March 31, 2024 and 2023, that had been previously modified with borrowers experiencing financial difficulties. AIG closely monitors the performance of the loans modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. All loans with borrowers experiencing financial difficulty that have been modified in the 12 months prior to March 31, 2024 are current and performing in conjunction with their modified terms. 8. 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 OCI). 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. As of March 31, 2024, approximately $ 26.9 billion of reserves from our Life and Retirement Run-Off Lines and approximately $ 2.9 billion of reserves from our General Insurance Run-Off Lines related to business written by multiple wholly-owned AIG subsidiaries, had been ceded to Fortitude Re under these reinsurance transactions. AIG | First Quarter 2024 Form 10-Q 37 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 8. Reinsurance 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: March 31, 2024 December 31, 2023 (in millions) Carrying Value Fair Value Carrying Value Fair Value Corresponding Accounting Policy Fixed maturity securities - available for sale (a) $ 16,726 $ 16,726 $ 17,384 $ 17,384 Fair value through other comprehensive income (loss) Fixed maturity securities - fair value option 5,035 5,035 4,867 4,867 Fair value through net investment income Commercial mortgage loans 3,882 3,614 3,921 3,685 Amortized cost Real estate investments 175 302 184 329 Amortized cost Private equity funds / hedge funds 1,920 1,920 1,910 1,910 Fair value through net investment income Policy loans 325 325 330 330 Amortized cost Short-term investments 178 178 176 176 Fair value through net investment income Funds withheld investment assets 28,241 28,100 28,772 28,681 Derivative assets, net (b) 14 14 45 45 Fair value through net realized gains (losses) Other (c) 675 675 758 758 Amortized cost Total $ 28,930 $ 28,789 $ 29,575 $ 29,484 (a) The change in the net unrealized gains (losses) on available for sale securities related to the Fortitude Re funds withheld assets was $( 163 ) million ($( 128 ) million after-tax) and $ 704 million ($ 556 million after-tax), respectively for the three months ended March 31, 2024 and 2023. (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 $ 17 million and $ 27 million, respectively, as of March 31, 2024. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $ 63 million and $ 34 million, respectively, as of December 31, 2023. These derivative assets and liabilities are fully collateralized either by cash or securities. (c) Primarily comprised of Cash and Accrued investment income. The impact of the funds withheld arrangements with Fortitude Re was as follows: Three Months Ended March 31, (in millions) 2024 2023 Net investment income - Fortitude Re funds withheld assets $ 369 $ 446 Net realized gains (losses) on Fortitude Re funds withheld assets: Net realized losses - Fortitude Re funds withheld assets ( 179 ) ( 31 ) Net realized gains (losses) - Fortitude Re funds withheld embedded derivative 13 ( 1,165 ) Net realized losses on Fortitude Re funds withheld assets ( 166 ) ( 1,196 ) Income (loss) from continuing operations before income tax expense (benefit) 203 ( 750 ) Income tax expense (benefit) (a) 43 ( 158 ) Net income (loss) 160 ( 592 ) Change in unrealized appreciation (depreciation) of all other investments (a) ( 128 ) 556 Comprehensive income (loss) $ 32 $ ( 36 ) (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 arrangement and the appreciation (depreciation) of the asset 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. 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 on uncollectible reinsurance 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; 38 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 8. Reinsurance • the relative financial health of the reinsurer as classified 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 recoverable's 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 March 31, 2024 were $ 71.1 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 90 percent of the reinsurance recoverables were investment grade, of which 49 percent related to General Insurance and 41 percent related to Life and Retirement; (ii) approximately 9 percent of the reinsurance recoverables were non-investment grade, the majority of which related to General Insurance and (iii) approximately one percent of the reinsurance recoverables related to entities that were not rated by AIG. The total reinsurance recoverables as of December 31, 2023 were $ 69.8 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 90 percent of the reinsurance recoverables were investment grade, of which 51 percent related to General Insurance and 39 percent related to Life and Retirement; (ii) approximately 9 percent of the reinsurance recoverables were non-investment grade, the majority of which related to General Insurance; (iii) approximately one percent of the reinsurance recoverables related to entities that were not rated by AIG. As of March 31, 2024 and December 31, 2023, approximately 82 percent and 83 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 March 31, 2024 2023 (in millions) General Insurance Life and Retirement Total General Insurance Life and Retirement Total Balance, beginning of year $ 255 $ 30 $ 285 $ 260 $ 84 $ 344 Addition to (release of) allowance for expected credit losses and disputes, net 1 ( 10 ) ( 9 ) ( 3 ) ( 10 ) ( 13 ) Write-offs charged against the allowance for credit losses and disputes ( 1 ) ( 2 ) ( 3 ) ( 1 ) — ( 1 ) Other changes — — — ( 3 ) — ( 3 ) Balance, end of period $ 255 $ 18 $ 273 $ 253 $ 74 $ 327 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. 9. Deferred Policy Acquisition Costs DAC represent those costs that are incremental and directly related to the successful acquisition of new or renewal of existing insurance contracts. We defer incremental costs that result directly from, and are essential to, the acquisition or renewal of an insurance contract. Such DAC generally include agent or broker commissions and bonuses, premium taxes, and medical and inspection fees that would not have been incurred if the insurance contract had not been acquired or renewed. Each cost is analyzed to assess whether it is fully deferrable. We partially defer costs, including certain commissions, when we do not believe that the entire cost is directly related to the acquisition or renewal of insurance contracts. Commissions that are not deferred to DAC are recorded in General operating and other expenses in the Condensed Consolidated Statements of Income (Loss). We also defer a portion of employee total compensation and payroll-related fringe benefits directly related to time spent performing specific acquisition or renewal activities, including costs associated with the time spent on underwriting, policy issuance and processing, and sales force contract selling. The amounts deferred are derived based on successful efforts for each distribution channel and/or cost center from which the cost originates. AIG | First Quarter 2024 Form 10-Q 39 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 9. Deferred Policy Acquisition Costs DAC for all contracts, except for those with limited to no exposure to policyholder behavior risk, (i.e., certain investment contracts), is grouped and amortized on a constant level basis over the expected term of the related contracts. The following table presents a rollforward of DAC: Three Months Ended March 31, 2024 General Insurance Individual Retirement Group Retirement Life Insurance Institutional Markets (in millions) Total Balance, beginning of year $ 2,075 $ 4,735 $ 1,056 $ 4,149 $ 70 $ 12,085 Capitalization 882 170 22 134 13 1,221 Amortization expense ( 828 ) ( 148 ) ( 21 ) ( 104 ) ( 3 ) ( 1,104 ) Other, including foreign exchange ( 56 ) — — ( 7 ) — ( 63 ) Reclassified to held for sale* ( 1 ) — — ( 27 ) — ( 28 ) Balance, end of period $ 2,072 $ 4,757 $ 1,057 $ 4,145 $ 80 $ 12,111 Three Months Ended March 31, 2023 Balance, beginning of year $ 2,310 $ 4,597 $ 1,060 $ 4,839 $ 51 $ 12,857 Capitalization 1,358 187 20 120 4 1,689 Amortization expense ( 1,034 ) ( 137 ) ( 21 ) ( 99 ) ( 2 ) ( 1,293 ) Other, including foreign exchange 40 — — 11 — 51 Balance, end of period $ 2,674 $ 4,647 $ 1,059 $ 4,871 $ 53 $ 13,304 * Represents changes in DAC included in Assets held for sale. For additional information, see Note 4. DEFERRED SALES INDUCEMENTS We offer DSI which include enhanced crediting rates or bonus payments to contract holders (bonus interest) on certain annuity and investment contract products. To qualify for accounting treatment as an asset, the bonus interest must be explicitly identified in the contract at inception. We must also demonstrate that such amounts are incremental to amounts we credit on similar contracts without bonus interest and are higher than the contracts’ expected ongoing crediting rates for periods after the bonus period. DSI is reported in Other assets, while amortization related to DSI is recorded in Interest credited to policyholder account balances. DSI amounts are deferred and amortized on a constant level basis over the life of the contract consistent with DAC. The following table presents a rollforward of DSI: Three Months Ended March 31, 2024 2023 (in millions) Individual Retirement Group Retirement Total Individual Retirement Group Retirement Total Balance, beginning of year $ 333 $ 164 $ 497 $ 381 $ 177 $ 558 Capitalization 1 — 1 2 — 2 Amortization expense ( 13 ) ( 3 ) ( 16 ) ( 14 ) ( 3 ) ( 17 ) Balance, end of period* $ 321 $ 161 $ 482 $ 369 $ 174 $ 543 * At March 31, 2024 and 2023, Other assets, excluding DSI, totaled $ 11.8 billion and $ 12.4 billion, respectively. 10. 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. 40 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 10. Variable Interest Entities 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 March 31, 2024 Assets: Bonds available for sale $ 39 $ 154 $ 193 Other bond securities 46 — 46 Equity securities 19 — 19 Mortgage and other loans receivable — 1,993 1,993 Other invested assets Alternative investments (a) 2,536 — 2,536 Investment real estate 1,413 — 1,413 Short-term investments 157 4 161 Cash 54 — 54 Accrued investment income 2 6 8 Other assets 80 9 89 Total (b) $ 4,346 $ 2,166 $ 6,512 Liabilities: Debt of consolidated investment entities $ 1,019 $ 1,114 $ 2,133 Other (c) 70 33 103 Total $ 1,089 $ 1,147 $ 2,236 December 31, 2023 Assets: Bonds available for sale $ 36 $ 148 $ 184 Other bond securities 45 — 45 Equity securities 8 — 8 Mortgage and other loans receivable — 2,063 2,063 Other invested assets Alternative investments (a) 2,695 — 2,695 Investment real estate 1,488 — 1,488 Short-term investments 125 10 135 Cash 61 — 61 Accrued investment income 2 7 9 Other assets 94 2 96 Total (b) $ 4,554 $ 2,230 $ 6,784 Liabilities: Debt of consolidated investment entities $ 1,094 $ 1,106 $ 2,200 Other (c) 82 1 83 Total $ 1,176 $ 1,107 $ 2,283 (a) Comprised primarily of investments in real estate joint ventures at March 31, 2024 and December 31, 2023. (b) The assets of each VIE can be used only to settle specific obligations of that VIE. (c) Comprised primarily of Other liabilities at March 31, 2024 and December 31, 2023. (d) At March 31, 2024 and December 31, 2023, off-balance sheet exposure primarily consisting of our insurance companies’ commitments to real estate and investment entities were $ 1.8 billion and $ 1.9 billion, respectively, of which commitments to external parties were $ 0.5 billion and $ 0.4 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. AIG | First Quarter 2024 Form 10-Q 41 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 10. Variable Interest Entities 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 (c) Off-Balance Sheet Total March 31, 2024 Real estate and investment entities (a) $ 546,012 $ 9,226 $ 3,566 (d) $ 12,792 Other (b) 1,027 58 748 (e) 806 Total $ 547,039 $ 9,284 $ 4,314 $ 13,598 December 31, 2023 Real estate and investment entities (a) $ 528,053 $ 9,125 $ 3,720 (d) $ 12,845 Other (b) 1,027 58 748 (e) 806 Total $ 529,080 $ 9,183 $ 4,468 $ 13,651 (a) Comprised primarily of hedge funds and private equity funds. (b) At March 31, 2024 and December 31, 2023, excludes approximately $ 1,948 million and $ 1,971 million, respectively, of VIE assets related to AIGFP and its consolidated subsidiaries, with maximum off-balance sheet exposure to loss of $ 1,918 million and $ 1,941 million, respectively. For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report. (c) At March 31, 2024 and December 31, 2023, $ 9.2 billion and $ 9.1 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets. (d) These amounts represent our unfunded commitments to invest in private equity funds and hedge funds. (e) These amounts represent our estimate of the maximum exposure to loss under certain insurance policies issued to VIEs if a hypothetical loss occurred to the extent of the full amount of the insured value. Our insurance policies cover defined risks and our estimate of liability is included in our insurance reserves on the balance sheet. For additional information on VIEs, see Note 10 to the Consolidated Financial Statements in the 2023 Annual Report. 11. 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 economically mitigate financial risk associated with embedded derivatives and MRBs in certain insurance liabilities. 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. As part of our strategy to enhance investment income, 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. 42 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Derivatives and Hedge Accounting 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: March 31, 2024 December 31, 2023 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 $ 577 $ 208 $ 2,638 $ 50 $ 1,863 $ 230 $ 752 $ 17 Foreign exchange contracts 5,627 385 1,932 204 3,847 416 6,402 336 Derivatives not designated as hedging instruments: (a) Interest rate contracts 52,800 3,276 36,050 3,329 42,549 3,056 42,466 3,614 Foreign exchange contracts 14,993 851 6,430 423 8,803 820 9,900 558 Equity contracts 80,551 2,878 10,368 1,229 81,110 2,019 9,595 745 Credit contracts (b) 3,808 111 508 36 2,109 41 509 37 Other contracts (c) 43,182 13 47 1 44,640 13 48 2 Total derivatives, gross $ 201,538 $ 7,722 $ 57,973 $ 5,272 $ 184,921 $ 6,595 $ 69,672 $ 5,309 Counterparty netting (d) ( 4,545 ) ( 4,545 ) ( 3,864 ) ( 3,864 ) Cash collateral (e) ( 2,601 ) ( 326 ) ( 2,220 ) ( 1,050 ) Total derivatives on Condensed Consolidated Balance Sheets (f) $ 576 $ 401 $ 511 $ 395 (a) Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral. (b) As of March 31, 2024 and December 31, 2023, included CDSs on super senior multi-sector CLO with a net notional amount of $ 49 million and $ 50 million (fair value liability of $ 33 million and $ 32 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 derivative s. Derivative instrument assets and liabilities are recorded in Other assets and Other liabilities, respectively. Fair value of assets related to bifurcated embedded derivatives was $ 1.4 billion at March 31, 2024 and $ 1.2 billion at December 31, 2023. Fair value of liabilities related to bifurcated embedded derivatives was $ 8.7 billion and $ 8.0 billion, respectively, at March 31, 2024 and December 31, 2023. 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 fixed index annuities, index universal life products, and bonds available for sale, which include equity and interest rate components, and the funds withheld arrangement with Fortitude Re. For additional information, see Note 8. 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 $ 1.4 billion and $ 1.9 billion at March 31, 2024 and December 31, 2023, respectively. 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 $ 3.2 billion and $ 2.8 billion at March 31, 2024 and December 31, 2023, 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. AIG | First Quarter 2024 Form 10-Q 43 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Derivatives and Hedge Accounting 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 months ended March 31, 2024 and 2023, we recognized gains (losses) of $ 25 million and $( 25 ) million, respectively, included in Change in foreign currency translation adjustments in OCI 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 March 31, 2024 Interest rate contracts: Interest credited to policyholder account balances $ ( 62 ) $ — $ 64 $ 2 Foreign exchange contracts: Net realized gains/(losses) 88 ( 18 ) ( 88 ) ( 18 ) Three Months Ended March 31, 2023 Interest rate contracts: Interest credited to policyholder account balances $ 43 $ — $ ( 47 ) $ ( 4 ) Foreign exchange contracts: Net realized gains/(losses) ( 130 ) 76 130 76 (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. 44 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Derivatives and Hedge Accounting 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): Three Months Ended March 31, Gains (Losses) Recognized in Income (in millions) 2024 2023 By Derivative Type: Interest rate contracts $ ( 289 ) $ 95 Foreign exchange contracts 71 ( 101 ) Equity contracts 189 ( 78 ) Commodity contracts — 7 Credit contracts 23 ( 1 ) Other contracts 16 16 Embedded derivatives ( 549 ) ( 1,548 ) Total $ ( 539 ) $ ( 1,610 ) By Classification: Policy fees $ 15 $ 16 Net investment income - excluding Fortitude Re funds withheld assets — — Net investment income - Fortitude Re funds withheld assets 6 ( 2 ) Net realized gains (losses) - excluding Fortitude Re funds withheld assets (a) 220 ( 391 ) Net realized losses on Fortitude Re funds withheld assets (b) ( 77 ) ( 1,127 ) Policyholder benefits and claims incurred ( 3 ) 3 Change in the fair value of market risk benefits, net (c) ( 700 ) ( 109 ) Total $ ( 539 ) $ ( 1,610 ) (a) Includes $ 5 million gain related to the sale of AIG Life reported in Net (gain) loss on divestitures. For additional information, see Notes 1 and 4 . (b) 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. (c) This represents activity related to derivatives that economically hedged changes in the fair value of certain market risk benefits. CREDIT RISK-RELATED CONTINGENT FEATURES We estimate that at March 31, 2024, 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 $ 32 million at March 31, 2024 and December 31, 2023, respectively. The aggregate fair value of assets posted as collateral under these contracts at March 31, 2024 and December 31, 2023, was approximately $ 33 million and $ 34 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, CLO 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 value of these hybrid securities was under $ 1 million at both March 31, 2024 and December 31, 2023, respectively. These securities have par amounts of $ 42 million and $ 42 million at March 31, 2024 and December 31, 2023, respectively, and have remaining stated maturity dates that extend to 2052. AIG | First Quarter 2024 Form 10-Q 45 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities 12. 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. 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. 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. 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 $ 12.5 billion and $ 12.1 billion at March 31, 2024 and December 31, 2023, 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 March 31, 2024 and December 31, 2023 we held collateral of approximately $ 8.8 billion and $ 8.7 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 March 31, 2024 and December 31, 2023. The following table presents the rollforward of activity in loss reserves: Three Months Ended March 31, (in millions) 2024 2023 Liability for unpaid loss and loss adjustment expenses, beginning of year $ 70,393 $ 75,167 Reinsurance recoverable ( 30,289 ) ( 32,102 ) Net Liability for unpaid loss and loss adjustment expenses, beginning of year 40,104 43,065 Losses and loss adjustment expenses incurred: Current year 3,365 3,784 Prior years, excluding discount and amortization of deferred gain — ( 27 ) Prior years, discount charge (benefit) 106 94 Prior years, amortization of deferred gain on retroactive reinsurance (a) ( 32 ) ( 60 ) Total losses and loss adjustment expenses incurred 3,439 3,791 Losses and loss adjustment expenses paid: Current year ( 286 ) ( 289 ) Prior years ( 2,857 ) ( 3,549 ) Total losses and loss adjustment expenses paid ( 3,143 ) ( 3,838 ) Other changes: Foreign exchange effect ( 496 ) 397 Retroactive reinsurance adjustment (net of discount) (b) ( 8 ) 12 Reclassified to held for sale, net of reinsurance recoverables (c) ( 5 ) — Total other changes ( 509 ) 409 Liability for unpaid loss and loss adjustment expenses, end of period: Net liability for unpaid losses and loss adjustment expenses 39,891 43,427 Reinsurance recoverable 30,169 32,366 Total $ 70,060 $ 75,793 (a) Includes $ 5 million and $ 7 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 months ended March 31, 2024 and 2023, respectively. (b) Includes benefit (charge) from change in discount on retroactive reinsurance in the amount of $ 55 million and $ 70 million for the three months ended March 31, 2024 and 2023, respectively. (c) Represents change in loss reserves included in Liabilities held for sale. For additional information, see Note 4 . 46 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities On January 20, 2017, we entered into an adverse development reinsurance agreement with NICO, under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the paid losses on subject business paid on or after January 1, 2016 in excess of $ 25 billion of net paid losses, up to an aggregate limit of $ 25 billion. At NICO’s 80 percent share, NICO’s limit of liability under the contract is $ 20 billion. We account for this transaction as retroactive reinsurance. We paid total consideration, including interest, of $ 10.2 billion. The consideration was placed into a collateral trust account as security for NICO’s claim payment obligations, and Berkshire has provided a parental guarantee to secure the obligations of NICO under the agreement. Prior Year Development During the three months ended March 31, 2024, we did not recognize any prior year loss reserve development excluding discount and amortization of deferred gain. During the three months ended March 31, 2023, we recognized favorable prior year loss reserve development of $ 27 million excluding discount and amortization of deferred gain. The development in this period was primarily driven by favorable development on U.S. Workers' Compensation and Other product lines, partially offset by unfavorable development on prior year catastrophes. Discounting of Loss Reserves At March 31, 2024 and December 31, 2023, the loss reserves reflect a net loss reserve discount of $ 1.2 billion and $ 1.2 billion, 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 March 31, 2024 and December 31, 2023, the discount consists of $ 293 million and $ 294 million of tabular discount, respectively, and $ 919 million and $ 939 million of non-tabular discount for workers’ compensation, respectively. During the three months ended March 31, 2024 and 2023, the benefit / (charge) from changes in discount of $( 76 ) million and $( 64 ) million, respectively, were recorded as part of 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) March 31, 2024 December 31, 2023 U.S. workers' compensation $ 2,261 $ 2,337 Retroactive reinsurance ( 1,049 ) ( 1,104 ) Total reserve discount (a)(b) $ 1,212 $ 1,233 (a) Excludes $ 194 million and $ 196 million of discount related to certain long-tail liabilities in the UK at March 31, 2024 and December 31, 2023, respectively. (b) Includes gross discount of $ 680 million and $ 687 million, which was 100 percent ceded to Fortitude Re at March 31, 2024 and December 31, 2023, respectively. AIG | First Quarter 2024 Form 10-Q 47 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities The following table presents the net loss reserve discount benefit (charge): Three Months Ended March 31, (in millions) 2024 2023 Current accident year $ 30 $ 30 Accretion and other adjustments to prior year discount ( 106 ) ( 94 ) Net reserve discount benefit (charge) ( 76 ) ( 64 ) Change in discount on loss reserves ceded under retroactive reinsurance 55 70 Net change in total reserve discount* $ ( 21 ) $ 6 * Excludes $( 2 ) million and $ 4 million of discount related to certain long-tail liabilities in the UK for the three months ended March 31, 2024 and 2023, respectively. Amortization of Deferred Gain on Retroactive Reinsurance Amortization of the deferred gain on retroactive reinsurance includes $ 27 million and $ 53 million related to the adverse development reinsurance cover with NICO for the three months ended March 31, 2024 and 2023, 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. FUTURE POLICY BENEFITS Future policy benefits primarily include reserves for traditional life and annuity payout contracts, which represent an estimate of the present value of future benefits less the present value of future net premiums. Included in Future policy benefits are liabilities for annuities issued in structured settlement arrangements whereby a claimant receives life contingent payments over their lifetime. Also included are pension risk transfer arrangements whereby an upfront premium is received in exchange for guaranteed retirement benefits. All payments under these arrangements are fixed and determinable with respect to their amounts and dates. Structured settlement or other annuitization elections (e.g., certain single premium immediate annuities) that do not involve life contingent payments, but rather payments for a stated period are included in Policyholder contract deposits. For traditional and limited pay long-duration products, benefit reserves are accrued and benefit expense is recognized using a net premium ratio methodology for each annual cohort of business. 48 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities The following tables present the balances and changes in the liability for future policy benefits and a reconciliation of the net liability for future policy benefits to the liability for future policy benefits in the Condensed Consolidated Balance Sheets: Three Months Ended March 31, 2024 General Insurance Individual Retirement Group Retirement Life Insurance Institutional Markets Other (f) Total (in millions, except for liability durations) Present value of expected net premiums Balance, beginning of year $ 1,702 $ — $ — $ 8,379 $ — $ 973 $ 11,054 Effect of changes in discount rate assumptions (AOCI) 339 — — 1,482 — 44 1,865 Reclassified to Liabilities held for sale — — — 4,287 — — 4,287 Beginning balance at original discount rate 2,041 — — 14,148 — 1,017 17,206 Effect of actual variances from expected experience ( 2 ) — — ( 13 ) — — ( 15 ) Adjusted beginning of year balance 2,039 — — 14,135 — 1,017 17,191 Issuances 31 — — 353 — — 384 Interest accrual 11 — — 117 — 11 139 Net premium collected ( 138 ) — — ( 381 ) — ( 29 ) ( 548 ) Foreign exchange impact ( 91 ) — — ( 46 ) — — ( 137 ) Other — — — ( 4 ) — — ( 4 ) Ending balance at original discount rate 1,852 — — 14,174 — 999 17,025 Effect of changes in discount rate assumptions (AOCI) ( 283 ) — — ( 1,621 ) — ( 57 ) ( 1,961 ) Reclassified to Liabilities held for sale — — — ( 4,247 ) — — ( 4,247 ) Balance, end of period $ 1,569 $ — $ — $ 8,306 $ — $ 942 $ 10,817 Present value of expected future policy benefits Balance, beginning of year $ 2,149 $ 1,353 $ 217 $ 17,531 $ 18,482 $ 20,654 $ 60,386 Effect of changes in discount rate assumptions (AOCI) 441 132 ( 3 ) 2,745 1,906 437 5,658 Reclassified to Liabilities held for sale — — — 5,119 — — 5,119 Beginning balance at original discount rate 2,590 1,485 214 25,395 20,388 21,091 71,163 Effect of actual variances from expected experience (a) ( 2 ) ( 6 ) ( 1 ) ( 7 ) — ( 9 ) ( 25 ) Adjusted beginning of year balance 2,588 1,479 213 25,388 20,388 21,082 71,138 Issuances 32 34 5 350 1,726 2 2,149 Interest accrual 13 16 3 236 217 252 737 Benefit payments ( 141 ) ( 33 ) ( 7 ) ( 458 ) ( 283 ) ( 370 ) ( 1,292 ) Foreign exchange impact ( 119 ) — — ( 61 ) ( 82 ) — ( 262 ) Other — — — ( 3 ) — ( 3 ) ( 6 ) Ending balance at original discount rate 2,373 1,496 214 25,452 21,966 20,963 72,464 Effect of changes in discount rate assumptions (AOCI) ( 374 ) ( 153 ) — ( 3,149 ) ( 2,347 ) ( 959 ) ( 6,982 ) Reclassified to Liabilities held for sale — — — ( 5,078 ) — — ( 5,078 ) Balance, end of period $ 1,999 $ 1,343 $ 214 $ 17,225 $ 19,619 $ 20,004 $ 60,404 Net liability for future policy benefits, end of period $ 430 $ 1,343 $ 214 $ 8,919 $ 19,619 $ 19,062 $ 49,587 Liability for future policy benefits for certain participating contracts 1,302 Liability for universal life policies with secondary guarantees and similar features (b) 3,972 Deferred profit liability 2,553 Other reconciling items (c) 1,571 Future policy benefits for life and accident and health insurance contracts 58,985 Less: Reinsurance recoverable ( 22,898 ) Net liability for future policy benefits after reinsurance recoverable $ 36,087 Weighted average liability duration of the liability for future policy benefits (d)(e) 9.1 7.7 6.7 12.6 12.2 11.2 AIG | First Quarter 2024 Form 10-Q 49 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities Three Months Ended March 31, 2023 General Insurance Individual Retirement Group Retirement Life Insurance Institutional Markets Other (f) Total (in millions, except for liability durations) Present value of expected net premiums Balance, beginning of year $ 1,929 $ — $ — $ 11,654 $ — $ 991 $ 14,574 Effect of changes in discount rate assumptions (AOCI) 262 — — 1,872 — 66 2,200 Beginning balance at original discount rate 2,191 — — 13,526 — 1,057 16,774 Effect of actual variances from expected experience ( 10 ) 1 — 12 — 3 6 Adjusted beginning of year balance 2,181 1 — 13,538 — 1,060 16,780 Issuances 36 6 — 322 — — 364 Interest accrual 11 — — 106 — 12 129 Net premium collected ( 57 ) ( 7 ) — ( 352 ) — ( 30 ) ( 446 ) Foreign exchange impact ( 8 ) — — 96 — — 88 Other — — — 3 — — 3 Ending balance at original discount rate 2,163 — — 13,713 — 1,042 16,918 Effect of changes in discount rate assumptions (AOCI) ( 353 ) — — ( 1,648 ) — ( 48 ) ( 2,049 ) Balance, end of period $ 1,810 $ — $ — $ 12,065 $ — $ 994 $ 14,869 Present value of expected future policy benefits Balance, beginning of year $ 2,380 $ 1,223 $ 211 $ 21,179 $ 12,464 $ 20,429 $ 57,886 Effect of changes in discount rate assumptions (AOCI) 362 167 2 3,424 2,634 1,083 7,672 Beginning balance at original discount rate 2,742 1,390 213 24,603 15,098 21,512 65,558 Effect of actual variances from expected experience (a) ( 2 ) ( 3 ) ( 1 ) 26 ( 5 ) — 15 Adjusted beginning of year balance 2,740 1,387 212 24,629 15,093 21,512 65,573 Issuances 36 70 2 318 1,450 3 1,879 Interest accrual 13 12 3 224 139 257 648 Benefit payments ( 60 ) ( 32 ) ( 7 ) ( 476 ) ( 228 ) ( 379 ) ( 1,182 ) Foreign exchange impact ( 10 ) — — 277 125 — 392 Other — — — 1 — ( 3 ) ( 2 ) Ending balance at original discount rate 2,719 1,437 210 24,973 16,579 21,390 67,308 Effect of changes in discount rate assumptions (AOCI) ( 457 ) ( 141 ) 3 ( 3,081 ) ( 2,302 ) ( 492 ) ( 6,470 ) Balance, end of period $ 2,262 $ 1,296 $ 213 $ 21,892 $ 14,277 $ 20,898 $ 60,838 Net liability for future policy benefits, end of period $ 452 $ 1,296 $ 213 $ 9,827 $ 14,277 $ 19,904 $ 45,969 Liability for future policy benefits for certain participating contracts 1,340 Liability for universal life policies with secondary guarantees and similar features (b) 3,512 Deferred profit liability 2,396 Other reconciling items (c) 1,629 Future policy benefits for life and accident and health insurance contracts 54,846 Less: Reinsurance recoverable ( 24,266 ) Net liability for future policy benefits after reinsurance recoverable $ 30,580 Weighted average liability duration of the liability for future policy benefits (d) 10.0 7.7 7.1 12.4 11.5 11.6 (a) Effect of changes in cash flow assumptions and variances from actual experience are partially offset by changes in the deferred profit liability. (b) Additional details can be found in the table that presents the balances and changes in the liability for universal life policies with secondary guarantees and similar features. (c) Other reconciling items primarily include the Accident and Health as well as Group Benefits (short-duration) contracts. (d) The weighted average liability durations are calculated as the modified duration using projected future net liability cash flows that are aggregated at the segment level, utilizing the segment level weighted average interest rates and current discount rate, which can be found in the table below. (e) Includes balances that were reclassified to Liabilities held for sale in the Condensed Consolidated Balance sheets. For additional information, see Note 4. (f) Represents Life and Retirement legacy insurance lines ceded to Fortitude Re. 50 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities For the three months ended March 31, 2024 and 2023 in the traditional and term life insurance block, capping of net premium ratios at 100 percent caused a (credit)/charge to net income of $( 1 ) million and $ 7 million, respectively. The discount rate was updated based on market observable information. Relative to the prior period, the increase in upper-medium-grade fixed income yields resulted in a decrease in the liability for future policy benefits. The following table presents the amount of undiscounted expected future benefit payments and undiscounted and discounted expected gross premiums for future policy benefits for nonparticipating contracts: Three Months Ended March 31, (in millions) 2024 2023 General Insurance (a) Undiscounted expected future benefits and expense $ 2,911 $ 3,350 Undiscounted expected future gross premiums 4,002 4,616 Individual Retirement Undiscounted expected future benefits and expense $ 2,156 $ 2,048 Undiscounted expected future gross premiums — — Group Retirement Undiscounted expected future benefits and expense $ 309 $ 317 Undiscounted expected future gross premiums — — Life Insurance (b) Undiscounted expected future benefits and expense $ 40,741 $ 39,028 Undiscounted expected future gross premiums 30,656 28,964 Institutional Markets Undiscounted expected future benefits and expense $ 42,519 $ 29,029 Undiscounted expected future gross premiums — — Other (c) Undiscounted expected future benefits and expense $ 42,701 $ 44,148 Undiscounted expected future gross premiums 2,106 2,225 (a) General Insurance discounted expected future gross premiums (at current discount rate) for the three months ended March 31, 2024 were $ 2.9 billion. (b) Includes balances reclassified to Liabilities held for sale at March 31, 2024. Life Insurance discounted expected future gross premiums (at current discount rate) for the three months ended March 31, 2024 were $ 20.0 billion. (c) Represents Life and Retirement legacy insurance lines ceded to Fortitude Re. Other discounted expected future gross premiums (at current discount rate) for the three months ended March 31, 2024 were $ 1.4 billion. The following table presents the amount of revenue and interest recognized in the Condensed Consolidated Statements of Income (Loss) for future policy benefits for nonparticipating contracts: Three Months Ended March 31, Gross Premiums Interest Accretion (in millions) 2024 2023 2024 2023 General Insurance $ 110 $ 95 $ 2 $ 1 Individual Retirement 39 75 16 12 Group Retirement 5 6 3 3 Life Insurance 618 575 119 118 Institutional Markets 1,805 1,581 217 139 Other* 52 54 241 245 Total $ 2,629 $ 2,386 $ 598 $ 518 * Represents Life and Retirement legacy insurance lines ceded to Fortitude Re. The following table presents the weighted-average interest rate for future policy benefits for nonparticipating contracts: Three Months Ended March 31, 2024 General Insurance Individual Retirement Group Retirement Life Insurance (a) Institutional Markets Other (b) Weighted-average interest rate, original discount rate 1.84 % 3.79 % 5.13 % 4.12 % 4.25 % 4.86 % Weighted-average interest rate, current discount rate 3.70 % 5.27 % 5.24 % 5.28 % 5.19 % 5.32 % Three Months Ended March 31, 2023 Weighted-average interest rate, original discount rate 1.78 % 3.65 % 5.19 % 4.11 % 3.76 % 4.88 % Weighted-average interest rate, current discount rate 3.64 % 5.33 % 4.91 % 5.08 % 5.04 % 5.10 % (a) Weighted-average interest rates for Life Insurance include balances that have been reclassified to Liabilities held-for-sale at March 31, 2024. (b) Represents Life and Retirement legacy insurance lines ceded to Fortitude Re. The weighted average interest rates are calculated using projected future net liability cash flows that are aggregated to the segment level, and are represented as an annual rate. AIG | First Quarter 2024 Form 10-Q 51 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities Additional Liabilities: For universal-life type products, insurance benefits in excess of the account balance are generally recognized as expenses in the period incurred unless the design of the product is such that future charges are insufficient to cover the benefits, in which case an “additional liability” is accrued over the life of the contract. These additional liabilities are included in Future policy benefits for life and accident and health insurance contracts in the Condensed Consolidated Balance Sheets. Our additional liabilities primarily consist of universal life policies with secondary guarantees and these additional liabilities are recognized in addition to the Policyholder account balances. For universal life policies with secondary guarantees, as well as other universal life policies for which profits followed by losses are expected at contract inception, a liability is recognized based on a benefit ratio of (a) the present value of total expected payments, in excess of the account value, over the life of the contract, divided by (b) the present value of total expected assessments over the life of the contract. For universal life policies without secondary guarantees, for which profits followed by losses are first expected after contract inception, we establish a liability, in addition to policyholder account balances, so that expected future losses are recognized in proportion to the emergence of profits in the earlier (profitable) years. Universal life account balances are reported within Policyholder contract deposits, while these additional liabilities are reported within the liability for future policy benefits in the Condensed Consolidated Balance Sheets. These additional liabilities are also adjusted to reflect the effect of unrealized gains or losses on fixed maturity securities available for sale on accumulated assessments, with related changes recognized through OCI. The policyholder behavior assumptions for these liabilities include mortality, lapses and premium persistency. The capital market assumptions used for the liability for universal life secondary guarantees include discount rates and net earned rates. The following table presents the balances and changes in the liability for universal life policies with secondary guarantees and similar features: Three Months Ended March 31, 2024 2023 (in millions, except duration of liability) Life Insurance Other (b) Total Life Insurance Other (b) Total Balance, beginning of year $ 3,731 $ 55 $ 3,786 $ 3,300 $ 55 $ 3,355 Effect of changes in experience 109 ( 1 ) 108 74 ( 1 ) 73 Adjusted beginning balance 3,840 54 3,894 3,374 54 3,428 Assessments 145 — 145 179 — 179 Excess benefits paid ( 232 ) — ( 232 ) ( 238 ) — ( 238 ) Interest accrual 38 1 39 28 1 29 Other — — — ( 5 ) — ( 5 ) Changes related to unrealized appreciation (depreciation) of investments 126 — 126 119 — 119 Balance, end of period 3,917 55 3,972 3,457 55 3,512 Less: Reinsurance recoverable ( 172 ) ( 55 ) ( 227 ) ( 192 ) — ( 192 ) Balance, end of period, net of Reinsurance recoverable $ 3,745 $ — $ 3,745 $ 3,265 $ 55 $ 3,320 Weighted average duration of liability (a) 25.3 9.1 26.4 9.4 (a) The weighted average duration of liabilities is calculated as the modified duration using projected future net liability cash flows that are aggregated at the segment level, utilizing the segment level weighted average interest rates, which can be found in the table below. (b) Represents Life and Retirement legacy insurance lines ceded to Fortitude Re. The following table presents the amount of revenue and interest recognized in the Condensed Consolidated Statements of Income (Loss) for the liability for universal life policies with secondary guarantees and similar features: Three Months Ended March 31, Gross Assessments Interest Accretion (in millions) 2024 2023 2024 2023 Life Insurance $ 248 $ 299 $ 38 $ 28 Other* 10 10 1 1 Total $ 258 $ 309 $ 39 $ 29 * Represents Life and Retirement legacy insurance lines ceded to Fortitude Re. The following table presents the calculation of weighted average interest rate for the liability for universal life policies with secondary guarantees and similar features: Three Months Ended March 31, 2024 2023 Life Insurance Other* Life Insurance Other* Weighted-average interest rate 3.92 % 4.20 % 3.76 % 4.24 % * Represents Life and Retirement legacy insurance lines ceded to Fortitude Re. 52 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities The weighted average interest rates are calculated using projected future net liability cash flows that are aggregated to the segment level, and are represented as an annual rate. The following table presents details concerning our universal life policies with secondary guarantees and similar features: Three Months Ended March 31, (dollars in millions) 2024 2023 Account value $ 3,773 $ 3,556 Net amount at risk $ 73,092 $ 70,014 Average attained age of contract holders 53 53 POLICYHOLDER CONTRACT DEPOSITS The liability for Policyholder contract deposits is primarily recorded at accumulated value (deposits received and net transfers from separate accounts, plus accrued interest credited, less withdrawals and assessed fees). Deposits collected on investment-oriented products are not reflected as revenues. They are recorded directly to Policyholder contract deposits upon receipt. Amounts assessed against the contract holders for mortality, administrative, and other services are included as Policy fees in revenues. In addition to liabilities for universal life, fixed annuities, fixed options within variable annuities, annuities without life contingencies, funding agreements and GICs, policyholder contract deposits also include our liability for (i) index features accounted for as embedded derivatives at fair value, (ii) annuities issued in a structured settlement arrangement with no life contingency and (iii) certain contracts we have elected to account for at fair value. Changes in the fair value of the embedded derivatives related to policy index features and the fair value of derivatives hedging these liabilities are recognized in realized gains and losses. For additional information on index credits accounted for as embedded derivatives, see Note 5. Under a funding agreement-backed notes issuance program, an unaffiliated, non-consolidated statutory trust issues medium-term notes to investors, which are secured by funding agreements issued to the trust by one of our Life and Retirement companies through our Institutional Markets business. The following table presents the balances and changes in Policyholder contract deposits account balances (a) : Three Months Ended March 31, 2024 Individual Retirement Group Retirement Life Insurance Institutional Markets Other (d) Total (in millions, except for average crediting rate) Policyholder contract deposits account balance, beginning of year $ 94,896 $ 41,299 $ 10,231 $ 13,649 $ 3,333 $ 163,408 Deposits 4,878 1,349 407 798 11 7,443 Policy charges ( 186 ) ( 122 ) ( 377 ) ( 17 ) ( 15 ) ( 717 ) Surrenders and withdrawals ( 4,600 ) ( 2,466 ) ( 73 ) ( 31 ) ( 21 ) ( 7,191 ) Benefit payments ( 761 ) ( 494 ) ( 79 ) ( 181 ) ( 79 ) ( 1,594 ) Net transfers from (to) separate account 1,248 1,024 5 ( 27 ) — 2,250 Interest credited 816 303 121 157 40 1,437 Other ( 3 ) 2 6 ( 11 ) 3 ( 3 ) Policyholder contract deposits account balance, end of period 96,288 40,895 10,241 14,337 3,272 165,033 Other reconciling items (b) ( 1,225 ) ( 192 ) 134 33 ( 85 ) ( 1,335 ) Policyholder contract deposits $ 95,063 $ 40,703 $ 10,375 $ 14,370 $ 3,187 $ 163,698 Weighted average crediting rate 2.86 % 3.05 % 4.39 % 4.59 % 4.98 % Cash surrender value (c) $ 89,795 $ 39,746 $ 9,042 $ 2,585 $ 1,696 $ 142,864 AIG | First Quarter 2024 Form 10-Q 53 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities Three Months Ended March 31, 2023 Individual Retirement Group Retirement Life Insurance Institutional Markets Other (d) Total (in millions, except for average crediting rate) Policyholder contract deposits account balance, beginning of year $ 89,554 $ 43,395 $ 10,224 $ 11,734 $ 3,587 $ 158,494 Deposits 4,864 1,326 414 595 11 7,210 Policy charges ( 244 ) ( 110 ) ( 384 ) ( 17 ) ( 16 ) ( 771 ) Surrenders and withdrawals ( 3,171 ) ( 2,016 ) ( 56 ) ( 403 ) ( 20 ) ( 5,666 ) Benefit payments ( 1,036 ) ( 557 ) ( 49 ) ( 167 ) ( 88 ) ( 1,897 ) Net transfers from (to) separate account 728 592 ( 1 ) 443 — 1,762 Interest credited 377 270 88 105 43 883 Other ( 2 ) 3 ( 16 ) 4 ( 1 ) ( 12 ) Policyholder contract deposits account balance, end of period 91,070 42,903 10,220 12,294 3,516 160,003 Other reconciling items (b) ( 1,889 ) ( 279 ) 116 74 ( 129 ) ( 2,107 ) Policyholder contract deposits $ 89,181 $ 42,624 $ 10,336 $ 12,368 $ 3,387 $ 157,896 Weighted average crediting rate 2.52 % 2.78 % 4.24 % 3.55 % 4.95 % Cash surrender value (c) $ 84,906 $ 41,361 $ 8,874 $ 2,545 $ 1,781 $ 139,467 (a) Transactions between the general account and the separate account are presented in this table on a gross basis (e.g., a policyholder's funds are initially deposited into the general account and then simultaneously transferred to the separate account), thus, did not impact the ending balance of policyholder contract deposits. (b) Includes MRBs that are bifurcated and reported separately, net of embedded derivatives recorded in Policyholder contract deposits. Other also includes amounts related to Other Operations of $( 85 ) million and $( 129 ) million at March 31, 2024 and 2023, respectively. (c) Cash surrender value is related to the portion of policyholder contract deposits that have a defined cash surrender value (e.g. GICs, do not have a cash surrender value). (d) Primarily represents Life and Retirement legacy insurance lines ceded to Fortitude Re. For information related to net amount at risk, see Note 13. The following table presents Policyholder contract deposits account balance by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums: March 31, 2024 At Guaranteed Minimum 1 Basis Point - 50 Basis Points Above More than 50 Basis Points Above Minimum Guarantee Total (in millions, except percentage of total) Individual Retirement Range of Guaranteed Minimum Credited Rate <=1% $ 6,251 $ 1,917 $ 28,202 $ 36,370 > 1% - 2% 3,556 21 1,490 5,067 > 2% - 3% 7,653 11 1,407 9,071 > 3% - 4% 6,342 36 5 6,383 > 4% - 5% 424 — 4 428 > 5% 32 — 3 35 Total $ 24,258 $ 1,985 $ 31,111 $ 57,354 Group Retirement Range of Guaranteed Minimum Credited Rate <=1% $ 2,133 $ 1,895 $ 7,672 $ 11,700 > 1% - 2% 3,597 1,126 670 5,393 > 2% - 3% 11,686 215 110 12,011 > 3% - 4% 603 — — 603 > 4% - 5% 6,579 — — 6,579 > 5% 141 — — 141 Total $ 24,739 $ 3,236 $ 8,452 $ 36,427 Life Insurance Range of Guaranteed Minimum Credited Rate <=1% $ — $ — $ — $ — > 1% - 2% — 110 365 475 > 2% - 3% 9 1,072 856 1,937 > 3% - 4% 1,190 482 7 1,679 > 4% - 5% 2,820 — — 2,820 > 5% 214 — — 214 Total $ 4,233 $ 1,664 $ 1,228 $ 7,125 Total* $ 53,230 $ 6,885 $ 40,791 $ 100,906 Percentage of total 53 % 7 % 40 % 100 % 54 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 12. Insurance Liabilities March 31, 2023 At Guaranteed Minimum 1 Basis Point - 50 Basis Points Above More than 50 Basis Points Above Minimum Guarantee Total (in millions, except percentage of total) Individual Retirement Range of Guaranteed Minimum Credited Rate <=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 $ 28,768 $ 2,627 $ 25,830 $ 57,225 Group Retirement Range of Guaranteed Minimum Credited Rate <=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 $ 28,261 $ 3,661 $ 6,402 $ 38,324 Life Insurance Range of Guaranteed Minimum Credited Rate <=1% $ — $ — $ — $ — > 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 $ 4,613 $ 1,111 $ 1,626 $ 7,350 Total* $ 61,642 $ 7,399 $ 33,858 $ 102,899 Percentage of total 60 % 7 % 33 % 100 % * Excludes policyholder contract deposits account balances that are not subject to guaranteed minimum crediting rates. OTHER POLICYHOLDER FUNDS Other policyholder funds include unearned revenue reserves (URR), consisting of front-end loads on investment-oriented contracts, representing those policy loads that are non-level and typically higher in initial policy years than in later policy years. Amortization of URR is recorded in Policy fees. URR for investment-oriented contracts are generally deferred and amortized into income using the same assumptions and factors used to amortize DAC (i.e., on a constant level basis). The following table presents a rollforward of URR: Life Insurance Institutional Markets Other* Total (in millions) Three Months Ended March 31, 2024 Balance, beginning of year $ 1,770 $ 1 $ 94 $ 1,865 Revenue deferred 40 — — 40 Amortization ( 28 ) — ( 2 ) ( 30 ) Balance, end of period $ 1,782 $ 1 $ 92 $ 1,875 Three Months Ended March 31, 2023 Balance, beginning of year $ 1,727 $ 2 $ 105 $ 1,834 Revenue deferred 38 — — 38 Amortization ( 27 ) ( 1 ) ( 2 ) ( 30 ) Balance, end of period $ 1,738 $ 1 $ 103 $ 1,842 * Represents Life and Retirement legacy insurance lines ceded to Fortitude Re. At March 31, 2024 and 2023, Other policyholder funds, excluding URR, totaled $ 1.4 billion and $ 1.6 billion, respectively. AIG | First Quarter 2024 Form 10-Q 55 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 13. Market Risk Benefits 13. Market Risk Benefits MRBs are defined as contracts or contract features that both provide protection to the contract holder from other-than-nominal capital market risk and expose AIG to other-than nominal capital market risk. The MRB represents an amount that a policyholder receives in addition to the account balance upon the occurrence of a specific event or circumstance, such as death, annuitization, or periodic withdrawal that involves protection from other-than-nominal capital market risk. Certain contract features, such as GMWBs, guaranteed minimum death benefits (GMDB) and guaranteed minimum income benefits (GMIBs) commonly found in variable, fixed index and fixed annuities, are MRBs. MRBs are assessed at contract inception using a non-option method involving attributed fees that results in an initial fair value of zero or an option method that results in a fair value greater than zero. MRBs are recorded at fair value, and AIG applies a non-option attributed fee valuation method for variable annuity products, and an option-based valuation method (host offset) for both fixed index and fixed products. Changes in the fair value of MRBs, net represents changes in the fair value of market risk benefit liabilities and assets (with the exception of our own credit risk changes), and includes attributed rider fees and benefits, net of changes in the fair value of derivative instruments and fixed maturity securities that are used to economically hedge market risk from the variable annuity GMWB riders. The following table presents the balances of and changes in MRBs: Three Months Ended March 31, 2024 2023 Individual Retirement Group Retirement Total Individual Retirement Group Retirement Total (in millions, except for attained age of contract holders) Balance, beginning of year $ 4,562 $ 308 $ 4,870 $ 3,738 $ 296 $ 4,034 Effect of changes in our own credit risk ( 1,072 ) ( 88 ) ( 1,160 ) ( 441 ) ( 24 ) ( 465 ) Balance, beginning of year, before effect of changes in our own credit risk $ 3,490 $ 220 $ 3,710 3,297 272 3,569 Issuances 123 10 133 191 9 200 Interest accrual 45 3 48 38 4 42 Attributed fees 174 15 189 235 17 252 Expected claims ( 18 ) — ( 18 ) ( 25 ) ( 1 ) ( 26 ) Effect of changes in interest rates ( 474 ) ( 38 ) ( 512 ) 478 46 524 Effect of changes in interest rate volatility ( 14 ) — ( 14 ) ( 73 ) ( 4 ) ( 77 ) Effect of changes in equity markets ( 529 ) ( 50 ) ( 579 ) ( 391 ) ( 36 ) ( 427 ) Effect of changes in equity index volatility ( 15 ) — ( 15 ) 16 ( 3 ) 13 Actual outcome different from model expected outcome ( 63 ) 3 ( 60 ) 72 1 73 Effect of changes in other future expected assumptions ( 5 ) ( 1 ) ( 6 ) ( 94 ) ( 18 ) ( 112 ) Other, including foreign exchange — ( 2 ) ( 2 ) 1 — 1 Balance, end of period, before effect of changes in our own credit risk 2,714 160 2,874 3,745 287 4,032 Effect of changes in our own credit risk 1,100 89 1,189 339 32 371 Balance, end of period 3,814 249 4,063 4,084 319 4,403 Less: Reinsured MRB, end of period ( 68 ) — ( 68 ) ( 89 ) — ( 89 ) Net Liability Balance after reinsurance recoverable $ 3,746 $ 249 $ 3,995 $ 3,995 $ 319 $ 4,314 Net amount at risk GMDB only $ 623 $ 136 $ 759 $ 1,307 $ 266 $ 1,573 GMWB only $ 128 $ 12 $ 140 $ 63 $ 5 $ 68 Combined* $ 576 $ 13 $ 589 $ 1,726 $ 31 $ 1,757 Weighted average attained age of contract holders 71 64 71 64 * Certain contracts contain both guaranteed GMDB and GMWB features and are modeled together for the purposes of calculating the MRB. The following is a reconciliation of MRBs by amounts in an asset position and in a liability position to the MRBs amount in the Condensed Consolidated Balance Sheets: March 31, 2024 March 31, 2023 (in millions) Asset* Liability* Net Asset* Liability* Net Individual Retirement $ 968 $ 4,714 $ 3,746 $ 685 $ 4,680 $ 3,995 Group Retirement 204 453 249 145 464 319 Total $ 1,172 $ 5,167 $ 3,995 $ 830 $ 5,144 $ 4,314 * Cash flows and attributed fees for MRBs are determined on a policy level basis and are reported based on their asset or liability position at the balance sheet date. For additional information related to fair value measurements of MRBs, see Note 5. 56 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 14. Separate Account Assets and Liabilities 14. Separate Account Assets and Liabilities We report variable contracts within the separate accounts when investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder and the separate account meets additional accounting criteria to qualify for separate account treatment. The assets supporting the variable portion of variable annuity and variable universal life contracts that qualify for separate account treatment are carried at fair value and are reported as separate account assets, with an equivalent summary total reported as separate account liabilities. The assets of separate accounts are legally segregated and are not subject to claims that arise from any of our other businesses. Policy values for variable products and investment contracts are expressed in terms of investment units. Each unit is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio. The current liability at any time is the sum of the current unit value of all investment units in the separate accounts, plus any liabilities for MRBs. Amounts assessed against the policyholders for mortality, administrative and other services are included in policy fees. Investment performance (including investment income, net investment gains (losses) and changes in unrealized gains (losses)) and the corresponding amounts credited to policyholders of such separate accounts are offset within the same line in the Condensed Consolidated Statements of Income (Loss). For discussion of the fair value measurement of guaranteed benefits that are accounted for as MRBs, see Note 5. The following table presents fair value of separate account investment options: March 31, 2024 December 31, 2023 (in millions) Individual Retirement Group Retirement Life Insurance Institutional Markets Total Individual Retirement Group Retirement Life Insurance Institutional Markets Total Equity funds $ 26,945 $ 30,285 $ 900 $ 635 $ 58,765 $ 25,451 $ 28,675 $ 819 $ 593 $ 55,538 Bond funds 4,121 3,315 45 1,281 8,762 4,037 3,292 44 1,303 8,676 Balanced funds 18,179 5,663 55 2,062 25,959 17,711 5,479 53 1,923 25,166 Money market funds 693 802 16 176 1,687 694 742 16 173 1,625 Total $ 49,938 $ 40,065 $ 1,016 $ 4,154 $ 95,173 $ 47,893 $ 38,188 $ 932 $ 3,992 $ 91,005 The following table presents the balances and changes in Separate account liabilities: Three Months Ended March 31, 2024 Individual Retirement Group Retirement Life Insurance Institutional Markets Total (in millions) Balance, beginning of year $ 47,893 $ 38,188 $ 932 $ 3,992 $ 91,005 Premiums and deposits 294 340 9 69 712 Policy charges ( 288 ) ( 115 ) ( 12 ) ( 24 ) ( 439 ) Surrenders and withdrawals ( 1,193 ) ( 1,052 ) ( 9 ) ( 31 ) ( 2,285 ) Benefit payments ( 239 ) ( 154 ) ( 2 ) ( 5 ) ( 400 ) Investment performance 3,451 2,934 98 139 6,622 Net transfers from (to) general account and other 20 ( 76 ) — 14 ( 42 ) Balance, end of period $ 49,938 $ 40,065 $ 1,016 $ 4,154 $ 95,173 Cash surrender value* $ 48,975 $ 39,865 $ 995 $ 4,150 $ 93,985 Three Months Ended March 31, 2023 Balance, beginning of year $ 45,178 $ 34,361 $ 799 $ 4,515 $ 84,853 Premiums and deposits 451 360 9 26 846 Policy charges ( 344 ) ( 110 ) ( 12 ) ( 24 ) ( 490 ) Surrenders and withdrawals ( 844 ) ( 669 ) ( 6 ) ( 404 ) ( 1,923 ) Benefit payments ( 215 ) ( 130 ) ( 1 ) ( 54 ) ( 400 ) Investment performance 2,131 2,186 53 99 4,469 Net transfers from (to) general account and other 73 ( 78 ) ( 1 ) 8 2 Balance, end of period $ 46,430 $ 35,920 $ 841 $ 4,166 $ 87,357 Cash surrender value* $ 45,388 $ 35,726 $ 794 $ 4,168 $ 86,076 * The cash surrender value represents the amount of the contract holder’s account balance distributable at the balance sheet date less applicable surrender charges. AIG | First Quarter 2024 Form 10-Q 57 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 14. Separate Account Assets and Liabilities Separate account liabilities primarily represent the contract holder's account balance in separate account assets and will be equal and offsetting to total separate account assets. 15. 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. 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 American General Life Insurance Company (AGL) continues to defend against Moriarty v. American General Life Insurance Co. (S.D. Cal.), a putative class action involving Sections 10113.71 and 10113.72 of the California Insurance Code. In general, those statutes require that for life-insurance policies issued and delivered in California: (1) the policy must contain a 60-day grace period following nonpayment of premium during which the policy remains in force; (2) the insurer must provide a 30-day pre-lapse notice; and (3) the insurer must notify policy owners of the right to designate a secondary recipient for lapse notices. The Moriarty plaintiff contends AGL did not comply with these requirements for a policy issued before these statutes went into effect. The plaintiff seeks damages and other relief. AGL asserts various defenses to the plaintiff’s claims and to class certification. In 2022, the District Court held a trial was necessary to determine whether AGL was liable, and it denied class certification. In May 2023, the case was reassigned to a new judge. On August 14, 2023, the District Court granted the plaintiff’s motion for summary judgment on the plaintiff’s breach-of-contract claim. On September 26, 2023, the District Court decided that good cause exists to allow the plaintiff to file a third motion for class certification. At the same time, however, the District Court certified its August 14, 2023 order for interlocutory appeal to the Ninth Circuit and stayed trial-court proceedings pending the outcome of AGL’s appeal. The Ninth Circuit granted AGL’s petition for interlocutory appeal on November 21, 2023, which remains pending. 58 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 15. Contingencies, Commitments and Guarantees AGL is defending other actions in California involving similar issues: Allen v. Protective Life Insurance Co. and AGL (E.D. Cal.), in which the individual plaintiff filed a motion on August 11, 2023 seeking leave to amend the complaint to add class-action allegations against AGL; and Chuck v. American General Life Insurance Co. (C.D. Cal.), which was filed on September 6, 2023 as a putative class action. These cases are in the early stages, and we expect their progress will be influenced by future developments in Moriarty and cases against other insurers involving the same statutes. We have accrued our current estimate of probable loss with respect to these litigation matters. 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 $ 6.0 billion and $ 6.1 billion at March 31, 2024 and December 31, 2023, 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 AIGFP and certain of its subsidiaries. We have also issued guarantees of all present and future payment obligations and liabilities of AIG Markets, Inc. Due to the deconsolidation of AIGFP and its subsidiaries, as of March 31, 2024, a $ 92 million guarantee related to the obligations of AIGFP and certain of its subsidiaries was recognized, and is reported in Other liabilities. 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 10. • For additional information on derivatives, see Note 11. 16. 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 (the 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. On March 15, 2024, we redeemed all 20,000 outstanding shares of our Series A Preferred Stock and all 20,000,000 of the corresponding Depositary Shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock, for a redemption price of $ 25,000 per share (equivalent to $ 25.00 per Depositary Share) for an aggregate redemption price of $ 500 million, paid in cash. The $ 15 million difference between the aggregate redemption price and the outstanding par and additional paid in capital amount of $ 485 million was recorded as a reduction of retained earnings and is presented on Dividends on preferred stock and preferred stock redemption premiums on the Condensed Consolidated Statements of Income. AIG | First Quarter 2024 Form 10-Q 59 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 16. Equity Common Stock The following table presents a rollforward of outstanding shares: Three Months Ended March 31, 2024 Common Stock Issued Treasury Stock Common Stock Outstanding (in millions) Shares, beginning of year 1,906.7 ( 1,217.9 ) 688.8 Shares issued — 5.6 5.6 Shares repurchased — ( 23.4 ) ( 23.4 ) Shares, end of period 1,906.7 ( 1,235.7 ) 671.0 Dividends Dividends are payable on AIG common stock, par value $ 2.50 per share (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. For a discussion of restrictions on payments of dividends to AIG Parent by its subsidiaries, see Note 20 to the Consolidated Financial Statements in the 2023 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 the Securities Exchange Act of 1934, as amended (the Exchange Act) Rule 10b5-1 repurchase plans. On April 30, 2024, the Board of Directors authorized the repurchase of $ 10.0 billion of AIG Common Stock (inclusive of the approximately $ 3.9 billion remaining under the Board's prior share repurchase authorization). 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. Pursuant to an Exchange Act Rule 10b5-1 repurchase plan, from April 1, 2024 to April 26, 2024, we repurchased approximately 7 million shares of AIG Common Stock for an aggregate purchase price of approximately $ 558 million. DIVIDENDS DECLARED On April 30, 2024, our Board of Directors declared a cash dividend on AIG Common Stock of $ 0.40 per share, an 11 percent increase from prior quarterly dividends on AIG Common Stock, payable on June 28, 2024 to shareholders of record on June 14, 2024. 60 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 16. Equity ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table presents a rollforward of Accumulated other comprehensive income (loss): (in millions) Unrealized Appreciation (Depreciation) of Fixed Maturity Securities on Which Allowance for Credit Losses Was Taken Unrealized Appreciation (Depreciation) of All Other Investments Change in Fair Value of Market Risk Benefits Attributable to Changes in Our Own Credit Risk Change in the discount rates used to measure traditional and limited payment long-duration insurance contracts Foreign Currency Translation Adjustments Retirement Plan Liabilities Adjustment Total Balance, December 31, 2023, net of tax $ ( 106 ) $ ( 10,888 ) $ ( 476 ) $ 1,233 $ ( 2,979 ) $ ( 821 ) $ ( 14,037 ) Change in unrealized appreciation (depreciation) of investments* 72 ( 1,274 ) — — — — ( 1,202 ) Change in other — 5 — — — — 5 Change in fair value of market risk benefits, net — — ( 29 ) — — — ( 29 ) Change in discount rates — — — 697 — — 697 Change in future policy benefits — ( 126 ) — — — — ( 126 ) Change in foreign currency translation adjustments — — — — ( 339 ) — ( 339 ) Change in net actuarial loss — — — — — 7 7 Change in prior service cost — — — — — 2 2 Change in deferred tax asset (liability) ( 15 ) 105 6 ( 152 ) ( 14 ) ( 2 ) ( 72 ) Total other comprehensive income (loss) 57 ( 1,290 ) ( 23 ) 545 ( 353 ) 7 ( 1,057 ) Corebridge noncontrolling interests — ( 83 ) ( 5 ) 15 — — ( 73 ) Noncontrolling interests 17 ( 559 ) ( 11 ) 258 ( 3 ) — ( 298 ) Balance, March 31, 2024, net of tax $ ( 66 ) $ ( 11,702 ) $ ( 493 ) $ 1,535 $ ( 3,329 ) $ ( 814 ) $ ( 14,869 ) Balance, December 31, 2022, net of tax $ ( 136 ) $ ( 20,675 ) $ ( 284 ) $ 2,459 $ ( 3,056 ) $ ( 924 ) $ ( 22,616 ) Change in unrealized appreciation (depreciation) of investments 9 4,996 — — — — 5,005 Change in other — 106 — — — — 106 Change in fair value of market risk benefits, net — — 95 — — — 95 Change in discount rates — — — ( 527 ) — — ( 527 ) Change in future policy benefits — ( 100 ) — — — — ( 100 ) Change in foreign currency translation adjustments — — — — ( 19 ) — ( 19 ) Change in net actuarial loss — — — — — 27 27 Change in deferred tax asset (liability) ( 3 ) ( 750 ) ( 20 ) 107 ( 9 ) 1 ( 674 ) Total other comprehensive income (loss) 6 4,252 75 ( 420 ) ( 28 ) 28 3,913 Noncontrolling interests 4 706 17 ( 111 ) 10 — 626 Balance, March 31, 2023, net of tax $ ( 134 ) $ ( 17,129 ) $ ( 226 ) $ 2,150 $ ( 3,094 ) $ ( 896 ) $ ( 19,329 ) * Includes net unrealized gains and losses attributable to businesses held for sale at March 31, 2024. The following table presents the other comprehensive income (loss) reclassification adjustments for the three months ended March 31, 2024 and 2023 , 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 Change in Fair Value of Market Risk Benefits Attributable to Changes in Our Own Credit Risk Change in the discount rates used to measure traditional and limited payment long-duration insurance contracts Foreign Currency Translation Adjustments Retirement Plan Liabilities Adjustment Total Three Months Ended March 31, 2024 Unrealized change arising during period $ 66 $ ( 1,832 ) $ ( 29 ) $ 697 $ ( 339 ) $ 2 $ ( 1,435 ) Less: Reclassification adjustments included in net income ( 6 ) ( 437 ) — — — ( 7 ) ( 450 ) Total other comprehensive income (loss), before of income tax expense (benefit) 72 ( 1,395 ) ( 29 ) 697 ( 339 ) 9 ( 985 ) Less: Income tax expense (benefit) 15 ( 105 ) ( 6 ) 152 14 2 72 Total other comprehensive income (loss), net of income tax expense (benefit) $ 57 $ ( 1,290 ) $ ( 23 ) $ 545 $ ( 353 ) $ 7 $ ( 1,057 ) Three Months Ended March 31, 2023 Unrealized change arising during period $ ( 7 ) $ 4,566 $ 95 $ ( 527 ) $ ( 19 ) $ 18 $ 4,126 Less: Reclassification adjustments included in net income ( 16 ) ( 436 ) — — — ( 9 ) ( 461 ) Total other comprehensive income (loss), before income tax expense (benefit) 9 5,002 95 ( 527 ) ( 19 ) 27 4,587 Less: Income tax expense (benefit) 3 750 20 ( 107 ) 9 ( 1 ) 674 Total other comprehensive income (loss), net of income tax expense (benefit) $ 6 $ 4,252 $ 75 $ ( 420 ) $ ( 28 ) $ 28 $ 3,913 AIG | First Quarter 2024 Form 10-Q 61 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 16. Equity 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) (a) : Amount Reclassified from AOCI Affected Line Item in the Three Months Ended March 31, Condensed Consolidated (in millions) 2024 2023 Statements of Income (Loss) Unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken Investments $ ( 6 ) $ ( 16 ) Net realized gains (losses) Total ( 6 ) ( 16 ) Unrealized appreciation (depreciation) of all other investments Investments ( 437 ) ( 436 ) Net realized gains (losses) Total ( 437 ) ( 436 ) Change in retirement plan liabilities adjustment Prior-service credit — ( 1 ) (b) Actuarial losses ( 7 ) ( 8 ) (b) Total ( 7 ) ( 9 ) Total reclassifications for the period $ ( 450 ) $ ( 461 ) (a) The following items are not reclassified out of AOCI and included in the Condensed Consolidated Statements of Income (Loss) and thus have been excluded from the table: (a) Change in fair value of market risk benefits attributable to changes in our own credit risk (b) Change in the discount rates used to measure traditional and limited-payment long-duration insurance contracts, and (c) Fair value of liabilities under fair value option attributable to changes in own credit risk. (b) These AOCI components are included in the computation of net periodic pension cost. 62 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 17. Earnings Per Common Share (EPS) 17. 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 March 31, (dollars in millions, except per common share data) 2024 2023 Numerator for EPS: Income (loss) from continuing operations $ 1,600 $ ( 87 ) Less: Net income (loss) from continuing operations attributable to noncontrolling interests 384 ( 117 ) Less: Preferred stock dividends and preferred stock redemption premiums 22 7 Income (loss) attributable to AIG common shareholders from continuing operations 1,194 23 Income (loss) from discontinued operations, net of income tax expense — — Net income (loss) attributable to AIG common shareholders $ 1,194 $ 23 Denominator for EPS: Weighted average common shares outstanding - basic 682,576,848 738,661,428 Dilutive common shares 5,384,670 5,437,758 Weighted average common shares outstanding - diluted (a) 687,961,518 744,099,186 Income (loss) per common share attributable to AIG common shareholders: Basic: Income (loss) from continuing operations $ 1.75 $ 0.03 Income from discontinued operations $ — $ — Income (loss) attributable to AIG common shareholders $ 1.75 $ 0.03 Diluted: Income (loss) from continuing operations $ 1.74 $ 0.03 Income from discontinued operations $ — $ — Income (loss) attributable to AIG common shareholders $ 1.74 $ 0.03 (a) Potential dilutive common shares include our share-based employee compensation plans. The number of potential common shares excluded from diluted shares outstanding was 0.1 million and 4.5 million for the three months ended March 31, 2024 and 2023, respectively, because the effect of including those common shares in the calculation would have been anti-dilutive. For information regarding our repurchases of AIG Common Stock, see Note 16. AIG | First Quarter 2024 Form 10-Q 63 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 18. Income Taxes 18. Income Taxes U.S. TAX LAW CHANGES The Inflation Reduction Act of 2022 (H.R. 5376) includes 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. Although the U.S. Treasury and Internal Revenue Service (IRS) issued interim CAMT guidance during 2023, many details and specifics of application of the CAMT remain subject to future guidance. We expect to be subject to CAMT in 2024. 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 initial public offering 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 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. 64 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 18. Income Taxes INTERIM TAX EXPENSE (BENEFIT) For the three months ended March 31, 2024, the effective tax rate on income from continuing operations was 22.0 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax charges associated with the effect of foreign operations, U.S. federal and foreign valuation allowance changes, and state and local income taxes, partially offset by tax benefits related to tax exempt income and excess tax benefits related to share-based compensation payments recorded through the income statement. 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 months ended March 31, 2023, the effective tax rate on loss from continuing operations was 62.3 percent. The effective tax rate on loss from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax benefits associated with tax exempt income, excess tax benefits related to share based compensation payments recorded through the income statement, tax adjustments related to prior year returns 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, U.S. federal valuation allowance changes and state and local income taxes. 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. During the first quarter, taxable income projections were updated to reflect the latest projections of income for our insurance and non-insurance companies, and projections of taxable income generated from prudent and feasible tax planning strategies. Given there is a shorter carryforward period to utilize remaining net operating losses, we continue to consider multiple data points and stresses. Additionally, 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 macroeconomic 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 2022 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. 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. After factoring in multiple data points and assessing the relative weight of all positive and negative evidence, we concluded that valuation allowance of $ 300 million should remain on a portion of AIG's U.S. federal consolidated income tax group tax attribute carryforwards that are not more likely than not to be realized. Accordingly, during the three months ended March 31, 2024, we recorded no change in valuation allowance. As of March 31, 2024, we reported a valuation allowance of $ 177 million related to Corebridge. 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 three months ended March 31, 2024, Corebridge recorded a $ 15 million increase in valuation allowance. AIG | First Quarter 2024 Form 10-Q 65 TABLE OF CONTENTS ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 18. Income Taxes For the three months ended March 31, 2024, recent changes in market conditions, including changes in 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 an increase to 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 March 31, 2024, based on all available evidence, we concluded that a valuation allowance of $ 1.8 billion is necessary on a portion of the deferred tax assets related to unrealized tax capital losses that are not more-likely-than-not to be realized. Of the total valuation allowance, $ 1.2 billion relates to the unrealized tax capital losses in the U.S. Life Insurance Companies' available for sale securities portfolio and $ 561 million relates to the unrealized tax capital losses in the non-life insurance companies' available for sale securities portfolio. For the three months ended March 31, 2024, we recorded an increase in valuation allowance of $ 194 million associated with the unrealized tax capital losses in the U.S. Life Insurance Companies’ available for sale securities portfolio and $ 11 million associated with the unrealized tax capital losses in the non-life insurance companies’ available for sale securities portfolio. The valuation allowance increase was primarily allocated to other comprehensive income. For the three months ended March 31, 2024, we recognized a net $ 3 million decrease in deferred tax asset valuation allowance associated with certain foreign jurisdictions. TAX EXAMINATIONS We are currently under examination by the IRS for the tax years 2011 through 2019, and are engaging in the Appeals process for certain disagreed issues related to tax years 2007 through 2010. ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES At both March 31, 2024 and December 31, 2023, our unrecognized tax benefits, excluding interest and penalties, were $ 1.4 billion. At both March 31, 2024 and December 31, 2023, the amounts of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate were $ 1.4 billion. Unrecognized tax benefits that would not affect the effective tax rate generally relate to such factors as the timing, rather than the permissibility of the deduction. Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At both March 31, 2024 and December 31, 2023, we had accrued liabilities of $ 52 million, for the payment of interest (net of the federal benefit) and penalties. For the three months ended March 31, 2024 and March 31, 2023, we accrued benefit of $ 0 million and $ 7 million, respectively, for the payment of interest and penalties. 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. 66 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations Glossary and Acronyms of Selected Insurance Terms and References Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), we use certain terms and abbreviations, which are summarized in the Glossary and Acronyms. American International Group, Inc. (AIG) has incorporated into this discussion a number of cross-references to additional information included throughout this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2023 (the 2023 Annual Report) to assist readers seeking additional information related to a particular subject. In this Quarterly Report on Form 10-Q, unless otherwise mentioned or unless the context indicates otherwise, we use the terms “AIG,” “we,” “us,” “our” or "the Company" to refer to American International Group, Inc., a Delaware corporation, and its consolidated subsidiaries. We use the term “AIG Parent” to refer solely to American International Group, Inc., and not to any of its consolidated subsidiaries. Cautionary Statement Regarding Forward-Looking Information and Factors That May Affect Future Results This Quarterly Report on Form 10-Q and other publicly available documents may include, and members of AIG management may from time to time make and discuss, statements which, to the extent they are not statements of historical or present fact, may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward‑looking statements are intended to provide management’s current expectations or plans for AIG’s future operating and financial performance, based on assumptions currently believed to be valid and accurate. Forward-looking statements are often preceded by, followed by or include words such as “will,” “believe,” “anticipate,” “expect,” “expectations,” “intend,” “plan,” “strategy,” “prospects,” “project,” “anticipate,” “should,” “guidance,” “outlook,” “confident,” “focused on achieving,” “view,” “target,” “goal,” “estimate” and other words of similar meaning in connection with a discussion of future operating or financial performance. These statements may include, among other things, projections, goals and assumptions that relate to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expense reduction efforts, the outcome of contingencies such as legal proceedings, anticipated organizational, business or regulatory changes, such as the separation of the Life and Retirement business from AIG, the effect of catastrophic events, both natural and man-made, and macroeconomic and/or geopolitical events, anticipated dispositions, monetization and/or acquisitions of businesses or assets, the successful integration of acquired businesses, management succession and retention plans, exposure to risk, trends in operations and financial results, and other statements that are not historical facts. AIG | First Quarter 2024 Form 10-Q 67 TABLE OF CONTENTS All forward-looking statements involve risks, uncertainties and other factors that may cause AIG’s actual results and financial condition to differ, possibly materially, from the results and financial condition expressed or implied in the forward-looking statements. Factors that could cause AIG’s actual results to differ, possibly materially, from those in specific projections, targets, goals, plans, assumptions and other forward-looking statements include, without limitation: • the impact of adverse developments affecting economic conditions in the markets in which AIG and its businesses operate in the U.S. and globally, including adverse developments related to financial market conditions, macroeconomic trends, fluctuations in interest rates and foreign currency exchange rates, inflationary pressures, including social inflation, pressures on the commercial real estate market, an economic slowdown or recession, any potential U.S. federal government shutdown and geopolitical events or conflicts, including the conflict between Russia and Ukraine and the conflict in Israel and the surrounding areas; • occurrence of catastrophic events, both natural and man-made, including the effects of climate change, geopolitical events and conflicts and civil unrest; • disruptions in the availability or accessibility of AIG's or a third party’s information technology systems, including hardware and software, infrastructure or networks, and the inability to safeguard the confidentiality and integrity of customer, employee or company data due to cyberattacks, data security breaches, or infrastructure vulnerabilities; • AIG’s ability to successfully dispose of, monetize and/or acquire businesses or assets or successfully integrate acquired businesses, and the anticipated benefits thereof; • AIG's ability to realize expected strategic, financial, operational or other benefits from the separation of Corebridge Financial, Inc. (Corebridge) as well as AIG’s equity market exposure to Corebridge; • AIG's ability to effectively implement restructuring initiatives and potential cost-savings opportunities; • AIG's ability to effectively implement technological advancements, including the use of artificial intelligence (AI), and respond to competitors' AI and other technology initiatives; • the effectiveness of strategies to retain and recruit key personnel and to implement effective succession plans; • concentrations in AIG’s investment portfolios; • AIG’s reliance on third-party investment managers; • changes in the valuation of AIG’s investments; • AIG’s reliance on third parties to provide certain business and administrative services; • availability of adequate reinsurance or access to reinsurance on acceptable terms; • concentrations of AIG’s insurance, reinsurance and other risk exposures; • nonperformance or defaults by counterparties, including Fortitude Reinsurance Company Ltd. (Fortitude Re); • AIG's ability to adequately assess risk and estimate related losses as well as the effectiveness of AIG’s enterprise risk management policies and procedures, including with respect to business continuity and disaster recovery plans; • difficulty in marketing and distributing products through current and future distribution channels; • actions by rating agencies with respect to AIG’s credit and financial strength ratings as well as those of its businesses and subsidiaries; • changes to sources of or access to liquidity; • changes in judgments concerning the recognition of deferred tax assets and the impairment of goodwill; • changes in judgments or assumptions concerning insurance underwriting and insurance liabilities; • changes in accounting principles and financial reporting requirements; • the effects of sanctions, including those related to the conflict between Russia and Ukraine, and the failure to comply with those sanctions; • the effects of changes in laws and regulations, including those relating to the regulation of insurance, in the U.S. and other countries in which AIG and its businesses operate; • changes to tax laws in the U.S. and other countries in which AIG and its businesses operate; • the outcome of significant legal, regulatory or governmental proceedings; • AIG’s ability to effectively execute on sustainability targets and standards; • AIG’s ability to address evolving stakeholder expectations and regulatory requirements with respect to environmental, social and governance matters; • the impact of epidemics, pandemics and other public health crises and responses thereto; and • such other factors discussed in: – Part I, Item 2. MD&A of this Quarterly Report on Form 10‑Q; and – Part I, Item 1A. Risk Factors and Part II, Item 7. MD&A of the 2023 Annual Report. Forward-looking statements speak only as of the date of this report, or in the case of any document incorporated by reference, the date of that document. We are not under any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in any forward-looking statements is disclosed from time to time in other filings with the Securities and Exchange Commission (SEC). 68 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS INDEX TO ITEM 2 Page Use of Non-GAAP Measures 70 Critical Accounting Estimates 72 Executive Summary 73 Overview 73 Operating Structure 73 Regulatory, Industry and Economic Factors 74 Consolidated Results of Operations 76 Business Segment Operations 80 General Insurance 81 Life and Retirement 87 Other Operations 96 Investments 97 Overview 97 Investment Highlights in the Three Months Ended March 31, 2024 97 Investment Strategies 98 Credit Ratings 99 Insurance Reserves 106 Loss Reserves 106 Life and Annuity Future Policy Benefits, Policyholder Contract Deposits and Market Risk Benefits 109 Liquidity and Capital Resources 112 Overview 112 Liquidity and Capital Resources Highlights 113 Analysis of Sources and Uses of Cash 113 Liquidity and Capital Resources of AIG Parent and Subsidiaries 114 Credit Facilities 115 Contractual Obligations 115 Off-Balance Sheet Arrangements and Commercial Commitments 115 Debt 116 Credit Ratings 117 Financial Strength Ratings 118 Regulation and Supervision 118 Dividends 118 Repurchases of AIG Common Stock 119 Dividend Restrictions 119 Enterprise Risk Management 119 Overview 119 Glossary 120 Acronyms 122 AIG | First Quarter 2024 Form 10-Q 69 TABLE OF CONTENTS ITEM 2 | Use of Non-GAAP Measures Use of Non-GAAP Measures Throughout this MD&A, we present our financial condition and results of operations in the way we believe will be most meaningful and representative of our business results. Some of the measurements we use are “non-GAAP financial measures” under SEC rules and regulations. GAAP is the acronym for “generally accepted accounting principles” in the United States. The non-GAAP financial measures we present may not be comparable to similarly-named measures reported by other companies. We use the following operating performance measures because we believe they enhance the understanding of the underlying profitability of continuing operations and trends of our business segments. We believe they also allow for more meaningful comparisons with our insurance competitors. When we use these measures, reconciliations to the most comparable GAAP measure are provided on a consolidated basis in the Consolidated Results of Operations section of this MD&A. Book value per common share, excluding accumulated other comprehensive income (loss) (AOCI) adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets and deferred tax assets (DTA) (Adjusted book value per common share) is used to show the amount of our net worth on a per-common share basis after eliminating items that can fluctuate significantly from period to period including changes in fair value (1) of AIG’s available for sale securities portfolio, (2) of market risk benefits attributable to our own credit risk and (3) due to discount rates used to measure traditional and limited payment long-duration insurance contracts, foreign currency translation adjustments and U.S. tax attribute deferred tax assets. This measure also eliminates the asymmetrical impact resulting from changes in fair value of our available for sale securities portfolio wherein there is largely no offsetting impact for certain related insurance liabilities. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG post deconsolidation of Fortitude Re (Fortitude Re funds withheld assets) since these fair value movements are economically transferred to Fortitude Re. We exclude deferred tax assets representing U.S. tax attributes related to net operating loss carryforwards and foreign tax credits as they have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As net operating loss carryforwards and foreign tax credits are utilized, the portion of the DTA utilized is included in these book value per common share metrics. Adjusted book value per common share is derived by dividing total AIG common shareholders’ equity, excluding AOCI adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets, and DTA (Adjusted common shareholders’ equity), by total common shares outstanding. Return on common equity – Adjusted after-tax income excluding AOCI adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets and DTA (Adjusted return on common equity) is used to show the rate of return on common shareholders’ equity. We believe this measure is useful to investors because it eliminates items that can fluctuate significantly from period to period, including changes in fair value (1) of AIG’s available for sale securities portfolio, (2) of market risk benefits attributable to our own credit risk and (3) due to discount rates used to measure traditional and limited payment long-duration insurance contracts, foreign currency translation adjustments and U.S. tax attribute deferred tax assets. This measure also eliminates the asymmetrical impact resulting from changes in fair value of our available for sale securities portfolio wherein there is largely no offsetting impact for certain related insurance liabilities. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets since these fair value movements are economically transferred to Fortitude Re. We exclude deferred tax assets representing U.S. tax attributes related to net operating loss carryforwards and foreign tax credits as they have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As net operating loss carryforwards and foreign tax credits are utilized, the portion of the DTA utilized is included in Adjusted return on common equity. Adjusted return on common equity is derived by dividing actual or annualized adjusted after-tax income attributable to AIG common shareholders by average Adjusted common shareholders’ equity. Adjusted after-tax income attributable to AIG common shareholders is derived by excluding the tax effected adjusted pre-tax income (APTI) adjustments described below, dividends on preferred stock and preferred stock redemption premiums, noncontrolling interest on net realized gains (losses), other non-operating expenses and the following tax items from net income attributable to AIG: • deferred income tax valuation allowance releases and charges; • changes in uncertain tax positions and other tax items related to legacy matters having no relevance to our current businesses or operating performance; and • net tax charge related to the enactment of the Tax Cuts and Jobs Act. Adjusted revenues exclude Net realized gains (losses), income from non-operating litigation settlements (included in Other income for GAAP purposes), changes in fair value of securities used to hedge guaranteed living benefits (included in Net investment income for GAAP purposes) and income from elimination of the international reporting lag. Adjusted revenues is a GAAP measure for our segments. 70 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Use of Non-GAAP Measures Adjusted pre-tax income is derived by excluding the items set forth below from income from continuing operations before income tax. This definition is consistent across our segments. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to our current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and measures that we believe to be common to the industry. APTI is a GAAP measure for our segments. Excluded items include the following: • changes in fair value of securities used to hedge guaranteed living benefits; • net change in market risk benefits (MRBs); • changes in benefit reserves related to net realized gains and losses; • changes in the fair value of equity securities; • net investment income on Fortitude Re funds withheld assets; • following deconsolidation of Fortitude Re, net realized gains and losses on Fortitude Re funds withheld assets; • loss (gain) on extinguishment of debt; • 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. Earned income on such economic hedges is reclassified from net realized gains and losses to specific APTI line items based on the economic risk being hedged (e.g. net investment income and interest credited to policyholder account balances); • income or loss from discontinued operations; • net loss reserve discount benefit (charge); • pension expense related to lump sum payments to former employees; • net gain or loss on divestitures and other; • non-operating litigation reserves and settlements; • restructuring and other costs related to initiatives designed to reduce operating expenses, improve efficiency and simplify our organization; • the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain; • integration and transaction costs associated with acquiring or divesting businesses; • losses from the impairment of goodwill; • non-recurring costs associated with the implementation of non-ordinary course legal or regulatory changes or changes to accounting principles; and • income from elimination of the international reporting lag. • General Insurance – Ratios: We, along with most property and casualty insurance companies, use the loss ratio, the expense ratio and the combined ratio as measures of underwriting performance. These ratios are relative measurements that describe, for every $100 of net premiums earned, the amount of losses and loss adjustment expenses (which for General Insurance excludes net loss reserve discount), and the amount of other underwriting expenses that would be incurred. A combined ratio of less than 100 indicates underwriting income and a combined ratio of over 100 indicates an underwriting loss. Our ratios are calculated using the relevant segment information calculated under GAAP, and thus may not be comparable to similar ratios calculated for regulatory reporting purposes. The underwriting environment varies across countries and products, as does the degree of litigation activity, all of which affect such ratios. In addition, investment returns, local taxes, cost of capital, regulation, product type and competition can have an effect on pricing and consequently on profitability as reflected in underwriting income and associated ratios. – Accident year loss and accident year combined ratios, as adjusted (Accident year loss ratio, ex-CATs and Accident year combined ratio, ex-CATs): both the accident year loss and accident year combined ratios, as adjusted, exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting. Natural catastrophe losses are generally weather or seismic events, in each case, having a net impact on AIG in excess of $10 million and man-made catastrophe losses, such as terrorism and civil disorders that exceed the $10 million threshold. We believe that as adjusted ratios are meaningful measures of our underwriting results on an ongoing basis as they exclude catastrophes and the impact of reserve discounting which are outside of management’s control. We also exclude prior year development to provide transparency related to current accident year results. • Life and Retirement – Premiums and deposits: includes direct and assumed amounts received and earned on traditional life insurance policies, group benefit policies and life-contingent payout annuities, as well as deposits received on universal life, investment-type annuity contracts, Federal Home Loan Bank (FHLB) funding agreements and mutual funds. We believe the measure of premiums and deposits is useful in understanding customer demand for our products, evolving product trends and our sales performance period over period. Results from discontinued operations are excluded from all of these measures. AIG | First Quarter 2024 Form 10-Q 71 TABLE OF CONTENTS ITEM 2 | Critical Accounting Estimates Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment. The accounting policies that we believe are most dependent on the application of estimates and assumptions, which are critical accounting estimates, are related to the determination of: • loss reserves; • valuation of future policy benefit liabilities and recognition of measurement gains and losses; • valuation of MRBs related to guaranteed benefit features of variable annuity, fixed annuity and fixed index annuity products; • valuation of embedded derivative liabilities for fixed index annuity and index universal life 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; • 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. For a complete discussion of our critical accounting estimates, see Part II, Item 7. MD&A – Critical Accounting Estimates in the 2023 Annual Report. 72 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Executive Summary Executive Summary OVERVIEW This overview of the MD&A highlights selected information and may not contain all of the information that is important to current or potential investors in our securities. You should read this Quarterly Report on Form 10-Q, together with the 2023 Annual Report, in their entirety for a more detailed description of events, trends, uncertainties, risks and critical accounting estimates affecting us. OPERATING STRUCTURE AIG reports the results of its businesses through three segments – General Insurance, Life and Retirement and Other Operations. General Insurance consists of two operating segments – North America and International. Life and Retirement consists of four operating segments – Individual Retirement, Group Retirement, Life Insurance and Institutional Markets. Other Operations is primarily comprised of corporate, our institutional asset management business and consolidation and eliminations. For additional information on our business segments, see Note 3 to the Condensed Consolidated Financial Statements, and for information regarding the separation of Life and Retirement and AIG Life Limited (AIG Life), see Note 1 to the Condensed Consolidated Financial Statements. Business Segments General Insurance Life and Retirement General Insurance is a leading provider of insurance products and services for commercial and personal insurance customers. It includes one of the world’s most far-reaching property casualty networks. General Insurance offers a broad range of products to customers through a diversified, multichannel distribution network. Customers value General Insurance’s strong capital position, extensive risk management and claims experience and its ability to be a market leader in critical lines of the insurance business. Life and Retirement is a unique franchise that brings together a broad portfolio of life insurance, retirement and institutional products offered through an extensive, multi-channel distribution network. It holds long-standing, leading market positions in many of the markets it serves in the U.S. With its strong capital position, customer-focused service, breadth of product expertise and deep distribution relationships across multiple channels, Life and Retirement is well positioned to serve growing market needs. General Insurance includes the following major operating companies: National Union Fire Insurance Company of Pittsburgh, Pa. (National Union); American Home Assurance Company (American Home); Lexington Insurance Company (Lexington); AIG General Insurance Company, Ltd.; AIG Asia Pacific Insurance, Pte, Ltd.; AIG Europe S.A.; American International Group UK Ltd.; Talbot Underwriting Ltd. (Talbot); Western World Insurance Company and Glatfelter Insurance Group (Glatfelter). Life and Retirement includes the following major operating companies: American General Life Insurance Company (AGL); The Variable Annuity Life Insurance Company (VALIC); The United States Life Insurance Company in the City of New York (U.S. Life) and AIG Life. 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. AIG | First Quarter 2024 Form 10-Q 73 TABLE OF CONTENTS ITEM 2 | Executive Summary REGULATORY, INDUSTRY AND ECONOMIC FACTORS Regulatory Environment Our operations around the world are subject to regulation by many different types of regulatory authorities, including insurance, securities, derivatives and investment advisory in the United States and abroad. The insurance and financial services industries are generally subject to close regulatory scrutiny and supervision. On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) adopted its climate-related disclosure rules, which require registrants to provide detailed climate-related disclosures in registration statements and periodic reports. We are evaluating the potential impacts of these new requirements at this time, including in connection with ongoing litigation challenging such requirements and the SEC's stay of the requirements pending judicial review. However, if these requirements are implemented following the completion of judicial review, they may significantly increase the complexity of AIG’s periodic reporting as a U.S. public company. In the European Union, the EU Digital Operational Resilience Act (DORA) will require covered entities, including insurance intermediaries, reinsurance intermediaries and ancillary insurance intermediaries, other than micro-, small, or medium enterprises, to comply with a wide range of organizational and technical requirements to identify, manage and mitigate operational risk arising from use of network and information systems and, in particular, the use of third party ICT service providers. Covered entities will be required to comply with DORA by January 2025. On April 25, 2024, the Department of Labor (DOL) published a final rule in the Federal Register updating the definition for when a person is an “investment advice fiduciary” for purposes of transactions with ERISA qualified plans, related plan participants and IRAs. The DOL also published changes with respect to existing prohibited transactions exemptions (PTEs) relating to such advice, including PTE 84-24 and PTE 2020-02. The rule is effective September 23, 2024 and includes a one-year transition period thereafter for certain requirements. We are evaluating the potential impact of the DOL’s rule to our business. Our insurance subsidiaries are subject to regulation and supervision by the states and jurisdictions in which they do business. We expect that the domestic and international regulations applicable to us and our regulated entities will continue to evolve for the foreseeable future. For information regarding our regulation and supervision by different regulatory authorities in the United States and abroad, see Part I, Item 1. Business – Regulation and Part I, Item 1A. Risk Factors – Regulation in the 2023 Annual Report. Impact of Changes in the Interest Rate Environment and Equity Markets Certain key U.S. benchmark rates continued to rise during the first three months of 2024 as markets reacted to heightened inflation measures, geopolitical risk, and the Board of Governors of the Federal Reserve System implementing multiple increases to short term interest rates. The yield pick of new investments over sales, maturities and paydowns and redemptions, excluding Fortitude Re, averaged 150 basis points during the first three months of 2024. This combined with resetting of coupon rates on floating rate securities and loans has improved the overall portfolio yields. However, the key benchmark rates remain highly volatile. We actively manage our exposure to the interest rate environment through portfolio construction and asset-liability management, including spread management strategies for our investment-oriented products and economic hedging of interest rate risk from guarantee features in our variable and fixed index annuities, but we may not be able to fully mitigate our interest rate risk by matching exposure of our assets relative to our liabilities. Equity Markets Our financial results are impacted by the performance of equity markets, which impacts the performance of our alternative investment portfolio, fee income and net amount at risk. For instance, in our variable annuity separate accounts, mutual fund assets and brokerage and advisory assets, we generally earn fee income based on the account value, which fluctuates with the equity markets as a significant amount of these assets are invested in equity funds. The impact of equity market returns, both increases and decreases, is reflected in our results due to the impact on the account value and the fair values of equity-exposed securities. In Life and Retirement, hedging costs could also be significantly impacted by changes in the level of equity markets as rebalancing and option costs are tied to the equity market volatility. These hedging costs are partially offset by our rider fees that are tied to the level of the Chicago Board Options Exchange Volatility Index. As rebalancing and option costs increase or decrease, the rider fees will increase or decrease partially offsetting the hedging costs incurred. Market and other economic factors may result in increased credit impairments, downgrades and losses across single or numerous asset classes due to lower collateral values or deteriorating cash flow and profitability by borrowers could lead to higher defaults on our investment portfolio, especially in geographic, industry or investment sectors where we have higher concentrations of exposure, such as real estate related borrowings. These factors can also cause widening of credit spreads which could reduce investment asset valuations, decrease fee income and increase statutory capital requirements, as well as reduce the availability of investments that are attractive from a risk-adjusted perspective. 74 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Executive Summary Alternative investments include private equity funds which are generally reported on a one-quarter lag. Accordingly, changes in valuations driven by equity market conditions during the first quarter of 2024 may impact the private equity investments in the alternative investments portfolio in the second quarter of 2024. Annuity Sales and Surrenders The rising rate environment and our partnership with Blackstone Inc. and its investment advisory affiliates (Blackstone) have provided a strong tailwind for fixed and fixed index annuity sales, however, higher interest rates have also resulted in an increase in surrenders. Rising interest rates could continue to create the potential for increased sales, but could also drive higher surrenders relative to what we have already experienced. Fixed annuities have surrender charge periods, generally in the three-to-seven year range. Fixed index annuities have surrender charge periods, generally in the five-to-ten year range, and within our Group Retirement segment, certain of our fixed investment options are subject to other withdrawal restrictions, which may help mitigate increased early surrenders in a rising rate environment. In addition, older contracts that have higher minimum interest rates and continue to be attractive to contract holders have driven better than expected persistency in fixed annuities, although the reserves for such contracts have continued to decrease over time in amount and as a percentage of the total annuity portfolio. We closely monitor surrenders of fixed annuities as contracts with lower minimum interest rates come out of the surrender charge period. Reinvestment and Spread Management We actively monitor fixed income markets, including the level of interest rates, credit spreads and the shape of the yield curve. We also frequently review our interest rate assumptions and actively manage the crediting rates used for new and in-force business. Business strategies continue to evolve and we attempt to maintain profitability of the overall business in light of the interest rate environment. A rising interest rate environment results in improved yields on new investments and improves margins for our Life and Retirement business while also making certain products, such as fixed annuities, more attractive to potential customers. However, the rising rate environment has resulted in lower values on general and separate account assets, mutual fund assets and brokerage and advisory assets that hold investments in fixed income assets. For additional information on our investment and asset-liability management strategies, see Investments. For investment-oriented products, including universal life insurance, and variable, fixed and fixed index annuities, in our Individual Retirement, Group Retirement, Life Insurance and Institutional Markets businesses, our spread management strategies include disciplined pricing and product design for new business, modifying or limiting the sale of products that do not achieve targeted spreads, using asset-liability management to match assets to liabilities to the extent practicable, and actively managing crediting rates to help mitigate some of the pressure on investment spreads. Renewal crediting rate management is guided by specific contract provisions designed to allow crediting rates to be reset at pre-established intervals and subject to minimum crediting rate guarantees. We expect to continue to adjust crediting rates on in-force business, as appropriate, to be responsive to changing rate environments. As interest rates rise, we may need to raise crediting rates on in-force business for competitive and other reasons, potentially offsetting a portion of the additional investment income resulting from investing in a higher interest rate environment. Of the aggregate fixed account values of our Individual Retirement and Group Retirement annuity products, 52 percent were crediting at the contractual minimum guaranteed interest rate as of March 31, 2024. The percentage of fixed account values of our annuity products that are currently crediting at rates above one percent were 49 percent and 50 percent as of March 31, 2024 and December 31, 2023, respectively. In the universal life products in our Life Insurance business, 59 percent and 59 percent of the account values were crediting at the contractual minimum guaranteed interest rate as of March 31, 2024 and December 31, 2023, respectively. These businesses continue to focus on pricing discipline and strategies to manage the minimum guaranteed interest crediting rates offered on new sales in the context of regulatory requirements and competitive positioning. General Insurance Our net investment income is significantly impacted by market interest rates as well as the deployment of asset allocation strategies to manage duration, enhance yield and manage interest rate risk. As interest rates increase, so too does our ability to reinvest future cash inflows from premiums, as well as sales and maturities of existing investments, at more favorable rates. For additional information on our investment and asset-liability management strategies, see Investments. While the impact of rising interest rates on our General Insurance segment increases the benefit of investment income, the current and medium-term inflationary environment may also translate into higher loss cost trends. We monitor these trends closely, particularly loss cost trend uncertainty, to ensure that not only our pricing, but also our loss reserving assumptions are proactive to, and considerate of, current and future economic conditions. For our General Insurance segment loss reserves, rising interest rates may favorably impact the statutory net loss reserve discount for workers’ compensation and its associated amortization. AIG | First Quarter 2024 Form 10-Q 75 TABLE OF CONTENTS ITEM 2 | Executive Summary Impact of Currency Volatility Currency volatility remains acute. Strengthening of the U.S. dollar against the Euro, British pound and the Japanese yen (the Major Currencies) impacts income for our businesses with substantial international operations. In particular, growth trends in net premiums written reported in U.S. dollars can differ significantly from those measured in original currencies. The net effect on underwriting results, however, is significantly mitigated, as both revenues and expenses are similarly affected. These currencies may continue to fluctuate, especially as a result of central bank responses to inflation, concerns regarding future economic growth and other macroeconomic factors, and such fluctuations will affect net premiums written growth trends reported in U.S. dollars, as well as financial statement line item comparability. General Insurance businesses are transacted in most major foreign currencies. The following table presents the average of the quarterly weighted average exchange rates of the Major Currencies, which have the most significant impact on our businesses: Three Months Ended March 31, Rate for 1 USD 2024 2023 Percentage Change Currency: GBP 0.79 0.82 (4) % EUR 0.92 0.94 (2) % JPY 146.61 132.82 10 % Unless otherwise noted, references to the effects of foreign exchange in the General Insurance discussion of results of operations are with respect to movements in the Major Currencies included in the preceding table. Consolidated Results of Operations The following section provides a comparative discussion of our consolidated results of operations on a reported basis for the three months ended March 31, 2024 and 2023. Factors that relate primarily to a specific business are discussed in more detail within the business segment operations section. For information regarding the critical accounting estimates that affect our results of operations, see Critical Accounting Estimates above and Part II, Item 7. MD&A – Critical Accounting Estimates in the 2023 Annual Report. The following table presents our consolidated results of operations and other key financial metrics: Three Months Ended March 31, Percentage Change (in millions) 2024 2023 Revenues: Premiums $ 8,167 $ 8,481 (4) % Policy fees 714 698 2 Net investment income: Net investment income - excluding Fortitude Re funds withheld assets 3,535 3,087 15 Net investment income - Fortitude Re funds withheld assets 369 446 (17) Total net investment income 3,904 3,533 11 Net realized gains (losses): Net realized losses - excluding Fortitude Re funds withheld assets and embedded derivative (258) (713) 64 Net realized losses on Fortitude Re funds withheld assets (179) (31) (477) Net realized gains (losses) on Fortitude Re funds withheld embedded derivative 13 (1,165) NM Total net realized losses (424) (1,909) 78 Other income 217 181 20 Total revenues 12,578 10,984 15 Benefits, losses and expenses: Policyholder benefits and losses incurred (including remeasurement losses of $100 and $64 for the three months ended March 31, 2024, and 2023, respectively) 6,320 6,397 (1) Change in the fair value of market risk benefits, net (369) 196 NM Interest credited to policyholder account balances 1,204 1,040 16 Amortization of deferred policy acquisition costs 1,104 1,293 (15) General operating and other expenses 2,014 1,980 2 76 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Consolidated Results of Operations Three Months Ended March 31, Percentage Change (in millions) 2024 2023 Interest expense 260 307 (15) Net (gain) loss on divestitures and other (6) 2 NM Total benefits, losses and expenses 10,527 11,215 (6) Income (loss) from continuing operations before income tax expense (benefit) 2,051 (231) NM Income tax expense (benefit) 451 (144) NM Income (loss) from continuing operations 1,600 (87) NM Income (loss) from discontinued operations, net of income taxes — — NM Net income (loss) 1,600 (87) NM Less: Net income (loss) attributable to noncontrolling interests 384 (117) NM Net income attributable to AIG 1,216 30 NM Less: Dividends on preferred stock and preferred stock redemption premiums 22 7 214 Net income attributable to AIG common shareholders $ 1,194 $ 23 NM % (in millions, except per common share data) March 31, 2024 December 31, 2023 Balance sheet data: Total assets $ 544,121 $ 539,306 Short-term and long-term debt 19,318 19,796 Debt of consolidated investment entities 2,617 2,591 Total AIG shareholders’ equity 43,385 45,351 Book value per common share 64.66 65.14 Adjusted book value per common share 77.79 76.65 NET INCOME (LOSS) ATTRIBUTABLE TO AIG COMMON SHAREHOLDERS Three Months Ended March 31, 2024 and 2023 Comparison Net income (loss) attributable to AIG common shareholders increased $1.2 billion due to the following, on a pre-tax basis: • an increase in Net realized gains on Fortitude Re funds withheld embedded derivative of $1.2 billion driven by interest rate movement partially offset by higher Net realized losses on Fortitude Re funds withheld assets of $148 million; • an increase in Net realized gains excluding Fortitude Re funds withheld assets and embedded derivative of $455 million, driven by a $608 million increase in derivative and hedge activity and gains on Index-linked interest credited embedded derivatives, net of related hedges, partially offset by foreign exchange losses of $100 million; • an increase in Net investment income of $371 million primarily driven by higher income on available for sale fixed maturity securities of $373 million and an increase in interest income on mortgages and other loans of $80 million, partially offset by a decrease in the fair value of fixed maturity securities where we elected the fair value option of $55 million and lower returns on our alternative investments of $66 million; • an increase in Change in the fair value of market risk benefits, net of $565 million primarily driven by interest rate movement and equity market movements; and • an increase in underwriting income in General Insurance of $94 million, reflecting lower catastrophe losses and improvement in the accident year loss ratio, primarily driven by changes in business mix along with continued positive rate change, focused risk selection and improved terms and conditions partially offset by lower net favorable prior year reserve development. The increase in Net income (loss) attributable to AIG common shareholders was partially offset by the following, on a pre-tax basis: • an increase in income attributable to noncontrolling interest of $501 million primarily driven by the increase in the noncontrolling interest on Corebridge as a result of an increase in net income at Corebridge compared to 2023 and lower ownership by AIG of Corebridge common stock. The $595 million increase in income tax expense was primarily attributable to higher income from continuing operations. INCOME TAX EXPENSE ANALYSIS For the three months ended March 31, 2024 and 2023, the effective tax rate on income (loss) from continuing operations was 22.0 percent and 62.3 percent, respectively. For additional information, see Note 18 to the Condensed Consolidated Financial Statements. AIG | First Quarter 2024 Form 10-Q 77 TABLE OF CONTENTS ITEM 2 | Consolidated Results of Operations NON-GAAP RECONCILIATIONS The following table presents a reconciliation of Book value per common share to Adjusted book value per common share, which is a non-GAAP measure. For additional information, see Use of Non-GAAP Measures. March 31, December 31, (in millions, except per common share data) 2024 2023 Total AIG shareholders' equity $ 43,385 $ 45,351 Preferred equity — 485 Total AIG common shareholders' equity 43,385 44,866 Less: Deferred tax assets 4,153 4,313 Less: Accumulated other comprehensive income (loss) (14,869) (14,037) Add: Cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (1,904) (1,791) Subtotal: AOCI plus cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (12,965) (12,246) Adjusted common shareholders' equity $ 52,197 $ 52,799 Total common shares outstanding 671.0 688.8 Book value per common share $ 64.66 $ 65.14 Adjusted book value per common share 77.79 76.65 The following table presents a reconciliation of Return on common equity to Adjusted return on common equity, which is a non-GAAP measure. For additional information, see Use of Non-GAAP Measures. Three Months Ended March 31, Year Ended December 31, (dollars in millions) 2024 2023 2023 Actual or annualized net income (loss) attributable to AIG common shareholders $ 4,776 $ 92 $ 3,614 Actual or annualized adjusted after-tax income attributable to AIG common shareholders 4,864 4,844 4,921 Average AIG common shareholders' equity $ 44,126 $ 41,659 $ 41,930 Less: Average DTA 4,233 4,531 4,322 Less: Average AOCI (14,453) (20,973) (19,499) Add: Average cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (1,848) (2,640) (2,475) Subtotal: AOCI plus cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (12,605) (18,333) (17,024) Average adjusted AIG common shareholders' equity $ 52,498 $ 55,461 $ 54,632 Return on common equity 10.8 % 0.2 % 8.6 % Adjusted return on common equity 9.3 % 8.7 % 9.0 % The following table presents a reconciliation of revenues to adjusted revenues: Three Months Ended March 31, (in millions) 2024 2023 Revenues $ 12,578 $ 10,984 Changes in fair value of securities used to hedge guaranteed living benefits (17) (13) Changes in the fair value of equity securities (99) (51) Other (income) expense - net (7) 7 Net investment income on Fortitude Re funds withheld assets (369) (446) Net realized losses on Fortitude Re funds withheld assets 179 31 Net realized (gains) losses on Fortitude Re funds withheld embedded derivative (13) 1,165 Net realized losses (a) 313 772 Non-operating litigation reserves and settlements — (1) Net impact from elimination of international reporting lag (b) — (4) Adjusted revenues $ 12,565 $ 12,444 (a) 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. (b) For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report. 78 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Consolidated Results of Operations The following table presents a reconciliation of pre-tax income (loss)/net income (loss) attributable to AIG to adjusted pre-tax income (loss)/adjusted after-tax income (loss) attributable to AIG: Three Months Ended March 31, 2024 2023 (in millions, except per common share data) Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (d) After Tax Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (d) After Tax Pre-tax income (loss)/net income (loss), including noncontrolling interests $ 2,051 $ 451 $ — $ 1,600 $ (231) $ (144) $ — $ (87) Noncontrolling interests (384) (384) 117 117 Pre-tax income (loss)/net income attributable to AIG $ 2,051 $ 451 $ (384) $ 1,216 $ (231) $ (144) $ 117 $ 30 Dividends on preferred stock and preferred stock redemption premiums 22 7 Net income attributable to AIG common shareholders $ 1,194 $ 23 Changes in uncertain tax positions and other tax adjustments 14 — (14) 22 — (22) Deferred income tax valuation allowance charges (12) — 12 (19) — 19 Changes in fair value of securities used to hedge guaranteed living benefits 2 — — 2 3 1 — 2 Change in the fair value of market risk benefits, net (a) (369) (78) — (291) 196 41 — 155 Changes in benefit reserves related to net realized gains (losses) (2) — — (2) (6) (1) — (5) Changes in the fair value of equity securities (99) (21) — (78) (51) (11) — (40) Loss on extinguishment of debt and preferred stock redemption premiums — — — 15 — — — — Net investment income on Fortitude Re funds withheld assets (369) (77) — (292) (446) (94) — (352) Net realized losses on Fortitude Re funds withheld assets 179 38 — 141 31 7 — 24 Net realized (gains) losses on Fortitude Re funds withheld embedded derivative (13) (3) — (10) 1,165 245 — 920 Net realized losses (b) 307 60 — 247 766 208 — 558 Net loss (gain) on divestitures and other (6) (1) — (5) 2 — — 2 Non-operating litigation reserves and settlements — — — — (1) — — (1) Unfavorable (favorable) prior year development and related amortization changes ceded under retroactive reinsurance agreements 2 — — 2 (19) (4) — (15) Net loss reserve discount (benefit) charge 76 16 — 60 64 13 — 51 Integration and transaction costs associated with acquiring or divesting businesses 64 13 — 51 52 11 — 41 Restructuring and other costs 114 24 — 90 117 25 — 92 Non-recurring costs related to regulatory or accounting changes 4 1 — 3 13 3 — 10 Net impact from elimination of international reporting lag (c) — — — — (12) (3) — (9) Noncontrolling interests (d) 91 91 (242) (242) Adjusted pre-tax income (loss)/Adjusted after-tax income (loss) attributable to AIG common shareholders $ 1,941 $ 425 $ (293) $ 1,216 $ 1,643 $ 300 $ (125) $ 1,211 Weighted average diluted shares outstanding 688.0 744.1 Income per common share attributable to AIG common shareholders (diluted) $ 1.74 $ 0.03 Adjusted after-tax income per common share attributable to AIG common shareholders (diluted) $ 1.77 $ 1.63 (a) Includes realized gains and losses on certain derivative instruments used for non-qualifying (economic) hedging. (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. (c) For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report. (d) Includes the portion of equity interest of non-operating income of Corebridge and consolidated investment entities that AIG does not own. PRE-TAX INCOME (LOSS) COMPARISON Three Months Ended March 31, 2024 and 2023 Comparison Pre-tax income (loss) was $2.1 billion and $(231) million in the three months ended March 31, 2024 and 2023, respectively. For the main drivers impacting AIG’s results of operations, see – Net Income (Loss) Attributable to AIG Common Shareholders above. ADJUSTED PRE-TAX INCOME (LOSS) COMPARISON Three Months Ended March 31, 2024 and 2023 Comparison Adjusted pre-tax income (loss) was $1.9 billion and $1.6 billion in the three months ended March 31, 2024 and 2023, respectively. For the main drivers impacting AIG’s adjusted pre-tax income (loss), see Business Segment Operations. AIG | First Quarter 2024 Form 10-Q 79 TABLE OF CONTENTS ITEM 2 | Business Segment Operations Business Segment Operations Our business operations consist of General Insurance, Life and Retirement and Other Operations. General Insurance consists of two operating segments: North America and International. Life and Retirement consists of four operating segments: Individual Retirement, Group Retirement, Life Insurance and Institutional Markets. Other Operations is primarily comprised of corporate, our institutional asset management business and consolidation and eliminations. The following table summarizes Adjusted pre-tax income (loss) from our business segment operations. See also Note 3 to the Condensed Consolidated Financial Statements. Three Months Ended March 31, (in millions) 2024 2023 General Insurance North America - Underwriting income $ 224 $ 299 International - Underwriting income 372 203 Net investment income 762 746 General Insurance 1,358 1,248 Life and Retirement Individual Retirement 622 533 Group Retirement 199 187 Life Insurance 58 82 Institutional Markets 112 84 Life and Retirement 991 886 Other Operations Other Operations before consolidation and eliminations (438) (434) Consolidation and eliminations 30 (57) Other Operations (408) (491) Adjusted pre-tax income $ 1,941 $ 1,643 80 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Business Segment Operations | General Insurance General Insurance General Insurance is managed by our geographic markets of North America and International. Our global presence is underpinned by our multinational capabilities to provide Commercial Lines and Personal Insurance products within these geographic markets. PRODUCTS AND DISTRIBUTION North America consists of insurance businesses in the United States, Canada and Bermuda. 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 as well as AIG’s Global Specialty business. Property: Products include commercial and industrial property, including business interruption, as well as package insurance products and services that cover exposures to man-made and natural disasters. Liability: Products include general liability, environmental, commercial automobile liability, workers’ compensation, excess casualty and crisis management insurance products. Casualty also includes risk-sharing and other customized structured programs for large corporate and multinational customers. Financial Lines: Products include professional liability insurance for a range of businesses and risks, including directors and officers, mergers and acquisitions, fidelity, employment practices, fiduciary liability, cyber risk, kidnap and ransom, and errors and omissions insurance. Specialty: Products include marine, energy-related property insurance products, aviation, political risk, trade credit, trade finance and portfolio solutions. On July 3, 2023, AIG completed the sale of Crop Risk Services, Inc. (CRS) to American Financial Group, Inc. and in substance, AIG exited the crop business. For periods prior to the sale of CRS, the underwriting results are included in adjusted pre-tax income of General Insurance – North America. On November 1, 2023, AIG completed the sale of Validus Reinsurance, Ltd. (Validus Re), including AlphaCat Managers Ltd. and Talbot Treaty reinsurance business to RenaissanceRe Holdings Ltd. (RenaissanceRe). For periods prior to the sale of Validus Re, the underwriting results are included in adjusted pre-tax income of General Insurance – North America. For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report. Accident & Health: Products include voluntary and sponsor-paid personal accident and supplemental health products for individuals, employees, associations and other organizations, as well as a broad range of travel insurance products and services for leisure and business travelers. Personal Lines: Products include personal auto and personal property in selected markets, comprehensive extended warranty, device protection insurance, home warranty and related services, and insurance for high net-worth individuals offered through Private Client Select (PCS) in the U.S. that covers auto, homeowners, umbrella, yacht, fine art and collections. General Insurance products in North America and International markets are distributed through various channels, including captive and independent agents, brokers, affinity partners, airlines and travel agents, and retailers. Our global platform enables writing multinational and cross-border risks in both Commercial Lines and Personal Insurance. AIG | First Quarter 2024 Form 10-Q 81 TABLE OF CONTENTS ITEM 2 | Business Segment Operations | General Insurance BUSINESS STRATEGY Profitable Growth: Build on our high-quality portfolio by focusing on targeted growth through continued underwriting discipline, improved retentions and new business development. Deploy capital efficiently to act opportunistically and achieve growth in profitable lines, geographies and customer segments, while taking a disciplined underwriting approach to exposure management, terms and conditions and rate change to achieve our risk/return hurdles. Continue to be open to inorganic growth opportunities in profitable markets and segments to expand our capabilities and footprint. Reinsurance Optimization: Strategically partner with reinsurers to effectively manage exposure to losses arising from frequency of large catastrophic events and severity from individual risk losses. We strive to optimize our reinsurance program to manage volatility and protect the balance sheet from tail events and unpredictable net losses in support of our profitable growth objectives. Underwriting Excellence: Continue to enhance portfolio optimization through strength of underwriting framework and guidelines as well as clear communication of risk appetite and rate adequacy. Empower and increase accountability of the underwriter and continue to integrate underwriting, claims and actuarial to enable better decision making. Focus on enhancing risk selection, driving consistent underwriting best practices and building robust monitoring standards to improve underwriting results. COMPETITION AND CHALLENGES General Insurance operates in a highly competitive industry against global, national and local insurers and reinsurers and underwriting syndicates in specific market areas and product types. Insurance companies compete through a combination of risk acceptance criteria, product pricing, service levels and terms and conditions. We serve our business and individual customers on a global basis – from the largest multinational corporations to local businesses and individuals. General Insurance seeks to differentiate itself in the markets where we participate by providing leading expertise and insight to clients, distribution partners and other stakeholders, delivering underwriting excellence and value-driven insurance solutions and providing high quality, tailored end-to-end support to stakeholders. In doing so, we leverage our world-class global franchise, multinational capabilities, balance sheet strength and financial flexibility. Our challenges include: • ensuring adequate business pricing given passage of time to reporting and settlement for insurance business, particularly with respect to long-tail Commercial Lines exposures; • impact of social and economic inflation on claim frequency and severity; and • volatility in claims arising from natural and man-made catastrophes and other aggregations of risk exposure. INDUSTRY AND ECONOMIC FACTORS The results of General Insurance for the three months ended March 31, 2024 reflect continued strong performance from our Commercial Lines portfolio and focused execution on our portfolio management strategies within Personal Insurance. Across our North America and International Commercial Lines of business we have seen increased demand for our insurance products with continued positive rate change and improvement in terms and conditions. We continue to monitor the impact of inflation, ongoing labor force and supply chain disruptions and volatile commodity prices, among other factors, on rate adequacy and loss cost trends. Similarly, we are monitoring the responsive monetary policy actions taken or anticipated to be taken by central banks, to curb inflation and the corresponding impact on market interest rates. General Insurance – North America North America Commercial remains in a firm market amidst a backdrop of increasing claims severity due to elevated economic and social inflation, as well as a higher frequency and severity of natural catastrophe losses over recent years. While market discipline continues to support price increases across most lines, we are seeing capacity move back into the market in certain segments given the improved pricing levels which is putting pressure on rates. We have focused on retaining our best accounts which has led to improving retention across the portfolio. These retention rates are often coupled with an exposure limit management strategy to reduce volatility within the portfolio. We continue to proactively identify segment growth areas as market conditions warrant through effective portfolio management, while non-renewing unprofitable business. 82 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Business Segment Operations | General Insurance Personal Insurance growth prospects are supported by the need for full life cycle products and coverage, increases in personal wealth accumulation, and awareness of insurance protection and risk management. We compete in the high net worth market, accident and health insurance, travel insurance, and warranty services. General Insurance – International We are continuing to pursue growth in our most profitable lines of business and diversify our portfolio across all regions by expanding key business lines while remaining a market leader in key developed and developing markets. Overall, Commercial Lines continue to show positive rate change, particularly in our Property and Casualty portfolios and across international markets where market events or withdrawal of capability and capacity have favorably impacted pricing. We are maintaining our underwriting discipline, reducing gross and net limits where appropriate, utilizing reinsurance to reduce volatility, as well as continuing our risk selection strategy to improve profitability. Personal Insurance focuses on individual customers, as well as group and corporate clients. Although market competition within Personal Insurance has increased, we continue to benefit from the underwriting quality and portfolio diversity. GENERAL INSURANCE RESULTS Three Months Ended March 31, (in millions) 2024 2023 Change Underwriting results: Net premiums written $ 4,512 $ 6,965 (35) % (Increase) decrease in unearned premiums 1,274 (706) NM Net premiums earned 5,786 6,259 (8) Losses and loss adjustment expenses incurred (a) 3,353 3,752 (11) Acquisition expenses: Amortization of deferred policy acquisition costs 828 912 (9) Other acquisition expenses 275 316 (13) Total acquisition expenses 1,103 1,228 (10) General operating expenses 734 777 (6) Underwriting income 596 502 19 Net investment income 762 746 2 Adjusted pre-tax income $ 1,358 $ 1,248 9 % Loss ratio (a) 58.0 59.9 (1.9) Acquisition ratio 19.1 19.6 (0.5) General operating expense ratio 12.7 12.4 0.3 Expense ratio 31.8 32.0 (0.2) Combined ratio (a) 89.8 91.9 (2.1) Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted: Catastrophe losses and reinstatement premiums (1.9) (4.2) 2.3 Prior year development, net of reinsurance and prior year premiums 0.5 1.0 (0.5) Accident year loss ratio, as adjusted 56.6 56.7 (0.1) Accident year combined ratio, as adjusted 88.4 88.7 (0.3) (a) Consistent with our definition of APTI, excludes net loss reserve discount and the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain. AIG | First Quarter 2024 Form 10-Q 83 TABLE OF CONTENTS ITEM 2 | Business Segment Operations | General Insurance The following table presents General Insurance net premiums written by operating segment, showing change on both reported and constant dollar basis: Three Months Ended March 31, Percentage Change in (in millions) 2024 2023 U.S. dollars Original Currency North America $ 1,334 $ 3,680 (64) % (64) % International 3,178 3,285 (3) (2) Total net premiums written $ 4,512 $ 6,965 (35) % (35) % The following tables present General Insurance accident year catastrophes (a) by geography and number of events: (dollars in millions) # of Events North America International Total Three Months Ended March 31, 2024 Windstorms and hailstorms 3 $ 42 $ — $ 42 Winter storms 2 50 — 50 Earthquakes 1 — 15 15 Reinstatement premiums — (1) (1) Total catastrophe-related charges 6 $ 92 $ 14 $ 106 Three Months Ended March 31, 2023 Flooding, rainstorms and other 1 $ 10 $ 77 $ 87 Windstorms and hailstorms 5 67 39 106 Winter storms 2 25 22 47 Earthquakes 1 15 10 25 Reinstatement premiums (1) — (1) Total catastrophe-related charges 9 $ 116 $ 148 $ 264 (a) Natural catastrophe losses are generally weather or seismic events, in each case, having a net impact on AIG in excess of $10 million and man-made catastrophe losses, such as terrorism and civil unrest that exceed the $10 million threshold. 84 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Business Segment Operations | General Insurance NORTH AMERICA RESULTS Three Months Ended March 31, (in millions) 2024 2023 Change Underwriting results: Net premiums written $ 1,334 $ 3,680 (64) % (Increase) decrease in unearned premiums 1,168 (700) NM Net premiums earned 2,502 2,980 (16) Losses and loss adjustment expenses incurred (a) 1,572 1,808 (13) Acquisition expenses: Amortization of deferred policy acquisition costs 340 410 (17) Other acquisition expenses 97 146 (34) Total acquisition expenses 437 556 (21) General operating expenses 269 317 (15) Underwriting income $ 224 $ 299 (25) % Loss ratio (a) 62.8 60.7 2.1 Acquisition ratio 17.5 18.7 (1.2) General operating expense ratio 10.8 10.6 0.2 Expense ratio 28.3 29.3 (1.0) Combined ratio (a) 91.1 90.0 1.1 Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted: Catastrophe losses and reinstatement premiums (3.6) (3.9) 0.3 Prior year development, net of reinsurance and prior year premiums 0.9 2.6 (1.7) Accident year loss ratio, as adjusted 60.1 59.4 0.7 Accident year combined ratio, as adjusted 88.4 88.7 (0.3) (a) Consistent with our definition of APTI, excludes net loss reserve discount and the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain. Business and Financial Highlights Net Premiums Written Comparison for the Three Months Ended March 31, 2024 and 2023 Net premiums written decreased by $2.3 billion due to the decline in Commercial Lines ($2.3 billion), driven by the sales of AIG Re and CRS. Underwriting Income (Loss) Comparison for the Three Months Ended March 31, 2024 and 2023 Underwriting income decreased by $75 million primarily due to: • lower net favorable prior year development (1.7 points or $58 million), primarily as a result of favorable development in Casualty recognized in 2023; and • the impact of sales of AIG Re and CRS on accident year results This decrease was partially offset by: • a lower expense ratio of 1.0 points reflecting a lower acquisition ratio (1.2 points) primarily driven by changes in business mix and the sale of AIG Re, improved commission terms and reinsurance program changes, partially offset by an increase in general operating expense ratio (0.2 points); and • lower catastrophe losses (0.3 points or $24 million). AIG | First Quarter 2024 Form 10-Q 85 TABLE OF CONTENTS ITEM 2 | Business Segment Operations | General Insurance INTERNATIONAL RESULTS Three Months Ended March 31, (in millions) 2024 2023 Change Underwriting results: Net premiums written $ 3,178 $ 3,285 (3) % (Increase) decrease in unearned premiums 106 (6) NM Net premiums earned 3,284 3,279 — Losses and loss adjustment expenses incurred 1,781 1,944 (8) Acquisition expenses: Amortization of deferred policy acquisition costs 488 502 (3) Other acquisition expenses 178 170 5 Total acquisition expenses 666 672 (1) General operating expenses 465 460 1 Underwriting income $ 372 $ 203 83 % Loss ratio 54.2 59.3 (5.1) Acquisition ratio 20.3 20.5 (0.2) General operating expense ratio 14.2 14.0 0.2 Expense ratio 34.5 34.5 — Combined ratio 88.7 93.8 (5.1) Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted: Catastrophe losses and reinstatement premiums (0.4) (4.5) 4.1 Prior year development, net of reinsurance and prior year premiums 0.1 (0.6) 0.7 Accident year loss ratio, as adjusted 53.9 54.2 (0.3) Accident year combined ratio, as adjusted 88.4 88.7 (0.3) Business and Financial Highlights Net Premiums Written Comparison for the Three Months Ended March 31, 2024 and 2023 Net premiums written, excluding the impact of foreign exchange ($50 million), decreased by $57 million primarily due to the decline in Commercial Lines ($64 million) resulting from the sale of AIG Re and lower production in Specialty and Financial Lines, partially offset by increases in Casualty and Property. Underwriting Income (Loss) Comparison for the Three Months Ended March 31, 2024 and 2023 Underwriting income increased by $169 million primarily due to: • lower catastrophe losses (4.1 points or $134 million); • net favorable prior year reserve development of $5 million in 2024 compared to net adverse prior year reserve development in 2023 of $21 million (0.7 points or $26 million), primarily as a result of unfavorable development in Property and Specialty recognized in 2023; and • improvement in the accident year loss ratio, as adjusted (0.3 points) primarily driven by changes in business mix along with continued positive rate change, focused risk selection and improved terms and conditions. Expense ratio remained flat reflecting an increase in the general operating expense ratio (0.2 points), partially offset by a lower acquisition ratio (0.2 points) primarily driven by changes in business mix and improved commission terms. 86 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Life and Retirement Life and Retirement Life and Retirement consists of four operating segments: Individual Retirement, Group Retirement, Life Insurance and Institutional Markets. We offer a broad portfolio of products in the U.S. through a multichannel distribution network and life and health products in the UK. PRODUCTS AND DISTRIBUTION Fixed Annuities: Products include single premium fixed annuities, immediate annuities and deferred income annuities. Certain fixed deferred annuity products offer optional income protection features. The fixed annuities product line maintains an industry-leading position in the U.S. bank distribution channel and has broadened into the regional broker-dealer, wirehouse, and independent agent channels by leveraging our scale and investment capabilities. Fixed Index Annuities: Products include fixed index annuities that provide growth potential based in part on the performance of a market index as well as optional living guaranteed features that provide lifetime income protection. Fixed index annuities are distributed primarily through banks, broker-dealers, independent marketing organizations and independent insurance agents. Variable Annuities: Products include variable annuities that offer a combination of growth potential, death benefit features and income protection features. Variable annuities are distributed primarily through banks, wirehouses, and regional and independent broker-dealers. Group Retirement: Known in the marketplace as Corebridge Retirement Services. Services and products consist of recordkeeping, plan administration and compliance services, financial planning and advisory solutions offered to employer-defined contribution plan participants, along with proprietary and limited non-proprietary annuities and advisory and brokerage products offered outside of plans. Retirement Services offers its products and services through VALIC and its subsidiaries, VALIC Financial Advisors, Inc. and VALIC Retirement Services Company. Retirement Services employee financial professionals have the ability to serve clients throughout their financial journey from the workplace through retirement via our integrated financial planning model. Our financial professionals serve in-plan clients by providing enrollment support, education and financial guidance and serve out-of-plan clients with financial planning, annuity products, brokerage and advisory offerings. Life Insurance : In the U.S., products primarily include term life and universal life insurance distributed through independent marketing organizations, independent insurance agents, financial advisors and direct marketing. Corebridge previously announced agreements to sell Laya Healthcare Limited (Laya) and AIG Life. The sale of Laya closed on October 31, 2023 and the AIG Life sale closed on April 8, 2024. Institutional Markets: Products primarily include stable value wrap products, structured settlement and pension risk transfer annuities (direct and assumed reinsurance), corporate- and bank-owned life insurance, high net worth products and guaranteed investment contracts (GICs). Institutional Markets products are primarily distributed through specialized marketing and consulting firms and structured settlement brokers. FHLB Funding Agreements: Funding agreements are issued by our U.S. Life and Retirement companies to FHLBs in their respective districts at fixed or floating rates over specified periods, which can be prepaid at our discretion. Proceeds are generally invested in fixed income securities and other suitable investments to generate spread income. These investment contracts do not have mortality or morbidity risk and are similar to GICs. AIG | First Quarter 2024 Form 10-Q 87 TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Life and Retirement BUSINESS STRATEGY Deliver client-centric solutions through our unique franchise by bringing together a broad portfolio of life insurance, retirement and institutional products offered through an extensive, multichannel distribution network. Life and Retirement focuses on ease of doing business, offering valuable solutions, and expanding and deepening its distribution relationships across multiple channels. Position market leading businesses to serve growing needs by continually enhancing product solutions, service delivery and digital capabilities while using data and analytics in an innovative manner to improve customer experience. Individual Retirement will continue to capitalize on the opportunity to meet consumer demand for wealth accumulation and guaranteed income products by maintaining an innovative suite of fixed, variable and fixed index annuity products, while also managing risk from guarantee features through risk-mitigating product design and well-developed economic hedging capabilities. Group Retirement continues to enhance its technology platform to improve the customer experience for plan sponsors and individual participants. Retirement Services’ self-service tools paired with its employee financial advisors provide a compelling service platform. Group Retirement’s strategy also involves providing financial planning services for its clients and meeting their need for income in retirement. In this role, Group Retirement’s clients may invest in assets in which AIG or a third party is custodian. Life Insurance in the U.S. will continue to position itself for growth and changing market dynamics while continuing to execute strategies to enhance returns. Our focus is on materializing success from a multi-year effort of building state-of-the-art platforms and underwriting innovations, which are expected to bring process improvements and cost efficiencies. Institutional Markets continues to grow its assets under management across multiple product lines, including stable value wrap, GICs and pension risk transfer annuities. Our growth strategy is transactional and allows us to pursue select transactions that meet our risk-adjusted return requirements. Enhance Operational Effectiveness by simplifying processes and operating environments to increase competitiveness, improve service and product capabilities and facilitate delivery of our target customer experience. We continue to invest in technology to improve operating efficiency and ease of doing business for our distribution partners and customers. We believe that simplifying our operating models will enhance productivity and support further profitable growth. Manage our Balance Sheet through a rigorous approach to our products and portfolio. We match our product design and high-quality investments with our asset and liability exposures to support our cash and liquidity needs under various operating scenarios. Deliver Value Creation and Manage Capital by striving to deliver solid earnings and returns on capital through disciplined pricing, sustainable underwriting improvements, expense efficiency, and diversification of risk, while optimizing capital allocation and efficiency within insurance entities to enhance return on common equity. COMPETITION AND CHALLENGES Life and Retirement operates in the highly competitive insurance and financial services industry in the U.S. and select international markets, competing against various financial services companies, including banks and other life insurance and mutual fund companies. Competition is primarily based on product pricing and design, distribution, financial strength, customer service and ease of doing business. Our business remains competitive due to its long-standing market leading positions, innovative products, distribution relationships across multiple channels, customer-focused service and strong financial ratings. Our primary challenges include: • managing a rising rate environment. While a rising rate environment improves yields on new investment, improves margins on our business, and increases sales in certain products such as fixed annuities, it may also result in increased competition for certain products resulting in a need to increase crediting rates, and has resulted in lower separate account asset values for investments in fixed income which has reduced fee income; • increased competition in our primary markets, including aggressive pricing of annuities by competitors, increased competition and consolidation of employer groups in the group retirement planning market, and competitors with different profitability targets in the pension risk transfer space as well as other product lines; • increasingly complex new and proposed regulatory requirements, which have affected industry growth and costs; and • upgrading our technology and underwriting processes while managing general operating expenses. 88 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Life and Retirement INDUSTRY AND ECONOMIC FACTORS Individual Retirement Increasing life expectancy and reduced expectations for traditional retirement income from defined benefit programs are leading Americans to seek additional financial security as they approach retirement. The strong demand for fixed index and fixed annuities with guaranteed living benefit features has attracted increased competition in this product space. In response to the ever changing interest rate environment we have developed guaranteed living benefits for variable, fixed index and fixed annuities with margins that are less sensitive to the level of interest rates. Changes in the capital markets (interest rate environment, credit spreads, equity markets, volatility) can have a significant impact on sales, surrender rates, investment returns, guaranteed income features, and net investment spreads in the annuity industry. Group Retirement Group Retirement competes in the defined contribution market under the Retirement Services brand. Retirement Services is a leading retirement plan provider in the U.S. for K-12 schools and school districts, higher education, healthcare, government and other not-for-profit institutions. The defined contribution market is a highly efficient and competitive market that requires support for both plan sponsors and individual participants. To meet this challenge, Retirement Services is investing in a client-focused technology platform to support improved compliance and self-service functionality. Retirement Services’ model pairs self-service tools with its employee financial advisors who provide individual plan participants with enrollment support and comprehensive financial planning services. Changes in the interest rates, credit spreads and equity market environment can have a significant impact on investment returns, fee income, advisory and other income, guaranteed income features, and net investment spreads, and a moderate impact on sales and surrender rates. Life Insurance Consumers have a significant need for life insurance, whether it is used for income replacement for their surviving family, estate planning or wealth transfer. Additionally, consumers use life insurance to provide living benefits in case of chronic, critical or terminal illnesses, and to supplement retirement income. In response to consumer needs and a changing interest rate environment, our Life Insurance product portfolio will continue to promote products with less long-duration interest rate risk and mitigate exposure to products that have long-duration interest rate risk through sales levels and hedging strategies. As life insurance ownership remains at historical lows in the U.S., efforts to expand the reach and increase the affordability of life insurance are critical. The industry is investing in consumer-centric efforts to reduce traditional barriers to securing life protection by simplifying the sales and service experience. Digitally enabled processes and tools provide a fast, friendly and simple path to life insurance protection. Institutional Markets Institutional Markets serves a variety of needs for corporate clients. Demand is driven by a number of factors including the macroeconomic and regulatory environment. We expect to see continued growth in the pension risk transfer market (direct and assumed reinsurance) as corporate plan sponsors look to transfer asset or liability, longevity, administrative and operational risks associated with their defined benefit plans. Changes in interest rates and credit spreads can have a significant impact on investment returns and net investment spreads, impacting organic growth opportunities. For additional information on the separation of Life and Retirement, see Part I, Item 1A. Risk Factors – Business and Operations – “No assurances can be given that the separation of our Life and Retirement business will be completed or as to the specific terms or timing thereof. In addition, we may not achieve the expected benefits of the separation and will have continuing equity market exposure to Corebridge until we fully divest our stake” in the 2023 Annual Report and Note 1 to the Condensed Consolidated Financial Statements. For additional information on the impact of market interest rate movement on our Life and Retirement business, see Executive Summary – Regulatory, Industry and Economic Factors – Impact of Changes in the Interest Rate Environment and Equity Markets . AIG | First Quarter 2024 Form 10-Q 89 TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Life and Retirement LIFE AND RETIREMENT RESULTS Three Months Ended March 31, (in millions) 2024 2023 Change Adjusted revenues: Premiums $ 2,362 $ 2,201 7 % Policy fees 714 698 2 Net investment income 2,645 2,277 16 Advisory fee and other income 200 195 3 Total adjusted revenues 5,921 5,371 10 Benefits and expenses: Policyholder benefits 2,881 2,600 11 Interest credited to policyholder account balances 1,189 1,015 17 Amortization of deferred policy acquisition costs 276 259 7 Non deferrable insurance commissions 144 136 6 Advisory fee expenses 68 65 5 General operating expenses 372 407 (9) Interest expense — 3 NM Total benefits and expenses 4,930 4,485 10 Adjusted pre-tax income $ 991 $ 886 12 % Our insurance companies generate significant revenues from investment activities. As a result, the operating segments in Life and Retirement are significantly impacted by variances in net investment income on the asset portfolios that support insurance liabilities and surplus. For additional information on our investment strategy, asset-liability management process and invested asset composition, see Investments. INDIVIDUAL RETIREMENT RESULTS Three Months Ended March 31, (in millions) 2024 2023 Change Adjusted revenues: Premiums $ 41 $ 78 (47) % Policy fees 191 174 10 Net investment income 1,338 1,129 19 Advisory fee and other income 116 103 13 Total adjusted revenues 1,686 1,484 14 Benefits and expenses: Policyholder benefits 36 65 (45) Interest credited to policyholder account balances 639 519 23 Amortization of deferred policy acquisition costs 148 137 8 Non deferrable insurance commissions 90 86 5 Advisory fee expenses 35 34 3 General operating expenses 116 108 7 Interest expense — 2 NM Total benefits and expenses 1,064 951 12 Adjusted pre-tax income $ 622 $ 533 17 % Fixed annuities base net investment spread: Base yield* 5.33 % 4.83 % 50 bps Cost of funds 3.18 2.82 36 Fixed annuities base net investment spread 2.15 % 2.01 % 14 bps Variable and fixed index annuities base net investment spread: Base yield* 4.91 % 4.34 % 57 bps Cost of funds 2.20 1.74 46 Variable and fixed index annuities base net investment spread 2.71 % 2.60 % 11 bps * Includes returns from base portfolio including accretion and income (loss) from certain other invested assets. 90 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Life and Retirement Business and Financial Highlights Adjusted Pre-Tax Income (Loss) Comparison for the Three Months Ended March 31, 2024 and 2023 Adjusted pre-tax income increased $89 million primarily due to higher net investment income, net of interest credited ($89 million) driven by higher base portfolio income, net of interest credited ($92 million) due to improved base yields and growth in invested assets driven by higher general account sales, partially offset by lower yield enhancement income ($2 million) and lower alternative investment income ($1 million). INDIVIDUAL RETIREMENT GAAP PREMIUMS, PREMIUMS AND DEPOSITS, SURRENDERS AND NET FLOWS Premiums and deposits is a non-GAAP financial measure that includes, in addition to direct and assumed premiums, deposits received on investment-type annuity contracts. Net flows for annuity products in Individual Retirement represent premiums and deposits less death, surrender and other withdrawal benefits. The following table presents a reconciliation of Individual Retirement GAAP premiums to premiums and deposits: Three Months Ended March 31, (in millions) 2024 2023 Premiums $ 41 $ 78 Deposits 4,822 4,807 Other (2) (2) Premiums and deposits $ 4,861 $ 4,883 The following table presents Individual Retirement premiums and deposits and net flows by product line: Three Months Ended March 31, Premiums and Deposits Net Flows (in millions) 2024 2023 2024 2023 Fixed annuities $ 2,612 $ 2,248 $ (211) $ (90) Fixed index annuities 1,883 2,057 925 1,389 Variable annuities 366 578 (1,228) (636) Total $ 4,861 $ 4,883 $ (514) $ 663 Premiums and Deposits and Net Flow Comparison for the Three Months Ended March 31, 2024 and 2023 Fixed Annuities Net outflows increased by $121 million over the prior year, primarily due to higher surrenders and withdrawals of ($686 million), partially offset by higher premiums and deposits of ($364 million) due to strong sales execution as interest rates rose and lower death benefits of ($201 million). Fixed Index Annuities Net inflows decreased ($464 million) primarily due to lower premiums and deposits ($174 million), higher surrenders and withdrawals ($270 million) and higher death benefits ($20 million). Variable Annuities Net outflows increased ($592 million) primarily due to lower premiums and deposits of ($212 million) due to market volatility, and higher surrenders and withdrawals of ($364 million) and higher death benefits of ($16 million). The following table presents surrenders rates: Three Months Ended March 31, 2024 2023 Fixed annuities 20.6 % 15.1 % Fixed index annuities 8.0 6.7 Variable annuities 9.4 7.1 AIG | First Quarter 2024 Form 10-Q 91 TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Life and Retirement The following table presents account value for fixed annuities and variable and fixed index annuities by surrender charge category: March 31, 2024 December 31, 2023 (in millions) Fixed Annuities Fixed Index Annuities Variable Annuities Fixed Annuities Fixed Index Annuities Variable Annuities No surrender charge $ 20,884 $ 1,905 $ 31,352 $ 21,793 $ 1,727 $ 29,819 Greater than 0% - 2% 859 3,545 6,889 1,023 3,326 6,717 Greater than 2% - 4% 2,784 6,498 6,284 2,844 6,413 5,799 Greater than 4% 23,116 28,965 10,737 21,766 28,128 11,014 Non-surrenderable (a) 2,464 — 1,156 2,474 — 1,156 Total account value (b) $ 50,107 $ 40,913 $ 56,418 $ 49,900 $ 39,594 $ 54,505 (a) The non-surrenderable portion of variable annuities relates to funding agreements. (b) Includes payout immediate annuities and funding agreements. Individual Retirement annuities are typically subject to a three- to ten-year surrender charge period, depending on the product. For fixed annuities, the proportion of account value subject to surrender charge at March 31, 2024 increased compared to December 31, 2023 primarily due to growth in the business. For fixed index annuities, the proportion of account value subject to surrender charge at March 31, 2024 was flat to December 31, 2023. The increase in the proportion of account value with no surrender charge for variable annuities as of March 31, 2024 compared to December 31, 2023 was principally due to normal aging of business. GROUP RETIREMENT RESULTS Three Months Ended March 31, (in millions) 2024 2023 Change Adjusted revenues: Premiums $ 5 $ 6 (17) % Policy fees 107 100 7 Net investment income 494 500 (1) Advisory fee and other income 83 77 8 Total adjusted revenues 689 683 1 Benefits and expenses: Policyholder benefits 3 9 (67) Interest credited to policyholder account balances 298 291 2 Amortization of deferred policy acquisition costs 21 21 — Non deferrable insurance commissions 29 28 4 Advisory fee expenses 33 29 14 General operating expenses 106 117 (9) Interest expense — 1 NM Total benefits and expenses 490 496 (1) Adjusted pre-tax income $ 199 $ 187 6 % Base net investment spread: Base yield* 4.42 % 4.22 % 20 bps Cost of funds 2.89 2.70 19 Base net investment spread 1.53 % 1.52 % 1 bps * Includes returns from base portfolio including accretion and income (loss) from certain other invested assets. 92 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Life and Retirement Business and Financial Highlights Adjusted Pre-Tax Income (Loss) Comparison for the Three Months Ended March 31, 2024 and 2023 Adjusted pre-tax income increased $12 million primarily due to: • lower general operating expenses ($11 million); and • higher policy and advisory fee income, net of advisory fee expenses ($9 million) due to higher average separate account, advisory, and mutual fund assets driven by improved equity market performance. This increase was partially offset by: • lower net investment income, net of interest credited ($13 million) primarily driven by lower yield enhancements and alternative investment income ($9 million). GROUP RETIREMENT GAAP PREMIUMS, PREMIUMS AND DEPOSITS, SURRENDERS AND NET FLOWS Premiums and deposits are a non-GAAP financial measure that includes, in addition to direct and assumed premiums, deposits received on investment-type annuity contracts, FHLB funding agreements and mutual funds under administration. Net flows for annuity products included in Group Retirement represent premiums and deposits less death, surrender and other withdrawal benefits. Net flows for mutual funds represent deposits less withdrawals. Client deposits into advisory and brokerage accounts less total client withdrawals from advisory and brokerage accounts, are not included in net flows, but do contribute to growth in assets under administration and advisory fee income. The following table presents a reconciliation of Group Retirement GAAP premiums to premiums and deposits and net flows: Three Months Ended March 31, (in millions) 2024 2023 Premiums $ 5 $ 6 Deposits 2,049 2,240 Premiums and deposits* $ 2,054 $ 2,246 Net Flows $ (1,891) $ (819) * Excludes client deposits into advisory and brokerage accounts of $730 million and $541 million for the three months ended March 31, 2024 and 2023, respectively. Premiums and Deposits and Net Flow Comparison for the Three Months Ended March 31, 2024 and 2023 Net outflows were ($1.1 billion) higher compared to the prior year primarily due to higher surrenders and withdrawals ($862 million), lower premiums and deposits ($192 million) and lower death and payout annuity benefits ($18 million). Large plan acquisitions and surrenders resulted in lower net flows of ($459 million) compared to the prior year. Excluding large plan acquisitions and surrenders, net outflows were concentrated in products with higher contractual guaranteed minimum crediting rates. The following table presents Group Retirement surrenders rates: Three Months Ended March 31, 2024 2023 Surrender rates 13.6 % 11.0 % The following table presents account value for Group Retirement annuities by surrender charge category: (in millions) March 31, 2024 (a) December 31, 2023 (b) No surrender charge (b) $ 71,578 $ 70,500 Greater than 0% - 2% 1,274 1,251 Greater than 2% - 4% 1,629 1,698 Greater than 4% 6,197 5,757 Non-surrenderable 486 490 Total account value (c) $ 81,164 $ 79,696 (a) Excludes mutual fund assets under administration of $29.5 billion and $27.8 billion at March 31, 2024 and December 31, 2023, respectively. (b) Group Retirement amounts in this category include account values in the general account of approximately $4.0 billion and $4.1 billion at March 31, 2024 and December 31, 2023, respectively, which are subject to 20 percent annual withdrawal limitations at the participant level and account value in the general account of $5.2 billion and $5.3 billion at March 31, 2024 and December 31, 2023, respectively, which are subject to 20 percent annual withdrawal limitations at the plan level. (c) Includes payout immediate annuities and funding agreements. AIG | First Quarter 2024 Form 10-Q 93 TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Life and Retirement Group Retirement annuity deposits are typically subject to a four- to seven-year surrender charge period, depending on the product. At March 31, 2024, Group Retirement annuity account value with no surrender charge increased compared to December 31, 2023 primarily due to an increase in assets under management from higher equity markets partially offset by negative net flows. LIFE INSURANCE RESULTS Three Months Ended March 31, (in millions) 2024 2023 Change Adjusted revenues: Premiums $ 520 $ 542 (4) % Policy fees 368 375 (2) Net investment income 326 317 3 Other income — 15 NM Total adjusted revenues 1,214 1,249 (3) Benefits and expenses: Policyholder benefits 819 808 1 Interest credited to policyholder account balances 83 82 1 Amortization of deferred policy acquisition costs 104 99 5 Non deferrable insurance commissions 20 17 18 Advisory fee expenses — 2 NM General operating expenses 130 159 (18) Total benefits and expenses 1,156 1,167 (1) Adjusted pre-tax income $ 58 $ 82 (29) % Business and Financial Highlights Adjusted Pre-Tax Income (Loss) Comparison for the Three Months Ended March 31, 2024 and 2023 Adjusted pre-tax income decreased $24 million primarily due to: • higher policyholder benefits, net of premiums and fees ($40 million), primarily driven by one-time reinsurance adjustments; and • lower other income ($15 million), primarily driven by the sale of Laya in October 2023 . This decrease was partially offset by: • lower general operating expenses of $29 million primarily driven by the sale of Laya in October 2023 ($20 million). General other operating expenses excluding the impact from the sale of Laya decreased $9 million. LIFE INSURANCE GAAP PREMIUMS AND PREMIUMS AND DEPOSITS Premiums for Life Insurance represent amounts received on traditional life insurance policies, primarily term life and international life and health. Premiums and deposits for Life Insurance is a non-GAAP financial measure that includes direct and assumed premiums as well as deposits received on universal life insurance. Premiums and deposits, excluding the effect of foreign exchange, increased $4 million in the three months ended March 31, 2024 compared to the same period in 2023 due to growth in domestic traditional life premiums. The following table presents a reconciliation of Life Insurance GAAP premiums to premiums and deposits: Three Months Ended March 31, (in millions) 2024 2023 Premiums $ 520 $ 542 Deposits 393 398 Other* 257 216 Premiums and deposits $ 1,170 $ 1,156 * Other principally consists of adding back ceded premiums to reflect the gross premiums and deposits. 94 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Life and Retirement INSTITUTIONAL MARKETS RESULTS Three Months Ended March 31, (in millions) 2024 2023 Change Adjusted revenues: Premiums $ 1,796 $ 1,575 14 % Policy fees 48 49 (2) Net investment income 487 331 47 Other income 1 — NM Total adjusted revenues 2,332 1,955 19 Benefits and expenses: Policyholder benefits 2,023 1,718 18 Interest credited to policyholder account balances 169 123 37 Amortization of deferred policy acquisition costs 3 2 50 Non deferrable insurance commissions 5 5 — General operating expenses 20 23 (13) Total benefits and expenses 2,220 1,871 19 Adjusted pre-tax income $ 112 $ 84 33 % Business and Financial Highlights Adjusted Pre-Tax Income (Loss) Comparison for the Three Months Ended March 31, 2024 and 2023 Adjusted pre-tax income increased $28 million primarily due to: • higher premiums primarily on new pension risk transfer business ($221 million); and • higher net investment income ($156 million) primarily driven by higher base portfolio income. This increase was partially offset by: • higher policyholder benefits (including interest accretion) primarily on new pension risk transfer business ($305 million); and • higher interest credited on policyholder account balances, primarily related to the GIC business ($46 million). INSTITUTIONAL MARKETS GAAP PREMIUMS AND PREMIUMS AND DEPOSITS Premiums for Institutional Markets primarily represent amounts received on pension risk transfer or structured settlement annuities with life contingencies. Premiums increased $221 million in the three months ended March 31, 2024 compared to the same period in 2023 primarily driven by the transactional nature of the pension risk transfer business (direct and assumed reinsurance). Premiums and deposits for Institutional Markets is a non-GAAP financial measure that includes direct and assumed premiums as well as deposits received on investment-type annuity contracts. Deposits primarily include GICs, FHLB funding agreements and structured settlement annuities with no life contingencies. Premiums and deposits increased $423 million in the three months ended March 31, 2024, compared to the same period in 2023 primarily due to higher premiums on pension risk transfer business and higher deposits on new GICs. The following table presents a reconciliation of Institutional Markets GAAP premiums to premiums and deposits: Three Months Ended March 31, (in millions) 2024 2023 Premiums $ 1,796 $ 1,575 Deposits 781 581 Other* 9 7 Premiums and deposits $ 2,586 $ 2,163 * Other principally consists of adding back ceded premiums to reflect the gross premiums and deposits. AIG | First Quarter 2024 Form 10-Q 95 TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Other Operations 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. OTHER OPERATIONS RESULTS Three Months Ended March 31, (in millions) 2024 2023 Change Adjusted revenues: Premiums $ 18 $ 17 6 % Net investment income: Interest and dividends 110 116 (5) Alternative investments (72) 20 NM Other investment loss (4) (14) 71 Investment expenses (10) (10) — Total net investment income 24 112 (79) Other income 15 3 400 Total adjusted revenues 57 132 (57) Benefits, losses and expenses: Policyholder benefits and losses incurred 3 4 (25) Acquisition expenses: Amortization of deferred policy acquisition costs — — NM Other acquisition expenses (2) (1) (100) Total acquisition expenses (2) (1) (100) General operating expenses: Corporate and Other 224 238 (6) Asset Management 13 7 86 Amortization of intangible assets 4 10 (60) Total General operating expenses 241 255 (5) Interest expense: Corporate and Other 227 240 (5) Asset Management* 26 68 (62) Total interest expense 253 308 (18) Total benefits, losses and expenses 495 566 (13) Adjusted pre-tax loss before consolidation and eliminations (438) (434) (1) Consolidation and eliminations 30 (57) NM Adjusted pre-tax loss $ (408) $ (491) 17 % Adjusted pre-tax income (loss) by activities: Corporate and Other $ (349) $ (435) 20 % Asset Management (89) 1 NM Consolidation and eliminations 30 (57) NM Adjusted pre-tax loss $ (408) $ (491) 17 % * Interest – Asset Management primarily represents interest expense on consolidated investment entities of $23 million and $66 million in the three months ended March 31, 2024 and 2023, respectively. 96 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Business Segment Operations | Other Operations THREE MONTHS ENDED MARCH 31, 2024 AND 2023 COMPARISON Adjusted pre-tax loss before consolidation and eliminations of $438 million in 2024 compared to $434 million in 2023, an increase of $4 million, was primarily due to: • lower net investment income associated with consolidated investment entities of $139 million, partially offset by higher income on AIG Parent portfolio of $46 million due to higher yields and higher average balance; and • lower interest expense of $55 million primarily driven by interest savings of $22 million from $2.6 billion debt repurchases, through cash tender offers and debt redemption and maturity in 2023 and 2024 and lower interest expense of $42 million associated with consolidated investments entities as a result of deconsolidation and paydowns on debt, partially offset by interest expense of $9 million on the $750 million AIG Senior unsecured debt issued in March 2023. Adjusted pre-tax loss on consolidation and eliminations of $30 million in 2024 compared to $57 million in 2023, a decrease of $87 million, was primarily due to the elimination of the insurance companies’ net investment income from their investment in the consolidated investment entities of $106 million. Investments OVERVIEW Our investment strategies are tailored to the specific business needs of each segment by targeting an asset allocation mix that supports estimated cash flows of our outstanding liabilities and provides diversification from an asset class, sector, issuer, and geographic perspective. The primary objectives are generation of investment income, preservation of capital, liquidity management and growth of surplus. The majority of assets backing our insurance liabilities consist of fixed maturity securities. Inflation remains elevated relative to the Federal Reserve target however it has decreased over the past several quarters. Interest rates also remain elevated although credit spreads have narrowed for most asset classes as recession concerns began to recede and the likelihood for a soft landing increased. Our Investment Management Agreements with Blackstone Inc. In 2021, AIG entered into a long-term asset management relationship with Blackstone, pursuant to which Blackstone initially managed $50 billion of Corebridge’s existing investment portfolio, with that amount increasing to an aggregate of $92.5 billion by the third quarter of 2027. As of March 31, 2024, Blackstone manages $63 billion in book value of assets in Corebridge's investment portfolio. As these assets run-off, we expect Blackstone to reinvest primarily in Blackstone-originated investments across a range of asset classes, including private and structured credit, and commercial and residential real estate securitized and whole loans. We continue to manage asset allocation and portfolio-level risk management decisions with respect to any assets managed by Blackstone, ensuring that we maintain a consistent level of oversight across our entire investment portfolio considering our asset-liability matching needs, risk appetite and capital positions. Our Investment Management Agreements with BlackRock, Inc. Since April 2022, AIG and Corebridge insurance company subsidiaries have entered into separate investment management agreements with BlackRock, Inc. and its investment advisory affiliates (BlackRock). Substantially all investment management agreements contemplated for AIG insurance company subsidiaries have been executed. A small number of insurance companies remain under discussion and expect to be resolved in 2024. As of March 31, 2024, BlackRock manages $133 billion of our investment portfolio, consisting of liquid fixed income and certain private placement assets, including $75 billion of Corebridge assets. In addition, liquid fixed income assets associated with the Fortitude Re funds withheld asset portfolio were separately transferred to BlackRock for management in 2022. INVESTMENT HIGHLIGHTS IN THE THREE MONTHS ENDED MARCH 31, 2024 • Blended investment yields on new investments are higher than blended rates on investments that were sold, matured or called during this period. We continued to make investments in structured securities and other fixed maturity securities with attractive risk-adjusted return characteristics to improve yields and increase net investment income. • The higher interest rate environment has contributed to higher income in the base portfolio for the three months ended March 31, 2024 compared to the same period in the prior year. Total Net investment income increased for the three months ended March 31, 2024 compared to the same period in the prior year, primarily due to higher returns in our fixed maturity securities, mortgage and other loans, short-term investments and hedge fund portfolios, partially offset by lower income in our private equity portfolio. AIG | First Quarter 2024 Form 10-Q 97 TABLE OF CONTENTS ITEM 2 | Investments INVESTMENT STRATEGIES Investment strategies are assessed at the segment level and involve considerations that include local and general market and economic conditions, duration and cash flow management, risk appetite and volatility constraints, rating agency and regulatory capital considerations, tax, regulatory and legal investment limitations, and, as applicable, environmental, social and governance considerations. Some of our key investment strategies are as follows: • Our fundamental strategy across the portfolios is to seek investments with similar duration and cash flow characteristics to the associated insurance liabilities to the extent practicable. • We seek to purchase investments that offer enhanced yield through illiquidity premiums, such as private placements and commercial mortgage loans, which also add portfolio diversification. These assets typically afford credit protections through covenants, ability to customize structures that meet our insurance liability needs, and deeper due diligence given information access. • Given our global presence, we seek investments that provide diversification from investments available in local markets. To the extent we purchase these investments, we generally hedge any currency risk using derivatives, which could provide opportunities to earn higher risk adjusted returns compared to investments in the functional currency. • AIG Parent, included in Other Operations, actively manages its assets and liabilities, counterparties and duration. AIG Parent’s liquidity sources are held primarily in the form of cash and short-term investments. This strategy allows us to both diversify our sources of liquidity and reduce the cost of maintaining sufficient liquidity. • Within the U.S., the Life and Retirement and General Insurance investments are generally split between reserve backing and surplus portfolios. – Insurance reserves are backed mainly by investment grade fixed maturity securities that meet our duration, risk-return, capital, tax, liquidity, credit quality and diversification objectives. We assess asset classes based on their fundamental underlying risk factors, including credit (public and private), commercial real estate and residential real estate, regardless of whether such investments are bonds, loans, or structured products. – Surplus investments seek to enhance portfolio returns and are generally comprised of a mix of fixed maturity investment grade and below investment grade securities and various alternative asset classes, including private equity, real estate equity, and hedge funds. Over the past few years, hedge fund investments have been reduced. • Outside of the U.S., fixed maturity securities held by our insurance companies consist primarily of investment-grade securities generally denominated in the currencies of the countries in which we operate. • We also utilize derivatives to manage our asset and liability duration as well as currency exposures. Asset-Liability Management The investment strategy within the General Insurance companies focuses on growth of surplus, maintenance of sufficient liquidity for unanticipated insurance claims, and preservation of capital. General Insurance invests primarily in fixed maturity securities issued by corporations, municipalities and other governmental agencies; structured securities collateralized by, among other assets, residential and commercial real estate; and commercial mortgage loans. Fixed maturity securities of the General Insurance companies have an average duration of 3.8 years, with an average of 4.0 years for North America and 3.5 years for International. While invested assets backing reserves of the General Insurance companies are primarily invested in conventional liquid fixed maturity securities, we have continued to allocate to asset classes that offer higher yields through structural and illiquidity premiums, particularly in our North America operations. In addition, we continue to invest in both fixed rate and floating rate asset-backed investments to manage our exposure to potential changes in interest rates and inflation. We seek to diversify the portfolio across asset classes, sectors and issuers to mitigate idiosyncratic portfolio risks. In addition, a portion of the surplus of General Insurance companies is invested in a diversified portfolio of alternative investments that seek to balance liquidity, volatility and growth of surplus. Although these alternative investments are subject to periodic earnings fluctuations, they have historically achieved yields in excess of the fixed maturity portfolio yields and have provided added diversification to the broader portfolio. The investment strategy of the Life and Retirement companies is to provide net investment income to back liabilities that result in stable distributable earnings and enhance portfolio value, subject to asset-liability management, capital, liquidity and regulatory constraints. The Life and Retirement companies use asset-liability management as a primary tool to monitor and manage risk in their businesses. The Life and Retirement companies maintain a diversified, high-to-medium quality portfolio of fixed maturity securities issued by corporations, municipalities and other governmental agencies; structured securities collateralized by, among other assets, residential and commercial real estate; and commercial mortgage loans that, to the extent practicable, match the duration characteristics of the 98 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Investments liabilities. We seek to diversify the portfolio across asset classes, sectors, and issuers to mitigate idiosyncratic portfolio risks. The investment portfolio of each product line is tailored to the specific characteristics of its insurance liabilities, and as a result, duration varies between distinct portfolios. The interest rate environment has a direct impact on the asset-liability management profile of the businesses, and changes in the interest rate environment may result in the need to lengthen or shorten the duration of the portfolio. In a rising rate environment, we may shorten the duration of the investment portfolio. Fixed maturity securities of the Life and Retirement companies’ domestic operations have an average duration of 6.7 years. In addition, the Life and Retirement companies seek to enhance surplus portfolio returns through investments in a diversified portfolio of alternative investments. Although these alternative investments are subject to periodic earnings fluctuations, they have historically achieved returns in excess of the fixed maturity portfolio returns. National Association of Insurance Commissioners (NAIC) Designations of Fixed Maturity Securities The Securities Valuation Office (SVO) of the NAIC evaluates the investments of U.S. insurers for statutory reporting purposes and assigns fixed maturity securities to one of six categories called NAIC Designations. In general, NAIC Designations of ‘1’ highest quality, or ‘2’ high quality, include fixed maturity securities considered investment grade, while NAIC Designations of ‘3’ through ‘6’ generally include fixed maturity securities referred to as below investment grade. NAIC Designations for non-agency Residential Mortgage Backed Securities (RMBS) and Commercial Mortgage Backed Securities (CMBS) are calculated using third party modeling results provided through the NAIC. These methodologies result in an improved NAIC Designation for such securities compared to the rating typically assigned by the three major rating agencies. The following tables summarize the ratings distribution of AIG subsidiaries’ fixed maturity security portfolio by NAIC Designation, and the distribution by composite AIG credit rating, which is generally based on ratings of the three major rating agencies. For fixed maturity securities where no NAIC Designation is assigned or able to be calculated using third-party data, the NAIC Designation category used in the first table below reflects an internal rating. The NAIC Designations presented below do not reflect the added granularity to the designation categories adopted by the NAIC in 2020, which further subdivide each category of fixed maturity securities by appending letter modifiers to the numerical designations. For a full description of the composite AIG credit ratings, see – Credit Ratings below. The following table presents the fixed maturity security portfolio categorized by NAIC Designation, at fair value: March 31, 2024 (in millions) NAIC Designation 1 2 Total Investment Grade 3 4 5 6 Total Below Investment Grade Total Other fixed maturity securities $ 87,603 $ 67,422 $ 155,025 $ 6,266 $ 4,770 $ 652 $ 70 $ 11,758 $ 166,783 Mortgage-backed, asset-backed and collateralized 62,333 7,869 70,202 400 305 99 15 819 71,021 Total* $ 149,936 $ 75,291 $ 225,227 $ 6,666 $ 5,075 $ 751 $ 85 $ 12,577 $ 237,804 * Excludes $86 million of fixed maturity securities for which no NAIC Designation is available. The following table presents the fixed maturity security portfolio categorized by composite AIG credit rating, at fair value: March 31, 2024 (in millions) Composite AIG Credit Rating AAA/AA/A BBB Total Investment Grade BB B CCC and Lower Total Below Investment Grade Total Other fixed maturity securities $ 89,591 $ 65,054 $ 154,645 $ 6,286 $ 4,967 $ 885 $ 12,138 $ 166,783 Mortgage-backed, asset-backed and collateralized 56,964 8,756 65,720 535 507 4,259 5,301 71,021 Total* $ 146,555 $ 73,810 $ 220,365 $ 6,821 $ 5,474 $ 5,144 $ 17,439 $ 237,804 * Excludes $86 million of fixed maturity securities for which no NAIC Designation is available. CREDIT RATINGS At March 31, 2024, approximately 89 percent of our fixed maturity securities were held by our domestic entities. Approximately 93 percent of these securities were rated investment grade by one or more of the principal rating agencies. Moody’s Investors Service Inc. (Moody’s), Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc. (S&P), or similar foreign rating services rate a significant portion of our foreign entities’ fixed maturity securities portfolio. Rating services are not available for some foreign-issued securities. We closely monitor the credit quality of the foreign portfolio’s non-rated fixed maturity securities. At March 31, 2024, approximately 93 percent of such investments were either rated investment grade or, on the basis of analysis of our investment managers, were equivalent from a credit standpoint to securities rated investment grade. Approximately 26 percent of the foreign entities’ fixed maturity securities portfolio is comprised of sovereign fixed maturity securities supporting policy liabilities in the country of issuance. AIG | First Quarter 2024 Form 10-Q 99 TABLE OF CONTENTS ITEM 2 | Investments Composite AIG Credit Ratings With respect to our fixed maturity securities, the credit ratings in the table below and in subsequent tables reflect: (i) a composite of the ratings of the three major rating agencies, or when agency ratings are not available, the NAIC Designation assigned by the NAIC SVO (99 percent of total fixed maturity securities), or (ii) our internal ratings when these investments have not been rated by any of the major rating agencies or the NAIC. The “Non-rated” category in those tables consists of fixed maturity securities that have not been rated by any of the major rating agencies, the NAIC or us. For information regarding credit risks associated with investments see Part II, Item 7. MD&A – Enterprise Risk Management in the 2023 Annual Report. The following table presents the composite AIG credit ratings of our fixed maturity securities calculated on the basis of their fair value: Available for Sale Other Total (in millions) March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023 Rating: Other fixed maturity securities AAA $ 7,488 $ 7,668 $ 37 $ 38 $ 7,525 $ 7,706 AA 37,992 38,349 972 955 38,964 39,304 A 42,848 44,511 250 231 43,098 44,742 BBB 63,683 64,765 1,374 1,339 65,057 66,104 Below investment grade 11,466 11,693 489 467 11,955 12,160 Non-rated 191 178 4 6 195 184 Total $ 163,668 $ 167,164 $ 3,126 $ 3,036 $ 166,794 $ 170,200 Mortgage-backed, asset-backed and collateralized AAA $ 18,095 $ 16,477 $ 259 $ 212 $ 18,354 $ 16,689 AA 29,013 27,411 760 745 29,773 28,156 A 8,473 8,145 371 359 8,844 8,504 BBB 8,022 7,262 734 729 8,756 7,991 Below investment grade 5,191 5,248 104 109 5,295 5,357 Non-rated 25 26 49 51 74 77 Total $ 68,819 $ 64,569 $ 2,277 $ 2,205 $ 71,096 $ 66,774 Total AAA $ 25,583 $ 24,145 $ 296 $ 250 $ 25,879 $ 24,395 AA 67,005 65,760 1,732 1,700 68,737 67,460 A 51,321 52,656 621 590 51,942 53,246 BBB 71,705 72,027 2,108 2,068 73,813 74,095 Below investment grade 16,657 16,941 593 576 17,250 17,517 Non-rated 216 204 53 57 269 261 Total $ 232,487 $ 231,733 $ 5,403 $ 5,241 $ 237,890 $ 236,974 Available-for-Sale Investments The following table presents the fair value of our available-for-sale securities: (in millions) March 31, 2024 December 31, 2023 Bonds available for sale: U.S. government and government sponsored entities $ 5,789 $ 5,616 Obligations of states, municipalities and political subdivisions 10,093 10,663 Non-U.S. governments 11,968 12,453 Corporate debt 135,818 138,432 Mortgage-backed, asset-backed and collateralized: RMBS 21,421 20,444 CMBS 14,488 14,128 CLO/ABS 32,910 29,997 Total mortgage-backed, asset-backed and collateralized 68,819 64,569 Total bonds available for sale* $ 232,487 $ 231,733 * At March 31, 2024 and December 31, 2023, the fair value of bonds available for sale held by us that were below investment grade or not rated totaled $16.9 billion and $17.1 billion, respectively. 100 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Investments The following table presents the fair value of our aggregate credit exposures to non-U.S. governments for our fixed maturity securities: (in millions) March 31, 2024 December 31, 2023 Canada $ 1,350 $ 1,411 Germany 933 929 France 653 677 Japan 648 699 United Kingdom 435 478 Indonesia 433 451 Chile 417 404 Mexico 366 374 Israel 361 337 Australia 331 314 Other 6,080 6,416 Total $ 12,007 $ 12,490 The following table presents the fair value of our aggregate European credit exposures by major sector for our fixed maturity securities: March 31, 2024 December 31, 2023 Total (in millions) Sovereign Financial Institution Non-Financial Corporates Structured Products Total Euro-Zone countries: Germany $ 933 $ 296 $ 2,330 $ 16 $ 3,575 $ 3,558 France 653 1,749 1,022 14 3,438 3,482 Netherlands 159 941 994 44 2,138 2,128 Belgium 34 304 911 40 1,289 1,311 Spain 9 266 598 195 1,068 1,114 Ireland 9 54 422 457 942 1,163 Luxembourg 17 363 315 13 708 642 Italy 15 105 526 — 646 641 Denmark 221 76 132 — 429 441 Finland 20 61 31 1 113 118 Other Euro-Zone 210 24 50 — 284 299 Total Euro-Zone $ 2,280 $ 4,239 $ 7,331 $ 780 $ 14,630 $ 14,897 Remainder of Europe: United Kingdom $ 435 $ 4,384 $ 8,625 $ 723 $ 14,167 $ 14,018 Switzerland 15 546 748 3 1,312 1,360 Guernsey — — — 594 594 624 Norway 232 85 212 — 529 558 Sweden 125 199 103 — 427 428 Russian Federation 2 — 33 — 35 35 Other - Remainder of Europe 30 172 44 46 292 303 Total - Remainder of Europe $ 839 $ 5,386 $ 9,765 $ 1,366 $ 17,356 $ 17,326 Total $ 3,119 $ 9,625 $ 17,096 $ 2,146 $ 31,986 $ 32,223 AIG | First Quarter 2024 Form 10-Q 101 TABLE OF CONTENTS ITEM 2 | Investments Investments in Municipal Bonds At March 31, 2024, the U.S. municipal bond portfolio was composed primarily of essential service revenue bonds and high-quality tax-exempt bonds with 98 percent of the portfolio rated A or higher. The following table presents the fair values of our available for sale U.S. municipal bond portfolio by state and municipal bond type: March 31, 2024 (in millions) State General Obligation Local General Obligation Revenue Total Fair Value December 31, 2023 Total Fair Value California $ 497 $ 416 $ 1,403 $ 2,316 $ 2,361 New York 42 174 1,684 1,900 1,984 Texas 15 289 527 831 923 Illinois 81 57 545 683 725 Massachusetts 197 20 262 479 495 Ohio 16 — 322 338 371 Pennsylvania 56 2 272 330 360 Georgia 83 34 184 301 319 Florida 4 — 229 233 240 Washington 69 17 145 231 256 New Jersey 3 2 197 202 263 Missouri — — 178 178 184 Virginia 8 3 144 155 221 All other states 288 148 1,480 1,916 1,961 Total $ 1,359 $ 1,162 $ 7,572 $ 10,093 $ 10,663 Investments in Corporate Debt Securities The following table presents the fair value of our available for sale corporate debt securities by industry categories: Industry Category (in millions) March 31, 2024 December 31, 2023 Financial institutions: Money center/Global bank groups $ 8,763 $ 8,744 Regional banks – other 472 456 Life insurance 2,405 2,439 Securities firms and other finance companies 536 555 Insurance non-life 4,927 4,937 Regional banks – North America 5,114 5,279 Other financial institutions 17,981 18,300 Utilities 19,481 19,643 Communications 8,596 8,799 Consumer noncyclical 16,375 16,973 Capital goods 5,890 6,194 Energy 10,854 11,091 Consumer cyclical 8,877 8,682 Basic materials 4,456 4,632 Other 21,091 21,708 Total* $ 135,818 $ 138,432 * At March 31, 2024 and December 31, 2023, approximately 92 percent and 92 percent, respectively, of these investments were rated investment grade. 102 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Investments Investments in RMBS The following table presents the fair value of AIG’s RMBS available for sale securities: (in millions) March 31, 2024 December 31, 2023 Agency RMBS $ 6,582 $ 7,045 Alt-A RMBS 5,220 4,844 Subprime RMBS 1,643 1,649 Prime non-agency 3,366 3,132 Other housing related 4,610 3,774 Total RMBS (a)(b) $ 21,421 $ 20,444 (a) Includes approximately $4.0 billion and $4.1 billion at March 31, 2024 and December 31, 2023, respectively, of certain RMBS that had experienced deterioration in credit quality since their origination. This excludes impact of U.S. debt downgrade of Fannie Mae and Freddie Mac. For additional information on purchased credit deteriorated securities, see Note 6 to the Condensed Consolidated Financial Statements. (b) The weighted average expected life was six years and seven years at March 31, 2024 and December 31, 2023, respectively. Our investments guidelines for investing in RMBS, CLO and other asset-backed securities (ABS) take into consideration the quality of the originator, the manager, the servicer, security credit ratings, underlying characteristics of the mortgages, borrower characteristics, and the level of credit enhancement in the transaction. Investments in CMBS The following table presents the fair value of our CMBS available for sale securities: (in millions) March 31, 2024 December 31, 2023 CMBS (traditional) $ 12,842 $ 12,205 Agency 1,402 1,434 Other 244 489 Total $ 14,488 $ 14,128 The fair value of CMBS holdings remained stable during the three months ended March 31, 2024. The majority of our investments in CMBS are in tranches that contain substantial credit protection features through collateral subordination. The majority of CMBS holdings are traditional conduit transactions, broadly diversified across property types and geographical areas. Investments in CLO/ABS The following table presents the fair value of our CLO/ABS available for sale securities by collateral type: (in millions) March 31, 2024 December 31, 2023 Collateral Type: ABS $ 18,182 $ 15,762 Bank loans 14,724 14,104 Other 4 131 Total $ 32,910 $ 29,997 AIG | First Quarter 2024 Form 10-Q 103 TABLE OF CONTENTS ITEM 2 | Investments Unrealized Losses of Fixed Maturity Securities The following table shows the aging of the unrealized losses of fixed maturity securities, the extent to which the fair value is less than amortized cost or cost, and the number of respective items in each category: March 31, 2024 Less Than or Equal Greater Than 20% Greater Than 50% to 20% of Cost (b) to 50% of Cost (b) of Cost (b) Total Aging (a) Unrealized Unrealized Unrealized Unrealized (dollars in millions) Cost (c) Loss (d) Items (e) Cost (c) Loss (d) Items (e) Cost (c) Loss (d) Items (e) Cost (c) Loss (d) Items (e) Investment grade bonds 0-6 months $ 21,724 $ 513 3,426 $ 3,746 $ 1,178 249 $ 13 $ 7 3 $ 25,483 $ 1,698 3,678 7-11 months 8,543 428 1,160 1,879 576 122 — — — 10,422 1,004 1,282 12 months or more 109,488 10,015 16,531 39,693 11,590 3,433 433 242 30 149,614 21,847 19,994 Total $ 139,755 $ 10,956 21,117 $ 45,318 $ 13,344 3,804 $ 446 $ 249 33 $ 185,519 $ 24,549 24,954 Below investment grade bonds 0-6 months $ 1,838 $ 64 571 $ 54 $ 18 36 $ 21 $ 19 13 $ 1,913 $ 101 620 7-11 months 731 37 163 103 33 17 14 14 6 848 84 186 12 months or more 6,930 423 2,258 827 234 166 42 30 20 7,799 687 2,444 Total $ 9,499 $ 524 2,992 $ 984 $ 285 219 $ 77 $ 63 39 $ 10,560 $ 872 3,250 Total bonds 0-6 months $ 23,562 $ 577 3,997 $ 3,800 $ 1,196 285 $ 34 $ 26 16 $ 27,396 $ 1,799 4,298 7-11 months 9,274 465 1,323 1,982 609 139 14 14 6 11,270 1,088 1,468 12 months or more 116,418 10,438 18,789 40,520 11,824 3,599 475 272 50 157,413 22,534 22,438 Total (d) $ 149,254 $ 11,480 24,109 $ 46,302 $ 13,629 4,023 $ 523 $ 312 72 $ 196,079 $ 25,421 28,204 (a) Represents the number of consecutive months that fair value has been less than cost by any amount. (b) Represents the percentage by which fair value is less than cost. (c) For bonds, represents amortized cost net of allowance. (d) At March 31, 2024, includes mark to market movement relating to embedded derivatives. (e) Item count is by CUSIP by subsidiary. The allowance for credit losses was $6 million for investment grade bonds and $119 million for below investment grade bonds as of March 31, 2024. Commercial Mortgage Loans At March 31, 2024, we had direct commercial mortgage loan exposure of $38.5 billion. The following table presents the commercial mortgage loan exposure by location and class of loan based on amortized cost: Number of Loans Class Percent of Total (dollars in millions) Apartments Offices Retail Industrial Hotel Others Total March 31, 2024 State: New York 79 $ 1,552 $ 4,106 $ 486 $ 564 $ 101 $ — $ 6,809 18 % California 62 838 1,102 155 1,293 618 12 4,018 10 New Jersey 79 2,394 80 357 879 — 31 3,741 10 Texas 44 898 849 344 279 18 128 2,516 7 Massachusetts 19 660 840 549 22 — — 2,071 5 Florida 47 742 106 504 87 535 — 1,974 5 Illinois 22 610 466 3 70 — 20 1,169 3 Pennsylvania 20 159 133 229 279 23 — 823 2 Ohio 22 140 9 159 431 — — 739 2 Colorado 15 274 93 131 70 168 — 736 2 Other states 127 2,796 475 669 1,001 172 — 5,113 13 Foreign 78 4,205 1,404 827 1,597 404 332 8,769 23 Total* 614 $ 15,268 $ 9,663 $ 4,413 $ 6,572 $ 2,039 $ 523 $ 38,478 100 % 104 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Investments Number of Loans Class Percent of Total (dollars in millions) Apartments Offices Retail Industrial Hotel Others Total December 31, 2023 State: New York 78 $ 1,508 $ 4,172 $ 488 $ 440 $ 101 $ — $ 6,709 18 % California 62 829 1,123 157 1,309 621 12 4,051 11 New Jersey 78 2,316 80 358 753 — 32 3,539 9 Texas 42 894 884 145 280 18 — 2,221 6 Florida 48 729 107 507 106 535 — 1,984 5 Massachusetts 19 662 750 542 22 — — 1,976 5 Illinois 21 609 467 3 44 — 20 1,143 3 Colorado 17 308 93 179 70 168 — 818 2 Pennsylvania 20 151 133 249 218 23 — 774 2 Ohio 22 141 10 161 431 — — 743 2 Other states 127 2,787 457 675 943 173 47 5,082 13 Foreign 78 4,195 1,432 842 1,751 414 335 8,969 24 Total* 612 $ 15,129 $ 9,708 $ 4,306 $ 6,367 $ 2,053 $ 446 $ 38,009 100 % * Does not reflect allowance for credit losses. For additional information on commercial mortgage loans, see Note 7 to the Condensed Consolidated Financial Statements and Note 7 to the Consolidated Financial Statements in the 2023 Annual Report. Net Realized Gains and Losses The following table presents the components of Net realized gains (losses): Three Months Ended March 31, 2024 2023 (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 $ (406) $ (37) $ (443) $ (387) $ (65) $ (452) Intent to sell (16) (32) (48) — — — Change in allowance for credit losses on fixed maturity securities (62) (6) (68) (16) — (16) Change in allowance for credit losses on loans (23) 1 (22) (42) (21) (63) Foreign exchange transactions 14 (14) — 114 16 130 Index-linked interest credited embedded derivatives, net of related hedges 90 — 90 (178) — (178) All other derivatives and hedge accounting* 123 (90) 33 (217) 38 (179) Sales of alternative investments and real estate investments 30 (1) 29 4 1 5 Other (8) — (8) 9 — 9 Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative (258) (179) (437) (713) (31) (744) Net realized gains (losses) on Fortitude Re funds withheld embedded derivative — 13 13 — (1,165) (1,165) Net realized gains (losses) $ (258) $ (166) $ (424) $ (713) $ (1,196) $ (1,909) * Derivative activity related to hedging MRBs is recorded in Change in the fair value of MRBs, net. For additional disclosures about MRBs, see Note 13 to the Condensed Consolidated Financial Statements. Lower Net realized losses excluding Fortitude Re funds withheld assets in the three months ended March 31, 2024 compared to 2023 were primarily due to derivative gains in the current period compared to the prior year period. Index-linked interest credited embedded derivatives, net of related hedges, reflected higher gains in the three months ended March 31, 2024 compared to 2023. Fair value gains or losses in the hedging portfolio are typically not fully offset by increases or decreases in liabilities due to the non-performance or “own credit” risk adjustment used in the valuation of index-linked interest credited embedded derivatives, which are not hedged as part of our economic hedging program, and other risk margins used for valuation that cause the embedded derivatives to be less sensitive to changes in market rates than the hedge portfolio. Net realized gains (losses) on Fortitude Re funds withheld assets primarily reflect changes in the valuation of the modified coinsurance and funds withheld assets. Increases in the valuation of these assets result in losses to AIG as the appreciation on the assets under those reinsurance arrangements must be transferred to Fortitude Re. Decreases in valuation of the assets result in AIG | First Quarter 2024 Form 10-Q 105 TABLE OF CONTENTS ITEM 2 | Investments gains to AIG as the depreciation on the assets under those reinsurance arrangements must be transferred to Fortitude Re. For additional information on the impact of the funds withheld arrangements with Fortitude Re, see Note 8 to the Condensed Consolidated Financial Statements. For additional information on market risk management related to these product features, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – Life and Retirement Companies’ Key Risks – Variable Annuity, Fixed Index Annuity and Index Universal Life Risk Management and Hedging Programs in the 2023 Annual Report. For additional information on the economic hedging target and the impact to pre-tax income of this program, see Insurance Reserves – Life and Annuity Future Policy Benefits, Policyholder Contract Deposits and Market Risk Benefits – Variable Annuity Guaranteed Benefits and Hedging Results in this MD&A. For additional information on our investment portfolio, see Note 6 to the Condensed Consolidated Financial Statements. Change in Unrealized Gains and Losses on Investments The change in net unrealized gains and losses on investments in the three months ended March 31, 2024 was primarily attributable to a change in the fair value of fixed maturity securities. For the three months ended March 31, 2024, net unrealized losses were $1.2 billion due to higher interest rates, partially offset by tighter credit spreads. The change in net unrealized gains and losses on investments in the three months ended March 31, 2023 was primarily attributable to an increase in the fair value of fixed maturity securities. For the three months ended March 31, 2023, net unrealized gains were $5.0 billion primarily due to lower interest rates. For additional information on our investment portfolio, see Note 6 to the Condensed Consolidated Financial Statements. Insurance Reserves LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (LOSS RESERVES) The following table presents the components of our gross and net loss reserves by segment and major lines of business (a) : March 31, 2024 December 31, 2023 (in millions) Net liability for unpaid losses and loss adjustment expenses Reinsurance recoverable on unpaid losses and loss adjustment expenses Gross liability for unpaid losses and loss adjustment expenses Net liability for unpaid losses and loss adjustment expenses Reinsurance recoverable on unpaid losses and loss adjustment expenses Gross liability for unpaid losses and loss adjustment expenses General Insurance: U.S. Workers' Compensation (net of discount) $ 2,676 $ 4,095 $ 6,771 $ 2,655 $ 4,099 $ 6,754 U.S. Excess Casualty 3,389 3,254 6,643 3,321 3,272 6,593 U.S. Other Casualty 4,141 3,675 7,816 4,112 3,676 7,788 U.S. Financial Lines 5,700 1,622 7,322 5,672 1,622 7,294 U.S. Property and Special Risks 4,381 1,341 5,722 4,403 1,494 5,897 U.S. Personal Insurance 754 2,129 2,883 767 2,163 2,930 UK/Europe Casualty and Financial Lines 7,409 1,976 9,385 7,447 1,951 9,398 UK/Europe Property and Special Risks 2,932 1,758 4,690 2,913 1,665 4,578 UK/Europe and Japan Personal Insurance 1,396 675 2,071 1,483 671 2,154 Other product lines (b) 5,486 5,172 10,658 5,416 5,182 10,598 Unallocated loss adjustment expenses (b) 1,136 836 1,972 1,298 841 2,139 Total General Insurance 39,400 26,533 65,933 39,487 26,636 66,123 Other Operations Run-Off: U.S. run-off long tail insurance lines (net of discount) 215 3,346 3,561 283 3,360 3,643 Other run-off product lines 188 61 249 228 60 288 Blackboard U.S. Holdings, Inc. 80 115 195 91 119 210 Unallocated loss adjustment expenses 8 114 122 15 114 129 Total Other Operations Run-Off 491 3,636 4,127 617 3,653 4,270 Total $ 39,891 $ 30,169 $ 70,060 $ 40,104 $ 30,289 $ 70,393 (a) Includes net loss reserve discount of $1.2 billion and $1.2 billion at March 31, 2024 and December 31, 2023, respectively. For information regarding loss reserve discount, see Note 12 to the Condensed Consolidated Financial Statements. (b) Other product lines and Unallocated loss adjustment expenses includes Gross liability for unpaid losses and loss adjustment expense and Reinsurance recoverable on unpaid losses and loss adjustment expense for the Fortitude Re reinsurance of $2.9 billion at both March 31, 2024 and December 31, 2023, respectively. 106 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Insurance Reserves Prior Year Development The following table summarizes incurred (favorable) unfavorable prior year development net of reinsurance by segment: Three Months Ended March 31, (in millions) 2024 2023 General Insurance: North America $ (32) $ (82) International (2) 14 Total General Insurance* $ (34) $ (68) Other Operations Run-Off — — Total prior year favorable development $ (34) $ (68) * Includes the amortization attributed to the deferred gain at inception from the National Indemnity Company (NICO) adverse development reinsurance agreement of $34 million and $41 million for the three months ended March 31, 2024 and 2023, respectively. Consistent with our definition of APTI, the amount excludes the related changes in amortization of the deferred gain of $(2) million and $19 million for the three months ended March 31, 2024 and 2023, respectively. Net Loss Development In the three months ended March 31, 2024, we recognized favorable prior year loss reserve development of $34 million. The key components of this development were: North America • Amortization benefit related to the deferred gain on the adverse development cover. In the three months ended March 31, 2023, we recognized favorable prior year loss reserve development of $68 million. The key components of this development were: North America • Favorable development in U.S. Workers' Compensation reflecting continued favorable loss experience. • Amortization benefit related to the deferred gain on the adverse development cover. • Unfavorable development driven by U.S. Property and Special Risks driven by prior year catastrophes. International • Unfavorable development on prior year catastrophes. The following tables summarize incurred (favorable) unfavorable prior year development net of reinsurance, by segment and major lines of business, and by accident year groupings: Three Months Ended March 31, 2024 (in millions) Total 2023 2022 & Prior General Insurance North America: U.S. Workers' Compensation $ (11) $ — $ (11) U.S. Excess Casualty (8) — (8) U.S. Other Casualty (8) — (8) U.S. Financial Lines (5) — (5) U.S. Property and Special Risks — — — U.S. Personal Insurance — — — Other Product Lines — — — Total General Insurance North America $ (32) $ — $ (32) General Insurance International: UK/Europe Casualty and Financial Lines $ — $ — $ — UK/Europe Property and Special Risks — — — UK/Europe and Japan Personal Insurance — — — Other product lines (2) — (2) Total General Insurance International $ (2) $ — $ (2) Other Operations Run-Off — — — Total Prior Year (Favorable) Unfavorable Development $ (34) $ — $ (34) AIG | First Quarter 2024 Form 10-Q 107 TABLE OF CONTENTS ITEM 2 | Insurance Reserves Three Months Ended March 31, 2023 (in millions) Total 2022 2021 & Prior General Insurance North America: U.S. Workers' Compensation $ (36) $ — $ (36) U.S. Excess Casualty (10) — (10) U.S. Other Casualty (27) (25) (2) U.S. Financial Lines (7) — (7) U.S. Property and Special Risks 18 70 (52) U.S. Personal Insurance (3) 12 (15) Other Product Lines (17) (29) 12 Total General Insurance North America $ (82) $ 28 $ (110) General Insurance International: UK/Europe Casualty and Financial Lines $ (1) $ 4 $ (5) UK/Europe Property and Special Risks 11 47 (36) UK/Europe and Japan Personal Insurance (6) (2) (4) Other product lines 10 1 9 Total General Insurance International $ 14 $ 50 $ (36) Total Prior Year (Favorable) Unfavorable Development $ (68) $ 78 $ (146) We note that for certain categories of claims (e.g., construction defect claims and environmental claims) and for reinsurance recoverable, losses may sometimes be reclassified to an earlier or later accident year as more information about the date of occurrence becomes available to us. Significant Reinsurance Agreements In the first quarter of 2017, we entered into an adverse development reinsurance agreement with NICO, under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. Commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the losses on subject business paid on or after January 1, 2016 in excess of $25 billion of net paid losses, up to an aggregate limit of $25 billion. We account for this transaction as retroactive reinsurance. This transaction resulted in a gain, which under GAAP retroactive reinsurance accounting is deferred and amortized into income over the settlement period. NICO created a collateral trust account as security for their claim payment obligations to us, into which they deposited the consideration paid under the agreement, and Berkshire Hathaway Inc. has provided a parental guarantee to secure NICO’s obligations under the agreement. For a description of AIG’s catastrophe reinsurance protection for 2023, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – General Insurance Companies’ Key Risks – Natural Catastrophe Risk in the 2023 Annual Report. The table below shows the calculation of the deferred gain on the adverse development reinsurance agreement, the effect of discounting of loss reserves and amortization of the deferred gain. (in millions) March 31, 2024 December 31, 2023 Gross Covered Losses Covered reserves before discount $ 10,628 $ 10,849 Inception to date losses paid 30,378 30,157 Attachment point (25,000) (25,000) Covered losses above attachment point $ 16,006 $ 16,006 Deferred Gain Development Covered losses above attachment ceded to NICO (80%) $ 12,805 $ 12,805 Consideration paid including interest (10,188) (10,188) Pre-tax deferred gain before discount and amortization 2,617 2,617 Discount on ceded losses (a) (1,049) (1,104) Pre-tax deferred gain before amortization 1,568 1,513 Inception to date amortization of deferred gain at inception (1,462) (1,428) Inception to date amortization attributed to changes in deferred gain (b) 71 64 Deferred gain liability reflected in AIG's balance sheet $ 177 $ 149 (a) The accretion of discount and a reduction in effective interest rates is offset by changes in estimates of the amount and timing of future recoveries. (b) Excluded from APTI. 108 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Insurance Reserves The following table presents the rollforward of activity in the deferred gain from the adverse development reinsurance agreement: Three Months Ended March 31, (in millions) 2024 2023 Balance at beginning of year, net of discount $ 149 $ 205 (Favorable) unfavorable prior year reserve development ceded to NICO (a) — — Amortization attributed to deferred gain at inception (b) (34) (41) Amortization attributed to changes in deferred gain (c) 7 (12) Changes in discount on ceded loss reserves 55 70 Balance at end of period, net of discount $ 177 $ 222 (a) Prior year reserve development ceded to NICO under the retroactive reinsurance agreement is deferred under GAAP. (b) Represents amortization of the deferred gain recognized in APTI. (c) Excluded from APTI. The lines of business subject to this agreement include those with longer tails, which carry a higher degree of uncertainty. Since inception, there have been periods of unfavorable prior year development, with more recent favorable development. This agreement will continue to reduce the impact of volatility in the development on our ultimate loss estimates over time. The agreement has resulted in lower capital charges for reserve risks at our U.S. insurance subsidiaries. In addition, net investment income declined as a result of lower invested assets. Fortitude Re was established during the first quarter of 2018 in a series of reinsurance transactions related to our run-off operations. Those reinsurance transactions were designed to consolidate most of our insurance run-off lines into a single legal entity. As of March 31, 2024, approximately $26.9 billion of reserves from our Life and Retirement Run-Off Lines and approximately $2.9 billion of reserves from our General Insurance Run-Off Lines related to business written by multiple wholly-owned AIG subsidiaries, had been ceded to Fortitude Re under these reinsurance transactions. LIFE AND ANNUITY FUTURE POLICY BENEFITS, POLICYHOLDER CONTRACT DEPOSITS AND MARKET RISK BENEFITS The following section provides discussion of life and annuity future policy benefits, policyholder contract deposits and market risk benefits. Variable Annuity Guaranteed Benefits and Hedging Results Our Individual Retirement and Group Retirement businesses offer variable annuity products with riders that provide guaranteed benefits. The liabilities are accounted for as MRBs and measured at fair value. The fair value of the MRBs may fluctuate significantly based on market interest rates, equity prices, credit spreads, market volatility, policyholder behavior and other factors. In addition to risk-mitigating features in our variable annuity product design, we have an economic hedging program designed to manage market risk from GMWBs, including exposures to changes in interest rates, equity prices, credit spreads and volatility. The hedging program includes all in-force GMWB policies and utilizes derivative instruments, including but not limited to equity options, futures contracts and interest rate swap and option contracts, as well as fixed maturity securities. For additional information on market risk management related to these product features, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – Life and Retirement Companies’ Key Risks – Variable Annuity, Fixed Index Annuity and Index Universal Life Risk Management and Hedging Programs in the 2023 Annual Report. AIG | First Quarter 2024 Form 10-Q 109 TABLE OF CONTENTS ITEM 2 | Insurance Reserves Differences in Valuation of MRBs and Economic Hedge Target The variable annuity hedging program utilizes an economic hedge target, which represents an estimate of the underlying economic risks in our GMWB riders. The economic hedge target differs from the GAAP valuation of the MRBs, creating volatility in our net income (loss) primarily due to the following: • The MRBs include both the GMWB riders and the GMDB riders while the hedge program is targeting the economic risks of just the GMWB rider; • The hedge program is designed to offset moves in the GMWB economic liability and therefore has a lower sensitivity to equity market changes than the MRBs; • The economic hedge target includes 100 percent of the GMWB rider fees in present value calculations; • The GAAP valuation reflects those fees attributed to the MRBs, such that the initial value at contract issue equals zero. Since the MRB includes GMWBs and GMDBs, these attributed fees are typically larger than just the GMWB rider fees; • The economic hedge target uses best estimate actuarial assumptions and excludes explicit risk margins used for GAAP valuation, such as margins for policyholder behavior, mortality, and volatility; and • The economic hedge target excludes our own credit risk changes (non-performance adjustments) used in the GAAP valuation, which are recognized in Other comprehensive income (loss) (OCI). The GAAP valuation has different sensitivities to movements in interest rates and other market factors, and to changes from actuarial assumption updates, than the economic hedge target. For additional information on our valuation methodology for MRBs, see Note 5 to the Condensed Consolidated Financial Statements. The market value of the hedge portfolio compared to the economic hedge target at any point in time may be different and is not expected to be fully offsetting. In addition to the derivatives held in conjunction with the variable annuity hedging program, the Life and Retirement companies generally have cash and invested assets available to cover future claims payable under these guarantees. The primary sources of difference between the change in the fair value of the hedging portfolio and the economic hedge target include: • basis risk due to the variance between expected and actual fund returns, which may be either positive or negative; • realized volatility versus implied volatility; • actual versus expected changes in the hedge target driven by assumptions not subject to hedging, particularly policyholder behavior; and • risk exposures that we have elected not to explicitly or fully hedge. The following table presents a reconciliation between the fair value of the GAAP MRBs and the value of our economic hedge target: (in millions) March 31, 2024 December 31, 2023 Reconciliation of market risk benefits and economic hedge target: Market risk benefits liability, net $ 571 $ 1,340 Exclude non-performance risk adjustment (814) (826) Market risk benefits liability, excluding NPA (243) 514 Adjustments for risk margins and differences in valuation 667 522 Economic hedge target liability $ 424 $ 1,036 Impact on Pre-tax Income (Loss) The impact on our pre-tax income (loss) of variable annuity guaranteed benefits and related hedging results includes changes in the fair value of MRBs, and changes in the fair value of related derivative hedging instruments, and along with attributed rider fees and net of benefits associated with MRBs are together recognized in Change in the fair value of MRBs, net, with the exception of our own credit risk changes, which are recognized in OCI. Changes in the fair value of MRBs, net are excluded from adjusted pre-tax income of Individual Retirement and Group Retirement. The change in the fair value of the MRBs and the change in the value of the hedging portfolio are not expected to be fully offsetting, primarily due to the differences in valuation between the economic hedge target, the GAAP MRBs and the fair value of the hedging portfolio, as discussed above. When corporate credit spreads widen, the change in the non-performance risk adjustment (NPA) spread generally reduces the fair value of the MRBs liabilities, resulting in a gain in AOCI, and when corporate credit spreads tighten, the change in the NPA spread generally increases the fair value of the MRBs liabilities, resulting in a loss in AOCI. In addition to changes driven by credit market-related movements in the NPA spread, the NPA balance also reflects changes in business activity and in the net amount at risk from the underlying guaranteed living benefits. Change in Economic Hedge Target The decrease in the economic hedge target liability in the three months ended March 31, 2024 was primarily driven by higher interest rates and equity markets. 110 AIG | First Quarter 2024 Form 10-Q TABLE OF CONTENTS ITEM 2 | Insurance Reserves The following table presents the impact on pre-tax income (loss) and other comprehensive income (loss) of Variable Annuity MRBs and Hedging: Three Months Ended March 31, 2024 2023 (in millions) MRB Liability* Hedge Assets Net MRB Liability* Hedge Assets Net Issuances $ 1 $ — $ 1 $ (3) $ — $ (3) Interest accrual (9) (61) (70) (15) (55) (70) Attributed fees (189) — (189) (251) — (251) Expected claims 18 — 18 26 — 26 Effect of changes in interest rates 297 (341) (44) (367) 346 (21) Effect of changes in interest rate volatility 14 (39) (25) 81 (60) 21 Effect of changes in equity markets 580 (359) 221 421 (262) 159 Effect of changes in equity index volatility 15 31 46 (12) (7) (19) Actual outcome different from model expected outcome 29 — 29 (61) — (61) Effect of changes in other future expected assumptions (1) — (1) 96 — 96 Foreign exchange Impact 2 — 2 — — — Total impact on balance before other and changes in our own credit risk 757 (769) (12) (85) (38) (123) Other (2) 2 — — (20) (20) Effect of changes in our own credit risk 12 17 29 (378) 2 (376) Total income (loss) impact on market risk benefits 767 (750) 17 (463) (56) (519) Less: Impact on OCI 12 (48) (36) (378) 56 (322) Add: Fees net of claims and ceded premiums and benefits 168 — 168 224 — 224 Net impact on pre-tax income (loss) $ 923 $ (702) $ 221 $ 139 $ (112) $ 27 Net change in value of economic hedge target and related hedges Net impact on economic gains (losses) $ 3 $ (208) * MRB Liability is partially offset by MRB Assets. Three Months Ended March 31, 2024 Net impact on pre-tax income of $221 million was primarily driven by increases in equity markets. On an economic basis, the changes in the fair value of the hedge portfolio were partially offset by the changes in the economic hedge target. In the three months ended March 31, 2024, we had a net mark-to-market gain of approximately $3 million from our hedging activities related to our economic hedge target. Three Months Ended March 31, 2023 Net impact on pre-tax income of $27 million was primarily driven by increases in equity markets and the impact of the LIBOR to SOFR transition. The hedge program is designed to offset moves in the GMWB economic liability and therefore has a lower sensitivity to equity market changes than the MRBs. With the transition of risk free rates to the SOFR curve our discounting of fees has been reduced, resulting in a one-time favorable impact to the MRB liability. On an economic basis, the changes in the fair value of the hedge portfolio were partially offset by the changes in the economic hedge target. In the three months ended March 31, 2023, we had a net mark-to-market loss of approximately $208 million from our hedging activities related to our economic hedge target primarily driven by tightening credit spreads and lower equity volatility. AIG | First Quarter 2024 Form 10-Q 111 TABLE OF CONTENTS ITEM 2 | Liquidity and Capital Resources Liquidity and Capital Resources OVERVIEW Liquidity refers to the ability to generate sufficient cash resources to meet the cash requirements of our business operations and payment obligations. Capital refers to the long-term financial resources available to support the operation of our businesses, fund business growth and cover financial and operational needs that arise from adverse circumstances. Our primary source of ongoing capital generation is derived from the profitability of our insurance subsidiaries. We must comply with numerous constraints on our capital positions. These constraints drive the requirements for capital adequacy at AIG and the individual businesses and are based on internally defined risk tolerances, regulatory requirements, rating agency and creditor expectations and business needs. For information regarding our liquidity risk framework, see Part II, Item 7. MD&A – Enterprise Risk Management – Risk Appetite, Limits, Identification and Measurement and Part II, Item 7. MD&A – Enterprise Risk Management – Liquidity Risk Management in the 2023 Annual Report. We believe that we have sufficient liquidity and capital resources to satisfy future requirements and meet our obligations to policyholders, customers, creditors and debt-holders, including those arising from reasonably foreseeable contingencies or events. Nevertheless, some circumstances may cause our cash or capital needs to exceed projected liquidity or readily deployable capital resources. For information regarding risks associated with our liquidity and capital resources, see Part I, Item 1A