Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value

Assets and liabilities measured and carried at fair value in the financial statements at December 31 are summarized below (in millions):

	Level 1		Level 2		Level 3		Total
December 31, 2012
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	227	$	141	$	20	$	388
States, municipalities and political subdivisions	—		4,410		58		4,468
Foreign government	—		260		—		260
Residential MBS	—		3,833		371		4,204
Commercial MBS	—		2,896		22		2,918
Corporate and other	5		11,386		489		11,880
Total AFS fixed maturities	232		22,926		960		24,118
Trading fixed maturities	—		321		—		321
Equity securities	781		121		37		939
Assets of managed investment entities (“MIE”)	256		2,929		40		3,225
Variable annuity assets (separate accounts) (a)	—		580		—		580
Other investments	—		133		—		133
Total assets accounted for at fair value	$	1,269	$	27,010	$	1,037	$	29,316
Liabilities:
Liabilities of managed investment entities	$	147	$	—	$	2,745	$	2,892
Derivatives in annuity benefits accumulated	—		—		465		465
Other liabilities — derivatives	—		17		—		17
Total liabilities accounted for at fair value	$	147	$	17	$	3,210	$	3,374
December 31, 2011
Assets:
Available for sale fixed maturities:
U.S. Government and government agencies	$	248	$	134	$	—	$	382
States, municipalities and political subdivisions	—		3,794		83		3,877
Foreign government	—		254		—		254
Residential MBS	—		3,487		361		3,848
Commercial MBS	—		2,821		19		2,840
Corporate and other	9		10,078		519		10,606
Total AFS fixed maturities	257		20,568		982		21,807
Trading fixed maturities	—		439		1		440
Equity securities	888		29		11		928
Assets of managed investment entities	290		2,724		44		3,058
Variable annuity assets (separate accounts) (a)	—		548		—		548
Other investments	—		71		—		71
Total assets accounted for at fair value	$	1,435	$	24,379	$	1,038	$	26,852
Liabilities:
Liabilities of managed investment entities	$	194	$	—	$	2,593	$	2,787
Derivatives in annuity benefits accumulated	—		—		361		361
Other liabilities — derivatives	—		23		—		23
Total liabilities accounted for at fair value	$	194	$	23	$	2,954	$	3,171

 (a)   Variable annuity liabilities equal the fair value of variable annuity assets.

Unobservable inputs used by management in determining fair value of embedded derivatives

Unobservable Input	Range
Adjustment for insurance subsidiary’s credit risk	0.45% – 2.05% over the risk free rate
Risk margin for uncertainty in cash flows	0.4% reduction in the discount rate
Surrenders	4% – 20% of indexed account value
Partial surrenders	2% – 5% of indexed account value
Annuitizations	1% – 2% of indexed account value
Deaths	1% – 2.5% of indexed account value
Budgeted option costs	2.5% – 4.0% of indexed account value

Changes in balances of Level 3 financial assets and liabilities

				Total realized/unrealized gains (losses) included in
	Balance at December 31, 2011			Net income			Other comprehensive income (loss)		Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at December 31, 2012
AFS fixed maturities:
U.S. government	$	—		$	—		$	—	$	20		$	—		$	—	$	—		$	20
State and municipal	83			—			4		19			(7		)	8		(49		)	58
Residential MBS	361			5			17		96			(45		)	228		(291		)	371
Commercial MBS	19			1			2		—			—			—		—			22
Corporate and other	519			10			17		141			(71		)	29		(156		)	489
Trading fixed maturities	1			—			—		—			—			—		(1		)	—
Equity securities	11			—			2		30			—			13		(19		)	37
Assets of MIE	44			—			—		20			(14		)	13		(23		)	40
Liabilities of MIE (*)	(2,593		)	(189		)	—		(793		)	830			—		—			(2,745		)
Embedded derivatives	(361		)	(57		)	—		(73		)	26			—		—			(465		)

(*) Total realized/unrealized loss included in net income includes losses of $125 million related to liabilities outstanding as of December 31, 2012. See Note H — “Managed Investment Entities.”

				Total realized/unrealized gains (losses) included in
	Balance at December 31, 2010			Net income			Other comprehensive income (loss)			Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at December 31, 2011
AFS fixed maturities:
State and municipal	$	20		$	—		$	4		$	58		$	(4	)	$	17	$	(12	)	$	83
Residential MBS	312			3			(9		)	42			(38		)	127		(76		)	361
Commercial MBS	6			1			—			9			—			13		(10		)	19
Corporate and other	436			2			15			236			(72		)	90		(188		)	519
Trading fixed maturities	3			—			—			—			—			—		(2		)	1
Equity securities	21			—			1			2			(2		)	2		(13		)	11
Assets of MIE	48			(8		)	—			32			(18		)	9		(19		)	44
Liabilities of MIE (*)	(2,258		)	—			—			(401		)	66			—		—			(2,593		)
Embedded derivatives	(181		)	(29		)	—			(171		)	20			—		—			(361		)

(*) Total realized/unrealized loss included in net income includes losses of $3 million related to liabilities outstanding as of December 31, 2011. See Note H — “Managed Investment Entities.”

							Total realized/unrealized gains (losses) included in
	Balance at December 31, 2009			Consolidate  Managed  Inv.  Entities			Net income			Other comprehensive income (loss)			Purchases, sales, issuances and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at December 31, 2010
AFS fixed maturities:
State and municipal	$	23		$	—		$	—		$	1		$	(4	)	$	17	$	(17	)	$	20
Residential MBS	435			—			7			26			17			27		(200		)	312
Commercial MBS	—			—			—			—			6			—		—			6
Corporate and other	311			(6		)	(10		)	10			100			118		(87		)	436
Trading fixed maturities	1			—			—			—			4			2		(4		)	3
Equity securities	25			—			—			(1		)	—			—		(3		)	21
Assets of MIE	—			90			8			—			(16		)	26		(60		)	48
Liabilities of MIE (*)	—			(2,084		)	(220		)	—			46			—		—			(2,258		)
Embedded derivatives	(113		)	—			(23		)	—			(45		)	—		—			(181		)

(*) Total realized/unrealized loss included in net income includes losses of $213 million related to liabilities outstanding as of December 31, 2010. See Note H — “Managed Investment Entities.”

Fair value of financial instruments

The carrying value and fair value of financial instruments that are not carried at fair value in the financial statements at December 31 are summarized below (in millions):

	Carrying Value		Fair Value		Level 1		Level 2		Level 3
2012
Financial assets:
Cash and cash equivalents	$	1,705	$	1,705	$	1,705	$	—	$	—
Mortgage loans	607		613		—		—		613
Policy loans	228		228		—		—		228
Total financial assets not accounted for at fair value	$	2,540	$	2,546	$	1,705	$	—	$	841
Financial liabilities:
Annuity benefits accumulated (*)	$	17,405	$	17,422	$	—	$	—	$	17,422
Long-term debt	953		1,086		—		990		96
Total financial liabilities not accounted for at fair value	$	18,358	$	18,508	$	—	$	990	$	17,518
2011
Financial assets:
Cash and cash equivalents	$	1,324	$	1,324	$	1,324	$	—	$	—
Mortgage loans	401		401		—		—		401
Policy loans	252		252		—		—		252
Total financial assets not accounted for at fair value	$	1,977	$	1,977	$	1,324	$	—	$	653
Financial liabilities:
Annuity benefits accumulated (*)	$	15,219	$	15,314	$	—	$	—	$	15,314
Long-term debt	934		1,010		—		891		119
Total financial liabilities not accounted for at fair value	$	16,153	$	16,324	$	—	$	891	$	15,433

(*)    Excludes life contingent annuities in the payout phase.