Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value

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

	Level 1		Level 2		Level 3		Total
March 31, 2014
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	152	$	154	$	15	$	321
States, municipalities and political subdivisions	—		5,662		61		5,723
Foreign government	—		193		—		193
Residential MBS	—		4,309		272		4,581
Commercial MBS	—		2,591		28		2,619
Asset-backed securities (“ABS”)	—		2,554		206		2,760
Corporate and other	30		10,841		322		11,193
Total AFS fixed maturities	182		26,304		904		27,390
Trading fixed maturities	—		297		—		297
Equity securities	1,059		197		41		1,297
Assets of managed investment entities (“MIE”)	267		2,427		29		2,723
Variable annuity assets (separate accounts) (a)	—		666		—		666
Other investments — derivatives	—		288		—		288
Total assets accounted for at fair value	$	1,508	$	30,179	$	974	$	32,661
Liabilities:
Liabilities of managed investment entities	$	91	$	—	$	2,322	$	2,413
Derivatives in annuity benefits accumulated	—		—		904		904
Other liabilities — derivatives	—		12		—		12
Total liabilities accounted for at fair value	$	91	$	12	$	3,226	$	3,329
December 31, 2013
Assets:
Available for sale fixed maturities:
U.S. Government and government agencies	$	147	$	152	$	15	$	314
States, municipalities and political subdivisions	—		5,311		61		5,372
Foreign government	—		208		—		208
Residential MBS	—		3,994		316		4,310
Commercial MBS	—		2,696		28		2,724
Asset-backed securities	—		2,418		75		2,493
Corporate and other	28		10,672		335		11,035
Total AFS fixed maturities	175		25,451		830		26,456
Trading fixed maturities	—		305		—		305
Equity securities	1,023		125		31		1,179
Assets of managed investment entities	266		2,592		30		2,888
Variable annuity assets (separate accounts) (a)	—		665		—		665
Other investments — derivatives	—		274		—		274
Total assets accounted for at fair value	$	1,464	$	29,412	$	891	$	31,767
Liabilities:
Liabilities of managed investment entities	$	156	$	—	$	2,411	$	2,567
Derivatives in annuity benefits accumulated	—		—		804		804
Other liabilities — derivatives	—		10		—		10
Total liabilities accounted for at fair value	$	156	$	10	$	3,215	$	3,381

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

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

The following table presents information about the unobservable inputs used by management in determining fair value of these embedded derivatives. See Note F — “Derivatives.”

Unobservable Input	Range
Adjustment for insurance subsidiary’s credit risk	0.40% – 1.60% over the risk free rate
Risk margin for uncertainty in cash flows	0.3% reduction in the discount rate
Surrenders	4% – 16% of indexed account value
Partial surrenders	2% – 6% of indexed account value
Annuitizations	1% – 2% of indexed account value
Deaths	1.5% – 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

Changes in balances of Level 3 financial assets and liabilities carried at fair value during the first three months of 2014 and 2013 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.

				Total realized/unrealized gains (losses) included in
	Balance at December 31, 2013			Net income			Other comprehensive income (loss)		Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at March 31, 2014
AFS fixed maturities:
U.S. government agency	$	15		$	—		$	—	$	—		$	—		$	—	$	—		$	15
State and municipal	61			—			—		—			—			—		—			61
Residential MBS	316			1			4		—			(8		)	32		(73		)	272
Commercial MBS	28			—			—		—			—			—		—			28
Asset-backed securities	75			—			1		50			(1		)	81		—			206
Corporate and other	335			1			3		1			(16		)	—		(2		)	322
Equity securities	31			1			2		30			(9		)	—		(14		)	41
Assets of MIE	30			(1		)	—		—			—			—		—			29
Liabilities of MIE (*)	(2,411		)	1			—		(45		)	133			—		—			(2,322		)
Embedded derivatives	(804		)	(54		)	—		(55		)	9			—		—			(904		)

(*) Total realized/unrealized loss included in net income includes gains of $4 million related to liabilities outstanding as of March 31, 2014. See Note H — “Managed Investment Entities.”

				Total realized/unrealized gains (losses) included in
	Balance at December 31, 2012			Net income			Other comprehensive income (loss)		Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at March 31, 2013
AFS fixed maturities:
U.S. government agency	$	20		$	—		$	—	$	—		$	—		$	—	$	—		$	20
State and municipal	58			—			—		—			—			—		(4		)	54
Residential MBS	371			2			6		6			(12		)	16		(35		)	354
Commercial MBS	22			1			—		—			—			7		—			30
Asset-backed securities	253			1			—		12			(6		)	—		(15		)	245
Corporate and other	236			—			—		10			(2		)	—		—			244
Equity securities	37			—			3		9			—			—		—			49
Assets of MIE	40			(4		)	—		—			—			—		(6		)	30
Liabilities of MIE (*)	(2,745		)	(25		)	—		—			250			—		19			(2,501		)
Embedded derivatives	(465		)	(80		)	—		(17		)	7			—		—			(555		)

(*) Total realized/unrealized loss included in net income includes losses of $18 million related to liabilities outstanding as of March 31, 2013. 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 are summarized below (in millions):

	Carrying Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2014
Financial assets:
Cash and cash equivalents	$	1,876	$	1,876	$	1,876	$	—	$	—
Mortgage loans	888		886		—		—		886
Policy loans	235		235		—		—		235
Total financial assets not accounted for at fair value	$	2,999	$	2,997	$	1,876	$	—	$	1,121
Financial liabilities:
Annuity benefits accumulated (*)	$	21,542	$	20,860	$	—	$	—	$	20,860
Long-term debt	913		1,018		—		942		76
Total financial liabilities not accounted for at fair value	$	22,455	$	21,878	$	—	$	942	$	20,936
December 31, 2013
Financial assets:
Cash and cash equivalents	$	1,639	$	1,639	$	1,639	$	—	$	—
Mortgage loans	781		779		—		—		779
Policy loans	238		238		—		—		238
Total financial assets not accounted for at fair value	$	2,658	$	2,656	$	1,639	$	—	$	1,017
Financial liabilities:
Annuity benefits accumulated (*)	$	20,741	$	19,959	$	—	$	—	$	19,959
Long-term debt	913		985		—		909		76
Total financial liabilities not accounted for at fair value	$	21,654	$	20,944	$	—	$	909	$	20,035

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