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Derivatives (Tables)
 3 Months Ended
Mar. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location
The following table presents the gross notional amount, estimated fair value and primary underlying risk exposure of the Company’s derivatives, excluding embedded derivatives, held at:
 
 
 
 
March 31, 2014
 
December 31, 2013
 
 
Primary Underlying Risk Exposure
 
Notional
Amount
 
Estimated Fair Value
 
Notional
Amount
 
Estimated Fair Value
 
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
 
 
(In millions)
Derivatives Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
Fair value hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
$
6,300

 
$
1,488

 
$
35

 
$
6,419

 
$
1,282

 
$
78

Foreign currency swaps
 
Foreign currency exchange rate
 
2,140

 
245

 
80

 
2,713

 
252

 
135

Foreign currency forwards
 
Foreign currency exchange rate
 
3,025

 
47

 
1

 
2,935

 
—

 
77

Subtotal
 
 
 
11,465

 
1,780

 
116

 
12,067

 
1,534

 
290

Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
3,011

 
196

 
48

 
3,121

 
83

 
141

Interest rate forwards
 
Interest rate
 
735

 
38

 
—

 
450

 
7

 
7

Foreign currency swaps
 
Foreign currency exchange rate
 
12,837

 
422

 
616

 
12,452

 
401

 
660

Subtotal
 
 
 
16,583

 
656

 
664

 
16,023

 
491

 
808

Foreign operations hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forwards
 
Foreign currency exchange rate
 
3,178

 
19

 
16

 
3,182

 
82

 
47

Currency options
 
Foreign currency exchange rate
 
8,366

 
168

 
4

 
7,362

 
318

 
—

Subtotal
 
 
 
11,544

 
187

 
20

 
10,544

 
400

 
47

Total qualifying hedges
 
39,592

 
2,623

 
800

 
38,634

 
2,425

 
1,145

Derivatives Not Designated or Not Qualifying as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
102,687

 
3,515

 
1,617

 
107,354

 
3,330

 
1,767

Interest rate floors
 
Interest rate
 
66,943

 
454

 
314

 
63,064

 
451

 
346

Interest rate caps
 
Interest rate
 
34,460

 
126

 
—

 
39,460

 
177

 
—

Interest rate futures
 
Interest rate
 
5,778

 
2

 
5

 
6,011

 
9

 
9

Interest rate options
 
Interest rate
 
28,036

 
357

 
220

 
40,978

 
255

 
243

Synthetic GICs
 
Interest rate
 
4,405

 
—

 
—

 
4,409

 
—

 
—

Foreign currency swaps
 
Foreign currency exchange rate
 
8,896

 
128

 
645

 
9,307

 
133

 
684

Foreign currency forwards
 
Foreign currency exchange rate
 
12,228

 
94

 
122

 
11,311

 
69

 
359

Currency futures
 
Foreign currency exchange rate
 
1,340

 
1

 
1

 
1,316

 
1

 
1

Currency options
 
Foreign currency exchange rate
 
5,996

 
103

 
21

 
2,265

 
53

 
48

Credit default swaps — purchased
 
Credit
 
3,627

 
7

 
43

 
3,725

 
7

 
51

Credit default swaps — written
 
Credit
 
9,848

 
146

 
7

 
9,055

 
166

 
1

Equity futures
 
Equity market
 
5,598

 
3

 
72

 
5,157

 
1

 
43

Equity options
 
Equity market
 
31,467

 
1,370

 
1,151

 
37,411

 
1,344

 
1,068

Variance swaps
 
Equity market
 
21,919

 
199

 
646

 
21,636

 
174

 
577

TRRs
 
Equity market
 
3,633

 
2

 
81

 
3,802

 
—

 
179

Total non-designated or non-qualifying derivatives
 
346,861

 
6,507

 
4,945

 
366,261

 
6,170

 
5,376

Total
 
 
 
$
386,453

 
$
9,130

 
$
5,745

 
$
404,895

 
$
8,595

 
$
6,521
Components of Net Derivatives Gains (Losses)
The components of net derivative gains (losses) were as follows:
 
Three Months 
 Ended 
 March 31,
 
2014
 
2013
 
(In millions)
Derivatives and hedging gains (losses) (1)
$
452

 
$
(2,314
)
Embedded derivatives
(109
)
 
1,684

Total net derivative gains (losses)
$
343

 
$
(630
)
__________________
(1)
Includes foreign currency transaction gains (losses) on hedged items in cash flow and non-qualifying hedging relationships, which are not presented elsewhere in this note.
Earned Income On Derivatives And Income Statement Location
The following table presents earned income on derivatives:
 
Three Months 
 Ended 
 March 31,
 
2014
 
2013
 
(In millions)
Qualifying hedges:
 
 
 
Net investment income
$
33

 
$
36

Interest credited to policyholder account balances
32

 
35

Other expenses
(1
)
 
(3
)
Non-qualifying hedges:
 
 
 
Net investment income
(1
)
 
(1
)
Net derivative gains (losses)
219

 
15

Policyholder benefits and claims
(8
)
 
(65
)
Total
$
274

 
$
17
Amount and location of gains (losses) recognized in income for derivatives that are not designated or qualifying as hedging instruments
The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or qualifying as hedging instruments:
 
Net
Derivative
Gains (Losses)
 
Net
Investment
Income (1)
 
Policyholder
Benefits and
Claims (2)
 
(In millions)
Three Months Ended March 31, 2014
 
 
 
 
 
Interest rate derivatives
$
298

 
$
—

 
$
12

Foreign currency exchange rate derivatives
69

 
—

 
—

Credit derivatives — purchased
1

 
1

 
—

Credit derivatives — written
(9
)
 
—

 
—

Equity derivatives
(181
)
 
(6
)
 
(38
)
Total
$
178

 
$
(5
)
 
$
(26
)
Three Months Ended March 31, 2013
 
 
 
 
 
Interest rate derivatives
$
(233
)
 
$
—

 
$
2

Foreign currency exchange rate derivatives
(451
)
 
—

 
—

Credit derivatives — purchased
(6
)
 
(3
)
 
—

Credit derivatives — written
32

 
—

 
—

Equity derivatives
(1,553
)
 
(7
)
 
(274
)
Total
$
(2,211
)
 
$
(10
)
 
$
(272
)
__________________
(1)
Changes in estimated fair value related to economic hedges of equity method investments in joint ventures; changes in estimated fair value related to derivatives held in relation to trading portfolios; and changes in estimated fair value related to derivatives held within contractholder-directed unit-linked investments.
(2)
Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.
Net derivatives gains (losses) recognized on fair value derivatives and the related hedged items
The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):
Derivatives in Fair Value
Hedging Relationships
 
Hedged Items in Fair Value
Hedging Relationships
 
Net Derivative
Gains (Losses)
Recognized
for Derivatives
 
Net Derivative
Gains (Losses)
Recognized for
Hedged Items
 
Ineffectiveness
Recognized in
Net Derivative
Gains (Losses)
 
 
 
 
(In millions)
Three Months Ended March 31, 2014
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
1

 
$
1

 
$
2

 
 
Policyholder liabilities (1)
 
209

 
(204
)
 
5

Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
(4
)
 
4

 
—

 
 
Foreign-denominated PABs (2)
 
(27
)
 
32

 
5

Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
10

 
(9
)
 
1

Total
 
$
189

 
$
(176
)
 
$
13

Three Months Ended March 31, 2013
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
8

 
$
(8
)
 
$
—

 
 
Policyholder liabilities (1)
 
(153
)
 
152

 
(1
)
Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
4

 
(5
)
 
(1
)
 
 
Foreign-denominated PABs (2)
 
(139
)
 
133

 
(6
)
Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
—

 
—

 
—

Total
 
$
(280
)
 
$
272

 
$
(8
)
__________________
(1)
Fixed rate liabilities reported in PABs or future policy benefits.
(2)
Fixed rate or floating rate liabilities.
Derivatives and Non-Derivative Hedging Instruments in Net Investment Hedging Relationships
The following table presents the effects of derivatives in net investment hedging relationships on the consolidated statements of operations and comprehensive income (loss) and the consolidated statements of equity:
Derivatives in Net Investment Hedging Relationships (1), (2)
 
Amount of Gains (Losses) Deferred in AOCI
 (Effective Portion)
 
 
(In millions)
Three Months Ended March 31, 2014
 
 
Foreign currency forwards
 
$
(34
)
Currency options
 
(114
)
Total
 
$
(148
)
Three Months Ended March 31, 2013
 
 
Foreign currency forwards
 
$
80

Currency options
 
90

Total
 
$
170


__________________
(1)
During both of the three months ended March 31, 2014 and 2013, there were no sales or substantial liquidations of net investments in foreign operations that would have required the reclassification of gains or losses from AOCI into earnings.
(2)
There was no ineffectiveness recognized for the Company’s hedges of net investments in foreign operations. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Schedule of estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps
The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
 
 
March 31, 2014
 
December 31, 2013
Rating Agency Designation of Referenced
Credit Obligations (1)
 
Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps (2)
 
Weighted
Average
Years to
Maturity (3)
 
Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps (2)
 
Weighted
Average
Years to
Maturity (3)
 
 
(In millions)
 
 
 
(In millions)
 
 
Aaa/Aa/A
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
$
9

 
$
560

 
2.4

 
$
10

 
$
545

 
2.6

Credit default swaps referencing indices
 
16

 
3,263

 
1.9

 
26

 
2,739

 
1.5

Subtotal
 
25

 
3,823

 
2.0

 
36

 
3,284

 
1.6

Baa
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
21

 
1,485

 
3.1

 
24

 
1,320

 
3.1

Credit default swaps referencing indices
 
64

 
4,160

 
5.0

 
73

 
4,071

 
4.7

Subtotal
 
85

 
5,645

 
4.5

 
97

 
5,391

 
4.3

Ba
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
—

 
5

 
3.5

 
—

 
5

 
3.8

Credit default swaps referencing indices
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
—

 
5

 
3.5

 
—

 
5

 
3.8

B
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
—

 
—

 
—

 
—

 
—

 
—

Credit default swaps referencing indices
 
29

 
375

 
5.1

 
32

 
375

 
4.9

Subtotal
 
29

 
375

 
5.1

 
32

 
375

 
4.9

Total
 
$
139

 
$
9,848

 
3.5

 
$
165

 
$
9,055

 
3.4

__________________
(1)
The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)
Assumes the value of the referenced credit obligations is zero.
(3)
The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts.
Estimated Fair Value of Derivative Assets and Liabilities after Master Netting Agreements and Cash Collateral
The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
 
 
March 31, 2014
 
December 31, 2013
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
(In millions)
Gross estimated fair value of derivatives:
 
 
 
 
 
 
 
 
OTC-bilateral (1)
 
$
9,103

 
$
5,391

 
$
8,537

 
$
6,367

OTC-cleared (1)
 
254

 
324

 
302

 
129

Exchange-traded
 
6

 
78

 
11

 
53

Total gross estimated fair value of derivatives (1)
 
9,363

 
5,793

 
8,850

 
6,549

Amounts offset on the consolidated balance sheets
 
—

 
—

 
—

 
—

Estimated fair value of derivatives presented on the consolidated balance sheets (1)
 
9,363

 
5,793

 
8,850

 
6,549

Gross amounts not offset on the consolidated balance sheets:
 
 
 
 
 
 
 
 
Gross estimated fair value of derivatives: (2)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(4,255
)
 
(4,255
)
 
(4,631
)
 
(4,631
)
OTC-cleared
 
(156
)
 
(156
)
 
(122
)
 
(122
)
Exchange-traded
 
(5
)
 
(5
)
 
(5
)
 
(5
)
Cash collateral: (3)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(2,437
)
 
(3
)
 
(1,679
)
 
(3
)
OTC-cleared
 
(96
)
 
(168
)
 
(169
)
 
(7
)
Exchange-traded
 
—

 
(60
)
 
—

 
(44
)
Securities collateral: (4)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(2,193
)
 
(933
)
 
(2,105
)
 
(1,464
)
OTC-cleared
 
—

 
—

 
—

 
—

Exchange-traded
 
—

 
(13
)
 
—

 
(4
)
Net amount after application of master netting agreements and collateral
 
$
221

 
$
200

 
$
139

 
$
269

__________________
(1)
At March 31, 2014 and December 31, 2013, derivative assets include income or expense accruals reported in accrued investment income or in other liabilities of $233 million and $255 million, respectively, and derivative liabilities include income or expense accruals reported in accrued investment income or in other liabilities of $48 million and $28 million, respectively.
(2)
Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.
(3)
Cash collateral received is included in cash and cash equivalents, short-term investments or in fixed maturity securities, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet. The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At March 31, 2014 and December 31, 2013, the Company received excess cash collateral of $102 million and $104 million, respectively, and provided excess cash collateral of $250 million and $236 million, respectively, which is not included in the table above due to the foregoing limitation.
(4)
Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or repledge this collateral, but at March 31, 2014 none of the collateral had been sold or repledged. Securities collateral pledged by the Company is reported in fixed maturity securities on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or repledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At March 31, 2014 and December 31, 2013, the Company received excess securities collateral with an estimated fair value of $247 million and $238 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At March 31, 2014 and December 31, 2013, the Company provided excess securities collateral with an estimated fair value of $41 million and $66 million, respectively, for its OTC-bilateral derivatives, and $135 million and $141 million, respectively, for its OTC-cleared derivatives, and $63 million and $81 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
Derivative Instruments, Gain (Loss) [Line Items]  
Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location
The following table presents the effects of derivatives in cash flow hedging relationships on the consolidated statements of operations and comprehensive income (loss) and the consolidated statements of equity:
Derivatives in Cash Flow
Hedging Relationships
 
Amount of Gains
(Losses) Deferred in
AOCI on Derivatives
 
Amount and Location
of Gains (Losses)
Reclassified from
AOCI into Income (Loss)
 
Amount and Location
of Gains (Losses)
Recognized in Income
(Loss) on Derivatives
 
 
(Effective Portion)
 
(Effective Portion)
 
(Ineffective Portion)
 
 
 
 
Net Derivative
Gains (Losses)
 
Net Investment
Income
 
Other
Expenses
 
Net Derivative
Gains (Losses)
 
 
(In millions)
Three Months Ended March 31, 2014
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
228

 
$
15

 
$
2

 
$
—

 
$
5

Interest rate forwards
 
41

 
—

 
1

 
—

 
1

Foreign currency swaps
 
52

 
36

 
(1
)
 
1

 
—

Credit forwards
 
—

 
—

 
—

 
—

 
—

Total
 
$
321

 
$
51

 
$
2

 
$
1

 
$
6

Three Months Ended March 31, 2013
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(124
)
 
$
4

 
$
2

 
$
—

 
$
(2
)
Interest rate forwards
 
(25
)
 
3

 
1

 
(1
)
 
—

Foreign currency swaps
 
87

 
(189
)
 
(1
)
 
—

 
4

Credit forwards
 
—

 
—

 
—

 
—

 
—

Total
 
$
(62
)
 
$
(182
)
 
$
2

 
$
(1
)
 
$
2
Schedule of Derivative Instruments
The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that are in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. The table also presents the incremental collateral that the Company would be required to provide if there was a one notch downgrade in the Company’s credit rating at the reporting date or if the Company’s credit rating sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position at the reporting date. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.
 
 
 
 
Estimated Fair Value of
Collateral Provided:
 
Fair Value of Incremental
Collateral Provided Upon:
 
 
Estimated
Fair Value of
Derivatives in 
Net Liability
Position (1)
 
Fixed Maturity
Securities
 
Cash
 
One Notch
Downgrade in 
the Company’s
Credit Rating
 
Downgrade in the Company’s
Credit Rating to a Level
that Triggers Full Overnight
Collateralization or Termination
of the Derivative Position
 
 
(In millions)
March 31, 2014
 
 
 
 
 
 
 
 
 
 
Derivatives subject to credit-contingent provisions
 
$
1,074

 
$
974

 
$
—

 
$
22

 
$
28

Derivatives not subject to credit-contingent provisions
 
27

 
—

 
3

 
—

 
—

Total
 
$
1,101

 
$
974

 
$
3

 
$
22

 
$
28

December 31, 2013
 
 
 
 
 
 
 
 
 
 
Derivatives subject to credit-contingent provisions
 
$
1,674

 
$
1,530

 
$
—

 
$
27

 
$
34

Derivatives not subject to credit-contingent provisions
 
20

 
—

 
3

 
—

 
—

Total
 
$
1,694

 
$
1,530

 
$
3

 
$
27

 
$
34

__________________
(1)
After taking into consideration the existence of netting agreements.
Embedded Derivative Financial Instruments [Member]
  
Derivative Instruments, Gain (Loss) [Line Items]  
Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location
The following table presents changes in estimated fair value related to embedded derivatives:
 
Three Months 
 Ended 
 March 31,
 
2014
 
2013
 
(In millions)
Net derivative gains (losses) (1)
$
(109
)
 
$
1,684

Policyholder benefits and claims
$
15

 
$
(47
)
__________________
(1)
The valuation of guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses), in connection with this adjustment, were $43 million and ($414) million for the three months ended March 31, 2014 and 2013, respectively.
Schedule of Derivative Instruments
The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
 
 
Balance Sheet Location
 
March 31, 2014
 
December 31, 2013
 
 
 
 
(In millions)
Net embedded derivatives within asset host contracts:
 
 
 
 
 
 
Ceded guaranteed minimum benefits
 
Premiums, reinsurance and other receivables
 
$
259

 
$
247

Funds withheld on assumed reinsurance
 
Other invested assets
 
42

 
38

Options embedded in debt or equity securities
 
Investments
 
(164
)
 
(145
)
Net embedded derivatives within asset host contracts
 
$
137

 
$
140

 
 
 
 
 
 
 
Net embedded derivatives within liability host contracts:
 
 
 
 
 
 
Direct guaranteed minimum benefits
 
PABs
 
$
(2,154
)
 
$
(2,296
)
Assumed guaranteed minimum benefits
 
PABs
 
1,402

 
1,262

Funds withheld on ceded reinsurance
 
Other liabilities
 
64

 
60

Other
 
PABs
 
15

 
5

Net embedded derivatives within liability host contracts
 
$
(673
)
 
$
(969
)