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Derivatives (Tables)
 9 Months Ended
Sep. 30, 2015
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:
 
 
 
 
September 30, 2015
 
December 31, 2014
 
 
Primary Underlying Risk Exposure
 
Gross
Notional
Amount
 
Estimated Fair Value
 
Gross
Notional
Amount
 
Estimated Fair Value
 
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
 
 
(In millions)
Derivatives Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
Fair value hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
$
5,922

 
$
2,294

 
$
19

 
$
6,044

 
$
2,064

 
$
21

Foreign currency swaps
 
Foreign currency exchange rate
 
3,116

 
87

 
230

 
2,708

 
65

 
100

Foreign currency forwards
 
Foreign currency exchange rate
 
2,085

 
—

 
38

 
2,335

 
—

 
291

Subtotal
 
 
 
11,123

 
2,381

 
287

 
11,087

 
2,129

 
412

Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
2,488

 
557

 
—

 
2,560

 
528

 
—

Interest rate forwards
 
Interest rate
 
105

 
26

 
—

 
225

 
63

 
—

Foreign currency swaps
 
Foreign currency exchange rate
 
21,612

 
1,141

 
1,748

 
18,325

 
563

 
930

Subtotal
 
 
 
24,205

 
1,724

 
1,748

 
21,110

 
1,154

 
930

Foreign operations hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forwards
 
Foreign currency exchange rate
 
3,866

 
78

 
7

 
4,097

 
295

 
11

Currency options
 
Foreign currency exchange rate
 
6,769

 
293

 
12

 
6,419

 
415

 
—

Subtotal
 
 
 
10,635

 
371

 
19

 
10,516

 
710

 
11

Total qualifying hedges
 
45,963

 
4,476

 
2,054

 
42,713

 
3,993

 
1,353

Derivatives Not Designated or Not Qualifying as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
89,232

 
5,305

 
2,518

 
93,266

 
4,570

 
2,051

Interest rate floors
 
Interest rate
 
27,337

 
395

 
93

 
55,645

 
440

 
199

Interest rate caps
 
Interest rate
 
54,018

 
75

 
2

 
49,128

 
145

 
1

Interest rate futures
 
Interest rate
 
3,874

 
3

 
9

 
2,707

 
4

 
9

Interest rate options
 
Interest rate
 
35,336

 
1,623

 
20

 
48,078

 
1,241

 
75

Synthetic GICs
 
Interest rate
 
4,223

 
—

 
—

 
4,298

 
—

 
—

Foreign currency swaps
 
Foreign currency exchange rate
 
11,062

 
669

 
465

 
11,041

 
447

 
385

Foreign currency forwards
 
Foreign currency exchange rate
 
12,158

 
220

 
230

 
13,206

 
127

 
791

Currency futures
 
Foreign currency exchange rate
 
2,495

 
1

 
1

 
522

 
2

 
—

Currency options
 
Foreign currency exchange rate
 
9,443

 
502

 
229

 
8,324

 
585

 
340

Credit default swaps — purchased
 
Credit
 
2,274

 
27

 
34

 
2,830

 
8

 
34

Credit default swaps — written
 
Credit
 
10,458

 
58

 
11

 
10,527

 
181

 
6

Equity futures
 
Equity market
 
6,748

 
23

 
82

 
6,073

 
65

 
2

Equity index options
 
Equity market
 
46,447

 
1,681

 
920

 
39,345

 
1,426

 
1,036

Equity variance swaps
 
Equity market
 
24,872

 
209

 
682

 
24,598

 
196

 
639

TRRs
 
Equity market
 
3,847

 
248

 
4

 
3,297

 
22

 
101

Total non-designated or non-qualifying derivatives
 
343,824

 
11,039

 
5,300

 
372,885

 
9,459

 
5,669

Total
 
 
 
$
389,787

 
$
15,515

 
$
7,354

 
$
415,598

 
$
13,452

 
$
7,022

The following table presents earned income on derivatives:
 
Three Months 
 Ended 
 September 30,
 
Nine Months 
 Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(In millions)
Qualifying hedges:
 
 
 
 
 
 
 
Net investment income
$
55

 
$
44

 
$
158

 
$
111

Interest credited to policyholder account balances
6

 
24

 
21

 
88

Other expenses
(2
)
 
(1
)
 
(4
)
 
(2
)
Non-qualifying hedges:
 
 
 
 
 
 
 
Net investment income
(1
)
 
(1
)
 
(3
)
 
(3
)
Net derivative gains (losses)
256

 
282

 
757

 
650

Policyholder benefits and claims
4

 
74

 
12

 
10

Total
$
318

 
$
422

 
$
941

 
$
854
Components of Net Derivatives Gains (Losses)
The components of net derivative gains (losses) were as follows:
 
Three Months 
 Ended 
 September 30,
 
Nine Months 
 Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(In millions)
Derivatives and hedging gains (losses) (1)
$
2,318

 
$
543

 
$
1,433

 
$
1,077

Embedded derivatives gains (losses)
(1,833
)
 
(65
)
 
(1,039
)
 
55

Total net derivative gains (losses)
$
485

 
$
478

 
$
394

 
$
1,132

__________________
(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.
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 September 30, 2015
 
 
 
 
 
Interest rate derivatives
$
1,157

 
$
—

 
$
17

Foreign currency exchange rate derivatives
364

 
—

 
—

Credit derivatives — purchased
16

 
3

 
—

Credit derivatives — written
(77
)
 
(1
)
 
—

Equity derivatives
747

 
(1
)
 
340

Total
$
2,207

 
$
1

 
$
357

Three Months Ended September 30, 2014
 
 
 
 
 
Interest rate derivatives
$
13

 
$
—

 
$
3

Foreign currency exchange rate derivatives
211

 
—

 
—

Credit derivatives — purchased
5

 
1

 
—

Credit derivatives — written
(32
)
 
—

 
—

Equity derivatives
160

 
(1
)
 
12

Total
$
357

 
$
—

 
$
15

Nine Months Ended September 30, 2015
 
 
 
 
 
Interest rate derivatives
$
250

 
$
—

 
$
10

Foreign currency exchange rate derivatives
443

 
—

 
—

Credit derivatives — purchased
9

 
3

 
—

Credit derivatives — written
(108
)
 
—

 
—

Equity derivatives
99

 
(8
)
 
214

Total
$
693

 
$
(5
)
 
$
224

Nine Months Ended September 30, 2014
 
 
 
 
 
Interest rate derivatives
$
616

 
$
—

 
$
25

Foreign currency exchange rate derivatives
199

 
—

 
—

Credit derivatives — purchased
(1
)
 
1

 
—

Credit derivatives — written
(19
)
 
—

 
—

Equity derivatives
(446
)
 
(13
)
 
(145
)
Total
$
349

 
$
(12
)
 
$
(120
)
__________________
(1)
Changes in estimated fair value related to economic hedges of equity method investments in joint ventures, derivatives held in relation to trading portfolios and 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 September 30, 2015
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
(4
)
 
$
3

 
$
(1
)
 
 
Policyholder liabilities (1)
 
289

 
(290
)
 
(1
)
Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
6

 
(3
)
 
3

 
 
Foreign-denominated policyholder account balances (2)
 
(47
)
 
46

 
(1
)
Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
49

 
(45
)
 
4

Total
 
$
293

 
$
(289
)
 
$
4

Three Months Ended September 30, 2014
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
9

 
$
(8
)
 
$
1

 
 
Policyholder liabilities (1)
 
43

 
(44
)
 
(1
)
Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
12

 
(12
)
 
—

 
 
Foreign-denominated policyholder account balances (2)
 
(134
)
 
129

 
(5
)
Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
(49
)
 
45

 
(4
)
Total
 
$
(119
)
 
$
110

 
$
(9
)
Nine Months Ended September 30, 2015
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
(5
)
 
$
8

 
$
3

 
 
Policyholder liabilities (1)
 
120

 
(126
)
 
(6
)
Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
13

 
(6
)
 
7

 
 
Foreign-denominated policyholder account balances (2)
 
(186
)
 
179

 
(7
)
Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
(49
)
 
45

 
(4
)
Total
 
$
(107
)
 
$
100

 
$
(7
)
Nine Months Ended September 30, 2014
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
7

 
$
(5
)
 
$
2

 
 
Policyholder liabilities (1)
 
389

 
(379
)
 
10

Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
5

 
(5
)
 
—

 
 
Foreign-denominated policyholder account balances (2)
 
(160
)
 
158

 
(2
)
Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
(33
)
 
31

 
(2
)
Total
 
$
208

 
$
(200
)
 
$
8

__________________
(1)
Fixed rate liabilities reported in policyholder account balances 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 September 30, 2015
 
 
Foreign currency forwards
 
$
88

Currency options
 
(18
)
Total
 
$
70

Three Months Ended September 30, 2014
 
 
Foreign currency forwards
 
$
227

Currency options
 
163

Total
 
$
390

Nine Months Ended September 30, 2015
 
 
Foreign currency forwards
 
$
244

Currency options
 
(61
)
Total
 
$
183

Nine Months Ended September 30, 2014
 
 
Foreign currency forwards
 
$
148

Currency options
 
(75
)
Total
 
$
73


__________________
(1)
During both the three months and nine months ended September 30, 2015, 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. In May 2014, the Company sold its interest in MAL (see Note 3 of the Notes to the Consolidated Financial Statements included in the 2014 Annual Report), which was a hedged item in a net investment hedging relationship. As a result, during the nine months ended September 30, 2014, the Company released losses of $77 million from AOCI into earnings upon the sale. During the three months ended September 30, 2014, 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:
 
 
September 30, 2015
 
December 31, 2014
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)
 
$
7

 
$
690

 
2.5

 
$
10

 
$
677

 
2.4

Credit default swaps referencing indices
 
2

 
1,610

 
3.2

 
10

 
1,700

 
2.6

Subtotal
 
9

 
2,300

 
3.0

 
20

 
2,377

 
2.6

Baa
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
12

 
1,434

 
2.7

 
23

 
1,591

 
2.8

Credit default swaps referencing indices
 
26

 
5,939

 
5.0

 
94

 
5,774

 
4.7

Subtotal
 
38

 
7,373

 
4.5

 
117

 
7,365

 
4.3

Ba
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
1

 
60

 
2.2

 
—

 
60

 
3.0

Credit default swaps referencing indices
 
(1
)
 
100

 
1.2

 
(1
)
 
100

 
2.0

Subtotal
 
—

 
160

 
1.6

 
(1
)
 
160

 
2.4

B
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
—

 
—

 
—

 
—

 
—

 
—

Credit default swaps referencing indices
 
—

 
625

 
5.1

 
39

 
625

 
4.9

Subtotal
 
—

 
625

 
5.1

 
39

 
625

 
4.9

Total
 
$
47

 
$
10,458

 
4.2

 
$
175

 
$
10,527

 
3.9

__________________
(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 gross 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:
 
 
September 30, 2015
 
December 31, 2014
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (6)
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
(In millions)
Gross estimated fair value of derivatives:
 
 
 
 
 
 
 
 
OTC-bilateral (1)
 
$
14,245

 
$
6,008

 
$
12,256

 
$
6,017

OTC-cleared (1)
 
1,470

 
1,295

 
1,380

 
1,054

Exchange-traded
 
27

 
92

 
71

 
11

Total gross estimated fair value of derivatives (1)
 
15,742

 
7,395

 
13,707

 
7,082

Amounts offset on the consolidated balance sheets
 
—

 
—

 
—

 
—

Estimated fair value of derivatives presented on the consolidated balance sheets (1)
 
15,742

 
7,395

 
13,707

 
7,082

Gross amounts not offset on the consolidated balance sheets:
 
 
 
 
 
 
 
 
Gross estimated fair value of derivatives: (2)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(4,682
)
 
(4,682
)
 
(4,082
)
 
(4,082
)
OTC-cleared
 
(1,225
)
 
(1,225
)
 
(989
)
 
(989
)
Exchange-traded
 
(2
)
 
(2
)
 
(5
)
 
(5
)
Cash collateral: (3), (4)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(7,151
)
 
(4
)
 
(4,153
)
 
(133
)
OTC-cleared
 
(244
)
 
(63
)
 
(386
)
 
(62
)
Exchange-traded
 
—

 
(44
)
 
—

 
(4
)
Securities collateral: (5)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(2,039
)
 
(1,240
)
 
(3,768
)
 
(1,700
)
OTC-cleared
 
—

 
—

 
—

 
(3
)
Exchange-traded
 
—

 
(46
)
 
—

 
(2
)
Net amount after application of master netting agreements and collateral
 
$
399

 
$
89

 
$
324

 
$
102

__________________
(1)
At September 30, 2015 and December 31, 2014, derivative assets included income or expense accruals reported in accrued investment income or in other liabilities of $227 million and $255 million, respectively, and derivative liabilities included income or expense accruals reported in accrued investment income or in other liabilities of $41 million and $60 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 by the Company for OTC-bilateral and OTC-cleared derivatives 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. In certain instances, cash collateral pledged to the Company as initial margin for OTC-bilateral derivatives is held in separate custodial accounts and is not recorded on the Company’s balance sheet because the account title is in the name of the counterparty (but segregated for the benefit of the Company). The amount of this off-balance sheet collateral was $0 and $263 million at September 30, 2015 and December 31, 2014, respectively.
(4)
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 September 30, 2015 and December 31, 2014, the Company received excess cash collateral of $76 million and $87 million (including $0 and $36 million off-balance sheet cash collateral held in separate custodial accounts), respectively, and provided excess cash collateral of $175 million and $192 million, respectively, which is not included in the table above due to the foregoing limitation.
(5)
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 re-pledge this collateral, but at September 30, 2015, none of the collateral had been sold or re-pledged. 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 re-pledge 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 September 30, 2015 and December 31, 2014, the Company received excess securities collateral with an estimated fair value of $154 million and $395 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At September 30, 2015 and December 31, 2014, the Company provided excess securities collateral with an estimated fair value of $145 million and $117 million, respectively, for its OTC-bilateral derivatives, and $270 million and $199 million, respectively, for its OTC-cleared derivatives, and $161 million and $245 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
(6)
See Note 5 for information regarding the Company’s gross and net payables and receivables under repurchase agreement transactions.
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:
 
 
September 30, 2015
 
December 31, 2014
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (6)
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
(In millions)
Gross estimated fair value of derivatives:
 
 
 
 
 
 
 
 
OTC-bilateral (1)
 
$
14,245

 
$
6,008

 
$
12,256

 
$
6,017

OTC-cleared (1)
 
1,470

 
1,295

 
1,380

 
1,054

Exchange-traded
 
27

 
92

 
71

 
11

Total gross estimated fair value of derivatives (1)
 
15,742

 
7,395

 
13,707

 
7,082

Amounts offset on the consolidated balance sheets
 
—

 
—

 
—

 
—

Estimated fair value of derivatives presented on the consolidated balance sheets (1)
 
15,742

 
7,395

 
13,707

 
7,082

Gross amounts not offset on the consolidated balance sheets:
 
 
 
 
 
 
 
 
Gross estimated fair value of derivatives: (2)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(4,682
)
 
(4,682
)
 
(4,082
)
 
(4,082
)
OTC-cleared
 
(1,225
)
 
(1,225
)
 
(989
)
 
(989
)
Exchange-traded
 
(2
)
 
(2
)
 
(5
)
 
(5
)
Cash collateral: (3), (4)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(7,151
)
 
(4
)
 
(4,153
)
 
(133
)
OTC-cleared
 
(244
)
 
(63
)
 
(386
)
 
(62
)
Exchange-traded
 
—

 
(44
)
 
—

 
(4
)
Securities collateral: (5)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(2,039
)
 
(1,240
)
 
(3,768
)
 
(1,700
)
OTC-cleared
 
—

 
—

 
—

 
(3
)
Exchange-traded
 
—

 
(46
)
 
—

 
(2
)
Net amount after application of master netting agreements and collateral
 
$
399

 
$
89

 
$
324

 
$
102

__________________
(1)
At September 30, 2015 and December 31, 2014, derivative assets included income or expense accruals reported in accrued investment income or in other liabilities of $227 million and $255 million, respectively, and derivative liabilities included income or expense accruals reported in accrued investment income or in other liabilities of $41 million and $60 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 by the Company for OTC-bilateral and OTC-cleared derivatives 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. In certain instances, cash collateral pledged to the Company as initial margin for OTC-bilateral derivatives is held in separate custodial accounts and is not recorded on the Company’s balance sheet because the account title is in the name of the counterparty (but segregated for the benefit of the Company). The amount of this off-balance sheet collateral was $0 and $263 million at September 30, 2015 and December 31, 2014, respectively.
(4)
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 September 30, 2015 and December 31, 2014, the Company received excess cash collateral of $76 million and $87 million (including $0 and $36 million off-balance sheet cash collateral held in separate custodial accounts), respectively, and provided excess cash collateral of $175 million and $192 million, respectively, which is not included in the table above due to the foregoing limitation.
(5)
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 re-pledge this collateral, but at September 30, 2015, none of the collateral had been sold or re-pledged. 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 re-pledge 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 September 30, 2015 and December 31, 2014, the Company received excess securities collateral with an estimated fair value of $154 million and $395 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At September 30, 2015 and December 31, 2014, the Company provided excess securities collateral with an estimated fair value of $145 million and $117 million, respectively, for its OTC-bilateral derivatives, and $270 million and $199 million, respectively, for its OTC-cleared derivatives, and $161 million and $245 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
(6)
See Note 5 for information regarding the Company’s gross and net payables and receivables under repurchase agreement transactions.
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 September 30, 2015
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
211

 
$
40

 
$
3

 
$
—

 
$
1

Interest rate forwards
 
7

 
1

 
1

 
1

 
—

Foreign currency swaps
 
(116
)
 
(286
)
 
—

 
—

 
4

Credit forwards
 
—

 
1

 
—

 
—

 
—

Total
 
$
102

 
$
(244
)
 
$
4

 
$
1

 
$
5

Three Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
96

 
$
1

 
$
3

 
$
—

 
$
6

Interest rate forwards
 
9

 
(10
)
 
—

 
1

 
(1
)
Foreign currency swaps
 
13

 
(466
)
 
(1
)
 
—

 
2

Credit forwards
 
—

 
—

 
1

 
—

 
—

Total
 
$
118

 
$
(475
)
 
$
3

 
$
1

 
$
7

Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
116

 
$
52

 
$
9

 
$
—

 
$
3

Interest rate forwards
 
2

 
5

 
3

 
2

 
—

Foreign currency swaps
 
(224
)
 
(563
)
 
(1
)
 
1

 
6

Credit forwards
 
—

 
1

 
1

 
—

 
—

Total
 
$
(106
)
 
$
(505
)
 
$
12

 
$
3

 
$
9

Nine Months Ended September 30, 2014
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
458

 
$
28

 
$
7

 
$
—

 
$
6

Interest rate forwards
 
61

 
(8
)
 
2

 
2

 
—

Foreign currency swaps
 
95

 
(368
)
 
(2
)
 
1

 
1

Credit forwards
 
—

 
—

 
1

 
—

 
—

Total
 
$
614

 
$
(348
)
 
$
8

 
$
3

 
$
7
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)
September 30, 2015
 
 
 
 
 
 
 
 
 
 
Derivatives subject to credit-contingent provisions
 
$
1,154

 
$
1,236

 
$
1

 
$
3

 
$
3

Derivatives not subject to credit-contingent provisions
 
164

 
149

 
4

 
—

 
—

Total
 
$
1,318

 
$
1,385

 
$
5

 
$
3

 
$
3

December 31, 2014
 
 
 
 
 
 
 
 
 
 
Derivatives subject to credit-contingent provisions
 
$
1,832

 
$
1,750

 
$
131

 
$
5

 
$
7

Derivatives not subject to credit-contingent provisions
 
84

 
65

 
2

 
—

 
—

Total
 
$
1,916

 
$
1,815

 
$
133

 
$
5

 
$
7

__________________
(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 
 September 30,
 
Nine Months 
 Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(In millions)
Net derivative gains (losses) (1)
$
(1,833
)
 
$
(65
)
 
$
(1,039
)
 
$
55

Policyholder benefits and claims
$
59

 
$
32

 
$
40

 
$
55

__________________
(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 $253 million and $222 million for the three months and nine months ended September 30, 2015, respectively, and $5 million and ($3) million for the three months and nine months ended September 30, 2014, 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
 
September 30, 2015
 
December 31, 2014
 
 
 
 
(In millions)
Net embedded derivatives within asset host contracts:
 
 
 
 
 
 
Ceded guaranteed minimum benefits
 
Premiums, reinsurance and other receivables
 
$
369

 
$
324

Funds withheld on assumed reinsurance
 
Other invested assets
 
40

 
53

Options embedded in debt or equity securities
 
Investments
 
(269
)
 
(217
)
Net embedded derivatives within asset host contracts
 
$
140

 
$
160

Net embedded derivatives within liability host contracts:
 
 
 
 
 
 
Direct guaranteed minimum benefits
 
Policyholder account balances and Future policy benefits
 
$
570

 
$
(1,126
)
Assumed guaranteed minimum benefits
 
Policyholder account balances
 
1,016

 
973

Funds withheld on ceded reinsurance
 
Other liabilities
 
5

 
83

Other
 
Policyholder account balances
 
(14
)
 
24

Net embedded derivatives within liability host contracts
 
$
1,577

 
$
(46
)