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Derivatives (Tables)
 6 Months Ended
Jun. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location
The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, excluding embedded derivatives, held at:
 
 
 
 
June 30, 2017
 
December 31, 2016
 
 
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
 
$
4,347

 
$
2,326

 
$
5

 
$
5,331

 
$
2,262

 
$
6

Foreign currency swaps
 
Foreign currency exchange rate
 
632

 
48

 
—

 
1,221

 
34

 
224

Foreign currency forwards
 
Foreign currency exchange rate
 
2,175

 
—

 
59

 
1,085

 
—

 
54

Subtotal
 
 
 
7,154

 
2,374

 
64

 
7,637

 
2,296

 
284

Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
3,886

 
331

 
16

 
2,085

 
332

 
34

Interest rate forwards
 
Interest rate
 
3,542

 
—

 
210

 
4,032

 
—

 
370

Foreign currency swaps
 
Foreign currency exchange rate
 
30,168

 
1,640

 
1,778

 
28,173

 
2,079

 
2,065

Subtotal
 
 
 
37,596

 
1,971

 
2,004

 
34,290

 
2,411

 
2,469

Foreign operations hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forwards
 
Foreign currency exchange rate
 
1,932

 
7

 
51

 
1,394

 
47

 
5

Currency options
 
Foreign currency exchange rate
 
8,236

 
34

 
114

 
8,878

 
148

 
45

Subtotal
 
 
 
10,168

 
41

 
165

 
10,272

 
195

 
50

Total qualifying hedges
 
54,918

 
4,386

 
2,233

 
52,199

 
4,902

 
2,803

Derivatives Not Designated or Not Qualifying as Hedging Instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
82,022

 
3,396

 
1,465

 
81,524

 
6,017

 
3,328

Interest rate floors
 
Interest rate
 
7,201

 
136

 
—

 
14,201

 
187

 
9

Interest rate caps
 
Interest rate
 
81,560

 
72

 
2

 
90,400

 
137

 
2

Interest rate futures
 
Interest rate
 
5,143

 
24

 
2

 
6,081

 
12

 
12

Interest rate options
 
Interest rate
 
32,884

 
822

 
48

 
20,854

 
764

 
1

Interest rate forwards
 
Interest rate
 
358

 
—

 
34

 
613

 
—

 
25

Interest rate total return swaps
 
Interest rate
 
4,198

 
26

 
389

 
5,425

 
2

 
738

Synthetic GICs
 
Interest rate
 
6,305

 
—

 
—

 
5,566

 
—

 
—

Foreign currency swaps
 
Foreign currency exchange rate
 
13,031

 
1,071

 
451

 
12,912

 
1,600

 
466

Foreign currency forwards
 
Foreign currency exchange rate
 
17,206

 
103

 
572

 
15,580

 
126

 
977

Currency futures
 
Foreign currency exchange rate
 
869

 
—

 
4

 
915

 
—

 
—

Currency options
 
Foreign currency exchange rate
 
2,481

 
51

 
—

 
3,615

 
195

 
17

Credit default swaps — purchased
 
Credit
 
1,955

 
8

 
42

 
2,038

 
14

 
40

Credit default swaps — written
 
Credit
 
13,377

 
259

 
4

 
12,645

 
189

 
9

Equity futures
 
Equity market
 
7,904

 
12

 
3

 
12,494

 
68

 
3

Equity index options
 
Equity market
 
77,608

 
1,543

 
2,024

 
54,028

 
1,323

 
1,458

Equity variance swaps
 
Equity market
 
23,231

 
266

 
866

 
23,157

 
223

 
756

Equity total return swaps
 
Equity market
 
2,630

 
3

 
78

 
3,901

 
2

 
160

Total non-designated or nonqualifying derivatives
 
379,963

 
7,792

 
5,984

 
365,949

 
10,859

 
8,001

Total
 
 
 
$
434,881

 
$
12,178

 
$
8,217

 
$
418,148

 
$
15,761

 
$
10,804

The following table presents earned income on derivatives:
 
Three Months
Ended
June 30,
 
Six Months
Ended
June 30,
 
2017
 
2016
 
2017
 
2016
 
(In millions)
Qualifying hedges:
 
 
 
 
 
 
 
Net investment income
$
76

 
$
73

 
$
157

 
$
130

Interest credited to policyholder account balances
(14
)
 
1

 
(20
)
 
7

Other expenses
(2
)
 
(4
)
 
(5
)
 
(6
)
Nonqualifying hedges:
 
 
 
 
 
 
 
Net investment income
—

 
(1
)
 
—

 
(1
)
Net derivative gains (losses)
212

 
248

 
500

 
531

Policyholder benefits and claims
5

 
6

 
11

 
11

Total
$
277

 
$
323

 
$
643

 
$
672
Components of Net Derivatives Gains (Losses)
The components of net derivative gains (losses) were as follows:
 
Three Months
Ended
June 30,
 
Six Months
Ended
June 30,
 
2017
 
2016
 
2017
 
2016
 
(In millions)
Freestanding derivatives and hedging gains (losses) (1)
$
(506
)
 
$
2,525

 
$
(2,010
)
 
$
5,029

Embedded derivatives gains (losses)
69

 
(4,624
)
 
647

 
(5,793
)
Total net derivative gains (losses)
$
(437
)
 
$
(2,099
)
 
$
(1,363
)
 
$
(764
)
__________________
(1)
Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying 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 not qualifying as hedging instruments:
 
 
Net
Derivative
Gains (Losses)
 
Net
Investment
Income (1)
 
Policyholder
Benefits and
Claims (2)
 
 
(In millions)
Three Months Ended June 30, 2017
 
 
 
 
 
 
Interest rate derivatives
 
$
277

 
$
(2
)
 
$
(12
)
Foreign currency exchange rate derivatives
 
(566
)
 
—

 
2

Credit derivatives — purchased
 
(7
)
 
—

 
—

Credit derivatives — written
 
49

 
—

 
—

Equity derivatives
 
(705
)
 
(2
)
 
(136
)
Total
 
$
(952
)
 
$
(4
)
 
$
(146
)
 
 
 
 
 
 
 
Three Months Ended June 30, 2016
 
 
 
 
 
 
Interest rate derivatives
 
$
1,657

 
$
—

 
$
55

Foreign currency exchange rate derivatives
 
1,196

 
—

 
(11
)
Credit derivatives — purchased
 
(22
)
 
(10
)
 
—

Credit derivatives — written

3

 
9

 
—

Equity derivatives
 
(213
)
 
(3
)
 
(65
)
Total
 
$
2,621

 
$
(4
)
 
$
(21
)
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
 
 
 
 
Interest rate derivatives
 
$
(382
)
 
$
—

 
$
(11
)
Foreign currency exchange rate derivatives
 
(223
)
 
—

 
2

Credit derivatives — purchased
 
(15
)
 
—

 
—

Credit derivatives — written
 
87

 
—

 
—

Equity derivatives
 
(1,998
)
 
(5
)
 
(392
)
Total
 
$
(2,531
)
 
$
(5
)
 
$
(401
)
Six Months Ended June 30, 2016
 
 
 
 
 
 
Interest rate derivatives
 
$
3,629

 
$
—

 
$
97

Foreign currency exchange rate derivatives
 
1,719

 
—

 
(12
)
Credit derivatives — purchased
 
(27
)
 
—

 
—

Credit derivatives — written
 
(3
)
 
—

 
—

Equity derivatives
 
(260
)
 
(14
)
 
(33
)
Total
 
$
5,058

 
$
(14
)
 
$
52

__________________
(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 June 30, 2017
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
—

 
$
(1
)
 
$
(1
)
 
 
Policyholder liabilities (1)
 
52

 
18

 
70

Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
(2
)
 
3

 
1

 
 
Foreign-denominated policyholder account balances (2)
 
45

 
(26
)
 
19

Foreign currency forwards:    
 
Foreign-denominated fixed maturity securities
 
(21
)
 
19

 
(2
)
Total
 
$
74

 
$
13

 
$
87

Three Months Ended June 30, 2016
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
(3
)
 
$
—

 
$
(3
)
 
 
Policyholder liabilities (1)
 
197

 
(200
)
 
(3
)
Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
7

 
(8
)
 
(1
)
 
 
Foreign-denominated policyholder account balances (2)
 
(51
)
 
48

 
(3
)
Foreign currency forwards:    
 
Foreign-denominated fixed maturity securities
 
137

 
(126
)
 
11

Total
 
$
287

 
$
(286
)
 
$
1

Six Months Ended June 30, 2017
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
1

 
$
(2
)
 
$
(1
)
 
 
Policyholder liabilities (1)
 
(1
)
 
70

 
69

Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
(5
)
 
6

 
1

 
 
Foreign-denominated policyholder account balances (2)
 
46

 
(24
)
 
22

Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
24

 
(22
)
 
2

Total
 
$
65

 
$
28

 
$
93

Six Months Ended June 30, 2016
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
(11
)
 
$
7

 
$
(4
)
 
 
Policyholder liabilities (1)
 
543

 
(548
)
 
(5
)
Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
6

 
(6
)
 
—

 
 
Foreign-denominated policyholder account balances (2)
 
(26
)
 
23

 
(3
)
Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
276

 
(254
)
 
22

Total
 
$
788

 
$
(778
)
 
$
10

__________________
(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 June 30, 2017
 
 
Foreign currency forwards
 
$
(31
)
Currency options
 
(2
)
Total
 
$
(33
)
Three Months Ended June 30, 2016
 
 
Foreign currency forwards
 
$
(104
)
Currency options
 
(146
)
Total
 
$
(250
)
Six Months Ended June 30, 2017
 
 
Foreign currency forwards
 
$
(126
)
Currency options
 
(233
)
Total
 
$
(359
)
Six Months Ended June 30, 2016
 
 
Foreign currency forwards
 
$
(335
)
Currency options
 
(314
)
Total
 
$
(649
)

__________________
(1)
During both the three months and six months ended June 30, 2017 and 2016, 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:
 
 
June 30, 2017
 
December 31, 2016
Rating Agency Designation of Referenced
Credit Obligations (1)
 
Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps
 
Weighted
Average
Years to
Maturity (2)
 
Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps
 
Weighted
Average
Years to
Maturity (2)
 
 
(Dollars in millions)
Aaa/Aa/A
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (3)
 
$
8

 
$
470

 
2.6

 
$
6

 
$
494

 
3.0

Credit default swaps referencing indices
 
52

 
2,800

 
3.2

 
42

 
2,768

 
3.6

Subtotal
 
60

 
3,270

 
3.1

 
48

 
3,262

 
3.6

Baa
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (3)
 
9

 
806

 
2.1

 
7

 
931

 
2.3

Credit default swaps referencing indices
 
163

 
8,731

 
5.1

 
106

 
7,946

 
5.0

Subtotal
 
172

 
9,537

 
4.8

 
113

 
8,877

 
4.7

Ba
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (3)
 
(2
)
 
180

 
3.7

 
(2
)
 
155

 
4.0

Credit default swaps referencing indices
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
(2
)
 
180

 
3.7

 
(2
)
 
155

 
4.0

B
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (3)
 
2

 
60

 
1.5

 
1

 
70

 
1.8

Credit default swaps referencing indices
 
23

 
330

 
5.0

 
20

 
281

 
5.0

Subtotal
 
25

 
390

 
4.4

 
21

 
351

 
4.3

Total
 
$
255

 
$
13,377

 
4.4

 
$
180

 
$
12,645

 
4.4

__________________
(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 Global Ratings (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)
The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
(3)
Single name credit default swaps may be referenced to the credit of corporations, foreign governments, or state and political subdivisions.
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:
 
 
June 30, 2017
 
December 31, 2016
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (1)
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
(In millions)
Gross estimated fair value of derivatives:
 
 
 
 
 
 
 
 
OTC-bilateral (1)
 
$
11,636

 
$
7,819

 
$
13,387

 
$
8,650

OTC-cleared (1), (6)
 
627

 
352

 
2,543

 
2,047

Exchange-traded
 
36

 
9

 
80

 
15

Total gross estimated fair value of derivatives (1)
 
12,299

 
8,180

 
16,010

 
10,712

Amounts offset on the consolidated balance sheets
 
—

 
—

 
—

 
—

Estimated fair value of derivatives presented on the consolidated balance sheets (1), (6)
 
12,299

 
8,180

 
16,010

 
10,712

Gross amounts not offset on the consolidated balance sheets:
 
 
 
 
 
 
 
 
Gross estimated fair value of derivatives: (2)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(5,311
)
 
(5,311
)
 
(6,018
)
 
(6,018
)
OTC-cleared
 
(70
)
 
(70
)
 
(1,068
)
 
(1,068
)
Exchange-traded
 
(2
)
 
(2
)
 
(5
)
 
(5
)
Cash collateral: (3), (4)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(4,369
)
 
(1
)
 
(4,897
)
 
(84
)
OTC-cleared
 
(555
)
 
(223
)
 
(1,427
)
 
(974
)
Exchange-traded
 
—

 
(1
)
 
—

 
(9
)
Securities collateral: (5)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(1,889
)
 
(2,334
)
 
(2,069
)
 
(2,516
)
OTC-cleared
 
—

 
(55
)
 
—

 
—

Exchange-traded
 
—

 
(6
)
 
—

 
—

Net amount after application of master netting agreements and collateral
 
$
103

 
$
177

 
$
526

 
$
38

__________________
(1)
At June 30, 2017 and December 31, 2016, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $121 million and $249 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of ($37) million and ($92) 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.
(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 June 30, 2017 and December 31, 2016, the Company received excess cash collateral of $495 million and $168 million, respectively, and provided excess cash collateral of $361 million and $486 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 June 30, 2017, 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 June 30, 2017 and December 31, 2016, the Company received excess securities collateral with an estimated fair value of $349 million and $217 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At June 30, 2017 and December 31, 2016, the Company provided excess securities collateral with an estimated fair value of $320 million and $297 million, respectively, for its OTC-bilateral derivatives, and $676 million and $1.2 billion, respectively, for its OTC-cleared derivatives, and $230 million and $569 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
(6)
Effective January 3, 2017, the CME amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. See Note 1 for further information on the CME amendments.
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:
 
 
June 30, 2017
 
December 31, 2016
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (1)
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
(In millions)
Gross estimated fair value of derivatives:
 
 
 
 
 
 
 
 
OTC-bilateral (1)
 
$
11,636

 
$
7,819

 
$
13,387

 
$
8,650

OTC-cleared (1), (6)
 
627

 
352

 
2,543

 
2,047

Exchange-traded
 
36

 
9

 
80

 
15

Total gross estimated fair value of derivatives (1)
 
12,299

 
8,180

 
16,010

 
10,712

Amounts offset on the consolidated balance sheets
 
—

 
—

 
—

 
—

Estimated fair value of derivatives presented on the consolidated balance sheets (1), (6)
 
12,299

 
8,180

 
16,010

 
10,712

Gross amounts not offset on the consolidated balance sheets:
 
 
 
 
 
 
 
 
Gross estimated fair value of derivatives: (2)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(5,311
)
 
(5,311
)
 
(6,018
)
 
(6,018
)
OTC-cleared
 
(70
)
 
(70
)
 
(1,068
)
 
(1,068
)
Exchange-traded
 
(2
)
 
(2
)
 
(5
)
 
(5
)
Cash collateral: (3), (4)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(4,369
)
 
(1
)
 
(4,897
)
 
(84
)
OTC-cleared
 
(555
)
 
(223
)
 
(1,427
)
 
(974
)
Exchange-traded
 
—

 
(1
)
 
—

 
(9
)
Securities collateral: (5)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(1,889
)
 
(2,334
)
 
(2,069
)
 
(2,516
)
OTC-cleared
 
—

 
(55
)
 
—

 
—

Exchange-traded
 
—

 
(6
)
 
—

 
—

Net amount after application of master netting agreements and collateral
 
$
103

 
$
177

 
$
526

 
$
38

__________________
(1)
At June 30, 2017 and December 31, 2016, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $121 million and $249 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of ($37) million and ($92) 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.
(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 June 30, 2017 and December 31, 2016, the Company received excess cash collateral of $495 million and $168 million, respectively, and provided excess cash collateral of $361 million and $486 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 June 30, 2017, 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 June 30, 2017 and December 31, 2016, the Company received excess securities collateral with an estimated fair value of $349 million and $217 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At June 30, 2017 and December 31, 2016, the Company provided excess securities collateral with an estimated fair value of $320 million and $297 million, respectively, for its OTC-bilateral derivatives, and $676 million and $1.2 billion, respectively, for its OTC-cleared derivatives, and $230 million and $569 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
(6)
Effective January 3, 2017, the CME amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. See Note 1 for further information on the CME amendments.
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 June 30, 2017
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
73

 
$
6

 
$
4

 
$
—

 
$
6

Interest rate forwards
 
94

 
2

 
2

 
1

 
(1
)
Foreign currency swaps
 
(174
)
 
414

 
(1
)
 
—

 
(1
)
Credit forwards
 
—

 
1

 
—

 
—

 
—

Total
 
$
(7
)
 
$
423

 
$
5

 
$
1

 
$
4

Three Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
140

 
$
18

 
$
4

 
$
—

 
$
1

Interest rate forwards
 
38

 
(1
)
 
2

 
1

 
—

Foreign currency swaps
 
622

 
(269
)
 
(1
)
 
—

 
4

Credit forwards
 
—

 
3

 
—

 
—

 
—

Total
 
$
800

 
$
(249
)
 
$
5

 
$
1

 
$
5

Six Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
78

 
$
14

 
$
9

 
$
—

 
$
7

Interest rate forwards
 
138

 
(2
)
 
3

 
1

 
(1
)
Foreign currency swaps
 
(13
)
 
632

 
(1
)
 
1

 
1

Credit forwards
 
—

 
1

 
—

 
—

 
—

Total
 
$
203

 
$
645

 
$
11

 
$
2

 
$
7

Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
353

 
$
28

 
$
7

 
$
—

 
$
—

Interest rate forwards
 
47

 
1

 
3

 
1

 
—

Foreign currency swaps
 
1,096

 
37

 
(1
)
 
1

 
2

Credit forwards
 
—

 
3

 
—

 
—

 
—

Total
 
$
1,496

 
$
69

 
$
9

 
$
2

 
$
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 MetLife, Inc. would be required to provide if there was a one-notch downgrade in MetLife, Inc.’s senior unsecured debt rating at the reporting date or if the Company’s credit or financial strength rating, as applicable, 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.
 
 
June 30, 2017
 
December 31, 2016
 
 
Derivatives
Subject to
Credit-
Contingent
Provisions
 
Derivatives
Not Subject
to Credit-
Contingent
Provisions
 
Total
 
Derivatives
Subject to
Credit-
Contingent
Provisions
 
Derivatives
Not Subject
to Credit-
Contingent
Provisions
 
Total
 
 
(In millions)
Estimated Fair Value of Derivatives in a Net Liability Position (1)
 
$
2,483

 
$
25

 
$
2,508

 
$
2,607

 
$
25

 
$
2,632

Estimated Fair Value of Collateral Provided:
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
$
2,572

 
$
22

 
$
2,594

 
$
2,742

 
$
31

 
$
2,773

Cash
 
$
10

 
$
—

 
$
10

 
$
91

 
$
—

 
$
91

Estimated Fair Value of Incremental Collateral Provided Upon:
 
 
 
 
 

 
 
 
 
 

One-notch downgrade in the Company’s credit or financial strength rating, as applicable
 
$
5

 
$
—

 
$
5

 
$
6

 
$
—

 
$
6

Downgrade in the Company’s credit or financial strength rating, as applicable, to a level that triggers full overnight collateralization or termination of the derivative position
 
$
5

 
$
—

 
$
5

 
$
9

 
$
—

 
$
9

__________________
(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
June 30,
 
Six Months
Ended
June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(In millions)
Net derivative gains (losses) (1)
 
$
69

 
$
(4,624
)
 
$
647

 
$
(5,793
)
Policyholder benefits and claims
 
$
14

 
$
60

 
$
(1
)
 
$
105

__________________
(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 ($138) million and ($181) million for the three months and six months ended June 30, 2017, respectively, and $1.1 billion and $1.5 billion for the three months and six months ended June 30, 2016, 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
 
June 30, 2017
 
December 31, 2016
 
 
 
 
(In millions)
Embedded derivatives within asset host contracts:
 
 
 
 
 
 
Ceded guaranteed minimum benefits
 
Premiums, reinsurance and other receivables
 
$
388

 
$
380

Options embedded in debt or equity securities
 
Investments
 
(219
)
 
(137
)
Embedded derivatives within asset host contracts
 
$
169

 
$
243

Embedded derivatives within liability host contracts:
 
 
 
 
 
 
Direct guaranteed minimum benefits
 
Policyholder account balances
 
$
2,196

 
$
2,720

Assumed guaranteed minimum benefits
 
Policyholder account balances
 
1,280

 
1,205

Funds withheld on ceded reinsurance
 
Other liabilities
 
6

 
(30
)
Fixed annuities with equity indexed returns
 
Policyholder account balances
 
407

 
210

Embedded derivatives within liability host contracts
 
$
3,889

 
$
4,105