Derivatives

6 Months Ended

Jun. 30, 2013

Derivatives [Abstract]

Derivatives

7. Derivatives

Accounting for Derivatives

  Freestanding Derivatives

Freestanding derivatives are carried in the Company’s consolidated balance sheets either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. See “— Credit Risk on Freestanding Derivatives.”

Accruals on derivatives are generally recorded in accrued investment income or within other liabilities. However, accruals that are not scheduled to settle within one year are included with the derivatives carrying value in other invested assets or other liabilities.

If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are reported in net derivative gains (losses) except as follows:

Statement of Operations Presentation:	Derivative:
Policyholder benefits and claims	—   Economic hedges of variable annuity guarantees included in future policy benefits
Net investment income	—   Economic hedges of equity method investments in joint ventures —   All derivatives held in relation to trading portfolios —   Derivatives held within contractholder-directed unit-linked investments
Other revenues	—   Derivatives held in connection with the Company’s mortgage banking activities prior to the MetLife Bank Divestiture

  Hedge Accounting

To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. Hedge designation and financial statement presentation of changes in estimated fair value of the hedging derivatives are as follows:

• Fair value hedge (a hedge of the estimated fair value of a recognized asset or liability) - in net derivative gains (losses), consistent with the change in fair value of the hedged item attributable to the designated risk being hedged.

• Cash flow hedge (a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability) - effectiveness in OCI (deferred gains or losses on the derivative are reclassified into the consolidated statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item); ineffectiveness in net derivative gains (losses).

• Net investment in a foreign operation hedge - effectiveness in OCI, consistent with the translation adjustment for the hedged net investment in the foreign operation; ineffectiveness in net derivative gains (losses).

The change in estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of operations within interest income or interest expense to match the location of the hedged item. Accruals on derivatives in net investment hedges are recognized in OCI.

In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method that will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income.

The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument.

When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item, the derivative continues to be carried in the consolidated balance sheets at its estimated fair value, with changes in estimated fair value recognized in net derivative gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in OCI related to discontinued cash flow hedges are released into the consolidated statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.

When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried in the consolidated balance sheets at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses).

In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value in the consolidated balance sheets, with changes in its estimated fair value recognized in the current period as net derivative gains (losses).

  Embedded Derivatives

The Company purchases certain securities, issues certain insurance products and investment contracts and is a party to certain reinsurance agreements that have embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. The embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative if:

• the combined instrument is not accounted for in its entirety at fair value with changes in fair value recorded in earnings;

• the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract; and

• a separate instrument with the same terms as the embedded derivative would qualify as a derivative instrument.

Such embedded derivatives are carried in the consolidated balance sheets at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses) except for those in policyholder benefits and claims related to ceded reinsurance of GMIB. If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees.

See Note 8 for information about the fair value hierarchy for derivatives.

Derivative Strategies

The Company is exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. The Company uses a variety of strategies to manage these risks, including the use of derivatives.

Derivatives are financial instruments whose values are derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”). The types of derivatives the Company uses include swaps, forwards, futures and option contracts. To a lesser extent, the Company uses credit default swaps and structured interest rate swaps to synthetically replicate investment risks and returns which are not readily available in the cash market.

  Interest Rate Derivatives

The Company uses a variety of interest rate derivatives to reduce its exposure to changes in interest rates, including interest rate swaps, caps, floors, swaptions, futures and forwards.

Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount. The Company utilizes interest rate swaps in fair value, cash flow and non-qualifying hedging relationships.

The Company uses structured interest rate swaps to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. Treasury, agency, or other fixed maturity security. Structured interest rate swaps are included in interest rate swaps. Structured interest rate swaps are not designated as hedging instruments

The Company purchases interest rate caps and floors primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities, as well as to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively. In certain instances, the Company locks in the economic impact of existing purchased caps and floors by entering into offsetting written caps and floors. The Company utilizes interest rate caps and floors in non-qualifying hedging relationships.

In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring and to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance. The Company utilizes exchange-traded interest rate futures in non-qualifying hedging relationships.

Swaptions are used by the Company to hedge interest rate risk associated with the Company’s long-term liabilities and invested assets. A swaption is an option to enter into a swap with a forward starting effective date. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. The Company utilizes swaptions in non-qualifying hedging relationships. Swaptions are included in interest rate options.

The Company enters into interest rate forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. The Company utilizes interest rate forwards in cash flow hedging relationships.

  Foreign Currency Exchange Rate Derivatives

The Company uses foreign currency exchange rate derivatives including foreign currency swaps, foreign currency forwards and currency options, to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies. The Company also uses foreign currency derivatives to hedge the foreign currency exchange rate risk associated with certain of its net investments in foreign operations.

In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount. The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in fair value, cash flow and non-qualifying hedging relationships.

In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The Company utilizes foreign currency forwards in fair value, net investment in foreign operations and non-qualifying hedging relationships.

The Company enters into currency options that give it the right, but not the obligation, to sell the foreign currency amount in exchange for a functional currency amount within a limited time at a contracted price. The contracts may also be net settled in cash, based on differentials in the foreign exchange rate and the strike price. The Company uses currency options to hedge against the foreign currency exposure inherent in certain of its variable annuity products. The Company also uses currency options as an economic hedge of foreign currency exposure related to the Company’s international subsidiaries. The Company utilizes currency options in net investment in foreign operations and non-qualifying hedging relationships.

To a lesser extent, the Company uses exchange-traded currency futures to hedge currency mismatches between assets and liabilities. The Company utilizes exchange-traded currency futures in non-qualifying hedging relationships.

  Credit Derivatives

The Company enters into purchased credit default swaps to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations, repudiation, moratorium, or involuntary restructuring. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in non-qualifying hedging relationships.

The Company enters into written credit default swaps to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments, such as U.S. Treasury securities, agency securities or other fixed maturity securities. These credit default swaps are not designated as hedging instruments.

The Company also enters into certain purchased and written credit default swaps held in relation to trading portfolios for the purpose of generating profits on short-term differences in price. These credit default swaps are not designated as hedging instruments.

The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.

  Equity Derivatives

The Company uses a variety of equity derivatives to reduce its exposure to equity market risk, including equity index options, variance swaps, exchange-traded equity futures and total rate of return swaps (“TRRs”).

Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in non-qualifying hedging relationships.

Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. The Company utilizes equity variance swaps in non-qualifying hedging relationships.

In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge liabilities embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in non-qualifying hedging relationships.

TRRs are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and the LIBOR, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses TRRs to hedge its equity market guarantees in certain of its insurance products. TRRs can be used as hedges or to synthetically create investments. The Company utilizes TRRs in non-qualifying hedging relationships.

Primary Risks Managed by Derivatives

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:

		June 30, 2013						December 31, 2012
		Notional      Amount		Estimated Fair Value				Notional      Amount		Estimated Fair Value
	Primary Underlying Risk Exposure			Assets		Liabilities				Assets		Liabilities
		(In millions)
Derivatives Designated as Hedging Instruments
Fair value hedges:
Interest rate swaps	Interest rate	$	5,434	$	1,469	$	58	$	5,397	$	1,921	$	90
Foreign currency swaps	Foreign currency exchange rate		3,004		211		167		3,187		332		85
Subtotal			8,438		1,680		225		8,584		2,253		175
Cash flow hedges:
Interest rate swaps	Interest rate		3,382		273		48		3,642		705		—
Interest rate forwards	Interest rate		1,035		79		—		675		139		—
Foreign currency swaps	Foreign currency exchange rate		11,666		366		410		9,038		219		355
Credit forwards	Credit		60		—		3		—		—		—
Subtotal			16,143		718		461		13,355		1,063		355
Foreign operations hedges:
Foreign currency forwards	Foreign currency exchange rate		4,015		91		6		2,552		43		61
Currency options	Foreign currency exchange rate		5,154		272		2		4,375		43		3
Subtotal			9,169		363		8		6,927		86		64
Total qualifying hedges			33,750		2,761		694		28,866		3,402		594
Derivatives Not Designated or Not Qualifying as Hedging Instruments
Interest rate swaps	Interest rate		104,030		3,606		1,684		83,250		5,201		2,043
Interest rate floors	Interest rate		63,064		646		515		56,246		1,174		837
Interest rate caps	Interest rate		34,960		193		—		49,465		74		—
Interest rate futures	Interest rate		6,836		11		13		11,684		1		38
Interest rate options	Interest rate		34,585		352		181		16,328		640		60
Synthetic GICs	Interest rate		4,309		—		—		4,162		—		—
Foreign currency swaps	Foreign currency exchange rate		8,671		296		485		8,208		199		736
Foreign currency forwards	Foreign currency exchange rate		11,340		148		171		9,202		26		288
Currency futures	Foreign currency exchange rate		1,238		—		2		1,408		4		—
Currency options	Foreign currency exchange rate		1,010		65		9		129		1		—
Credit default swaps -purchased	Credit		3,299		13		32		3,674		11		34
Credit default swaps -written	Credit		9,644		92		10		8,879		79		5
Equity futures	Equity market		5,982		11		54		7,008		14		132
Equity options	Equity market		30,381		2,044		610		22,920		2,825		356
Variance swaps	Equity market		21,888		114		441		19,830		122		310
Total rate of return swaps	Equity market		3,736		82		44		3,092		4		103
Total non-designated or non-qualifying derivatives			344,973		7,673		4,251		305,485		10,375		4,942
Total		$	378,723	$	10,434	$	4,945	$	334,351	$	13,777	$	5,536

Based on notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship as of June 30, 2013 and December 31, 2012. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps that are used to synthetically create credit investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. For these non-qualified derivatives, changes in market factors can lead to the recognition of fair value changes in the consolidated statement of operations without an offsetting gain or loss recognized in earnings for the item being hedged.

  Net Derivative Gains (Losses)

The components of net derivative gains (losses) were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In millions)
Derivatives and hedging gains (losses) (1)	$	(2,769)	$	3,470	$	(5,083)	$	(332)
Embedded derivatives		1,079		(1,378)		2,763		446
Total net derivative gains (losses)	$	(1,690)	$	2,092	$	(2,320)	$	114

(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.

The following table presents earned income on derivatives:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In millions)
Qualifying hedges:
Net investment income	$	35	$	31	$	71	$	55
Interest credited to policyholder account balances		36		38		71		83
Other expenses		(1)		(1)		(4)		(2)
Non-qualifying hedges:
Net investment income		(2)		(2)		(3)		(3)
Other revenues		—		15		—		33
Net derivative gains (losses)		200		240		215		229
Policyholder benefits and claims		9		52		(56)		(10)
Total	$	277	$	373	$	294	$	385

Non-Qualifying Derivatives and Derivatives for Purposes Other Than Hedging

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)		Other   Revenues (3)
	(In millions)
Three Months Ended June 30, 2013:
Interest rate derivatives	$	(2,128)	$	—	$	(19)	$	—
Foreign currency exchange rate derivatives		(533)		—		—		—
Credit derivatives - purchased		1		(1)		—		—
Credit derivatives - written		(5)		—		—		—
Equity derivatives		(329)		(4)		(82)		—
Total	$	(2,994)	$	(5)	$	(101)	$	—
Three Months Ended June 30, 2012:
Interest rate derivatives	$	2,177	$	—	$	—	$	119
Foreign currency exchange rate derivatives		320		—		—		—
Credit derivatives - purchased		17		2		—		—
Credit derivatives - written		(53)		—		—		—
Equity derivatives		792		(15)		50		—
Total	$	3,253	$	(13)	$	50	$	119
Six Months Ended June 30, 2013:
Interest rate derivatives	$	(2,361)	$	—	$	(17)	$	—
Foreign currency exchange rate derivatives		(984)		—		—		—
Credit derivatives - purchased		(5)		(4)		—		—
Credit derivatives - written		27		—		—		—
Equity derivatives		(1,882)		(11)		(356)		—
Total	$	(5,205)	$	(15)	$	(373)	$	—
Six Months Ended June 30, 2012:
Interest rate derivatives	$	718	$	—	$	—	$	5
Foreign currency exchange rate derivatives		(22)		—		—		—
Credit derivatives - purchased		(171)		(7)		—		—
Credit derivatives - written		51		—		—		—
Equity derivatives		(1,146)		(8)		(213)		—
Total	$	(570)	$	(15)	$	(213)	$	5

(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.

(3) Changes in estimated fair value related to derivatives held in connection with the Company’s mortgage banking activities prior to the MetLife Bank Divestiture.

Fair Value Hedges

The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate assets and liabilities to floating rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets and liabilities; and (iii) foreign currency forwards to hedge the foreign currency fair value exposure of foreign currency denominated fixed rate investments.

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, 2013:
Interest rate swaps:	Fixed maturity securities	$	30	$	(30)	$	—
	Policyholder liabilities (1)		(383)		381		(2)
Foreign currency swaps:	Foreign-denominated fixed maturity securities		13		(11)		2
	Foreign-denominated PABs (2)		(55)		63		8
Foreign currency forwards:	Foreign-denominated fixed maturity securities		—		—		—
Total		$	(395)	$	403	$	8
Three Months Ended June 30, 2012:
Interest rate swaps:	Fixed maturity securities	$	(10)	$	9	$	(1)
	Policyholder liabilities (1)		414		(406)		8
Foreign currency swaps:	Foreign-denominated fixed maturity securities		(1)		1		—
	Foreign-denominated PABs (2)		(133)		124		(9)
Foreign currency forwards:	Foreign-denominated fixed maturity securities		51		(50)		1
Total		$	321	$	(322)	$	(1)
Six Months Ended June 30, 2013:
Interest rate swaps:	Fixed maturity securities	$	38	$	(38)	$	—
	Policyholder liabilities (1)		(536)		533		(3)
Foreign currency swaps:	Foreign-denominated fixed maturity securities		17		(16)		1
	Foreign-denominated PABs (2)		(194)		196		2
Foreign currency forwards:	Foreign-denominated fixed maturity securities		—		—		—
Total		$	(675)	$	675	$	—
Six Months Ended June 30, 2012:
Interest rate swaps:	Fixed maturity securities	$	(4)	$	3	$	(1)
	Policyholder liabilities (1)		114		(105)		9
Foreign currency swaps:	Foreign-denominated fixed maturity securities		1		(1)		—
	Foreign-denominated PABs (2)		(76)		61		(15)
Foreign currency forwards:	Foreign-denominated fixed maturity securities		(7)		6		(1)
Total		$	28	$	(36)	$	(8)

(1) Fixed rate liabilities reported in PABs or future policy benefits.

(2) Fixed rate or floating rate liabilities.

For the Company’s foreign currency forwards, the change in the fair value of the derivative related to the changes in the difference between the spot price and the forward price is excluded from the assessment of hedge effectiveness. For all other derivatives, all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. For both the three months and six months ended June 30, 2013, no component of the change in fair value of derivatives was excluded from the assessment of hedge effectiveness. For both the three months and six months ended June 30, 2012, the component of the change in fair value of derivatives that was excluded from the assessment of hedge effectiveness was not significant.

Cash Flow Hedges

The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities; (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments; and (v) interest rate swaps and interest rate forwards to hedge forecasted fixed-rate borrowings.

In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified certain amounts from AOCI into net derivative gains (losses). These amounts were not significant for both the three months and six months ended June 30, 2013, and were $1 million and $4 million for the three months and six months ended June 30, 2012, respectively.

At both June 30, 2013 and December 31, 2012, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed eight years.

At June 30, 2013 and December 31, 2012, the balance in AOCI associated with cash flow hedges was $1.1 billion and $1.3 billion, respectively.

The following table presents the effects of derivatives in cash flow hedging relationships on the interim condensed consolidated statements of operations and comprehensive income and the interim condensed 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, 2013:
Interest rate swaps	$	(273)	$	10	$	2	$	—	$	6
Interest rate forwards		(5)		3		—		—		1
Foreign currency swaps		(30)		(68)		(1)		—		2
Credit forwards		(3)		—		1		—		—
Total	$	(311)	$	(55)	$	2	$	—	$	9
Three Months Ended June 30, 2012:
Interest rate swaps	$	491	$	(2)	$	—	$	(1)	$	(4)
Interest rate forwards		100		—		1		—		(1)
Foreign currency swaps		214		(6)		(2)		1		2
Credit forwards		—		—		1		—		—
Total	$	805	$	(8)	$	—	$	—	$	(3)
Six Months Ended June 30, 2013:
Interest rate swaps	$	(397)	$	14	$	4	$	—	$	4
Interest rate forwards		(30)		6		1		(1)		1
Foreign currency swaps		57		(257)		(2)		—		6
Credit forwards		(3)		—		1		—		—
Total	$	(373)	$	(237)	$	4	$	(1)	$	11
Six Months Ended June 30, 2012:
Interest rate swaps	$	198	$	(1)	$	1	$	(3)	$	—
Interest rate forwards		12		—		1		—		—
Foreign currency swaps		110		5		(3)		1		1
Credit forwards		—		—		1		—		—
Total	$	320	$	4	$	—	$	(2)	$	1

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

At June 30, 2013, $52 million of deferred net gains (losses) on derivatives in AOCI was expected to be reclassified to earnings within the next 12 months.

Hedges of Net Investments in Foreign Operations

The Company uses foreign currency exchange rate derivatives, which may include foreign currency forwards and currency options, to hedge portions of its net investments in foreign operations against adverse movements in exchange rates. The Company measures ineffectiveness on these derivatives based upon the change in forward rates.

When net investments in foreign operations are sold or substantially liquidated, the amounts in AOCI are reclassified to the consolidated statement of operations, while a pro rata portion will be reclassified upon partial sale of the net investments in foreign operations.

The following table presents the effects of derivatives in net investment hedging relationships in the interim condensed consolidated statements of operations and comprehensive income and the interim condensed consolidated statements of equity:

	Amount of Gains (Losses) Deferred in AOCI
Derivatives in Net Investment Hedging Relationships (1), (2)	(Effective Portion)
	(In millions)
Three Months Ended June 30, 2013:
Foreign currency forwards	$	85
Currency options		131
Total	$	216
Three Months Ended June 30, 2012:
Foreign currency forwards	$	42
Currency options		(25)
Total	$	17
Six Months Ended June 30, 2013:
Foreign currency forwards	$	165
Currency options		221
Total	$	386
Six Months Ended June 30, 2012:
Foreign currency forwards	$	(10)
Currency options		(24)
Total	$	(34)

(1) During the three months and six months ended June 30, 2013 and 2012, 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.

At June 30, 2013 and December 31, 2012, the cumulative foreign currency translation gain (loss) recorded in AOCI related to hedges of net investments in foreign operations was $288 million and ($98) million, respectively.

Credit Derivatives

In connection with synthetically created credit investment transactions and credit default swaps held in relation to the trading portfolio, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the non-qualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $9.6 billion and $8.9 billion at June 30, 2013 and December 31, 2012, respectively. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. At June 30, 2013 and December 31, 2012, the Company would have received $82 million and $74 million, respectively, to terminate all of these contracts.

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, 2013						December 31, 2012
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	$	732		2.4	$	10	$	777		2.7
Credit default swaps referencing indices		26		2,914		1.7		42		2,713		2.1
Subtotal		35		3,646		1.8		52		3,490		2.2
Baa
Single name credit default swaps (corporate)		12		1,668		3.7		8		1,314		3.4
Credit default swaps referencing indices		24		3,900		4.9		11		3,750		4.9
Subtotal		36		5,568		4.6		19		5,064		4.5
Ba
Single name credit default swaps (corporate)		—		55		3.8		—		25		2.7
Credit default swaps referencing indices		—		—		—		—		—		—
Subtotal		—		55		3.8		—		25		2.7
B
Single name credit default swaps (corporate)		—		—		—		—		—		—
Credit default swaps referencing indices		11		375		4.9		3		300		4.9
Subtotal		11		375		4.9		3		300		4.9
Total	$	82	$	9,644		3.5	$	74	$	8,879		3.6

(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.

The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. As a result, the maximum amounts of potential future recoveries available to offset the $9.6 billion and $8.9 billion from the table above were $85 million and $150 million at June 30, 2013 and December 31, 2012, respectively.

Written credit default swaps held in relation to the trading portfolio amounted to $10 million in notional and $0 in fair value at both June 30, 2013 and December 31, 2012.

Credit Risk on Freestanding Derivatives

The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements.

The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company’s OTC-bilateral derivative transactions are generally governed by ISDA Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited, to events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions. Substantially all of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives. See Note 8 for a description of the impact of credit risk on the valuation of derivatives.

The Company’s OTC-cleared derivatives are effected through central clearing counterparties and its exchange-traded derivatives are effected through regulated exchanges. Such positions are marked to market and margined on a daily basis, and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivatives.

The estimated fair value 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, 2013				December 31, 2012
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)	$	10,620	$	4,908	$	14,048	$	5,480
OTC-cleared (1)		5		1		—		—
Exchange-traded		22		69		19		170
Total gross estimated fair value of derivatives (1)		10,647		4,978		14,067		5,650
Amounts offset in the consolidated balance sheets		—		—		—		—
Estimated fair value of derivatives presented in the consolidated balance sheets (1)		10,647		4,978		14,067		5,650
Gross amounts not offset in the consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral		(4,147)		(4,147)		(4,562)		(4,562)
OTC-cleared		—		—		—		—
Exchange-traded		(20)		(20)		(19)		(19)
Cash collateral: (3)
OTC-bilateral		(3,099)		(2)		(5,960)		(1)
OTC-cleared		(5)		(1)		—		—
Exchange-traded		—		(49)		—		(151)
Securities collateral: (4)
OTC-bilateral		(3,012)		(611)		(3,526)		(875)
OTC-cleared		—		—		—		—
Exchange-traded		—		—		—		—
Net amount after application of master netting agreements and collateral	$	364	$	148	$	—	$	42

(1) At June 30, 2013 and December 31, 2012, derivative assets include income or expense accruals reported in accrued investment income or in other liabilities of $213 million and $290 million, respectively, and derivative liabilities include income or expense accruals reported in accrued investment income or in other liabilities of $33 million and $114 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 in the consolidated balance sheets. 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 in the consolidated balance sheets. 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, 2013 and December 31, 2012, the Company received excess cash collateral of $62 million and $0, respectively, and provided excess cash collateral of $329 million and $290 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 consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or repledge this collateral, but at June 30, 2013 none of the collateral had been sold or repledged. Securities collateral pledged by the Company is reported in fixed maturity securities in the consolidated balance sheets. 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 June 30, 2013 and December 31, 2012, the Company received excess securities collateral of $207 million and $161 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At June 30, 2013 and December 31, 2012, the Company provided excess securities collateral of $113 million and $0, respectively, for its OTC-bilateral derivatives, $47 million and $0, respectively, for its OTC-cleared derivatives, and $39 million and $40 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.

The Company’s collateral arrangements for its OTC-bilateral derivatives generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the fair value of that counterparty’s derivatives reaches a pre-determined threshold. Certain of these arrangements also include credit-contingent provisions that provide for a reduction of these thresholds (on a sliding scale that converges toward zero) in the event of downgrades in the credit ratings of the Company and/or the counterparty. In addition, certain of the Company’s netting agreements for derivatives contain provisions that require both the Company and the counterparty to maintain a specific investment grade credit rating from each of Moody’s and S&P. If a party’s credit ratings were to fall below that specific investment grade credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such party’s reasonable valuation of the derivatives.

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)
June 30, 2013:
Derivatives subject to credit-contingent provisions	$	700	$	724	$	—	$	19	$	31
Derivatives not subject to credit-contingent provisions		14		—		2		—		—
Total	$	714	$	724	$	2	$	19	$	31
December 31, 2012:
Derivatives subject to credit-contingent provisions	$	771	$	775	$	—	$	35	$	73
Derivatives not subject to credit-contingent provisions		79		100		1		—		—
Total	$	850	$	875	$	1	$	35	$	73

(1) After taking into consideration the existence of netting agreements.

Embedded Derivatives

The Company issues certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including GMWBs, guaranteed minimum accumulation benefits (“GMABs”) and certain GMIBs; ceded reinsurance of guaranteed minimum benefits related to GMABs and certain GMIBs; assumed reinsurance of guaranteed minimum benefits related to GMWBs and GMABs; funding agreements with equity or bond indexed crediting rates; funds withheld on assumed and ceded reinsurance; and certain debt and equity securities.

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, 2013		December 31, 2012
		(In millions)
Net embedded derivatives within asset host contracts:
Ceded guaranteed minimum benefits	Premiums, reinsurance and other receivables	$	293	$	439
Funds withheld on assumed reinsurance	Other invested assets		46		66
Options embedded in debt or equity securities	Investments		(143)		(88)
Other	Other invested assets		—		1
Net embedded derivatives within asset host contracts		$	196	$	418
Net embedded derivatives within liability host contracts:
Direct guaranteed minimum benefits	PABs	$	(736)	$	923
Assumed guaranteed minimum benefits	PABs		1,670		2,582
Funds withheld on ceded reinsurance	Other liabilities		83		162
Other	PABs		8		17
Net embedded derivatives within liability host contracts		$	1,025	$	3,684

The following table presents changes in estimated fair value related to embedded derivatives:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In millions)				(In millions)
Net derivative gains (losses) (1)	$	1,079	$	(1,378)	$	2,763	$	446
Policyholder benefits and claims	$	(33)	$	42	$	(80)	$	(5)

(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 ($236) million and ($650) million for the three months and six months ended June 30, 2013, respectively, and $608 million and ($636) million for the three months and six months ended June 30, 2012, respectively.