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Investments (Tables)
 9 Months Ended
Sep. 30, 2014
Investments [Abstract]  
Schedule for fixed income securities at amortized cost, gross unrealized gains and losses and fair value
The amortized cost, gross unrealized gains and losses and fair value for fixed income securities are as follows:
($ in millions)
Amortized
 
Gross unrealized
 
Fair
 
cost
 
Gains
 
Losses
 
value
September 30, 2014
 

 
 

 
 

 
 

U.S. government and agencies
$
683

 
$
97

 
$
—

 
$
780

Municipal
3,129

 
432

 
(14
)
 
3,547

Corporate
19,550

 
1,579

 
(113
)
 
21,016

Foreign government
660

 
80

 
(1
)
 
739

Asset-backed securities (“ABS”)
723

 
18

 
(23
)
 
718

Residential mortgage-backed securities (“RMBS”)
602

 
59

 
(5
)
 
656

Commercial mortgage-backed securities (“CMBS”)
570

 
50

 
(3
)
 
617

Redeemable preferred stock
14

 
3

 
—

 
17

Total fixed income securities
$
25,931

 
$
2,318

 
$
(159
)
 
$
28,090

 
 
 
 
 
 
 
 
December 31, 2013
 

 
 

 
 

 
 

U.S. government and agencies
$
678

 
$
90

 
$
(2
)
 
$
766

Municipal
3,135

 
231

 
(62
)
 
3,304

Corporate
20,397

 
1,214

 
(295
)
 
21,316

Foreign government
715

 
83

 
(6
)
 
792

ABS
1,011

 
30

 
(34
)
 
1,007

RMBS
752

 
50

 
(12
)
 
790

CMBS
724

 
47

 
(7
)
 
764

Redeemable preferred stock
15

 
2

 
—

 
17

Total fixed income securities
$
27,427

 
$
1,747

 
$
(418
)
 
$
28,756
Schedule for fixed income securities based on contractual maturities
The scheduled maturities for fixed income securities are as follows as of September 30, 2014:
($ in millions)
Amortized
cost
 
Fair
value
Due in one year or less
$
1,282

 
$
1,304

Due after one year through five years
5,163

 
5,602

Due after five years through ten years
10,155

 
10,709

Due after ten years
7,436

 
8,484

 
24,036

 
26,099

ABS, RMBS and CMBS
1,895

 
1,991

Total
$
25,931

 
$
28,090
Schedule of net investment income
Net investment income is as follows:
 
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
Fixed income securities
$
349

 
$
487

 
$
1,179

 
$
1,477

Mortgage loans
48

 
91

 
188

 
269

Equity securities
7

 
3

 
17

 
8

Limited partnership interests
51

 
37

 
209

 
104

Short-term investments
—

 
—

 
1

 
1

Policy loans
10

 
12

 
30

 
36

Other
15

 
18

 
43

 
50

Investment income, before expense
480

 
648

 
1,667

 
1,945

Investment expense
(19
)
 
(27
)
 
(55
)
 
(84
)
Net investment income
$
461

 
$
621

 
$
1,612

 
$
1,861
Schedule of realized capital gains and losses by asset type
Realized capital gains and losses by asset type are as follows:
 
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
Fixed income securities
$
(1
)
 
$
(12
)
 
$
(1
)
 
$
(6
)
Mortgage loans
2

 
(6
)
 
3

 
19

Equity securities
(5
)
 
5

 
11

 
37

Limited partnership interests
28

 
—

 
(5
)
 
(3
)
Derivatives
4

 
(5
)
 
7

 
14

Other
—

 
2

 
3

 
—

Realized capital gains and losses
$
28

 
$
(16
)
 
$
18

 
$
61
Schedule of realized capital gains and losses by transaction type
Realized capital gains and losses by transaction type are as follows:
 
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
Impairment write-downs
$
2

 
$
(10
)
 
$
(2
)
 
$
(28
)
Change in intent write-downs
(21
)
 
(7
)
 
(40
)
 
(15
)
Net other-than-temporary impairment losses recognized in earnings
(19
)
 
(17
)
 
(42
)
 
(43
)
Sales
43

 
6

 
51

 
90

Valuation and settlements of derivative instruments
4

 
(5
)
 
9

 
14

Realized capital gains and losses
$
28

 
$
(16
)
 
$
18

 
$
61
Schedule of other-than-temporary impairment losses by asset type
Other-than-temporary impairment losses by asset type are as follows:
($ in millions)
Three months ended September 30, 2014
 
Nine months ended September 30, 2014
 
Gross
 
Included
in OCI
 
Net
 
Gross
 
Included
in OCI
 
Net
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

Municipal
$
—

 
$
—

 
$
—

 
$
(1
)
 
$
—

 
$
(1
)
Corporate
(3
)
 
—

 
(3
)
 
(3
)
 
—

 
(3
)
ABS
—

 
—

 
—

 
(1
)
 
—

 
(1
)
RMBS
—

 
—

 
—

 
3

 
(1
)
 
2

Total fixed income securities
(3
)
 
—

 
(3
)
 
(2
)
 
(1
)
 
(3
)
Mortgage loans
2

 
—

 
2

 
6

 
—

 
6

Equity securities
(21
)
 
—

 
(21
)
 
(29
)
 
—

 
(29
)
Limited partnership interests
3

 
—

 
3

 
(16
)
 
—

 
(16
)
Other-than-temporary impairment losses
$
(19
)
 
$
—

 
$
(19
)
 
$
(41
)
 
$
(1
)
 
$
(42
)
 
Three months ended September 30, 2013
 
Nine months ended September 30, 2013
 
Gross
 
Included
in OCI
 
Net
 
Gross
 
Included
in OCI
 
Net
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

Municipal
$
—

 
$
—

 
$
—

 
$
(8
)
 
$
—

 
$
(8
)
ABS
—

 
—

 
—

 
—

 
(1
)
 
(1
)
RMBS
(5
)
 
4

 
(1
)
 
(4
)
 
3

 
(1
)
CMBS
(8
)
 
4

 
(4
)
 
(27
)
 
(4
)
 
(31
)
Total fixed income securities
(13
)
 
8

 
(5
)
 
(39
)
 
(2
)
 
(41
)
Mortgage loans
(6
)
 
—

 
(6
)
 
11

 
—

 
11

Equity securities
(4
)
 
—

 
(4
)
 
(5
)
 
—

 
(5
)
Limited partnership interests
(1
)
 
—

 
(1
)
 
(5
)
 
—

 
(5
)
Other
(1
)
 
—

 
(1
)
 
(3
)
 
—

 
(3
)
Other-than-temporary impairment losses
$
(25
)
 
$
8

 
$
(17
)
 
$
(41
)
 
$
(2
)
 
$
(43
)
Schedule of other-than-temporary impairment losses on fixed income securities included in accumulated other comprehensive income
The total amount of other-than-temporary impairment losses included in accumulated other comprehensive income at the time of impairment for fixed income securities, which were not included in earnings, are presented in the following table.  The amounts exclude $139 million and $164 million as of September 30, 2014 and December 31, 2013, respectively, of net unrealized gains related to changes in valuation of the fixed income securities subsequent to the impairment measurement date.
 
($ in millions)
September 30, 2014
 
December 31, 2013
Municipal
$
(5
)
 
$
(5
)
ABS
(6
)
 
(10
)
RMBS
(56
)
 
(90
)
CMBS
(5
)
 
(12
)
Total
$
(72
)
 
$
(117
)
Schedule of rollforwards of the cumulative credit losses recognized in earnings for fixed income securities held
Rollforwards of the cumulative credit losses recognized in earnings for fixed income securities held as of the end of the period are as follows:
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
Beginning balance
$
(229
)
 
$
(318
)
 
$
(299
)
 
$
(345
)
Additional credit loss for securities previously other-than-temporarily impaired
—

 
—

 
2

 
(12
)
Additional credit loss for securities not previously other-than-temporarily impaired
(3
)
 
(2
)
 
(4
)
 
(19
)
Reduction in credit loss for securities disposed or collected
9

 
12

 
19

 
68

Reduction in credit loss for securities the Company has made the decision to sell or more likely than not will be required to sell
—

 
—

 
—

 
—

Change in credit loss due to accretion of increase in cash flows
1

 
—

 
1

 
—

Reduction in credit loss for securities sold in LBL disposition
—

 
—

 
59

 
—

Ending balance
$
(222
)
 
$
(308
)
 
$
(222
)
 
$
(308
)
Schedule of unrealized net capital gains and losses included in accumulated other comprehensive income
Unrealized net capital gains and losses included in accumulated other comprehensive income are as follows:
($ in millions)
Fair value
 
Gross unrealized
 
Unrealized net gains (losses)
September 30, 2014
 
Gains
 
Losses
 
Fixed income securities
$
28,090

 
$
2,318

 
$
(159
)
 
$
2,159

Equity securities
1,229

 
138

 
—

 
138

Short-term investments
762

 
—

 
—

 
—

Derivative instruments (1)
(4
)
 
1

 
(5
)
 
(4
)
Equity method (“EMA”) limited partnerships (2)
 

 
 

 
 

 
(2
)
Unrealized net capital gains and losses, pre-tax
 

 
 

 
 

 
2,291

Amounts recognized for:
 

 
 

 
 

 
 

Insurance reserves (3)
 

 
 

 
 

 
(169
)
DAC and DSI (4)
 

 
 

 
 

 
(157
)
Amounts recognized
 

 
 

 
 

 
(326
)
Deferred income taxes
 

 
 

 
 

 
(693
)
Unrealized net capital gains and losses, after-tax
 

 
 

 
 

 
$
1,272

_______________
 
(1) 
Included in the fair value of derivative instruments are $1 million classified as assets and $5 million classified as liabilities.
(2) 
Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ other comprehensive income. Fair value and gross unrealized gains and losses are not applicable.
(3) 
The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency. Although the Company evaluates premium deficiencies on the combined performance of life insurance and immediate annuities with life contingencies, the adjustment primarily relates to structured settlement annuities with life contingencies, in addition to annuity buy-outs and certain payout annuities with life contingencies.
(4) 
The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.
($ in millions)
Fair value
 
Gross unrealized
 
Unrealized net gains (losses)
December 31, 2013
 
Gains
 
Losses
 
Fixed income securities
$
28,756

 
$
1,747

 
$
(418
)
 
$
1,329

Equity securities
650

 
90

 
(5
)
 
85

Short-term investments
590

 
—

 
—

 
—

Derivative instruments (1)
(13
)
 
1

 
(14
)
 
(13
)
EMA limited partnerships
 

 
 

 
 

 
(2
)
Investments classified as held for sale
 

 
 

 
 

 
190

Unrealized net capital gains and losses, pre-tax
 

 
 

 
 

 
1,589

Amounts recognized for:
 

 
 

 
 

 
 

Insurance reserves
 

 
 

 
 

 
—

DAC and DSI
 

 
 

 
 

 
(156
)
Amounts recognized
 

 
 

 
 

 
(156
)
Deferred income taxes
 

 
 

 
 

 
(506
)
Unrealized net capital gains and losses, after-tax
 

 
 

 
 

 
$
927

_______________
 
(1) 
Included in the fair value of derivative instruments are $1 million classified as assets and $14 million classified as liabilities.
Schedule of change in unrealized net capital gains and losses
The change in unrealized net capital gains and losses for the nine months ended September 30, 2014 is as follows:
($ in millions)
 

Fixed income securities
$
830

Equity securities
53

Derivative instruments
9

Investments classified as held for sale
(190
)
Total
702

Amounts recognized for:
 

Insurance reserves
(169
)
DAC and DSI
(1
)
Amounts recognized
(170
)
Deferred income taxes
(187
)
Increase in unrealized net capital gains and losses, after-tax
$
345
Summary of gross unrealized losses and fair value of fixed income and equity securities by length of time
The following table summarizes the gross unrealized losses and fair value of fixed income and equity securities by the length of time that individual securities have been in a continuous unrealized loss position.
 
($ in millions)
Less than 12 months
 
12 months or more
 
Total
unrealized
losses
 
 
Number
of issues
 
Fair
value
 
Unrealized
losses
 
Number
of issues
 
Fair
value
 
Unrealized
losses
 
 
 
September 30, 2014
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Fixed income securities
 

 
 

 
 

 
 

 
 

 
 

 
 

 
U.S. government and agencies
2

 
$
21

 
$
—

 
—

 
$
—

 
$
—

 
$
—

 
Municipal
12

 
98

 
(2
)
 
25

 
143

 
(12
)
 
(14
)
 
Corporate
278

 
1,844

 
(33
)
 
119

 
1,064

 
(80
)
 
(113
)
 
Foreign government
1

 
7

 
—

 
1

 
14

 
(1
)
 
(1
)
 
ABS
18

 
129

 
(1
)
 
26

 
239

 
(22
)
 
(23
)
 
RMBS
18

 
2

 
—

 
47

 
77

 
(5
)
 
(5
)
 
CMBS
4

 
3

 
—

 
4

 
43

 
(3
)
 
(3
)
 
Total fixed income securities
333

 
2,104

 
(36
)
 
222

 
1,580

 
(123
)
 
(159
)
 
Equity securities
2

 
8

 
—

 
—

 
—

 
—

 
—

 
Total fixed income and equity securities
335

 
$
2,112

 
$
(36
)
 
222

 
$
1,580

 
$
(123
)
 
$
(159
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment grade fixed income securities
143

 
$
1,133

 
$
(12
)
 
172

 
$
1,294

 
$
(87
)
 
$
(99
)
 
Below investment grade fixed income securities
190

 
971

 
(24
)
 
50

 
286

 
(36
)
 
(60
)
 
Total fixed income securities
333

 
$
2,104

 
$
(36
)
 
222

 
$
1,580

 
$
(123
)
 
$
(159
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Fixed income securities
 

 
 

 
 

 
 

 
 

 
 

 
 

 
U.S. government and agencies
4

 
$
76

 
$
(2
)
 
—

 
$
—

 
$
—

 
$
(2
)
 
Municipal
63

 
347

 
(24
)
 
21

 
99

 
(38
)
 
(62
)
 
Corporate
530

 
5,191

 
(224
)
 
48

 
467

 
(71
)
 
(295
)
 
Foreign government
7

 
76

 
(4
)
 
1

 
13

 
(2
)
 
(6
)
 
ABS
17

 
162

 
(1
)
 
42

 
400

 
(33
)
 
(34
)
 
RMBS
35

 
42

 
(2
)
 
47

 
129

 
(10
)
 
(12
)
 
CMBS
5

 
14

 
—

 
6

 
52

 
(7
)
 
(7
)
 
Total fixed income securities
661

 
5,908

 
(257
)
 
165


1,160


(161
)
 
(418
)
 
Equity securities
25

 
80

 
(5
)
 
—

 
—

 
—

 
(5
)
 
Total fixed income and equity securities
686

 
$
5,988

 
$
(262
)
 
165

 
$
1,160

 
$
(161
)
 
$
(423
)
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Investment grade fixed income securities
526

 
$
5,272

 
$
(236
)
 
110

 
$
834

 
$
(112
)
 
$
(348
)
 
Below investment grade fixed income securities
135

 
636

 
(21
)
 
55

 
326

 
(49
)
 
(70
)
 
Total fixed income securities
661

 
$
5,908

 
$
(257
)
 
165

 
$
1,160

 
$
(161
)
 
$
(418
)
Summary of carrying value of non-impaired fixed and variable rate mortgage loans by debt service coverage ratio distribution
The following table reflects the carrying value of non-impaired fixed rate and variable rate mortgage loans summarized by debt service coverage ratio distribution.
($ in millions)
September 30, 2014
 
December 31, 2013
Debt service coverage
ratio distribution
Fixed rate
mortgage
loans
 
Variable rate
mortgage
loans
 
Total
 
Fixed rate
mortgage
loans
 
Variable rate
mortgage
loans
 
Total
Below 1.0
$
186

 
$
—

 
$
186

 
$
153

 
$
—

 
$
153

1.0 - 1.25
351

 
—

 
351

 
560

 
—

 
560

1.26 - 1.50
1,178

 
2

 
1,180

 
1,167

 
2

 
1,169

Above 1.50
1,917

 
—

 
1,917

 
2,176

 
38

 
2,214

Total non-impaired mortgage loans
$
3,632

 
$
2

 
$
3,634

 
$
4,056

 
$
40

 
$
4,096
Schedule of net carrying value of impaired mortgage loans
The net carrying value of impaired mortgage loans is as follows:
($ in millions)
September 30, 2014
 
December 31, 2013
Impaired mortgage loans with a valuation allowance
$
10

 
$
77

Impaired mortgage loans without a valuation allowance
—

 
—

Total impaired mortgage loans
$
10

 
$
77

Valuation allowance on impaired mortgage loans
$
7

 
$
21
Schedule of rollforward of the valuation allowance on impaired mortgage loans
The rollforward of the valuation allowance on impaired mortgage loans is as follows:
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
Beginning balance
$
9

 
$
21

 
$
21

 
$
42

Net (decrease) increase in valuation allowance
(2
)
 
6

 
(6
)
 
(11
)
Charge offs
—

 
—

 
(8
)
 
(4
)
Mortgage loans classified as held for sale
—

 
(2
)
 
—

 
(2
)
Ending balance
$
7

 
$
25

 
$
7

 
$
25