XML 60 R21.htm IDEA: XBRL DOCUMENT v2.4.0.8
Derivative Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Summary of volume and fair value positions of derivative instruments and reporting location in the Condensed Consolidated Statement of Financial Position
The following table provides a summary of the volume and fair value positions of derivative instruments as well as their reporting location in the Condensed Consolidated Statement of Financial Position as of September 30, 2014.
($ in millions, except number of contracts)
 
 
Volume (1)
 
 
 
 
 
 
 
Balance sheet location
 
Notional
amount
 
Number
of
contracts
 
Fair
value,
net
 
Gross
asset
 
Gross
liability
Asset derivatives
 
 
 

 
 

 
 

 
 

 
 

Derivatives designated as accounting hedging instruments
 
 
 

 
 

 
 

 
 

 
 

Foreign currency swap agreements
Other investments
 
$
16

 
n/a

 
$
2

 
$
2

 
$
—

Derivatives not designated as accounting hedging instruments
 
 
 

 
 

 
 

 
 

 
 

Interest rate contracts
 
 
 

 
 

 
 

 
 

 
 

Interest rate cap agreements
Other investments
 
95

 
n/a

 
—

 
—

 
—

Financial futures contracts
Other assets
 
—

 
50

 
—

 
—

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options
Other investments
 
—

 
2,932

 
65

 
65

 
—

Financial futures contracts
Other assets
 
—

 
200

 
—

 
—

 
—

Foreign currency contracts
 
 
 

 
 

 
 

 
 

 
 

Foreign currency forwards
Other investments
 
62

 
n/a

 
4

 
4

 
—

Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps – buying protection
Other investments
 
22

 
n/a

 
—

 
—

 
—

Credit default swaps – selling protection
Other investments
 
80

 
n/a

 
2

 
2

 
—

Other contracts
 
 
 

 
 

 
 

 
 

 
 

Other contracts
Other assets
 
3

 
n/a

 
1

 
1

 
—

Subtotal
 
 
262

 
3,182

 
72

 
72

 
—

Total asset derivatives
 
 
$
278

 
3,182

 
$
74

 
$
74

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Liability derivatives
 
 
 

 
 

 
 

 
 

 
 

Derivatives designated as accounting hedging instruments
 
 
 

 
 

 
 

 
 

 
 

Foreign currency swap agreements
Other liabilities & accrued expenses
 
$
119

 
n/a

 
$
(6
)
 
$
—

 
$
(6
)
Derivatives not designated as accounting hedging instruments
 
 
 

 
 

 
 

 
 

 
 

Interest rate contracts
 
 
 

 
 

 
 

 
 

 
 

Interest rate swap agreements
Other liabilities & accrued expenses
 
85

 
n/a

 
3

 
3

 
—

Interest rate cap agreements
Other liabilities & accrued expenses
 
90

 
n/a

 
2

 
2

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options and futures
Other liabilities & accrued expenses
 
—

 
3,365

 
(20
)
 
—

 
(20
)
Foreign currency contracts
 
 
 

 
 

 
 

 
 

 
 

Foreign currency forwards
Other liabilities & accrued expenses
 
69

 
n/a

 
—

 
—

 
—

Embedded derivative financial instruments
 
 
 

 
 

 
 

 
 

 
 

Guaranteed accumulation benefits
Contractholder funds
 
650

 
n/a

 
(36
)
 
—

 
(36
)
Guaranteed withdrawal benefits
Contractholder funds
 
453

 
n/a

 
(13
)
 
—

 
(13
)
Equity-indexed and forward starting options in life and annuity product contracts
Contractholder funds
 
1,773

 
n/a

 
(269
)
 
—

 
(269
)
Other embedded derivative financial instruments
Contractholder funds
 
85

 
n/a

 
(3
)
 
—

 
(3
)
Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps – buying protection
Other liabilities & accrued expenses
 
68

 
n/a

 
(1
)
 
—

 
(1
)
Credit default swaps – selling protection
Other liabilities & accrued expenses
 
100

 
n/a

 
(9
)
 
—

 
(9
)
Subtotal
 
 
3,373

 
3,365

 
(346
)
 
5

 
(351
)
Total liability derivatives
 
 
3,492

 
3,365

 
(352
)
 
$
5

 
$
(357
)
 
 
 
 
 
 
 
 
 
 
 
 
Total derivatives
 
 
$
3,770

 
6,547

 
$
(278
)
 
 

 
 

___________

(1) 
Volume for OTC derivative contracts is represented by their notional amounts.  Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded.  (n/a = not applicable)






The following table provides a summary of the volume and fair value positions of derivative instruments as well as their reporting location in the Consolidated Statement of Financial Position as of December 31, 2013.
($ in millions, except number of contracts)
 
 
Volume (1)
 
 
 
 
 
 
 
Balance sheet location
 
Notional
amount
 
Number
of
contracts
 
Fair
value,
net
 
Gross
asset
 
Gross
liability
Asset derivatives
 
 
 

 
 

 
 

 
 

 
 

Derivatives designated as accounting hedging instruments
 
 
 

 
 

 
 

 
 

 
 

Foreign currency swap agreements
Other investments
 
$
16

 
n/a

 
$
1

 
$
1

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as accounting hedging instruments
 
 
 

 
 

 
 

 
 

 
 

Interest rate contracts
 
 
 

 
 

 
 

 
 

 
 

Interest rate swaption agreements
Other investments
 
1,420

 
n/a

 
—

 
—

 
—

Interest rate cap agreements
Other investments
 
61

 
n/a

 
2

 
2

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options and warrants (2)
Other investments
 
3

 
10,035

 
261

 
261

 
—

Financial futures contracts
Other assets
 
—

 
627

 
—

 
—

 
—

Foreign currency contracts
 
 
 

 
 

 
 

 
 

 
 

Foreign currency forwards
Other investments
 
47

 
n/a

 
—

 
—

 
—

Embedded derivative financial instruments
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps
Fixed income securities
 
12

 
n/a

 
(12
)
 
—

 
(12
)
Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps – buying protection
Other investments
 
1

 
n/a

 
—

 
—

 
—

Credit default swaps – selling protection
Other investments
 
85

 
n/a

 
2

 
2

 
—

Other contracts
 
 
 

 
 

 
 

 
 

 
 

Other contracts
Other assets
 
4

 
n/a

 
—

 
—

 
—

Subtotal
 
 
1,633

 
10,662

 
253

 
265

 
(12
)
Total asset derivatives
 
 
$
1,649

 
10,662

 
$
254

 
$
266

 
$
(12
)
 
 
 
 
 
 
 
 
 
 
 
 
Liability derivatives
 
 
 

 
 

 
 

 
 

 
 

Derivatives designated as accounting hedging instruments
 
 
 

 
 

 
 

 
 

 
 

Foreign currency swap agreements
Other liabilities & accrued expenses
 
$
132

 
n/a

 
$
(15
)
 
$
—

 
$
(15
)
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as accounting hedging instruments
 
 
 

 
 

 
 

 
 

 
 

Interest rate contracts
 
 
 

 
 

 
 

 
 

 
 

Interest rate swap agreements
Other liabilities & accrued expenses
 
85

 
n/a

 
4

 
4

 
—

Interest rate swaption agreements
Other liabilities & accrued expenses
 
4,570

 
n/a

 
1

 
1

 
—

Interest rate cap agreements
Other liabilities & accrued expenses
 
262

 
n/a

 
4

 
4

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options
Other liabilities & accrued expenses
 
55

 
10,035

 
(165
)
 
2

 
(167
)
Embedded derivative financial instruments
 
 
 

 
 

 
 

 
 

 
 

Guaranteed accumulation benefits
Contractholder funds
 
738

 
n/a

 
(43
)
 
—

 
(43
)
Guaranteed withdrawal benefits
Contractholder funds
 
506

 
n/a

 
(13
)
 
—

 
(13
)
Equity-indexed and forward starting options in life and annuity product contracts
Contractholder funds
 
1,693

 
n/a

 
(247
)
 
—

 
(247
)
 
Liabilities held for sale
 
2,363

 
n/a

 
(246
)
 
—

 
(246
)
Other embedded derivative financial instruments
Contractholder funds
 
85

 
n/a

 
(4
)
 
—

 
(4
)
Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps – buying protection
Other liabilities & accrued expenses
 
171

 
n/a

 
(2
)
 
—

 
(2
)
Credit default swaps – selling protection
Other liabilities & accrued expenses
 
100

 
n/a

 
(15
)
 
—

 
(15
)
Subtotal
 
 
10,628

 
10,035

 
(726
)
 
11

 
(737
)
Total liability derivatives
 
 
10,760

 
10,035

 
(741
)
 
$
11

 
$
(752
)
 
 
 
 
 
 
 
 
 
 
 
 
Total derivatives
 
 
$
12,409

 
20,697

 
$
(487
)
 
 

 
 

____________
 
(1) 
Volume for OTC derivative contracts is represented by their notional amounts.  Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded.  (n/a = not applicable)
(2) 
In addition to the number of contracts presented in the table, the Company held 837,100 stock warrants.  Stock warrants can be converted to cash upon sale of those instruments or exercised for shares of common stock.
Schedule of gross and net amounts about the Company's OTC derivatives subject to enforceable master netting arrangements
The following table provides gross and net amounts for the Company’s OTC derivatives, all of which are subject to enforceable master netting agreements.
($ in millions)
 
 
Offsets
 
 
 
 
 
 
 
Gross
amount
 
Counter-
party
netting
 
Cash
collateral
(received)
pledged
 
Net
amount on
balance
sheet
 
Securities
collateral
(received)
pledged
 
Net
amount
September 30, 2014
 

 
 

 
 

 
 

 
 

 
 

Asset derivatives
$
12

 
$
(5
)
 
$
—

 
$
7

 
$
(2
)
 
$
5

Liability derivatives
(16
)
 
5

 
—

 
(11
)
 
13

 
2

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 

 
 

 
 

 
 

 
 

 
 

Asset derivatives
$
14

 
$
(11
)
 
$
—

 
$
3

 
$
(3
)
 
$
—

Liability derivatives
(33
)
 
11

 
(4
)
 
(26
)
 
22

 
(4
)
Summary of impacts on operations and AOCI from foreign currency contracts, cash flow hedges
The following table provides a summary of the impacts of the Company’s foreign currency contracts in cash flow hedging relationships.  Amortization of net losses from accumulated other comprehensive income related to cash flow hedges is expected to be $1 million during the next twelve months.  There was no hedge ineffectiveness reported in realized gains and losses for the three months and nine months ended September 30, 2014 or 2013.
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
Gain (loss) recognized in OCI on derivatives during the period
$
10

 
$
(7
)
 
$
6

 
$
2

Loss recognized in OCI on derivatives during the term of the hedging relationship
(4
)
 
(14
)
 
(4
)
 
(14
)
Loss reclassified from AOCI into income (net investment income)
(1
)
 
—

 
(1
)
 
(1
)
Loss reclassified from AOCI into income (realized capital gains and losses)
—

 
—

 
(2
)
 
—
Schedule of gains and losses from valuation, settlements, and hedge ineffectiveness, fair value hedges and derivatives not designated as hedges
The following tables present gains and losses from valuation, settlements and hedge ineffectiveness reported on derivatives not designated as accounting hedging instruments in the Condensed Consolidated Statements of Operations and Comprehensive Income.  For the three months and nine months ended September 30, 2014 and 2013, the Company had no derivatives used in fair value hedging relationships.
($ in millions)
Realized
capital
gains and
losses
 
Contract
benefits
 
Interest
credited to
contractholder
funds
 
Loss on
disposition
of
operations
 
Total gain (loss)
recognized in
net income on
derivatives
Three months ended September 30, 2014
 

 
 

 
 

 
 

 
 

Interest rate contracts
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Equity and index contracts
—

 
—

 
4

 
—

 
4

Embedded derivative financial instruments
—

 
4

 
6

 
—

 
10

Foreign currency contracts
4

 
—

 
—

 
—

 
4

Credit default contracts
—

 
—

 
—

 
—

 
—

Other contracts
—

 
—

 
(1
)
 
—

 
(1
)
Total
$
4

 
$
4

 
$
9

 
$
—

 
$
17

 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2014
 

 
 

 
 

 
 

 
 

Interest rate contracts
$
(2
)
 
$
—

 
$
—

 
$
(4
)
 
$
(6
)
Equity and index contracts
—

 
—

 
25

 
—

 
25

Embedded derivative financial instruments
—

 
8

 
(5
)
 
—

 
3

Foreign currency contracts
4

 
—

 
—

 
—

 
4

Credit default contracts
7

 
—

 
—

 
—

 
7

Other contracts
—

 
—

 
—

 
—

 
—

Total
$
9

 
$
8

 
$
20

 
$
(4
)
 
$
33

 
Realized
capital
gains and
losses
 
Contract
benefits
 
Interest
credited to
contractholder
funds
 
Total gain (loss)
recognized in
net income on
derivatives
Three months ended September 30, 2013
 

 
 

 
 

 
 

Interest rate contracts
$
—

 
$
—

 
$
—

 
$
—

Equity and index contracts
—

 
—

 
16

 
16

Embedded derivative financial instruments
—

 
10

 
(9
)
 
1

Foreign currency contracts
(2
)
 
—

 
—

 
(2
)
Credit default contracts
(3
)
 
—

 
—

 
(3
)
Other contracts
—

 
—

 
—

 
—

Total
$
(5
)
 
$
10

 
$
7

 
$
12

 
 
 
 
 
 
 
 
Nine months ended September 30, 2013
 

 
 

 
 

 
 

Interest rate contracts
$
3

 
$
—

 
$
—

 
$
3

Equity and index contracts
—

 
—

 
63

 
63

Embedded derivative financial instruments
(1
)
 
56

 
(35
)
 
20

Foreign currency contracts
(1
)
 
—

 
—

 
(1
)
Credit default contracts
13

 
—

 
—

 
13

Other contracts
—

 
—

 
(3
)
 
(3
)
Total
$
14

 
$
56

 
$
25

 
$
95
Summary of counterparty credit exposure by counterparty credit rating
The following table summarizes the counterparty credit exposure by counterparty credit rating as it relates to the Company’s OTC derivatives.
($ in millions)
 
September 30, 2014
 
December 31, 2013
Rating (1)
 
Number of
counter-
parties
 
Notional
amount (2)
 
Credit
exposure (2)
 
Exposure,
net of
collateral (2)
 
Number of
counter-
parties
 
Notional
amount (2)
 
Credit
exposure (2)
 
Exposure,
net of
collateral (2)
A+
 
1

 
$
16

 
$
—

 
$
—

 
1

 
$
22

 
$
1

 
$
1

A
 
3

 
97

 
6

 
3

 
4

 
1,523

 
2

 
—

A-
 
1

 
8

 
1

 
1

 
1

 
24

 
1

 
—

BBB+
 
1

 
11

 
—

 
—

 
1

 
3

 
—

 
—

BBB
 
1

 
62

 
—

 
—

 
1

 
76

 
1

 
—

Total
 
7

 
$
194

 
$
7

 
$
4

 
8

 
$
1,648

 
$
5

 
$
1

__________
 
(1) 
Rating is the lower of S&P or Moody’s ratings.
(2) 
Only OTC derivatives with a net positive fair value are included for each counterparty.
Summary of derivative instruments with credit features in a liability position, including fair value of assets and collateral netted against the liability
The following summarizes the fair value of derivative instruments with termination, cross-default or collateral credit-risk-contingent features that are in a liability position, as well as the fair value of assets and collateral that are netted against the liability in accordance with provisions within legally enforceable MNAs.
($ in millions)
September 30, 2014
 
December 31, 2013
Gross liability fair value of contracts containing credit-risk-contingent features
$
10

 
$
25

Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs
(3
)
 
(9
)
Collateral posted under MNAs for contracts containing credit-risk-contingent features
(5
)
 
(14
)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently
$
2

 
$
2
Schedule of CDS notional amounts by credit rating and fair value of protection sold
The following table shows the CDS notional amounts by credit rating and fair value of protection sold.
 
($ in millions)
Notional amount
 
 
 
AA
 
A
 
BBB
 
BB and
lower
 
Total
 
Fair
value
September 30, 2014
 

 
 

 
 

 
 

 
 

 
 

Single name
 

 
 

 
 

 
 

 
 

 
 

Corporate debt
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

First-to-default Basket
 

 
 

 
 

 
 

 
 

 
 

Municipal
—

 
100

 
—

 
—

 
100

 
(9
)
Index
 

 
 

 
 

 
 

 
 

 
 

Corporate debt
1

 
26

 
50

 
3

 
80

 
2

Total
$
1

 
$
126

 
$
50

 
$
3

 
$
180

 
$
(7
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 

 
 

 
 

 
 

 
 

 
 

Single name
 

 
 

 
 

 
 

 
 

 
 

Corporate debt
$
—

 
$
5

 
$
—

 
$
—

 
$
5

 
$
—

First-to-default Basket
 

 
 

 
 

 
 

 
 

 
 

Municipal
—

 
100

 
—

 
—

 
100

 
(15
)
Index
 

 
 

 
 

 
 

 
 

 
 

Corporate debt
1

 
20

 
55

 
4

 
80

 
2

Total
$
1

 
$
125

 
$
55

 
$
4

 
$
185

 
$
(13
)