Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2015

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 March 31, 2015.



($ 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	$	84	n/a	$	8		$	9	$	(1	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other investments	153		n/a	1			1		—
Equity and index contracts
Options	Other investments	—		3,070	69			69		—
Financial futures contracts	Other assets	—		1,086	1			1		—
Foreign currency contracts
Foreign currency forwards	Other investments	56		n/a	2			2		—
Credit default contracts
Credit default swaps – buying protection	Other investments	32		n/a	(1		)	—		(1		)
Credit default swaps – selling protection	Other investments	80		n/a	2			2		—
Other contracts
Other contracts	Other assets	3		n/a	1			1		—
Subtotal		324		4,156	75			76		(1		)
Total asset derivatives		$	408	4,156	$	83		$	85	$	(2	)

Liability derivatives
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses	$	85	n/a	$	—		$	—	$	—
Interest rate cap agreements	Other liabilities & accrued expenses	12		n/a	—			—		—
Financial futures contracts	Other liabilities & accrued expenses	—		214	—			—		—
Equity and index contracts
Options	Other liabilities & accrued expenses	—		3,030	(10		)	—		(10		)
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	45		n/a	—			—		—
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds	590		n/a	(31		)	—		(31		)
Guaranteed withdrawal benefits	Contractholder funds	408		n/a	(14		)	—		(14		)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds	1,785		n/a	(281		)	—		(281		)
Other embedded derivative financial instruments	Contractholder funds	85		n/a	—			—		—
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	15		n/a	—			—		—
Credit default swaps – selling protection	Other liabilities & accrued expenses	100		n/a	(9		)	—		(9		)
Subtotal		3,125		3,244	(345		)	—		(345		)
Total liability derivatives		3,125		3,244	(345		)	$	—	$	(345	)

Total derivatives		$	3,533	7,400	$	(262	)

___________


⁽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, 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	$	85	n/a	$	3		$	3	$	—

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other investments	163		n/a	2			2		—
Equity and index contracts
Options	Other investments	—		3,225	83			83		—
Financial futures contracts	Other assets	—		704	1			1		—
Foreign currency contracts
Foreign currency forwards	Other investments	57		n/a	—			—		—
Credit default contracts
Credit default swaps – buying protection	Other investments	19		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		322		3,929	89			89		—
Total asset derivatives		$	407	3,929	$	92		$	92	$	—

Liability derivatives
Derivatives designated as accounting hedging instruments
Foreign currency swap agreements	Other liabilities & accrued expenses	$	50	n/a	$	(1	)	$	—	$	(1	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses	85		n/a	1			1		—
Interest rate cap agreements	Other liabilities & accrued expenses	11		n/a	—			—		—
Financial futures contract	Other liabilities & accrued expenses	—		200	—			—		—
Equity and index contracts
Options and futures	Other liabilities & accrued expenses	—		3,131	(22		)	—		(22		)
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	36		n/a	1			1		—
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds	615		n/a	(32		)	—		(32		)
Guaranteed withdrawal benefits	Contractholder funds	425		n/a	(13		)	—		(13		)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds	1,786		n/a	(278		)	—		(278		)
Other embedded derivative financial instruments	Contractholder funds	85		n/a	—			—		—
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	49		n/a	(1		)	—		(1		)
Credit default swaps – selling protection	Other liabilities & accrued expenses	100		n/a	(9		)	—		(9		)
Subtotal		3,192		3,331	(353		)	2		(355		)
Total liability derivatives		3,242		3,331	(354		)	$	2	$	(356	)

Total derivatives		$	3,649	7,260	$	(262	)

____________


⁽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)

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
March 31, 2015
Asset derivatives	$	13		$	(2	)	$	(4	)	$	7		$	(5	)	$	2
Liability derivatives	(10		)	2			—			(8		)	6			(2		)

December 31, 2014
Asset derivatives	$	7		$	(2	)	$	—		$	5		$	(4	)	$	1
Liability derivatives	(11		)	2			—			(9		)	7			(2		)

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 gains from accumulated other comprehensive income related to cash flow hedges is expected to be a gain of $3 million during the next twelve months. There was no hedge ineffectiveness reported in realized gains and losses for the three months ended March 31, 2015 or 2014.



($ in millions)	Three months ended March 31,
	2015		2014
Gain (loss) recognized in OCI on derivatives during the period	$	8	$	(2	)
Gain (loss) recognized in OCI on derivatives during the term of the hedging relationship	7		(15		)
Loss reclassified from AOCI into income (net investment income)	—		—
Gain reclassified from AOCI into income (realized capital gains and losses)	3		—

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 and settlements reported on derivatives not designated as accounting hedging instruments in the Condensed Consolidated Statements of Operations and Comprehensive Income. For the three months ended March 31, 2015 and 2014, 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 March 31, 2015
Equity and index contracts	$	(1	)	$	—	$	4		$	—		$	3
Embedded derivative financial instruments	—			—		(3		)	—			(3		)
Foreign currency contracts	5			—		—			—			5
Total	$	4		$	—	$	1		$	—		$	5

Three months ended March 31, 2014
Interest rate contracts	$	(1	)	$	—	$	—		$	(4	)	$	(5	)
Equity and index contracts	—			—		9			—			9
Embedded derivative financial instruments	—			5		(1		)	—			4
Credit default contracts	3			—		—			—			3
Total	$	2		$	5	$	8		$	(4	)	$	11

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)	March 31, 2015							December 31, 2014
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	$	104	$	4	$	—	1	$	164	$	2	$	1
A	5	161		7		2		3	88		3		1
A-	1	10		—		—		1	8		—		—
BBB+	—	—		—		—		1	11		—		—
BBB	1	50		—		—		1	52		—		—
Total	8	$	325	$	11	$	2	7	$	323	$	5	$	2

__________


⁽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)	March 31, 2015			December 31, 2014
Gross liability fair value of contracts containing credit-risk-contingent features	$	10		$	11
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs	(2		)	(2		)
Collateral posted under MNAs for contracts containing credit-risk-contingent features	(6		)	(7		)
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
March 31, 2015
First-to-default Basket
Municipal	$	—	$	100	$	—	$	—	$	100	$	(9	)
Index
Corporate debt	1		20		52		7		80		2
Total	$	1	$	120	$	52	$	7	$	180	$	(7	)

December 31, 2014
First-to-default Basket
Municipal	$	—	$	100	$	—	$	—	$	100	$	(9	)
Index
Corporate debt	—		22		52		6		80		2
Total	$	—	$	122	$	52	$	6	$	180	$	(7	)