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Investments (Tables)
 9 Months Ended
Sep. 30, 2015
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, 2015
 

 
 

 
 

 
 

U.S. government and agencies
$
508

 
$
68

 
$
—

 
$
576

Municipal
2,212

 
323

 
(9
)
 
2,526

Corporate
18,198

 
1,045

 
(340
)
 
18,903

Foreign government
387

 
44

 
(1
)
 
430

Asset-backed securities (“ABS”)
1,737

 
9

 
(25
)
 
1,721

Residential mortgage-backed securities (“RMBS”)
439

 
54

 
(4
)
 
489

Commercial mortgage-backed securities (“CMBS”)
481

 
34

 
(3
)
 
512

Redeemable preferred stock
13

 
3

 
—

 
16

Total fixed income securities
$
23,975

 
$
1,580

 
$
(382
)
 
$
25,173

 
 
 
 
 
 
 
 
December 31, 2014
 

 
 

 
 

 
 

U.S. government and agencies
$
668

 
$
102

 
$
—

 
$
770

Municipal
3,156

 
520

 
(14
)
 
3,662

Corporate
19,465

 
1,670

 
(150
)
 
20,985

Foreign government
654

 
81

 
—

 
735

ABS
773

 
13

 
(21
)
 
765

RMBS
554

 
55

 
(4
)
 
605

CMBS
538

 
43

 
(2
)
 
579

Redeemable preferred stock
14

 
2

 
—

 
16

Total fixed income securities
$
25,822

 
$
2,486

 
$
(191
)
 
$
28,117
Schedule for fixed income securities based on contractual maturities
The scheduled maturities for fixed income securities are as follows as of September 30, 2015:
($ in millions)
Amortized
cost
 
Fair
value
Due in one year or less
$
1,054

 
$
1,064

Due after one year through five years
6,438

 
6,794

Due after five years through ten years
8,882

 
9,108

Due after ten years
4,944

 
5,485

 
21,318

 
22,451

ABS, RMBS and CMBS
2,657

 
2,722

Total
$
23,975

 
$
25,173
Schedule of net investment income
Net investment income is as follows:
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2015
 
2014
 
2015
 
2014
Fixed income securities
$
300

 
$
349

 
$
960

 
$
1,179

Mortgage loans
46

 
48

 
147

 
188

Equity securities
6

 
7

 
19

 
17

Limited partnership interests
105

 
51

 
250

 
209

Short-term investments
1

 
—

 
2

 
1

Policy loans
9

 
10

 
26

 
30

Other
19

 
15

 
55

 
43

Investment income, before expense
486

 
480

 
1,459

 
1,667

Investment expense
(13
)
 
(19
)
 
(42
)
 
(55
)
Net investment income
$
473

 
$
461

 
$
1,417

 
$
1,612
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,
 
2015
 
2014
 
2015
 
2014
Fixed income securities
$
256

 
$
(1
)
 
$
370

 
$
(1
)
Mortgage loans
1

 
2

 
2

 
3

Equity securities
(58
)
 
(5
)
 
(10
)
 
11

Limited partnership interests
(20
)
 
28

 
(18
)
 
(5
)
Derivatives
15

 
4

 
21

 
7

Other
(5
)
 
—

 
(6
)
 
3

Realized capital gains and losses
$
189

 
$
28

 
$
359

 
$
18
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,
 
2015
 
2014
 
2015
 
2014
Impairment write-downs
$
(17
)
 
$
2

 
$
(29
)
 
$
(2
)
Change in intent write-downs
(50
)
 
(21
)
 
(57
)
 
(40
)
Net other-than-temporary impairment losses recognized in earnings
(67
)
 
(19
)
 
(86
)
 
(42
)
Sales and other
241

 
43

 
427

 
51

Valuation and settlements of derivative instruments
15

 
4

 
18

 
9

Realized capital gains and losses
$
189

 
$
28

 
$
359

 
$
18
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, 2015
 
Three months ended September 30, 2014
 
Gross
 
Included
in OCI
 
Net
 
Gross
 
Included
in OCI
 
Net
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

Corporate
$
(4
)
 
$
—

 
$
(4
)
 
$
(3
)
 
$
—

 
$
(3
)
ABS
(8
)
 
6

 
(2
)
 
—

 
—

 
—

CMBS
(1
)
 
—

 
(1
)
 
—

 
—

 
—

Total fixed income securities
(13
)
 
6

 
(7
)
 
(3
)
 
—

 
(3
)
Mortgage loans
—

 
—

 
—

 
2

 
—

 
2

Equity securities
(58
)
 
—

 
(58
)
 
(21
)
 
—

 
(21
)
Limited partnership interests
—

 
—

 
—

 
3

 
—

 
3

Other
(2
)
 
—

 
(2
)
 
—

 
—

 
—

Other-than-temporary impairment losses
$
(73
)
 
$
6

 
$
(67
)
 
$
(19
)
 
$
—

 
$
(19
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2015
 
Nine months ended September 30, 2014
 
Gross
 
Included
in OCI
 
Net
 
Gross
 
Included
in OCI
 
Net
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

Municipal
$
—

 
$
—

 
$
—

 
$
(1
)
 
$
—

 
$
(1
)
Corporate
(11
)
 
3

 
(8
)
 
(3
)
 
—

 
(3
)
ABS
(10
)
 
6

 
(4
)
 
(1
)
 
—

 
(1
)
RMBS
—

 
—

 
—

 
3

 
(1
)
 
2

CMBS
(1
)
 
—

 
(1
)
 
—

 
—

 
—

Total fixed income securities
(22
)
 
9

 
(13
)
 
(2
)
 
(1
)
 
(3
)
Mortgage loans
—

 
—

 
—

 
6

 
—

 
6

Equity securities
(68
)
 
—

 
(68
)
 
(29
)
 
—

 
(29
)
Limited partnership interests
(2
)
 
—

 
(2
)
 
(16
)
 
—

 
(16
)
Other
(3
)
 
—

 
(3
)
 
—

 
—

 
—

Other-than-temporary impairment losses
$
(95
)
 
$
9

 
$
(86
)
 
$
(41
)
 
$
(1
)
 
$
(42
)
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 $134 million and $138 million as of September 30, 2015 and December 31, 2014, 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, 2015
 
December 31, 2014
Municipal
$
(5
)
 
$
(5
)
ABS
(8
)
 
(1
)
RMBS
(50
)
 
(55
)
CMBS
(6
)
 
(5
)
Total
$
(69
)
 
$
(66
)
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,
 
2015
 
2014
 
2015
 
2014
Beginning balance
$
(206
)
 
$
(229
)
 
$
(209
)
 
$
(299
)
Additional credit loss for securities previously other-than-temporarily impaired
(3
)
 
—

 
(5
)
 
2

Additional credit loss for securities not previously other-than-temporarily impaired
(4
)
 
(3
)
 
(8
)
 
(4
)
Reduction in credit loss for securities disposed or collected
13

 
9

 
20

 
19

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

 
2

 
1

Reduction in credit loss for securities sold in Lincoln Benefit Life Company (“LBL”) disposition
—

 
—

 
—

 
59

Ending balance
$
(200
)
 
$
(222
)
 
$
(200
)
 
$
(222
)
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, 2015
 
Gains
 
Losses
 
Fixed income securities
$
25,173

 
$
1,580

 
$
(382
)
 
$
1,198

Equity securities
1,370

 
21

 
(74
)
 
(53
)
Short-term investments
937

 
—

 
—

 
—

Derivative instruments (1)
11

 
11

 
—

 
11

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

 
 

 
 

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

 
 

 
 

 
1,154

Amounts recognized for:
 

 
 

 
 

 
 

Insurance reserves (3)
 

 
 

 
 

 
—

DAC and DSI (4)
 

 
 

 
 

 
(92
)
Amounts recognized
 

 
 

 
 

 
(92
)
Deferred income taxes
 

 
 

 
 

 
(377
)
Unrealized net capital gains and losses, after-tax
 

 
 

 
 

 
$
685

_______________
 
(1) 
Included in the fair value of derivative instruments are $4 million classified as assets and $(7) million classified as liabilities.
(2) 
Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ other comprehensive income. Fair value and gross unrealized gains and losses are not applicable.
(3) 
The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency. Although the Company evaluates premium deficiencies on the combined performance of life insurance and immediate annuities with life contingencies, the adjustment primarily relates to structured settlement annuities with life contingencies, in addition to annuity buy-outs and certain payout annuities with life contingencies.
(4) 
The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.
($ in millions)
Fair value
 
Gross unrealized
 
Unrealized net gains (losses)
December 31, 2014
 
Gains
 
Losses
 
Fixed income securities
$
28,117

 
$
2,486

 
$
(191
)
 
$
2,295

Equity securities
970

 
57

 
(14
)
 
43

Short-term investments
857

 
—

 
—

 
—

Derivative instruments (1)
2

 
3

 
(1
)
 
2

EMA limited partnerships
 

 
 

 
 

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

 
 

 
 

 
2,338

Amounts recognized for:
 

 
 

 
 

 
 

Insurance reserves
 

 
 

 
 

 
(28
)
DAC and DSI
 

 
 

 
 

 
(176
)
Amounts recognized
 

 
 

 
 

 
(204
)
Deferred income taxes
 

 
 

 
 

 
(752
)
Unrealized net capital gains and losses, after-tax
 

 
 

 
 

 
$
1,382

_______________
 
(1) 
Included in the fair value of derivative instruments are $3 million classified as assets and $1 million classified as liabilities.
Schedule of change in unrealized net capital gains and losses
The change in unrealized net capital gains and losses for the nine months ended September 30, 2015 is as follows:
($ in millions)
 

Fixed income securities
$
(1,097
)
Equity securities
(96
)
Derivative instruments
9

Total
(1,184
)
Amounts recognized for:
 

Insurance reserves
28

DAC and DSI
84

Amounts recognized
112

Deferred income taxes
375

Decrease in unrealized net capital gains and losses, after-tax
$
(697
)
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, 2015
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Fixed income securities
 

 
 

 
 

 
 

 
 

 
 

 
 

 
U.S. government and agencies
1

 
$
5

 
$
—

 
—

 
$
—

 
$
—

 
$
—

 
Municipal
21

 
56

 
(1
)
 
5

 
24

 
(8
)
 
(9
)
 
Corporate
686

 
3,948

 
(244
)
 
60

 
551

 
(96
)
 
(340
)
 
Foreign government
2

 
32

 
(1
)
 
—

 
—

 
—

 
(1
)
 
ABS
37

 
387

 
(8
)
 
19

 
186

 
(17
)
 
(25
)
 
RMBS
31

 
2

 
—

 
40

 
57

 
(4
)
 
(4
)
 
CMBS
6

 
32

 
—

 
2

 
4

 
(3
)
 
(3
)
 
Total fixed income securities
784

 
4,462

 
(254
)
 
126

 
822

 
(128
)
 
(382
)
 
Equity securities
419

 
742

 
(74
)
 
—

 
—

 
—

 
(74
)
 
Total fixed income and equity securities
1,203

 
$
5,204

 
$
(328
)
 
126

 
$
822

 
$
(128
)
 
$
(456
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment grade fixed income securities
422

 
$
2,931

 
$
(114
)
 
77

 
$
550

 
$
(73
)
 
$
(187
)
 
Below investment grade fixed income securities
362

 
1,531

 
(140
)
 
49

 
272

 
(55
)
 
(195
)
 
Total fixed income securities
784

 
$
4,462

 
$
(254
)
 
126

 
$
822

 
$
(128
)
 
$
(382
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Fixed income securities
 

 
 

 
 

 
 

 
 

 
 

 
 

 
U.S. government and agencies
1

 
$
1

 
$
—

 
—

 
$
—

 
$
—

 
$
—

 
Municipal
17

 
90

 
(1
)
 
10

 
47

 
(13
)
 
(14
)
 
Corporate
281

 
1,780

 
(69
)
 
91

 
875

 
(81
)
 
(150
)
 
Foreign government
—

 
—

 
—

 
1

 
15

 
—

 
—

 
ABS
19

 
168

 
(2
)
 
23

 
217

 
(19
)
 
(21
)
 
RMBS
19

 
3

 
—

 
45

 
73

 
(4
)
 
(4
)
 
CMBS
8

 
33

 
—

 
3

 
32

 
(2
)
 
(2
)
 
Total fixed income securities
345

 
2,075

 
(72
)
 
173

 
1,259

 
(119
)
 
(191
)
 
Equity securities
294

 
327

 
(13
)
 
1

 
6

 
(1
)
 
(14
)
 
Total fixed income and equity securities
639

 
$
2,402

 
$
(85
)
 
174

 
$
1,265

 
$
(120
)
 
$
(205
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment grade fixed income securities
167

 
$
1,275

 
$
(28
)
 
127

 
$
989

 
$
(79
)
 
$
(107
)
 
Below investment grade fixed income securities
178

 
800

 
(44
)
 
46

 
270

 
(40
)
 
(84
)
 
Total fixed income securities
345

 
$
2,075

 
$
(72
)
 
173

 
$
1,259

 
$
(119
)
 
$
(191
)
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, 2015
 
December 31, 2014
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
$
97

 
$
—

 
$
97

 
$
110

 
$
—

 
$
110

1.0 - 1.25
381

 
—

 
381

 
387

 
—

 
387

1.26 - 1.50
1,173

 
—

 
1,173

 
1,118

 
1

 
1,119

Above 1.50
2,166

 
1

 
2,167

 
2,054

 
—

 
2,054

Total non-impaired mortgage loans
$
3,817

 
$
1

 
$
3,818

 
$
3,669

 
$
1

 
$
3,670
Schedule of net carrying value of impaired mortgage loans
The net carrying value of impaired mortgage loans is as follows:
($ in millions)
September 30, 2015
 
December 31, 2014
Impaired mortgage loans with a valuation allowance
$
9

 
$
16

Impaired mortgage loans without a valuation allowance
—

 
—

Total impaired mortgage loans
$
9

 
$
16

Valuation allowance on impaired mortgage loans
$
7

 
$
8
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,
 
2015
 
2014
 
2015
 
2014
Beginning balance
$
7

 
$
9

 
$
8

 
$
21

Net decrease in valuation allowance
—

 
(2
)
 
—

 
(6
)
Charge offs
—

 
—

 
(1
)
 
(8
)
Ending balance
$
7

 
$
7

 
$
7

 
$
7