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Derivative Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2016
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, 2016.
($ 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 not designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Interest rate contracts
 
 
 

 
 

 
 

 
 

 
 

Interest rate cap agreements
Other investments
 
$
23

 
n/a

 
$
—

 
$
—

 
$
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options
Other investments
 
—

 
4,210

 
83

 
83

 
—

Financial futures contracts
Other assets
 
—

 
52

 
—

 
—

 
—

Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps – selling protection
Other investments
 
80

 
n/a

 
1

 
1

 
—

Other contracts
 
 
 

 
 

 
 

 
 

 
 

Other contracts
Other assets
 
3

 
n/a

 
1

 
1

 
—

Subtotal
 
 
106

 
4,262

 
85

 
85

 
—

Total asset derivatives
 
 
$
106

 
4,262

 
$
85

 
$
85

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Liability derivatives
 
 
 

 
 

 
 

 
 

 
 

Derivatives designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Foreign currency swap agreements
Other liabilities & accrued expenses
 
$
49

 
n/a

 
$
4

 
$
4

 
$
—

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
 
44

 
n/a

 
1

 
1

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options and futures
Other liabilities & accrued expenses
 
—

 
4,627

 
(26
)
 
—

 
(26
)
Foreign currency contracts
 
 
 

 
 

 
 

 
 

 
 

Foreign currency forwards
Other liabilities & accrued expenses
 
173

 
n/a

 
(2
)
 
—

 
(2
)
Embedded derivative financial instruments
 
 
 

 
 

 
 

 
 

 
 

Guaranteed accumulation benefits
Contractholder funds
 
420

 
n/a

 
(38
)
 
—

 
(38
)
Guaranteed withdrawal benefits
Contractholder funds
 
299

 
n/a

 
(13
)
 
—

 
(13
)
Equity-indexed and forward starting options in life and annuity product contracts
Contractholder funds
 
1,741

 
n/a

 
(255
)
 
—

 
(255
)
Other embedded derivative financial instruments
Contractholder funds
 
85

 
n/a

 
—

 
—

 
—

Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps – buying protection
Other liabilities & accrued expenses
 
86

 
n/a

 
(4
)
 
—

 
(4
)
Credit default swaps – selling protection
Other liabilities & accrued expenses
 
100

 
n/a

 
(4
)
 
—

 
(4
)
Subtotal
 
 
3,033

 
4,627

 
(341
)
 
1

 
(342
)
Total liability derivatives
 
 
3,082

 
4,627

 
(337
)
 
$
5

 
$
(342
)
Total derivatives
 
 
$
3,188

 
8,889

 
$
(252
)
 
 

 
 

___________

(1) 
Volume for OTC and cleared 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, 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
 
$
45

 
n/a

 
$
6

 
$
6

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Interest rate contracts
 
 
 

 
 

 
 

 
 

 
 

Interest rate cap agreements
Other investments
 
42

 
n/a

 
—

 
—

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options
Other investments
 
—

 
3,730

 
44

 
44

 
—

Financial futures contracts
Other assets
 
—

 
997

 
1

 
1

 
—

Foreign currency contracts
 
 
 

 
 

 
 

 
 

 
 

Foreign currency forwards
Other investments
 
81

 
n/a

 
1

 
1

 
—

Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps – buying protection
Other investments
 
51

 
n/a

 
2

 
3

 
(1
)
Credit default swaps – selling protection
Other investments
 
80

 
n/a

 
1

 
1

 
—

Other contracts
 
 
 

 
 

 
 

 
 

 
 

Other contracts
Other assets
 
3

 
n/a

 
1

 
1

 
—

Subtotal
 
 
257

 
4,727

 
50

 
51

 
(1
)
Total asset derivatives
 
 
$
302

 
4,727

 
$
56

 
$
57

 
$
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
Liability derivatives
 
 
 

 
 

 
 

 
 

 
 

Derivatives designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Foreign currency swap agreements
Other liabilities & accrued expenses
 
$
19

 
n/a

 
$
4

 
$
4

 
$
—

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
 
72

 
n/a

 
1

 
1

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options
Other liabilities & accrued expenses
 
—

 
3,645

 
(6
)
 
—

 
(6
)
Embedded derivative financial instruments
 
 
 

 
 

 
 

 
 

 
 

Guaranteed accumulation benefits
Contractholder funds
 
481

 
n/a

 
(38
)
 
—

 
(38
)
Guaranteed withdrawal benefits
Contractholder funds
 
332

 
n/a

 
(14
)
 
—

 
(14
)
Equity-indexed and forward starting options in life and annuity product contracts
Contractholder funds
 
1,781

 
n/a

 
(247
)
 
—

 
(247
)
Other embedded derivative financial instruments
Contractholder funds
 
85

 
n/a

 
—

 
—

 
—

Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps – buying protection
Other liabilities & accrued expenses
 
2

 
n/a

 
—

 
—

 
—

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

 
n/a

 
(8
)
 
—

 
(8
)
Subtotal
 
 
2,938

 
3,645

 
(312
)
 
1

 
(313
)
Total liability derivatives
 
 
2,957

 
3,645

 
(308
)
 
$
5

 
$
(313
)
Total derivatives
 
 
$
3,259

 
8,372

 
$
(252
)
 
 

 
 

____________
 
(1) 
Volume for OTC and cleared 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
September 30, 2016
 

 
 

 
 

 
 

 
 

 
 

Asset derivatives
$
5

 
$
(5
)
 
$
—

 
$
—

 
$
—

 
$
—

Liability derivatives
(8
)
 
5

 
(5
)
 
(8
)
 
6

 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 

 
 

 
 

 
 

 
 

 
 

Asset derivatives
$
15

 
$
(6
)
 
$
(5
)
 
$
4

 
$
(1
)
 
$
3

Liability derivatives
(9
)
 
6

 
(5
)
 
(8
)
 
7

 
(1
)
Offsetting Liabilities [Table Text Block]
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, 2016
 

 
 

 
 

 
 

 
 

 
 

Asset derivatives
$
5

 
$
(5
)
 
$
—

 
$
—

 
$
—

 
$
—

Liability derivatives
(8
)
 
5

 
(5
)
 
(8
)
 
6

 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 

 
 

 
 

 
 

 
 

 
 

Asset derivatives
$
15

 
$
(6
)
 
$
(5
)
 
$
4

 
$
(1
)
 
$
3

Liability derivatives
(9
)
 
6

 
(5
)
 
(8
)
 
7

 
(1
)
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 $1 million during the next twelve months. There was no hedge ineffectiveness reported in realized gains and losses for the three months and nine months ended September 30, 2016 or 2015.
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Gain (loss) recognized in OCI on derivatives during the period
$
—

 
$
4

 
$
(2
)
 
$
11

Gain recognized in OCI on derivatives during the term of the hedging relationship
4

 
11

 
4

 
11

Gain (loss) reclassified from AOCI into income (net investment income)
1

 
—

 
1

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

 
—

 
3

 
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 and nine months ended September 30, 2016 and 2015, 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
 
Total gain (loss) recognized in net income on derivatives
Three months ended September 30, 2016
 

 
 

 
 

 
 

Equity and index contracts
$
(2
)

$
—


$
14


$
12

Embedded derivative financial instruments
—


3


(5
)

(2
)
Foreign currency contracts
(2
)

—


—


(2
)
Credit default contracts
3


—


—


3

Total
$
(1
)

$
3


$
9


$
11

 
 
 
 
 
 
 
 
Nine months ended September 30, 2016
 

 
 

 
 

 
 

Interest rate contracts
$
(1
)
 
$
—

 
$
—

 
$
(1
)
Equity and index contracts
(3
)
 
—

 
9

 
6

Embedded derivative financial instruments
—

 
1

 
(8
)
 
(7
)
Foreign currency contracts
(3
)
 
—

 
—

 
(3
)
Credit default contracts
2

 
—

 
—

 
2

Total
$
(5
)
 
$
1

 
$
1

 
$
(3
)
 
 
 
 
 
 
 
 
Three months ended September 30, 2015
 
 
 
 
 
 
 
Interest rate contracts
$
(1
)
 
$
—

 
$
—

 
$
(1
)
Equity and index contracts
11

 
—

 
(27
)
 
(16
)
Embedded derivative financial instruments
—

 
(8
)
 
28

 
20

Foreign currency contracts
3

 
—

 
—

 
3

Credit default contracts
2

 
—

 
—

 
2

Other contracts
—

 
—

 
(1
)
 
(1
)
Total
$
15

 
$
(8
)
 
$
—

 
$
7

 
 
 
 
 
 
 
 
Nine months ended September 30, 2015
 
 
 
 
 
 
 
Equity and index contracts
$
10

 
$
—

 
$
(23
)
 
$
(13
)
Embedded derivative financial instruments
—

 
(8
)
 
36

 
28

Foreign currency contracts
5

 
—

 
—

 
5

Credit default contracts
3

 
—

 
—

 
3

Total
$
18

 
$
(8
)
 
$
13

 
$
23
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, 2016
 
December 31, 2015
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

 
$
63

 
$
3

 
$
—

 
1

 
$
82

 
$
5

 
$
—

A
 
3

 
43

 
1

 
1

 
5

 
178

 
6

 
6

A-
 
—

 
—

 
—

 
—

 
1

 
16

 
3

 
—

BBB+
 
1

 
1

 
—

 
—

 
2

 
36

 
—

 
—

Total
 
5

 
$
107

 
$
4

 
$
1

 
9

 
$
312

 
$
14

 
$
6

__________
 
(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, 2016
 
December 31, 2015
Gross liability fair value of contracts containing credit-risk-contingent features
$
4

 
$
9

Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs
(1
)
 
(1
)
Collateral posted under MNAs for contracts containing credit-risk-contingent features
—

 
(7
)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently
$
3

 
$
1
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, 2016
 

 
 

 
 

 
 

 
 

 
 

First-to-default Basket
 

 
 

 
 

 
 

 
 

 
 

Municipal
$
—

 
$
—

 
$
100

 
$
—

 
$
100

 
$
(4
)
Index
 

 
 

 
 

 
 

 
 

 
 

Corporate debt
1

 
19

 
49

 
11

 
80

 
1

Total
$
1

 
$
19

 
$
149

 
$
11

 
$
180

 
$
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 

 
 

 
 

 
 

 
 

 
 

First-to-default Basket
 

 
 

 
 

 
 

 
 

 
 

Municipal
$
—

 
$
—

 
$
100

 
$
—

 
$
100

 
$
(8
)
Index
 

 
 

 
 

 
 

 
 

 
 

Corporate debt
1

 
20

 
52

 
7

 
80

 
1

Total
$
1

 
$
20

 
$
152

 
$
7

 
$
180

 
$
(7
)