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Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value of Assets and Liabilities

Summary of assets and liabilities measured at fair value on a recurring and non-recurring basis

($ in millions)		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Counterparty and cash collateral netting		Balance as of September 30, 2012
Assets
Fixed income securities:
U.S. government and agencies	$	976	$	1,310	$	--			$	2,286
Municipal		--		4,386		411				4,797
Corporate		--		30,543		1,420				31,963
Foreign government		--		1,050		--				1,050
RMBS		--		2,008		--				2,008
CMBS		--		1,414		21				1,435
ABS		--		1,712		186				1,898
Redeemable preferred stock		--		17		1				18
Total fixed income securities		976		42,440		2,039				45,455
Equity securities		141		40		14				195
Short-term investments		207		1,054		--				1,261
Other investments:
Free-standing derivatives		--		312		2	$	(70)		244
Separate account assets		6,820		--		--				6,820
Other assets		--		--		1				1
Total recurring basis assets		8,144		43,846		2,056		(70)		53,976
Non-recurring basis (1)		--		--		16				16
Total assets at fair value	$	8,144	$	43,846	$	2,072	$	(70)	$	53,992
% of total assets at fair value		15.1 %		81.2 %		3.8 %		(0.1) %		100.0 %

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(551)			$	(551)
Other liabilities:
Free-standing derivatives		--		(142)		(32)	$	37		(137)
Total liabilities at fair value	$	--	$	(142)	$	(583)	$	37	$	(688)
% of total liabilities at fair value		-- %		20.6 %		84.7 %		(5.3) %		100.0 %

(1) Includes $9 million of mortgage loans and $7 million of other investments written-down to fair value in connection with recognizing other-than-temporary impairments.

($ in millions)

Fair value

Valuation
technique

Unobservable
input

Range

Weighted
average

ARS backed by
student loans

$ 275

Discounted cash
flow model

Anticipated date liquidity will
return to the
market

18 - 60 months

34 - 46 months

Derivatives
embedded in life
and annuity contracts
— Equity-indexed
and forward
starting options

$ (413)

Stochastic cash
flow model

Projected option cost

1.0 - 2.0 %

1.95 %

($ in millions)		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Counterparty and cash collateral netting		Balance as of December 31, 2011
Assets
Fixed income securities:
U.S. government and agencies	$	1,614	$	1,129	$	--			$	2,743
Municipal		--		4,305		387				4,692
Corporate		--		29,085		1,319				30,404
Foreign government		--		1,068		--				1,068
RMBS		--		2,667		47				2,714
CMBS		--		1,653		30				1,683
ABS		--		1,854		254				2,108
Redeemable preferred stock		--		15		1				16
Total fixed income securities		1,614		41,776		2,038				45,428
Equity securities		127		38		14				179
Short-term investments		46		547		--				593
Other investments:
Free-standing derivatives		--		268		1	$	(103)		166
Separate account assets		6,984		--		--				6,984
Other assets		--		--		1				1
Total recurring basis assets		8,771		42,629		2,054		(103)		53,351
Non-recurring basis (1)		--		--		24				24
Total assets at fair value	$	8,771	$	42,629	$	2,078	$	(103)	$	53,375
% of total assets at fair value		16.4 %		79.9 %		3.9 %		(0.2) %		100.0 %

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(723)			$	(723)
Other liabilities:
Free-standing derivatives		--		(96)		(89)	$	60		(125)
Total liabilities at fair value	$	--	$	(96)	$	(812)	$	60	$	(848)
% of total liabilities at fair value		-- %		11.3 %		95.8 %		(7.1) %		100.0 %

(1) Includes $19 million of mortgage loans and $5 million of other investments written-down to fair value in connection with recognizing other-than-temporary impairments.

Summary of quantitative information about the significant unobservable inputs used in Level 3 fair value measurements

($ in millions)

Fair value

Valuation
technique

Unobservable
input

Range

Weighted
average

ARS backed by
student loans

$ 275

Discounted cash
flow model

Anticipated date liquidity will
return to the
market

18 - 60 months

34 - 46 months

Derivatives
embedded in life
and annuity contracts
— Equity-indexed
and forward
starting options

$ (413)

Stochastic cash
flow model

Projected option cost

1.0 - 2.0 %

1.95 %

Schedule of rollforward of Level 3 assets and liabilities held at fair value on a recurring basis

					Total gains (losses) included in:
		Balance as of June 30, 2012			Net income (1)			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	363		$	--		$	7		$	53		$	--
Corporate		1,403			9			38			74			--
CMBS		21			(1	)		1			--			--
ABS		274			(9	)		33			42			(4	)
Redeemable preferred stock		1			--			--			--			--
Total fixed income securities		2,062			(1	)		79			169			(4	)
Equity securities		15			(1	)		--			--			--
Other investments:
Free-standing derivatives, net		(71	)		10			--			--			--
Other assets		1			--			--			--			--
Total recurring Level 3 assets	$	2,007		$	8		$	79		$	169		$	(4	)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(707	)	$	160		$	--		$	--		$	--
Total recurring Level 3 liabilities	$	(707	)	$	160		$	--		$	--		$	--

		Purchases			Sales			Issues			Settlements			Balance as of September 30, 2012
Assets
Fixed income securities:
Municipal	$	--		$	(12	)	$	--		$	--		$	411
Corporate		54			(113	)		--			(45	)		1,420
CMBS		--			--			--			--			21
ABS		--			(150	)		--			--			186
Redeemable preferred stock		--			--			--			--			1
Total fixed income securities		54			(275	)		--			(45	)		2,039
Equity securities		--			--			--			--			14
Other investments:
Free-standing derivatives, net		21			--			--			10			(30	)	(2)
Other assets		--			--			--						1
Total recurring Level 3 assets	$	75		$	(275	)	$	--		$	(35	)	$	2,024

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--		$	--		$	(24	)	$	20		$	(551	)
Total recurring Level 3 liabilities	$	--		$	--		$	(24	)	$	20		$	(551	)

(1) The effect to net income totals $168 million and is reported in the Condensed Consolidated Statements of Operations and Comprehensive Income as follows: $2 million in realized capital gains and losses, $5 million in net investment income, $143 million in interest credited to contractholder funds and $18 million in contract benefits.

(2) Comprises $2 million of assets and $32 million of liabilities.

				Total gains (losses) included in:
		Balance as of December 31, 2011		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	387	$	--	$	9	$	53	$	(10)
Corporate		1,319		16		58		207		(10)
RMBS		47		--		--		--		(47)
CMBS		30		(3)		9		--		--
ABS		254		20		45		42		(4)
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,038		33		121		302		(71)
Equity securities		14		(1)		1		--		--
Other investments:
Free-standing derivatives, net		(88)		22		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	1,965	$	54	$	122	$	302	$	(71)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(723)	$	151	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(723)	$	151	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of September 30, 2012
Assets
Fixed income securities:
Municipal	$	--	$	(28)	$	--	$	--	$	411
Corporate		98		(187)		--		(81)		1,420
RMBS		--		--		--		--		--
CMBS		--		--		--		(15)		21
ABS		--		(161)		--		(10)		186
Redeemable preferred stock		1		(1)		--		--		1
Total fixed income securities		99		(377)		--		(106)		2,039
Equity securities		5		(5)		--		--		14
Other investments:
Free-standing derivatives, net		27		--		--		9		(30)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	131	$	(382)	$	--	$	(97)	$	2,024

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(53)	$	74	$	(551)
Total recurring Level 3 liabilities	$	--	$	--	$	(53)	$	74	$	(551)

_______________

(1) The effect to net income totals $205 million and is reported in the Condensed Consolidated Statements of Operations and Comprehensive Income as follows: $37 million in realized capital gains and losses, $17 million in net investment income, $119 million in interest credited to contractholder funds and $32 million in contract benefits.

(2) Comprises $2 million of assets and $32 million of liabilities.

				Total gains (losses) included in:
		Balance as of June 30, 2011		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	433	$	--	$	(2)	$	--	$	(22)
Corporate		1,567		(6)		(20)		3		(82)
RMBS		847		--		2		--		(764)
CMBS		904		--		(4)		--		(868)
ABS		1,786		(37)		(73)		--		(88)
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		5,538		(43)		(97)		3		(1,824)
Equity securities		13		--		--		--		--
Other investments:
Free-standing derivatives, net		(67)		(40)		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	5,485	$	(83)	$	(97)	$	3	$	(1,824)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(629)	$	2	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(629)	$	2	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of September 30, 2011
Assets
Fixed income securities:
Municipal	$	--	$	(11)	$	--	$	--	$	398
Corporate		207		(48)		--		(43)		1,578
RMBS		--		--		--		(4)		81
CMBS		--		--		--		--		32
ABS		67		(1)		--		(73)		1,581
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		274		(60)		--		(120)		3,671
Equity securities		--		--		--		--		13
Other investments:
Free-standing derivatives, net		5		--		--		(1)		(103)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	279	$	(60)	$	--	$	(121)	$	3,582

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(15)	$	45	$	(597)
Total recurring Level 3 liabilities	$	--	$	--	$	(15)	$	45	$	(597)

_______________

(1) The effect to net income totals $(81) million and is reported in the Condensed Consolidated Statements of Operations as follows: $(93) million in realized capital gains and losses, $13 million in net investment income, $54 million in interest credited to contractholder funds and $(55) million in contract benefits.

(2) Comprises $1 million of assets and $104 million of liabilities.

				Total gains (losses) included in:
		Balance as of December 31, 2010		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	601	$	--	$	13	$	--	$	(33)
Corporate		1,760		27		(2)		183		(193)
RMBS		1,189		(57)		78		--		(821)
CMBS		844		(42)		111		65		(878)
ABS		1,974		17		(47)		--		(183)
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		6,369		(55)		153		248		(2,108)
Equity securities		29		(5)		--		--		(10)
Other investments:
Free-standing derivatives, net		(77)		(37)		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	6,322	$	(97)	$	153	$	248	$	(2,118)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(653)	$	(24)	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(653)	$	(24)	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of September 30, 2011
Assets
Fixed income securities:
Municipal	$	10	$	(193)	$	--	$	--	$	398
Corporate		262		(408)		--		(51)		1,578
RMBS		--		(222)		--		(86)		81
CMBS		--		(66)		--		(2)		32
ABS		146		(131)		--		(195)		1,581
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		418		(1,020)		--		(334)		3,671
Equity securities		--		(1)		--		--		13
Other investments:
Free-standing derivatives, net		20		--		--		(9)		(103)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	438	$	(1,021)	$	--	$	(343)	$	3,582

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(42)	$	122	$	(597)
Total recurring Level 3 liabilities	$	--	$	--	$	(42)	$	122	$	(597)

_______________

(1) The effect to net income totals $(121) million and is reported in the Condensed Consolidated Statements of Operations as follows: $(122) million in realized capital gains and losses, $28 million in net investment income, $(9) million in interest credited to contractholder funds and $(18) million in contract benefits.

(2) Comprises $1 million of assets and $104 million of liabilities.

Schedule of change in unrealized gains and losses included in net income for Level 3 assets and liabilities held

($ in millions)		Three months ended September 30,				Nine months ended September 30,
		2012		2011		2012		2011
Assets
Fixed income securities:
Corporate	$	5	$	(13)	$	12	$	1
RMBS		--		--		--		--
CMBS		(1)		(1)		(2)		(10)
ABS		--		(38)		--		(29)
Total fixed income securities		4		(52)		10		(38)
Equity securities		(1)		--		(1)		--
Other investments:
Free-standing derivatives, net		(7)		(39)		4		(42)
Total recurring Level 3 assets	$	(4)	$	(91)	$	13	$	(80)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	160	$	2	$	151	$	(24)
Total recurring Level 3 liabilities	$	160	$	2	$	151	$	(24)

Schedule of carrying values and fair value estimates of financial instruments not carried at fair value

Financial assets

($ in millions)		September 30, 2012				December 31, 2011
		Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	$	6,267	$	6,567	$	6,546	$	6,739
Cost method limited partnerships		631		774		754		882
Bank loans		281		282		299		290
Notes due from related party		275		275		275		235

Financial liabilities

($ in millions)		September 30, 2012				December 31, 2011
		Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	$	27,903	$	28,999	$	30,161	$	30,468
Notes due to related parties		696		696		700		659
Liability for collateral		503		503		263		263

- Definition

Tabular disclosure related to assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a recurring and/or nonrecurring basis in periods after initial recognition. Disclosures include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3) as well as transfers between levels 1 and 2.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 6

-Footnote 4

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (a,b,bb)

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2C

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-Publisher FASB

-Name Accounting Standards Codification

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-Name Accounting Standards Codification

-Topic 820

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Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 33

-Subparagraph a, b

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

- Definition

Tabular disclosure of the amount of gains or losses for the period included in earnings or resulted in a change to net assets, have arisen from the use of significant unobservable inputs (level 3) to measure the fair value of assets, liabilities, and financial instruments classified in shareholders' equity.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

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Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

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Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15

-Subparagraph b-d

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 19

-Subparagraph a, b, c(1), d(1)

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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+ Details