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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Summary of volume and fair value positions of derivative instruments and reporting location in the Statement of Financial Position

($ in millions, except number of contracts)	Asset derivatives
			Volume (1)
	Balance sheet location		Notional amount	Number of contracts		Fair value, net		Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Foreign currency swap agreements	Other investments	$	101	n/a	$	(6)	$	2	$	(8)
Total			101	n/a		(6)		2		(8)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other investments		7,941	n/a		56		74		(18)
Interest rate swaption agreements	Other investments		250	n/a		--		--		--
Interest rate cap and floor agreements	Other investments		673	n/a		2		2		--
Financial futures contracts and options	Other assets		--	2		--		--		--
Equity and index contracts
Options, futures and warrants (2)	Other investments		147	14,600		226		226		--
Options, futures and warrants	Other assets		--	167		--		--		--
Embedded derivative financial instruments
Conversion options	Fixed income securities		5	n/a		1		1		--
Equity-indexed call options	Fixed income securities		90	n/a		10		10		--
Credit default swaps	Fixed income securities		12	n/a		(12)		--		(12)
Credit default contracts
Credit default swaps – buying protection	Other investments		122	n/a		(1)		--		(1)
Credit default swaps – selling protection	Other investments		100	n/a		--		--		--
Other contracts
Other contracts	Other assets		4	n/a		1		1		--
Total			9,344	14,769		283		314		(31)

Total asset derivatives		$	9,445	14,769	$	277	$	316	$	(39)

_________________

(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.

	Liability derivatives
			Volume (1)
	Balance sheet location		Notional amount	Number of contracts		Fair value, net		Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Foreign currency swap agreements	Other liabilities & accrued expenses	$	50	n/a	$	(9)	$	--	$	(9)
Total			50	n/a		(9)		--		(9)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		85	n/a		9		9		--
Interest rate cap and floor agreements	Other liabilities & accrued expenses		359	n/a		--		--		--
Financial futures contracts and options	Other liabilities & accrued expenses		--	496		--		--		--
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		--	13,070		(105)		--		(105)
Foreign currency contracts
Foreign currency forwards and options	Other liabilities & accrued expenses		44	n/a		--		--		--
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		853	n/a		(85)		--		(85)
Guaranteed withdrawal benefits	Contractholder funds		573	n/a		(44)		--		(44)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		3,835	n/a		(413)		--		(413)
Other embedded derivative financial instruments	Contractholder funds		85	n/a		(9)		--		(9)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		114	n/a		--		1		(1)
Credit default swaps – selling protection	Other liabilities & accrued expenses		130	n/a		(32)		--		(32)
Total			6,078	13,566		(679)		10		(689)

Total liability derivatives			6,128	13,566		(688)	$	10	$	(698)

Total derivatives		$	15,573	28,335	$	(411)

_________________

($ in millions, except number of contracts)	Asset derivatives
			Volume (1)
	Balance sheet location		Notional amount	Number of contracts		Fair value, net		Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Interest rate swap agreements	Other investments	$	144	n/a	$	(8)	$	--	$	(8	)
Foreign currency swap agreements	Other investments		127	n/a		(5)		3		(8	)
Total			271	n/a		(13)		3		(16	)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other investments		8,028	n/a		122		137		(15	)
Interest rate swaption agreements	Other investments		500	n/a		--		--		--
Interest rate cap and floor agreements	Other investments		1,591	n/a		(12)		--		(12	)
Financial futures contracts and options	Other assets		n/a	40		--		--		--
Equity and index contracts
Options, futures and warrants (2)	Other investments		163	15,180		104		104		--
Options, futures and warrants	Other assets		n/a	1,011		--		--		--
Foreign currency contracts
Foreign currency swap agreements	Other investments		50	n/a		6		6		--
Embedded derivative financial instruments
Conversion options	Fixed income securities		5	n/a		--		--		--
Equity-indexed call options	Fixed income securities		150	n/a		11		11		--
Credit default swaps	Fixed income securities		170	n/a		(113)		--		(113	)
Credit default contracts
Credit default swaps – buying protection	Other investments		110	n/a		2		4		(2	)
Credit default swaps – selling protection	Other investments		32	n/a		--		--		--
Other contracts
Other contracts	Other investments		5	n/a		--		--		--
Other contracts	Other assets		4	n/a		1		1		--
Total			10,808	16,231		121		263		(142	)

Total asset derivatives		$	11,079	16,231	$	108	$	266	$	(158	)

	Liability derivatives
			Volume (1)
	Balance sheet location		Notional amount	Number of contracts		Fair value, net		Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Interest rate swap agreements	Other liabilities & accrued expenses	$	28	n/a	$	(5)	$	--	$	(5	)
Foreign currency swap agreements	Other liabilities & accrued expenses		50	n/a		(7)		--		(7	)
Total			78	n/a		(12)		--		(12	)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		85	n/a		8		8		--
Interest rate cap and floor agreements	Other liabilities & accrued expenses		914	n/a		(9)		--		(9	)
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		n/a	14,985		(49)		--		(49	)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		917	n/a		(105)		--		(105	)
Guaranteed withdrawal benefits	Contractholder funds		613	n/a		(57)		--		(57	)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		3,996	n/a		(553)		--		(553	)
Other embedded derivative financial instruments	Contractholder funds		85	n/a		(8)		--		(8	)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		127	n/a		5		6		(1	)
Credit default swaps – selling protection	Other liabilities & accrued expenses		270	n/a		(68)		1		(69	)
Total			7,007	14,985		(836)		15		(851	)

Total liability derivatives			7,085	14,985		(848)	$	15	$	(863	)

Total derivatives		$	18,164	31,216	$	(740)

Summary of impacts on operations and AOCI from foreign currency contracts, cash flow hedges

($ in millions)		Three months ended September 30,				Nine months ended September 30,
Effective portion		2012		2011		2012		2011
(Loss) gain recognized in OCI on derivatives during the period	$	(3)	$	20	$	(3)	$	7
Loss recognized in OCI on derivatives during the term of the hedging relationship		(14)		(10)		(14)		(10	)
Loss reclassified from AOCI into income (net investment income)		--		(1)		--		--

Loss reclassified from AOCI into income (realized capital gains and losses)		--		--		(1)		--
Ineffective portion and amount excluded from effectiveness testing

Gain recognized in income on derivatives (realized capital gains and losses)		--		--		--		--

Schedule of gains and losses from valuation, settlements, and hedge ineffectiveness, fair value hedges and derivatives not designated as hedges

($ in millions)		Three months ended September 30, 2012
		Net investment income		Realized capital gains and losses		Contract benefits		Interest credited to contractholder funds		Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	--	$	--	$	--	$	--	$	--
Subtotal		--		--		--		--		--

Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(1)		--		--		(1	)
Equity and index contracts		--		--		--		19		19
Embedded derivative financial instruments		--		2		18		138		158
Foreign currency contracts		--		--		--		--		--
Credit default contracts		--		7		--		--		7
Other contracts		--		--		--		1		1
Subtotal		--		8		18		158		184
Total	$	--	$	8	$	18	$	158	$	184

		Nine months ended September 30, 2012
		Net investment income		Realized capital gains and losses		Contract benefits		Interest credited to contractholder funds		Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	(1)	$	--	$	--	$	--	$	(1	)
Subtotal		(1)		--		--		--		(1	)

Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		2		--		--		2
Equity and index contracts		--		--		--		56		56
Embedded derivative financial instruments		--		20		32		140		192
Foreign currency contracts		--		(1)		--		--		(1	)
Credit default contracts		--		14		--		--		14
Other contracts		--		--		--		3		3
Subtotal		--		35		32		199		266
Total	$	(1)	$	35	$	32	$	199	$	265

		Three months ended September 30, 2011
		Net investment income		Realized capital gains and losses		Contract benefits		Interest credited to contractholder funds		Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	(1)	$	--	$	--	$	--	$	(1	)
Subtotal		(1)		--		--		--		(1	)

Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(130)		--		--		(130	)
Equity and index contracts		--		--		--		(71)		(71	)
Embedded derivative financial instruments		--		(49)		(55)		87		(17	)
Credit default contracts		--		(7)		--		--		(7	)
Other contracts		--		--		--		1		1
Subtotal		--		(186)		(55)		17		(224	)
Total	$	(1)	$	(186)	$	(55)	$	17	$	(225	)

		Nine months ended September 30, 2011
		Net investment income		Realized capital gains and losses		Contract benefits		Interest credited to contractholder funds		Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	(2)	$	(8)	$	--	$	(5)	$	(15	)
Foreign currency and interest rate contracts		--		--		--		(32)		(32	)
Subtotal		(2)		(8)		--		(37)		(47	)

Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(152)		--		--		(152	)
Equity and index contracts		--		--		--		(25)		(25	)
Embedded derivative financial instruments		--		(53)		(18)		74		3
Credit default contracts		--		6		--		--		6
Other contracts		--		--		--		6		6
Subtotal		--		(199)		(18)		55		(162	)
Total	$	(2)	$	(207)	$	(18)	$	18	$	(209	)

Summary of the changes in fair value of fair value hedging relationships

($ in millions)		Gain (loss) on derivatives				Gain (loss) on hedged risk
Location of gain or (loss) recognized in net income on derivatives		Interest rate contracts		Foreign currency & interest rate contracts		Contractholder funds		Investments

Three months ended September 30, 2012
Net investment income	$	1	$	--	$	--	$	(1	)
Total	$	1	$	--	$	--	$	(1	)

Nine months ended September 30, 2012
Net investment income	$	3	$	--	$	--	$	(3	)
Total	$	3	$	--	$	--	$	(3	)

Three months ended September 30, 2011
Net investment income	$	1	$	--	$	--	$	(1	)
Total	$	1	$	--	$	--	$	(1	)

Nine months ended September 30, 2011
Interest credited to contractholder funds	$	(7)	$	(34)	$	41	$	--
Net investment income		24		--		--		(24	)
Realized capital gains and losses		(8)		--		--		--
Total	$	9	$	(34)	$	41	$	(24	)

Summary of counterparty credit exposure by counterparty credit rating

($ in millions)	September 30, 2012							December 31, 2011

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)
AA-	--	$	--	$	--	$	--	1	$	25	$	1	$	1
A+	1		1,510		7		2	3		2,936		24		4
A	4		3,759		22		--	2		3,913		14		--
A-	2		411		--		--	2		3,815		25		--
BBB+	1		3,617		23		--	2		57		41		41
Total	8	$	9,297	$	52	$	2	10	$	10,746	$	105	$	46

(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

($ in millions)		September 30, 2012		December 31, 2011
Gross liability fair value of contracts containing credit-risk-contingent features	$	56	$	133
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs		(36)		(60	)
Collateral posted under MNAs for contracts containing credit-risk-contingent features		(20)		(72	)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	--	$	1

Schedule of 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, 2012
Single name
Investment grade corporate debt	$	--	$	5	$	--	$	--	$	5	$	--
Municipal		25		--		--		--		25		(4	)
Subtotal		25		5		--		--		30		(4	)
Baskets
First-to-default
Municipal		--		100		--		--		100		(28	)
Subtotal		--		100		--		--		100		(28	)
Index
Investment grade corporate debt		1		26		68		5		100		--
Total	$	26	$	131	$	68	$	5	$	230	$	(32	)

December 31, 2011
Single name
Investment grade corporate debt	$	40	$	45	$	15	$	10	$	110	$	(1	)
High yield debt		--		--		--		2		2		--
Municipal		25		--		--		--		25		(5	)
Subtotal		65		45		15		12		137		(6	)
Baskets
Tranche
Investment grade corporate debt		--		--		--		65		65		(29	)
First-to-default
Municipal		--		100		--		--		100		(33	)
Subtotal		--		100		--		65		165		(62	)
Total	$	65	$	145	$	15	$	77	$	302	$	(68	)

- Definition

Tabular disclosure of the location and fair value amounts of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments) reported in the statement of financial position.

+ References+ Details