Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2013

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 March 31, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	908	$	1,089	$	--			$	1,997
Municipal		--		4,318		251				4,569
Corporate		--		30,497		1,363				31,860
Foreign government		--		1,155		--				1,155
ABS		--		1,499		211				1,710
RMBS		--		1,622		--				1,622
CMBS		--		1,286		6				1,292
Redeemable preferred stock		--		17		1				18
Total fixed income securities		908		41,483		1,832				44,223
Equity securities		371		1		7				379
Short-term investments		248		1,095		--				1,343
Other investments:
Free-standing derivatives		--		264		4	$	(47)		221
Separate account assets		6,750		--		--				6,750
Other assets		--		--		1				1
Total recurring basis assets		8,277		42,843		1,844		(47)		52,917
Non-recurring basis (1)		--		--		20				20
Total assets at fair value	$	8,277	$	42,843	$	1,864	$	(47)	$	52,937
% of total assets at fair value		15.6 %		80.9 %		3.5 %		-- %		100.0 %
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(567)			$	(567)
Other liabilities:
Free-standing derivatives		--		(155)		(24)	$	24		(155)
Total liabilities at fair value	$	--	$	(155)	$	(591)	$	24	$	(722)
% of total liabilities at fair value		-- %		21.5 %		81.8 %		(3.3) %		100.0 %

______________

(1)  Includes $20 million of other investments written-down to fair value in connection with recognizing other-than-temporary impairments.

($ 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, 2012
Assets
Fixed income securities:
U.S. government and agencies	$	1,074	$	1,305	$	--			$	2,379
Municipal		--		4,366		338				4,704
Corporate		--		30,030		1,501				31,531
Foreign government		--		1,180		--				1,180
ABS		--		1,666		199				1,865
RMBS		--		1,791		--				1,791
CMBS		--		1,387		21				1,408
Redeemable preferred stock		--		17		1				18
Total fixed income securities		1,074		41,742		2,060				44,876
Equity securities		338		--		7				345
Short-term investments		220		655		--				875
Other investments:
Free-standing derivatives		--		173		3	$	(47)		129
Separate account assets		6,610		--		--				6,610
Other assets		2		--		1				3
Total recurring basis assets		8,244		42,570		2,071		(47)		52,838
Non-recurring basis (1)		--		--		6				6
Total assets at fair value	$	8,244	$	42,570	$	2,077	$	(47)	$	52,844
% of total assets at fair value		15.6 %		80.6 %		3.9 %		(0.1) %		100.0 %
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(553)			$	(553)
Other liabilities:
Free-standing derivatives		--		(91)		(30)	$	29		(92)
Total liabilities at fair value	$	--	$	(91)	$	(583)	$	29	$	(645)
% of total liabilities at fair value		-- %		14.1 %		90.4 %		(4.5) %		100.0 %

______________

(1)  Includes $4 million of mortgage loans, $1 million of limited partnership interests and $1 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
March 31, 2013
ARS backed by student loans	$	115	Discounted cash flow model	Anticipated date liquidity will return to the market	18 - 60 months	36 - 48 months
Derivatives embedded in life and annuity contracts - Equity-indexed and forward starting options	$	(459)	Stochastic cash flow model	Projected option cost	1.0 - 2.0 %	1.89 %
December 31, 2012
ARS backed by student loans	$	202	Discounted cash flow model	Anticipated date liquidity will return to the market	18 - 60 months	32 - 44 months
Derivatives embedded in life and annuity contracts - Equity-indexed and forward starting options	$	(419)	Stochastic cash flow model	Projected option cost	1.0 - 2.0 %	1.92 %

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

($ in millions)					Total gains (losses) included in:
		Balance as of December 31, 2012			Net income (1)			OCI			Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	338		$	(12	)	$	26		$	--	$	--
Corporate		1,501			12			(2	)		25		(125	)
ABS		199			--			7			17		--
CMBS		21			--			2			--		--
Redeemable preferred stock		1			--			--			--		--
Total fixed income securities		2,060			--			33			42		(125	)
Equity securities		7			--			--			--		--
Other investments:
Free-standing derivatives, net		(27	)		7			--			--		--
Other assets		1			--			--			--		--
Total recurring Level 3 assets	$	2,041		$	7		$	33		$	42	$	(125	)
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(553	)	$	6		$	--		$	--	$	--
Total recurring Level 3 liabilities	$	(553	)	$	6		$	--		$	--	$	--

		Purchases		Sales			Issues			Settlements			Balance as of March 31, 2013
Assets
Fixed income securities:
Municipal	$	--	$	(101	)	$	--		$	--		$	251
Corporate		72		(109	)		--			(11	)		1,363
ABS		--		(8	)		--			(4	)		211
CMBS		--		(17	)		--			--			6
Redeemable preferred stock		--		--			--			--			1
Total fixed income securities		72		(235	)		--			(15	)		1,832
Equity securities		--		--			--			--			7
Other investments:
Free-standing derivatives, net		1		--			--			(1	)		(20	)	(2)
Other assets		--		--			--			--			1
Total recurring Level 3 assets	$	73	$	(235	)	$	--		$	(16	)	$	1,820
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--		$	(24	)	$	4		$	(567	)
Total recurring Level 3 liabilities	$	--	$	--		$	(24	)	$	4		$	(567	)

______________

(1)  The effect to net income totals $13 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, $(20) million in interest credited to contractholder funds and $26 million in contract benefits.

(2)  Comprises $4 million of assets and $24 million of liabilities.

($ in millions)					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		$	--		$	--	$	--	$	--
Corporate		1,319			5			26		56		(10	)
ABS		254			13			13		--		--
RMBS		47			--			--		--		(47	)
CMBS		30			(1	)		6		--		--
Redeemable preferred stock		1			--			--		--		--
Total fixed income securities		2,038			17			45		56		(57	)
Equity securities		14			--			--		--		--
Other investments:
Free-standing derivatives, net		(88	)		15			--		--		--
Other assets		1			--			--		--		--
Total recurring Level 3 assets	$	1,965		$	32		$	45	$	56	$	(57	)
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(723	)	$	(25	)	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(723	)	$	(25	)	$	--	$	--	$	--

		Purchases		Sales			Issues			Settlements			Balance as of March 31, 2012
Assets
Fixed income securities:
Municipal	$	--	$	--		$	--		$	--		$	387
Corporate		19		(54	)		--			(32	)		1,329
ABS		--		--			--			(3	)		277
RMBS		--		--			--			--			--
CMBS		--		--			--			(15	)		20
Redeemable preferred stock		--		--			--			--			1
Total fixed income securities		19		(54	)		--			(50	)		2,014
Equity securities		--		--			--			--			14
Other investments:
Free-standing derivatives, net		3		--			--			--			(70	)	(2)
Other assets		--		--			--			--			1
Total recurring Level 3 assets	$	22	$	(54	)	$	--		$	(50	)	$	1,959
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--		$	(12	)	$	30		$	(730	)
Total recurring Level 3 liabilities	$	--	$	--		$	(12	)	$	30		$	(730	)

______________

(1)  The effect to net income totals $7 million and is reported in the Condensed Consolidated Statements of Operations and Comprehensive Income as follows: $26 million in realized capital gains and losses, $6 million in net investment income, $(56) million in interest credited to contractholder funds and $31 million in contract benefits.

(2)  Comprises $2 million of assets and $72 million of liabilities.

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

($ in millions)		2013			2012
Assets
Fixed income securities:
Municipal	$	(7	)	$	--
Corporate		5			3
ABS		--			13
CMBS		(1	)		(1	)
Total fixed income securities		(3	)		15
Other investments:
Free-standing derivatives, net		7			15
Total recurring Level 3 assets	$	4		$	30
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	6		$	(25	)
Total recurring Level 3 liabilities	$	6		$	(25	)

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

Financial assets

($ in millions)		March 31, 2013				December 31, 2012
		Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	$	5,823	$	6,191	$	5,943	$	6,223
Cost method limited partnerships		613		784		617		778
Agent loans		318		311		319		314
Bank loans		273		276		282		282
Notes due from related party		275		275		275		275

Financial liabilities

($ in millions)		March 31, 2013				December 31, 2012
		Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	$	26,409	$	27,185	$	26,984	$	27,989
Notes due to related parties		496		496		496		496
Liability for collateral		625		625		561		561