Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2013

Summary of volume and fair value positions of derivative instruments and reporting location in the 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 March 31, 2013.

($ 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	$	16	n/a	$	3	$	3	$	--
Total			16	n/a		3		3		--

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other investments		4,284	n/a		18		26		(8)
Interest rate cap agreements	Other investments		159	n/a		1		1		--
Financial futures contracts	Other assets		n/a	238		--		--		--
Equity and index contracts
Options and warrants (2)	Other investments		10	12,230		212		212		--
Financial futures contracts	Other assets		n/a	91		--		--		--
Foreign currency contracts
Foreign currency forwards	Other investments		44	n/a		--		--		--
Embedded derivative financial instruments
Conversion options	Fixed income securities		5	n/a		--		--		--
Credit default swaps	Fixed income securities		12	n/a		(12)		--		(12)
Credit default contracts
Credit default swaps – buying protection	Other investments		37	n/a		--		--		--
Credit default swaps – selling protection	Other investments		105	n/a		1		1		--
Other contracts
Other contracts	Other assets		4	n/a		1		1		--
Total			4,660	12,559		221		241		(20)

Total asset derivatives		$	4,676	12,559	$	224	$	244	$	(20)

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(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	$	132	n/a	$	(17)	$	--	$	(17)
Total			132	n/a		(17)		--		(17)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		2,185	n/a		20		22		(2)
Interest rate swaption agreements	Other liabilities & accrued expenses		250	n/a		--		--		--
Interest rate cap agreements	Other liabilities & accrued expenses		380	n/a		2		2		--
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		125	11,539		(125)		1		(126)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		939	n/a		(70)		--		(70)
Guaranteed withdrawal benefits	Contractholder funds		635	n/a		(30)		--		(30)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		3,998	n/a		(459)		--		(459)
Other embedded derivative financial instruments	Contractholder funds		85	n/a		(8)		--		(8)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		180	n/a		(2)		--		(2)
Credit default swaps – selling protection	Other liabilities & accrued expenses		125	n/a		(24)		--		(24)
Total			8,902	11,539		(696)		25		(721)

Total liability derivatives			9,034	11,539		(713)	$	25	$	(738)

Total derivatives		$	13,710	24,098	$	(489)

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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, 2012.

($ 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	$	16	n/a	$	2	$	2	$	--
Total			16	n/a		2		2		--

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other investments		5,541	n/a		19		28		(9)
Interest rate cap agreements	Other investments		372	n/a		1		1		--
Financial futures contracts	Other assets		n/a	2		--		--		--
Equity and index contracts
Options and warrants (2)	Other investments		146	12,400		125		125		--
Financial futures contracts	Other assets		n/a	249		2		2		--
Foreign currency contracts
Foreign currency forwards	Other investments		44	n/a		--		--		--
Embedded derivative financial instruments
Conversion options	Fixed income securities		5	n/a		--		--		--
Equity-indexed call options	Fixed income securities		90	n/a		9		9		--
Credit default swaps	Fixed income securities		12	n/a		(12)		--		(12)
Credit default contracts
Credit default swaps – buying protection	Other investments		32	n/a		(1)		--		(1)
Credit default swaps – selling protection	Other investments		100	n/a		1		1		--
Other contracts
Other contracts	Other assets		4	n/a		1		1		--
Total			6,346	12,651		145		167		(22)

Total asset derivatives		$	6,362	12,651	$	147	$	169	$	(22)

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	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	$	135	n/a	$	(19)	$	--	$	(19)
Total			135	n/a		(19)		--		(19)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		1,185	n/a		16		18		(2)
Interest rate swaption agreements	Other liabilities & accrued expenses		250	n/a		--		--		--
Interest rate cap agreements	Other liabilities & accrued expenses		429	n/a		1		1		--
Financial futures contracts	Other liabilities & accrued expenses		--	357		--		--		--
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		--	12,262		(58)		--		(58)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		820	n/a		(86)		--		(86)
Guaranteed withdrawal benefits	Contractholder funds		554	n/a		(39)		--		(39)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		3,916	n/a		(419)		--		(419)
Other embedded derivative financial instruments	Contractholder funds		85	n/a		(9)		--		(9)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		193	n/a		(2)		--		(2)
Credit default swaps – selling protection	Other liabilities & accrued expenses		130	n/a		(30)		--		(30)
Total			7,562	12,619		(626)		19		(645)

Total liability derivatives			7,697	12,619		(645)	$	19	$	(664)

Total derivatives		$	14,059	25,270	$	(498)

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Schedule of gross and net amounts about the Company's OTC derivatives subject to enforceable master netting arrangements

($ in millions)				Offsets
		Gross amount		Counter- party netting		Cash collateral (received) pledged		Net amount on balance sheet		Securities collateral (received) pledged		Net amount
March 31, 2013
Asset derivatives	$	57	$	(33)	$	(14)	$	10	$	(10)	$	--
Liability derivatives		(53)		33		(9)		(29)		26		(3)

December 31, 2012
Asset derivatives	$	52	$	(29)	$	(18)	$	5	$	(5)	$	--
Liability derivatives		(63)		29		--		(34)		25		(9)

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

($ in millions)		2013		2012
Gain (loss) recognized in OCI on derivatives during the period	$	3	$	(5)
Loss recognized in OCI on derivatives during the term of the hedging relationship		(14)		(16)
Loss reclassified from AOCI into income (realized capital gains and losses)		--		(1)

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

($ in millions)		2013
		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 not designated as accounting hedging instruments
Equity and index contracts	$	--	$	--	$	--	$	38	$	38
Embedded derivative financial instruments		--		(1)		26		(40)		(15)
Foreign currency contracts		--		1		--		--		1
Credit default contracts		--		7		--		--		7
Total	$	--	$	7	$	26	$	(2)	$	31

		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		--		(1)		--		--		(1)
Equity and index contracts		--		--		--		53		53
Embedded derivative financial instruments		--		15		31		(38)		8
Credit default contracts		--		9		--		--		9
Other contracts		--		--		--		2		2
Subtotal		--		23		31		17		71
Total	$	(1)	$	23	$	31	$	17	$	70

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		Investments
Net investment income	$	1	$	(1)

Summary of counterparty credit exposure by counterparty credit rating

($ in millions)	March 31, 2013							December 31, 2012
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	$	883	$	3	$	1	1	$	19	$	--	$	--
A	4		2,270		14		--	3		2,252		12		--
A-	2		90		--		--	2		311		1		1
BBB+	1		3,360		14		--	1		3,617		11		--
Total	8	$	6,603	$	31	$	1	7	$	6,199	$	24	$	1

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(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)		March 31, 2013		December 31, 2012
Gross liability fair value of contracts containing credit-risk-contingent features	$	53	$	62
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs		(25)		(28)
Collateral posted under MNAs for contracts containing credit-risk-contingent features		(26)		(25)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	2	$	9

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
March 31, 2013
Single name
Investment grade corporate debt (1)	$	--	$	5	$	--	$	--	$	5	$	(1	)
Municipal		25		--		--		--		25		(2	)
Subtotal		25		5		--		--		30		(3	)
Baskets
First-to-default
Municipal		--		100		--		--		100		(21	)
Index
Investment grade corporate debt (1)		1		26		67		6		100		1
Total	$	26	$	131	$	67	$	6	$	230	$	(23	)

December 31, 2012
Single name
Investment grade corporate debt (1)	$	--	$	5	$	--	$	--	$	5	$	--
Municipal		25		--		--		--		25		(3	)
Subtotal		25		5		--		--		30		(3	)
Baskets
First-to-default
Municipal		--		100		--		--		100		(26	)
Index
Investment grade corporate debt (1)		1		26		68		5		100		--
Total	$	26	$	131	$	68	$	5	$	230	$	(29	)

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(1) Investment grade corporate debt categorization is based on the rating of the underlying name(s) at initial purchase.

- 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.

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