Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	221	$	954	$	--			$	1,175
Municipal		--		4,017		225				4,242
Corporate		--		28,496		1,255				29,751
Foreign government		--		1,122		--				1,122
ABS		--		1,273		190				1,463
RMBS		--		1,449		--				1,449
CMBS		--		1,216		5				1,221
Redeemable preferred stock		--		16		1				17
Total fixed income securities		221		38,543		1,676				40,440
Equity securities		495		49		6				550
Short-term investments		117		627		--				744
Other investments:
Free-standing derivatives		--		207		6	$	(14)		199
Separate account assets		6,488		--		--				6,488
Other assets		--		--		1				1
Total recurring basis assets		7,321		39,426		1,689		(14)		48,422
Non-recurring basis (1)		--		--		60				60
Total assets at fair value	$	7,321	$	39,426	$	1,749	$	(14)	$	48,482
% of total assets at fair value		15.1 %		81.3 %		3.6 %		-- %		100.0 %

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(533)			$	(533)
Other liabilities:
Free-standing derivatives		--		(130)		(13)	$	10		(133)
Total liabilities at fair value	$	--	$	(130)	$	(546)	$	10	$	(666)
% of total liabilities at fair value		-- %		19.5 %		82.0 %		(1.5) %		100.0 %

________________

(1) Includes $47 million of mortgage loans and $13 million of limited partnership interests 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
June 30, 2013
ARS backed by student loans	$	95	Discounted cash flow model	Anticipated date liquidity will return to the market	36 - 54 months	38 - 50 months

Derivatives embedded in life and annuity contracts - Equity-indexed and forward starting options	$	(445)	Stochastic cash flow model	Projected option cost	1.0 - 2.0 %	1.87 %

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 March 31, 2013		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	251	$	--	$	(6)	$	--	$	--
Corporate		1,363		8		(36)		38		(43)
ABS		211		(1)		8		--		(16)
CMBS		6		(1)		--		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		1,832		6		(34)		38		(59)
Equity securities		7		--		--		--		--
Other investments:
Free-standing derivatives, net		(20)		15		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	1,820	$	21	$	(34)	$	38	$	(59)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(567)	$	57	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(567)	$	57	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2013
Assets
Fixed income securities:
Municipal	$	--	$	(20)	$	--	$	--	$	225
Corporate		21		(27)		--		(69)		1,255
ABS		--		--		--		(12)		190
CMBS		--		--		--		--		5
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		21		(47)		--		(81)		1,676
Equity securities		--		(1)		--		--		6
Other investments:
Free-standing derivatives, net		--		--		--		(2)		(7)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	21	$	(48)	$	--	$	(83)	$	1,676

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(26)	$	3	$	(533)
Total recurring Level 3 liabilities	$	--	$	--	$	(26)	$	3	$	(533)

_____________

(1) The effect to net income totals $78 million and is reported in the Condensed Consolidated Statements of Operations and Comprehensive Income as follows: $15 million in realized capital gains and losses, $4 million in net investment income, $39 million in interest credited to contractholder funds and $20 million in contract benefits.

(2) Comprises $6 million of assets and $13 million of liabilities.

($ 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)	$	20	$	--	$	--
Corporate		1,501		20		(38)		63		(168)
ABS		199		(1)		15		17		(16)
CMBS		21		(1)		2		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,060		6		(1)		80		(184)
Equity securities		7		--		--		--		--
Other investments:
Free-standing derivatives, net		(27)		22		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	2,041	$	28	$	(1)	$	80	$	(184)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(553)	$	63	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(553)	$	63	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2013
Assets
Fixed income securities:
Municipal	$	--	$	(121)	$	--	$	--	$	225
Corporate		93		(136)		--		(80)		1,255
ABS		--		(8)		--		(16)		190
CMBS		--		(17)		--		--		5
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		93		(282)		--		(96)		1,676
Equity securities		--		(1)		--		--		6
Other investments:
Free-standing derivatives, net		1		--		--		(3)		(7)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	94	$	(283)	$	--	$	(99)	$	1,676

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(50)	$	7	$	(533)
Total recurring Level 3 liabilities	$	--	$	--	$	(50)	$	7	$	(533)

____________

(1) The effect to net income totals $91 million and is reported in the Condensed Consolidated Statements of Operations and Comprehensive Income as follows: $17 million in realized capital gains and losses, $9 million in net investment income, $19 million in interest credited to contractholder funds and $46 million in contract benefits.

(2) Comprises $6 million of assets and $13 million of liabilities.

($ in millions)				Total gains (losses) included in:
		Balance as of March 31, 2012		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	387	$	--	$	2	$	--	$	(10)
Corporate		1,329		2		(6)		77		--
ABS		277		16		(1)		--		--
CMBS		20		(1)		2		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,014		17		(3)		77		(10)
Equity securities		14		--		1		--		--
Other investments:
Free-standing derivatives, net		(70)		(3)		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	1,959	$	14	$	(2)	$	77	$	(10)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(730)	$	16	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(730)	$	16	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of June 31, 2012
Assets
Fixed income securities:
Municipal	$	--	$	(16)	$	--	$	--	$	363
Corporate		25		(20)		--		(4)		1,403
ABS		--		(11)		--		(7)		274
CMBS		--		--		--		--		21
Redeemable preferred stock		1		(1)		--		--		1
Total fixed income securities		26		(48)		--		(11)		2,062
Equity securities		5		(5)		--		--		15
Other investments:
Free-standing derivatives, net		3		--		--		(1)		(71)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	34	$	(53)	$	--	$	(12)	$	2,007

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(17)	$	24	$	(707)
Total recurring Level 3 liabilities	$	--	$	--	$	(17)	$	24	$	(707)

____________

(1) The effect to net income totals $30 million and is reported in the Condensed Consolidated Statements of Operations and Comprehensive Income as follows: $9 million in realized capital gains and losses, $6 million in net investment income, $32 million in interest credited to contractholder funds and $(17) million in contract benefits.

(2) Comprises $1 million of assets and $72 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	$	--	$	2	$	--	$	(10)
Corporate		1,319		7		20		133		(10)
ABS		254		29		12		--		--
RMBS		47		--		--		--		(47)
CMBS		30		(2)		8		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,038		34		42		133		(67)
Equity securities		14		--		1		--		--
Other investments:
Free-standing derivatives, net		(88)		12		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	1,965	$	46	$	43	$	133	$	(67)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(723)	$	(9)	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(723)	$	(9)	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2012
Assets
Fixed income securities:
Municipal	$	--	$	(16)	$	--	$	--	$	363
Corporate		44		(74)		--		(36)		1,403
ABS		--		(11)		--		(10)		274
RMBS		--		--		--		--		--
CMBS		--		--		--		(15)		21
Redeemable preferred stock		1		(1)		--		--		1
Total fixed income securities		45		(102)		--		(61)		2,062
Equity securities		5		(5)		--		--		15
Other investments:
Free-standing derivatives, net		6		--		--		(1)		(71)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	56	$	(107)	$	--	$	(62)	$	2,007

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(29)	$	54	$	(707)
Total recurring Level 3 liabilities	$	--	$	--	$	(29)	$	54	$	(707)

__________

(1) The effect to net income totals $37 million and is reported in the Condensed Consolidated Statements of Operations and Comprehensive Income as follows: $35 million in realized capital gains and losses, $12 million in net investment income, $(24) million in interest credited to contractholder funds and $14 million in contract benefits.

(2) Comprises $1 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)		Three months ended June 30,				Six months ended June 30,
		2013		2012		2013		2012
Assets
Fixed income securities:
Municipal	$	--	$	--	$	(6)	$	--
Corporate		4		1		7		9
ABS		(1)		5		(1)		18
CMBS		(1)		(1)		(2)		(1	)
Total fixed income securities		2		5		(2)		26
Other investments:
Free-standing derivatives, net		9		(4)		16		11
Total recurring Level 3 assets	$	11	$	1	$	14	$	37

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	57	$	16	$	63	$	(9	)
Total recurring Level 3 liabilities	$	57	$	16	$	63	$	(9	)

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

Financial assets

($ in millions)		June 30, 2013				December 31, 2012
		Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	$	5,803	$	6,054	$	5,943	$	6,223
Cost method limited partnerships		611		793		617		778
Agent loans		321		306		319		314
Bank loans		261		260		282		282
Notes due from related party		275		275		275		275

Financial liabilities

($ in millions)		June 30, 2013				December 31, 2012
		Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	$	23,989	$	24,646	$	26,984	$	27,989
Notes due to related parties		296		296		496		496
Liability for collateral		446		446		561		561

- 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.

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-Name Statement of Financial Accounting Standard (FAS)

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- 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.

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- 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.

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