Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 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 September 30, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	111	$	703	$	--			$	814
Municipal		--		3,236		174				3,410
Corporate		--		20,592		1,003				21,595
Foreign government		--		816		--				816
ABS		--		823		115				938
RMBS		--		939		--				939
CMBS		--		804		2				806
Redeemable preferred stock		--		16		1				17
Total fixed income securities		111		27,929		1,295				29,335
Equity securities		576		49		6				631
Short-term investments		75		436		--				511
Other investments: Free-standing derivatives		--		220		6	$	(16)		210
Separate account assets		4,928		--		--				4,928
Other assets		--		--		1				1
Assets held for sale		1,697		10,138		365				12,200
Total recurring basis assets		7,387		38,772		1,673		(16)		47,816
Non-recurring basis (1)		--		--		43				43
Total assets at fair value	$	7,387	$	38,772	$	1,716	$	(16)	$	47,859
% of total assets at fair value		15.4 %		81.0 %		3.6 %		-- %		100.0 %
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	--	$	--	$	(283)			$	(283)
Other liabilities: Free-standing derivatives		--		(145)		(16)	$	11		(150)
Liabilities held for sale		--		--		(249)				(249)
Total recurring basis liabilities		--		(145)		(548)		11		(682)
Non-recurring basis (2)		--		--		(11,282)				(11,282)
Total liabilities at fair value	$	--	$	(145)	$	(11,830)	$	11	$	(11,964)
% of total liabilities at fair value		-- %		1.2 %		98.9 %		(0.1) %		100.0 %

(1)   Includes $27 million of mortgage loans, $13 million of limited partnership interests and $3 million of other investments written-down to fair value in connection with recognizing other-than-temporary impairments.

(2)  Relates to LBL business held for sale (see Note 2).  The total fair value measurement includes $15,577 million of assets held for sale and $(14,908) million of liabilities held for sale, less $12,200 million of assets and $(249) million of liabilities measured at fair value on a 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 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
September 30, 2013
ARS backed by student loans	$	82	Discounted cash flow model	Anticipated date liquidity will return to the market	36 - 54 months	37 - 49 months
Derivatives embedded in life and annuity contracts - Equity-indexed and forward starting options	$	(205)	Stochastic cash flow model	Projected option cost	1.0 - 2.0 %	1.72 %
Liabilities held for sale — Equity-indexed and forward starting options	$	(249)	Stochastic cash flow model	Projected option cost	1.0 - 2.0 %	1.93 %
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 June 30, 2013		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	225	$	--	$	1	$	--	$	--
Corporate		1,255		8		1		21		--
ABS		190		--		15		--		--
CMBS		5		--		2		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		1,676		8		19		21		--
Equity securities		6		--		--		--		--
Free-standing derivatives, net		(7)		(2)		--		--		--
Other assets		1		--		--		--		--
Assets held for sale		--		(1)		(8)		3		(2)
Total recurring Level 3 assets	$	1,676	$	5	$	11	$	24	$	(2)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(533)	$	8	$	--	$	--	$	--
Liabilities held for sale		--		16		--		--		--
Total recurring Level 3 liabilities	$	(533)	$	24	$	--	$	--	$	--

		Transfer to held for sale		Purchases/ Issues (2)		Sales		Settlements		Balance as of September 30, 2013
Assets
Fixed income securities:
Municipal	$	(51)	$	--	$	(1)	$	--	$	174
Corporate		(244)		39		(28)		(49)		1,003
ABS		(85)		--		--		(5)		115
CMBS		(5)		--		--		--		2
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		(385)		39		(29)		(54)		1,295
Equity securities		--		--		--		--		6
Free-standing derivatives, net		--		1		--		(2)		(10)	(3)
Other assets		--		--		--		--		1
Assets held for sale		385		--		(10)		(2)		365
Total recurring Level 3 assets	$	--	$	40	$	(39)	$	(58)	$	1,657
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	265	$	(24)	$	--	$	1	$	(283)
Liabilities held for sale		(265)		(2)		--		2		(249)
Total recurring Level 3 liabilities	$	--	$	(26)	$	--	$	3	$	(532)

____________

(1) The effect to net income totals $29 million and is reported in the Condensed Consolidated Statements of Operations and Comprehensive Income as follows: $1 million in realized capital gains and losses, $3 million in net investment income, $15 million in interest credited to contractholder funds and $10 million in contract benefits.

(2) Represents purchases for assets and issues for liabilities.

(3) Comprises $6 million of assets and $16 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)	$	21	$	--	$	--
Corporate		1,501		28		(37)		84		(168)
ABS		199		(1)		30		17		(16)
CMBS		21		(1)		4		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,060		14		18		101		(184)
Equity securities		7		--		--		--		--
Free-standing derivatives, net		(27)		20		--		--		--
Other assets		1		--		--		--		--
Assets held for sale		--		(1)		(8)		3		(2)
Total recurring Level 3 assets	$	2,041	$	33	$	10	$	104	$	(186)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(553)	$	77	$	--	$	--	$	--
Liabilities held for sale		--		16		--		--		--
Total recurring Level 3 liabilities	$	(553)	$	93	$	--	$	--	$	--

		Transfer to held for sale		Purchases/ Issues (2)		Sales		Settlements		Balance as of September 30, 2013
Assets
Fixed income securities:
Municipal	$	(51)	$	--	$	(122)	$	--	$	174
Corporate		(244)		132		(164)		(129)		1,003
ABS		(85)		--		(8)		(21)		115
CMBS		(5)		--		(17)		--		2
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		(385)		132		(311)		(150)		1,295
Equity securities		--		--		(1)		--		6
Free-standing derivatives, net		--		2		--		(5)		(10)	(3)
Other assets		--		--		--		--		1
Assets held for sale		385		--		(10)		(2)		365
Total recurring Level 3 assets	$	--	$	134	$	(322)	$	(157)	$	1,657
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	265	$	(74)	$	--	$	2	$	(283)
Liabilities held for sale		(265)		(2)		--		2		(249)
Total recurring Level 3 liabilities	$	--	$	(76)	$	--	$	4	$	(532)

____________

(1) The effect to net income totals $126 million and is reported in the Condensed Consolidated Statements of Operations and Comprehensive Income as follows: $18 million in realized capital gains and losses, $12 million in net investment income, $40 million in interest credited to contractholder funds and $56 million in contract benefits.

(2) Represents purchases for assets and issues for liabilities.

(3) Comprises $6 million of assets and $16 million of liabilities.

($ in millions)				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		--
ABS		274		(9)		33		42		(4)
CMBS		21		(1)		1		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,062		(1)		79		169		(4)
Equity securities		15		(1)		--		--		--
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
ABS		--		(150)		--		--		186
CMBS		--		--		--		--		21
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		54		(275)		--		(45)		2,039
Equity securities		--		--		--		--		14
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.

($ 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	$	--	$		9	$	53	$	(10)
Corporate			1,319		16			58		207		(10)
ABS			254		20			45		42		(4)
RMBS			47		--			--		--		(47)
CMBS			30		(3)			9		--		--
Redeemable preferred stock			1		--			--		--		--
Total fixed income securities			2,038		33			121		302		(71)
Equity securities			14		(1)			1		--		--
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
ABS			--		(161)			--		(10)		186
RMBS			--		--			--		--		--
CMBS			--		--			--		(15)		21
Redeemable preferred stock			1		(1)			--		--		1
Total fixed income securities			99		(377)			--		(106)		2,039
Equity securities			5		(5)			--		--		14
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.

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,
		2013		2012		2013		2012
Assets
Fixed income securities:
Municipal	$	--	$	--	$	(5)	$	--
Corporate		3		5		9		12
ABS		--		--		(1)		--
CMBS		--		(1)		(1)		(2)
Total fixed income securities		3		4		2		10
Equity securities		--		(1)		--		(1)
Free-standing derivatives, net		(2)		(7)		14		4
Assets held for sale		(1)		--		(1)		--
Total recurring Level 3 assets	$	--	$	(4)	$	15	$	13
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	8	$	160	$	77	$	151
Liabilities held for sale		16		--		16		--
Total recurring Level 3 liabilities	$	24	$	160	$	93	$	151

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

Financial assets

($ in millions)		September 30, 2013				December 31, 2012
		Carrying  value		Fair  value		Carrying  value		Fair  value
Mortgage loans	$	4,264	$	4,409	$	5,943	$	6,223
Cost method limited partnerships		603		787		617		778
Agent loans		328		319		319		314
Bank loans		167		168		282		282
Notes due from related party		275		275		275		275
Assets held for sale		1,497		1,573		--		--

Financial liabilities

($ in millions)		September 30, 2013				December 31, 2012
		Carrying  value		Fair  value		Carrying  value		Fair  value
Contractholder funds on investment contracts	$	15,670	$	16,199	$	26,984	$	27,989
Notes due to related parties		286		286		496		496
Liability for collateral		363		363		561		561
Liabilities held for sale		7,704		7,550		--		--