Investments and Derivative Instruments

6 Months Ended

Jun. 30, 2011

Investments and Derivative Instruments [Abstract]

Investments and Derivative Instruments

4. Investments and Derivative Instruments

Significant Investment Accounting Policies

Recognition and Presentation of Other-Than-Temporary Impairments

The Company deems debt securities and certain equity securities with debt-like characteristics (collectively “debt securities”) to be other-than-temporarily impaired (“impaired”) if a security meets the following conditions: a) the Company intends to sell or it is more likely than not the Company will be required to sell the security before a recovery in value, or b) the Company does not expect to recover the entire amortized cost basis of the security. If the Company intends to sell or it is more likely than not the Company will be required to sell the security before a recovery in value, a charge is recorded in net realized capital losses equal to the difference between the fair value and amortized cost basis of the security. For those impaired debt securities which do not meet the first condition and for which the Company does not expect to recover the entire amortized cost basis, the difference between the security’s amortized cost basis and the fair value is separated into the portion representing a credit other-than-temporary impairment (“impairment”), which is recorded in net realized capital losses, and the remaining impairment, which is recorded in OCI. Generally, the Company determines a security’s credit impairment as the difference between its amortized cost basis and its best estimate of expected future cash flows discounted at the security’s effective yield prior to impairment. The remaining non-credit impairment, which is recorded in OCI, is the difference between the security’s fair value and the Company’s best estimate of expected future cash flows discounted at the security’s effective yield prior to the impairment, which typically represents current market liquidity and risk premiums. The previous amortized cost basis less the impairment recognized in net realized capital losses becomes the security’s new cost basis. The Company accretes the new cost basis to the estimated future cash flows over the expected remaining life of the security by prospectively adjusting the security’s yield, if necessary.

The Company’s evaluation of whether a credit impairment exists for debt securities includes but is not limited to, the following factors: (a) changes in the financial condition of the security’s underlying collateral, (b) whether the issuer is current on contractually obligated interest and principal payments, (c) changes in the financial condition, credit rating and near-term prospects of the issuer, (d) the extent to which the fair value has been less than the amortized cost of the security and (e) the payment structure of the security. The Company’s best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process that incorporates information received from third-party sources along with certain internal assumptions and judgments regarding the future performance of the security. The Company’s best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, current and projected delinquency rates, and loan-to-value (“LTV”) ratios. In addition, for structured securities, the Company considers factors including, but not limited to, average cumulative collateral loss rates that vary by vintage year, commercial and residential property value declines that vary by property type and location and commercial real estate delinquency levels. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries which may include estimating the underlying collateral value. In addition, projections of expected future debt security cash flows may change based upon new information regarding the performance of the issuer and/or underlying collateral such as changes in the projections of the underlying property value estimates.

For equity securities where the decline in the fair value is deemed to be other-than-temporary, a charge is recorded in net realized capital losses equal to the difference between the fair value and cost basis of the security. The previous cost basis less the impairment becomes the security’s new cost basis. The Company asserts its intent and ability to retain those equity securities deemed to be temporarily impaired until the price recovers. Once identified, these securities are systematically restricted from trading unless approved by a committee of investment and accounting professionals (“Committee”). The Committee will only authorize the sale of these securities based on predefined criteria that relate to events that could not have been reasonably foreseen. Examples of the criteria include, but are not limited to, the deterioration in the issuer’s financial condition, security price declines, a change in regulatory requirements or a major business combination or major disposition.

The primary factors considered in evaluating whether an impairment exists for an equity security include, but are not limited to: (a) the length of time and extent to which the fair value has been less than the cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated payments and (d) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery.

Mortgage Loan Valuation Allowances

The Company’s security monitoring process reviews mortgage loans on a quarterly basis to identify potential credit losses. Commercial mortgage loans are considered to be impaired when management estimates that, based upon current information and events, it is probable that the Company will be unable to collect amounts due according to the contractual terms of the loan agreement. Criteria used to determine if an impairment exists include, but are not limited to: current and projected macroeconomic factors, such as unemployment rates, and property-specific factors such as rental rates, occupancy levels, LTV ratios and debt service coverage ratios (“DSCR”). In addition, the Company considers historic, current and projected delinquency rates and property values. These assumptions require the use of significant management judgment and include the probability and timing of borrower default and loss severity estimates. In addition, projections of expected future cash flows may change based upon new information regarding the performance of the borrower and/or underlying collateral such as changes in the projections of the underlying property value estimates.

For mortgage loans that are deemed impaired, a valuation allowance is established for the difference between the carrying amount and the Company’s share of either (a) the present value of the expected future cash flows discounted at the loan’s original effective interest rate, (b) the loan’s observable market price or, most frequently, (c) the fair value of the collateral. A valuation allowance has been established for either individual loans or as a projected loss contingency for loans with an LTV ratio of 90% or greater and consideration of other credit quality factors, including DSCR. Changes in valuation allowances are recorded in net realized capital gains and losses. Interest income on impaired loans is accrued to the extent it is deemed collectable and the loans continue to perform under the original or restructured terms. Interest income ceases to accrue for loans when it is probable that the Company will not receive interest and principal payments according to the contractual terms of the loan agreement, or if a loan is more than 60 days past due. Loans may resume accrual status when it is determined that sufficient collateral exists to satisfy the full amount of the loan and interest payments, as well as when it is probable cash will be received in the foreseeable future. Interest income on defaulted loans is recognized when received.

Net Realized Capital Gains (Losses)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Before-tax)	2011			2010			2011			2010
Gross gains on sales	$	172		$	234		$	201		$	305
Gross losses on sales		(59	)		(54	)		(133	)		(115	)
Net OTTI losses recognized in earnings		(11	)		(89	)		(50	)		(226	)
Valuation allowance on mortgage loans		27			(39	)		25			(111	)
Japanese fixed annuity contract hedges, net [1]		6			27			(11	)		11
Periodic net coupon settlements on credit derivatives/Japan		—			—			(4	)		(4	)
Results of variable annuity hedge program
GMWB derivatives, net		(35	)		(405	)		28			(283	)
Macro hedge program		(16	)		397			(330	)		233
Total results of variable annuity hedge program		(51	)		(8	)		(302	)		(50	)
GMIB/GMAB/GMWB reinsurance		(5	)		(671	)		336			(556	)
Coinsurance and modified coinsurance reinsurance contracts		18			1,222			(496	)		843
Other, net		(41	)		(17	)		(56	)		(6	)
Net realized capital gains (losses)	$	56		$	605		$	(490	)	$	91

[1] Relates to derivative hedging instruments, excluding periodic net coupon settlements, and is net of the Japanese fixed annuity product liability adjustment for changes in the dollar/yen exchange spot rate, as well as Japan FVO securities.

Net realized capital gains and losses from investment sales, after deducting the life and pension policyholders’ share for certain products, are reported as a component of revenues and are determined on a specific identification basis. Gross gains and losses on sales and impairments previously reported as unrealized losses in AOCI were $102 and $18, respectively, for the three and six months ended June 30, 2011 and $91 and ($36) for the three and six months ended June 30, 2010, respectively. Proceeds from sales of AFS securities totaled $5.7 billion and $9.9 billion, respectively, for the three and six months ended June 30, 2011 and $10.2 billion and $12.6 billion, respectively, for the three and six months ended June 30, 2010.

Other-Than-Temporary Impairment Losses

The following table presents a roll-forward of the Company’s cumulative credit impairments on debt securities held.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Before-tax)	2011			2010			2011			2010
Balance as of beginning of period	$	(1,579	)	$	(1,763	)	$	(1,598	)	$	(1,632	)
Additions for credit impairments recognized on [1]:
Securities not previously impaired		(4	)		(39	)		(23	)		(142	)
Securities previously impaired		(3	)		(46	)		(16	)		(79	)
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period		74			112			122			113
Securities due to an increase in expected cash flows		2			11			5			15
Balance as of end of period	$	(1,510	)	$	(1,725	)	$	(1,510	)	$	(1,725	)

[1] These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.

Available-for-Sale Securities

The following table presents the Company’s AFS securities by type.

	June 30, 2011												December 31, 2010
	Cost or		Gross		Gross					Non-			Cost or		Gross		Gross					Non-
	Amortized		Unrealized		Unrealized			Fair		Credit			Amortized		Unrealized		Unrealized			Fair		Credit
	Cost		Gains		Losses			Value		OTTI [1]			Cost		Gains		Losses			Value		OTTI [1]
ABS	$	2,551	$	43	$	(281	)	$	2,313	$	(9	)	$	2,395	$	29	$	(356	)	$	2,068	$	(1	)
CDOs		2,152		1		(276	)		1,877		(48	)		2,278		—		(379	)		1,899		(59	)
CMBS		4,606		151		(215	)		4,542		(18	)		5,283		146		(401	)		5,028		(15	)
Corporate [2]		26,943		1,623		(428	)		28,111		—			25,934		1,545		(538	)		26,915		6
Foreign govt./govt. agencies		948		70		(5	)		1,013		—			963		48		(9	)		1,002		—
Municipal		1,224		21		(96	)		1,149		—			1,149		7		(124	)		1,032		—
RMBS		3,853		98		(380	)		3,571		(100	)		4,450		79		(411	)		4,118		(113	)
U.S. Treasuries		2,489		10		(82	)		2,417		—			2,871		11		(110	)		2,772		—
Total fixed maturities, AFS		44,766		2,017		(1,763	)		44,993		(175	)		45,323		1,865		(2,328	)		44,834		(182	)
Equity securities, AFS		426		40		(34	)		432		—			320		61		(41	)		340		—
Total AFS securities	$	45,192	$	2,057	$	(1,797	)	$	45,425	$	(175	)	$	45,643	$	1,926	$	(2,369	)	$	45,174	$	(182	)

[1]	Represents the amount of cumulative non-credit OTTI losses recognized in OCI on securities that also had credit impairments. These losses are included in gross unrealized losses as of June 30, 2011 and December 31, 2010.
[2]	Gross unrealized gains (losses) exclude the change in fair value of bifurcated embedded derivative features of certain securities. Subsequent changes in fair value are recorded in net realized capital gains (losses).

The following table presents the Company’s fixed maturities, AFS, by contractual maturity year.

	June 30, 2011
Contractual Maturity	Amortized Cost		Fair Value
One year or less	$	1,826	$	1,847
Over one year through five years		9,999		10,514
Over five years through ten years		7,654		8,035
Over ten years		12,125		12,294
Subtotal		31,604		32,690
Mortgage-backed and asset-backed securities		13,162		12,303
Total fixed maturities, AFS	$	44,766	$	44,993

Estimated maturities may differ from contractual maturities due to security call or prepayment provisions. Due to the potential for variability in payment speeds (i.e. prepayments or extensions), mortgage-backed and asset-backed securities are not categorized by contractual maturity.

Security Unrealized Loss Aging

The following tables present the Company’s unrealized loss aging for AFS securities by type and length of time the security was in a continuous unrealized loss position.

	June 30, 2011
	Less Than 12 Months							12 Months or More							Total
	Amortized		Fair		Unrealized			Amortized		Fair		Unrealized			Amortized		Fair		Unrealized
	Cost		Value		Losses			Cost		Value		Losses			Cost		Value		Losses
ABS	$	192	$	185	$	(7	)	$	1,145	$	871	$	(274	)	$	1,337	$	1,056	$	(281	)
CDOs		330		308		(22	)		1,804		1,550		(254	)		2,134		1,858		(276	)
CMBS		849		811		(38	)		1,637		1,460		(177	)		2,486		2,271		(215	)
Corporate [1]		3,795		3,665		(125	)		2,538		2,213		(303	)		6,333		5,878		(428	)
Foreign govt./govt. agencies		109		108		(1	)		40		36		(4	)		149		144		(5	)
Municipal		201		196		(5	)		616		525		(91	)		817		721		(96	)
RMBS		516		499		(17	)		1,268		905		(363	)		1,784		1,404		(380	)
U.S. Treasuries		1,003		954		(49	)		133		100		(33	)		1,136		1,054		(82	)
Total fixed maturities		6,995		6,726		(264	)		9,181		7,660		(1,499	)		16,176		14,386		(1,763	)
Equity securities		169		166		(3	)		131		100		(31	)		300		266		(34	)
Total securities in an unrealized loss	$	7,164	$	6,892	$	(267	)	$	9,312	$	7,760	$	(1,530	)	$	16,476	$	14,652	$	(1,797	)

	December 31, 2010
	Less Than 12 Months							12 Months or More							Total
	Amortized		Fair		Unrealized			Amortized		Fair		Unrealized			Amortized		Fair		Unrealized
	Cost		Value		Losses			Cost		Value		Losses			Cost		Value		Losses
ABS	$	237	$	226	$	(11	)	$	1,226	$	881	$	(345	)	$	1,463	$	1,107	$	(356	)
CDOs		316		288		(28	)		1,934		1,583		(351	)		2,250		1,871		(379	)
CMBS		374		355		(19	)		2,532		2,150		(382	)		2,906		2,505		(401	)
Corporate [1]		3,726		3,591		(130	)		2,777		2,348		(408	)		6,503		5,939		(538	)
Foreign govt./govt. agencies		250		246		(4	)		40		35		(5	)		290		281		(9	)
Municipal		415		399		(16	)		575		467		(108	)		990		866		(124	)
RMBS		1,187		1,155		(32	)		1,379		1,000		(379	)		2,566		2,155		(411	)
U.S. Treasuries		1,142		1,073		(69	)		158		117		(41	)		1,300		1,190		(110	)
Total fixed maturities		7,647		7,333		(309	)		10,621		8,581		(2,019	)		18,268		15,914		(2,328	)
Equity securities		18		17		(1	)		148		108		(40	)		166		125		(41	)
Total securities in an unrealized loss	$	7,665	$	7,350	$	(310	)	$	10,769	$	8,689	$	(2,059	)	$	18,434	$	16,039	$	(2,369	)

[1] Unrealized losses exclude the fair value of bifurcated embedded derivative features of certain securities. Subsequent changes in fair value are recorded in net realized capital gains (losses).

As of June 30, 2011, AFS securities in an unrealized loss position, comprised of 1,667 securities, largely related to commercial real estate, corporate securities primarily within the financial services sector and RMBS which have experienced price deterioration. As of June 30, 2011, 80% of securities in a gross unrealized loss position were depressed less than 20% of cost or amortized cost. The improvement in unrealized losses during 2011 was primarily attributable to declining interest rates and credit spread tightening.

Most of the securities depressed for twelve months or more relate to structured securities primarily within commercial and residential real estate, including structured securities that have a floating-rate coupon referenced to a market index such as LIBOR. Also included are financial services securities that have a floating-rate coupon and/or long-dated maturities. Current market spreads continue to be significantly wider for these securities as compared to spreads at the security’s respective purchase date, largely due to the economic and market uncertainties regarding future performance of commercial and residential real estate. Deteriorations in valuation are also the result of substantial declines in certain market indexes. The Company reviewed these securities as part of its impairment analysis and where a credit impairment has not been recorded, the Company’s best estimate is that expected future cash flows are sufficient to recover the amortized cost basis of the security. Furthermore, the Company neither has an intention to sell nor does it expect to be required to sell these securities.

Mortgage Loans

	June 30, 2011							December 31, 2010
	Amortized		Valuation			Carrying		Amortized		Valuation			Carrying
	Cost [1]		Allowance			Value		Cost [1]		Allowance			Value
Commercial	$	3,820	$	(33	)	$	3,787	$	3,306		(62	)		3,244
Total mortgage loans	$	3,820	$	(33	)	$	3,787	$	3,306	$	(62	)	$	3,244

[1] Amortized cost represents carrying value prior to valuation allowances, if any.

As of June 30, 2011, the carrying value of mortgage loans associated with the valuation allowance was $554. Included in the table above, are mortgage loans held-for-sale with a carrying value and valuation allowance of $64 and $4, respectively, as of June 30, 2011 and December 31, 2010. The carrying value of these loans is included in mortgage loans in the Company’s Condensed Consolidated Balance Sheets.

The following table presents the activity within the Company’s valuation allowance for mortgage loans. These loans have been evaluated both individually and collectively for impairment. Loans evaluated collectively for impairment are immaterial.

	2011			2010
Balance as of January 1	$	(62	)	$	(260	)
(Additions)/Reversals		25			(111	)
Deductions		4			283
Balance as of June 30	$	(33	)	$	(88	)

The current weighted-average LTV ratio of the Company’s commercial mortgage loan portfolio was 70% as of June 30, 2011, while the weighted-average LTV ratio at origination of these loans was 64%. LTV ratios compare the loan amount to the value of the underlying property collateralizing the loan. The loan values are updated no less than annually through property level reviews of the portfolio. Factors considered in the property valuation include, but are not limited to, actual and expected property cash flows, geographic market data and capitalization rates. DSCRs compare a property’s net operating income to the borrower’s principal and interest payments. The current weighted average DSCR of the Company’s commercial mortgage loan portfolio was 1.95x as of June 30, 2011. The Company did not hold any commercial mortgage loans greater than 60 days past due.

The following table presents the carrying value of the Company’s commercial mortgage loans by LTV and DSCR.

Commercial Mortgage Loans Credit Quality June 30, 2011
	June 30, 2011					December 31, 2010
			Avg. Debt-					Avg. Debt-
	Carrying		Service			Carrying		Service
Loan-to-value	Value		Coverage Ratio			Value		Coverage Ratio
Greater than 80%	$	709		1.67	x	$	961		1.67	x
65% - 80%		1,790		1.76	x		1,366		2.11	x
Less than 65%		1,288		2.38	x		917		2.44	x
Total commercial mortgage loans	$	3,787		1.95	x	$	3,244		2.07	x

The following tables present the carrying value of the Company’s mortgage loans by region and property type.

Mortgage Loans by Region
	June 30, 2011					December 31, 2010
	Carrying		Percent of			Carrying		Percent of
	Value		Total			Value		Total
East North Central	$	50		1.3	%	$	51		1.6	%
Middle Atlantic		404		10.7	%		344		10.6	%
Mountain		62		1.6	%		49		1.5	%
New England		203		5.4	%		188		5.8	%
Pacific		993		26.2	%		898		27.7	%
South Atlantic		715		18.9	%		679		20.9	%
West North Central		19		0.5	%		19		0.6	%
West South Central		115		3.0	%		117		3.6	%
Other [1]		1,226		32.4	%		899		27.7	%
Total mortgage loans	$	3,787		100.0	%	$	3,244		100.0	%

[1] Primarily represents loans collateralized by multiple properties in various regions.

Mortgage Loans by Property Type
	June 30, 2011					December 31, 2010
	Carrying		Percent of			Carrying		Percent of
	Value		Total			Value		Total
Commercial
Agricultural	$	130		3.4	%	$	177		5.5	%
Industrial		1,151		30.4	%		833		25.7	%
Lodging		115		3.0	%		123		3.8	%
Multifamily		684		18.1	%		479		14.8	%
Office		740		19.5	%		796		24.5	%
Retail		754		20.0	%		556		17.1	%
Other		213		5.6	%		280		8.6	%
Total mortgage loans	$	3,787		100.0	%	$	3,244		100.0	%

Variable Interest Entities

The Company is involved with various special purpose entities and other entities that are deemed to be VIEs primarily as a collateral manager and as an investor through normal investment activities, as well as a means of accessing capital. A VIE is an entity that either has investors that lack certain essential characteristics of a controlling financial interest or lacks sufficient funds to finance its own activities without financial support provided by other entities.

The Company performs ongoing qualitative assessments of its VIEs to determine whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is deemed to have a controlling financial interest when it has both the ability to direct the activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s Condensed Consolidated Financial Statements.

Consolidated VIEs

The following table presents the carrying value of assets and liabilities, and the maximum exposure to loss relating to the VIEs for which the Company is the primary beneficiary. Creditors have no recourse against the Company in the event of default by these VIEs nor does the Company have any implied or unfunded commitments to these VIEs. The Company’s financial or other support provided to these VIEs is limited to its investment management services and original investment.

	June 30, 2011						December 31, 2010
					Maximum						Maximum
	Total		Total		Exposure		Total		Total		Exposure
	Assets		Liabilities [1]		to Loss [2]		Assets		Liabilities [1]		to Loss [2]
CDOs [3]	$	510	$	444	$	42	$	729	$	416	$	265
Limited partnerships		7		3		4		14		6		8
Total	$	517	$	447	$	46	$	743	$	422	$	273

[1]	Included in other liabilities in the Company’s Condensed Consolidated Balance Sheets.
[2]	The maximum exposure to loss represents the maximum loss amount that the Company could recognize as a reduction in net investment income or as a realized capital loss and is the cost basis of the Company’s investment.
[3]	Total assets included in fixed maturities, AFS, and fixed maturities, FVO, in the Company’s Condensed Consolidated Balance Sheets.

CDOs represent structured investment vehicles for which the Company has a controlling financial interest as it provides collateral management services, earns a fee for those services and also holds investments in the securities issued by these vehicles. Limited partnerships represent a hedge fund for which the Company holds a majority interest in the fund as an investment.

Non-Consolidated VIEs

The Company does not hold any investments issued by VIEs for which the Company is not the primary beneficiary as of June 30, 2011 and December 31, 2010.

In addition, the Company, through normal investment activities, makes passive investments in structured securities issued by VIEs for which the Company is not the manager which are included in ABS, CDOs, CMBS and RMBS in the Available-for-Sale Securities table and fixed maturities, FVO, in the Company’s Condensed Consolidated Balance Sheets. The Company has not provided financial or other support with respect to these investments other than its original investment. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the principal amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment.

Derivative Instruments

The Company utilizes a variety of over-the-counter and exchange traded derivative instruments as a part of its overall risk management strategy, as well as to enter into replication transactions. Derivative instruments are used to manage risk associated with interest rate, equity market, credit spread, issuer default, price, and currency exchange rate risk or volatility. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that would otherwise be permissible investments under the Company’s investment policies. The Company also purchases and issues financial instruments and products that either are accounted for as free-standing derivatives, such as certain reinsurance contracts, or may contain features that are deemed to be embedded derivative instruments, such as the GMWB rider included with certain variable annuity products.

Cash flow hedges

Interest rate swaps

Interest rate swaps are primarily used to convert interest receipts on floating-rate fixed maturity securities or interest payments on floating-rate guaranteed investment contracts to fixed rates. These derivatives are predominantly used to better match cash receipts from assets with cash disbursements required to fund liabilities.

The Company also enters into forward starting swap agreements to hedge the interest rate exposure related to the purchase of fixed-rate securities. These derivatives are primarily structured to hedge interest rate risk inherent in the assumptions used to price certain liabilities.

Foreign currency swaps

Foreign currency swaps are used to convert foreign currency-denominated cash flows related to certain investment receipts and liability payments to U.S. dollars in order to minimize cash flow fluctuations due to changes in currency rates.

Fair value hedges

Interest rate swaps

Interest rate swaps are used to hedge the changes in fair value of certain fixed rate liabilities and fixed maturity securities due to fluctuations in interest rates.

Foreign currency swaps

Foreign currency swaps are used to hedge the changes in fair value of certain foreign currency-denominated fixed rate liabilities due to changes in foreign currency rates by swapping the fixed foreign payments to floating rate U.S. dollar denominated payments.

Non-qualifying strategies

Interest rate swaps, swaptions, caps, floors, and futures

The Company uses interest rate swaps, swaptions, caps, floors, and futures to manage duration between assets and liabilities in certain investment portfolios. In addition, the Company enters into interest rate swaps to terminate existing swaps, thereby offsetting the changes in value of the original swap. As of June 30, 2011 and December 31, 2010, the notional amount of interest rate swaps in offsetting relationships was $4.6 billion and $4.7 billion, respectively.

Foreign currency swaps and forwards

The Company enters into foreign currency swaps and forwards to convert the foreign currency exposures of certain foreign currency-denominated fixed maturity investments to U.S. dollars.

Japan 3Win foreign currency swaps

Prior to the second quarter of 2009, The Company offered certain variable annuity products with a GMIB rider through a wholly-owned Japanese subsidiary. The GMIB rider is reinsured to a wholly-owned U.S. subsidiary, which invests in U.S. dollar denominated assets to support the liability. The U.S. subsidiary entered into pay U.S. dollar, receive yen forward contracts to hedge the currency and interest rate exposure between the U.S. dollar denominated assets and the yen denominated fixed liability reinsurance payments.

Japanese fixed annuity hedging instruments

Prior to the second quarter of 2009, The Company offered a yen denominated fixed annuity product through a wholly-owned Japanese subsidiary and reinsured to a wholly-owned U.S. subsidiary. The U.S. subsidiary invests in U.S. dollar denominated securities to support the yen denominated fixed liability payments and entered into currency rate swaps to hedge the foreign currency exchange rate and yen interest rate exposures that exist as a result of U.S. dollar assets backing the yen denominated liability.

Japanese variable annuity hedging instruments

The Company enters into foreign currency forward and option contracts to hedge the foreign currency risk associated with certain Japanese variable annuity liabilities reinsured from a wholly-owned Japanese subsidiary. Foreign currency risk may arise for some segments of the business where assets backing the liabilities are denominated in U.S. dollars while the liabilities are denominated in yen. Foreign currency risk may also arise when certain variable annuity policyholder accounts are invested in various currencies while the related guaranteed minimum death benefit (“GMDB”) and GMIB guarantees are effectively yen-denominated.

The Company’s net notional amount relating to Japanese variable annuity hedging instruments as of June 30, 2011 was $1.7 billion, which consisted of $2.6 billion of long positions offset by short positions of $937. The Company’s net notional amount relating to Japanese variable annuity hedging instruments as of December 31, 2010 was $1.7 billion which consisted of $1.7 billion of long positions only.

Credit derivatives that purchase credit protection

Credit default swaps are used to purchase credit protection on an individual entity or referenced index to economically hedge against default risk and credit-related changes in value on fixed maturity securities. These contracts require the Company to pay a periodic fee in exchange for compensation from the counterparty should the referenced security issuers experience a credit event, as defined in the contract.

Credit derivatives that assume credit risk

Credit default swaps are used to assume credit risk related to an individual entity, referenced index, or asset pool, as a part of replication transactions. These contracts entitle the Company to receive a periodic fee in exchange for an obligation to compensate the derivative counterparty should the referenced security issuers experience a credit event, as defined in the contract. The Company is also exposed to credit risk due to credit derivatives embedded within certain fixed maturity securities. These securities are primarily comprised of structured securities that contain credit derivatives that reference a standard index of corporate securities or particular securities.

Credit derivatives in offsetting positions

The Company enters into credit default swaps to terminate existing credit default swaps, thereby offsetting the changes in value of the original swap going forward.

Equity index swaps and options

The Company offers certain equity indexed products, which may contain an embedded derivative that requires bifurcation. The Company enters into S&P index swaps and options to economically hedge the equity volatility risk associated with these embedded derivatives.

GMWB product derivatives

The Company offers certain variable annuity products with a GMWB rider in the U.S. and formerly in the U.K. and Japan. The GMWB is a bifurcated embedded derivative that provides the policyholder with a guaranteed remaining balance (“GRB”) if the account value is reduced to zero through a combination of market declines and withdrawals. The GRB is generally equal to premiums less withdrawals. Certain contract provisions can increase the GRB at contractholder election or after the passage of time. The notional value of the embedded derivative is the GRB.

GMWB reinsurance contracts

The Company has entered into reinsurance arrangements to offset a portion of its risk exposure to the GMWB for the remaining lives of covered variable annuity contracts. Reinsurance contracts covering GMWB are accounted for as free-standing derivatives. The notional amount of the reinsurance contracts is the GRB amount.

GMWB hedging instruments

The Company enters into derivative contracts to partially hedge exposure associated with a portion of the GMWB liabilities that are not reinsured. These derivative contracts include customized swaps, interest rate swaps and futures, and equity swaps, options, and futures, on certain indices including the S&P 500 index, EAFE index, and NASDAQ index.

The following table represents notional and fair value for GMWB hedging instruments.

	Notional Amount				Fair Value
	June 30,		December 31,		June 30,			December 31,
	2011		2010		2011			2010
Customized swaps	$	9,615	$	10,113	$	175		$	209
Equity swaps, options, and futures		5,239		4,943		372			391
Interest rate swaps and futures		2,752		2,800		(118	)		(133	)
Total	$	17,606	$	17,856	$	429		$	467

Macro hedge program

The Company utilizes equity options, equity futures contracts, currency forwards, and currency options to partially hedge against a decline in the equity markets or changes in foreign currency exchange rates and the resulting statutory surplus and capital impact primarily arising from GMDB, GMIB and GMWB obligations. The Company also enters into foreign currency denominated interest rate swaps to hedge the interest rate exposure related to the potential annuitization of certain benefit obligations issued in Japan.

The following table represents notional and fair value for the macro hedge program.

	Notional Amount				Fair Value
	June 30,		December 31,		June 30,			December 31,
	2011		2010		2011			2010
Long equity options, swaps and futures	$	8,650	$	13,332	$	231		$	205
Short equity options, swaps and futures		2,116		1,168		23			—
Long currency forward contracts		196		1,791		(4	)		64
Short currency forward contracts		2,778		1,441		56			29
Foreign interest rate swaps		737		—		8			—
Cross-currency equity options		121		1,000		4			3
Long currency options		2,155		3,075		139			67
Short currency options		465		2,221		(8	)		(5	)
Total	$	17,218	$	24,028	$	449		$	363

The Company’s net notional amount relating to the macro hedge program as of June 30, 2011 and December 31, 2010 was $6.5 billion and $14.4 billion, respectively, which consisted of $11.9 billion and $19.2 billion, respectively, of long positions offset by $5.4 billion and $4.8 billion, respectively, of short positions.

GMAB, GMWB and GMIB reinsurance contracts

The Company reinsured the GMAB, GMWB, and GMIB embedded derivatives for host variable annuity contracts written by HLIKK. The reinsurance contracts are accounted for as free-standing derivative contracts. The notional amount of the reinsurance contracts is the yen denominated GRB balance value converted at the period-end yen to U.S. dollar foreign spot exchange rate. For further information on this transaction, refer to Note 10 of the Notes to Condensed Consolidated Financial Statements.

Coinsurance and modified coinsurance reinsurance contracts

During 2009, a subsidiary entered into a coinsurance with funds withheld and modified coinsurance reinsurance agreement with an affiliated captive reinsurer, which creates an embedded derivative. In addition, provisions of this agreement include reinsurance to cede a portion of direct written U.S. GMWB riders, which is accounted for as an embedded derivative. Additional provisions of this agreement cede variable annuity contract GMAB, GMWB and GMIB riders reinsured by the Company that have been assumed from HLIKK and is accounted for as a free-standing derivative. For further information on this transaction, refer to Note 10 of the Notes to Condensed Financial Statements.

Derivative Balance Sheet Classification

The table below summarizes the balance sheet classification of the Company’s derivative related fair value amounts, as well as the gross asset and liability fair value amounts. The fair value amounts presented do not include income accruals or cash collateral held amounts, which are netted with derivative fair value amounts to determine balance sheet presentation. Derivatives in the Company’s separate accounts are not included because the associated gains and losses accrue directly to policyholders. The Company’s derivative instruments are held for risk management purposes, unless otherwise noted in the table below. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and is presented in the table to quantify the volume of the Company’s derivative activity. Notional amounts are not necessarily reflective of credit risk.

	Net Derivatives										Asset Derivatives				Liability Derivatives
	Notional Amount				Fair Value						Fair Value				Fair Value
	Jun. 30,		Dec. 31,		Jun. 30,			Dec. 31,			Jun. 30,		Dec. 31,		Jun. 30,			Dec. 31,
Hedge Designation/ Derivative Type	2011		2010		2011			2010			2011		2010		2011			2010
Cash flow hedges
Interest rate swaps	$	7,479	$	7,652	$	175		$	144		$	192	$	182	$	(17	)	$	(38	)
Foreign currency swaps		240		255		(1	)		—			16		18		(17	)		(18	)
Total cash flow hedges		7,719		7,907		174			144			208		200		(34	)		(56	)
Fair value hedges
Interest rate swaps		1,223		1,079		(57	)		(47	)		1		4		(58	)		(51	)
Foreign currency swaps		677		677		14			(12	)		95		71		(81	)		(83	)
Total fair value hedges		1,900		1,756		(43	)		(59	)		96		75		(139	)		(134	)
Non-qualifying strategies
Interest rate contracts
Interest rate swaps, swaptions, caps, floors, and futures		5,344		5,490		(240	)		(255	)		151		121		(391	)		(376	)
Foreign exchange contracts
Foreign currency swaps and forwards		196		196		(20	)		(14	)		—		—		(20	)		(14	)
Japan 3Win foreign currency swaps		2,285		2,285		152			177			152		177		—			—
Japanese fixed annuity hedging instruments		2,137		2,119		487			608			494		608		(7	)		—
Japanese variable annuity hedging instruments		3,526		1,720		10			73			61		74		(51	)		(1	)
Credit contracts
Credit derivatives that purchase credit protection		940		1,730		(5	)		(5	)		10		18		(15	)		(23	)
Credit derivatives that assume credit risk [1]		1,755		2,035		(384	)		(376	)		4		7		(388	)		(383	)
Credit derivatives in offsetting positions		5,247		5,175		(53	)		(57	)		70		60		(123	)		(117	)
Equity contracts
Equity index swaps and options		191		188		(8	)		(10	)		6		5		(14	)		(15	)
Variable annuity hedge program
GMWB product derivatives [2]		39,143		42,278		(1,433	)		(1,625	)		—		—		(1,433	)		(1,625	)
GMWB reinsurance contracts		7,886		8,767		237			280			237		280		—			—
GMWB hedging instruments		17,606		17,856		429			467			575		647		(146	)		(180	)
Macro hedge program		17,218		24,028		449			363			464		372		(15	)		(9	)
Other
GMAB, GMWB, and GMIB reinsurance contracts		21,061		21,423		(2,350	)		(2,633	)		—		—		(2,350	)		(2,633	)
Coinsurance and modified coinsurance reinsurance contracts		50,106		51,934		1,431			1,722			2,059		2,342		(628	)		(620	)
Total non-qualifying strategies		174,641		187,224		(1,298	)		(1,285	)		4,283		4,711		(5,581	)		(5,996	)
Total cash flow hedges, fair value hedges, and non-qualifying strategies	$	184,260	$	196,887	$	(1,167	)	$	(1,200	)	$	4,587	$	4,986	$	(5,754	)	$	(6,186	)
Balance Sheet Location
Fixed maturities, available-for-sale	$	416	$	441	$	(27	)	$	(26	)	$	—	$	—	$	(27	)	$	(26	)
Other investments		21,899		51,633		756			1,453			1,066		2,021		(310	)		(568	)
Other liabilities		43,655		20,318		233			(357	)		1,225		343		(992	)		(700	)
Consumer notes		39		39		(4	)		(5	)		—		—		(4	)		(5	)
Reinsurance recoverables		55,879		58,834		1,668			2,002			2,296		2,622		(628	)		(620	)
Other policyholder funds and benefits payable		62,372		65,622		(3,793	)		(4,267	)		—		—		(3,793	)		(4,267	)
Total derivatives	$	184,260	$	196,887	$	(1,167	)	$	(1,200	)	$	4,587	$	4,986	$	(5,754	)	$	(6,186	)

[1]	The derivative instruments related to this strategy are held for other investment purposes.
[2]	These derivatives are embedded within liabilities and are not held for risk management purposes.

Change in Notional Amount

The net decrease in notional amount of derivatives since December 31, 2010, was primarily due to the following:

• The notional amount related to the macro hedge program declined $6.8 billion primarily due to the expiration of certain currency and equity index options. This notional was not replaced given the Company had appropriate levels of market risk coverage for both equity and foreign exchange rate risk.

• The GMWB product derivative notional declined $3.1 billion primarily as a result of policyholder lapses and withdrawals.

• The notional amount related to the coinsurance and modified coinsurance reinsurance contracts declined $1.8 billion primarily due to policyholder lapses and withdrawals.

Change in Fair Value

The change in the total fair value of derivative instruments since December 31, 2010, was primarily related to the following:

• The increase in the combined GMWB hedging program, which includes the GMWB product, reinsurance, and hedging derivatives, was primarily a result of lower implied market volatility and outperformance of the underlying actively managed funds as compared to their respective indices.

• Under an internal reinsurance agreement with an affiliate, the increase in fair value associated with the GMAB, GMWB, and GMIB reinsurance contracts along with a portion of the GMWB related derivatives are ceded to the affiliated reinsurer and result in an offsetting fair value of the coinsurance and modified coinsurance reinsurance contracts.

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current period earnings. No components of each derivative’s gain or loss were excluded from the assessment of hedge effectiveness.

The following table presents the components of the gain or loss on derivatives that qualify as cash flow hedges:

Derivatives in Cash Flow Hedging Relationships
										Gain Recognized in Income on
		Gain Recognized in OCI on								Derivative
		Derivative (Effective Portion)								(Ineffective Portion)
		Three Months				Six Months				Three Months				Six Months
		Ended				Ended				Ended				Ended
		June 30,				June 30,				June 30,				June 30,
		2011		2010		2011		2010		2011		2010		2011		2010
Interest rate swaps	Net realized capital gains	$	101	$	208	$	42	$	285	$	—	$	1	$	—	$	1
Foreign currency swaps	Net realized capital gains		1		—		2		4		—		—		—		—
Total		$	102	$	208	$	44	$	289	$	—	$	1	$	—	$	1

Derivatives in Cash Flow Hedging Relationships
		Gain (Loss) Reclassified from AOCI into Income
		(Effective Portion)
		Three Months Ended					Six Months Ended
		June 30,					June 30,
		2011		2010			2011		2010
Interest rate swaps	Net realized capital gains	$	1	$	1		$	2	$	1
Interest rate swaps	Net investment income		20		12			39		19
Foreign currency swaps	Net realized capital gains (losses)		3		(11	)		11		(16	)
Foreign currency swaps	Net investment income		—		—			—		—
Total		$	24	$	2		$	52	$	4

As of June 30, 2011, the before-tax deferred net gains on derivative instruments recorded in AOCI that are expected to be reclassified to earnings during the next twelve months are $65. This expectation is based on the anticipated interest payments on hedged investments in fixed maturity securities that will occur over the next twelve months, at which time the Company will recognize the deferred net gains (losses) as an adjustment to interest income over the term of the investment cash flows. The maximum term over which the Company is hedging its exposure to the variability of future cash flows (for forecasted transactions, excluding interest payments on existing variable-rate financial instruments) is approximately two years.

During the three and six months ended June 30, 2011, the Company had no net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring. For the three and six months ended June 30, 2010, the Company had less than $1 of net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring.

Fair Value Hedges

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. The Company includes the gain or loss on the derivative in the same line item as the offsetting loss or gain on the hedged item. No components of each derivative’s gain or loss were excluded from the assessment of hedge effectiveness.

The Company recognized in income gains (losses) representing the ineffective portion of fair value hedges as follows:

Derivatives in Fair Value Hedging Relationships
	Gain (Loss) Recognized in Income [1]
	Three Months Ended											Six Months Ended
	June 30,											June 30,
	2011						2010					2011						2010
				Hedge						Hedge					Hedge						Hedge
	Derivative			Item			Derivative			Item		Derivative			Item			Derivative			Item
Interest rate swaps
Net realized capital gains (losses)	$	(26	)	$	25		$	(40	)	$	37	$	(15	)	$	14		$	(52	)	$	47
Benefits, losses and loss adjustment expenses		—			—			(7	)		8		—			—			(2	)		3
Foreign currency swaps
Net realized capital gains (losses)		22			(22	)		(11	)		11		36			(36	)		(40	)		40
Benefits, losses and loss adjustment expenses		(1	)		1			—			—		(9	)		9			(1	)		1
Total	$	(5	)	$	4		$	(58	)	$	56	$	12		$	(13	)	$	(95	)	$	91

[1] The amounts presented do not include the periodic net coupon settlements of the derivative or the coupon income (expense) related to the hedged item. The net of the amounts presented represents the ineffective portion of the hedge.

Non-qualifying Strategies

For non-qualifying strategies, including embedded derivatives that are required to be bifurcated from their host contracts and accounted for as derivatives, the gain or loss on the derivative is recognized currently in earnings within net realized capital gains or losses. The following table presents the gain or loss recognized in income on non-qualifying strategies:

Non-qualifying Strategies Gain (Loss) Recognized within Net Realized Capital Gains (Losses)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Interest rate contracts
Interest rate swaps, swaptions, caps, floors, futures, and forwards	$	3		$	(4	)	$	7		$	(4	)
Foreign exchange contracts
Foreign currency swaps and forwards		(4	)		13			(7	)		16
Japan 3Win related foreign currency swaps [1]		33			65			(25	)		9
Japanese fixed annuity hedging instruments [2]		57			160			(5	)		141
Japanese variable annuity hedging instruments		6			32			(56	)		45
Credit contracts
Credit derivatives that purchase credit protection		(1	)		26			(13	)		25
Credit derivatives that assume credit risk		(12	)		(45	)		3			(13	)
Equity contracts
Equity index swaps, options, and futures		2			4			2			5
Variable annuity hedge program
GMWB product derivatives		(82	)		(1,476	)		273			(1,130	)
GMWB reinsurance contracts		4			246			(61	)		185
GMWB hedging instruments		43			825			(184	)		662
Macro hedge program		(16	)		397			(330	)		233
Other
GMAB, GMWB, and GMIB reinsurance contracts		(5	)		(671	)		336			(556	)
Coinsurance and modified coinsurance reinsurance contracts		18			1,222			(496	)		843
Total	$	46		$	794		$	(556	)	$	461

[1]	The associated liability is adjusted for changes in spot rates through realized capital gains and was $(49) and $(103) for the three months ended June 30, 2011 and 2010, respectively, and $(7) and $(96) for the six months ended June 30, 2011 and 2010, respectively.
[2]	The associated liability is adjusted for changes in spot rates through realized capital gains and was $(63) and $(126) for the three months ended June 30, 2011 and 2010, respectively, and $(10) and $(119) for the six months ended June 30, 2011 and 2010, respectively.

For the three and six months ended June 30, 2011, the net realized capital gain (loss) related to derivatives used in non-qualifying strategies was primarily comprised of the following:

• For the three months ended June 30, 2011 the net gain related to the Japanese fixed annuity hedging instruments is primarily due to the U.S. dollar weakening in comparison to the Japanese yen.

• For the six months ended June 30, 2011 the net gain associated with GMAB, GMWB, and GMIB product reinsurance contracts, which are reinsured to an affiliated captive reinsurer, is primarily due to an increase in Japan equity markets and a decrease in Japan currency volatility.

• For the six months ended June 30, 2011 the net loss on the coinsurance and modified coinsurance reinsurance agreement, which is accounted for as a derivative instrument primarily offsets the net loss on GMAB, GMWB, and GMIB reinsurance contracts. For a discussion related to the reinsurance agreement refer to Note 10 of the Notes to Condensed Consolidated Financial Statements for more information on this transaction.

• For the six months ended June 30, 2011 the net loss associated with the macro hedge program is primarily due to foreign currency movements and a higher equity market valuation.

• For the six months ended June 30, 2011 the net loss associated with the Japan variable annuity hedging instruments is primarily due to the Japanese yen currency movements in comparison to the euro and the U.S. dollar.

• For the three months ended June 30, 2011 the loss related to the combined GMWB hedging program, which includes the GMWB product, reinsurance, and hedging derivatives is primarily a result of a general decrease in long-term interest rates. For the six months ended June 30, 2011 the gain related to the combined GMWB hedging program is primarily due to a lower implied market volatility and outperformance of the underlying actively managed funds as compared to their respective indices.

For the three and six months ended June 30, 2010, the net realized capital gain (loss) related to derivatives used in non-qualifying strategies was primarily due to the following:

• The net gain associated with the macro hedge program was primarily due to lower equity market valuation and appreciation of the Japanese yen.

• The net gain on the Japanese fixed annuity hedging instruments was primarily due to the U.S. dollar weakening in comparison to the Japanese yen.

• The net gain for the three months ended June 30, 2010, related to the Japan 3 Win hedging derivatives was primarily due to the U.S. dollar weakening in comparison to the Japanese yen, partially offset by the decrease in long-term interest rates.

• The net loss on derivatives associated with GMAB, GMWB, and GMIB product reinsurance contracts, which are reinsured to an affiliated captive reinsurer, was primarily due to a decline in the Japan equity markets, a decrease in Japan interest rates, and an increase in Japan equity market volatility, partially offset by the impact of credit standing.

• The loss related to the combined GMWB hedging program which includes the GMWB product, reinsurance, and hedging derivatives was primarily driven by higher implied market volatility and a general decrease in long-term interest rates.

• The net gain on the coinsurance and modified coinsurance reinsurance agreement, which is accounted for as a derivative instrument, primarily offsets the net loss on the GMAB, GMWB, and GMIB reinsurance contracts as well as a portion of the GMWB product derivatives.

For a discussion related to the reinsurance agreement refer to Note 10 “Transactions with Affiliates” for more information on this transaction.

Credit Risk Assumed through Credit Derivatives

The Company enters into credit default swaps that assume credit risk of a single entity, referenced index, or asset pool in order to synthetically replicate investment transactions. The Company will receive periodic payments based on an agreed upon rate and notional amount and will only make a payment if there is a credit event. A credit event payment will typically be equal to the notional value of the swap contract less the value of the referenced security issuer’s debt obligation after the occurrence of the credit event. A credit event is generally defined as a default on contractually obligated interest or principal payments or bankruptcy of the referenced entity. The credit default swaps in which the Company assumes credit risk primarily reference investment grade single corporate issuers and baskets, which include trades ranging from baskets of up to five corporate issuers to standard and customized diversified portfolios of corporate issuers. The diversified portfolios of corporate issuers are established within sector concentration limits and are typically divided into tranches that possess different credit ratings.

The following tables present the notional amount, fair value, weighted average years to maturity, underlying referenced credit obligation type and average credit ratings, and offsetting notional amounts and fair value for credit derivatives in which the Company is assuming credit risk as of June 30, 2011 and December 31, 2010.

As of June 30, 2011
							Underlying Referenced
						Weighted	Credit Obligation(s) [1]
						Average		Average	Offsetting
Credit Derivative type by derivative	Notional		Fair			Years to		Credit	Notional		Offsetting
risk exposure	Amount [2]		Value			Maturity	Type	Rating	Amount [3]		Fair Value [3]
Single name credit default swaps
Investment grade risk exposure	$	1,029	$	(1	)	3 years	Corporate Credit/ Foreign Gov.	A+	$	936	$	(42	)
Below investment grade risk exposure		130		(4	)	3 years	Corporate Credit	B+		114		(6	)
Basket credit default swaps [4]
Investment grade risk exposure		2,065		1		3 years	Corporate Credit	BBB+		1,221		(9	)
Investment grade risk exposure		353		(42	)	6 years	CMBS Credit	A-		353		42
Below investment grade risk exposure		477		(349	)	4 years	Corporate Credit	BBB+		—		—
Embedded credit derivatives
Investment grade risk exposure		25		24		3 years	Corporate Credit	BBB-		—		—
Below investment grade risk exposure		300		262		6 years	Corporate Credit	BB+		—		—
Total	$	4,379	$	(109	)				$	2,624	$	(15	)

As of December 31, 2010
							Underlying Referenced
						Weighted	Credit Obligation(s) [1]
						Average		Average	Offsetting
Credit Derivative type by derivative	Notional		Fair			Years to		Credit	Notional		Offsetting
risk exposure	Amount [2]		Value			Maturity	Type	Rating	Amount [3]		Fair Value [3]
Single name credit default swaps
Investment grade risk exposure	$	1,038	$	(6	)	3 years	Corporate Credit/Foreign Gov.	A+	$	945	$	(36	)
Below investment grade risk exposure		151		(6	)	3 years	Corporate Credit	BB-		135		(11	)
Basket credit default swaps [4]
Investment grade risk exposure		2,064		(7	)	4 years	Corporate Credit	BBB+		1,155		(7	)
Investment grade risk exposure		352		(32	)	6 years	CMBS Credit	A-		352		32
Below investment grade risk exposure		667		(334	)	4 years	Corporate Credit	BBB+		—		—
Embedded credit derivatives
Investment grade risk exposure		25		25		4 years	Corporate Credit	BBB-		—		—
Below investment grade risk exposure		325		286		6 years	Corporate Credit	BB		—		—
Total	$	4,622	$	(74	)				$	2,587	$	(22	)

[1]	The average credit ratings are based on availability and the midpoint of the applicable ratings among Moody’s, S&P, and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.
[2]	Notional amount is equal to the maximum potential future loss amount. There is no specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.
[3]	The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap.
[4]	Includes $2.4 billion and $2.6 billion as of June 30, 2011 and December 31, 2010, respectively, of standard market indices of diversified portfolios of corporate issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index. Also includes $478 and $467 as of June 30, 2011 and December 31, 2010, respectively, of customized diversified portfolios of corporate issuers referenced through credit default swaps.