VARIABLE INTEREST ENTITIES

9 Months Ended

Sep. 30, 2015

7. VARIABLE INTEREST ENTITIES

We enter into various arrangements with VIEs in the normal course of business and consolidate the VIEs when we determine we are the primary beneficiary. This analysis includes a review of the VIE’s capital structure, related contractual relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and our involvement with the entity. When assessing the need to consolidate a VIE, we evaluate the design of the VIE as well as the related risks the entity was designed to expose the variable interest holders to.

For VIEs with attributes consistent with that of an investment company or a money market fund, the primary beneficiary is the party or group of related parties that absorbs a majority of the expected losses of the VIE, receives the majority of the expected residual returns of the VIE, or both.

For all other VIEs, the primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of our decision-making ability and our ability to influence activities that significantly affect the economic performance of the VIE.

Balance Sheet Classification and Exposure to Loss

The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the Condensed Consolidated Balance Sheets:

(in millions)		Real Estate and Investment Entities^(d)		Securitization Vehicles		Structured Investment Vehicle		Affordable Housing Partnerships		Other		Total
September 30, 2015
Assets:
Bonds available for sale	$	-	$	10,915	$	-	$	-	$	24	$	10,939
Other bond securities		-		6,310		451		-		37		6,798
Mortgage and other loans receivable		1		2,104		-		-		139		2,244
Other invested assets		546		583		-		2,644		23		3,796
Other ^(a)		54		814		73		247		91		1,279
Total assets^(b)(e)	$	601	$	20,726	$	524	$	2,891	$	314	$	25,056
Liabilities:
Long-term debt	$	23	$	1,145	$	54	$	1,538	$	6	$	2,766
Other ^(c)		51		249		-		186		71		557
Total liabilities	$	74	$	1,394	$	54	$	1,724	$	77	$	3,323
December 31, 2014
Assets:
Bonds available for sale	$	-	$	11,459	$	-	$	-	$	35	$	11,494
Other bond securities		-		7,251		615		-		40		7,906
Mortgage and other loans receivable		-		2,398		-		-		162		2,560
Other invested assets		577		651		-		1,684		29		2,941
Other ^(a)		40		1,447		140		49		76		1,752
Total assets^(b)	$	617	$	23,206	$	755	$	1,733	$	342	$	26,653
Liabilities:
Long-term debt	$	69	$	1,370	$	52	$	199	$	7	$	1,697
Other^(c)		32		276		-		101		37		446
Total liabilities	$	101	$	1,646	$	52	$	300	$	44	$	2,143

(a) Comprised primarily of Short-term investments, Premiums and other receivables and Other assets at both September 30, 2015 and December 31, 2014.

(b) The assets of each VIE can be used only to settle specific obligations of that VIE.

(c) Comprised primarily of Other liabilities and Derivative liabilities, at fair value, at both September 30, 2015 and December 31, 2014.

(d) At September 30, 2015 and December 31, 2014, off-balance sheet exposure, primarily consisting of commitments to real estate and investment entities, was $127.2 million and $56.4 million, respectively.

(e) Includes the effect of consolidating previously unconsolidated partnerships.

We calculate our maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE, (ii) the notional amount of VIE assets or liabilities where we have also provided credit protection to the VIE with the VIE as the referenced obligation, and (iii) other commitments and guarantees to the VIE. Interest holders in VIEs sponsored by us generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to us, except in limited circumstances when we have provided a guarantee to the VIE’s interest holders.

The following table presents total assets of unconsolidated VIEs in which we hold a variable interest, as well as our maximum exposure to loss associated with these VIEs:

			Maximum Exposure to Loss
		Total VIE		On-Balance		Off-Balance
(in millions)		Assets		Sheet^(a)		Sheet	Total
September 30, 2015
Real estate and investment entities	$	21,844	$	3,179	$	393 ^$	3,572
Affordable housing partnerships		5,262		1,004		-	1,004
Other		1,110		242		992 ^(b)	1,234
Total	$	28,216	$	4,425	$	1,385 ^$	5,810
December 31, 2014
Real estate and investment entities	$	19,949	$	2,785	$	454 ^$	3,239
Affordable housing partnerships		7,911		425		-	425
Other^(c)		1,959		304		992 ^(b)	1,296
Total	$	29,819	$	3,514	$	1,446 ^$	4,960

(a) At September 30, 2015 and December 31, 2014, $4.1 billion and $3.2 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.

(b) These amounts represent our estimate of the maximum exposure to loss under certain insurance policies issued to VIEs if a hypothetical loss occurred to the extent of the full amount of the insured value. Our insurance policies cover defined risks and our estimate of liability is included in our insurance reserves on the balance sheet.

(c) The On-Balance and Off-Balance sheet amounts have been revised from $32 million and $0 to $304 million and $992 million, respectively, to correct the Maximum Exposure to Loss as of December 31, 2014, which are not considered material to previously issued financial statements.

See Note 10 to the Consolidated Financial Statements in the 2014 Annual Report for additional information on VIEs.