We have invested in the Class 1 Notes of two credit-linked note (“CLN”) structures, which represent special purpose trusts combining asset-backed securities with credit default swaps to produce multi-class structured securities. The CLN structures also include subordinated Class 2 Notes, which are held by third parties, and, together with the Class 1 Notes, represent 100% of the outstanding notes of the CLN structures. The entities that issued the CLNs are financed by the note holders, and, as such, the note holders participate in the expected losses and residual returns of the entities. Because the note holders do not have voting rights or similar rights, we determined the entities issuing the CLNs are VIEs, and as a note holder, our interest represented a variable interest. We have the power to direct the most significant activity affecting the performance of both CLN structures, as we have the ability to actively manage the reference portfolio underlying the credit default swaps. As a result, we have concluded we are the primary beneficiary of the VIEs associated with the CLNs and have consolidated the assets and liabilities of both CLN structures in our Consolidated Balance Sheets.

Asset and liability information (dollars in millions) for these consolidated VIEs included on our Consolidated Balance Sheets was as follows:

							As of June 30, 2011							As of December 31, 2010
							Number							Number
							of		Notional		Carrying			of		Notional		Carrying
						Instruments			Amounts		Value		Instruments			Amounts		Value
Assets
Fixed maturity corporate asset-backed
	credit card loan securities⁽¹⁾							N/A	$	-	$	593			N/A	$	-	$	584

Liabilities
Derivative instruments not designated
	and not qualifying as hedging
	instruments:
		Credit default swaps⁽²⁾						2	$	600	$	202			2	$	600	$	215
		Contingent forwards⁽²⁾						2		-		(3)			2		-		(6)
			Total derivative instruments not
				designated and not qualifying
				as hedging instruments				4		600		199			4		600		209
Federal income tax⁽²⁾								N/A		-		(69)			N/A		-		(77)
					Total liabilities			4	$	600	$	130			4	$	600	$	132

For details related to the fixed maturity available-for-sale (“AFS”) securities for these VIEs, see Note 5.

The credit default swaps create variability in the CLN structures and expose the note holders to the credit risk of the referenced portfolio. The contingent forwards transfer a portion of the loss in the underlying fixed maturity corporate asset-backed credit card loan securities back to the counterparty after credit losses reach our attachment point.

The gains (losses) for these consolidated VIEs (in millions) recorded on our Consolidated Statements of Income (Loss) were as follows:

			For the Three				For the Six
			Months Ended				Months Ended
			June 30,				June 30,
			2011		2010		2011		2010
Derivative Instruments Not Designated and
	Not Qualifying as Hedging Instruments
Credit default swaps⁽¹⁾			$	6	$	(70)	$	13	$	(69)
Contingent forwards⁽¹⁾				(1)		2		(3)		(3)
	Total derivative instruments not designated and
		not qualifying as hedging instruments	$	5	$	(68)	$	10	$	(72)

The following summarizes information regarding the CLN structures (dollars in millions) as of June 30, 2011:

	Amount and Date of Issuance
		$400		$200
		December		April
		2006		2007
Original attachment point (subordination)		5.50	%	2.05	%
Current attachment point (subordination)		4.17	%	1.48	%
Maturity	12/20/2016			3/20/2017
Current rating of tranche		B		Ba2
Current rating of underlying collateral pool		Aa1-B3		Aaa-Caa1
Number of defaults in underlying collateral pool		2		2
Number of entities		123		99
Number of countries		19		22

There has been no event of default on the CLNs themselves. Based upon our analysis, the remaining subordination as represented by the attachment point should be sufficient to absorb future credit losses, subject to changing market conditions. Similar to other debt market instruments, our maximum principal loss is limited to our original investment as of June 30, 2011.

As described more fully in Note 1 of our 2010 Form 10-K, we regularly review our investment holdings for other-than-temporary impairments (“OTTIs”). Based upon this review, we believe that the fixed maturity corporate asset-backed credit card loan securities were not other-than-temporarily impaired as of June 30, 2011.

The following summarizes the exposure of the CLN structures' underlying collateral by industry and rating as of June 30, 2011:


Industry			AAA		AA		A		BBB		BB		B		CCC		Total
Telecommunications			0.0	%	0.0	%	6.4	%	4.3	%	0.5	%	0.0	%	0.0	%	11.2	%
Financial intermediaries			0.3	%	4.0	%	6.2	%	0.5	%	0.0	%	0.0	%	0.0	%	11.0	%
Oil and gas			0.0	%	1.0	%	1.2	%	4.1	%	0.0	%	0.0	%	0.0	%	6.3	%
Utilities			0.0	%	0.0	%	3.1	%	1.4	%	0.0	%	0.0	%	0.0	%	4.5	%
Chemicals and plastics			0.0	%	0.0	%	2.3	%	1.2	%	0.3	%	0.0	%	0.0	%	3.8	%
Drugs			0.3	%	2.2	%	1.2	%	0.0	%	0.0	%	0.0	%	0.0	%	3.7	%
Retailers (except food
	and drug)		0.0	%	0.0	%	1.2	%	1.8	%	0.5	%	0.0	%	0.0	%	3.5	%
Industrial equipment			0.0	%	0.0	%	3.0	%	0.3	%	0.0	%	0.0	%	0.0	%	3.3	%
Sovereign			0.0	%	0.7	%	1.6	%	1.0	%	0.0	%	0.0	%	0.0	%	3.3	%
Food products			0.0	%	0.3	%	1.8	%	1.1	%	0.0	%	0.0	%	0.0	%	3.2	%
Conglomerates			0.0	%	2.6	%	0.5	%	0.0	%	0.0	%	0.0	%	0.0	%	3.1	%
Forest products			0.0	%	0.0	%	0.0	%	1.6	%	1.4	%	0.0	%	0.0	%	3.0	%
Other industry < 3%
	(27 industries)		0.0	%	2.0	%	15.4	%	17.3	%	3.7	%	1.4	%	0.3	%	40.1	%
		Total	0.6	%	12.8	%	43.9	%	34.6	%	6.4	%	1.4	%	0.3	%	100.0	%

Effective December 31, 2010, we issued a $500 million long-term senior note in exchange for a corporate bond AFS security of like principal and duration from a non-affiliated VIE whose primary activities are to acquire, hold and issue notes and loans, as well as pay and collect interest on the notes and loans. We have concluded that we are not the primary beneficiary of this VIE because we do not have power over the activities that most significantly affect its economic performance. In addition, the terms of the senior note provide us with a set-off right to the corporate bond AFS security we purchased from the VIE; therefore, neither appears on our Consolidated Balance Sheets. We assigned the corporate bond AFS security to one of our subsidiaries and issued a guarantee to our subsidiary for the timely payment of the corporate bond's principal.

Through our investment activities, we make passive investments in structured securities issued by VIEs for which we are not the manager. These structured securities include our mortgage-backed securities (“MBS”), which include collateralized mortgage obligations (“CMOs”), mortgage pass through securities (“MPTS”) and commercial mortgage-backed securities (“CMBS”) and our asset-backed securities (“ABS”) collateralized debt obligations (“CDOs”). We have not provided financial or other support with respect to these VIEs other than our original investment. We have determined that we are not the primary beneficiary of these VIEs due to the relative size of our investment in comparison to the principal amount of the structured securities issued by the VIEs and the level of credit subordination which reduces our obligation to absorb losses or right to receive benefits. Our maximum exposure to loss on these structured securities is limited to the amortized cost for these investments. We recognize our variable interest in these VIEs at fair value on our consolidated financial statements. For information about these structured securities, see Note 5.