Variable Interest Entities

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements [Abstract]

Consolidated Variable Interest Entities

4. Variable Interest Entities (“VIEs”)

Consolidated VIEs

See Note 4 in our 2011 Form 10-K for a detailed discussion of our consolidated VIEs, which information is incorporated herein by reference.

The following summarizes information regarding the credit-linked note (“CLN”) structures (dollars in millions) as of September 30, 2012:

	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		BB-		Ba2
Current rating of underlying collateral pool		Aa1-B3		Aaa-Caa2
Number of defaults in underlying collateral pool		2		2
Number of entities		123		99
Number of countries		20		21

The following summarizes the exposure of the CLN structures' underlying collateral by industry and rating as of September 30, 2012:

			AAA		AA		A		BBB		BB		B		CCC		Total
Industry
Financial intermediaries			-	%	2.1	%	7.6	%	0.9	%	-	%	-	%	-	%	10.6	%
Telecommunications			-	%	-	%	5.5	%	4.5	%	-	%	0.5	%	-	%	10.5	%
Oil and gas			0.3	%	2.1	%	1.0	%	4.6	%	-	%	-	%	-	%	8.0	%
Utilities			-	%	-	%	2.6	%	2.0	%	-	%	-	%	-	%	4.6	%
Chemicals and plastics			-	%	-	%	2.3	%	1.2	%	0.3	%	-	%	-	%	3.8	%
Drugs			0.3	%	2.7	%	0.7	%	-	%	-	%	-	%	-	%	3.7	%
Retailers (except food
	and drug)		-	%	-	%	2.1	%	0.9	%	0.5	%	-	%	-	%	3.5	%
Industrial equipment			-	%	-	%	3.0	%	0.3	%	-	%	-	%	-	%	3.3	%
Sovereign			-	%	0.7	%	1.2	%	1.3	%	-	%	-	%	-	%	3.2	%
Conglomerates			-	%	2.3	%	0.9	%	-	%	-	%	-	%	-	%	3.2	%
Forest products			-	%	-	%	-	%	1.6	%	1.4	%	-	%	-	%	3.0	%
Other			-	%	4.5	%	14.9	%	17.9	%	4.1	%	0.9	%	0.3	%	42.6	%
		Total	0.6	%	14.4	%	41.8	%	35.2	%	6.3	%	1.4	%	0.3	%	100.0	%

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

					As of September 30, 2012							As of December 31, 2011
					Number							Number
					of		Notional		Carrying			of		Notional		Carrying
				Instruments			Amounts		Value		Instruments			Amounts		Value
Assets
Fixed maturity securities:
	Asset-backed credit card loan					N/A	$	-	$	596			N/A	$	-	$	592
	U.S. government bonds					N/A		-		110			N/A		-		108
Excess mortality swap						1		100		-			1		100		-
			Total assets (1)			1	$	100	$	706			1	$	100	$	700
Liabilities
Non-qualifying hedges:
	Credit default swaps					2	$	600	$	175			2	$	600	$	295
	Contingent forwards					2		-		(1)			2		-		(4)
		Total non-qualifying hedges				4		600		174			4		600		291
Federal income tax						N/A		-		(53)			N/A		-		(98)
			Total liabilities (2)			4	$	600	$	121			4	$	600	$	193

• Reported in VIEs'fixed maturity securities on our Consolidated Balance Sheets.
• Reported in VIEs' liabilities on our Consolidated Balance Sheets.

For details related to the fixed maturity available-for-sale (“AFS”)securities for these VIEs, see Note 4.

As described more fully in Note 1 of our2011 Form 10-K, we regularly review our investment holdings for other-than-temporary impairment (“OTTI”). Based upon this review, we believe that the fixed maturity securities were not other-than-temporarily impaired as of September 30, 2012.

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

		For the Three				For the Nine
		Months Ended				Months Ended
		September 30,				September 30,
		2012		2011		2012		2011
Non-Qualifying Hedges
Credit default swaps		$	58	$	(105)	$	120	$	(92)
Contingent forwards			(1)		2		(3)		1
	Total non-qualifying hedges (1)	$	57	$	(103)	$	117	$	(91)

• Reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

Unconsolidated VIEs

See Note 4 in our 2011 Form 10-K for a detailed discussion of our unconsolidated VIEs, which information is incorporated herein by reference.