Variable Interest Entities ("VIE's")

3 Months Ended

Mar. 31, 2013

Variable Interest Entities ("VIE's") [Abstract]

Variable Interest Entities ("VIE's")

3.  Variable Interest Entities (“VIEs”)

Consolidated VIEs

See Note 4 in our 2012 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 March 31, 2013:

	Amount and Date of Issuance
	$400		$200
	December 2006		April 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 March 31, 2013:

	AAA		AA		A		BBB		BB		B		CCC		Total
Industry
Financial intermediaries	-	%	2.1	%	7.0	%	1.4	%	-	%	-	%	-	%	10.5	%
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	%	2.2	%	-	%	-	%	-	%	4.8	%
Chemicals and plastics	-	%	-	%	2.3	%	1.2	%	0.3	%	-	%	-	%	3.8	%
Drugs	0.3	%	2.2	%	1.2	%	-	%	-	%	-	%	-	%	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	%	15.4	%	17.4	%	4.6	%	0.3	%	0.3	%	42.5	%
Total	0.6	%	13.9	%	42.2	%	35.4	%	6.8	%	0.8	%	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 March 31, 2013						As of December 31, 2012
	Number of Instruments		Notional Amounts		Carrying Value		Number of Instruments		Notional Amounts		Carrying Value
Assets
Fixed maturity securities:
Asset-backed credit card loan		N/A	$	-	$	599		N/A	$	-	$	598
U.S. government bonds		N/A		-		109		N/A		-		110
Excess mortality swap		1		100		-		1		100		-
Total assets (1)		1	$	100	$	708		1	$	100	$	708
Liabilities
Non-qualifying hedges:
Credit default swaps		2	$	600	$	113		2	$	600	$	129
Contingent forwards		2		-		-		2		-		(1)
Total non-qualifying hedges		4		600		113		4		600		128
Federal income tax		N/A		-		(30)		N/A		-		(36)
Total liabilities (2)		4	$	600	$	83		4	$	600	$	92

⁽¹⁾ Reported in VIEs’ fixed maturity securities on our Consolidated Balance Sheets.

⁽²⁾ 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 our 2012 Form 10-K, we regularly review our investment holdings for other-than-temporary impairment (“OTTI”).  Based upon this review, we believe that the AFS fixed maturity securities were not other-than-temporarily impaired as of March 31, 2013.  

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

	For the Three Months Ended March 31,
	2013		2012
Non-Qualifying Hedges
Credit default swaps	$	15	$	71
Contingent forwards		-		(2)
Total non-qualifying hedges (1)	$	15	$	69

⁽¹⁾ Reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

Unconsolidated VIEs

See Note 4 in our 2012 Form 10-K for a detailed discussion of our unconsolidated VIEs, which information is incorporated herein by reference.

We invest in certain limited partnerships that operate qualified affordable housing projects that we have concluded are VIEs.  We receive returns from the limited partnerships in the form of income tax credits which are guaranteed by creditworthy third parties, and our exposure to loss is limited to the capital we invest in the limited partnership.  We are not the primary beneficiary of these VIEs as we do not have the power to direct the most significant activities of the limited partnerships.  Our maximum exposure to loss was $86 million and $92 million at March 31, 2013 and December 31, 2012, respectively.