Derivative Financial Instruments

3 Months Ended

Mar. 31, 2012

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

4. Derivative Financial Instruments

A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under the agreements and may not be representative of the potential for gain or loss on these instruments.

	March 31, 2012							December 31, 2011
	Contractual/ Notional		Estimated Fair Value					Contractual/ Notional		Estimated Fair Value
	Amount		Asset		(Liability)			Amount		Asset		(Liability)
(In millions)
With hedge designation:
Interest rate risk:
Interest rate swaps	$	300	$	3	$	(4	)	$	300	$	3	$	(3	)
Commodities:
Forwards – short		269		71		(11	)		268		64		(22	)
Foreign exchange:
Currency forwards – short		65		2		(1	)		154		1		(8	)
Without hedge designation:
Equity markets:
Options – purchased		650		27					286		33
– written		389				(13	)		398				(23	)
Equity swaps and warrants – long		20		14					63		16
Interest rate risk:
Interest rate swaps		117		1		(1	)		100		1		(1	)
Credit default swaps
– purchased protection		58				(1	)		145		8		(1	)
– sold protection		38							28				(2	)
Foreign exchange:
Currency forwards – long		180				(2	)		203		4
– short		142							330				(2	)

For derivative financial instruments without hedge designation, changes in the fair value of derivatives not held in a trading portfolio are reported in Investment gains (losses) and changes in the fair value of derivatives held for trading purposes are reported in Net investment income on the Consolidated Condensed Statements of Income. Losses of $1 million were included in Investment gains (losses) for the three months ended March 31, 2012 and 2011. Losses of $4 million were included in Net investment income for the three months ended March 31, 2012 and 2011.

The Company's derivative financial instruments with cash flow hedge designation hedge variable price risk associated with the purchase and sale of natural gas and other energy-related products, exposure to foreign currency losses on future foreign currency expenditures, as well as risks attributable to changes in interest rates on long term debt. For the three months ended March 31, 2012, the amount of gains recognized in OCI related to these cash flow hedges were $34 million, as compared to $16 million of losses recognized in the 2011 period. For the three months ended March 31, 2012 and 2011, the amount of gain reclassified from AOCI into income was $9 million and $8 million. As of March 31, 2012, the estimated amount of net unrealized gains associated with these cash flow hedges that will be reclassified from AOCI into earnings during the next twelve months was $46 million. The net amounts recognized due to ineffectiveness were less than $1 million for the three months ended March 31, 2012 and 2011.