Fair Values of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2013

Fair Values of Assets and Liabilities

Schedule of balances of assets and liabilities measured at fair value on a recurring basis

	March 31, 2013
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Fixed maturities:
Corporate debt securities	$	—	$	15,067	$	1,653	$	16,720
Residential mortgage backed securities	—		3,569		8		3,577
Commercial mortgage backed securities	—		2,657		168		2,825
State and municipal obligations	—		1,117		—		1,117
Asset backed securities	—		707		160		867
Foreign government bonds and obligations	—		214		—		214
U.S. government and agencies obligations	10		38		—		48
Total Available-for-Sale securities: Fixed maturities	10		23,369		1,989		25,368
Common stocks	2		2		—		4
Cash equivalents	—		137		—		137
Other assets:
Interest rate derivative contracts	—		1,937		—		1,937
Equity derivative contracts	339		867		—		1,206
Foreign currency derivative contracts	—		7		—		7
Total other assets	339		2,811		—		3,150
Separate account assets	—		72,532		—		72,532
Total assets at fair value	$	351	$	98,851	$	1,989	$	101,191
Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	3	$	—	$	3
IUL embedded derivatives	—		61		—		61
GMWB and GMAB embedded derivatives	—		—		266		266
Total future policy benefits	—		64		266		330		(1)
Other liabilities:
Interest rate derivative contracts	—		1,421		—		1,421
Equity derivative contracts	141		1,768		—		1,909
Foreign currency derivative contracts	—		1		—		1
Total other liabilities	141		3,190		—		3,331
Total liabilities at fair value	$	141	$	3,254	$	266	$	3,661

(1) The Company’s adjustment for nonperformance risk resulted in a $295 million cumulative decrease to the embedded derivative liability.

	December 31, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Fixed maturities:
Corporate debt securities	$	—	$	15,387	$	1,654	$	17,041
Residential mortgage backed securities	—		3,598		23		3,621
Commercial mortgage backed securities	—		2,834		170		3,004
State and municipal obligations	—		1,122		—		1,122
Asset backed securities	—		715		156		871
Foreign government bonds and obligations	—		224		—		224
U.S. government and agencies obligations	10		39		—		49
Total Available-for-Sale securities: Fixed maturities	10		23,919		2,003		25,932
Common stocks	2		2		—		4
Cash equivalents	—		264		—		264
Other assets:
Interest rate derivative contracts	—		2,191		—		2,191
Equity derivative contracts	285		936		—		1,221
Foreign currency derivative contracts	—		6		—		6
Total other assets	285		3,133		—		3,418
Separate account assets	—		69,395		—		69,395
Total assets at fair value	$	297	$	96,713	$	2,003	$	99,013
Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		45		—		45
GMWB and GMAB embedded derivatives	—		—		833		833
Total future policy benefits	—		47		833		880		(1)
Other liabilities:
Interest rate derivative contracts	—		1,486		—		1,486
Equity derivative contracts	258		1,535		—		1,793
Total other liabilities	258		3,021		—		3,279
Total liabilities at fair value	$	258	$	3,068	$	833	$	4,159

(1) The Company’s adjustment for nonperformance risk resulted in a $389 million cumulative decrease to the embedded derivative liability.

Summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis

	Available-for-Sale Securities: Fixed Maturities															Future Policy
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total			Benefits:GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2013	$	1,654		$	23		$	170		$	156		$	2,003		$	(833	)
Total gains (losses) included in:
Net income	—			—			—			1			1		(1)	618		(2)
Other comprehensive income	—			—			(2		)	4			2			—
Purchases	54			—			—			—			54			—
Sales	—			—			—			—			—			—
Issues	—			—			—			—			—			(50		)
Settlements	(55		)	—			—			(1		)	(56		)	(1		)
Transfers into Level 3	—			—			—			—			—			—
Transfers out of Level 3	—			(15		)	—			—			(15		)	—
Balance, March 31, 2013	$	1,653		$	8		$	168		$	160		$	1,989		$	(266	)
Changes in unrealized gains (losses) relating to assets and liabilities held at March 31, 2013 included in:
Net investment income	$	—		$	—		$	—		$	1		$	1		$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—			609

(1) Represents a $1 million gain included in net investment income in the Consolidated Statements of Income.

(2) Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Income.

	Available-for-Sale Securities: Fixed Maturities																	Future Policy Benefits:
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities		Asset Backed Securities		Other Structured Investments		Total			Common Stock		GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2012	$	1,342		$	58		$	16	$	133	$	14	$	1,563		$	—	$	(1,585	)
Total gains (losses) included in:
Net income	—			(2		)	—		—		—		(2		)(1)	—		784		(2)
Other comprehensive income	4			5			—		—		1		10			—		—
Purchases	98			24			—		—		—		122			1		—
Sales	—			—			—		—		—		—			—		—
Issues	—			—			—		—		—		—			—		(39		)
Settlements	(51		)	(3		)	—		—		—		(54		)	—		—
Transfers into Level 3	—			—			—		7		—		7			—		—
Transfers out of Level 3	—			—			—		—		—		—			—		—
Balance, March 31, 2012	$	1,393		$	82		$	16	$	140	$	15	$	1,646		$	1	$	(840	)
Changes in unrealized gains (losses) relating to assets and liabilities held at March 31, 2012 included in:
Net realized investment gains (losses)	$	—		$	2		$	—	$	—	$	—	$	2		$	—	$	—
Benefits, claims, losses and settlement expenses	—			—			—		—		—		—			—		769

(1)    Represents a $2 million loss included in net realized investment gains in the Consolidated Statements of Income.

(2)    Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Income.

Significant unobservable inputs used in the fair value measurements

	March 31, 2013
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Corporate debt securities (private placements)	$	1,625	Discounted cash flow	Yield/spread to U.S. Treasuries	1.1% – 6.0% (2.0%)
GMWB and GMAB embedded derivatives	$	266	Discounted cash flow	Utilization of guaranteed withdrawals(1)	0.0% – 56.4%
				Surrender rate	0.0% – 56.3%
				Market volatility(2)	5.2% – 20.2%
				Nonperformance risk(3)	93 bps

	December 31, 2012
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Corporate debt securities (private placements)	$	1,624	Discounted cash flow	Yield/spread to U.S. Treasuries	1.1% – 8.5% (2.2%)
GMWB and GMAB embedded derivatives	$	833	Discounted cash flow	Utilization of guaranteed withdrawals(1)	0.0% – 56.4%
				Surrender rate	0.0% – 56.3%
				Market volatility(2)	5.6% – 21.2%
				Nonperformance risk(3)	97 bps

(1) The utilization of the guaranteed withdrawals represents the percentage of policyholders that will begin withdrawing in any given year.

(2) Market volatility is implied volatility of fund of funds.

(3) The nonperformance risk is the spread added to the observable interest rates used in the valuation of the embedded derivative.

Schedule of carrying value and the estimated fair value of financial instruments that are not reported at fair value

	March 31, 2013
	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	3,365	$	—	$	—	$	3,553	$	3,553
Policy loans	752		—		—		686		686
Other investments	314		—		284		37		321
Restricted cash	75		75		—		—		75
Financial Liabilities
Future policy benefits	$	14,548	$	—	$	—	$	15,578	$	15,578
Separate account liabilities	375		—		375		—		375
Line of credit with Ameriprise Financial	150		—		—		150		150
Short-term borrowings	500		—		500		—		500
Other liabilities	123		—		—		121		121

	December 31, 2012
	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	3,389	$	—	$	—	$	3,568	$	3,568
Policy loans	752		—		—		725		725
Other investments	309		—		292		24		316
Restricted cash	86		86		—		—		86
Financial Liabilities
Future policy benefits	$	14,701	$	—	$	—	$	15,982	$	15,982
Separate account liabilities	360		—		360		—		360
Line of credit with Ameriprise Financial	150		—		—		150		150
Short-term borrowings	501		—		500		—		500
Other liabilities	144		—		—		142		142