Fair Values of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2013

Fair Values of Assets and Liabilities

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

	June 30, 2013
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Fixed maturities:
Corporate debt securities	$	—	$	14,447	$	1,558	$	16,005
Residential mortgage backed securities	—		3,555		50		3,605
Commercial mortgage backed securities	—		2,457		164		2,621
State and municipal obligations	—		1,022		—		1,022
Asset backed securities	—		704		154		858
Foreign government bonds and obligations	—		254		—		254
U.S. government and agencies obligations	9		37		—		46
Total Available-for-Sale securities: Fixed maturities	9		22,476		1,926		24,411
Common stocks	2		3		—		5
Cash equivalents	—		213		—		213
Other assets:
Interest rate derivative contracts	—		1,638		—		1,638
Equity derivative contracts	326		1,094		—		1,420
Credit derivative contracts	—		7		—		7
Foreign currency derivative contracts	—		4		—		4
Total other assets	326		2,743		—		3,069
Separate account assets	—		71,828		—		71,828
Total assets at fair value	$	337	$	97,263	$	1,926	$	99,526
Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	3	$	—	$	3
IUL embedded derivatives	—		—		76		76
GMWB and GMAB embedded derivatives	—		—		11		11
Total future policy benefits	—		3		87		90		(1)
Other liabilities:
Interest rate derivative contracts	—		1,483		—		1,483
Equity derivative contracts	269		1,827		—		2,096
Total other liabilities	269		3,310		—		3,579
Total liabilities at fair value	$	269	$	3,313	$	87	$	3,669

(1) The Company’s adjustment for nonperformance risk resulted in a $263 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	—		2		878		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	$	3,023	$	878	$	4,159

(1) The Company’s adjustment for nonperformance risk resulted in a $398 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 Benefits
	Corporate Debt Securities			Residential Mortgage Backed Securities		Commercial Mortgage Backed Securities			Asset Backed Securities			Total			IULEmbedded Derivatives			GMWB and GMAB Embedded Derivatives			Total
									(in millions)
Balance, April 1, 2013	$	1,653		$	8	$	168		$	160		$	1,989		$	(61	)	$	(266	)	$	(327	)
Total gains (losses) included in:
Net income	(1		)	—		—			—			(1		)(1)	(2		)(2)	306		(3)	304
Other comprehensive loss	(35		)	—		(4		)	3			(36		)	—			—			—
Purchases	20			42		—			—			62			—			—			—
Sales	—			—		—			—			—			—			—			—
Issues	—			—		—			—			—			(13		)	(53		)	(66		)
Settlements	(79		)	—		—			—			(79		)	—			2			2
Transfers into Level 3	—			—		—			—			—			—			—			—
Transfers out of Level 3	—			—		—			(9		)	(9		)	—			—			—
Balance, June 30, 2013	$	1,558		$	50	$	164		$	154		$	1,926		$	(76	)	$	(11	)	$	(87	)
Changes in unrealized gains (losses) relating to assets and liabilities held at June 30, 2013 included in:
Benefits, claims, losses and settlement expenses	$	—		$	—	$	—		$	—		$	—		$	—		$	299		$	299
Interest credited to fixed accounts		—			—		—			—			—			(2	)		—			(2	)

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

(2) Included in interest credited to fixed accounts in the Consolidated Statements of Income.

(3) 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 Investment			Total			Common Stock			GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, April 1, 2012	$	1,393		$	82		$	16	$	140	$	15		$	1,646		$	1		$	(840	)
Total gains (losses) included in:
Net income	—			(5		)	—		—		—			(5		)(1)	—			(528		)(2)
Other comprehensive income	1			4			—		—		—			5			—			—
Purchases	95			—			8		—		—			103			—			—
Sales	—			—			—		—		—			—			—			—
Issues	—			—			—		—		—			—			—			(43		)
Settlements	(43		)	(3		)	—		—		—			(46		)	—			5
Transfers into Level 3	10			5			—		—		—			15			—			—
Transfers out of Level 3	—			(24		)	—		—		(15		)	(39		)	(1		)	—
Balance, June 30, 2012	$	1,456		$	59		$	24	$	140	$	—		$	1,679		$	—		$	(1,406	)
Changes in unrealized losses relating to assets and liabilities held at June 30, 2012 included in:
Net realized investment losses	$	—		$	(5	)	$	—	$	—	$	—		$	(5	)	$	—		$	—
Benefits, claims, losses and settlement expenses	—			—			—		—		—			—			—			(535		)

(1) Represents a $5 million loss included in net realized investment losses 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			Total			IUL Embedded Derivatives			GMWB and GMAB Embedded Derivatives			Total
	(in millions)
Balance, January 1, 2013	$	1,654		$	23		$	170		$	156		$	2,003		$	(45	)	$	(833	)	$	(878	)
Total gains (losses) included in:
Net income	(1		)	—			—			1			—		(1)	(6		)(2)	924		(3)	918
Other comprehensive loss	(35		)	—			(6		)	7			(34		)	—			—			—
Purchases	74			42			—			—			116			—			—			—
Sales	—			—			—			—			—			—			—			—
Issues	—			—			—			—			—			(25		)	(103		)	(128		)
Settlements	(134		)	—			—			(1		)	(135		)	—			1			1
Transfers into Level 3	—			—			—			—			—			—			—			—
Transfers out of Level 3	—			(15		)	—			(9		)	(24		)	—			—			—
Balance, June 30, 2013	$	1,558		$	50		$	164		$	154		$	1,926		$	(76	)	$	(11	)	$	(87	)
Changes in unrealized gains (losses) relating to assets and liabilities held at June 30, 2013 included in:
Net investment income	$	(1	)	$	—		$	—		$	1		$	—		$	—		$	—		$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—			—			908			908
Interest credited to fixed accounts	—			—			—			—			—			(6		)	—			(6		)

(1)   Included in net investment income in the Consolidated Statements of Income.

(2)   Included in interest credited to fixed accounts in the Consolidated Statements of Income.

(3)   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 Investment			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	—			(7		)	—		—			—			(7		)(1)	—			256		(2)
Other comprehensive income	5			9			—		1			1			16			—			—
Purchases	193			24			8		—			—			225			1			—
Sales	—			—			—		—			—			—			—			—
Issues	—			—			—		—			—			—			—			(82		)
Settlements	(94		)	(6		)	—		(1		)	—			(101		)	—			5
Transfers into Level 3	10			5			—		7			—			22			—			—
Transfers out of Level 3	—			(24		)	—		—			(15		)	(39		)	(1		)	—
Balance, June 30, 2012	$	1,456		$	59		$	24	$	140		$	—		$	1,679		$	—		$	(1,406	)
Changes in unrealized gains (losses) relating to assets and liabilities held at June 30, 2012 included in:
Net investment income	$	(1	)	$	—		$	—	$	1		$	—		$	—		$	—		$	—
Net realized investment losses	—			(6		)	—		—			—			(6		)	—			—
Benefits, claims, losses and settlement expenses	—			—			—		—			—			—			—			234

(1)       Represents a $7 million loss included in net realized investment losses 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

	June 30, 2013
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Corporate debt securities (private placements)	$	1,529	Discounted cash flow	Yield/spread to U.S. Treasuries	0.5% – 5.8% (1.9%)
IUL embedded derivatives	$	76	Discounted cash flow	Nonperformance risk(3)	96	bps
GMWB and GMAB embedded derivatives	$	11	Discounted cash flow	Utilization of guaranteed withdrawals(1)	0.0% – 56.4%
				Surrender rate	0.0% – 56.3%
				Market volatility(2)	5.5% – 21.2%
				Nonperformance risk(3)	96	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%)
IUL embedded derivatives	$	45	Discounted cash flow	Nonperformance risk(3)	97	bps
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 derivatives.

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

	June 30, 2013
	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	3,360	$	—	$	—	$	3,447	$	3,447
Policy loans	760		—		—		753		753
Other investments	309		—		278		35		313
Restricted cash	5		5		—		—		5
Financial Liabilities
Future policy benefits	$	14,389	$	—	$	—	$	14,972	$	14,972
Separate account liabilities	371		—		371		—		371
Line of credit with Ameriprise Financial	150		—		—		150		150
Short-term borrowings	501		—		501		—		501
Other liabilities	113		—		—		111		111

	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