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Derivatives (Tables)
 6 Months Ended
Jun. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location
The following table presents the gross notional amount, estimated fair value and primary underlying risk exposure of the Company’s derivatives, excluding embedded derivatives, held at:


 
June 30, 2013
 
December 31, 2012

Primary Underlying Risk Exposure
 
Notional
Amount
 
Estimated Fair Value
 
Notional
Amount
 
Estimated Fair Value

Assets
 
Liabilities
 
Assets
 
Liabilities


 
(In millions)
Derivatives Designated as Hedging Instruments
Fair value hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Interest rate
 
$
587

 
$
15

 
$
5

 
$
538

 
$
28

 
$
9

Foreign currency swaps
Foreign currency exchange rate
 
122

 
—

 
22

 
122

 
—

 
14

Subtotal
 
 
709

 
15

 
27

 
660

 
28

 
23

Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Interest rate
 
598

 
29

 
12

 
658

 
99

 
—

Interest rate forwards
Interest rate
 
310

 
27

 
—

 
410

 
81

 
—

Foreign currency swaps
Foreign currency exchange rate
 
546

 
30

 
4

 
524

 
16

 
14

Credit forwards
Credit
 
5

 
—

 
—

 
—

 
—

 
—

Subtotal
 
 
1,459

 
86

 
16

 
1,592

 
196

 
14

Total qualifying hedges
 
2,168

 
101

 
43

 
2,252

 
224

 
37

 
Derivatives Not Designated or Not Qualifying as Hedging Instruments
Interest rate swaps
Interest rate
 
22,660

 
902

 
431

 
16,869

 
1,254

 
513

Interest rate floors
Interest rate
 
17,604

 
162

 
156

 
15,136

 
318

 
274

Interest rate caps
Interest rate
 
8,001

 
36

 
—

 
9,031

 
11

 
—

Interest rate futures
Interest rate
 
1,743

 
—

 
1

 
2,771

 
—

 
7

Foreign currency swaps
Foreign currency exchange rate
 
834

 
58

 
25

 
811

 
60

 
35

Foreign currency forwards
Foreign currency exchange rate
 
43

 
—

 
—

 
139

 
—

 
4

Credit default swaps - purchased
Credit
 
198

 
—

 
2

 
162

 
—

 
2

Credit default swaps - written
Credit
 
2,393

 
23

 
—

 
2,456

 
23

 
1

Equity futures
Equity market
 
971

 
3

 
—

 
1,075

 
—

 
27

Equity options
Equity market
 
3,431

 
411

 
14

 
2,845

 
469

 
1

Variance swaps
Equity market
 
2,562

 
1

 
85

 
2,346

 
11

 
62

TRRs
Equity market
 
437

 
6

 
8

 
300

 
—

 
7

Total non-designated or non-qualifying derivatives
 
60,877

 
1,602

 
722

 
53,941

 
2,146

 
933

Total
 
$
63,045

 
$
1,703

 
$
765

 
$
56,193

 
$
2,370

 
$
970
Earned Income On Derivatives And Income Statement Location
The following table presents earned income on derivatives:

Three Months
Ended
June 30,
 
Six Months
Ended
June 30,

2013
 
2012
 
2013
 
2012

(In millions)
Qualifying hedges:
 
 
 
 
 
 
 
Net investment income
$
—

 
$
1

 
$
1

 
$
1

Interest credited to policyholder account balances
1

 
6

 
2

 
16

Non-qualifying hedges:
 
 
 
 
 
 
 
Net derivative gains (losses)
45

 
47

 
61

 
55

Policyholder benefits and claims
—

 
(2
)
 
(7
)
 
(2
)
Total
$
46

 
$
52

 
$
57

 
$
70
Amount and location of gains (losses) recognized in income for derivatives that are not designated or qualifying as hedging instruments
The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or qualifying as hedging instruments:
 
Net
Derivative
Gains (Losses)
 
Net
Investment
Income (Loss) (1)
 
Policyholder
Benefits and
Claims (2) 

(In millions)
Three Months Ended June 30, 2013:
 
 
 
 
 
Interest rate derivatives
$
(425
)
 
$
—

 
$
(15
)
Foreign currency exchange rate derivatives
1

 
—

 
—

Credit derivatives - purchased
—

 
—

 
—

Credit derivatives - written
—

 
—

 
—

Equity derivatives
(42
)
 
(1
)
 
(11
)
Total
$
(466
)
 
$
(1
)
 
$
(26
)
Three Months Ended June 30, 2012:
 
 
 
 
 
Interest rate derivatives
$
392

 
$
—

 
$
—

Foreign currency exchange rate derivatives
15

 
—

 
—

Credit derivatives - purchased
2

 
—

 
—

Credit derivatives - written
(16
)
 
—

 
—

Equity derivatives
76

 
(1
)
 
7

Total
$
469

 
$
(1
)
 
$
7

Six Months Ended June 30, 2013:
 
 
 
 
 
Interest rate derivatives
$
(403
)
 
$
—

 
$
(13
)
Foreign currency exchange rate derivatives
16

 
—

 
—

Credit derivatives - purchased
—

 
—

 
—

Credit derivatives - written
7

 
—

 
—

Equity derivatives
(243
)
 
(3
)
 
(45
)
Total
$
(623
)
 
$
(3
)
 
$
(58
)
Six Months Ended June 30, 2012:
 
 
 
 
 
Interest rate derivatives
$
117

 
$
—

 
$
—

Foreign currency exchange rate derivatives
8

 
—

 
—

Credit derivatives - purchased
(8
)
 
—

 
—

Credit derivatives - written
14

 
—

 
—

Equity derivatives
(215
)
 
(2
)
 
(23
)
Total
$
(84
)
 
$
(2
)
 
$
(23
)
____________
(1)
Changes in estimated fair value related to economic hedges of equity method investments in joint ventures.
(2)
Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.
Net derivatives gains (losses) recognized on fair value derivatives and the related hedged items
The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):


Derivatives in Fair Value
Hedging Relationships
 


Hedged Items in Fair Value
Hedging Relationships
 
Net Derivative
Gains (Losses)
Recognized
for Derivatives
 
Net Derivative
Gains (Losses)
Recognized for
Hedged Items
 
Ineffectiveness
Recognized in
Net Derivative
Gains (Losses)
 
 
 
 
(In millions)
Three Months Ended June 30, 2013:
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
6

 
$
(7
)
 
$
(1
)
 
 
Policyholder liabilities (1)
 
(11
)
 
10

 
(1
)
Foreign currency swaps:
 
Foreign-denominated PABs (2)
 
—

 
—

 
—

Total
 
$
(5
)
 
$
3

 
$
(2
)
Three Months Ended June 30, 2012:
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
(2
)
 
$
1

 
$
(1
)
 
 
Policyholder liabilities (1)
 
15

 
(15
)
 
—

Foreign currency swaps:
 
Foreign-denominated PABs (2)
 
(44
)
 
40

 
(4
)
Total
 
$
(31
)
 
$
26

 
$
(5
)
Six Months Ended June 30, 2013:
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
7

 
$
(8
)
 
$
(1
)
 
 
Policyholder liabilities (1)
 
(18
)
 
16

 
(2
)
Foreign currency swaps:
 
Foreign-denominated PABs (2)
 
(7
)
 
7

 
—

Total
 
$
(18
)
 
$
15

 
$
(3
)
Six Months Ended June 30, 2012:
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
(2
)
 
$
1

 
$
(1
)
 
 
Policyholder liabilities (1)
 
2

 
(3
)
 
(1
)
Foreign currency swaps:
 
Foreign-denominated PABs (2)
 
(32
)
 
24

 
(8
)
Total
 
$
(32
)
 
$
22

 
$
(10
)
____________ 
(1)
Fixed rate liabilities reported in PABs or future policy benefits.
(2)
Fixed rate or floating rate liabilities.
Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location
The following table presents the effects of derivatives in cash flow hedging relationships on the interim condensed consolidated statements of operations and comprehensive income and the interim condensed consolidated statements of stockholders’ equity:
 
Derivatives in Cash Flow
Hedging Relationships
 
Amount of Gains
 (Losses) Deferred in
 AOCI on Derivatives
 
Amount and Location
 of Gains (Losses)
Reclassified from
AOCI into Income (Loss)
 
Amount and Location
of Gains (Losses)
Recognized in Income (Loss)
on Derivatives

 
(Effective Portion)
 
(Effective Portion)
 
(Ineffective Portion)

 

 
Net Derivative
Gains (Losses)
 
Net Investment
Income
 
Net Derivative
Gains (Losses)

 

 
(In millions)
 

Three Months Ended June 30, 2013:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(54
)
 
$
—

 
$
—

 
$
1

Interest rate forwards
 
(20
)
 
3

 
—

 
1

Foreign currency swaps
 
(2
)
 
—

 
—

 
—

Total
 
$
(76
)
 
$
3

 
$
—

 
$
2

Three Months Ended June 30, 2012:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
96

 
$
—

 
$
—

 
$
—

Interest rate forwards
 
72

 
—

 
—

 
(1
)
Foreign currency swaps
 
19

 
(2
)
 
—

 
—

Total
 
$
187

 
$
(2
)
 
$
—

 
$
(1
)
Six Months Ended June 30, 2013:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(77
)
 
$
(1
)
 
$
—

 
$
1

Interest rate forwards
 
(35
)
 
6

 
1

 
1

Foreign currency swaps
 
22

 
(1
)
 
—

 
1

Total
 
$
(90
)
 
$
4

 
$
1

 
$
3

Six Months Ended June 30, 2012:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
62

 
$
—

 
$
—

 
$
—

Interest rate forwards
 
15

 
—

 
—

 
—

Foreign currency swaps
 
14

 
(1
)
 
—

 
—

Total
 
$
91

 
$
(1
)
 
$
—

 
$
—
Schedule of estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps
The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at: 
 
 
June 30, 2013
 
December 31, 2012
Rating Agency Designation of Referenced
Credit Obligations (1)
 

Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount
of Future
Payments under
Credit Default
Swaps (2)
 


Weighted
Average
Years to
Maturity (3)
 

Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount
of Future
Payments under
Credit Default
Swaps (2)
 


Weighted
Average
Years to
Maturity (3)
 
 
(In millions)
 
 
 
(In millions)
 
 
Aaa/Aa/A
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
$
2

 
$
137

 
2.8

 
$
3

 
$
167

 
3.2

Credit default swaps referencing indices
 
7

 
650

 
1.6

 
10

 
650

 
2.1

Subtotal
 
9

 
787

 
1.8

 
13

 
817

 
2.3

Baa
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
7

 
486

 
3.4

 
4

 
479

 
3.8

Credit default swaps referencing indices
 
6

 
1,074

 
5.0

 
5

 
1,124

 
4.8

Subtotal
 
13

 
1,560

 
4.5

 
9

 
1,603

 
4.5

Ba
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
—

 
10

 
5.1

 
—

 
—

 
—

Credit default swaps referencing indices
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
—

 
10

 
5.1

 
—

 
—

 
—

B
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
—

 
—

 
—

 
—

 
—

 
—

Credit default swaps referencing indices
 
1

 
36

 
5.1

 
—

 
36

 
5.0

Subtotal
 
1

 
36

 
5.1

 
—

 
36

 
5.0

Total
 
$
23

 
$
2,393

 
3.6

 
$
22

 
$
2,456

 
3.8

____________
(1)
The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)
Assumes the value of the referenced credit obligations is zero.
(3)
The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts.
Estimated Fair Value of Derivative Assets and Liabilities after Master Netting Agreements and Cash Collateral
The estimated fair value of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at: 

 
June 30, 2013
 
December 31, 2012
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement
 
Assets
 
Liabilities
 
Assets
 
Liabilities

 
(In millions)
Gross estimated fair value of derivatives:
 
 
 
 
 
 
 
 
OTC-bilateral (1)
 
$
1,744

 
$
792

 
$
2,436

 
$
982

OTC-cleared (1)
 
—

 
1

 
—

 
—

Exchange-traded
 
3

 
1

 
—

 
34

Total gross estimated fair value of derivatives (1)
 
1,747

 
794

 
2,436

 
1,016

Amounts offset in the consolidated balance sheets
 
—

 
—

 
—

 
—

Estimated fair value of derivatives presented in the consolidated balance sheets (1)
 
1,747

 
794

 
2,436

 
1,016

Gross amounts not offset in the consolidated balance sheets:
 
 
 
 
 
 
 
 
Gross estimated fair value of derivatives: (2)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(674
)
 
(674
)
 
(838
)
 
(838
)
OTC-cleared
 
—

 
—

 
—

 
—

Exchange-traded
 
(1
)
 
(1
)
 
—

 
—

Cash collateral: (3)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(476
)
 
—

 
(897
)
 
—

OTC-cleared
 
—

 
(1
)
 
—

 
—

Exchange-traded
 
—

 
(1
)
 
—

 
(34
)
Securities collateral: (4)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(565
)
 
(105
)
 
(689
)
 
(121
)
OTC-cleared
 
—

 
—

 
—

 
—

Exchange-traded
 
—

 
—

 
—

 
—

Net amount after application of master netting agreements and collateral
 
$
31

 
$
12

 
$
12

 
$
23

____________
(1)
At June 30, 2013 and December 31, 2012, derivative assets include income or expense accruals reported in accrued investment income or in other liabilities of $44 million and $66 million, respectively, and derivative liabilities include income or expense accruals reported in accrued investment income or in other liabilities of $29 million and $46 million, respectively.
(2)
Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.
(3)
Cash collateral received is included in cash and cash equivalents, short-term investments, or in fixed maturity securities, and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the consolidated balance sheets. The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables in the consolidated balance sheets. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At June 30, 2013 and December 31, 2012, the Company received excess cash collateral of $18 million and $0, respectively, and provided excess cash collateral of $58 million and $53 million, respectively, which is not included in the table above due to the foregoing limitation.
(4)
Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the consolidated balance sheets. Subject to certain constraints, the Company is permitted by contract to sell or repledge this collateral, but at June 30, 2013 none of the collateral had been sold or repledged. Securities collateral pledged by the Company is reported in fixed maturity securities in the consolidated balance sheets. Subject to certain constraints, the counterparties are permitted by contract to sell or repledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At June 30, 2013 and December 31, 2012, the Company received excess securities collateral of $23 million and $0, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At June 30, 2013 and December 31, 2012, the Company provided excess securities collateral of $12 million and $0, respectively, for its OTC-bilateral derivatives and $1 million and $0, respectively, for its OTC-cleared derivatives, which are not included in the table above due to the foregoing limitation. At both June 30, 2013 and December 31, 2012, the Company did not pledge any securities collateral for its exchange-traded derivatives.
Derivative Instruments, Gain (Loss) [Line Items]  
Components of Net Derivatives Gains (Losses)
The components of net derivative gains (losses) were as follows:
 

Three Months
Ended
June 30,
 
Six Months
Ended
June 30,

2013
 
2012
 
2013
 
2012

(In millions)
Derivatives and hedging gains (losses) (1)
$
(423
)
 
$
517

 
$
(563
)
 
$
(36
)
Embedded derivatives
(72
)
 
65

 
181

 
179

Total net derivative gains (losses)
$
(495
)
 
$
582

 
$
(382
)
 
$
143

____________
(1)
Includes foreign currency transaction gains (losses) on hedged items in cash flow and non-qualifying hedging relationships, which are not presented elsewhere in this note.
Schedule of Derivative Instruments
The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that are in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. The table also presents the incremental collateral that the Company would be required to provide if there was a one notch downgrade in the Company’s credit rating at the reporting date or if the Company’s credit rating sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position at the reporting date. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table. 


 
Estimated Fair Value of
Collateral Provided:
 
Fair Value of Incremental
 Collateral Provided Upon:

Estimated
Fair Value of
Derivatives in Net
Liability Position (1)
 
Fixed Maturity
Securities
 
One Notch
Downgrade
in the
Company’s
Credit
Rating
 
Downgrade in the
Company’s Credit Rating
to a Level that Triggers
Full Overnight Collateralization or
Termination of
the Derivative Position
 
(In millions)
June 30, 2013
$
118

 
$
117

 
$
1

 
$
11

December 31, 2012
$
143

 
$
121

 
$
2

 
$
28

____________
(1)
After taking into consideration the existence of netting agreements.
Embedded Derivative Financial Instruments [Member]
  
Derivative Instruments, Gain (Loss) [Line Items]  
Components of Net Derivatives Gains (Losses)
The following table presents changes in estimated fair value related to embedded derivatives:
 
Three Months
Ended
June 30,
 
Six Months
Ended
June 30,
 
2013
 
2012
 
2013
 
2012
 
(In millions)
Net derivative gains (losses) (1), (2)
$
(72
)
 
$
65

 
$
181

 
$
179

____________
(1)
The valuation of direct and assumed guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment, were ($38) million and ($127) million for the three months and six months ended June 30, 2013, respectively, and $136 million and ($102) million for the three months and six months ended June 30, 2012, respectively. In addition, the valuation of ceded guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment, were $41 million and $159 million for the three months and six months ended June 30, 2013, respectively, and ($292) million and $39 million for the three months and six months ended June 30, 2012, respectively.
(2)
See Note 10 for discussion of affiliated net derivative gains (losses) included in the table above.
Schedule of Derivative Instruments
The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
 
Balance Sheet Location
 
June 30, 2013
 
December 31, 2012
 
 
 
(In millions)
Net embedded derivatives within asset host contracts:
 
 
 
 
 
Ceded guaranteed minimum benefits
Premiums, reinsurance and other receivables
 
$
2,314

 
$
3,551

Options embedded in debt or equity securities
Investments
 
(34
)
 
(14
)
Net embedded derivatives within asset host contracts
 
$
2,280

 
$
3,537

Net embedded derivatives within liability host contracts:
 
 
 
 
 
Direct guaranteed minimum benefits
PABs
 
$
(259
)
 
$
705

Assumed guaranteed minimum benefits
PABs
 
(3
)
 
4

Funds withheld on ceded reinsurance
Other liabilities
 
123

 
552

Net embedded derivatives within liability host contracts
 
$
(139
)
 
$
1,261