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Derivatives (Tables)
 9 Months Ended
Sep. 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:
 
 
 
September 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
 
$
465

 
$
6

 
$
8

 
$
538

 
$
28

 
$
9

Foreign currency swaps
Foreign currency exchange rate
 
122

 
—

 
15

 
122

 
—

 
14

Subtotal
 
 
587

 
6

 
23

 
660

 
28

 
23

Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Interest rate
 
537

 
16

 
19

 
658

 
99

 
—

Interest rate forwards
Interest rate
 
290

 
12

 
—

 
410

 
81

 
—

Foreign currency swaps
Foreign currency exchange rate
 
546

 
21

 
27

 
524

 
16

 
14

Subtotal
 
 
1,373

 
49

 
46

 
1,592

 
196

 
14

Total qualifying hedges
 
1,960

 
55

 
69

 
2,252

 
224

 
37

Derivatives Not Designated or Not Qualifying as Hedging Instruments
Interest rate swaps
Interest rate
 
23,748

 
925

 
424

 
16,869

 
1,254

 
513

Interest rate floors
Interest rate
 
17,604

 
144

 
139

 
15,136

 
318

 
274

Interest rate caps
Interest rate
 
8,001

 
29

 
—

 
9,031

 
11

 
—

Interest rate futures
Interest rate
 
1,493

 
1

 
—

 
2,771

 
—

 
7

Foreign currency swaps
Foreign currency exchange rate
 
823

 
51

 
44

 
811

 
60

 
35

Foreign currency forwards
Foreign currency exchange rate
 
43

 
—

 
2

 
139

 
—

 
4

Credit default swaps - purchased
Credit
 
194

 
—

 
2

 
162

 
—

 
2

Credit default swaps - written
Credit
 
2,299

 
29

 
—

 
2,456

 
23

 
1

Equity futures
Equity market
 
774

 
5

 
—

 
1,075

 
—

 
27

Equity options
Equity market
 
3,453

 
356

 
25

 
2,845

 
469

 
1

Variance swaps
Equity market
 
2,562

 
4

 
97

 
2,346

 
11

 
62

TRRs
Equity market
 
473

 
1

 
9

 
300

 
—

 
7

Total non-designated or non-qualifying derivatives
 
61,467

 
1,545

 
742

 
53,941

 
2,146

 
933

Total
 
$
63,427

 
$
1,600

 
$
811

 
$
56,193

 
$
2,370

 
$
970
Earned Income On Derivatives And Income Statement Location
The following table presents earned income on derivatives:
 
Three Months
Ended
September 30,
 
Nine Months
Ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
(In millions)
Qualifying hedges:
 
 
 
 
 
 
 
Net investment income
$
1

 
$
—

 
$
2

 
$
1

Interest credited to policyholder account balances
—

 
1

 
2

 
17

Non-qualifying hedges:
 
 
 
 
 
 
 
Net derivative gains (losses)
8

 
32

 
69

 
87

Policyholder benefits and claims
(6
)
 
(3
)
 
(13
)
 
(5
)
Total
$
3

 
$
30

 
$
60

 
$
100
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 September 30, 2013:
 
 
 
 
 
Interest rate derivatives
$
(47
)
 
$
—

 
$
(3
)
Foreign currency exchange rate derivatives
(30
)
 
—

 
—

Credit derivatives — purchased
—

 
—

 
—

Credit derivatives — written
10

 
—

 
—

Equity derivatives
(125
)
 
(3
)
 
(15
)
Total
$
(192
)
 
$
(3
)
 
$
(18
)
Three Months Ended September 30, 2012:
 
 
 
 
 
Interest rate derivatives
$
(84
)
 
$
—

 
$
—

Foreign currency exchange rate derivatives
(11
)
 
—

 
—

Credit derivatives — purchased
(2
)
 
—

 
—

Credit derivatives — written
22

 
—

 
—

Equity derivatives
(138
)
 
(1
)
 
(24
)
Total
$
(213
)
 
$
(1
)
 
$
(24
)
Nine Months Ended September 30, 2013:
 
 
 
 
 
Interest rate derivatives
$
(450
)
 
$
—

 
$
(16
)
Foreign currency exchange rate derivatives
(14
)
 
—

 
—

Credit derivatives — purchased
—

 
—

 
—

Credit derivatives — written
17

 
—

 
—

Equity derivatives
(368
)
 
(6
)
 
(60
)
Total
$
(815
)
 
$
(6
)
 
$
(76
)
Nine Months Ended September 30, 2012:
 
 
 
 
 
Interest rate derivatives
$
33

 
$
—

 
$
—

Foreign currency exchange rate derivatives
(3
)
 
—

 
—

Credit derivatives — purchased
(10
)
 
—

 
—

Credit derivatives — written
36

 
—

 
—

Equity derivatives
(353
)
 
(3
)
 
(47
)
Total
$
(297
)
 
$
(3
)
 
$
(47
)
____________
(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 September 30, 2013:
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
(1
)
 
$
1

 
$
—

 
 
Policyholder liabilities (1)
 
(6
)
 
6

 
—

Foreign currency swaps:
 
Foreign-denominated PABs (2)
 
6

 
(7
)
 
(1
)
Total
 
$
(1
)
 
$
—

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

 
$
(1
)
 
 
Policyholder liabilities (1)
 
(4
)
 
4

 
—

Foreign currency swaps:
 
Foreign-denominated PABs (2)
 
3

 
(3
)
 
—

Total
 
$
(4
)
 
$
3

 
$
(1
)
Nine Months Ended September 30, 2013:
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
6

 
$
(7
)
 
$
(1
)
 
 
Policyholder liabilities (1)
 
(24
)
 
22

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

 
(1
)
Total
 
$
(19
)
 
$
15

 
$
(4
)
Nine Months Ended September 30, 2012:
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
(5
)
 
$
3

 
$
(2
)
 
 
Policyholder liabilities (1)
 
(2
)
 
1

 
(1
)
Foreign currency swaps:
 
Foreign-denominated PABs (2)
 
(29
)
 
21

 
(8
)
Total
 
$
(36
)
 
$
25

 
$
(11
)
____________ 
(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 (loss) 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 September 30, 2013:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(20
)
 
$
2

 
$
—

 
$
(1
)
Interest rate forwards
 
(12
)
 
1

 
—

 
(1
)
Foreign currency swaps
 
(32
)
 
1

 
—

 
—

Credit forwards
 
(1
)
 
—

 
—

 
—

Total
 
$
(65
)
 
$
4

 
$
—

 
$
(2
)
Three Months Ended September 30, 2012:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(15
)
 
$
—

 
$
—

 
$
—

Interest rate forwards
 
(7
)
 
1

 
—

 
1

Foreign currency swaps
 
(22
)
 
—

 
—

 
(1
)
Credit forwards
 
—

 
—

 
—

 
—

Total
 
$
(44
)
 
$
1

 
$
—

 
$
—

Nine Months Ended September 30, 2013:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(97
)
 
$
1

 
$
—

 
$
—

Interest rate forwards
 
(47
)
 
7

 
1

 
—

Foreign currency swaps
 
(10
)
 
—

 
—

 
1

Credit forwards
 
(1
)
 
—

 
—

 
—

Total
 
$
(155
)
 
$
8

 
$
1

 
$
1

Nine Months Ended September 30, 2012:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
47

 
$
—

 
$
—

 
$
—

Interest rate forwards
 
8

 
1

 
—

 
1

Foreign currency swaps
 
(8
)
 
(1
)
 
—

 
(1
)
Credit forwards
 
—

 
—

 
—

 
—

Total
 
$
47

 
$
—

 
$
—

 
$
—
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: 
 
 
September 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

 
$
117

 
2.4
 
$
3

 
$
167

 
3.2
Credit default swaps referencing indices
 
7

 
650

 
1.3
 
10

 
650

 
2.1
Subtotal
 
9

 
767

 
1.5
 
13

 
817

 
2.3
Baa
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
8

 
500

 
3.2
 
4

 
479

 
3.8
Credit default swaps referencing indices
 
10

 
996

 
5.0
 
5

 
1,124

 
4.8
Subtotal
 
18

 
1,496

 
4.4
 
9

 
1,603

 
4.5
B
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
—

 
—

 
0.0
 
—

 
—

 
0.0
Credit default swaps referencing indices
 
2

 
36

 
5.3
 
—

 
36

 
5.0
Subtotal
 
2

 
36

 
5.3
 
—

 
36

 
5.0
Total
 
$
29

 
$
2,299

 
3.5
 
$
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: 
 
 
September 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)
 
$
1,598

 
$
821

 
$
2,436

 
$
982

OTC-cleared (1)
 
39

 
14

 
—

 
—

Exchange-traded
 
5

 
—

 
—

 
34

Total gross estimated fair value of derivatives (1)
 
1,642

 
835

 
2,436

 
1,016

Amounts offset in the consolidated balance sheets
 
—

 
—

 
—

 
—

Estimated fair value of derivatives presented in the consolidated balance sheets (1)
 
1,642

 
835

 
2,436

 
1,016

Gross amounts not offset in the consolidated balance sheets:
 
 
 
 
 
 
 
 
Gross estimated fair value of derivatives: (2)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(682
)
 
(682
)
 
(838
)
 
(838
)
OTC-cleared
 
(13
)
 
(13
)
 
—

 
—

Exchange-traded
 
—

 
—

 
—

 
—

Cash collateral: (3)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(356
)
 
—

 
(897
)
 
—

OTC-cleared
 
(23
)
 
—

 
—

 
—

Exchange-traded
 
—

 
—

 
—

 
(34
)
Securities collateral: (4)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(456
)
 
(120
)
 
(689
)
 
(121
)
OTC-cleared
 
—

 
(1
)
 
—

 
—

Exchange-traded
 
—

 
—

 
—

 
—

Net amount after application of master netting agreements and collateral
 
$
112

 
$
19

 
$
12

 
$
23

____________
(1)
At September 30, 2013 and December 31, 2012, derivative assets include income or expense accruals reported in accrued investment income or in other liabilities of $42 million and $66 million, respectively, and derivative liabilities include income or expense accruals reported in accrued investment income or in other liabilities of $24 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 September 30, 2013 and December 31, 2012, the Company received excess cash collateral of $9 million and $0, respectively, and provided excess cash collateral of $55 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 September 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 September 30, 2013 and December 31, 2012, the Company received excess securities collateral of $78 million and $0, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At September 30, 2013 and December 31, 2012, the Company provided excess securities collateral of $5 million and $0, respectively, for its OTC-bilateral derivatives and $18 million and $0, respectively, for its OTC-cleared derivatives, which are not included in the table above due to the foregoing limitation. At both September 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
September 30,
 
Nine Months
Ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
(In millions)
Derivatives and hedging gains (losses) (1)
$
(183
)
 
$
(189
)
 
$
(746
)
 
$
(225
)
Embedded derivatives
(16
)
 
91

 
165

 
270

Total net derivative gains (losses)
$
(199
)
 
$
(98
)
 
$
(581
)
 
$
45

____________
(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)
September 30, 2013
$
139

 
$
125

 
$
1

 
$
12

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
September 30,
 
Nine Months
Ended
September 30,
 
2013
 
2012
 
2013
 
2012
 
(In millions)
Net derivative gains (losses) (1), (2)
$
(16
)
 
$
91

 
$
165

 
$
270

____________
(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 ($12) million and ($139) million for the three months and nine months ended September 30, 2013, respectively, and ($110) million and ($212) million for the three months and nine months ended September 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 $39 million and $198 million for the three months and nine months ended September 30, 2013, respectively, and $202 million and $241 million for the three months and nine months ended September 30, 2012, respectively.
(2)
See Note 11 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
 
September 30, 2013
 
December 31, 2012
 
 
 
(In millions)
Net embedded derivatives within asset host contracts:
 
 
 
 
 
Ceded guaranteed minimum benefits
Premiums, reinsurance and other receivables
 
$
1,797

 
$
3,551

Options embedded in debt or equity securities
Investments
 
(31
)
 
(14
)
Net embedded derivatives within asset host contracts
 
$
1,766

 
$
3,537

Net embedded derivatives within liability host contracts:
 
 
 
 
 
Direct guaranteed minimum benefits
PABs
 
$
(674
)
 
$
705

Assumed guaranteed minimum benefits
PABs
 
(7
)
 
4

Funds withheld on ceded reinsurance
Other liabilities
 
75

 
552

Net embedded derivatives within liability host contracts
 
$
(606
)
 
$
1,261