Derivatives are financial instruments whose values are derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. The Company uses a variety of derivatives, including swaps, forwards, futures and option contracts, to manage various risks relating to its ongoing business. To a lesser extent, the Company uses credit derivatives, such as credit default swaps, to synthetically replicate investment risks and returns which are not readily available in the cash market. The Company also purchases certain securities, issues certain insurance policies and investment contracts and engages in certain reinsurance contracts that have embedded derivatives.

Freestanding derivatives are carried on the Company's consolidated balance sheets either as assets within other invested assets or as liabilities within other liabilities at estimated fair value as determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for OTC derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that are assumed to be consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), volatility, liquidity and changes in estimates and assumptions used in the pricing models.

The Company does not offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement.

If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are generally reported in net derivative gains (losses) except for those (i) in policyholder benefits and claims for economic hedges of variable annuity guarantees included in future policy benefits; and (ii) in net investment income for economic hedges of equity method investments in joint ventures. The fluctuations in estimated fair value of derivatives which have not been designated for hedge accounting can result in significant volatility in net income.

To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge as either (i) a hedge of the estimated fair value of a recognized asset or liability (“fair value hedge”); or (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness and the method which will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income.

The accounting for derivatives is complex and interpretations of the primary accounting guidance continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under such accounting guidance. If it was determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected.

Under a fair value hedge, changes in the estimated fair value of the hedging derivative, including amounts measured as ineffectiveness, and changes in the estimated fair value of the hedged item related to the designated risk being hedged, are reported within net derivative gains (losses). The estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of operations within interest income or interest expense to match the location of the hedged item. However, accruals that are not scheduled to settle until maturity are included in the estimated fair value of derivatives in the consolidated balance sheets.

Under a cash flow hedge, changes in the estimated fair value of the hedging derivative measured as effective are reported within other comprehensive income (loss), a separate component of stockholders' equity, and the deferred gains or losses on the derivative are reclassified into the consolidated statement of operations when the Company's earnings are affected by the variability in cash flows of the hedged item. Changes in the estimated fair value of the hedging instrument measured as ineffectiveness are reported within net derivative gains (losses). The estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of operations within interest income or interest expense to match the location of the hedged item. However, accruals that are not scheduled to settle until maturity are included in the estimated fair value of derivatives in the consolidated balance sheets.

The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument.

When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item, the derivative continues to be carried in the consolidated balance sheets at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in other comprehensive income (loss) related to discontinued cash flow hedges are released into the consolidated statement of operations when the Company's earnings are affected by the variability in cash flows of the hedged item.

When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried in the consolidated balance sheets at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in other comprehensive income (loss) pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses).

In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value in the consolidated balance sheets, with changes in its estimated fair value recognized in the current period as net derivative gains (losses).

The Company is also a party to financial instruments that contain terms which are deemed to be embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. If the instrument would not be accounted for in its entirety at estimated fair value and it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried in the consolidated balance sheets at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation.

The Company is exposed to various risks relating to its ongoing business operations, including interest rate risk, foreign currency risk, credit risk and equity market risk. The Company uses a variety of strategies to manage these risks, including the use of derivative instruments. The following table presents the gross notional amount, estimated fair value and primary underlying risk exposure of the Company's derivative financial instruments, excluding embedded derivatives, held at:

				June 30, 2011						December 31, 2010
						Estimated Fair						Estimated Fair
Primary Underlying				Notional		Value (1)				Notional		Value (1)
Risk Exposure	Instrument Type			Amount		Assets		Liabilities		Amount		Assets		Liabilities

				(In millions)

Interest rate	Interest rate swaps		$	10,912	$	686	$	244	$	9,102	$	658	$	252
	Interest rate floors			7,986		139		73		7,986		127		62
	Interest rate caps			7,658		33		0		7,158		29		1
	Interest rate futures			2,135		5		5		1,966		5		7
	Interest rate forwards			695		0		67		695		0		71
Foreign currency	Foreign currency swaps			2,019		384		92		2,561		585		68
	Foreign currency forwards			189		1		4		151		4		1
Credit	Credit default swaps			1,833		16		16		1,324		15		22
Equity market	Equity futures			249		1		2		93		0		0
	Equity options			1,778		228		0		733		77		0
	Variance swaps			1,807		15		13		1,081		20		8
	Total rate of return swaps			150		0		0		0		0		0
		Total	$	37,411	$	1,508	$	516	$	32,850	$	1,520	$	492

Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. The Company utilizes interest rate swaps in fair value, cash flow and non-qualifying hedging relationships.

The Company also enters into basis swaps to better match the cash flows from assets and related liabilities. In a basis swap, both legs of the swap are floating with each based on a different index. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. A single net payment is usually made by one counterparty at each due date. Basis swaps are included in interest rate swaps in the preceding table. The Company utilizes basis swaps in non-qualifying hedging relationships.

Inflation swaps are used as an economic hedge to reduce inflation risk generated from inflation-indexed liabilities. Inflation swaps are included in interest rate swaps in the preceding table. The Company utilizes inflation swaps in non-qualifying hedging relationships.

Implied volatility swaps are used by the Company primarily as economic hedges of interest rate risk associated with the Company's investments in mortgage-backed securities. In an implied volatility swap, the Company exchanges fixed payments for floating payments that are linked to certain market volatility measures. If implied volatility rises, the floating payments that the Company receives will increase, and if implied volatility falls, the floating payments that the Company receives will decrease. Implied volatility swaps are included in interest rate swaps in the preceding table. The Company utilizes implied volatility swaps in non-qualifying hedging relationships.

The Company purchases interest rate caps and floors primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities (duration mismatches), as well as to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively. In certain instances, the Company locks in the economic impact of existing purchased caps and floors by entering into offsetting written caps and floors. The Company utilizes interest rate caps and floors in non-qualifying hedging relationships.

In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring and to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance. The Company utilizes exchange-traded interest rate futures in non-qualifying hedging relationships.

The Company writes covered call options on its portfolio of U.S. Treasuries as an income generation strategy. In a covered call transaction, the Company receives a premium at the inception of the contract in exchange for giving the derivative counterparty the right to purchase the referenced security from the Company at a predetermined price. The call option is “covered” because the Company owns the referenced security over the term of the option. Covered call options are included in interest rate options. The Company utilizes covered call options in non-qualifying hedging relationships.

The Company enters into interest rate forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. The Company utilizes interest rate forwards in cash flow and non-qualifying hedging relationships.

Foreign currency derivatives, including foreign currency swaps and foreign currency forwards, are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.

In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon principal amount. The principal amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in fair value, cash flow and non-qualifying hedging relationships.

In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made in a different currency at the specified future date. The Company utilizes foreign currency forwards in non-qualifying hedging relationships.

Swap spreadlocks are used by the Company to hedge invested assets on an economic basis against the risk of changes in credit spreads. Swap spreadlocks are forward transactions between two parties whose underlying reference index is a forward starting interest rate swap where the Company agrees to pay a coupon based on a predetermined reference swap spread in exchange for receiving a coupon based on a floating rate. The Company has the option to cash settle with the counterparty in lieu of maintaining the swap after the effective date. The Company utilizes swap spreadlocks in non-qualifying hedging relationships.

Certain credit default swaps are used by the Company to hedge against credit-related changes in the value of its investments and to diversify its credit risk exposure in certain portfolios. In a credit default swap transaction, the Company agrees with another party, at specified intervals, to pay a premium to hedge credit risk. If a credit event, as defined by the contract, occurs, generally the contract will require the swap to be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. The Company utilizes credit default swaps in non-qualifying hedging relationships.

Credit default swaps are also used to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. Treasury or agency security. These credit default swaps are not designated as hedging instruments.

The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.

In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge liabilities embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in non-qualifying hedging relationships.

Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. Equity index options are included in equity options in the preceding table. The Company utilizes equity index options in non-qualifying hedging relationships.

Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. Equity variance swaps are included in variance swaps in the preceding table. The Company utilizes equity variance swaps in non-qualifying hedging relationships.

Total rate of return swaps (“TRRs”) are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and the London Inter-Bank Offer Rate (“LIBOR”), calculated by reference to an agreed notional principal amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. The Company uses TRRs to hedge its equity market guarantees in certain of its insurance products. TRRs can be used as hedges or to synthetically create investments. The Company utilizes TRRs in non-qualifying hedging relationships.

The following table presents the gross notional amount and estimated fair value of derivatives designated as hedging instruments by type of hedge designation at:

				June 30, 2011						December 31, 2010
				Notional		Estimated Fair Value				Notional		Estimated Fair Value
Derivatives Designated as Hedging Instruments				Amount		Assets		Liabilities		Amount		Assets		Liabilities

					(In millions)

Fair value hedges:
	Foreign currency swaps			$	598	$	272	$	16	$	787	$	334	$	18
	Interest rate swaps				330		11		16		193		11		15
		Subtotal			928		283		32		980		345		33
Cash flow hedges:
	Foreign currency swaps				441		17		16		295		15		11
	Interest rate swaps				415		0		26		575		1		45
	Interest rate forwards				695		0		67		695		0		71
		Subtotal			1,551		17		109		1,565		16		127
			Total qualifying hedges	$	2,479	$	300	$	141	$	2,545	$	361	$	160

The following table presents the gross notional amount and estimated fair value of derivatives that were not designated or do not qualify as hedging instruments by derivative type at:

			June 30, 2011						December 31, 2010
Derivatives Not Designated or Not		Notional		Estimated Fair Value				Notional		Estimated Fair Value
Qualifying as Hedging Instruments		Amount		Assets		Liabilities		Amount		Assets		Liabilities

			(In millions)

Interest rate swaps		$	10,167	$	675	$	202	$	8,334	$	646	$	192
Interest rate floors			7,986		139		73		7,986		127		62
Interest rate caps			7,658		33		0		7,158		29		1
Interest rate futures			2,135		5		5		1,966		5		7
Foreign currency swaps			980		95		60		1,479		236		39
Foreign currency forwards			189		1		4		151		4		1
Credit default swaps			1,833		16		16		1,324		15		22
Equity futures			249		1		2		93		0		0
Equity options			1,778		228		0		733		77		0
Variance swaps			1,807		15		13		1,081		20		8
Total rate of return swaps			150		0		0		0		0		0
	Total non-designated or non-qualifying derivatives	$	34,932	$	1,208	$	375	$	30,305	$	1,159	$	332

The following table presents the settlement payments recorded in income for the:

			Three Months				Six Months
			Ended				Ended
			June 30,				June 30,
			2011		2010		2011		2010

				(In millions)
Qualifying hedges:
	Net investment income		$	0	$	1	$	1	$	1
	Interest credited to policyholder account balances			12		6		23		16

Non-qualifying hedges:
	Net derivative gains (losses)			7		(1)		17		(7)
		Total	$	19	$	6	$	41	$	10

The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate investments to floating rate investments; (ii) interest rate swaps to convert fixed rate liabilities to floating rate liabilities; and (iii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated liabilities.

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 represents the amount of such net derivative gains (losses):

		Net Derivative		Net Derivative		Ineffectiveness
		Gains (Losses)		Gains (Losses)		Recognized in
Derivatives in Fair Value	Hedged Items in Fair Value	Recognized		Recognized for		Net Derivative
Hedging Relationships	Hedging Relationships	for Derivatives		Hedged Items		Gains (Losses)

			(In millions)
For the Three Months Ended June 30, 2011:
Interest rate swaps:	Fixed maturity securities	$	(4)	$	3	$	(1)
	Policyholder account balances (1)		5		(5)		0
Foreign currency swaps:	Foreign-denominated policyholder account balances (2)		14		(17)		(3)
Total		$	15	$	(19)	$	(4)

For the Three Months Ended June 30, 2010:
Interest rate swaps:	Fixed maturity securities	$	(1)	$	1	$	0
	Policyholder account balances (1)		4		(1)		3
Foreign currency swaps:	Foreign-denominated policyholder account balances (2)		(65)		55		(10)
Total		$	(62)	$	55	$	(7)

For the Six Months Ended June 30, 2011:
Interest rate swaps:	Fixed maturity securities	$	(3)	$	2	$	(1)
	Policyholder account balances (1)		0		(1)		(1)
Foreign currency swaps:	Foreign-denominated policyholder account balances (2)		36		(43)		(7)
Total		$	33	$	(42)	$	(9)

For the Six Months Ended June 30, 2010:
Interest rate swaps:	Fixed maturity securities	$	(1)	$	1	$	0
	Policyholder account balances (1)		5		(5)		0
Foreign currency swaps:	Foreign-denominated policyholder account balances (2)		(117)		99		(18)
Total		$	(113)	$	95	$	(18)

All components of each derivative's gain or loss were included in the assessment of hedge effectiveness.

The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities; (ii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; (iii) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments; and (iv) interest rate swaps to convert floating rate investments to fixed rate investments.

In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date or within two months of that date. The net amounts reclassified into net derivative gains (losses) for both the three months and six months ended June 30, 2011 related to such discontinued cash flow hedges were $1 million. For the three months and six months ended June 30, 2010, there were no instances in which the Company discontinued cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date or within two months of that date.

At both June 30, 2011 and December 31, 2010, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed six years.

The following table presents the components of accumulated other comprehensive income (loss), before income tax, related to cash flow hedges:

		Three Months					Six Months
		Ended					Ended
		June 30,				June 30,
		2011		2010		2011		2010

		(In millions)

Accumulated other comprehensive income (loss), balance at beginning of period		$	(132)	$	4	$	(109)	$	(1)
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash
	flow hedges		35		17		14		20
Amounts reclassified to net derivative gains (losses)			(2)		2		(4)		4
Accumulated other comprehensive income (loss), balance at end of period		$	(99)	$	23	$	(99)	$	23

At June 30, 2011, ($2) million of deferred net gains (losses) on derivatives in accumulated other comprehensive income (loss) was expected to be reclassified to earnings within the next 12 months.

The following table presents the effects of derivatives in cash flow hedging relationships on the interim condensed consolidated statements of operations and the interim condensed consolidated statements of stockholders' equity

		Amount of Gains		Amount and Location
		(Losses) Deferred		of Gains (Losses)		Amount and Location
		in Accumulated Other		Reclassified from		of Gains (Losses)
		Comprehensive Income		Accumulated Other Comprehensive		Recognized in Income (loss)
		(Loss) on Derivatives		Income (Loss) into Income (Loss)		on Derivatives
						(Ineffective Portion and
						Amount Excluded from
		(Effective Portion)		(Effective Portion)		Ineffectiveness Testing)
Derivatives in Cash Flow				Net Derivative		Net Derivative
Hedging Relationships				Gains (Losses)		Gains (Losses)

		(In millions)

For the Three Months Ended June 30, 2011:
Interest rate swaps		$	15	$	1	$	0
Foreign currency swaps			0		0		0
Interest rate forwards			20		0		(8)
Credit forwards			0		1		0
	Total	$	35	$	2	$	(8)

For the Three Months Ended June 30, 2010:
Interest rate swaps		$	1	$	0	$	0
Foreign currency swaps			10		(4)		0
Interest rate forwards			0		2		0
Credit forwards			6		0		0
	Total	$	17	$	(2)	$	0

For the Six Months Ended June 30, 2011:
Interest rate swaps		$	4	$	1	$	0
Foreign currency swaps			(1)		2		0
Interest rate forwards			11		0		(8)
Credit forwards			0		1		0
	Total	$	14	$	4	$	(8)

For the Six Months Ended June 30, 2010:
Interest rate swaps		$	1	$	0	$	0
Foreign currency swaps			10		(6)		0
Interest rate forwards			0		2		0
Credit forwards			9		0		0
	Total	$	20	$	(4)	$	0

All components of each derivative's gain or loss were included in the assessment of hedge effectiveness.

The Company enters into the following derivatives that do not qualify for hedge accounting or for purposes other than hedging: (i) interest rate swaps, implied volatility swaps, caps and floors and interest rate futures to economically hedge its exposure to interest rates; (ii) foreign currency forwards and swaps to economically hedge its exposure to adverse movements in exchange rates; (iii) credit default swaps to economically hedge exposure to adverse movements in credit; (iv) equity futures, equity index options, interest rate futures, TRRs and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (v) swap spreadlocks to economically hedge invested assets against the risk of changes in credit spreads; (vi) credit default swaps to synthetically create investments; (vii) interest rate forwards to buy and sell securities to economically hedge its exposure to interest rates; (viii) basis swaps to better match the cash flows of assets and related liabilities; (ix) inflation swaps to reduce risk generated from inflation-indexed liabilities; (x) covered call options for income generation; and (xi) equity options to economically hedge certain invested assets against adverse changes in equity indices.

The following tables present the amount and location of gains (losses) recognized in income for derivatives that were not designated or qualifying as hedging instruments:

			Net		Net		Policyholder
			Derivative		Investment		Benefits
			Gains (Losses)		Income (1)		and Claims (2)

			(In millions)

For the Three Months Ended June 30, 2011:
	Interest rate swaps		$	28	$	0	$	0
	Interest rate floors			18		0		0
	Interest rate caps			(16)		0		0
	Interest rate futures			(11)		0		0
	Equity futures			4		0		(1)
	Foreign currency swaps			(1)		0		0
	Foreign currency forwards			(5)		0		0
	Equity options			1		(1)		0
	Variance swaps			(4)		0		0
	Credit default swaps			2		0		0
		Total	$	16	$	(1)	$	(1)

For the Three Months Ended June 30, 2010:
	Interest rate swaps		$	45	$	0	$	0
	Interest rate floors			54		0		0
	Interest rate caps			(6)		0		0
	Interest rate futures			(23)		0		0
	Equity futures			4		0		0
	Foreign currency swaps			(13)		0		0
	Foreign currency forwards			9		0		0
	Equity options			66		5		0
	Interest rate options			(3)		0		0
	Variance swaps			38		0		0
	Credit default swaps			1		0		0
		Total	$	172	$	5	$	0

			Net		Net		Policyholder
			Derivative		Investment		Benefits
			Gains (Losses)		Income (1)		and Claims (2)

			(In millions)

For the Six Months Ended June 30, 2011:
	Interest rate swaps		$	4	$	0	$	0
	Interest rate floors			1		0		0
	Interest rate caps			(17)		0		0
	Interest rate futures			(12)		0		0
	Equity futures			4		0		(1)
	Foreign currency swaps			2		0		0
	Foreign currency forwards			(16)		0		0
	Equity options			(21)		(2)		0
	Variance swaps			(10)		0		0
	Credit default swaps			2		0		0
		Total	$	(63)	$	(2)	$	(1)

For the Six Months Ended June 30, 2010:
	Interest rate swaps		$	63	$	0	$	0
	Interest rate floors			47		0		0
	Interest rate caps			(14)		0		0
	Interest rate futures			(28)		0		0
	Equity futures			(1)		0		0
	Foreign currency swaps			(57)		0		0
	Foreign currency forwards			13		0		0
	Equity options			43		4		0
	Interest rate options			(3)		0		0
	Variance swaps			28		0		0
	Credit default swaps			1		0		0
		Total	$	92	$	4	$	0

In connection with synthetically created investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the non-qualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, generally the contract will require the Company to pay the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company's maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $1,469 million and $912 million at June 30, 2011 and December 31, 2010, respectively. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. At June 30, 2011 and December 31, 2010, the Company would have received $14 million and $13 million, respectively, to terminate all of these contracts.

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, 2011					December 31, 2010
					Maximum					Maximum
			Estimated		Amount			Estimated		Amount
			Fair Value		of Future		Weighted	Fair Value		of Future		Weighted
Rating Agency Designation of			of Credit		Payments under		Average	of Credit		Payments under		Average
Referenced			Default		Credit Default		Years to	Default		Credit Default		Years to
Credit Obligations (1)			Swaps		Swaps (2)		Maturity (3)	Swaps		Swaps (2)		Maturity (3)

			(In millions)

Aaa/Aa/A
Single name credit default swaps (corporate)			$	1	$	130	4.3	$	1	$	45	3.6
Credit default swaps referencing indices				10		661	3.6		11		679	3.7
	Subtotal			11		791	3.7		12		724	3.7
Baa
Single name credit default swaps (corporate)				1		255	4.9		0		5	3.0
Credit default swaps referencing indices				2		423	5.0		1		183	5.0
	Subtotal			3		678	5.0		1		188	5.0
		Total	$	14	$	1,469	4.3	$	13	$	912	4.0

The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. Generally, the current credit exposure of the Company's derivative contracts is limited to the net positive estimated fair value of derivative contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received pursuant to credit support annexes.

The Company manages its credit risk related to OTC derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. Because exchange-traded futures are effected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivative instruments. See Note 4 for a description of the impact of credit risk on the valuation of derivative instruments.

The Company enters into various collateral arrangements which require both the pledging and accepting of collateral in connection with its derivative instruments. At June 30, 2011 and December 31, 2010, the Company was obligated to return cash collateral under its control of $985 million and $965 million, respectively. This unrestricted cash collateral is included in cash and cash equivalents or in short-term investments and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the consolidated balance sheets. At June 30, 2011 and December 31, 2010, the Company had also accepted collateral consisting of various securities with a fair market value of $33 million and $3 million, respectively, which were held in separate custodial accounts. The Company is permitted by contract to sell or repledge this collateral, but at June 30, 2011, none of the collateral had been sold or repledged.

The Company's collateral arrangements for its OTC derivatives generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the fair value of that counterparty's derivatives reaches a pre-determined threshold. Certain of these arrangements also include credit-contingent provisions that provide for a reduction of these thresholds (on a sliding scale that converges toward zero) in the event of downgrades in the credit ratings of the Company and/or the counterparty. In addition, certain of the Company's netting agreements for derivative instruments contain provisions that require the Company to maintain a specific investment grade credit rating from at least one of the major credit rating agencies. If the Company's credit ratings were to fall below that specific investment grade credit rating, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments that are in a net liability position after considering the effect of netting agreements.

The following table presents the estimated fair value of the Company's OTC 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. Derivatives that are not subject to collateral agreements are not included in the scope of this table.

Estimated

Fair Value of

Collateral

Fair Value of Incremental

Provided:

Collateral Provided Upon:

Downgrade in the

One Notch

Company’s Credit Rating

Downgrade

to a Level that Triggers

Estimated

in the

Full Overnight

Fair Value (1) of

Company’s

Collateralization or

Derivatives in Net

Fixed Maturity

Credit

Termination of

Liability Position

Securities (2)

Rating

the Derivative Position

(In millions)

June 30, 2011

134

December 31, 2010

Without considering the effect of netting agreements, the estimated fair value of the Company's OTC derivatives with credit-contingent provisions that were in a gross liability position at June 30, 2011 was $220 million. At June 30, 2011, the Company provided securities collateral of $48 million in connection with these derivatives. In the unlikely event that both: (i) the Company's credit rating was downgraded to a level that triggers full overnight collateralization or termination of all derivative positions; and (ii) the Company's netting agreements were deemed to be legally unenforceable, then the additional collateral that the Company would be required to provide to its counterparties in connection with its derivatives in a gross liability position at June 30, 2011 would be $172 million. This amount does not consider gross derivative assets of $86 million for which the Company has the contractual right of offset.

The Company also has exchange-traded futures, which may require the pledging of collateral. At both June 30, 2011 and December 31, 2010, the Company did not pledge any securities collateral for exchange-traded futures. At June 30, 2011 and December 31, 2010, the Company provided cash collateral for exchange-traded futures of $34 million and $25 million, respectively, which is included in premiums, reinsurance and other receivables.

The Company has certain embedded derivatives that are required to be separated from their host contracts and accounted for as derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including guaranteed minimum withdrawal benefits (“GMWBs”), guaranteed minimum accumulation benefits (“GMABs”) and certain guaranteed minimum income benefits (“GMIBs”); affiliated ceded reinsurance contracts of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; affiliated assumed reinsurance contracts of guaranteed minimum benefits related to GMWBs and certain GMIBs; ceded reinsurance written on a funds withheld basis; and options embedded in debt or equity securities.

The following table presents the estimated fair value of the Company's embedded derivatives at:

			June 30, 2011		December 31, 2010

				(In millions)

Net embedded derivatives within asset host contracts:
	Ceded guaranteed minimum benefits		$	824	$	936
	Options embedded in debt or equity securities			0		(2)
		Net embedded derivatives within asset host contracts	$	824	$	934
Net embedded derivatives within liability host contracts:
	Direct guaranteed minimum benefits		$	17	$	254
	Assumed guaranteed minimum benefits			(5)		0
	Funds withheld on ceded reinsurance			30		5
		Net embedded derivatives within liability host contracts	$	42	$	259

The following table presents changes in estimated fair value related to embedded derivatives: