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Derivative Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Volume and fair value positions of derivative instruments and location in the Consolidated Statement of Financial Position
The following table provides a summary of the volume and fair value positions of derivative instruments as well as their reporting location in the Condensed Consolidated Statement of Financial Position as of September 30, 2015.
($ in millions, except number of contracts)
 
 
Volume (1)
 
 
 
 
 
 
 
Balance sheet location
 
Notional
amount
 
Number of contracts
 
Fair
value,
net
 
Gross
asset
 
Gross
liability
Asset derivatives
 
 
 

 
 

 
 

 
 

 
 

Derivatives designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Foreign currency swap agreements
Other investments
 
$
18

 
n/a

 
$
4

 
$
4

 
$
—

Derivatives not designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Interest rate contracts
 
 
 

 
 

 
 

 
 

 
 

Interest rate cap agreements
Other investments
 
135

 
n/a

 
1

 
1

 
—

   Financial futures contracts
Other assets
 
—

 
1,350

 
—

 
—

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options and warrants (2)
Other investments
 
—

 
3,820

 
21

 
21

 
—

Financial futures contracts
Other assets
 
—

 
826

 
2

 
2

 
—

Foreign currency contracts
 
 
 

 
 

 
 

 
 

 
 

Foreign currency forwards
Other investments
 
132

 
n/a

 
1

 
1

 
—

Embedded derivative financial instruments
 
 
 

 
 

 
 

 
 

 
 

Other embedded derivative financial instruments
Other investments
 
1,000

 
n/a

 
—

 
—

 
—

Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps - buying protection
Other investments
 
79

 
n/a

 
4

 
5

 
(1
)
Credit default swaps - selling protection
Other investments
 
150

 
n/a

 
2

 
2

 
—

Other contracts
 
 
 

 
 

 
 

 
 

 
 

Other contracts
Other investments
 
6

 
n/a

 
—

 
—

 
—

Other contracts
Other assets
 
3

 
n/a

 
1

 
1

 
—

Subtotal
 
 
1,505

 
5,996

 
32

 
33

 
(1
)
Total asset derivatives
 
 
$
1,523

 
5,996

 
$
36

 
$
37

 
$
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
Liability derivatives
 
 
 

 
 

 
 

 
 

 
 

Derivatives designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Foreign currency swap agreements
Other liabilities & accrued expenses
 
$
56

 
n/a

 
$
7

 
$
7

 
$
—

Derivatives not designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Interest rate contracts
 
 
 

 
 

 
 

 
 

 
 

Interest rate swap agreements
Other liabilities & accrued expenses
 
85

 
n/a

 
—

 
—

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options and futures
Other liabilities & accrued expenses
 
—

 
6,708

 
(6
)
 
—

 
(6
)
Foreign currency contracts
 
 
 

 
 

 
 

 
 

 
 

Foreign currency forwards
Other liabilities & accrued expenses
 
307

 
n/a

 
(8
)
 
1

 
(9
)
Embedded derivative financial instruments
 
 
 

 
 

 
 

 
 

 
 

Guaranteed accumulation benefits
Contractholder funds
 
496

 
n/a

 
(39
)
 
—

 
(39
)
Guaranteed withdrawal benefits
Contractholder funds
 
342

 
n/a

 
(14
)
 
—

 
(14
)
Equity-indexed and forward starting options in life and annuity product contracts
Contractholder funds
 
1,773

 
n/a

 
(242
)
 
—

 
(242
)
Other embedded derivative financial instruments
Contractholder funds
 
85

 
n/a

 
—

 
—

 
—

Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps – buying protection
Other liabilities & accrued expenses
 
287

 
n/a

 
(2
)
 
1

 
(3
)
Credit default swaps – selling protection
Other liabilities & accrued expenses
 
105

 
n/a

 
(9
)
 
—

 
(9
)
Subtotal
 
 
3,480

 
6,708

 
(320
)
 
2

 
(322
)
Total liability derivatives
 
 
3,536

 
6,708

 
(313
)
 
$
9

 
$
(322
)
Total derivatives
 
 
$
5,059

 
12,704

 
$
(277
)
 
 

 
 

__________________
(1) 
Volume for OTC derivative contracts is represented by their notional amounts.  Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded.  (n/a = not applicable)
(2) 
In addition to the number of contracts presented in the table, the Company held 220 stock rights and warrants.  Stock rights and warrants can be converted to cash upon sale of those instruments or exercised for shares of common stock.





The following table provides a summary of the volume and fair value positions of derivative instruments as well as their reporting location in the Consolidated Statement of Financial Position as of December 31, 2014.
($ in millions, except number of contracts)
 
 
Volume (1)
 
 
 
 
 
 
 
Balance sheet location
 
Notional
amount
 
Number
of
contracts
 
Fair
value,
net
 
Gross
asset
 
Gross
liability
Asset derivatives
 
 
 

 
 

 
 

 
 

 
 

Derivatives designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Foreign currency swap agreements
Other investments
 
$
85

 
n/a

 
$
3

 
$
3

 
$
—

Derivatives not designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Interest rate contracts
 
 
 

 
 

 
 

 
 

 
 

Interest rate cap agreements
Other investments
 
163

 
n/a

 
2

 
2

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

      Options and warrants (2)
Other investments
 
—

 
3,225

 
83

 
83

 
—

Financial futures contracts
Other assets
 
—

 
2,204

 
2

 
2

 
—

Foreign currency contracts
 
 
 

 
 

 
 

 
 

 
 

Foreign currency forwards
Other investments
 
471

 
n/a

 
(15
)
 
1

 
(16
)
Embedded derivative financial instruments
 
 
 

 
 

 
 

 
 

 
 

Other embedded derivative financial instruments
Other investments
 
1,000

 
n/a

 
—

 
—

 
—

Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps - buying protection
Other investments
 
29

 
n/a

 
—

 
—

 
—

Credit default swaps - selling protection
Other investments
 
100

 
n/a

 
2

 
2

 
—

Other contracts
 
 
 

 
 

 
 

 
 

 
 

Other contracts
Other assets
 
3

 
n/a

 
1

 
1

 
—

Subtotal
 
 
1,766

 
5,429

 
75

 
91

 
(16
)
Total asset derivatives
 
 
$
1,851

 
5,429

 
$
78

 
$
94

 
$
(16
)
 
 
 
 
 
 
 
 
 
 
 
 
Liability derivatives
 
 
 

 
 

 
 

 
 

 
 

Derivatives designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Foreign currency swap agreements
Other liabilities & accrued expenses
 
$
50

 
n/a

 
$
(1
)
 
$
—

 
$
(1
)
Derivatives not designated as accounting hedging instruments
 
 

 
 

 
 

 
 

 
 

Interest rate contracts
 
 
 

 
 

 
 

 
 

 
 

Interest rate swap agreements
Other liabilities & accrued expenses
 
85

 
n/a

 
1

 
1

 
—

Interest rate cap agreements
Other liabilities & accrued expenses
 
11

 
n/a

 
—

 
—

 
—

Financial futures contracts
Other liabilities & accrued expenses
 
—

 
700

 
—

 
—

 
—

Equity and index contracts
 
 
 

 
 

 
 

 
 

 
 

Options and futures
Other liabilities & accrued expenses
 
—

 
3,960

 
(23
)
 
—

 
(23
)
Foreign currency contracts
 
 
 

 
 

 
 

 
 

 
 

Foreign currency forwards
Other liabilities & accrued expenses
 
228

 
n/a

 
(1
)
 
2

 
(3
)
Embedded derivative financial instruments
 
 
 

 
 

 
 

 
 

 
 

Guaranteed accumulation benefits
Contractholder funds
 
615

 
n/a

 
(32
)
 
—

 
(32
)
Guaranteed withdrawal benefits
Contractholder funds
 
425

 
n/a

 
(13
)
 
—

 
(13
)
Equity-indexed and forward starting options in life and annuity product contracts
Contractholder funds
 
1,786

 
n/a

 
(278
)
 
—

 
(278
)
Other embedded derivative financial instruments
Contractholder funds
 
85

 
n/a

 
—

 
—

 
—

Credit default contracts
 
 
 

 
 

 
 

 
 

 
 

Credit default swaps – buying protection
Other liabilities & accrued expenses
 
420

 
n/a

 
(6
)
 
1

 
(7
)
Credit default swaps – selling protection
Other liabilities & accrued expenses
 
205

 
n/a

 
(8
)
 
2

 
(10
)
Subtotal
 
 
3,860

 
4,660

 
(360
)
 
6

 
(366
)
Total liability derivatives
 
 
3,910

 
4,660

 
(361
)
 
$
6

 
$
(367
)
Total derivatives
 
 
$
5,761

 
10,089

 
$
(283
)
 
 

 
 

__________________
(1) 
Volume for OTC derivative contracts is represented by their notional amounts.  Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded.  (n/a = not applicable)
(2) 
In addition to the number of contracts presented in the table, the Company held 220 stock rights and warrants.  Stock rights and warrants can be converted to cash upon sale of those instruments or exercised for shares of common stock.
Schedule of gross and net amount for the Company's OTC derivatives subject to enforceable master netting arrangements
The following table provides gross and net amounts for the Company’s OTC derivatives, all of which are subject to enforceable master netting agreements.
($ in millions)
 
 
Offsets
 
 
 
 
 
 
 
Gross amount
 
Counter-party netting
 
Cash collateral (received) pledged
 
Net amount on balance sheet
 
Securities collateral (received) pledged
 
Net amount
September 30, 2015
 

 
 

 
 

 
 

 
 

 
 

Asset derivatives
$
21

 
$
(10
)
 
$
(4
)
 
$
7

 
$
(4
)
 
$
3

Liability derivatives
(21
)
 
10

 
(5
)
 
(16
)
 
9

 
(7
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 

 
 

 
 

 
 

 
 

 
 

Asset derivatives
$
12

 
$
(22
)
 
$
17

 
$
7

 
$
(4
)
 
$
3

Liability derivatives
(35
)
 
22

 
—

 
(13
)
 
8

 
(5
)
Impacts on operations and AOCI from foreign currency contracts, cash flow hedges
There was no hedge ineffectiveness reported in realized gains and losses for the three months and nine months ended September 30, 2015 or 2014.
($ in millions)
Three months ended September 30,
 
Nine months ended September 30,
 
2015
 
2014
 
2015
 
2014
Gain recognized in OCI on derivatives during the period
$
4

 
$
10

 
$
11

 
$
6

Gain (loss) recognized in OCI on derivatives during the term of the hedging relationship
7

 
(8
)
 
7

 
(8
)
Loss reclassified from AOCI into income (net investment income)
—

 
(1
)
 
(1
)
 
(2
)
Gain (loss) reclassified from AOCI into income (realized capital gains and losses)
—

 
—

 
3

 
(2
)
Gains and losses from valuation, settlements, and hedge ineffectiveness, fair value hedges and derivatives not designated as hedges
For the three months and nine months ended September 30, 2015 and 2014, the Company had no derivatives used in fair value hedging relationships.
($ in millions)
Realized capital gains and losses
 
Life and annuity contract benefits
 
Interest credited to contractholder funds
 
Operating costs and expenses
 
Loss on disposition of operations
 
Total gain (loss) recognized in net income on derivatives
Three months ended September 30, 2015
 

 
 

 
 

 
 

 
 

 
 

Interest rate contracts
$
(3
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
(3
)
Equity and index contracts
24

 
—

 
(27
)
 
(12
)
 
—

 
(15
)
Embedded derivative financial instruments
—

 
(8
)
 
28

 
—

 
—

 
20

Foreign currency contracts
(2
)
 
—

 
—

 
(6
)
 
—

 
(8
)
Credit default contracts
5

 
—

 
—

 
—

 
—

 
5

Other contracts
—

 
—

 
(1
)
 
—

 
—

 
(1
)
Total
$
24

 
$
(8
)
 
$
—

 
$
(18
)
 
$
—

 
$
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2015
 

 
 

 
 

 
 

 
 

 
 

Interest rate contracts
$
(1
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
(1
)
Equity and index contracts
19

 
—

 
(23
)
 
(8
)
 
—

 
(12
)
Embedded derivative financial instruments
—

 
(8
)
 
36

 
—

 
—

 
28

Foreign currency contracts
(22
)
 
—

 
—

 
(3
)
 
—

 
(25
)
Credit default contracts
5

 
—

 
—

 
—

 
—

 
5

Other contracts
—

 
—

 
—

 
—

 
—

 
—

Total
$
1

 
$
(8
)
 
$
13

 
$
(11
)
 
$
—

 
$
(5
)
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2014
 

 
 

 
 

 
 

 
 

 
 

Interest rate contracts
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Equity and index contracts
(2
)
 
—

 
4

 
(4
)
 
—

 
(2
)
Embedded derivative financial instruments
—

 
4

 
6

 
—

 
—

 
10

Foreign currency contracts
(7
)
 
—

 
—

 
(5
)
 
—

 
(12
)
Credit default contracts
1

 
—

 
—

 
—

 
—

 
1

Other contracts
—

 
—

 
(1
)
 
—

 
—

 
(1
)
Total
$
(8
)
 
$
4

 
$
9

 
$
(9
)
 
$
—

 
$
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2014
 

 
 

 
 

 
 

 
 

 
 

Interest rate contracts
$
(8
)
 
$
—

 
$
—

 
$
—

 
$
(4
)
 
$
(12
)
Equity and index contracts
(13
)
 
—

 
25

 
3

 
—

 
15

Embedded derivative financial instruments
—

 
8

 
(5
)
 
—

 
—

 
3

Foreign currency contracts
(8
)
 
—

 
—

 
(2
)
 
—

 
(10
)
Credit default contracts
4

 
—

 
—

 
—

 
—

 
4

Total
$
(25
)
 
$
8

 
$
20

 
$
1

 
$
(4
)
 
$
—
Counterparty credit exposure by counterparty credit rating
The following table summarizes the counterparty credit exposure by counterparty credit rating as it relates to the Company’s OTC derivatives.
($ in millions)
 
September 30, 2015
 
December 31, 2014
Rating (1)
 
Number of
counter-
parties
 
Notional
amount (2)
 
Credit
exposure (2)
 
Exposure, net of collateral (2)
 
Number of
counter-
parties
 
Notional
amount (2)
 
Credit
exposure (2)
 
Exposure, net of collateral (2)
A+
 
1

 
$
95

 
$
5

 
$
1

 
1

 
$
164

 
$
2

 
$
1

A
 
5

 
336

 
11

 
3

 
3

 
118

 
3

 
2

A-
 
2

 
61

 
3

 
—

 
1

 
8

 
—

 
—

BBB+
 
1

 
13

 
—

 
—

 
1

 
11

 
—

 
—

BBB
 
—

 
—

 
—

 
—

 
1

 
52

 
—

 
—

Total
 
9

 
$
505

 
$
19

 
$
4

 
7

 
$
353

 
$
5

 
$
3

_______________
(1) 
Rating is the lower of S&P or Moody’s ratings.
(2) 
Only OTC derivatives with a net positive fair value are included for each counterparty.
Derivative instruments with credit features in a liability position, including fair value of assets and collateral netted against the liability
The following summarizes the fair value of derivative instruments with termination, cross-default or collateral credit-risk-contingent features that are in a liability position, as well as the fair value of assets and collateral that are netted against the liability in accordance with provisions within legally enforceable MNAs.
($ in millions)
September 30, 2015
 
December 31, 2014
Gross liability fair value of contracts containing credit-risk-contingent features
$
17

 
$
16

Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs
(2
)
 
(4
)
Collateral posted under MNAs for contracts containing credit-risk-contingent features
(12
)
 
(7
)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently
$
3

 
$
5
CDS notional amounts by credit rating and fair value of protection sold
The following table shows the CDS notional amounts by credit rating and fair value of protection sold.
($ in millions)
Notional amount
 
 
 
AA
 
A
 
BBB
 
BB and
lower
 
Total
 
Fair
value
September 30, 2015
 

 
 

 
 

 
 

 
 

 
 

Single name
 

 
 

 
 

 
 

 
 

 
 

Corporate debt
$
20

 
$
10

 
$
45

 
$
—

 
$
75

 
$
1

First-to-default Basket
 
 
 
 
 
 
 
 
 

 
 
Municipal
—

 
100

 
—

 
—

 
100

 
(9
)
Index
 
 
 
 
 
 
 
 
 

 
 
Corporate debt
1

 
20

 
53

 
6

 
80

 
1

Total
$
21

 
$
130

 
$
98

 
$
6

 
$
255

 
$
(7
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 

 
 

 
 

 
 

 
 

 
 

Single name
 

 
 

 
 

 
 

 
 

 
 

Corporate debt
$
20

 
$
15

 
$
90

 
$
—

 
$
125

 
$
1

First-to-default Basket
 
 
 
 
 
 
 
 
 

 
 
Municipal
—

 
100

 
—

 
—

 
100

 
(9
)
Index
 
 
 
 
 
 
 
 
 

 
 
Corporate debt
—

 
22

 
52

 
6

 
80

 
2

Total
$
20

 
$
137

 
$
142

 
$
6

 
$
305

 
$
(6
)