Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Volume and fair value positions of derivative instruments and location in the Consolidated Statement of Financial Position



Summary of the volume and fair value positions of derivative instruments as of September 30, 2019
($ in millions, except number of contracts)		Volume ⁽¹⁾
($ in millions, except number of contracts)	Balance sheet location	Notional amount		Number of contracts	Fair value, net			Gross asset		Gross liability
Asset derivatives
Derivatives designated as fair value accounting hedging instruments
Other	Other assets	$	2	n/a	$	—		$	—	$	—
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other investments	21		n/a	—			—		—
Futures	Other assets	—		2,674	—			—		—
Equity and index contracts
Options	Other investments	—		9,290	131			131		—
Futures	Other assets	—		1,607	1			1		—
Total return index contracts
Total return swap agreements – fixed income	Other investments	7		n/a	—			—		—
Total return swap agreements – equity index	Other investments	170		n/a	3			3		—
Foreign currency contracts
Foreign currency forwards	Other investments	291		n/a	19			20		(1		)
Credit default contracts
Credit default swaps – buying protection	Other investments	149		n/a	(4		)	—		(4		)
Credit default swaps – selling protection	Other investments	5		n/a	—			—		—
Subtotal		643		13,571	150			155		(5		)
Total asset derivatives		$	645	13,571	$	150		$	155	$	(5	)

Liability derivatives
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other liabilities & accrued expenses	$	14	n/a	$	—		$	—	$	—
Futures	Other liabilities & accrued expenses	—		2,915	—			—		—
Equity and index contracts
Options	Other liabilities & accrued expenses	—		9,016	(52		)	—		(52		)
Futures	Other liabilities & accrued expenses	—		1,383	(1		)	—		(1		)
Total return index contracts
Total return swap agreements – fixed income	Other liabilities & accrued expenses	228		n/a	8			8		—
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	396		n/a	23			24		(1		)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds	161		n/a	(21		)	—		(21		)
Guaranteed withdrawal benefits	Contractholder funds	205		n/a	(16		)	—		(16		)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds	1,782		n/a	(417		)	—		(417		)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	46		n/a	(1		)	—		(1		)
Credit default swaps – selling protection	Other liabilities & accrued expenses	4		n/a	—			—		—
Total liability derivatives		2,836		13,314	(477		)	$	32	$	(509	)
Total derivatives		$	3,481	26,885	$	(327	)


⁽¹⁾	Volume for OTC and cleared 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)



Summary of the volume and fair value positions of derivative instruments as of December 31, 2018
($ in millions, except number of contracts)		Volume
($ in millions, except number of contracts)	Balance sheet location	Notional amount		Number of contracts	Fair value, net			Gross asset		Gross liability
Asset derivatives
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other investments	$	6	n/a	$	—		$	—	$	—
Futures	Other assets	—		1,330	1			1		—
Equity and index contracts
Options	Other investments	—		11,131	115			115		—
Futures	Other assets	—		1,453	1			1		—
Total return index contracts
Total return swap agreements – fixed income	Other investments	7		n/a	—			—		—
Total return swap agreements – equity index	Other investments	61		n/a	(2		)	—		(2		)
Foreign currency contracts
Foreign currency forwards	Other investments	258		n/a	10			11		(1		)
Credit default contracts
Credit default swaps – buying protection	Other investments	136		n/a	(1		)	2		(3		)
Other contracts
Other	Other assets	2		n/a	—			—		—
Total asset derivatives		$	470	13,914	$	124		$	130	$	(6	)

Liability derivatives
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other liabilities & accrued expenses	$	31	n/a	$	1		$	1	$	—
Futures	Other liabilities & accrued expenses	—		1,300	(1		)	—		(1		)
Equity and index contracts
Options and futures	Other liabilities & accrued expenses	—		10,956	(50		)	—		(50		)
Total return index contracts
Total return swap agreements – fixed income	Other liabilities & accrued expenses	38		n/a	(1		)	—		(1		)
Total return swap agreements – equity index	Other liabilities & accrued expenses	71		n/a	(4		)	—		(4		)
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	341		n/a	10			11		(1		)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds	169		n/a	(25		)	—		(25		)
Guaranteed withdrawal benefits	Contractholder funds	210		n/a	(14		)	—		(14		)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds	1,770		n/a	(185		)	—		(185		)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	40		n/a	—			—		—
Credit default swaps – selling protection	Other liabilities & accrued expenses	5		n/a	—			—		—
Total liability derivatives		2,675		12,256	(269		)	$	12	$	(281	)
Total derivatives		$	3,145	26,170	$	(145	)

Schedule of gross and net amount for the Company's OTC derivatives subject to enforceable master netting arrangements



Gross and net amounts for OTC derivatives ⁽¹⁾
($ in millions)				Offsets
($ in millions)	Gross amount			Counter-party netting			Cash collateral (received) pledged			Net amount on balance sheet			Securities collateral (received) pledged		Net amount
September 30, 2019
Asset derivatives	$	55		$	(37	)	$	(15	)	$	3		$	—	$	3
Liability derivatives	(7		)	37			(32		)	(2		)	—		(2		)

December 31, 2018
Asset derivatives	$	25		$	(18	)	$	(5	)	$	2		$	—	$	2
Liability derivatives	(12		)	18			(12		)	(6		)	—		(6		)

⁽¹⁾

All OTC derivatives are subject to enforceable master netting agreements.

Gains and losses from valuation, settlements, and hedge ineffectiveness, fair value hedges and derivatives not designated as hedges



Gains (losses) from valuation and settlements reported on derivatives not designated as accounting hedges
($ in millions)	Realized capital gains (losses)			Life contract benefits			Interest credited to contractholder funds			Operating costs and expenses			Total gain (loss) recognized in net income on derivatives
Three months ended September 30, 2019
Interest rate contracts	$	32		$	—		$	—		$	—		$	32
Equity and index contracts	(10		)	—			4			(1		)	(7		)
Embedded derivative financial instruments	—			(1		)	(16		)	—			(17		)
Foreign currency contracts	21			—			—			—			21
Credit default contracts	(1		)	—			—			—			(1		)
Total return swaps - fixed income	1			—			—			—			1
Total return swaps - equity index	(3		)	—			—			—			(3		)
Total	$	40		$	(1	)	$	(12	)	$	(1	)	$	26

Nine months ended September 30, 2019
Interest rate contracts	$	58		$	—		$	—		$	—		$	58
Equity and index contracts	(98		)	—			46			25			(27		)
Embedded derivative financial instruments	—			2			(57		)	—			(55		)
Foreign currency contracts	31			—			—			—			31
Credit default contracts	(6		)	—			—			—			(6		)
Total return swaps - fixed income	11			—			—			—			11
Total return swaps - equity index	20			—			—			—			20
Total	$	16		$	2		$	(11	)	$	25		$	32

Three months ended September 30, 2018
Interest rate contracts	$	(1	)	$	—		$	—		$	—		$	(1	)
Equity and index contracts	(12		)	—			19			9			16
Embedded derivative financial instruments	—			2			(8		)	—			(6		)
Foreign currency contracts	7			—			—			—			7
Total return swaps	11			—			—			—			11
Total	$	5		$	2		$	11		$	9		$	27

Nine months ended September 30, 2018
Equity and index contracts	$	(15	)	$	—		$	25		$	12		$	22
Embedded derivative financial instruments	—			7			13			—			20
Foreign currency contracts	19			—			—			(1		)	18
Total return swaps	12			—			—			—			12
Credit default contracts	1			—			—			—			1
Total	$	17		$	7		$	38		$	11		$	73

Counterparty credit exposure by counterparty credit rating



OTC derivatives counterparty credit exposure by counterparty credit rating
($ in millions)	September 30, 2019							December 31, 2018
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+	6	$	1,152	$	46	$	3	3	$	643	$	19	$	1
A	1	112		3		—		2	121		1		—
Total	7	$	1,264	$	49	$	3	5	$	764	$	20	$	1


⁽¹⁾	Allstate uses the lower of S&P’s or Moody’s long-term debt issuer 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



($ in millions)	As of September 30, 2019			As of December 31, 2018
Gross liability fair value of contracts containing credit-risk-contingent features	$	7		$	11
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs	(7		)	(5		)
Collateral posted under MNAs for contracts containing credit-risk-contingent features	—			(2		)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	—		$	4