Derivative Financial Instruments and Off-balance sheet Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2012

Derivative Financial Instruments and Off-balance sheet Financial Instruments

Volume and fair value positions of derivative instruments and location in the 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 Consolidated Statement of Financial Position as of December 31, 2012.

($ in millions, except number of contracts)	Asset derivatives
		Volume (1)
	Balance sheet location	Notional amount		Number of contracts		Fair value, net			Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Foreign currency swap agreements	Other investments	$	16		n/a	$	2		$	2	$	—
Total			16		n/a		2			2		—
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other investments		5,541		n/a		19			28		(9	)
Interest rate cap and floor agreements	Other investments		372		n/a		1			1		—
Financial futures contracts and options	Other assets		n/a		2		—			—		—
Equity and index contracts
Options, futures and warrants (2)	Other investments		146		12,400		125			125		—
Options, futures and warrants	Other assets		n/a		1,087		5			5		—
Foreign currency contracts
Foreign currency forwards and options	Other investments		258		n/a		6			6		—
Embedded derivative financial instruments
Conversion options	Fixed income securities		5		n/a		—			—		—
Equity-indexed call options	Fixed income securities		90		n/a		9			9		—
Credit default swaps	Fixed income securities		12		n/a		(12	)		—		(12	)
Other embedded derivative financial instruments	Other investments		1,000		n/a		—			—		—
Credit default contracts
Credit default swaps – buying protection	Other investments		209		n/a		—			2		(2	)
Credit default swaps – selling protection	Other investments		308		n/a		2			3		(1	)
Other contracts
Other contracts	Other assets		4		n/a		1			1		—
Total			7,945		13,489		156			180		(24	)
Total asset derivatives		$	7,961		13,489	$	158		$	182	$	(24	)

(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 34,634 stock rights and 879,158 stock warrants. Stock rights and warrants can be converted to cash upon sale of those instruments or exercised for shares of common stock.

	Liability derivatives
		Volume (1)
	Balance sheet location	Notional amount		Number of contracts		Fair value, net			Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Foreign currency swap agreements	Other liabilities & accrued expenses	$	135		n/a	$	(19	)	$	—	$	(19	)
Total			135		n/a		(19	)		—		(19	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		1,185		n/a		16			18		(2	)
Interest rate swaption agreements	Other liabilities & accrued expenses		250		n/a		—			—		—
Interest rate cap and floor agreements	Other liabilities & accrued expenses		429		n/a		1			1		—
Financial futures contracts and options	Other liabilities & accrued expenses		—		357		—			—		—
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		—		12,262		(58	)		—		(58	)
Foreign currency contracts
Foreign currency forwards and options	Other liabilities & accrued expenses		139		n/a		(1	)		1		(2	)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		820		n/a		(86	)		—		(86	)
Guaranteed withdrawal benefits	Contractholder funds		554		n/a		(39	)		—		(39	)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		3,916		n/a		(419	)		—		(419	)
Other embedded derivative financial instruments	Contractholder funds		85		n/a		(9	)		—		(9	)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		420		n/a		(3	)		2		(5	)
Credit default swaps – selling protection	Other liabilities & accrued expenses		285		n/a		(29	)		1		(30	)
Total			8,083		12,619		(627	)		23		(650	)
Total liability derivatives			8,218		12,619		(646	)	$	23	$	(669	)
Total derivatives		$	16,179		26,108	$	(488	)

(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)

       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, 2011.

($ in millions, except number of contracts)	Asset derivatives
		Volume (1)
	Balance sheet location	Notional amount		Number of contracts		Fair value, net			Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Interest rate swap agreements	Other investments	$	144		n/a	$	(8	)	$	—	$	(8	)
Foreign currency swap agreements	Other investments		127		n/a		(5	)		3		(8	)
Total			271		n/a		(13	)		3		(16	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other investments		8,028		n/a		122			137		(15	)
Interest rate swaption agreements	Other investments		1,750		n/a		—			—		—
Interest rate cap and floor agreements	Other investments		1,591		n/a		(12	)		—		(12	)
Financial futures contracts and options	Other assets		n/a		40		—			—		—
Equity and index contracts
Options, futures and warrants (2)	Other investments		163		15,180		104			104		—
Options, futures and warrants	Other assets		n/a		2,132		1			1		—
Foreign currency contracts
Foreign currency swap agreements	Other investments		50		n/a		6			6		—
Foreign currency forwards and options	Other investments		190		n/a		1			3		(2	)
Embedded derivative financial instruments
Conversion options	Fixed income securities		5		n/a		—			—		—
Equity-indexed call options	Fixed income securities		150		n/a		11			11		—
Credit default swaps	Fixed income securities		172		n/a		(115	)		—		(115	)
Other embedded derivative financial instruments	Other investments		1,000		n/a		—			—		—
Credit default contracts
Credit default swaps – buying protection	Other investments		265		n/a		3			6		(3	)
Credit default swaps – selling protection	Other investments		167		n/a		(4	)		1		(5	)
Other contracts
Other contracts	Other investments		5		n/a		—			—		—
Other contracts	Other assets		4		n/a		1			1		—
Total			13,540		17,352		118			270		(152	)
Total asset derivatives		$	13,811		17,352	$	105		$	273	$	(168	)

(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 10,798 stock rights and 4,392,937 stock warrants. Stock rights and warrants can be converted to cash upon sale of those instruments or exercised for shares of common stock.

	Liability derivatives
		Volume (1)
	Balance sheet location	Notional amount		Number of contracts		Fair value, net			Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Interest rate swap agreements	Other liabilities & accrued expenses	$	28		n/a	$	(5	)	$	—	$	(5	)
Foreign currency swap agreements	Other liabilities & accrued expenses		50		n/a		(7	)		—		(7	)
Total			78		n/a		(12	)		—		(12	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		85		n/a		8			8		—
Interest rate swaption agreements	Other liabilities & accrued expenses		1,250		n/a		—			—		—
Interest rate cap and floor agreements	Other liabilities & accrued expenses		914		n/a		(9	)		—		(9	)
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		n/a		15,677		(50	)		—		(50	)
Foreign currency contracts
Foreign currency forwards and options	Other liabilities & accrued expenses		96		n/a		(1	)		—		(1	)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		917		n/a		(105	)		—		(105	)
Guaranteed withdrawal benefits	Contractholder funds		613		n/a		(57	)		—		(57	)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		3,996		n/a		(553	)		—		(553	)
Other embedded derivative financial instruments	Contractholder funds		85		n/a		(8	)		—		(8	)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		509		n/a		7			12		(5	)
Credit default swaps – selling protection	Other liabilities & accrued expenses		503		n/a		(77	)		2		(79	)
Total			8,968		15,677		(845	)		22		(867	)
Total liability derivatives			9,046		15,677		(857	)	$	22	$	(879	)
Total derivatives		$	22,857		33,029	$	(752	)

(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)

Impacts on operations and AOCI from foreign currency contracts, cash flow hedges

($ in millions)	2012			2011			2010
Effective portion
(Loss) gain recognized in OCI on derivatives during the period	$	(6	)	$	4		$	3
Loss recognized in OCI on derivatives during the term of the hedging relationship		(22	)		(17	)		(22	)
(Loss) gain reclassified from AOCI into income (realized capital gains and losses)		(1	)		(1	)		2

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

($ in millions)	2012
	Net investment income			Realized capital gains and losses			Life and annuity contract benefits		Interest credited to contractholder funds		Operating costs and expenses		Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	(1	)	$	—		$	—	$	—	$	—	$	(1	)
Subtotal		(1	)		—			—		—		—		(1	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts		—			(1	)		—		—		—		(1	)
Equity and index contracts		—			(4	)		—		56		17		69
Embedded derivative financial instruments		—			21			36		134		—		191
Foreign currency contracts		—			(1	)		—		—		7		6
Credit default contracts		—			9			—		—		—		9
Other contracts		—			—			—		3		—		3
Subtotal		—			24			36		193		24		277
Total	$	(1	)	$	24		$	36	$	193	$	24	$	276

	2011
	Net investment income			Realized capital gains and losses			Life and annuity contract benefits			Interest credited to contractholder funds			Operating costs and expenses			Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	(2	)	$	(8	)	$	—		$	(5	)	$	—		$	(15	)
Foreign currency and interest rate contracts		—			—			—			(32	)		—			(32	)
Subtotal		(2	)		(8	)		—			(37	)		—			(47	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts		—			(304	)		—			—			—			(304	)
Equity and index contracts		—			(43	)		—			(2	)		(3	)		(48	)
Embedded derivative financial instruments		—			(37	)		(32	)		(38	)		—			(107	)
Foreign currency contracts		—			(12	)		—			—			2			(10	)
Credit default contracts		—			8			—			—			—			8
Other contracts		—			—			—			7			—			7
Subtotal		—			(388	)		(32	)		(33	)		(1	)		(454	)
Total	$	(2	)	$	(396	)	$	(32	)	$	(70	)	$	(1	)	$	(501	)

	2010
	Net investment income			Realized capital gains and losses			Life and annuity contract benefits			Interest credited to contractholder funds			Operating costs and expenses			Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	(139	)	$	9		$	—		$	11		$	—		$	(119	)
Foreign currency and interest rate contracts		—			(2	)		—			(18	)		—			(20	)
Subtotal		(139	)		7			—			(7	)		—			(139	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts		—			(496	)		—			—			—			(496	)
Equity and index contracts		—			(91	)		—			113			18			40
Embedded derivative financial instruments		—			(3	)		(28	)		34			—			3
Foreign currency contracts		—			(10	)		—			—			(3	)		(13	)
Credit default contracts		—			(8	)		—			—			—			(8	)
Other contracts		—			—			—			3			—			3
Subtotal		—			(608	)		(28	)		150			15			(471	)
Total	$	(139	)	$	(601	)	$	(28	)	$	143		$	15		$	(610	)

Impact on operations, changes in fair value, fair value hedges

($ in millions)	Gain (loss) on derivatives						Gain (loss) on hedged risk
Location of gain or (loss) recognized in net income on derivatives	Interest rate contracts			Foreign currency & interest rate contracts			Contractholder funds		Investments
2012
Net investment income	$	3		$	—		$	—	$	(3	)
Total	$	3		$	—		$	—	$	(3	)
2011
Interest credited to contractholder funds	$	(7	)	$	(34	)	$	41	$	—
Net investment income		26			—			—		(26	)
Realized capital gains and losses		(8	)		—			—		—
Total	$	11		$	(34	)	$	41	$	(26	)
2010
Interest credited to contractholder funds	$	—		$	(48	)	$	48	$	—
Net investment income		(33	)		—			—		33
Realized capital gains and losses		9			(2	)		—		—
Total	$	(24	)	$	(50	)	$	48	$	33

Counterparty credit exposure by counterparty credit rating

($ in millions)	2012								2011
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)
AA-		—	$	—	$	—	$	—		1	$	25	$	1	$	1
A+		2		29		1		1		4		3,026		26		5
A		4		2,450		13		2		3		5,307		15		1
A-		3		797		8		2		2		3,815		25		—
BBB+		1		3,617		11		—		2		57		41		41
Total		10	$	6,893	$	33	$	5		12	$	12,230	$	108	$	48

(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

($ in millions)	2012			2011
Gross liability fair value of contracts containing credit-risk-contingent features	$	65		$	153
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs		(31	)		(69	)
Collateral posted under MNAs for contracts containing credit-risk-contingent features		(25	)		(76	)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	9		$	8

CDS notional amounts by credit rating and fair value of protection sold

	Notional amount
($ in millions)
									BB and lower				Fair value
	AAA		AA		A		BBB				Total
December 31, 2012
Single name
Investment grade corporate debt (1)	$	5	$	20	$	53	$	80	$	10	$	168	$	—
Municipal		—		25		—		—		—		25		(3	)
Subtotal		5		45		53		80		10		193		(3	)
Baskets
First-to-default
Municipal		—		—		100		—		—		100		(26	)
Subtotal		—		—		100		—		—		100		(26	)
Index
Investment grade corporate debt (1)		—		3		79		204		14		300		2
Total	$	5	$	48	$	232	$	284	$	24	$	593	$	(27	)
December 31, 2011
Single name
Investment grade corporate debt (1)	$	—	$	90	$	88	$	160	$	30	$	368	$	(7	)
High yield debt		—		—		—		—		2		2		—
Municipal		—		135		—		—		—		135		(12	)
Subtotal		—		225		88		160		32		505		(19	)
Baskets
Tranche
Investment grade corporate debt (1)		—		—		—		—		65		65		(29	)
First-to-default
Municipal		—		—		100		—		—		100		(33	)
Subtotal		—		—		100		—		65		165		(62	)
Total	$	—	$	225	$	188	$	160	$	97	$	670	$	(81	)

(1)

Investment grade corporate debt categorization is based on the rating of the underlying name(s) at initial purchase.

Contractual amounts of off-balance-sheet financial instruments

($ in millions)	2012		2011
Commitments to invest in limited partnership interests	$	2,080	$	2,015
Commitments to extend mortgage loans		67		84
Private placement commitments		54		83
Other loan commitments		7		26