Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value of Assets and Liabilities

Schedule of assets and liabilities that are measured at fair value on a recurring and non-recurring basis

($ in millions)		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Counterparty and cash collateral netting			Balance as of March 31, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	2,583	$	1,667		$	7					$	4,257
Municipal		--		11,202			660						11,862
Corporate		--		47,991			1,576						49,567
Foreign government		--		2,365			--						2,365
ABS		--		3,321			276						3,597
RMBS		--		2,747			3						2,750
CMBS		--		1,344			37						1,381
Redeemable preferred stock		--		26			1						27
Total fixed income securities		2,583		70,663			2,560						75,806
Equity securities		3,408		859			172						4,439
Short-term investments		811		2,358			--						3,169
Other investments:
Free-standing derivatives		--		269			4		$	(50	)		223
Separate account assets		6,750		--			--						6,750
Other assets		1		--			1						2
Total recurring basis assets		13,553		74,149			2,737			(50	)		90,389
Non-recurring basis (1)		--		--			20						20
Total assets at fair value	$	13,553	$	74,149		$	2,757		$	(50	)	$	90,409
% of total assets at fair value		15.0  %		82.0  %			3.0  %			--  %			100.0 %
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--		$	(567	)				$	(567	)
Other liabilities:
Free-standing derivatives		--		(163	)		(24	)	$	29			(158	)
Total liabilities at fair value	$	--	$	(163	)	$	(591	)	$	29		$	(725	)
% of total liabilities at fair value		-- %		22.5 %			81.5  %			(4.0)  %			100.0 %

____________

(1)  Includes $20 million of other investments written-down to fair value in connection with recognizing other-than-temporary impairments.

($ in millions)		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Counterparty and cash collateral netting		Balance as of December 31, 2012
Assets
Fixed income securities:
U.S. government and agencies	$	2,790	$	1,915	$	8			$	4,713
Municipal		--		12,104		965				13,069
Corporate		--		46,920		1,617				48,537
Foreign government		--		2,517		--				2,517
ABS		--		3,373		251				3,624
RMBS		--		3,029		3				3,032
CMBS		--		1,446		52				1,498
Redeemable preferred stock		--		26		1				27
Total fixed income securities		2,790		71,330		2,897				77,017
Equity securities		3,008		858		171				4,037
Short-term investments		703		1,633		--				2,336
Other investments:
Free-standing derivatives		--		187		3	$	(57)		133
Separate account assets		6,610		--		--				6,610
Other assets		5		--		1				6
Total recurring basis assets		13,116		74,008		3,072		(57)		90,139
Non-recurring basis (1)		--		--		9				9
Total assets at fair value	$	13,116	$	74,008	$	3,081	$	(57)	$	90,148
% of total assets at fair value		14.6 %		82.1 %		3.4 %		(0.1) %		100.0 %
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(553)			$	(553)
Other liabilities:
Free-standing derivatives		--		(98)		(30)	$	33		(95)
Total liabilities at fair value	$	--	$	(98)	$	(583)	$	33	$	(648)
% of total liabilities at fair value		-- %		15.1 %		90.0 %		(5.1) %		100.0 %

_______________

(1)  Includes $4 million of mortgage loans, $4 million of limited partnership interests and $1 million of other investments written-down to fair value in connection with recognizing other-than-temporary impairments.

Summary of quantitative information about the significant unobservable inputs

($ in millions)	Fair value		Valuation technique	Unobservable input	Range	Weighted average
March 31, 2013
ARS backed by student loans	$	213	Discounted cash flow model	Anticipated date liquidity will return to the market	18 - 60 months	31 - 43 months
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(459)	Stochastic cash flow model	Projected option cost	1.0 - 2.0 %	1.89%
December 31, 2012
ARS backed by student loans	$	394	Discounted cash flow model	Anticipated date liquidity will return to the market	18 - 60 months	31 - 43 months
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(419)	Stochastic cash flow model	Projected option cost	1.0 - 2.0 %	1.92%

Schedule of the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis

($ in millions)				Total gains (losses) included in:
		Balance as of December 31, 2012		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	8	$	--	$	--	$	--	$	--
Municipal		965		(24)		54		6		--
Corporate		1,617		12		(1)		25		(125)
ABS		251		1		7		18		--
RMBS		3		--		--		--		--
CMBS		52		--		2		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,897		(11)		62		49		(125)
Equity securities		171		1		1		--		--
Other investments:
Free-standing derivatives, net		(27)		7		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	3,042	$	(3)	$	63	$	49	$	(125)
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(553)	$	6	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(553)	$	6	$	--	$	--	$	--
		Purchases		Sales		Issues		Settlements		Balance as of March 31, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	(1)	$	7
Municipal		--		(339)		--		(2)		660
Corporate		264		(199)		--		(17)		1,576
ABS		56		(49)		--		(8)		276
RMBS		--		--		--		--		3
CMBS		1		(17)		--		(1)		37
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		321		(604)		--		(29)		2,560
Equity securities		--		(1)		--		--		172
Other investments:
Free-standing derivatives, net		1		--		--		(1)		(20)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	322	$	(605)	$	--	$	(30)	$	2,713
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(24)	$	4	$	(567)
Total recurring Level 3 liabilities	$	--	$	--	$	(24)	$	4	$	(567)

_______________

(1) The effect to net income totals $3 million and is reported in the Condensed Consolidated Statements of Operations as follows: $(10) million in realized capital gains and losses, $7 million in net investment income, $(20) million in interest credited to contractholder funds and $26 million in life and annuity contract benefits.

(2) Comprises $4 million of assets and $24 million of liabilities.

($ in millions)				Total gains (losses) included in:
		Balance as of December 31, 2011		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	1,332	$	(2)	$	7	$	--	$	(6)
Corporate		1,405		5		28		56		(18)
ABS		297		13		13		--		(35)
RMBS		51		--		--		--		(47)
CMBS		60		(1)		6		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		3,146		15		54		56		(106)
Equity securities		43		--		--		--		--
Other investments:
Free-standing derivatives, net		(95)		17		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	3,095	$	32	$	54	$	56	$	(106)
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(723)	$	(25)	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(723)	$	(25)	$	--	$	--	$	--
		Purchases		Sales		Issues		Settlements		Balance as of March 31, 2012
Assets
Fixed income securities:
Municipal	$	42	$	(105)	$	--	$	(1)	$	1,267
Corporate		76		(58)		--		(33)		1,461
ABS		16		--		--		(5)		299
RMBS		--		--		--		--		4
CMBS		--		--		--		(15)		50
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		134		(163)		--		(54)		3,082
Equity securities		70		--		--		--		113
Other investments:
Free-standing derivatives, net		3		--		--		5		(70)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	207	$	(163)	$	--	$	(49)	$	3,126
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(12)	$	30	$	(730)
Total recurring Level 3 liabilities	$	--	$	--	$	(12)	$	30	$	(730)

_______________

(1)  The effect to net income totals $7 million and is reported in the Condensed Consolidated Statements of Operations as follows: $26 million in realized capital gains and losses, $6 million in net investment income, $(56) million in interest credited to contractholder funds and $31 million in life and annuity contract benefits.

(2)  Comprises $2 million of assets and $72 million of liabilities.

Schedule of gains and losses included in net income for Level 3 assets and liabilities still held at the balance sheet date

($ in millions)		2013		2012
Assets
Fixed income securities:
Municipal	$	(14)	$	(1)
Corporate		5		3
ABS		--		13
CMBS		(1)		(1)
Total fixed income securities		(10)		14
Equity securities		1		--
Other investments:
Free-standing derivatives, net		7		15
Total recurring Level 3 assets	$	(2)	$	29
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	6	$	(25)
Total recurring Level 3 liabilities	$	6	$	(25)

Schedule of carrying values and fair value estimates of financial instruments not carried at fair value

($ in millions)		March 31, 2013				December 31, 2012
		Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	$	6,434	$	6,846	$	6,570	$	6,886
Cost method limited partnerships		1,425		1,748		1,406		1,714
Bank loans		809		818		682		684
Agent loans		318		311		319		314

($ in millions)		March 31, 2013				December 31, 2012
		Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	$	26,439	$	27,215	$	27,014	$	28,019
Long-term debt		6,556		7,616		6,057		7,141
Liability for collateral		827		827		808		808