Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	1,793	$	1,404	$	7			$	3,204
Municipal		--		10,163		553				10,716
Corporate		--		46,233		1,383				47,616
Foreign government		--		2,224		--				2,224
ABS		--		3,188		288				3,476
RMBS		--		2,482		3				2,485
CMBS		--		1,250		41				1,291
Redeemable preferred stock		--		26		1				27
Total fixed income securities		1,793		66,970		2,276				71,039
Equity securities		3,463		917		125				4,505
Short-term investments		599		2,047		--				2,646
Other investments:
Free-standing derivatives		--		211		6	$	(17)		200
Separate account assets		6,488		--		--				6,488
Other assets		2		--		1				3
Total recurring basis assets		12,345		70,145		2,408		(17)		84,881
Non-recurring basis (1)		--		--		77				77
Total assets at fair value	$	12,345	$	70,145	$	2,485	$	(17)	$	84,958
% of total assets at fair value		14.5 %		82.6 %		2.9 %		-- %		100.0 %

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(533)			$	(533)
Other liabilities:
Free-standing derivatives		--		(140)		(13)	$	12		(141)
Total liabilities at fair value	$	--	$	(140)	$	(546)	$	12	$	(674)
% of total liabilities at fair value		-- %		20.8 %		81.0 %		(1.8) %		100.0 %

_______________

(1) Includes $51 million of mortgage loans and $26 million of limited partnership interests 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

June 30, 2013

ARS backed by student loans

114

Discounted cash flow model

Anticipated date liquidity will return to the market

36 - 54 months

38 - 50 months

Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options

(445

)

Stochastic cash flow model

Projected option cost

1.0 - 2.0 %

1.87%

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 March 31, 2013		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	7	$	--	$	--	$	--	$	--
Municipal		660		(4)		(5)		--		(6)
Corporate		1,576		9		(38)		38		(150)
ABS		276		(1)		8		--		(16)
RMBS		3		--		--		--		--
CMBS		37		(1)		--		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,560		3		(35)		38		(172)
Equity securities		172		1		--		--		--
Other investments:
Free-standing derivatives, net		(20)		15		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	2,713	$	19	$	(35)	$	38	$	(172)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(567)	$	57	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(567)	$	57	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	--	$	7
Municipal		52		(124)		--		(20)		553
Corporate		96		(77)		--		(71)		1,383
ABS		70		(32)		--		(17)		288
RMBS		--		--		--		--		3
CMBS		5		--		--		--		41
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		223		(233)		--		(108)		2,276
Equity securities		--		(48)		--		--		125
Other investments:
Free-standing derivatives, net		--		--		--		(2)		(7)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	223	$	(281)	$	--	$	(110)	$	2,395

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(26)	$	3	$	(533)
Total recurring Level 3 liabilities	$	--	$	--	$	(26)	$	3	$	(533)

_______________

(1) The effect to net income totals $76 million and is reported in the Condensed Consolidated Statements of Operations as follows: $12 million in realized capital gains and losses, $5 million in net investment income, $39 million in interest credited to contractholder funds and $20 million in life and annuity contract benefits.

(2) Comprises $6 million of assets and $13 million of liabilities.

($ 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		(28)		49		6		(6)
Corporate		1,617		21		(39)		63		(275)
ABS		251		--		15		18		(16)
RMBS		3		--		--		--		--
CMBS		52		(1)		2		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,897		(8)		27		87		(297)
Equity securities		171		2		1		--		--
Other investments:
Free-standing derivatives, net		(27)		22		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	3,042	$	16	$	28	$	87	$	(297)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(553)	$	63	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(553)	$	63	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	(1)	$	7
Municipal		52		(463)		--		(22)		553
Corporate		360		(276)		--		(88)		1,383
ABS		126		(81)		--		(25)		288
RMBS		--		--		--		--		3
CMBS		6		(17)		--		(1)		41
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		544		(837)		--		(137)		2,276
Equity securities		--		(49)		--		--		125
Other investments:
Free-standing derivatives, net		1		--		--		(3)		(7)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	545	$	(886)	$	--	$	(140)	$	2,395

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(50)	$	7	$	(533)
Total recurring Level 3 liabilities	$	--	$	--	$	(50)	$	7	$	(533)

_______________

(1) The effect to net income totals $79 million and is reported in the Condensed Consolidated Statements of Operations as follows: $2 million in realized capital gains and losses, $12 million in net investment income, $19 million in interest credited to contractholder funds and $46 million in life and annuity contract benefits.

(2) Comprises $6 million of assets and $13 million of liabilities.

($ in millions)				Total gains (losses) included in:
		Balance as of March 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		1,267		(4)		10		--		(20)
Corporate		1,461		1		(5)		80		(20)
ABS		299		16		(1)		--		(16)
RMBS		4		--		--		--		--
CMBS		50		(1)		2		--		(5)
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		3,082		12		6		88		(61)
Equity securities		113		(4)		6		--		--
Other investments:
Free-standing derivatives, net		(70)		(3)		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	3,126	$	5	$	12	$	88	$	(61)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(730)	$	16	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(730)	$	16	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2012
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	--	$	8
Municipal		--		(100)		--		(9)		1,144
Corporate		55		(41)		--		(7)		1,524
ABS		58		(11)		--		(11)		334
RMBS		--		--		--		--		4
CMBS		2		(1)		--		--		47
Redeemable preferred stock		1		(1)		--		--		1
Total fixed income securities		116		(154)		--		(27)		3,062
Equity securities		92		(15)		--		--		192
Other investments:
Free-standing derivatives, net		3		--		--		(1)		(71)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	211	$	(169)	$	--	$	(28)	$	3,184

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(17)	$	24	$	(707)
Total recurring Level 3 liabilities	$	--	$	--	$	(17)	$	24	$	(707)

_______________

(1) The effect to net income totals $21 million and is reported in the Condensed Consolidated Statements of Operations as follows: $(3) million in realized capital gains and losses, $9 million in net investment income, $32 million in interest credited to contractholder funds and $(17) million in life and annuity contract benefits.

(2) Comprises $1 million of assets and $72 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:
U.S. government and agencies	$	--	$	--	$	--	$	8	$	--
Municipal		1,332		(6)		17		--		(26)
Corporate		1,405		6		23		136		(38)
ABS		297		29		12		--		(51)
RMBS		51		--		--		--		(47)
CMBS		60		(2)		8		--		(5)
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		3,146		27		60		144		(167)
Equity securities		43		(4)		6		--		--
Other investments:
Free-standing derivatives, net		(95)		14		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	3,095	$	37	$	66	$	144	$	(167)

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(723)	$	(9)	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(723)	$	(9)	$	--	$	--	$	--

		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2012
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	--	$	8
Municipal		42		(205)		--		(10)		1,144
Corporate		131		(99)		--		(40)		1,524
ABS		74		(11)		--		(16)		334
RMBS		--		--		--		--		4
CMBS		2		(1)		--		(15)		47
Redeemable preferred stock		1		(1)		--		--		1
Total fixed income securities		250		(317)		--		(81)		3,062
Equity securities		162		(15)		--		--		192
Other investments:
Free-standing derivatives, net		6		--		--		4		(71)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	418	$	(332)	$	--	$	(77)	$	3,184

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(29)	$	54	$	(707)
Total recurring Level 3 liabilities	$	--	$	--	$	(29)	$	54	$	(707)

_______________

(1) The effect to net income totals $28 million and is reported in the Condensed Consolidated Statements of Operations as follows: $23 million in realized capital gains and losses, $15 million in net investment income, $(24) million in interest credited to contractholder funds and $14 million in life and annuity contract benefits.

(2) Comprises $1 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)		Three months ended June 30,				Six months ended June 30,
		2013		2012		2013		2012
Assets
Fixed income securities:
Municipal	$	(6)	$	(5)	$	(16)	$	(5)
Corporate		4		1		8		9
ABS		(1)		5		(1)		18
RMBS		--		(1)		--		(1)
CMBS		(1)		(1)		(2)		(1)
Total fixed income securities		(4)		(1)		(11)		20
Equity securities		--		(4)		--		(4)
Other investments:
Free-standing derivatives, net		9		(4)		16		11
Total recurring Level 3 assets	$	5	$	(9)	$	5	$	27

Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	57	$	16	$	63	$	(9)
Total recurring Level 3 liabilities	$	57	$	16	$	63	$	(9)

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

Financial assets

($ in millions)		June 30, 2013				December 31, 2012
		Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	$	6,413	$	6,691	$	6,570	$	6,886
Cost method limited partnerships		1,441		1,795		1,406		1,714
Bank loans		991		987		682		684
Agent loans		321		306		319		314

Financial liabilities

($ in millions)		June 30, 2013				December 31, 2012
		Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	$	24,018	$	24,675	$	27,014	$	28,019
Short-term debt		500		500		--		--
Long-term debt		5,475		6,037		6,057		7,141
Liability for collateral		692		692		808		808

- Definition

Tabular disclosure related to assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a recurring and/or nonrecurring basis in periods after initial recognition. Disclosures include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3) as well as transfers between levels 1 and 2.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

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-Subparagraph (a,b,bb)

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 33

-Subparagraph a, b

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+ Details

- Definition

Tabular disclosure of the amount of gains or losses for the period included in earnings or resulted in a change to net assets, have arisen from the use of significant unobservable inputs (level 3) to measure the fair value of assets, liabilities, and financial instruments classified in shareholders' equity.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15

-Subparagraph b-d

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-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

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-Subparagraph a, c(1), c(2), c(3), d

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-Name Statement of Financial Accounting Standard (FAS)

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-Name Statement of Financial Accounting Standard (FAS)

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details