Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

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 June 30, 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	$	16	n/a	$	--	$	--	$	--

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other investments		79	n/a		1		1		--
Equity and index contracts
Options and warrants (2)	Other investments		--	3,721		94		94		--
Financial futures contracts	Other assets		--	1,103		--		--		--
Foreign currency contracts
Foreign currency forwards	Other investments		268	n/a		14		14		--
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		31	n/a		--		--		--
Credit default swaps - selling protection	Other investments		120	n/a		2		2		--
Other contracts
Other contracts	Other assets		4	n/a		1		1		--
Subtotal			1,502	4,824		112		112		--
Total asset derivatives		$	1,518	4,824	$	112	$	112	$	--

Liability derivatives
Derivatives designated as accounting hedging instruments
Foreign currency swap agreements	Other liabilities & accrued expenses	$	119	n/a	$	(15)	$	--	$	(15)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		85	n/a		5		5		--
Interest rate cap agreements	Other liabilities & accrued expenses		136	n/a		2		2		--
Financial futures contract	Other liabilities & accrued expenses		--	592		--		--		--
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		--	5,150		(40)		--		(40)
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses		46	n/a		--		--		--
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		674	n/a		(38)		--		(38)
Guaranteed withdrawal benefits	Contractholder funds		473	n/a		(13)		--		(13)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		1,770	n/a		(275)		--		(275)
Other embedded derivative financial instruments	Contractholder funds		85	n/a		(5)		--		(5)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		471	n/a		(11)		--		(11)
Credit default swaps – selling protection	Other liabilities & accrued expenses		165	n/a		(6)		2		(8)
Subtotal			3,905	5,742		(381)		9		(390)
Total liability derivatives			4,024	5,742		(396)	$	9	$	(405)

Total derivatives		$	5,542	10,566	$	(284)

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(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 428,125 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, 2013.

($ 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	$	16	n/a	$	1	$	1	$	--

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swaption agreements	Other investments		1,420	n/a		--		--		--
Interest rate cap agreements	Other investments		61	n/a		2		2		--
Financial futures contracts	Other assets		--	550		--		--		--
Equity and index contracts
Options and warrants (2)	Other investments		3	10,035		263		263		--
Financial futures contracts	Other assets		--	1,432		1		1		--
Foreign currency contracts
Foreign currency forwards	Other investments		161	n/a		10		10		--
Embedded derivative financial instruments
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		2	n/a		--		--		--
Credit default swaps - selling protection	Other investments		105	n/a		2		2		--
Other contracts
Other contracts	Other assets		4	n/a		--		--		--
Subtotal			2,768	12,017		266		278		(12)
Total asset derivatives		$	2,784	12,017	$	267	$	279	$	(12)

Liability derivatives
Derivatives designated as accounting hedging instruments
Foreign currency swap agreements	Other liabilities & accrued expenses	$	132	n/a	$	(15)	$	--	$	(15)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		85	n/a		4		4		--
Interest rate swaption agreements	Other liabilities & accrued expenses		4,570	n/a		1		1		--
Interest rate cap agreements	Other liabilities & accrued expenses		262	n/a		4		4		--
Equity and index contracts
Options	Other liabilities & accrued expenses		55	10,035		(165)		2		(167)
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses		148	n/a		(3)		2		(5)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		738	n/a		(43)		--		(43)
Guaranteed withdrawal benefits	Contractholder funds		506	n/a		(13)		--		(13)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		1,693	n/a		(247)		--		(247)
	Liabilities held for sale		2,363	n/a		(246)		--		(246)
Other embedded derivative financial instruments	Contractholder funds		85	n/a		(4)		--		(4)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		397	n/a		(6)		--		(6)
Credit default swaps – selling protection	Other liabilities & accrued expenses		185	n/a		(13)		2		(15)
Subtotal			11,087	10,035		(731)		15		(746)
Total liability derivatives			11,219	10,035		(746)	$	15	$	(761)

Total derivatives		$	14,003	22,052	$	(479)

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(2) In addition to the number of contracts presented in the table, the Company held 1,238,580 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

($ in millions)				Offsets
		Gross amount		Counter- party netting		Cash collateral (received) pledged		Net amount on balance sheet		Securities collateral (received) pledged		Net amount
June 30, 2014
Asset derivatives	$	25	$	(9)	$	(8)	$	8	$	--	$	8
Liability derivatives		(31)		9		--		(22)		18		(4)

December 31, 2013
Asset derivatives	$	28	$	(15)	$	(9)	$	4	$	(4)	$	--
Liability derivatives		(41)		15		(4)		(30)		23		(7)

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

($ in millions)		Three months ended June 30,				Six months ended June 30,
		2014		2013		2014		2013
(Loss) gain recognized in OCI on derivatives during the period	$	(2)	$	6	$	(4)	$	9
Loss recognized in OCI on derivatives during the term of the hedging relationship		(19)		(12)		(19)		(12)
Loss reclassified from AOCI into income (net investment income)		--		(1)		(1)		(1)
Loss reclassified from AOCI into income (realized capital gains and losses)		(2)		--		(2)		--

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

($ 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 June 30, 2014
Interest rate contracts	$	(4)	$	--	$	--	$	--	$	--	$	(4)
Equity and index contracts		(8)		--		12		6		--		10
Embedded derivative financial instruments		--		(1)		(10)		--		--		(11)
Foreign currency contracts		5		--		--		2		--		7
Credit default contracts		2		--		--		--		--		2
Other contracts		--		--		1		--		--		1
Total	$	(5)	$	(1)	$	3	$	8	$	--	$	5

Six months ended June 30, 2014
Interest rate contracts	$	(8)	$	--	$	--	$	--	$	(4)	$	(12)
Equity and index contracts		(11)		--		21		7		--		17
Embedded derivative financial instruments		--		4		(11)		--		--		(7)
Foreign currency contracts		(1)		--		--		3		--		2
Credit default contracts		3		--		--		--		--		3
Other contracts		--		--		1		--		--		1
Total	$	(17)	$	4	$	11	$	10	$	(4)	$	4

		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
Three months ended June 30, 2013
Interest rate contracts	$	--	$	3	$	--	$	--	$	--	$	3
Equity and index contracts		--		4		--		9		2		15
Embedded derivative financial instruments		--		--		20		14		--		34
Foreign currency contracts		--		(5)		--		--		--		(5)
Credit default contracts		--		12		--		--		--		12
Other contracts		--		--		--		(3)		--		(3)
Total	$	--	$	14	$	20	$	20	$	2	$	56

Six months ended June 30, 2013
Interest rate contracts	$	--	$	3	$	--	$	--	$	--	$	3
Equity and index contracts		--		(5)		--		47		13		55
Embedded derivative financial instruments		--		(1)		46		(26)		--		19
Foreign currency contracts		--		(4)		--		--		(7)		(11)
Credit default contracts		--		17		--		--		--		17
Other contracts		--		--		--		(3)		--		(3)
Total	$	--	$	10	$	46	$	18	$	6	$	80

Counterparty credit exposure by counterparty credit rating

($ in millions)	June 30, 2014							December 31, 2013
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+	2	$	101	$	3	$	3	1	$	22	$	1	$	1
A	5		121		6		1	5		1,628		9		2
A-	1		85		3		3	1		24		1		--
BBB+	1		65		4		1	1		33		3		--
BBB	1		62		--		--	1		76		1		--
Total	10	$	434	$	16	$	8	9	$	1,783	$	15	$	3

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(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)		June 30, 2014		December 31, 2013
Gross liability fair value of contracts containing credit-risk-contingent features	$	29	$	28
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs		(8)		(11)
Collateral posted under MNAs for contracts containing credit-risk-contingent features		(16)		(14)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	5	$	3

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
June 30, 2014
Single name
Corporate debt	$	20	$	20	$	65	$	--	$	105	$	2
First-to-default Basket
Municipal		--		100		--		--		100		(8)
Index
Corporate debt		1		21		53		5		80		2
Total	$	21	$	141	$	118	$	5	$	285	$	(4)

December 31, 2013
Single name
Corporate debt	$	20	$	25	$	65	$	--	$	110	$	2
First-to-default Basket
Municipal		--		100		--		--		100		(15)
Index
Corporate debt		1		20		55		4		80		2
Total	$	21	$	145	$	120	$	4	$	290	$	(11)