Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2014

Derivative Financial Instruments

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 September 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	$		2		$		2	$		--
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other investments		95		n/a		--				--			--
Financial futures contracts	Other assets		--		50		--				--			--
Equity and index contracts
Options and warrants (2)	Other investments		--		2,932		65				65			--
Financial futures contracts	Other assets		--		1,779		--				--			--
Foreign currency contracts
Foreign currency forwards	Other investments		82		n/a		6				6			--
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		33		n/a		--				--			--
Credit default swaps - selling protection	Other investments		115		n/a		2				2			--
Other contracts
Other contracts	Other assets		3		n/a		1				1			--
Subtotal			1,328		4,761		74				74			--
Total asset derivatives		$		1,344	4,761	$		76		$		76	$		--
Liability derivatives
Derivatives designated as accounting hedging instruments
Foreign currency swap agreements	Other liabilities & accrued expenses	$		119	n/a	$		(6	)	$		--	$		(6	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		85		n/a		3				3			--
Interest rate cap agreements	Other liabilities & accrued expenses		90		n/a		2				2			--
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		--		4,136		(21		)		--			(21		)
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses		608		n/a		(13		)		3			(16		)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		650		n/a		(36		)		--			(36		)
Guaranteed withdrawal benefits	Contractholder funds		453		n/a		(13		)		--			(13		)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		1,773		n/a		(269		)		--			(269		)
Other embedded derivative financial instruments	Contractholder funds		85		n/a		(3		)		--			(3		)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		500		n/a		(9		)		1			(10		)
Credit default swaps – selling protection	Other liabilities & accrued expenses		190		n/a		(8		)		1			(9		)
Subtotal			4,434		4,136		(367		)		10			(377		)
Total liability derivatives			4,553		4,136		(373		)	$		10	$		(383	)
Total derivatives		$		5,897	8,897	$		(297	)

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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 220 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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(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 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
September 30, 2014
Asset derivatives	$	19	$	(10)	$	(2)	$	7	$	(2)	$	5
Liability derivatives		(36)		10		9		(17)		15		(2)
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 September 30,				Nine months ended September 30,
		2014		2013		2014		2013
Gain (loss) recognized in OCI on derivatives during the period	$	10	$	(7)	$	6	$	2
Loss recognized in OCI on derivatives during the term of the hedging relationship		(8)		(19)		(8)		(19)
Loss reclassified from AOCI into income (net investment income)		(1)		--		(2)		(1)
Loss reclassified from AOCI into income (realized capital gains and losses)		--		--		(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 September 30, 2014
Interest rate contracts	$	--	$	--	$	--	$	--	$	--	$	--
Equity and index contracts		(2)		--		4		(4)		--		(2)
Embedded derivative financial instruments		--		4		6		--		--		10
Foreign currency contracts		(7)		--		--		(5)		--		(12)
Credit default contracts		1		--		--		--		--		1
Other contracts		--		--		(1)		--		--		(1)
Total	$	(8)	$	4	$	9	$	(9)	$	--	$	(4)
Nine months ended September 30, 2014
Interest rate contracts	$	(8)	$	--	$	--	$	--	$	(4)	$	(12)
Equity and index contracts		(13)		--		25		3		--		15
Embedded derivative financial instruments		--		8		(5)		--		--		3
Foreign currency contracts		(8)		--		--		(2)		--		(10)
Credit default contracts		4		--		--		--		--		4
Total	$	(25)	$	8	$	20	$	1	$	(4)	$	--

		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 September 30, 2013
Interest rate contracts	$	(1)	$	--	$	--	$	--	$	(1)
Equity and index contracts		(4)		--		16		10		22
Embedded derivative financial instruments		--		10		(9)		--		1
Foreign currency contracts		--		--		--		11		11
Credit default contracts		(7)		--		--		--		(7)
Other contracts		--		--		--		--		--
Total	$	(12)	$	10	$	7	$	21	$	26
Nine months ended September 30, 2013
Interest rate contracts	$	2	$	--	$	--	$	--	$	2
Equity and index contracts		(9)		--		63		23		77
Embedded derivative financial instruments		(1)		56		(35)		--		20
Foreign currency contracts		(4)		--		--		4		--
Credit default contracts		10		--		--		--		10
Other contracts		--		--		(3)		--		(3)
Total	$	(2)	$	56	$	25	$	27	$	106

Counterparty credit exposure by counterparty credit rating

($ in millions)	September 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+	1	$	16	$	--	$	--	1	$	22	$	1	$	1
A	4		163		8		3	5		1,628		9		2
A-	1		8		1		1	1		24		1		--
BBB+	1		11		--		--	1		33		3		--
BBB	1		62		--		--	1		76		1		--
Total	8	$	260	$	9	$	4	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)		September 30, 2014		December 31, 2013
Gross liability fair value of contracts containing credit-risk-contingent features	$	16	$	28
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs		(6)		(11)
Collateral posted under MNAs for contracts containing credit-risk-contingent features		(6)		(14)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	4	$	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
September 30, 2014
Single name
Corporate debt	$	20	$	15	$	65	$	25	$	125	$	1
First-to-default Basket
Municipal		--		100		--		--		100		(9)
Index
Corporate debt		1		26		50		3		80		2
Total	$	21	$	141	$	115	$	28	$	305	$	(6)
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)