Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value

Assets and liabilities measured and carried at fair value in the financial statements are summarized below (in millions):

	Level 1		Level 2		Level 3		Total
September 30, 2012
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	198	$	143	$	20	$	361
States, municipalities and political subdivisions	—		4,268		58		4,326
Foreign government	—		264		—		264
Residential MBS	—		3,953		367		4,320
Commercial MBS	—		2,924		21		2,945
All other corporate	4		11,031		495		11,530
Total AFS fixed maturities	202		22,583		961		23,746
Trading fixed maturities	—		308		1		309
Equity securities	883		112		36		1,031
Assets of managed investment entities (“MIE”)	221		2,846		35		3,102
Variable annuity assets (separate accounts) (a)	—		577		—		577
Other investments	—		153		—		153
Total assets accounted for at fair value	$	1,306	$	26,579	$	1,033	$	28,918
Liabilities:
Liabilities of managed investment entities	$	247	$	—	$	2,506	$	2,753
Derivatives in annuity benefits accumulated	—		—		497		497
Other liabilities — derivatives	—		18		—		18
Total liabilities accounted for at fair value	$	247	$	18	$	3,003	$	3,268
December 31, 2011
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	248	$	134	$	—	$	382
States, municipalities and political subdivisions	—		3,794		83		3,877
Foreign government	—		254		—		254
Residential MBS	—		3,487		361		3,848
Commercial MBS	—		2,821		19		2,840
All other corporate	9		10,078		519		10,606
Total AFS fixed maturities	257		20,568		982		21,807
Trading fixed maturities	—		439		1		440
Equity securities	888		29		11		928
Assets of managed investment entities (“MIE”)	290		2,724		44		3,058
Variable annuity assets (separate accounts) (a)	—		548		—		548
Other investments	—		71		—		71
Total assets accounted for at fair value	$	1,435	$	24,379	$	1,038	$	26,852
Liabilities:
Liabilities of managed investment entities	$	194	$	—	$	2,593	$	2,787
Derivatives in annuity benefits accumulated	—		—		361		361
Other liabilities — derivatives	—		23		—		23
Total liabilities accounted for at fair value	$	194	$	23	$	2,954	$	3,171

 (a)   Variable annuity liabilities equal the fair value of variable annuity assets.

Unobservable inputs used by management in determining fair value of embedded derivatives

Unobservable Input	Range
Adjustment for insurance subsidiary’s credit risk	0.5% – 2.05% over the risk free rate
Risk margin for uncertainty in cash flows	0.3% reduction in the discount rate
Surrenders	4% – 25% of indexed account value
Partial surrenders	3% – 5% of indexed account value
Annuitizations	1% – 2% of indexed account value
Deaths	1% – 2.5% of indexed account value
Budgeted option costs	2.5% – 4.0% of indexed account value

Changes in balances of Level 3 financial assets and liabilities

				Total realized/unrealized gains (losses) included in
	Balance at June 30, 2012			Net income			Other comprehensive income (loss)		Purchases and issuances			Sales and Settlements			Transfer into Level 3		Transfer out of Level 3			Balance at September 30, 2012
AFS fixed maturities:
U.S. government	$	20		$	—		$	—	$	—		$	—		$	—	$	—		$	20
State and municipal	86			—			2		—			(6		)	4		(28		)	58
Residential MBS	320			3			7		15			(11		)	86		(53		)	367
Commercial MBS	20			1			—		—			—			—		—			21
All other corporate	537			2			6		67			(19		)	1		(99		)	495
Trading fixed maturities	1			—			—		—			—			—		—			1
Equity securities	41			—			—		4			—			9		(18		)	36
Assets of MIE	54			—			—		—			(1		)	—		(18		)	35
Liabilities of MIE (*)	(2,429		)	(52		)	—		(97		)	72			—		—			(2,506		)
Embedded derivatives	(444		)	(41		)	—		(19		)	7			—		—			(497		)

(*) Total realized/unrealized loss included in net income includes losses of $49 million related to liabilities outstanding as of September 30, 2012. See Note H — “Managed Investment Entities.”

				Total realized/unrealized gains (losses) included in
	Balance at June 30, 2011			Net income			Other comprehensive income (loss)			Purchases and Issuances			Sales and Settlements			Transfer into Level 3		Transfer out of Level 3			Balance at September 30, 2011
AFS fixed maturities:
State and municipal	$	84		$	—		$	4		$	—		$	(3	)	$	—	$	(13	)	$	72
Residential MBS	255			1			(5		)	25			(9		)	24		(7		)	284
Commercial MBS	10			—			—			9			—			9		—			28
All other corporate	382			2			12			32			(14		)	46		(24		)	436
Trading fixed maturities	1			—			—			—			—			—		—			1
Equity securities	21			—			(1		)	2			—			2		—			24
Assets of MIE	53			(6		)	—			5			(7		)	—		(5		)	40
Liabilities of MIE (*)	(2,322		)	89			—			—			51			—		—			(2,182		)
Embedded derivatives	(279		)	32			—			(62		)	4			—		—			(305		)

(*) Total realized/unrealized loss included in net income includes losses of $89 million related to liabilities outstanding as of September 30, 2011. See Note H — “Managed Investment Entities.”

				Total realized/unrealized gains (losses) included in
	Balance at December 31, 2011			Net income			Other comprehensive income (loss)		Purchases and Issuances			Sales and Settlements			Transfer into Level 3		Transfer out of Level 3			Balance at September 30, 2012
AFS fixed maturities:
U.S. government	$	—		$	—		$	—	$	20		$	—		$	—	$	—		$	20
State and municipal	83			—			4		19			(7		)	9		(50		)	58
Residential MBS	361			5			11		86			(29		)	167		(234		)	367
Commercial MBS	19			1			1		—			—			—		—			21
All other corporate	519			9			18		124			(57		)	29		(147		)	495
Trading fixed maturities	1			—			—		—			—			—		—			1
Equity securities	11			—			—		30			—			13		(18		)	36
Assets of MIE	44			—			—		13			(13		)	14		(23		)	35
Liabilities of MIE (*)	(2,593		)	(155		)	—		(463		)	705			—		—			(2,506		)
Embedded derivatives	(361		)	(97		)	—		(57		)	18			—		—			(497		)

(*) Total realized/unrealized loss included in net income includes losses of $99 million related to liabilities outstanding as of September 30, 2012. See Note H — “Managed Investment Entities.”

				Total realized/unrealized gains (losses) included in
	Balance at December 31, 2010			Net income			Other comprehensive income (loss)			Purchases and Issuances			Sales and Settlements			Transfer into Level 3		Transfer out of Level 3			Balance at September 30, 2011
AFS fixed maturities:
State and municipal	$	20		$	—		$	5		$	53		$	(3	)	$	10	$	(13	)	$	72
Residential MBS	312			2			(8		)	42			(29		)	31		(66		)	284
Commercial MBS	6			—			—			9			—			13		—			28
All other corporate	436			1			17			123			(51		)	70		(160		)	436
Trading fixed maturities	3			—			—			—			—			—		(2		)	1
Equity securities	21			—			1			2			(2		)	2		—			24
Assets of MIE	48			(7		)	—			21			(13		)	8		(17		)	40
Liabilities of MIE (*)	(2,258		)	17			—			—			59			—		—			(2,182		)
Embedded derivatives	(181		)	4			—			(142		)	14			—		—			(305		)

(*) Total realized/unrealized loss included in net income includes losses of $19 million related to liabilities outstanding as of September 30, 2011. See Note H — “Managed Investment Entities.”

Fair value of financial instruments

The carrying value and fair value of financial instruments that are not carried at fair value in the financial statements are summarized below (in millions):

	Carrying Value		Fair Value		Level 1		Level 2		Level 3
September 30, 2012
Financial assets:
Cash and cash equivalents	$	1,626	$	1,626	$	1,626	$	—	$	—
Mortgage loans	566		575		—		—		575
Policy loans	229		229		—		—		229
Total financial assets not accounted for at fair value	$	2,421	$	2,430	$	1,626	$	—	$	804
Financial liabilities:
Annuity benefits accumulated (*)	$	17,040	$	17,452	$	—	$	—	$	17,452
Long-term debt	966		1,085		—		976		109
Total financial liabilities not accounted for at fair value	$	18,006	$	18,537	$	—	$	976	$	17,561

(*)    Excludes life contingent annuities in the payout phase.