Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

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
June 30, 2013
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	163	$	129	$	20	$	312
States, municipalities and political subdivisions	—		4,753		63		4,816
Foreign government	—		242		—		242
Residential MBS	—		3,824		329		4,153
Commercial MBS	—		2,818		28		2,846
Asset-backed securities (“ABS”)	—		2,054		180		2,234
Corporate and other	15		10,122		295		10,432
Total AFS fixed maturities	178		23,942		915		25,035
Trading fixed maturities	—		293		—		293
Equity securities	953		168		78		1,199
Assets of managed investment entities (“MIE”)	335		2,607		31		2,973
Variable annuity assets (separate accounts) (a)	—		608		—		608
Other investments	—		187		—		187
Total assets accounted for at fair value	$	1,466	$	27,805	$	1,024	$	30,295
Liabilities:
Liabilities of managed investment entities	$	121	$	—	$	2,482	$	2,603
Derivatives in annuity benefits accumulated	—		—		577		577
Other liabilities — derivatives	—		12		—		12
Total liabilities accounted for at fair value	$	121	$	12	$	3,059	$	3,192
December 31, 2012
Assets:
Available for sale fixed maturities:
U.S. Government and government agencies	$	227	$	141	$	20	$	388
States, municipalities and political subdivisions	—		4,410		58		4,468
Foreign government	—		260		—		260
Residential MBS	—		3,833		371		4,204
Commercial MBS	—		2,896		22		2,918
Asset-backed securities	—		1,387		253		1,640
Corporate and other	5		9,999		236		10,240
Total AFS fixed maturities	232		22,926		960		24,118
Trading fixed maturities	—		321		—		321
Equity securities	781		121		37		939
Assets of managed investment entities	256		2,929		40		3,225
Variable annuity assets (separate accounts) (a)	—		580		—		580
Other investments	—		133		—		133
Total assets accounted for at fair value	$	1,269	$	27,010	$	1,037	$	29,316
Liabilities:
Liabilities of managed investment entities	$	147	$	—	$	2,745	$	2,892
Derivatives in annuity benefits accumulated	—		—		465		465
Other liabilities — derivatives	—		17		—		17
Total liabilities accounted for at fair value	$	147	$	17	$	3,210	$	3,374

(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	0.50% – 2.00% over the risk free rate
Risk margin for uncertainty in cash flows	0.4% reduction in the discount rate
Surrenders	4% – 20% of indexed account value
Partial surrenders	2% – 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

Changes in balances of Level 3 financial assets and liabilities carried at fair value during the second quarter and first six months of 2013 and 2012 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.

				Total realized/unrealized gains (losses) included in
	Balance at March 31, 2013			Net income			Other comprehensive income (loss)			Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at June 30, 2013
AFS fixed maturities:
U.S. government agency	$	20		$	—		$	—		$	—		$	—		$	—	$	—		$	20
State and municipal	54			—			(1		)	10			—			—		—			63
Residential MBS	354			2			(7		)	—			(17		)	9		(12		)	329
Commercial MBS	30			(2		)	—			—			—			—		—			28
Asset-backed securities	245			2			(2		)	—			(39		)	—		(26		)	180
Corporate and other	244			—			(10		)	44			(4		)	25		(4		)	295
Equity securities	49			—			(1		)	39			—			—		(9		)	78
Assets of MIE	30			1			—			6			(6		)	—		—			31
Liabilities of MIE (*)	(2,501		)	(14		)	—			(406		)	439			—		—			(2,482		)
Embedded derivatives	(555		)	3			—			(32		)	7			—		—			(577		)

(*) Total realized/unrealized loss included in net income includes losses of $9 million related to liabilities outstanding as of June 30, 2013. See Note H — “Managed Investment Entities.”

				Total realized/unrealized gains (losses) included in
	Balance at March 31, 2012			Net income			Other comprehensive income (loss)		Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at June 30, 2012
AFS fixed maturities:
State and municipal	$	72		$	—		$	1	$	9		$	—		$	5	$	(1	)	$	86
Residential MBS	314			1			—		63			(7		)	21		(72		)	320
Commercial MBS	20			—			—		—			—			—		—			20
Asset-backed securities	239			4			—		10			(9		)	3		(7		)	240
Corporate and other	276			1			8		41			(13		)	4		—			317
Trading fixed maturities	1			—			—		—			—			—		—			1
Equity securities	24			—			—		17			—			—		—			41
Assets of MIE	64			—			—		1			(9		)	—		(2		)	54
Liabilities of MIE (*)	(2,554		)	(19		)	—		—			144			—		—			(2,429		)
Embedded derivatives	(437		)	3			—		(16		)	6			—		—			(444		)

(*) Total realized/unrealized loss included in net income includes losses of $14 million related to liabilities outstanding as of June 30, 2012. See Note H — “Managed Investment Entities.”

				Total realized/unrealized gains (losses) included in
	Balance at December 31, 2012			Net income			Other comprehensive income (loss)			Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at June 30, 2013
AFS fixed maturities:
U.S. government agency	$	20		$	—		$	—		$	—		$	—		$	—	$	—		$	20
State and municipal	58			—			(1		)	10			—			—		(4		)	63
Residential MBS	371			4			(1		)	6			(29		)	25		(47		)	329
Commercial MBS	22			(1		)	—			—			—			7		—			28
Asset-backed securities	253			3			(2		)	12			(45		)	—		(41		)	180
Corporate and other	236			—			(10		)	55			(6		)	24		(4		)	295
Equity securities	37			—			2			48			—			—		(9		)	78
Assets of MIE	40			(3		)	—			6			(6		)	—		(6		)	31
Liabilities of MIE (*)	(2,745		)	(39		)	—			(406		)	689			—		19			(2,482		)
Embedded derivatives	(465		)	(77		)	—			(49		)	14			—		—			(577		)

(*) Total realized/unrealized loss included in net income includes losses of $24 million related to liabilities outstanding as of June 30, 2013. 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 June 30, 2012
AFS fixed maturities:
State and municipal	$	83		$	—		$	1	$	19		$	—		$	5	$	(22	)	$	86
Residential MBS	361			2			—		71			(17		)	81		(178		)	320
Commercial MBS	19			—			1		—			—			—		—			20
Asset-backed securities	220			5			5		18			(14		)	13		(7		)	240
Corporate and other	299			2			6		59			(24		)	15		(40		)	317
Trading fixed maturities	1			—			—		—			—			—		—			1
Equity securities	11			—			—		26			—			4		—			41
Assets of MIE	44			—			—		13			(12		)	14		(5		)	54
Liabilities of MIE (*)	(2,593		)	(103		)	—		(366		)	633			—		—			(2,429		)
Embedded derivatives	(361		)	(57		)	—		(37		)	11			—		—			(444		)

(*) Total realized/unrealized loss included in net income includes losses of $51 million related to liabilities outstanding as of June 30, 2012. 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
June 30, 2013
Financial assets:
Cash and cash equivalents	$	1,271	$	1,271	$	1,271	$	—	$	—
Mortgage loans	599		603		—		—		603
Policy loans	242		242		—		—		242
Total financial assets not accounted for at fair value	$	2,112	$	2,116	$	1,271	$	—	$	845
Financial liabilities:
Annuity benefits accumulated (*)	$	18,648	$	17,865	$	—	$	—	$	17,865
Long-term debt	949		1,067		—		975		92
Total financial liabilities not accounted for at fair value	$	19,597	$	18,932	$	—	$	975	$	17,957
December 31, 2012
Financial assets:
Cash and cash equivalents	$	1,705	$	1,705	$	1,705	$	—	$	—
Mortgage loans	607		613		—		—		613
Policy loans	228		228		—		—		228
Total financial assets not accounted for at fair value	$	2,540	$	2,546	$	1,705	$	—	$	841
Financial liabilities:
Annuity benefits accumulated (*)	$	17,405	$	17,422	$	—	$	—	$	17,422
Long-term debt	953		1,086		—		990		96
Total financial liabilities not accounted for at fair value	$	18,358	$	18,508	$	—	$	990	$	17,518

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