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Fair Value Measurements (Tables)
 12 Months Ended
Dec. 31, 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
December 31, 2013
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Available for sale (“AFS”) fixed maturities:
 
 
 
 
 
 
 
U.S. Government and government agencies
$
147

 
$
152

 
$
15

 
$
314

States, municipalities and political subdivisions
—

 
5,311

 
61

 
5,372

Foreign government
—

 
208

 
—

 
208

Residential MBS
—

 
3,994

 
316

 
4,310

Commercial MBS
—

 
2,696

 
28

 
2,724

Asset-backed securities (“ABS”)
—

 
2,418

 
75

 
2,493

Corporate and other
28

 
10,672

 
335

 
11,035

Total AFS fixed maturities
175

 
25,451

 
830

 
26,456

Trading fixed maturities
—

 
305

 
—

 
305

Equity securities
1,023

 
125

 
31

 
1,179

Assets of managed investment entities (“MIE”)
266

 
2,592

 
30

 
2,888

Variable annuity assets (separate accounts) (a)
—

 
665

 
—

 
665

Other investments — derivatives
—

 
274

 
—

 
274

Total assets accounted for at fair value
$
1,464

 
$
29,412

 
$
891

 
$
31,767

Liabilities:
 
 
 
 
 
 
 
Liabilities of managed investment entities
$
156

 
$
—

 
$
2,411

 
$
2,567

Derivatives in annuity benefits accumulated
—

 
—

 
804

 
804

Other liabilities — derivatives
—

 
10

 
—

 
10

Total liabilities accounted for at fair value
$
156

 
$
10

 
$
3,215

 
$
3,381

 
 
 
 
 
 
 
 
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 — derivatives
—

 
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.
Fair value measurements, Levels 1 and 2 transfers
The transfers between Level 1 and Level 2 are reflected in the table below at fair value as of the end of the reporting period (dollars in millions):
 
Year ended December 31,
 
Level 2 To Level 1 Transfers
 
Level 1 To Level 2 Transfers
 
2013
 
2012
 
2013
 
2012
 
# of
 
Fair
 
# of
 
Fair
 
# of
 
Fair
 
# of
 
Fair
 
Transfers
 
Value
 
Transfers
 
Value
 
Transfers
 
Value
 
Transfers
 
Value
Perpetual preferred stocks
15

 
$
70

 
2

 
$
16

 
2

 
$
10

 
7

 
$
41

Common stocks
2

 
35

 
—

 
—

 
—

 
—

 
—

 
—

Redeemable preferred stocks
3

 
21

 
1

 
2

 
—

 
—

 
—

 
—
Unobservable inputs used by management in determining fair value of embedded derivatives
The following table presents information about the unobservable inputs used by management in determining fair value of these embedded derivatives. See Note F — “Derivatives.”

Unobservable Input
  
Range
Adjustment for insurance subsidiary’s credit risk
  
0.50% – 1.75% over the risk free rate
Risk margin for uncertainty in cash flows
  
0.3% reduction in the discount rate
Surrenders
  
4% – 16% of indexed account value
Partial surrenders
  
2% – 6% of indexed account value
Annuitizations
  
1% – 2% of indexed account value
Deaths
  
1.5% – 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 2013, 2012 and 2011 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 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 December 31, 2013
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
20

 
$
(2
)
 
$
(3
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
15

State and municipal
58

 
(1
)
 
(2
)
 
10

 
—

 
—

 
(4
)
 
61

Residential MBS
371

 
5

 
24

 
6

 
(53
)
 
86

 
(123
)
 
316

Commercial MBS
22

 
(1
)
 
(1
)
 
—

 
—

 
8

 
—

 
28

Asset-backed securities
253

 
4

 
(3
)
 
12

 
(57
)
 
11

 
(145
)
 
75

Corporate and other
236

 
1

 
(14
)
 
113

 
(17
)
 
24

 
(8
)
 
335

Equity securities
37

 
(1
)
 
6

 
53

 
(12
)
 
—

 
(52
)
 
31

Assets of MIE
40

 
(5
)
 
—

 
8

 
(7
)
 
—

 
(6
)
 
30

Liabilities of MIE (a)
(2,745
)
 
(26
)
 
—

 
(727
)
 
1,068

 
—

 
19

 
(2,411
)
Embedded derivatives (b)
(465
)
 
(182
)
 
—

 
(192
)
 
35

 
—

 
—

 
(804
)
(a)
Total realized/unrealized loss included in net income includes gains of $7 million related to liabilities outstanding as of December 31, 2013. See Note H — “Managed Investment Entities.”
(b)
Total realized/unrealized loss included in net income for the embedded derivatives reflects gains related to the unlocking of actuarial assumptions of $2 million in 2013.
 
 
 
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 December 31, 2012
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
—

 
$
—

 
$
—

 
$
20

 
$
—

 
$
—

 
$
—

 
$
20

State and municipal
83

 
—

 
4

 
19

 
(7
)
 
8

 
(49
)
 
58

Residential MBS
361

 
5

 
17

 
96

 
(45
)
 
228

 
(291
)
 
371

Commercial MBS
19

 
1

 
2

 
—

 
—

 
—

 
—

 
22

Asset-backed securities
228

 
7

 
8

 
55

 
(36
)
 
14

 
(23
)
 
253

Corporate and other
291

 
3

 
9

 
86

 
(35
)
 
15

 
(133
)
 
236

Trading fixed maturities
1

 
—

 
—

 
—

 
—

 
—

 
(1
)
 
—

Equity securities
11

 
—

 
2

 
30

 
—

 
13

 
(19
)
 
37

Assets of MIE
44

 
—

 
—

 
20

 
(14
)
 
13

 
(23
)
 
40

Liabilities of MIE (a)
(2,593
)
 
(189
)
 
—

 
(793
)
 
830

 
—

 
—

 
(2,745
)
Embedded derivatives (b)
(361
)
 
(57
)
 
—

 
(73
)
 
26

 
—

 
—

 
(465
)
(a)
Total realized/unrealized loss included in net income includes losses of $125 million related to liabilities outstanding as of December 31, 2012. See Note H — “Managed Investment Entities.”
(b)
Total realized/unrealized loss included in net income for the embedded derivatives reflects gains related to the unlocking of actuarial assumptions of $36 million in 2012.
 
 
 
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 December 31, 2011
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal
$
20

 
$
—

 
$
4

 
$
58

 
$
(4
)
 
$
17

 
$
(12
)
 
$
83

Residential MBS
312

 
3

 
(9
)
 
42

 
(38
)
 
127

 
(76
)
 
361

Commercial MBS
6

 
1

 
—

 
9

 
—

 
13

 
(10
)
 
19

Asset-backed securities
124

 
1

 
—

 
179

 
(29
)
 
4

 
(51
)
 
228

Corporate and other
312

 
1

 
15

 
57

 
(43
)
 
86

 
(137
)
 
291

Trading fixed maturities
3

 
—

 
—

 
—

 
—

 
—

 
(2
)
 
1

Equity securities
21

 
—

 
1

 
2

 
(2
)
 
2

 
(13
)
 
11

Assets of MIE
48

 
(8
)
 
—

 
32

 
(18
)
 
9

 
(19
)
 
44

Liabilities of MIE (a)
(2,258
)
 
—

 
—

 
(401
)
 
66

 
—

 
—

 
(2,593
)
Embedded derivatives
(181
)
 
(29
)
 
—

 
(171
)
 
20

 
—

 
—

 
(361
)
(a)
Total realized/unrealized loss included in net income includes losses of $3 million related to liabilities outstanding as of December 31, 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 at December 31 are summarized below (in millions):
 
 
Carrying
Value
 
Fair
Value
 
Level 1
 
Level 2
 
Level 3
2013
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,639

 
$
1,639

 
$
1,639

 
$
—

 
$
—

Mortgage loans
781

 
779

 
—

 
—

 
779

Policy loans
238

 
238

 
—

 
—

 
238

Total financial assets not accounted for at fair value
$
2,658

 
$
2,656

 
$
1,639

 
$
—

 
$
1,017

Financial liabilities:
 
 
 
 
 
 
 
 
 
Annuity benefits accumulated (*)
$
20,741

 
$
19,959

 
$
—

 
$
—

 
$
19,959

Long-term debt
913

 
985

 
—

 
909

 
76

Total financial liabilities not accounted for at fair value
$
21,654

 
$
20,944

 
$
—

 
$
909

 
$
20,035

 
 
 
 
 
 
 
 
 
 
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

 
$
17,558

 
$
—

 
$
—

 
$
17,558

Long-term debt
953

 
1,086

 
—

 
990

 
96

Total financial liabilities not accounted for at fair value
$
18,358

 
$
18,644

 
$
—

 
$
990

 
$
17,654


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