Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Schedule Of Positions in Derivative Instruments

The following table sets forth our positions in derivative instruments as of the dates indicated:


	Derivative assets						Derivative liabilities
			Fair value					Fair value
(Amounts in millions)	Balancesheet classification		September 30,2018		December 31, 2017		Balancesheet classification	September 30,2018		December 31, 2017
Derivatives designated ashedges
Cash flow hedges:
Interest rate swaps		Other invested assets	$	36	$	74	Other liabilities	$	155	$	25
Foreign currency swaps		Other invested assets		2		1	Other liabilities		—		—

Total cash flow hedges				38		75			155		25

Total derivativesdesignated as hedges				38		75			155		25

Derivatives not designated ashedges
Interest rate swaps in a foreign currency		Other invested assets		116		105	Other liabilities		—		—
Interest rate caps and floors		Other invested assets		3		—	Other liabilities		—		—
Foreign currency swaps		Other invested assets		5		11	Other liabilities		3		—
Equity index options		Other invested assets		79		80	Other liabilities		—		—
Financial futures		Other invested assets		—		—	Other liabilities		—		—
Equity return swaps		Other invested assets		—		—	Other liabilities		1		2
Other foreign currencycontracts		Other invested assets		4		5	Other liabilities		19		20
GMWB embedded derivatives		Reinsurance recoverable ⁽¹⁾		11		14	Policyholder account balances ⁽²⁾		201		250
Fixed index annuity embeddedderivatives		Other assets		—		—	Policyholder account balances ⁽³⁾		446		419
Indexed universal life embedded derivatives		Reinsurance recoverable		—		—	Policyholder account balances ⁽⁴⁾		13		14

Total derivatives notdesignated as hedges				218		215			683		705

Total derivatives			$	256	$	290		$	838	$	730

⁽¹⁾	Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits (“GMWB”) liabilities.

⁽²⁾	Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

⁽³⁾	Represents the embedded derivatives associated with our fixed index annuity liabilities.

⁽⁴⁾	Represents the embedded derivatives associated with our indexed universal life liabilities.

Schedule of Notional Amounts Outstanding on Derivative Instruments

The following tables represent activity associated with derivative instruments as of the dates indicated:


(Notional in millions)	Measurement		December 31, 2017		Additions		Maturities/ terminations			September 30, 2018
Derivatives designated as hedges
Cash flow hedges:
Interest rate swaps		Notional	$	11,155	$	1,645	$	(1,978	)	$	10,822
Foreign currency swaps		Notional		22		58		—			80

Total cash flow hedges				11,177		1,703		(1,978	)		10,902

Total derivatives designated as hedges				11,177		1,703		(1,978	)		10,902

Derivatives not designated as hedges
Interest rate swaps		Notional		4,679		—		(5	)		4,674
Interest rate swaps in a foreign currency		Notional		2,793		117		(203	)		2,707
Interest rate caps and floors		Notional		—		2,090		(79	)		2,011
Foreign currency swaps		Notional		349		133		(23	)		459
Credit default swaps		Notional		39		—		(39	)		—
Equity index options		Notional		2,420		1,895		(1,484	)		2,831
Financial futures		Notional		1,283		3,901		(3,964	)		1,220
Equity return swaps		Notional		96		3		(78	)		21
Other foreign currency contracts		Notional		471		516		(502	)		485

Total derivatives not designated as hedges				12,130		8,655		(6,377	)		14,408

Total derivatives			$	23,307	$	10,358	$	(8,355	)	$	25,310


(Number of policies)	Measurement		December 31, 2017		Additions		Maturities/ terminations			September 30, 2018
Derivatives not designated as hedges
GMWB embedded derivatives		Policies		30,450		—		(2,008	)		28,442
Fixed index annuity embedded derivatives		Policies		17,067		—		(390	)		16,677
Indexed universal life embedded derivatives		Policies		985		—		(38	)		947

Schedule of Pre-Tax Income Effects of Cash Flow Hedges

The following table provides information about the pre-tax income effects of cash flow hedges for the three months ended September 30, 2018:


(Amounts in millions)	Gain (loss) recognized in OCI			Gain (loss) reclassified into net income from OCI		Classification of gain (loss) reclassified into net income
Interest rate swaps hedging assets	$	(164	)	$	38		Net investment income
Interest rate swaps hedging liabilities		9			—		Interest expense
Foreign currency swaps		1			—		Net investment income

Total	$	(154	)	$	38

The following table provides information about the pre-tax income effects of cash flow hedges for the three months ended September 30, 2017:


(Amounts in millions)	Gain (loss) recognized in OCI			Gain (loss) reclassified into net income from OCI		Classification of gain (loss) reclassified into net income	Gain (loss)recognized innet income⁽¹⁾		Classification of gain (loss) recognized in net income
Interest rate swaps hedging assets	$	17		$	34	Net investment income	$	—	Net investment gains (losses)
Foreign currency swaps		(1	)		—	Net investment income		—	Net investment gains (losses)

Total	$	16		$	34		$	—

⁽¹⁾	Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness.

The following table provides information about the pre-tax income effects of cash flow hedges for the nine months ended September 30, 2018:


(Amounts in millions)	Gain (loss) recognized in OCI		Gain (loss) reclassified into net income from OCI		Classification of gain (loss) reclassified into net income
Interest rate swaps hedging assets	$	(391)	$	112		Net investment income
Interest rate swaps hedging assets		—		5		Net investment gains (losses)
Interest rate swaps hedging liabilities		31		—		Interest expense
Foreign currency swaps		1		—		Net investment income

Total	$	(359)	$	117

The following table provides information about the pre-tax income effects of cash flow hedges for the nine months ended September 30, 2017:


(Amounts in millions)	Gain (loss) recognized in OCI		Gain (loss) reclassified into net income from OCI		Classification of gain (loss) reclassified into net income		Gain (loss)recognized innet income ⁽¹⁾		Classification of gain (loss) recognized in net income
Interest rate swaps hedging assets	$	50	$	95		Net investment income	$	—		Net investment gains (losses)
Interest rate swaps hedging assets		—		2		Net investment gains (losses)		—		Net investment gains (losses)
Interest rate swaps hedging liabilities		(2)		—		Interest expense		—		Net investment gains (losses)
Foreign currency swaps		(2)		—		Net investment income		—		Net investment gains (losses)

Total	$	46	$	97			$	—

⁽¹⁾	Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness.

Reconciliation of Current Period Changes, Net of Applicable Income Taxes, for Derivatives Qualifying as Hedge

The following tables provide a reconciliation of current period changes, net of applicable income taxes, for these designated derivatives presented in the separate component of stockholders’ equity labeled “derivatives qualifying as hedges,” for the periods indicated:


	Three months ended September 30,
(Amounts in millions)	2018			2017
Derivatives qualifying as effective accounting hedges as of July 1	$	1,863		$	2,064
Current period increases (decreases) in fair value, net of deferred taxes of $32 and $(6)		(122	)		10
Reclassification to net (income), net of deferred taxes of $14 and $12		(24	)		(22	)

Derivatives qualifying as effective accounting hedges as of September 30	$	1,717		$	2,052


	Nine months ended September 30,
(Amounts in millions)	2018			2017
Derivatives qualifying as effective accounting hedges as of January 1	$	2,065		$	2,085
Cumulative effect of changes in accounting:
Stranded tax effects		12			—
Changes to the hedge accounting model, net of deferred taxes of $(1) and $—		2			—

Total cumulative effect of changes in accounting		14			—

Current period increases (decreases) in fair value, net of deferred taxes of $75 and $(17)		(287	)		29
Reclassification to net (income), net of deferred taxes of $42 and $35		(75	)		(62	)

Derivatives qualifying as effective accounting hedges as of September 30	$	1,717		$	2,052

Schedule of Pre-Tax Gain (Loss) Recognized in Net Income for Effects of Derivatives Not Designated as Hedges

The following tables provide the pre-tax gain (loss) recognized in net income for the effects of derivatives not designated as hedges for the periods indicated:


	Three months ended September 30,						Classification of gain (loss) recognized in net income
(Amounts in millions)	2018			2017
Interest rate swaps	$	2		$	1		Net investment gains (losses)
Interest rate swaps in a foreign currency		16			34		Net investment gains (losses)
Interest rate caps and floors		(3	)		—		Net investment gains (losses)
Credit default swaps related to securitization entities		—			2		Net investment gains (losses)
Equity index options		19			16		Net investment gains (losses)
Financial futures		(42	)		(17	)	Net investment gains (losses)
Equity return swaps		—			(5	)	Net investment gains (losses)
Other foreign currency contracts		5			6		Net investment gains (losses)
Foreign currency swaps		8			8		Net investment gains (losses)
GMWB embedded derivatives		39			30		Net investment gains (losses)
Fixed index annuity embedded derivatives		(29	)		(21	)	Net investment gains (losses)
Indexed universal life embedded derivatives		3			2		Net investment gains (losses)

Total derivatives not designated as hedges	$	18		$	56


	Nine months ended September 30,						Classification of gain (loss) recognized in net income
(Amounts in millions)	2018			2017
Interest rate swaps	$	(1	)	$	2		Net investment gains (losses)
Interest rate swaps in a foreign currency		25			60		Net investment gains (losses)
Interest rate caps and floors		(3	)		—		Net investment gains (losses)
Credit default swaps related to securitization entities		—			6		Net investment gains (losses)
Equity index options		12			42		Net investment gains (losses)
Financial futures		(79	)		(25	)	Net investment gains (losses)
Equity return swaps		(4	)		(19	)	Net investment gains (losses)
Other foreign currency contracts		5			6		Net investment gains (losses)
Foreign currency swaps		(10	)		13		Net investment gains (losses)
GMWB embedded derivatives		66			64		Net investment gains (losses)
Fixed index annuity embedded derivatives		(36	)		(57	)	Net investment gains (losses)
Indexed universal life embedded derivatives		10			5		Net investment gains (losses)

Total derivatives not designated as hedges	$	(15	)	$	97

Derivative Assets and Liabilities Subject to Master Netting Arrangement

The following table presents additional information about derivative assets and liabilities subject to an enforceable master netting arrangement as of the dates indicated:


	September 30, 2018									December 31, 2017
(Amounts in millions)	Derivativesassets⁽¹⁾			Derivativesliabilities⁽²⁾			Net derivatives			Derivativesassets⁽¹⁾			Derivativesliabilities⁽²⁾			Net derivatives
Amounts presented in the balance sheet:
Gross amounts recognized	$	251		$	179		$	72		$	278		$	47		$	231
Gross amounts offset in the balance sheet		—			—			—			—			—			—

Net amounts presented in the balance sheet		251			179			72			278			47			231
Gross amounts not offset in the balance sheet:
Financial instruments ⁽³⁾		(33	)		(33	)		—			(23	)		(23	)		—
Collateral received		(148	)		—			(148	)		(170	)		—			(170	)
Collateral pledged		—			(521	)		521			—			(288	)		288
Over collateralization		9			375			(366	)		—			264			(264	)

Net amount	$	79		$	—		$	79		$	85		$	—		$	85

⁽¹⁾	Included $6 million and $2 million of accruals on derivatives classified as other assets and does not include amounts related to embedded derivatives as of September 30, 2018 and December 31, 2017, respectively.

⁽²⁾	Included $1 million of accrual on derivatives classified as other liabilities as of September 30, 2018. Does not include amounts related to embedded derivatives and derivatives related to securitization entities as of September 30, 2018 and December 31, 2017.

⁽³⁾	Amounts represent derivative assets and/or liabilities that are presented gross within the balance sheet but are held with the same counterparty where we have a master netting arrangement. This adjustment results in presenting the net asset and net liability position for each counterparty.

Schedule of Credit Default Swaps Where We Sell Protection on Single Name Reference Entities and Fair Values

The following table sets forth our credit default swaps where we sell protection on single name reference entities and the fair values as of the dates indicated:


	September 30, 2018						December 31, 2017
(Amounts in millions)	Notional value		Assets		Liabilities		Notional value		Assets		Liabilities
Investment grade
Matures in less than one year	$	—	$	—	$	—	$	39	$	—	$	—

Total credit default swaps on single name reference entities	$	—	$	—	$	—	$	39	$	—	$	—

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

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- Definition

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

+ References

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