VARIABLE INTEREST ENTITIES

6 Months Ended

Jun. 30, 2016

7. VARIABLE INTEREST ENTITIES

We enter into various arrangements with VIEs in the normal course of business and consolidate the VIEs when we determine we are the primary beneficiary. This analysis includes a review of the VIE’s capital structure, related contractual relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and our involvement with the entity. When assessing the need to consolidate a VIE, we evaluate the design of the VIE as well as the related risks the entity was designed to expose the variable interest holders to.

The primary beneficiary of a VIE is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE.

Balance Sheet Classification and Exposure to Loss

The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the Condensed Consolidated Balance Sheets:

(in millions)		Real Estate and Investment Entities^(d)		Securitization Vehicles		Structured Investment Vehicle		Affordable Housing Partnerships		Other		Total
June 30, 2016
Assets:
Bonds available for sale	$	-	$	10,116	$	-	$	-	$	8	$	10,124
Other bond securities		-		5,254		334		-		6		5,594
Mortgage and other loans receivable		1		1,654		-		-		118		1,773
Other invested assets		2,043		427		-		2,848		25		5,343
Other ^(a)		570		912		78		296		168		2,024
Total assets^(b)	$	2,614	$	18,363	$	412	$	3,144	$	325	$	24,858
Liabilities:
Long-term debt	$	1,538	$	845	$	52	$	1,639	$	6	$	4,080
Other ^(c)		216		216		-		235		142		809
Total liabilities	$	1,754	$	1,061	$	52	$	1,874	$	148	$	4,889
December 31, 2015
Assets:
Bonds available for sale	$	-	$	10,309	$	-	$	-	$	15	$	10,324
Other bond securities		-		5,756		387		-		24		6,167
Mortgage and other loans receivable		1		1,960		-		-		132		2,093
Other invested assets		489		477		-		2,608		24		3,598
Other ^(a)		29		1,349		94		293		159		1,924
Total assets^(b)	$	519	$	19,851	$	481	$	2,901	$	354	$	24,106
Liabilities:
Long-term debt	$	-	$	1,025	$	53	$	1,513	$	6	$	2,597
Other^(c)		34		236		1		214		71		556
Total liabilities	$	34	$	1,261	$	54	$	1,727	$	77	$	3,153

(a) Comprised primarily of Short-term investments and Other assets at June 30, 2016 and December 31, 2015.

(b) The assets of each VIE can be used only to settle specific obligations of that VIE.

(c) Comprised primarily of Other liabilities and Derivative liabilities, at fair value, at June 30, 2016 and December 31, 2015.

(d) At June 30, 2016 and December 31, 2015, off-balance sheet exposure primarily consisting of commitments to real estate and investment entities was $119 million and $131 million, respectively.

We calculate our maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE, (ii) the notional amount of VIE assets or liabilities where we have also provided credit protection to the VIE with the VIE as the referenced obligation, and (iii) other commitments and guarantees to the VIE. Interest holders in VIEs sponsored by us generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to us, except in limited circumstances when we have provided a guarantee to the VIE’s interest holders.

The following table presents total assets of unconsolidated VIEs in which we hold a variable interest, as well as our maximum exposure to loss associated with these VIEs:

			Maximum Exposure to Loss
		Total VIE		On-Balance		Off-Balance
(in millions)		Assets		Sheet^(a)		Sheet			Total
June 30, 2016
Real estate and investment entities^(d)	$	425,402	$	12,346	$	2,166		$	14,512
Affordable housing partnerships		4,908		825		-			825
Other		4,346		339		779	^(b)		1,118
Total^(c)	$	434,656	$	13,510	$	2,945		$	16,455
December 31, 2015
Real estate and investment entities^(d)	$	21,951	$	3,072	$	398		$	3,470
Affordable housing partnerships		5,255		774		-			774
Other		1,110		215		1,000	^(b)		1,215
Total	$	28,316	$	4,061	$	1,398		$	5,459

(a) At June 30, 2016 and December 31, 2015, $ 13.0 billion and $3.8 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.

(b) These amounts primarily represent our estimate of the maximum exposure to loss under certain insurance policies issued to VIEs if a hypothetical loss occurred to the extent of the full amount of the insured value. Our insurance policies cover defined risks and our estimate of liability is included in our insurance reserves on the balance sheet.

(c) As discussed in Note 2, on January 1, 2016, we adopted accounting guidance that resulted in an increase in the number of our investment entities classified as VIEs.

(d) Comprised primarily of hedge funds and private equity funds.

See Note 9 to the Consolidated Financial Statements in the 2015 Annual Report for additional information on VIEs.