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Segment Information
9 Months Ended
Sep. 30, 2011
Notes to Financial Statements [Abstract] 
Segment Information

15. Segment Information

 

We provide products and services in two operating businesses and report results through four business segments as follows:

Business Corresponding Segments 
Retirement Solutions Annuities 
  Defined Contribution 
    
Insurance Solutions Life Insurance 
  Group Protection 

We also have Other Operations, which includes the financial data for operations that are not directly related to the business segments. Our reporting segments reflect the manner by which our chief operating decision makers view and manage the business. The following is a brief description of these segments and Other Operations.

 

Retirement Solutions

 

The Retirement Solutions business provides its products through two segments: Annuities and Defined Contribution. The Annuities segment provides tax-deferred investment growth and lifetime income opportunities for its clients by offering individual fixed annuities, including indexed annuities and variable annuities. The Defined Contribution segment provides employer-sponsored variable and fixed annuities, defined benefit, individual retirement accounts and mutual-fund based programs in the retirement plan marketplaces.

 

Insurance Solutions

 

The Insurance Solutions business provides its products through two segments: Life Insurance and Group Protection. The Life Insurance segment offers wealth protection and transfer opportunities through term insurance, a linked-benefit product (which is a UL policy linked with riders that provide for long-term care costs) and both single (including corporate-owned UL and VUL and bank-owned UL and VUL) and survivorship versions of UL and VUL insurance products. The Group Protection segment offers group life, disability and dental insurance to employers. These offices develop business through employee benefit brokers, third-party administrators and other employee benefit firms.

 

Other Operations

 

Other Operations includes investments related to the excess capital in our insurance subsidiaries; investments in media properties and other corporate investments; benefit plan net liability; the unamortized deferred gain on indemnity reinsurance related to the sale of reinsurance to Swiss Re in 2001; the results of certain disability income business due to the rescission of a reinsurance agreement with Swiss Re; the Institutional Pension business, which is a closed-block of pension business, the majority of which was sold on a group annuity basis, and is currently in run-off; and debt costs. We are actively managing our remaining radio station clusters to maximize performance and future value.

 

Segment operating revenues and income (loss) from operations are internal measures used by our management and Board of Directors to evaluate and assess the results of our segments. Income (loss) from operations is GAAP net income excluding the after-tax effects of the following items, as applicable:

 

  • Realized gains and losses associated with the following (“excluded realized gain (loss)”):

  • Sale or disposal of securities;
  • Impairments of securities;
  • Change in the fair value of derivative investments, embedded derivatives within certain reinsurance arrangements and our trading securities;
  • Change in the fair value of the derivatives we own to hedge our GDB riders within our variable annuities;
  • Change in the GLB embedded derivative reserves, net of the change in the fair value of the derivatives we own to hedge the changes in the embedded derivative reserves; and
  • Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products accounted for under the Derivatives and Hedging and the Fair Value Measurements and Disclosures Topics of the FASB ASC;

  • Change in reserves accounted for under the Financial Services – Insurance – Claim Costs and Liabilities for Future Policy Benefits Subtopic of the FASB ASC resulting from benefit ratio unlocking on our GDB and GLB riders (“benefit ratio unlocking”);
  • Income (loss) from the initial adoption of new accounting standards;
  • Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance;
  • Gain (loss) on early extinguishment of debt;
  • Losses from the impairment of intangible assets; and
  • Income (loss) from discontinued operations.

 

Operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:

 

  • Excluded realized gain (loss);
  • Amortization of DFEL arising from changes in GDB and GLB benefit ratio unlocking;
  • Amortization of deferred gains arising from the reserve changes on business sold through reinsurance; and
  • Revenue adjustments from the initial adoption of new accounting standards.

 

We use our prevailing corporate federal income tax rate of 35% while taking into account any permanent differences for events recognized differently in our financial statements and federal income tax returns when reconciling our non-GAAP measures to the most comparable GAAP measure. Operating revenues and income (loss) from operations do not replace revenues and net income as the GAAP measures of our consolidated results of operations.

 

Segment information (in millions) was as follows:

           For the Three  For the Nine
           Months Ended  Months Ended
           September 30, September 30,
           2011 2010 2011 2010
Revenues           
Operating revenues:           
 Retirement Solutions:           
  Annuities$ 710 $ 660 $ 2,175 $ 1,935
  Defined Contribution  248   245   771   730
   Total Retirement Solutions  958   905   2,946   2,665
 Insurance Solutions:           
  Life Insurance  1,176   1,108   3,552   3,372
  Group Protection  479   451   1,458   1,367
   Total Insurance Solutions  1,655   1,559   5,010   4,739
 Other Operations  120   122   351   367
Excluded realized gain (loss), pre-tax  (185)   25   (243)   (27)
Amortization of deferred gain arising from reserve            
 changes on business sold through reinsurance, pre-tax   1   1   2   2
Amortization of DFEL associated with           
 benefit ratio unlocking, pre-tax   (1)   1   (1)   (1)
    Total revenues$ 2,548 $ 2,613 $ 8,065 $ 7,745

           For the Three  For the Nine
           Months Ended  Months Ended
           September 30, September 30,
           2011 2010 2011 2010
Net Income (Loss)           
Income (loss) from operations:           
 Retirement Solutions:           
  Annuities$ 162 $ 126 $ 459 $ 361
  Defined Contribution  40   50   132   122
   Total Retirement Solutions  202   176   591   483
 Insurance Solutions:           
  Life Insurance  132   60   450   348
  Group Protection  28   9   78   54
   Total Insurance Solutions  160   69   528   402
 Other Operations  (45)   (40)   (104)   (113)
Excluded realized gain (loss), after-tax  (120)   17   (158)   (17)
Gain (loss) on early extinguishment of debt, after-tax  (5)   -   (5)   -
Income (expense) from reserve changes (net of related            
 amortization) on business sold through reinsurance, after-tax  -   1   1   1
Benefit ratio unlocking, after-tax  (41)   25   (37)   -
    Income (loss) from continuing operations, after-tax  151   248   816   756
    Income (loss) from discontinued operations, after-tax  (8)   (2)   (8)   29
     Net income (loss)$ 143 $ 246 $ 808 $ 785