Variable Interest Entities ("VIE's")

3 Months Ended

Mar. 31, 2014

Variable Interest Entities [Abstract]

3. Variable Interest Entities (“VIEs”)

Consolidated VIEs

See Note 4 in our 2013 Form 10-K for a detailed discussion of our consolidated VIEs, which information is incorporated herein by reference.

The following summarizes information regarding the credit-linked note (“CLN”) structures (dollars in millions) as of March 31, 2014:



	Amount and Date of Issuance
		$400	$200
		December	April
		2006	2007
Original attachment point (subordination)		5.50%	2.05%
Current attachment point (subordination)		4.17%	1.48%
Maturity		12/20/2016	3/20/2017
Current rating of tranche		BB+	Ba2
Current rating of underlying collateral pool		Aa1-B1	Aaa-Caa2
Number of defaults in underlying collateral pool		2	2
Number of entities		124	99
Number of countries		20	21

The following summarizes the exposure of the CLN structures’ underlying reference portfolios by industry and rating as of March 31, 2014:



	AAA	AA	A	BBB	BB	B	CCC	Total
Industry
Financial intermediaries	0.0%	2.1%	6.3%	2.1%	0.0%	0.0%	0.0%	10.5%
Telecommunications	0.0%	0.0%	3.5%	5.5%	2.0%	0.0%	0.0%	11.0%
Oil and gas	0.3%	2.1%	1.0%	4.6%	0.0%	0.0%	0.0%	8.0%
Utilities	0.0%	0.0%	2.6%	2.0%	0.0%	0.0%	0.0%	4.6%
Chemicals and plastics	0.0%	0.0%	2.3%	1.2%	0.3%	0.0%	0.0%	3.8%
Drugs	0.3%	2.2%	1.2%	0.0%	0.0%	0.0%	0.0%	3.7%
Retailers (except food
and drug)	0.0%	0.0%	2.1%	0.9%	0.5%	0.0%	0.0%	3.5%
Industrial equipment	0.0%	0.0%	2.6%	0.7%	0.0%	0.0%	0.0%	3.3%
Sovereign	0.0%	0.7%	1.5%	1.0%	0.0%	0.0%	0.0%	3.2%
Conglomerates	0.0%	2.3%	0.9%	0.0%	0.0%	0.0%	0.0%	3.2%
Forest products	0.0%	0.0%	0.5%	1.1%	1.4%	0.0%	0.0%	3.0%
Other	0.0%	4.6%	15.0%	17.4%	4.2%	0.7%	0.3%	42.2%
Total	0.6%	14.0%	39.5%	36.5%	8.4%	0.7%	0.3%	100.0%

Asset and liability information (dollars in millions) for the consolidated VIEs included on our Consolidated Balance Sheets was as follows:



		As of March 31, 2014							As of December 31, 2013
		Number							Number
		of		Notional		Carrying			of		Notional		Carrying
	Instruments			Amounts		Value		Instruments			Amounts		Value
Assets
Fixed maturity securities:
Asset-backed credit card loans			N/A	$	-	$	597			N/A	$	-	$	595
U.S. government bonds			N/A		-		-			N/A		-		102
Total return swap			1		361		-			1		361		-
Total assets (1)			1	$	361	$	597			1	$	361	$	697

Liabilities
Non-qualifying hedges:
Credit default swaps			2	$	600	$	22			2	$	600	$	27
Contingent forwards			2		-		-			2		-		-
Total liabilities (2)			4	$	600	$	22			4	$	600	$	27

⁽¹⁾

Reported in variable interest entities’ fixed maturity securities on our Consolidated Balance Sheets.

⁽²⁾

Reported in variable interest entities’ liabilities on our Consolidated Balance Sheets.

For details related to the fixed maturity available-for-sale (“AFS”) securities for these VIEs, see Note 4.

As described more fully in Note 1 of our 2013 Form 10-K, we regularly review our investment holdings for other-than-temporary impairment (“OTTI”). Based upon this review, we believe that the AFS fixed maturity securities were not other-than-temporarily impaired as of March 31, 2014.

The gains (losses) for the consolidated VIEs (in millions) recorded on our Consolidated Statements of Comprehensive Income (Loss) were as follows:


	For the Three
	Months Ended
	March 31,
	2014		2013
Non-Qualifying Hedges
Credit default swaps	$	5	$	15
Contingent forwards		-		-
Total non-qualifying hedges (1)	$	5	$	15

⁽¹⁾

Reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

Unconsolidated VIEs

See Note 4 in our 2013 Form 10-K for a detailed discussion of our unconsolidated VIEs, which information is incorporated herein by reference.

We invest in certain limited partnerships (“LPs”) that operate qualified affordable housing projects that we have concluded are VIEs. We receive returns from the LPs in the form of income tax credits that are guaranteed by creditworthy third parties, and our exposure to loss is limited to the capital we invest in the LPs. We are not the primary beneficiary of these VIEs as we do not have the power to direct the most significant activities of the LPs. Our maximum exposure to loss was $80 million and $77 million as of March 31, 2014, and December 31, 2013, respectively.

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name FASB Interpretation (FIN)

-Number 46R

-Paragraph 4

-Subparagraph g

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 167

-Paragraph 22B

-Appendix D

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 167

-Paragraph 23A

-Appendix D

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 167

-Paragraph 22E

-Appendix D

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name FASB Staff Position (FSP)

-Number FAS140-4/FIN46(R)-8

-Paragraph C4

-Subparagraph d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 810

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=7880789&loc=d3e5710-111685

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 810

-SubTopic 10

-Section 50

-Paragraph 5A

-URI http://asc.fasb.org/extlink&oid=7880789&loc=SL6759159-111685

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 810

-SubTopic 10

-Section 50

-Paragraph 6

-URI http://asc.fasb.org/extlink&oid=7880789&loc=d3e5747-111685

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 810

-SubTopic 10

-Section 50

-Paragraph 4

-URI http://asc.fasb.org/extlink&oid=7880789&loc=d3e5728-111685

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 810

-SubTopic 10

-Section 50

-Paragraph 9

-URI http://asc.fasb.org/extlink&oid=7880789&loc=SL6228884-111685

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Glossary Variable Interest Entity

-URI http://asc.fasb.org/extlink&oid=6528138

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 140

-Paragraph 35

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 13: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name FASB Interpretation (FIN)

-Number 46R

-Paragraph 2, 14, 15, 16, 23, 24, 25, 26

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 14: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 167

-Paragraph 24

-Appendix D

+ Details