Derivative Financial Instruments

6 Months Ended

Jun. 30, 2014

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

5.  Derivative Financial Instruments

A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under the agreements and may not be representative of the potential for gain or loss on these instruments.

	June 30, 2014							December 31, 2013
	Contractual/ Notional Amount		Estimated Fair Value					Contractual/ Notional Amount		Estimated Fair Value
			Asset		(Liability)					Asset		(Liability)
(In millions)
With hedge designation:
Commodities:
Forwards – short	$	8						$	11	$	1
Foreign exchange:
Currency forwards – short		167	$	6					114		2	$	(1)
Without hedge designation:
Equity markets:
Options – purchased		1,467		37					1,561		41
– written		777			$	(21	)		729				(23)
Equity swaps and warrants
– long		12		5					17		9
Interest rate risk:
Credit default swaps
– purchased protection		255							50				(3)
– sold protection		5							25
Foreign exchange:
Currency forwards – long									55
– short		219				(1	)		113
Currency options – long		375		1
Discontinued operations:
Interest rate risk:
Interest rate swaps		200				(2	)		300				(4)
Commodities:
Forwards – short		127		1		(8	)		180		4		(4)
Forwards – long		134		1		(4	)

Gross estimated fair values of derivative positions are currently presented in Equity securities, Receivables, Payable to brokers and Assets and Liabilities of discontinued operations on the Consolidated Condensed Balance Sheets. There would be no significant difference in the balance included in such accounts if the estimated fair values were presented net for the periods ended June 30, 2014 and December 31, 2013.

In connection with the anticipated sale of HighMount, as discussed in Note 2, cash flow hedge accounting treatment was discontinued for all of HighMount’s commodity and interest rate swaps in the second quarter of 2014 and a loss of $3 million after tax was reclassified from AOCI into Discontinued operations, net for those hedges where the original forecasted transactions are no longer probable of occurring. In addition, mark-to-market losses of $2 million after tax were recognized on these derivatives in the second quarter of 2014.

For derivative financial instruments without hedge designation, changes in the fair value of derivatives not held in a trading portfolio are reported in Investment gains (losses) and changes in the fair value of derivatives held for trading purposes are reported in Net investment income on the Consolidated Condensed Statements of Income. Gains of $1 million and losses of $5 million for the three months ended June 30, 2014 and 2013 and gains of $1 million and losses of $3 million for the six months ended June 30, 2014 and 2013 were included in Investment gains (losses). Losses of $3 million for the three months ended June 30, 2014 and 2013 and gains of $5 million and losses of $16 million for the six months ended June 30, 2014 and 2013 were included in Net investment income.

The Company’s derivative financial instruments with cash flow hedge designation hedge variable price risk associated with the purchase and sale of natural gas and exposure to foreign currency losses on future foreign currency expenditures. Gains of $5 million and losses of $2 million were recognized in OCI related to these cash flow hedges for the three months ended June 30, 2014 and 2013. Gains of $8 million and losses of $7 million were recognized in OCI related to these cash flow hedges for the six months ended June 30, 2014 and 2013. For the three months ended June 30, 2014 and 2013, gains of $4 million and $1 million were reclassified from AOCI into income. For the six months ended June 30, 2014 and 2013, gains of $3 million and $2 million were reclassified from AOCI into income. As of June 30, 2014, the estimated amount of net unrealized gains associated with these cash flow hedges that will be reclassified from AOCI into earnings during the next twelve months was $3 million. The net amounts recognized due to ineffectiveness were less than $1 million for the three and six months ended June 30, 2014 and 2013.