Variable Annuity and Insurance Guarantees

The majority of the variable annuity contracts offered by the Company contain GMDB provisions. The Company also offers variable annuities with GGU, GMWB and GMAB provisions. The Company previously offered contracts containing GMIB provisions. See Note 2 and Note 10 for additional information regarding the Company’s variable annuity guarantees.

The GMDB provisions provide a specified minimum return upon death of the contractholder. The death benefit payable is the greater of (i) the contract value less any purchase payment credits subject to recapture and less a pro-rata portion of any rider fees, or (ii) the GMDB provisions specified in the contract. The Company has three primary GMDB provisions:


•	Return of premium — provides purchase payments minus adjusted partial surrenders.


•	Reset — provides that the value resets to the account value every sixth contract anniversary minus adjusted partial surrenders. This provision was often provided in combination with the return of premium provision and is no longer offered.


•	Ratchet — provides that the value ratchets up to the maximum account value at specified anniversary intervals, plus subsequent purchase payments less adjusted partial surrenders.

The variable annuity contracts with GMWB riders typically have account values that are based on an underlying portfolio of mutual funds, the values of which fluctuate based on fund performance. At issue, the guaranteed amount is equal to the amount deposited but the guarantee may be increased annually to the account value (a “step-up”) in the case of favorable market performance.

The Company has GMWB riders in force, which contain one or more of the following provisions:


•	Withdrawals at a specified rate per year until the amount withdrawn is equal to the guaranteed amount.


•	Withdrawals at a specified rate per year for the life of the contractholder (“GMWB for life”).


•	Withdrawals at a specified rate per year for joint contractholders while either is alive.


•	Withdrawals based on performance of the contract.


•	Withdrawals based on the age withdrawals begin.


•	Once withdrawals begin, the contractholder’s funds are moved to one of the three least aggressive asset allocation models.


•	Credits are applied annually for a specified number of years to increase the guaranteed amount as long as withdrawals have not been taken.

Variable annuity contractholders age 79 or younger at contract issue can also obtain a principal-back guarantee by purchasing the optional GMAB rider for an additional charge. The GMAB rider guarantees that, regardless of market performance at the end of the 10-year waiting period, the contract value will be no less than the original investment or 80% of the highest anniversary value, adjusted for withdrawals. If the contract value is less than the guarantee at the end of the 10 -year period, a lump sum will be added to the contract value to make the contract value equal to the guarantee value. As of April 2012, clients who purchase a GMWB or GMAB rider are invested in one or more of four Portfolio Stabilizer managed volatility funds designed to pursue total return while seeking to mitigate exposure to market volatility.

Certain UL policies offered by the Company provide secondary guarantee benefits. The secondary guarantee ensures that, subject to specified conditions, the policy will not terminate and will continue to provide a death benefit even if there is insufficient policy value to cover the monthly deductions and charges.

The following table provides information related to variable annuity guarantees for which the Company has established additional liabilities:



	December 31, 2013							December 31, 2012
Variable Annuity Guarantees by Benefit Type⁽¹⁾	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk		Weighted Average Attained Age	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk		Weighted Average Attained Age
	(in millions, except age)
GMDB:
Return of premium	$	52,616	$	50,790	$	28	64	$	45,697	$	43,942	$	61	63
Five/six-year reset	11,220		8,663		42		64	11,233		8,722		115		63
One-year ratchet	7,676		7,261		38		65	7,367		6,933		106		65
Five-year ratchet	1,781		1,725		1		62	1,616		1,563		3		61
Other	1,015		996		36		69	912		885		62		68
Total — GMDB	$	74,308	$	69,435	$	145	64	$	66,825	$	62,045	$	347	63

GGU death benefit	$	1,052	$	998	$	121	64	$	958	$	907	$	93	63

GMIB	$	413	$	389	$	8	66	$	425	$	399	$	15	66

GMWB:
GMWB	$	3,936	$	3,921	$	1	67	$	3,898	$	3,880	$	3	66
GMWB for life	34,069		33,930		77		64	28,588		28,462		104		64
Total — GMWB	$	38,005	$	37,851	$	78	64	$	32,486	$	32,342	$	107	64

GMAB	$	4,194	$	4,181	$	2	58	$	3,773	$	3,762	$	5	57

⁽¹⁾ Individual variable annuity contracts may have more than one guarantee and therefore may be included in more than one benefit type. Variable annuity contracts for which the death benefit equals the account value are not shown in this table.

The net amount at risk for GMDB, GGU and GMAB guarantees is defined as the current guaranteed benefit amount in excess of the current contract value. The net amount at risk for GMIB and GMWB guarantees is defined as the greater of the present value of the minimum guaranteed withdrawal payments less the current contract value or zero. The present value is calculated using a discount rate that is consistent with assumptions embedded in the Company’s annuity pricing models. The Company previously defined the net amount at risk for GMIB and GMWB guarantees as the guaranteed benefit amount in excess of the contract value. The previously disclosed net amount at risk for GMIB and GMWB guarantees was $72 million and $297 million, respectively, as of December 31, 2012. The Company believes the revised definition of net amount at risk for GMIB and GMWB guarantees is more representative of the potential economic exposure of the guarantees.

The following table provides information related to insurance guarantees for which the Company has established additional liabilities:



	December 31, 2013			December 31, 2012
	Net Amount at Risk		Weighted Average Attained Age	Net Amount at Risk		Weighted Average Attained Age
	(in millions, except age)
UL secondary guarantees	$	5,674	62	$	5,060	61

The net amount at risk for UL secondary guarantees is defined as the current guaranteed death benefit amount in excess of the current policyholder value.

Changes in variable annuity and insurance guarantees were as follows:



	GMDB & GGU			GMIB			GMWB⁽¹⁾			GMAB⁽¹⁾			UL
	(in millions)
Balance at January 1, 2011	$	5		$	8		$	337		$	104		$	68
Incurred claims	10			2			1,040			133			53
Paid claims	(10		)	(1		)	—			—			(10		)
Balance at December 31, 2011	5			9			1,377			237			111
Incurred claims	6			1			(578		)	(134		)	57
Paid claims	(7		)	(1		)	—			—			(13		)
Balance at December 31, 2012	4			9			799			103			155
Incurred claims	4			(2		)	(1,182		)	(165		)	67
Paid claims	(4		)	(1		)	—			—			(16		)
Balance at December 31, 2013	$	4		$	6		$	(383	)	$	(62	)	$	206

⁽¹⁾ The incurred claims for GMWB and GMAB represent the total change in the liabilities.

The liabilities for guaranteed benefits are supported by general account assets.

The following table summarizes the distribution of separate account balances by asset type for variable annuity contracts providing guaranteed benefits:



	December 31,
	2013		2012
	(in millions)
Mutual funds:
Equity	$	39,195	$	33,037
Bond	26,519		26,849
Other	3,764		2,324
Total mutual funds	$	69,478	$	62,210

No gains or losses were recognized on assets transferred to separate accounts for the years ended December 31, 2013, 2012 and 2011.