Derivatives and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2014

Schedule of gross fair value of derivative instruments, including embedded derivatives

The Company uses derivatives as economic hedges and accounting hedges. The following table presents the balance sheet location and the gross fair value of derivative instruments, including embedded derivatives:



Derivatives designated as hedging instruments		Assets					Liabilities
Derivatives designated as hedging instruments	Balance Sheet Location	June 30, 2014		December 31, 2013		Balance Sheet Location	June 30, 2014			December 31, 2013
		(in millions)					(in millions)
Fair value hedges
Fixed rate debt	Other assets	$	85	$	82	Other liabilities	$	—		$	—
Total qualifying hedges		85		82			—			—
Derivatives not designated as hedging instruments
GMWB and GMAB
Interest rate contracts	Other assets	1,585		1,484		Other liabilities	1,306			1,672
Equity contracts	Other assets	1,642		1,741		Other liabilities	2,767			2,918
Credit contracts	Other assets	—		3		Other liabilities	—			—
Foreign exchange contracts	Other assets	2		2		Other liabilities	—			—
Embedded derivatives⁽¹⁾	N/A	—		—		Policyholder account balances, future policy benefits and claims⁽²⁾	(347		)	(575		)
Total GMWB and GMAB		3,229		3,230			3,726			4,015
Other derivatives:
Equity
EIA embedded derivatives	N/A	—		—		Policyholder account balances, future policy benefits and claims	5			5
IUL	Other assets	33		27		Other liabilities	11			13
IUL embedded derivatives	N/A	—		—		Policyholder account balances, future policy benefits and claims	184			125
Stock market certificates	Other assets	55		73		Other liabilities	49			66
Stock market certificates embedded derivatives	N/A	—		—		Customer deposits	6			7
Foreign exchange
Foreign currency	Other assets	3		2		Other liabilities	1			—
Other
Macro hedge program	Other assets	1		4		Other liabilities	141			139
Total other		92		106			397			355
Total non-designated hedges		3,321		3,336			4,123			4,370
Total derivatives		$	3,406	$	3,418		$	4,123		$	4,370

N/A Not applicable.

⁽¹⁾The fair values of GMWB and GMAB embedded derivatives fluctuate based on changes in equity, interest rate and credit markets.

⁽²⁾The fair value of the GMWB and GMAB embedded derivatives was a net asset at June 30, 2014 and December 31, 2013 and the amount is reported as a contra liability.

Schedule of payments to make and receive for options

The deferred premium associated with certain of the above options is paid or received semi-annually over the life of the option contract or at maturity. The following is a summary of the payments the Company is scheduled to make and receive for these options:



	Premiums Payable		Premiums Receivable
	(in millions)
2014 ⁽¹⁾	$	195	$	57
2015	374		69
2016	332		55
2017	262		54
2018	214		57
2019-2027	641		89
Total	$	2,018	$	381

⁽¹⁾2014 amounts represent the amounts payable and receivable for the period from July 1, 2014 to December 31, 2014.

Not Designated as Hedges

Derivative instruments

Schedule of gain (loss) on derivative instruments

The following table presents a summary of the impact of derivatives not designated as hedging instruments on the Consolidated Statements of Operations:



Derivatives not designated as hedging instruments	Location of Gain (Loss) on Derivatives Recognized in Income	Amount of Gain (Loss) on Derivatives Recognized in Income
		Three Months Ended June 30,						Six Months Ended June 30,
		2014			2013			2014			2013
		(in millions)
GMWB and GMAB
Interest rate contracts	Benefits, claims, losses and settlement expenses	$	245		$	(380	)	$	509		$	(512	)
Equity contracts	Benefits, claims, losses and settlement expenses	(197		)	12			(387		)	(480		)
Credit contracts	Benefits, claims, losses and settlement expenses	(12		)	8			(22		)	8
Foreign exchange contracts	Benefits, claims, losses and settlement expenses	—			2			(1		)	7
Embedded derivatives ⁽¹⁾	Benefits, claims, losses and settlement expenses	(124		)	255			(228		)	822
Total GMWB and GMAB		(88		)	(103		)	(129		)	(155		)
Other derivatives:
Interest rate
Tax hedge	Net investment income	—			—			3			—
Seed money	Net investment income	—			2			(1		)	2
Equity
IUL	Interest credited to fixed accounts	6			2			11			6
IUL embedded derivatives	Interest credited to fixed accounts	5			2			11			5
EIA	Interest credited to fixed accounts	1			—			1			1
EIA embedded derivatives	Interest credited to fixed accounts	(1		)	—			(1		)	(1		)
Stock market certificates	Banking and deposit interest expense	1			1			2			4
Stock market certificates embedded derivatives	Banking and deposit interest expense	(1		)	(1		)	(2		)	(4		)
Seed money	Net investment income	(2		)	(2		)	(3		)	(8		)
Deferred compensation	Distribution expenses	4			1			5			2
Deferred compensation	General and administrative expense	2			—			2			—
Foreign exchange
Foreign currency	Net investment income	(2		)	(3		)	(2		)	(3		)
Deferred compensation	Distribution expenses	1			—			1			—
Commodity
Seed money	Net investment income	—			1			(1		)	1
Other
Macro hedge program	Benefits, claims, losses and settlement expenses	(24		)	—			(25		)	—
Total other		(10		)	3			1			5
Total derivatives		$	(98	)	$	(100	)	$	(128	)	$	(150	)

⁽¹⁾The fair values of GMWB and GMAB embedded derivatives fluctuate based on changes in equity, interest rate and credit markets.

Cash flow hedges

Derivative instruments

Schedule of gain (loss) on derivative instruments

The following table presents the impact of the effective portion of the Company’s cash flow hedges on the Consolidated Statements of Operations and the Consolidated Statements of Equity:



Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(in millions)
Interest and debt expense	$	1		$	1		$	2		$	2
Net investment income	(1		)	(1		)	(2		)	(2		)
Total	$	—		$	—		$	—		$	—

Fair value hedges

Derivative instruments

Schedule of gain (loss) on derivative instruments

The following table presents the amounts recognized in income related to fair value hedges:



Derivatives designated as hedging instruments	Location of Gain Recorded into Income	Amount of Gain Recognized in Income on Derivatives
		Three Months Ended June 30,				Six Months Ended June 30,
		2014		2013		2014		2013
		(in millions)
Fixed rate debt	Interest and debt expense	$	8	$	10	$	16	$	20