Variable Annuity and Insurance Guarantees

12 Months Ended

Dec. 31, 2011

Variable Annuity and Insurance Guarantees

Variable Annuity and Insurance Guarantees

11. 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 is often provided in combination with the return of premium provision. This provision 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Withdrawals at a specified rate per year until the amount withdrawn is equal to the guaranteed amount.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 (of the five that are available prior to withdrawal).

•

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.

Certain UL contracts 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, 2011								December 31, 2010
Variable Annuity Guarantees by Benefit Type(1)	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk(2)		Weighted Average Attained Age		Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk(2)		Weighted Average Attained Age
	(in millions, except age)
GMDB:
Return of premium	$	40,011	$	38,275	$	382		63	$	37,714	$	36,028	$	173		62
Five/six-year reset		11,631		9,118		350		63		13,689		11,153		312		62
One-year ratchet		7,233		6,777		479		64		7,741		7,242		287		63
Five-year ratchet		1,472		1,418		25		61		1,466		1,414		8		60
Other		759		732		93		68		680		649		61		67
Total — GMDB	$	61,106	$	56,320	$	1,329		63	$	61,290	$	56,486	$	841		62
GGU death benefit	$	920	$	868	$	78		63	$	970	$	912	$	79		64
GMIB	$	463	$	433	$	106		65	$	597	$	561	$	76		64
GMWB:
GMWB	$	3,887	$	3,868	$	236		65	$	4,341	$	4,317	$	106		64
GMWB for life		23,756		23,625		863		64		20,374		20,259		129		63
Total — GMWB	$	27,643	$	27,493	$	1,099		64	$	24,715	$	24,576	$	235		63
GMAB	$	3,516	$	3,509	$	63		56	$	3,540	$	3,523	$	22		56

(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.

(2)

Represents the current guaranteed benefit amount in excess of the current contract value. GMIB, GMWB and GMAB benefits are subject to waiting periods and payment periods specified in the contract.

Changes in additional liabilities for variable annuity and insurance guarantees were as follows:

	GMDB & GGU			GMIB			GMWB			GMAB			UL
	(in millions)
Balance at January 1, 2009	$	55		$	12		$	1,471		$	367		$	7
Incurred claims		12			(5	)		(1,267	)		(267	)		8
Paid claims		(61	)		(1	)		—			—			—
Balance at December 31, 2009		6			6			204			100			15
Incurred claims		17			3			133			4			59
Paid claims		(18	)		(1	)		—			—			(6	)
Balance at December 31, 2010		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

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,
	2011		2010
	(in millions)
Mutual funds:
Equity	$	30,738	$	32,310
Bond		23,862		22,319
Other		1,969		2,208
Total mutual funds	$	56,569	$	56,837

No gains or losses were recognized on assets transferred to separate accounts for the years ended December 31, 2011, 2010 and 2009.