Fair Values of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2012

Fair Values of Assets and Liabilities

Schedule of assets and liabilities measured at fair value on a recurring basis

	March 31, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	18	$	1,855	$	—	$	1,873
Available-for-Sale securities:
Corporate debt securities	—		16,971		1,422		18,393
Residential mortgage backed securities	—		7,134		224		7,358
Commercial mortgage backed securities	—		4,495		89		4,584
Asset backed securities	—		1,848		208		2,056
State and municipal obligations	—		2,113		—		2,113
U.S. government and agencies obligations	21		47		—		68
Foreign government bonds and obligations	—		205		—		205
Common stocks	2		3		6		11
Other debt obligations	—		17		—		17
Total Available-for-Sale securities	23		32,833		1,949		34,805
Trading securities	1		40		—		41
Separate account assets	—		71,635		—		71,635
Investments segregated for regulatory purposes	—		267		—		267
Other assets:
Interest rate derivative contracts	—		1,600		—		1,600
Equity derivative contracts	312		860		—		1,172
Foreign currency derivative contracts	—		7		—		7
Commodity derivative contracts	—		1		—		1
Total other assets	312		2,468		—		2,780
Total assets at fair value	$	354	$	109,098	$	1,949	$	111,401
Liabilities
Future policy benefits and claims:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		9		—		9
GMWB and GMAB embedded derivatives	—		—		840		840
Total future policy benefits and claims	—		11		840		851		(1)
Customer deposits	—		10		—		10
Other liabilities:
Interest rate derivative contracts	—		1,097		—		1,097
Equity derivative contracts	309		1,356		—		1,665
Credit derivative contracts	—		1		—		1
Foreign currency derivative contracts	2		4		—		6
Other	—		4		—		4
Total other liabilities	311		2,462		—		2,773
Total liabilities at fair value	$	311	$	2,483	$	840	$	3,634

(1)    The Company’s adjustment for nonperformance risk resulted in a $342 million cumulative decrease to the embedded derivative liability.

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	20	$	2,287	$	—	$	2,307
Available-for-Sale securities:
Corporate debt securities	—		16,685		1,355		18,040
Residential mortgage backed securities	—		7,198		198		7,396
Commercial mortgage backed securities	—		4,669		50		4,719
Asset backed securities	—		1,779		206		1,985
State and municipal obligations	—		2,130		—		2,130
U.S. government and agencies obligations	22		49		—		71
Foreign government bonds and obligations	—		144		—		144
Common stocks	2		2		5		9
Other debt obligations	—		11		—		11
Total Available-for-Sale securities	24		32,667		1,814		34,505
Trading securities	1		30		—		31
Separate account assets	—		66,780		—		66,780
Investments segregated for regulatory purposes	—		293		—		293
Other assets:
Interest rate derivative contracts	—		1,958		—		1,958
Equity derivative contracts	274		1,077		—		1,351
Credit derivative contracts	—		1		—		1
Foreign currency derivative contracts	—		7		—		7
Commodity derivative contracts	—		2		—		2
Total other assets	274		3,045		—		3,319
Total assets at fair value	$	319	$	105,102	$	1,814	$	107,235
Liabilities
Future policy benefits and claims:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		3		—		3
GMWB and GMAB embedded derivatives	—		—		1,585		1,585
Total future policy benefits and claims	—		5		1,585		1,590		(1)
Customer deposits	—		6		—		6
Other liabilities:
Interest rate derivative contracts	—		1,209		—		1,209
Equity derivative contracts	297		764		—		1,061
Foreign currency derivative contracts	3		10		—		13
Other	—		2		—		2
Total other liabilities	300		1,985		—		2,285
Total liabilities at fair value	$	300	$	1,996	$	1,585	$	3,881

(1)    The Company’s adjustment for nonperformance risk resulted in a $506 million cumulative decrease to the embedded derivative liability.

Schedule of changes in level 3 assets and liabilities measured at fair value on a recurring basis

																		Future Policy
	Available-for-Sale Securities																	Benefits and
				Residential			Commercial											Claims: GMWB
	Corporate			Mortgage			Mortgage			Asset								and GMAB
	Debt			Backed			Backed			Backed			Common					Embedded
	Securities			Securities			Securities			Securities			Stocks		Total			Derivatives
	(in millions)
Balance, January 1, 2012	$	1,355		$	198		$	50		$	206		$	5	$	1,814		$	(1,585	)
Total gains (losses) included in:
Net income	—			(5		)	—			—			—		(5		)(1)	784		(2)
Other comprehensive income	4			15			2			1			—		22			—
Purchases	115			23			2			—			1		141			—
Sales	—			—			—			—			—		—			—
Issues	—			—			—			—			—		—			(39		)
Settlements	(52		)	(13		)	(2		)	(6		)	—		(73		)	—
Transfers into Level 3	—			6			37			7			—		50			—
Transfers out of Level 3	—			—			—			—			—		—			—
Balance, March 31, 2012	$	1,422		$	224		$	89		$	208		$	6	$	1,949		$	(840	)
Changes in unrealized gains (losses) relating to assets and liabilities held at March 31, 2012 included in:
Net investment income	$	—		$	(5	)	$	—		$	—		$	—	$	(5	)	$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—		—			769

(1) Included in net investment income in the Consolidated Statements of Operations.

(2) Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Operations.

																		Future Policy
	Available-for-Sale Securities																	Benefits and
				Residential			Commercial						Common					Claims: GMWB
	Corporate			Mortgage			Mortgage			Asset			and					and GMAB
	Debt			Backed			Backed			Backed			Preferred					Embedded
	Securities			Securities			Securities			Securities			Stocks		Total			Derivatives
	(in millions)
Balance, January 1, 2011	$	1,325		$	4,247		$	51		$	476		$	5	$	6,104		$	(421	)
Total gains included in:
Net income	—			7			—			2			—		9		(1)	263		(2)
Other comprehensive income	1			13			—			5			—		19			—
Purchases	37			149			14			29			—		229			—
Sales	—			(2		)	—			—			—		(2		)	—
Issuances	—			—			—			—			—		—			(32		)
Settlements	(38		)	(321		)	—			(24		)	—		(383		)	—
Transfers into Level 3	—			—			1			—			—		1			—
Transfers out of Level 3	(10		)	—			(40		)	—			—		(50		)	—
Balance, March 31, 2011	$	1,315		$	4,093		$	26		$	488		$	5	$	5,927		$	(190	)
Changes in unrealized gains (losses) included in:
Net investment income	$	—		$	18		$	—		$	2		$	—	$	20		$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—		—			257

(1) Included in net investment income in the Consolidated Statements of Operations.

(2) Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Operations.

Significant unobservable inputs used in the fair value measurements

	Fair Value			Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Residential mortgage backed securities	$		195	Discounted cash flow	Constant prepayment rate	0.5% - 12.3% (3.3%)
					Annual default rate	0.9% - 20.0% (11.9%)
					Loss severity	34% - 72% (58.0%)
					Yield/spread to Treasury	6.4% - 20.9% (9.1%)
Asset backed securities (sub-prime residential mortgage backed securities)	$		17	Discounted cash flow	Constant prepayment rate	2.3% - 7.7% (3.3%)
					Annual default rate	3.5% - 12.5% (7.7%)
					Loss severity	68% - 100% (77.0%)
					Yield/spread to Treasury	9.6% - 14.0% (11.9%)
GMWB and GMAB embedded derivatives	$	840		Discounted cash flow	Utilization of guaranteed withdrawals	0% - 90%
					Surrender rate	0% - 56.3%
					Market volatility (1)	5.8% - 22.3%
					Nonperformance risk (2)	101 bps

(1) Market volatility is implied volatility of fund of funds.

(2) The nonperformance risk is the spread added to the observable interest rates used in the valuation of the embedded derivatives.

Schedule of carrying value and estimated fair value of financial instruments

	March 31, 2012										December 31, 2011
	Carrying		Fair Value								Carrying
	Value		Level 1		Level 2		Level 3		Total		Value		Fair Value
	(in millions)
Financial Assets
Commercial mortgage loans, net	$	2,615	$	—	$	—	$	2,794	$	2,794	$	2,589	$	2,772
Policy and certificate loans	741		—		2		715		717		742		715
Receivables	2,417		172		870		1,083		2,125		2,444		2,148
Restricted and segregated cash	1,608		1,608		—		—		1,608		1,500		1,500
Other investments and assets	382		—		357		30		387		390		388
Financial Liabilities
Future policy benefits and claims	$	15,007	$	—	$	—	$	16,058	$	16,058	$	15,064	$	16,116
Investment certificate reserves	2,703		—		—		2,704		2,704		2,766		2,752
Banking and brokerage customer deposits	7,248		2,364		4,886		—		7,250		7,078		7,091
Separate account liabilities	3,720		—		3,720		—		3,720		3,950		3,950
Debt and other liabilities	3,149		179		3,023		220		3,422		3,180		3,412