Consolidated Investment Entities (Tables)

9 Months Ended

Sep. 30, 2012

Consolidated Investment Entities.

Schedule of assets and liabilities held by consolidated investment entities measured at fair value on a recurring basis

	September 30, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	18	$	2,815	$	—	$	2,833
Available-for-Sale securities:
Corporate debt securities	—		17,190		1,597		18,787
Residential mortgage backed securities	—		6,868		72		6,940
Commercial mortgage backed securities	—		4,058		212		4,270
Asset backed securities	—		1,704		200		1,904
State and municipal obligations	—		2,229		—		2,229
U.S. government and agencies obligations	21		40		—		61
Foreign government bonds and obligations	—		223		—		223
Common stocks	3		3		5		11
Total Available-for-Sale securities	24		32,315		2,086		34,425
Trading securities	1		20		—		21
Separate account assets	—		71,919		—		71,919
Investments segregated for regulatory purposes	—		25		—		25
Other assets:
Interest rate derivative contracts	—		2,544		—		2,544
Equity derivative contracts	404		1,069		—		1,473
Foreign currency derivative contracts	—		1		—		1
Commodity derivative contracts	—		1		—		1
Total other assets	404		3,615		—		4,019
Total assets at fair value	$	447	$	110,709	$	2,086	$	113,242
Liabilities
Future policy benefits and claims:
EIA embedded derivatives	$	—	$	3	$	—	$	3
IUL embedded derivatives	—		37		—		37
GMWB and GMAB embedded derivatives	—		—		1,142		1,142
Total future policy benefits and claims	—		40		1,142		1,182		(1)
Customer deposits	—		9		—		9
Other liabilities:
Interest rate derivative contracts	—		1,773		—		1,773
Equity derivative contracts	370		1,533		—		1,903
Foreign currency derivative contracts	2		—		—		2
Other	—		5		—		5
Total other liabilities	372		3,311		—		3,683
Total liabilities at fair value	$	372	$	3,360	$	1,142	$	4,874

(1) The Company’s adjustment for nonperformance risk resulted in a $429 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 debt of the consolidated investment entities and the stated interest rates

	Outstanding Balance						Stated Interest Rate
	September 30, 2012			December 31, 2011			September 30, 2012		December 31, 2011
	(in millions)
Senior notes due 2015	$	754	(1)	$	753	(1)	5.7	%	5.7	%
Senior notes due 2019	349		(1)	341		(1)	7.3		7.3
Senior notes due 2020	816		(1)	805		(1)	5.3		5.3
Senior notes due 2039	200			200			7.8		7.8
Junior subordinated notes due 2066	294			294			7.5		7.5
Total long-term debt	2,413			2,393
Short-term borrowings	500			504			0.5		0.3
Total	$	2,913		$	2,897

(1)       Amounts include adjustments for fair value hedges on the Company’s long-term debt and any unamortized discounts. See Note 11 for information on the Company’s fair value hedges.

Consolidated Investment Entities:

Consolidated Investment Entities.

Schedule of assets and liabilities held by consolidated investment entities measured at fair value on a recurring basis

	September 30, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	275	$	4	$	279
Common stocks	83		29		13		125
Other structured investments	—		55		—		55
Syndicated loans	—		3,945		183		4,128
Total investments	83		4,304		200		4,587
Receivables	—		24		—		24
Other assets	—		1		1,158		1,159
Total assets at fair value	$	83	$	4,329	$	1,358	$	5,770
Liabilities
Debt	$	—	$	—	$	4,691	$	4,691
Other liabilities	—		62		—		62
Total liabilities at fair value	$	—	$	62	$	4,691	$	4,753

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	314	$	4	$	318
Common stocks	75		25		13		113
Other structured investments	—		54		—		54
Syndicated loans	—		3,962		342		4,304
Total investments	75		4,355		359		4,789
Receivables	—		39		—		39
Other assets	—		2		1,108		1,110
Total assets at fair value	$	75	$	4,396	$	1,467	$	5,938
Liabilities
Debt	$	—	$	—	$	4,712	$	4,712
Other liabilities	—		85		—		85
Total liabilities at fair value	$	—	$	85	$	4,712	$	4,797

Schedule of changes in Level 3 assets and liabilities held by consolidated investment entities measured at fair value on a recurring basis

	Corporate
	Debt		Common		Syndicated			Other
	Securities		Stocks		Loans			Assets			Debt
	(in millions)
Balance, July 1, 2012	$	4	$	12	$	169		$	1,080		$	(4,726	)
Total gains (losses) included in:
Net income	—		—		2		(1)	(27		)(2)	(82		)(1)
Other comprehensive income	—		—		—			21			—
Purchases	—		—		26			146			—
Sales	—		—		(2		)	(62		)	—
Settlements	—		—		(22		)	—			117
Transfers into Level 3	—		1		59			—			—
Transfers out of Level 3	—		—		(49		)	—			—
Balance, September 30, 2012	$	4	$	13	$	183		$	1,158		$	(4,691	)
Changes in unrealized gains (losses) included in income relating to assets and liabilities held at September 30, 2012	$	—	$	—	$	1	(1)	$	(39	)(2)	$	(81	)(1)

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

(2) Included in other revenues in the Consolidated Statements of Operations.

	Corporate						Other
	Debt			Common			Structured			Syndicated			Other
	Securities			Stocks			Investments			Loans			Assets			Debt
	(in millions)
Balance, July 1, 2011	$	6		$	23		$	3		$	246		$	1,097		$	(5,234	)
Total gains (losses) included in:
Net income	—			(1		)(1)	—			(27		)(1)	—			157		(1)
Other comprehensive income	—			—			—			—			(32		)	—
Purchases	2			—			—			90			101			—
Sales	—			—			—			(2		)	(3		)	—
Issues	—			—			—			—			—			—
Settlements	(1		)	—			—			(57		)	—			42
Transfers into Level 3	—			5			—			250			—			—
Transfers out of Level 3	—			(18		)	(3		)	(65		)	—			—
Balance, September 30, 2011	$	7		$	9		$	—		$	435		$	1,163		$	(5,035	)
Changes in unrealized gains (losses) included in income relating to assets and liabilities held at September 30, 2011	$	—		$	(1	)(1)	$	—		$	(26	)(1)	$	5	(2)	$	156	(1)

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

(2) Included in other revenues in the Consolidated Statements of Operations.

	Corporate
	Debt		Common			Syndicated			Other
	Securities		Stocks			Loans			Assets			Debt
	(in millions)
Balance, January 1, 2012	$	4	$	13		$	342		$	1,108		$	(4,712	)
Total gains (losses) included in:
Net income	—		(1		)(1)	6		(1)	(64		)(2)	(223		)(1)
Other comprehensive income	—		—			—			20			—
Purchases	—		6			59			254			—
Sales	—		(4		)	(8		)	(160		)	—
Issues	—		—			—			—			—
Settlements	—		—			(84		)	—			244
Transfers into Level 3	—		14			186			—			—
Transfers out of Level 3	—		(15		)	(318		)	—			—
Balance, September 30, 2012	$	4	$	13		$	183		$	1,158		$	(4,691	)
Changes in unrealized losses included in income relating to assets and liabilities held at September 30, 2012	$	—	$	—		$	—		$	(86	)(2)	$	(221	)(1)

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

(2) Included in other revenues in the Consolidated Statements of Operations.

	Corporate						Other
	Debt			Common			Structured			Syndicated			Other
	Securities			Stocks			Investments			Loans			Assets			Debt
	(in millions)
Balance, January 1, 2011	$	6		$	11		$	22		$	—		$	887		$	(5,171	)
Total gains (losses) included in:
Net income	—			4		(1)	(1		)(1)	(23		)(1)	5		(2)	(59		)(1)
Other comprehensive income	—			—			—			—			(7		)	—
Purchases	2			—			3			183			296			—
Sales	(1		)	—			—			(8		)	(18		)	—
Issues	—			—			—			—			—			(27		)
Settlements	(1		)	—			—			(113		)	1			222
Transfers into Level 3	1			19			—			507			7			—
Transfers out of Level 3	—			(25		)	(24		)	(111		)	(8		)	—
Balance, September 30, 2011	$	7		$	9		$	—		$	435		$	1,163		$	(5,035	)
Changes in unrealized gains (losses) included in income relating to assets and liabilities held at September 30, 2011	$	—		$	1	(1)	$	—		$	(22	)(1)	$	17	(2)	$	(55	)(1)

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

(2) Included in other revenues in the Consolidated Statements of Operations.

Significant unobservable inputs used in the fair value measurements of assets and liabilities held by consolidated investment entities

The following table provides a summary of the significant unobservable inputs used in the fair value measurements developed by the Company or reasonably available to the Company of Level 3 assets and liabilities held by consolidated investment entities at September 30, 2012:

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Other assets	$	1,158	Discounted cash	Equivalent yield	4.3% - 11.2% (6.9)%
			flow/market comparables	Expected rental value	$4 - $307 $(32)
				(per square foot)
Debt	$	4,691	Discounted cash flow	Annual default rate	2.5% - 4.5% (2.6)%
				Discount rate	1.9% - 45.0% (3.5)%
				Constant prepayment rate	5.0% - 10.0% (9.6)%
				Loss recovery	36.4% - 63.6% (62.0)%

Schedule of fair value and unpaid principal balance of assets and liabilities carried at fair value under the fair value option

	September 30, 2012			December 31, 2011
	(in millions)
Syndicated loans
Unpaid principal balance	$	4,255		$	4,548
Excess unpaid principal over fair value	(127		)	(244		)
Fair value	$	4,128		$	4,304
Fair value of loans more than 90 days past due	$	24		$	18
Fair value of loans in nonaccrual status	24			18
Difference between fair value and unpaid principal of loans more than 90 days past due, loans in nonaccrual status or both	22			16
Debt
Unpaid principal balance	$	5,091		$	5,335
Excess unpaid principal over fair value	(400		)	(623		)
Fair value	$	4,691		$	4,712

Schedule of debt of the consolidated investment entities and the stated interest rates

	Carrying Value				Weighted Average Interest Rate
	September 30, 2012		December 31, 2011		September 30, 2012		December 31, 2011
	(in millions)
Debt of consolidated CDOs due 2012-2021	$	4,691	$	4,712	1.0	%	0.9	%
Floating rate revolving credit borrowings due 2014	308		378		2.9		3.2
Floating rate revolving credit borrowings due 2015	104		88		2.5		3.0
Floating rate revolving credit borrowings due 2017	118		—		4.7		—
Total	$	5,221	$	5,178