Fair Values of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2012

Fair Values of Assets and Liabilities

Schedule of assets and liabilities 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 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, July 1, 2012	$	1,485		$	222		$	69		$	201		$	5	$	1,982		$	(1,406	)
Total gains (losses) included in:
Net income	(1		)	(25		)	1			(5		)	—		(30		)(1)	321		(2)
Other comprehensive income	14			32			4			11			—		61			—
Purchases	139			54			—			—			—		193			—
Sales	—			(68		)	—			(7		)	—		(75		)	—
Issues	—			—			—			—			—		—			(49		)
Settlements	(40		)	(7		)	(1		)	(5		)	—		(53		)	(8		)
Transfers into Level 3	—			—			146			15			—		161			—
Transfers out of Level 3	—			(136		)	(7		)	(10		)	—		(153		)	—
Balance, September 30, 2012	$	1,597		$	72		$	212		$	200		$	5	$	2,086		$	(1,142	)
Changes in unrealized gains (losses) relating to assets and liabilities held at September 30, 2012 included in:
Net investment income	$	(1	)	$	—		$	1		$	1		$	—	$	1		$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—		—			310

(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, July 1, 2011	$	1,274		$	4,097		$	64		$	498		$	5	$	5,938		$	(316	)
Total gains (losses) included in:
Net income	—			52			—			4			—		56		(1)	(1,236		)(2)
Other comprehensive income	—			(107		)	(1		)	(15		)	—		(123		)	—
Purchases	71			57			15			43			—		186			—
Sales	—			—			—			—			—		—			—
Issues	—			—			—			—			—		—			(39		)
Settlements	(33		)	(274		)	(1		)	(27		)	—		(335		)	(9		)
Transfers into Level 3	7			—			—			14			—		21			—
Transfers out of Level 3	—			—			(25		)	(22		)	—		(47		)	—
Balance, September 30, 2011	$	1,319		$	3,825		$	52		$	495		$	5	$	5,696		$	(1,600	)
Changes in unrealized gains (losses) relating to assets and liabilities held at September 30, 2011 included in:
Net investment income	$	—		$	52		$	—		$	4		$	—	$	56		$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—		—			(1,241		)

(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												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	(1		)	(38		)	1			(5		)	—			(43		)(1)	577		(2)
Other comprehensive income	19			58			6			13			—			96			—
Purchases	349			99			9			—			1			458			—
Sales	—			(68		)	—			(7		)	—			(75		)	—
Issues	—			—			—			—			—			—			(131		)
Settlements	(135		)	(35		)	(3		)	(19		)	—			(192		)	(3		)
Transfers into Level 3	10			22			183			22			—			237			—
Transfers out of Level 3	—			(164		)	(34		)	(10		)	(1		)	(209		)	—
Balance, September 30, 2012	$	1,597		$	72		$	212		$	200		$	5		$	2,086		$	(1,142	)
Changes in unrealized gains (losses) relating to assets and liabilities held at September 30, 2012 included in:
Net investment income	$	(1	)	$	—		$	1		$	1		$	—		$	1		$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—			—			544

(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 (losses) included in:
Net income	7			58			—			8			—		73		(1)	(1,061		)(2)
Other comprehensive income	11			(106		)	—			(13		)	—		(108		)	—
Purchases	145			556			104			123			—		928			—
Sales	—			(3		)	—			—			—		(3		)	—
Issues	—			—			—			—			—		—			(107		)
Settlements	(166		)	(871		)	(2		)	(88		)	—		(1,127		)	(11		)
Transfers into Level 3	9			—			1			18			—		28			—
Transfers out of Level 3	(12		)	(56		)	(102		)	(29		)	—		(199		)	—
Balance, September 30, 2011	$	1,319		$	3,825		$	52		$	495		$	5	$	5,696		$	(1,600	)
Changes in unrealized gains (losses) relating to assets and liabilities held at September 30, 2011 included in:
Net investment income	$	—		$	69		$	—		$	8		$	—	$	77		$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—		—			(1,074		)

(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)
Corporate debt securities (private placements)	$	1,567	Discounted cash flow	Yield/spread to U.S. Treasuries	1.0% - 8.5% (2.2)%
GMWB and GMAB embedded derivatives	$	1,142	Discounted cash flow	Utilization of guaranteed withdrawals	0% - 90%
				Surrender rate	0% - 56.3%
				Market volatility (1)	5.6% - 21.7%
				Nonperformance risk (2)	100 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

	September 30, 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	$	2,541	$	—	$	—	$	2,755	$	2,755	$	2,589	$	2,772
Policy and certificate loans	752		—		2		648		650		742		715
Receivables	2,421		148		947		1,219		2,314		2,444		2,148
Restricted and segregated cash	2,035		2,035		—		—		2,035		1,500		1,500
Other investments and assets	373		—		333		47		380		390		388
Financial Liabilities
Future policy benefits and claims	$	14,877	$	—	$	—	$	16,296	$	16,296	$	15,064	$	16,116
Investment certificate reserves	3,052		—		—		3,053		3,053		2,766		2,752
Banking and brokerage customer deposits	6,987		2,548		4,440		—		6,988		7,078		7,091
Separate account liabilities	3,500		—		3,500		—		3,500		3,966		3,966
Debt and other liabilities	3,078		162		3,108		172		3,442		3,180		3,412