Consolidated Investment Entities (Tables)

3 Months Ended

Mar. 31, 2013

Consolidated Investment Entities.

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

	March 31, 2013
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	17	$	1,561	$	—	$	1,578
Available-for-Sale securities:
Corporate debt securities	—		16,769		1,764		18,533
Residential mortgage backed securities	—		5,356		8		5,364
Commercial mortgage backed securities	—		3,018		204		3,222
Asset backed securities	—		1,069		321		1,390
State and municipal obligations	—		2,256		—		2,256
U.S. government and agencies obligations	18		38		—		56
Foreign government bonds and obligations	—		215		—		215
Common stocks	4		4		5		13
Total Available-for-Sale securities	22		28,725		2,302		31,049
Trading securities	2		27		—		29
Separate account assets	—		75,499		—		75,499
Other assets:
Interest rate derivative contracts	—		2,094		—		2,094
Equity derivative contracts	339		933		—		1,272
Foreign currency derivative contracts	—		7		—		7
Commodity derivative contracts	—		1		—		1
Total other assets	339		3,035		—		3,374
Total assets at fair value	$	380	$	108,847	$	2,302	$	111,529
Liabilities
Future policy benefits and claims:
EIA embedded derivatives	$	—	$	3	$	—	$	3
IUL embedded derivatives	—		61		—		61
GMWB and GMAB embedded derivatives	—		—		266		266
Total future policy benefits and claims	—		64		266		330		(1)
Customer deposits	—		9		—		9
Other liabilities:
Interest rate derivative contracts	—		1,421		—		1,421
Equity derivative contracts	141		1,825		—		1,966
Foreign currency derivative contracts	1		1		—		2
Other	1		10		—		11
Total other liabilities	143		3,257		—		3,400
Total liabilities at fair value	$	143	$	3,330	$	266	$	3,739

(1) The Company’s adjustment for nonperformance risk resulted in a $295 million cumulative decrease to the embedded derivative liability.

	December 31, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	18	$	1,539	$	—	$	1,557
Available-for-Sale securities:
Corporate debt securities	—		17,051		1,764		18,815
Residential mortgage backed securities	—		5,145		284		5,429
Commercial mortgage backed securities	—		3,213		206		3,419
Asset backed securities	—		1,097		178		1,275
State and municipal obligations	—		2,239		—		2,239
U.S. government and agencies obligations	19		39		—		58
Foreign government bonds and obligations	—		224		—		224
Common stocks	3		4		6		13
Total Available-for-Sale securities	22		29,012		2,438		31,472
Trading securities	1		24		—		25
Separate account assets	—		72,397		—		72,397
Other assets:
Interest rate derivative contracts	—		2,358		—		2,358
Equity derivative contracts	285		973		—		1,258
Foreign currency derivative contracts	—		6		—		6
Commodity derivative contracts	—		1		—		1
Total other assets	285		3,338		—		3,623
Total assets at fair value	$	326	$	106,310	$	2,438	$	109,074
Liabilities
Future policy benefits and claims:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		45		—		45
GMWB and GMAB embedded derivatives	—		—		833		833
Total future policy benefits and claims	—		47		833		880		(1)
Customer deposits	—		8		—		8
Other liabilities:
Interest rate derivative contracts	—		1,486		—		1,486
Equity derivative contracts	258		1,565		—		1,823
Foreign currency derivative contracts	1		—		—		1
Other	1		3		—		4
Total other liabilities	260		3,054		—		3,314
Total liabilities at fair value	$	260	$	3,109	$	833	$	4,202

(1) The Company’s adjustment for nonperformance risk resulted in a $389 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
	March 31,			December 31,			March 31,		December 31,
	2013			2012			2013		2012
	(in millions)
Long-term debt:
Senior notes due 2015	$	745	(1)	$	750	(1)	5.7	%	5.7	%
Senior notes due 2019	343		(1)	347		(1)	7.3		7.3
Senior notes due 2020	807		(1)	812		(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	2,389			2,403
Short-term borrowings:
Federal Home Loan Bank (“FHLB”) advances	300			—			0.3		—
Repurchase agreements	200			501			0.4		0.4
Total short-term borrowings	500			501
Total	$	2,889		$	2,904

(1) Amounts include adjustments for fair value hedges on the Company’s long-term debt and any unamortized discounts. See Note 12 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

	March 31, 2013
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	240	$	3	$	243
Common stocks	110		51		8		169
Other structured investments	—		54		—		54
Syndicated loans	—		3,687		205		3,892
Total investments	110		4,032		216		4,358
Receivables	—		111		—		111
Other assets	—		12		1,176		1,188
Total assets at fair value	$	110	$	4,155	$	1,392	$	5,657
Liabilities
Debt	$	—	$	—	$	4,595	$	4,595
Other liabilities	—		301		—		301
Total liabilities at fair value	$	—	$	301	$	4,595	$	4,896

	December 31, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	251	$	3	$	254
Common stocks	91		32		14		137
Other structured investments	—		57		—		57
Syndicated loans	—		3,720		202		3,922
Total investments	91		4,060		219		4,370
Receivables	—		77		—		77
Other assets	—		2		1,214		1,216
Total assets at fair value	$	91	$	4,139	$	1,433	$	5,663
Liabilities
Debt	$	—	$	—	$	4,450	$	4,450
Other liabilities	—		166		—		166
Total liabilities at fair value	$	—	$	166	$	4,450	$	4,616

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, January 1, 2013	$	3	$	14		$	202		$	1,214		$	(4,450	)
Total losses included in:
Net income	—		—			—			(6		)(2)	(24		)(1)
Other comprehensive income	—		—			—			(77		)	—
Purchases	—		—			76			51			—
Sales	—		—			(18		)	(6		)	—
Issues	—		—			—			—			(410		)
Settlements	—		—			(13		)	—			289
Transfers into Level 3	—		2			51			—			—
Transfers out of Level 3	—		(8		)	(93		)	—			—
Balance, March 31, 2013	$	3	$	8		$	205		$	1,176		$	(4,595	)
Changes in unrealized losses included in income relating to assets and liabilities held at March 31, 2013	$	—	$	—		$	—		$	(5	)(2)	$	(24	)(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)	3		(1)	(27		)(2)	(125		)(1)
Other comprehensive income	—		—			—			32			—
Purchases	—		6			7			12			—
Sales	—		(2		)	(5		)	(90		)	—
Settlements	—		—			(30		)	—			68
Transfers into Level 3	—		1			86			—			—
Transfers out of Level 3	—		(9		)	(208		)	—			—
Balance, March 31, 2012	$	4	$	8		$	195		$	1,035		$	(4,769	)
Changes in unrealized gains (losses) included in income relating to assets and liabilities held at March 31, 2012	$	—	$	—		$	2	(1)	$	(34	)(2)	$	(125	)(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

	March 31, 2013
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Other assets	$	1,176	Discounted cash	Equivalent yield	4.9% - 14.0% (7.3%)
			flow/market comparables	Expected rental value	$4 - $289 $(30)
				(per square foot)
Debt	$	4,595	Discounted cash flow	Annual default rate	2.5% - 4.5% (2.5%)
				Discount rate	1.5% - 32.0% (2.7%)
				Constant prepayment rate	5.0% - 10.0% (9.7%)
				Loss recovery	36.4% - 63.6% (62.1%)

	December 31, 2012
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Other assets	$	1,214	Discounted cash	Equivalent yield	4.1% - 12.9% (7.2%)
			flow/market comparables	Expected rental value	$4 - $309 $(32)
				(per square foot)
Debt	$	4,450	Discounted cash flow	Annual default rate	2.5% - 4.5% (2.5%)
				Discount rate	1.6% - 30.0% (2.9%)
				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

	March 31, 2013			December 31, 2012
	(in millions)
Syndicated loans
Unpaid principal balance	$	3,958		$	4,023
Excess unpaid principal over fair value	(66		)	(101		)
Fair value	$	3,892		$	3,922
Fair value of loans more than 90 days past due	$	6		$	34
Fair value of loans in nonaccrual status	6			34
Difference between fair value and unpaid principal of loans more than 90 days past due, loans in nonaccrual status or both	32			38
Debt
Unpaid principal balance	$	4,878		$	4,757
Excess unpaid principal over fair value	(283		)	(307		)
Fair value	$	4,595		$	4,450

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

	Carrying Value				Weighted Average Interest Rate
	March 31, 2013		December 31, 2012		March 31, 2013		December 31, 2012
	(in millions)
Debt of consolidated CDOs due 2013-2025	$	4,595	$	4,450	1.0	%	0.9	%
Floating rate revolving credit borrowings due 2014	288		309		2.6		2.6
Floating rate revolving credit borrowings due 2015	97		104		2.4		2.4
Floating rate revolving credit borrowings due 2017	111		118		4.5		4.5
Floating rate revolving credit borrowings due 2018	57		—		3.7		—
Total	$	5,148	$	4,981