Fair Values of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2013

Fair Values of Assets and Liabilities

Schedule of assets and liabilities 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 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, 2013	$	1,764		$	284		$	206		$	178		$	6		$	2,438		$	(833	)
Total gains (losses) included in:
Net income	—			—			—			—			—			—			618		(1)
Other comprehensive income	—			—			(2		)	5			—			3			—
Purchases	54			—			—			139			—			193			—
Sales	—			—			—			—			—			—			—
Issues	—			—			—			—			—			—			(50		)
Settlements	(54		)	—			—			(1		)	—			(55		)	(1		)
Transfers into Level 3	—			—			—			—			—			—			—
Transfers out of Level 3	—			(276		)	—			—			(1		)	(277		)	—
Balance, March 31, 2013	$	1,764		$	8		$	204		$	321		$	5		$	2,302		$	(266	)
Changes in unrealized gains relating to assets and liabilities held at March 31, 2013 included in:
Benefits, claims, losses and settlement expenses	$	—		$	—		$	—		$	—		$	—		$	—		$	609

(1) 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		$	215		$	50		$	189		$	5	$	1,814		$	(1,585	)
Total gains (losses) included in:
Net income	—			(5		)	—			—			—		(5		)(1)	784		(2)
Other comprehensive income	4			16			2			—			—		22			—
Purchases	115			23			2			—			1		141			—
Sales	—			—			—			—			—		—			—
Issues	—			—			—			—			—		—			(39		)
Settlements	(52		)	(14		)	(2		)	(5		)	—		(73		)	—
Transfers into Level 3	—			6			37			7			—		50			—
Transfers out of Level 3	—			—			—			—			—		—			—
Balance, March 31, 2012	$	1,422		$	241		$	89		$	191		$	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.

Significant unobservable inputs used in the fair value measurements

	March 31, 2013
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Corporate debt securities (private placements)	$	1,713	Discounted cash flow	Yield/spread to U.S. Treasuries	1.1% - 6.0% (2.0%)
GMWB and GMAB embedded derivatives	$	266	Discounted cash flow	Utilization of guaranteed withdrawals (1)	0% - 56.4%
				Surrender rate	0% - 56.3%
				Market volatility (2)	5.2% - 20.2%
				Nonperformance risk (3)	93 bps

	December 31, 2012
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Corporate debt securities (private placements)	$	1,712	Discounted cash flow	Yield/spread to U.S. Treasuries	1.1% - 8.5% (2.1%)
GMWB and GMAB embedded derivatives	$	833	Discounted cash flow	Utilization of guaranteed withdrawals (1)	0% - 56.4%
				Surrender rate	0% - 56.3%
				Market volatility (2)	5.6% - 21.2%
				Nonperformance risk (3)	97 bps

(1) The utilization of guaranteed withdrawals represents the percentage of policyholders that will begin withdrawing in any given year.

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

(3) 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, 2013
	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	3,573	$	—	$	—	$	3,676	$	3,676
Policy and certificate loans	754		—		2		686		688
Receivables	1,068		146		918		8		1,072
Restricted and segregated cash	2,262		2,262		—		—		2,262
Other investments and assets	382		—		318		69		387
Financial Liabilities
Future policy benefits and claims	$	14,548	$	—	$	—	$	15,578	$	15,578
Investment certificate reserves	3,687		—		—		3,383		3,383
Brokerage customer deposits	2,798		2,798		—		—		2,798
Separate account liabilities	3,342		—		3,342		—		3,342
Debt and other liabilities	3,042		177		3,117		121		3,415

	December 31, 2012
	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	3,609	$	—	$	—	$	3,694	$	3,694
Policy and certificate loans	754		—		2		725		727
Receivables	1,067		135		926		12		1,073
Restricted and segregated cash	2,538		2,538		—		—		2,538
Other investments and assets	390		—		333		60		393
Financial Liabilities
Future policy benefits and claims	$	14,701	$	—	$	—	$	15,982	$	15,982
Investment certificate reserves	3,494		—		—		3,494		3,494
Brokerage customer deposits	3,024		3,024		—		—		3,024
Separate account liabilities	3,362		—		3,362		—		3,362
Debt and other liabilities	3,033		145		3,109		142		3,396