ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 13-3317783 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Indicate by check mark: | Yes | No | |
• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | ý | ¨ | |
• whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). | ý | ¨ | |
• whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. |
Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) | ý |
Item | Description | Page | |
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6. | |||
• | challenges related to the Company’s current operating environment, including continuing uncertainty about the strength and speed of the recovery in the United States and other key economies and the impact of governmental stimulus and austerity initiatives, sovereign credit concerns, including the potential consequences associated with recent and further potential downgrades to the credit ratings of debt issued by the United States government, European sovereigns and other adverse developments on financial, commodity and credit markets and consumer spending and investment, including in respect of Europe, and the effect of these events on our returns in our life and property and casualty investment portfolios and our hedging costs associated with our variable annuities business; |
• | the risks, challenges and uncertainties associated with our March 21, 2012 announcement that we will focus on our Property and Casualty, Group Benefits and Mutual Fund businesses, place our Individual Annuity business into runoff and pursue sales or other strategic alternatives for the Individual Life, Woodbury Financial Services and Retirement Plans businesses and related implementation plans and goals and objectives, as set forth in our Current Report on Form 8-K dated March 21, 2012; |
• | the success of our initiatives relating to the realignment of our business, including the continuing realignment of our hedge program for our variable annuity business, and plans to improve the profitability and long-term growth prospects of our key divisions, including through opportunistic acquisitions or divestitures or other actions or initiatives, and the impact of regulatory or other constraints on our ability to complete these initiatives and deploy capital among our businesses as and when planned; |
• | market risks associated with our business, including changes in interest rates, credit spreads, equity prices, market volatility and foreign exchange rates, and implied volatility levels, as well as continuing uncertainty in key sectors such as the global real estate market; |
• | the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy; |
• | volatility in our earnings and potential material changes to our results resulting from our adjustment of our risk management program to emphasize protection of statutory surplus and cash flows; |
• | the impact on our statutory capital of various factors, including many that are outside the Company’s control, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results; |
• | risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments; |
• | the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the valuation of the Company’s financial instruments that could result in changes to investment valuations; |
• | the subjective determinations that underlie the Company’s evaluation of other-than-temporary impairments on available-for-sale securities; |
• | losses due to nonperformance or defaults by others; |
• | the potential for further acceleration of deferred policy acquisition cost amortization; |
• | the potential for further impairments of our goodwill or the potential for changes in valuation allowances against deferred tax assets; |
• | the possible occurrence of terrorist attacks and the Company’s ability to contain its exposure, including the effect of the absence or insufficiency of applicable terrorism legislation on coverage; |
• | the possibility of unfavorable loss development including with respect to long-tailed exposures; |
• | the difficulty in predicting the Company’s potential exposure for asbestos and environmental claims; |
• | the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses and cost and availability of reinsurance; |
• | weather and other natural physical events, including the severity and frequency of storms, hail, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns; |
• | the response of reinsurance companies under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses; |
• | actions by our competitors, many of which are larger or have greater financial resources than we do; |
• | the Company’s ability to distribute its products through distribution channels, both current and future; |
• | the cost and other effects of increased regulation as a result of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), which, among other effects, has resulted in the establishment of a newly created Financial Services Oversight Council with the power to designate “systemically important” institutions, will require central clearing of, and/or impose new margin and capital requirements on, derivatives transactions, and created a new “Federal Insurance Office” within the U.S. Department of the Treasury (“Treasury”); |
• | unfavorable judicial or legislative developments; |
• | the uncertain effects of emerging claim and coverage issues; |
• | the potential effect of other domestic and foreign regulatory developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels, including changes to statutory reserves and/or risk-based capital requirements related to secondary guarantees under universal life and variable annuity products or changes in U.S. federal or other tax laws that affect the relative attractiveness of our investment products; |
• | regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends, including dividends associated with the proceeds from a sale of any of our life businesses; |
• | the Company’s ability to effectively price its property and casualty policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines; |
• | the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event; |
• | the risk that our framework for managing business risks may not be effective in mitigating material risk and loss to the Company; |
• | the potential for difficulties arising from outsourcing relationships; |
• | the impact of potential changes in federal or state tax laws, including changes affecting the availability of the separate account dividend received deduction; |
• | the impact of potential changes in accounting principles and related financial reporting requirements; |
• | the Company’s ability to protect its intellectual property and defend against claims of infringement; and |
• | other factors described in such forward-looking statements. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(In millions, except for per share data) | 2012 | As currently reported (see Note 1) 2011 | 2012 | As currently reported (see Note 1) 2011 | |||||||||||
(Unaudited) | |||||||||||||||
Revenues | |||||||||||||||
Earned premiums | $ | 3,400 | $ | 3,545 | $ | 6,842 | $ | 7,064 | |||||||
Fee income | 1,114 | 1,219 | 2,248 | 2,428 | |||||||||||
Net investment income (loss): | |||||||||||||||
Securities available-for-sale and other | 1,097 | 1,104 | 2,167 | 2,212 | |||||||||||
Equity securities, trading | (1,687 | ) | (597 | ) | 1,179 | 206 | |||||||||
Total net investment income (loss) | (590 | ) | 507 | 3,346 | 2,418 | ||||||||||
Net realized capital gains (losses): | |||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (106 | ) | (31 | ) | (142 | ) | (150 | ) | |||||||
OTTI losses recognized in other comprehensive income (“OCI”) | 8 | 8 | 15 | 72 | |||||||||||
Net OTTI losses recognized in earnings | (98 | ) | (23 | ) | (127 | ) | (78 | ) | |||||||
Net realized capital gains (losses), excluding net OTTI losses recognized in earnings | 687 | 92 | (194 | ) | (256 | ) | |||||||||
Total net realized capital gains (losses) | 589 | 69 | (321 | ) | (334 | ) | |||||||||
Other revenues | 61 | 61 | 120 | 125 | |||||||||||
Total revenues | 4,574 | 5,401 | 12,235 | 11,701 | |||||||||||
Benefits, losses and expenses | |||||||||||||||
Benefits, losses and loss adjustment expenses | 3,621 | 3,976 | 6,659 | 7,154 | |||||||||||
Benefits, losses and loss adjustment expenses – returns credited on international variable annuities | (1,686 | ) | (597 | ) | 1,178 | 206 | |||||||||
Amortization of deferred policy acquisition costs and present value of future profits | 554 | 592 | 875 | 1,042 | |||||||||||
Insurance operating costs and other expenses | 1,309 | 1,452 | 2,621 | 2,806 | |||||||||||
Loss on extinguishment of debt | 910 | — | 910 | — | |||||||||||
Interest expense | 115 | 128 | 239 | 256 | |||||||||||
Total benefits, losses and expenses | 4,823 | 5,551 | 12,482 | 11,464 | |||||||||||
Income (loss) from continuing operations before income taxes | (249 | ) | (150 | ) | (247 | ) | 237 | ||||||||
Income tax benefit | (149 | ) | (263 | ) | (244 | ) | (215 | ) | |||||||
Income (loss) from continuing operations, net of tax | (100 | ) | 113 | (3 | ) | 452 | |||||||||
Income (loss) from discontinued operations, net of tax | (1 | ) | (80 | ) | (2 | ) | 82 | ||||||||
Net income (loss) | $ | (101 | ) | $ | 33 | $ | (5 | ) | $ | 534 | |||||
Preferred stock dividends | 11 | 11 | 21 | 21 | |||||||||||
Net income (loss) available to common shareholders | $ | (112 | ) | $ | 22 | $ | (26 | ) | $ | 513 | |||||
Income (loss) from continuing operations, net of tax, available to common shareholders per common share | |||||||||||||||
Basic | $ | (0.25 | ) | $ | 0.23 | $ | (0.05 | ) | $ | 0.97 | |||||
Diluted | $ | (0.25 | ) | $ | 0.21 | $ | (0.05 | ) | $ | 0.89 | |||||
Net income (loss) available to common shareholders per common share | |||||||||||||||
Basic | $ | (0.26 | ) | $ | 0.05 | $ | (0.06 | ) | $ | 1.15 | |||||
Diluted | $ | (0.26 | ) | $ | 0.05 | $ | (0.06 | ) | $ | 1.06 | |||||
Cash dividends declared per common share | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.20 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(In millions) | 2012 | As currently reported (see Note 1) 2011 | 2012 | As currently reported (see Note 1) 2011 | |||||||||||
(Unaudited) | |||||||||||||||
Comprehensive Income | |||||||||||||||
Net income (loss) | $ | (101 | ) | $ | 33 | $ | (5 | ) | $ | 534 | |||||
Other comprehensive income (loss): | |||||||||||||||
Change in net unrealized gain / loss on securities | 747 | 565 | 988 | 887 | |||||||||||
Change in OTTI losses recognized in other comprehensive income | 13 | (4 | ) | 5 | 1 | ||||||||||
Change in net gain / loss on cash-flow hedging instruments | 81 | 71 | 28 | 3 | |||||||||||
Change in foreign currency translation adjustments | 56 | 55 | (80 | ) | 26 | ||||||||||
Change in pension and other postretirement plan adjustments | 31 | 26 | 64 | 48 | |||||||||||
Total other comprehensive income | 928 | 713 | 1,005 | 965 | |||||||||||
Total comprehensive income | $ | 827 | $ | 746 | $ | 1,000 | $ | 1,499 |
(In millions, except for share and per share data) | June 30, 2012 | As currently reported (see Note 1) December 31, 2011 | |||||
(Unaudited) | |||||||
Assets | |||||||
Investments: | |||||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $80,840 and $78,978) (includes variable interest entity assets, at fair value, of $269 and $153) | $ | 85,227 | $ | 81,809 | |||
Fixed maturities, at fair value using the fair value option (includes variable interest entity assets of $338, as of June 30, 2012 and December 31, 2011) | 1,165 | 1,328 | |||||
Equity securities, trading, at fair value (cost of $30,385 and $32,928) | 29,215 | 30,499 | |||||
Equity securities, available-for-sale, at fair value (cost of $859 and $1,056) | 851 | 921 | |||||
Mortgage loans (net of allowances for loan losses of $87 and $102) | 6,875 | 5,728 | |||||
Policy loans, at outstanding balance | 1,956 | 2,001 | |||||
Limited partnerships and other alternative investments (includes variable interest entity assets of $7, as of June 30, 2012 and December 31, 2011) | 2,944 | 2,532 | |||||
Other investments | 1,548 | 2,394 | |||||
Short-term investments (includes variable interest entity assets, at fair value, of $9 as of June 30, 2012) | 5,154 | 7,736 | |||||
Total investments | 134,935 | 134,948 | |||||
Cash | 2,338 | 2,581 | |||||
Premiums receivable and agents’ balances, net | 3,537 | 3,446 | |||||
Reinsurance recoverables, net | 4,943 | 4,768 | |||||
Deferred policy acquisition costs and present value of future profits | 6,336 | 6,556 | |||||
Deferred income taxes, net | 1,808 | 2,131 | |||||
Goodwill | 1,006 | 1,006 | |||||
Property and equipment, net | 1,001 | 1,029 | |||||
Other assets | 3,411 | 2,274 | |||||
Separate account assets | 144,662 | 143,870 | |||||
Total assets | $ | 303,977 | $ | 302,609 | |||
Liabilities | |||||||
Reserve for future policy benefits and unpaid losses and loss adjustment expenses | $ | 40,980 | $ | 41,016 | |||
Other policyholder funds and benefits payable | 44,014 | 45,612 | |||||
Other policyholder funds and benefits payable – international variable annuities | 29,174 | 30,461 | |||||
Unearned premiums | 5,278 | 5,222 | |||||
Long-term debt | 7,125 | 6,216 | |||||
Consumer notes | 254 | 314 | |||||
Other liabilities (includes variable interest entity liabilities of $439 and $471) | 10,529 | 8,412 | |||||
Separate account liabilities | 144,662 | 143,870 | |||||
Total liabilities | 282,016 | 281,123 | |||||
Commitments and Contingencies (Note 9) | |||||||
Stockholders’ Equity | |||||||
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 575,000 shares issued, liquidation preference $1,000 per share | 556 | 556 | |||||
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 469,746,638 and 469,750,171 shares issued | 5 | 5 | |||||
Additional paid-in capital | 10,037 | 10,391 | |||||
Retained earnings | 10,887 | 11,001 | |||||
Treasury stock, at cost — 34,147,822 and 27,211,115 shares | (1,780 | ) | (1,718 | ) | |||
Accumulated other comprehensive income, net of tax | 2,256 | 1,251 | |||||
Total stockholders’ equity | 21,961 | 21,486 | |||||
Total liabilities and stockholders’ equity | $ | 303,977 | $ | 302,609 |
Six Months Ended June 30, | |||||||
(In millions, except for share data) | 2012 | As currently reported (see Note 1) 2011 | |||||
(Unaudited) | |||||||
Preferred Stock | $ | 556 | $ | 556 | |||
Common Stock | 5 | 5 | |||||
Additional Paid-in Capital, beginning of period | 10,391 | 10,448 | |||||
Repurchase of warrants | (300 | ) | — | ||||
Issuance of shares under incentive and stock compensation plans | (52 | ) | (45 | ) | |||
Tax expense on employee stock options and awards | (2 | ) | (10 | ) | |||
Additional Paid-in Capital, end of period | 10,037 | 10,393 | |||||
Retained Earnings, beginning of period | 11,001 | 10,509 | |||||
Net income (loss) | (5 | ) | 534 | ||||
Dividends on preferred stock | (21 | ) | (21 | ) | |||
Dividends declared on common stock | (88 | ) | (88 | ) | |||
Retained Earnings, end of period | 10,887 | 10,934 | |||||
Treasury Stock, at Cost, beginning of period | (1,718 | ) | (1,774 | ) | |||
Treasury stock acquired | (149 | ) | — | ||||
Issuance of shares under incentive and stock compensation plans from treasury stock | 94 | 76 | |||||
Return of shares under incentive and stock compensation plans and other to treasury stock | (7 | ) | (7 | ) | |||
Treasury Stock, at Cost, end of period | (1,780 | ) | (1,705 | ) | |||
Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period | 1,251 | (990 | ) | ||||
Total other comprehensive income | 1,005 | 965 | |||||
Accumulated Other Comprehensive Income (Loss), net of tax, end of period | 2,256 | (25 | ) | ||||
Total Stockholders’ Equity | $ | 21,961 | $ | 20,158 | |||
Preferred Shares Outstanding (in thousands) | 575 | 575 | |||||
Common Shares Outstanding, at beginning of period (in thousands) | 442,539 | 444,549 | |||||
Treasury stock acquired | (8,045 | ) | — | ||||
Issuance of shares under incentive and stock compensation plans | 1,435 | 972 | |||||
Return of shares under incentive and stock compensation plans and other to treasury stock | (330 | ) | (235 | ) | |||
Common Shares Outstanding, at end of period | 435,599 | 445,286 |
Six Months Ended June 30, | |||||||
(In millions) | 2012 | As currently reported (see Note 1) 2011 | |||||
(Unaudited) | |||||||
Operating Activities | |||||||
Net income (loss) | $ | (5 | ) | $ | 534 | ||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Amortization of deferred policy acquisition costs and present value of future profits | 875 | 1,042 | |||||
Additions to deferred policy acquisition costs and present value of future profits | (852 | ) | (844 | ) | |||
Change in reserve for future policy benefits and unpaid losses and loss adjustment expenses and unearned premiums | 27 | 651 | |||||
Change in reinsurance recoverables | (291 | ) | (33 | ) | |||
Change in receivables and other assets | (274 | ) | (339 | ) | |||
Change in payables and accruals | 615 | 87 | |||||
Change in accrued and deferred income taxes | (190 | ) | (420 | ) | |||
Net realized capital losses | 321 | 215 | |||||
Net disbursements from investment contracts related to policyholder funds—international variable annuities | (1,287 | ) | (556 | ) | |||
Net decrease in equity securities, trading | 1,284 | 542 | |||||
Depreciation and amortization | 250 | 384 | |||||
Loss on extinguishment of debt | 910 | — | |||||
Other operating activities, net | (147 | ) | (299 | ) | |||
Net cash provided by operating activities | 1,236 | 964 | |||||
Investing Activities | |||||||
Proceeds from the sale/maturity/prepayment of: | |||||||
Fixed maturities, available-for-sale | 25,121 | 18,076 | |||||
Fixed maturities, fair value option | 153 | 1 | |||||
Equity securities, available-for-sale | 165 | 122 | |||||
Mortgage loans | 159 | 228 | |||||
Partnerships | 84 | 106 | |||||
Payments for the purchase of: | |||||||
Fixed maturities, available-for-sale | (24,484 | ) | (17,295 | ) | |||
Fixed maturities, fair value option | — | (534 | ) | ||||
Equity securities, available-for-sale | (55 | ) | (192 | ) | |||
Mortgage loans | (1,307 | ) | (1,075 | ) | |||
Partnerships | (588 | ) | (128 | ) | |||
Proceeds from business sold | — | 278 | |||||
Derivatives, net | (816 | ) | (300 | ) | |||
Change in policy loans, net | 45 | (7 | ) | ||||
Other investing activities, net | (28 | ) | (87 | ) | |||
Net cash used for investing activities | (1,551 | ) | (807 | ) | |||
Financing Activities | |||||||
Deposits and other additions to investment and universal life-type contracts | 6,218 | 5,840 | |||||
Withdrawals and other deductions from investment and universal life-type contracts | (12,094 | ) | (11,701 | ) | |||
Net transfers from separate accounts related to investment and universal life-type contracts | 5,058 | 5,649 | |||||
Repayments at maturity or settlement of consumer notes | (60 | ) | (14 | ) | |||
Net increase (decrease) in securities loaned or sold under agreements to repurchase | 1,560 | — | |||||
Repurchase of warrants | (300 | ) | — | ||||
Repayment of long-term debt | (2,133 | ) | — | ||||
Proceeds from the issuance of long-term debt | 2,123 | — | |||||
Proceeds from net issuance of shares under incentive and stock compensation plans, excess tax benefit and other | 1 | 2 | |||||
Treasury stock acquired | (154 | ) | — | ||||
Dividends paid on preferred stock | (21 | ) | (21 | ) | |||
Dividends paid on common stock | (89 | ) | (64 | ) | |||
Changes in bank deposits and payments on bank advances | — | (10 | ) | ||||
Net cash provided by (used for) financing activities | 109 | (319 | ) | ||||
Foreign exchange rate effect on cash | (37 | ) | (2 | ) | |||
Net decrease in cash | (243 | ) | (164 | ) | |||
Cash – beginning of period | 2,581 | 2,062 | |||||
Cash – end of period | $ | 2,338 | $ | 1,898 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Income taxes paid (received) | $ | (446 | ) | $ | 246 | ||
Interest paid | $ | 241 | $ | 250 |
December 31, 2011 | |||||||||||
As previously reported | Effect of change | As currently reported | |||||||||
Deferred policy acquisition costs and present value of future profits | $ | 8,744 | $ | (2,188 | ) | $ | 6,556 | ||||
Deferred income taxes, net | $ | 1,398 | $ | 733 | $ | 2,131 | |||||
Other liabilities | $ | 8,443 | $ | (31 | ) | $ | 8,412 | ||||
Retained earnings | $ | 12,519 | $ | (1,518 | ) | $ | 11,001 | ||||
Accumulated other comprehensive income, net of tax | $ | 1,157 | $ | 94 | $ | 1,251 | |||||
Total stockholders’ equity | $ | 22,910 | $ | (1,424 | ) | $ | 21,486 |
Three Months Ended June 30, 2011 | |||||||||||
As previously reported | Effect of change | As currently reported | |||||||||
Amortization of deferred policy acquisition costs and present value of future profits | $ | 835 | $ | (243 | ) | $ | 592 | ||||
Insurance operating costs and other expenses | $ | 1,224 | $ | 228 | $ | 1,452 | |||||
Income (loss) from continuing operations before income taxes | $ | (165 | ) | $ | 15 | $ | (150 | ) | |||
Income tax expense (benefit) | $ | (269 | ) | $ | 6 | $ | (263 | ) | |||
Net income (loss) | $ | 24 | $ | 9 | $ | 33 | |||||
Net income available to common shareholders | $ | 13 | $ | 9 | $ | 22 | |||||
Income from continuing operations, net of tax, available to common shareholders per common share | |||||||||||
Basic | $ | 0.21 | $ | 0.02 | $ | 0.23 | |||||
Diluted | $ | 0.19 | $ | 0.02 | $ | 0.21 | |||||
Net income available to common shareholders per common share | |||||||||||
Basic | $ | 0.03 | $ | 0.02 | $ | 0.05 | |||||
Diluted | $ | 0.03 | $ | 0.02 | $ | 0.05 |
Six Months Ended June 30, 2011 | |||||||||||
As previously reported | Effect of change | As currently reported | |||||||||
Amortization of deferred policy acquisition costs and present value of future profits | $ | 1,499 | $ | (457 | ) | $ | 1,042 | ||||
Insurance operating costs and other expenses | $ | 2,344 | $ | 462 | $ | 2,806 | |||||
Income (loss) from continuing operations before income taxes | $ | 242 | $ | (5 | ) | $ | 237 | ||||
Income tax expense (benefit) | $ | (211 | ) | $ | (4 | ) | $ | (215 | ) | ||
Net income (loss) | $ | 535 | $ | (1 | ) | $ | 534 | ||||
Net income available to common shareholders | $ | 514 | $ | (1 | ) | $ | 513 | ||||
Income from continuing operations, net of tax, available to common shareholders per common share | |||||||||||
Basic | $ | 0.97 | $ | — | $ | 0.97 | |||||
Diluted | $ | 0.89 | $ | — | $ | 0.89 | |||||
Net income available to common shareholders per common share | |||||||||||
Basic | $ | 1.16 | $ | (0.01 | ) | $ | 1.15 | ||||
Diluted | $ | 1.06 | $ | — | $ | 1.06 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Tax expense (benefit) at U.S. Federal statutory rate | $ | (87 | ) | $ | (53 | ) | $ | (86 | ) | $ | 83 | ||||
Tax-exempt interest | (35 | ) | (38 | ) | (71 | ) | (75 | ) | |||||||
Dividends-received deduction | (30 | ) | (90 | ) | (63 | ) | (127 | ) | |||||||
Valuation allowance | 6 | (89 | ) | (14 | ) | (91 | ) | ||||||||
Other | (3 | ) | 7 | (10 | ) | (5 | ) | ||||||||
Income tax benefit | $ | (149 | ) | $ | (263 | ) | $ | (244 | ) | $ | (215 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
(In millions, except for per share data) | 2012 | 2011 | 2012 | 2011 | ||||||||||
Earnings | ||||||||||||||
Income (loss) from continuing operations | ||||||||||||||
Income (loss) from continuing operations, net of tax | $ | (100 | ) | $ | 113 | $ | (3 | ) | $ | 452 | ||||
Less: Preferred stock dividends | 11 | 11 | 21 | 21 | ||||||||||
Income (loss) from continuing operations, net of tax, available to common shareholders | (111 | ) | 102 | (24 | ) | 431 | ||||||||
Add: Dilutive effect of preferred stock dividends | — | — | — | — | ||||||||||
Income (loss) from continuing operations, net of tax, available to common shareholders and assumed conversion of preferred shares | $ | (111 | ) | $ | 102 | $ | (24 | ) | $ | 431 | ||||
Income (loss) from discontinued operations, net of tax | $ | (1 | ) | $ | (80 | ) | $ | (2 | ) | $ | 82 | |||
Net income (loss) | ||||||||||||||
Net income (loss) | $ | (101 | ) | $ | 33 | $ | (5 | ) | $ | 534 | ||||
Less: Preferred stock dividends | 11 | 11 | 21 | 21 | ||||||||||
Net income (loss) available to common shareholders | (112 | ) | 22 | (26 | ) | 513 | ||||||||
Add: Dilutive effect of preferred stock dividends | — | — | — | 21 | ||||||||||
Net income (loss) available to common shareholders and assumed conversion of preferred shares | $ | (112 | ) | $ | 22 | $ | (26 | ) | $ | 534 | ||||
Shares | ||||||||||||||
Weighted average common shares outstanding, basic | 438.2 | 445.1 | 439.4 | 444.9 | ||||||||||
Dilutive effect of warrants | — | 36.3 | — | 38.6 | ||||||||||
Dilutive effect of stock compensation plans | — | 1.0 | — | 1.4 | ||||||||||
Dilutive effect of mandatory convertible preferred shares | — | — | — | 20.7 | ||||||||||
Weighted average shares outstanding and dilutive potential common shares | 438.2 | 482.4 | 439.4 | 505.6 | ||||||||||
Earnings (loss) per common share | ||||||||||||||
Basic | ||||||||||||||
Income (loss) from continuing operations, net of tax, available to common shareholders | $ | (0.25 | ) | $ | 0.23 | $ | (0.05 | ) | $ | 0.97 | ||||
Income (loss) from discontinued operations, net of tax | (0.01 | ) | (0.18 | ) | (0.01 | ) | 0.18 | |||||||
Net income (loss) available to common shareholders | $ | (0.26 | ) | $ | 0.05 | $ | (0.06 | ) | $ | 1.15 | ||||
Diluted | ||||||||||||||
Income (loss) from continuing operations, net of tax, available to common shareholders | $ | (0.25 | ) | $ | 0.21 | $ | (0.05 | ) | $ | 0.89 | ||||
Income (loss) from discontinued operations, net of tax | (0.01 | ) | (0.16 | ) | (0.01 | ) | 0.17 | |||||||
Net income (loss) available to common shareholders | $ | (0.26 | ) | $ | 0.05 | $ | (0.06 | ) | $ | 1.06 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Net income (loss) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Property & Casualty Commercial | $ | 149 | $ | 118 | $ | 338 | $ | 441 | |||||||
Group Benefits | 35 | 41 | 53 | 52 | |||||||||||
Consumer Markets | (50 | ) | (172 | ) | 58 | (64 | ) | ||||||||
Individual Life | 36 | 46 | 55 | 64 | |||||||||||
Retirement Plans | (2 | ) | 27 | 16 | 32 | ||||||||||
Mutual Funds | 18 | 27 | 38 | 55 | |||||||||||
Life Other Operations | 406 | 261 | 199 | 334 | |||||||||||
Property & Casualty Other Operations | (15 | ) | (164 | ) | 12 | (143 | ) | ||||||||
Corporate | (678 | ) | (151 | ) | (774 | ) | (237 | ) | |||||||
Net income (loss) | $ | (101 | ) | $ | 33 | $ | (5 | ) | $ | 534 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Revenues | 2012 | 2011 | 2012 | 2011 | |||||||||||
Earned premiums, fees, and other considerations | |||||||||||||||
Property & Casualty Commercial | |||||||||||||||
Workers’ compensation | $ | 737 | $ | 685 | $ | 1,470 | $ | 1,350 | |||||||
Property | 126 | 134 | 251 | 269 | |||||||||||
Automobile | 146 | 145 | 292 | 291 | |||||||||||
Package business | 289 | 285 | 581 | 568 | |||||||||||
Liability | 136 | 134 | 277 | 269 | |||||||||||
Fidelity and surety | 51 | 54 | 103 | 109 | |||||||||||
Professional liability | 67 | 80 | 135 | 159 | |||||||||||
Total Property & Casualty Commercial | 1,552 | 1,517 | 3,109 | 3,015 | |||||||||||
Group Benefits | |||||||||||||||
Group disability | 439 | 516 | 882 | 993 | |||||||||||
Group life and accident | 478 | 511 | 957 | 1,028 | |||||||||||
Other | 49 | 49 | 99 | 99 | |||||||||||
Total Group Benefits | 966 | 1,076 | 1,938 | 2,120 | |||||||||||
Consumer Markets | |||||||||||||||
Automobile | 630 | 657 | 1,262 | 1,329 | |||||||||||
Homeowners | 274 | 282 | 551 | 566 | |||||||||||
Total Consumer Markets [1] | 904 | 939 | 1,813 | 1,895 | |||||||||||
Individual Life | |||||||||||||||
Variable life | 85 | 91 | 172 | 182 | |||||||||||
Universal life | 122 | 109 | 248 | 215 | |||||||||||
Term / Other life | 13 | 12 | 27 | 24 | |||||||||||
Total Individual Life | 220 | 212 | 447 | 421 | |||||||||||
Retirement Plans | |||||||||||||||
401(k) | 81 | 88 | 165 | 172 | |||||||||||
Government plans | 13 | 13 | 25 | 26 | |||||||||||
Total Retirement Plans | 94 | 101 | 190 | 198 | |||||||||||
Mutual Funds | |||||||||||||||
Non-Proprietary | 134 | 161 | 270 | 323 | |||||||||||
Proprietary | 14 | 14 | 29 | 30 | |||||||||||
Total Mutual Funds | 148 | 175 | 299 | 353 | |||||||||||
Life Other Operations | 587 | 690 | 1,199 | 1,384 | |||||||||||
Property & Casualty Other Operations | (2 | ) | — | (2 | ) | — | |||||||||
Corporate | 45 | 54 | 97 | 106 | |||||||||||
Total earned premiums, fees, and other considerations | 4,514 | 4,764 | 9,090 | 9,492 | |||||||||||
Net investment income: | |||||||||||||||
Securities available-for-sale and other | 1,097 | 1,104 | 2,167 | 2,212 | |||||||||||
Equity securities, trading | (1,687 | ) | (597 | ) | 1,179 | 206 | |||||||||
Total net investment income | (590 | ) | 507 | 3,346 | 2,418 | ||||||||||
Net realized capital gains (losses) | 589 | 69 | (321 | ) | (334 | ) | |||||||||
Other revenues | 61 | 61 | 120 | 125 | |||||||||||
Total revenues | $ | 4,574 | $ | 5,401 | $ | 12,235 | $ | 11,701 |
[1] | For the three months ended June 30, 2012 and 2011, AARP members accounted for earned premiums of $671 and $694, respectively. For the six months ended June 30, 2012 and 2011, AARP members accounted for earned premiums of $1.3 billion and $1.4 billion, respectively. |
Level 1 | Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. Level 1 securities include highly liquid U.S. Treasuries, money market funds and exchange traded equity securities, open-ended mutual funds reported in separate account assets and derivative securities. |
Level 2 | Observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities. Most fixed maturities and preferred stocks, including those reported in separate account assets, are model priced by vendors using observable inputs and are classified within Level 2. |
Level 3 | Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Level 3 securities include less liquid securities, guaranteed product embedded and reinsurance derivatives and other complex derivative securities. Because Level 3 fair values, by their nature, contain one or more significant unobservable inputs as there is little or no observable market for these assets and liabilities, considerable judgment is used to determine the Level 3 fair values. Level 3 fair values represent the Company’s best estimate of an amount that could be realized in a current market exchange absent actual market exchanges. |
June 30, 2012 | |||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets accounted for at fair value on a recurring basis | |||||||||||||||
Fixed maturities, AFS | |||||||||||||||
Asset-backed securities (“ABS”) | $ | 3,002 | $ | — | $ | 2,679 | $ | 323 | |||||||
Collateralized debt obligations ("CDOs") | 3,037 | — | 2,137 | 900 | |||||||||||
Commercial mortgage-backed securities ("CMBS") | 6,346 | — | 5,360 | 986 | |||||||||||
Corporate | 42,983 | — | 41,178 | 1,805 | |||||||||||
Foreign government/government agencies | 3,598 | — | 3,543 | 55 | |||||||||||
States, municipalities and political subdivisions (“Municipal”) | 14,125 | — | 13,475 | 650 | |||||||||||
Residential mortgage-backed securities ("RMBS") | 6,981 | — | 5,773 | 1,208 | |||||||||||
U.S. Treasuries | 5,155 | 1,080 | 4,075 | — | |||||||||||
Total fixed maturities | 85,227 | 1,080 | 78,220 | 5,927 | |||||||||||
Fixed maturities, FVO | 1,165 | — | 672 | 493 | |||||||||||
Equity securities, trading | 29,215 | 1,902 | 27,313 | — | |||||||||||
Equity securities, AFS | 851 | 328 | 437 | 86 | |||||||||||
Derivative assets | |||||||||||||||
Credit derivatives | (19 | ) | — | (29 | ) | 10 | |||||||||
Equity derivatives | 28 | — | — | 28 | |||||||||||
Foreign exchange derivatives | 293 | — | 293 | — | |||||||||||
Interest rate derivatives | 310 | — | 222 | 88 | |||||||||||
U.S. guaranteed minimum withdrawal benefit ("GMWB") hedging instruments | 213 | — | 11 | 202 | |||||||||||
U.S. macro hedge program | 70 | — | — | 70 | |||||||||||
International program hedging instruments | 565 | — | 362 | 203 | |||||||||||
Other derivative contracts | 26 | — | — | 26 | |||||||||||
Total derivative assets [1] | 1,486 | — | 859 | 627 | |||||||||||
Short-term investments | 5,154 | 309 | 4,845 | — | |||||||||||
Reinsurance recoverable for U.S. GMWB | 376 | — | — | 376 | |||||||||||
Separate account assets [2] | 141,110 | 102,608 | 37,167 | 1,335 | |||||||||||
Total assets accounted for at fair value on a recurring basis | $ | 264,584 | $ | 106,227 | $ | 149,513 | $ | 8,844 | |||||||
Percentage of level to total | 100 | % | 40 | % | 57 | % | 3 | % | |||||||
Liabilities accounted for at fair value on a recurring basis | |||||||||||||||
Other policyholder funds and benefits payable | |||||||||||||||
U.S guaranteed withdrawal benefits | $ | (2,203 | ) | $ | — | $ | — | $ | (2,203 | ) | |||||
International guaranteed withdrawal benefits | (53 | ) | — | — | (53 | ) | |||||||||
International other guaranteed living benefits | (4 | ) | — | — | (4 | ) | |||||||||
Equity linked notes | (10 | ) | — | — | (10 | ) | |||||||||
Total other policyholder funds and benefits payable | (2,270 | ) | — | — | (2,270 | ) | |||||||||
Derivative liabilities | |||||||||||||||
Credit derivatives | (494 | ) | — | (45 | ) | (449 | ) | ||||||||
Equity derivatives | 25 | — | — | 25 | |||||||||||
Foreign exchange derivatives | 213 | — | 213 | — | |||||||||||
Interest rate derivatives | (622 | ) | — | (468 | ) | (154 | ) | ||||||||
U.S. GMWB hedging instruments | 597 | — | 43 | 554 | |||||||||||
U.S. macro hedge program | 110 | — | — | 110 | |||||||||||
International program hedging instruments | 23 | — | 65 | (42 | ) | ||||||||||
Total derivative liabilities [3] | (148 | ) | — | (192 | ) | 44 | |||||||||
Other Liabilities | (29 | ) | — | — | (29 | ) | |||||||||
Consumer notes [4] | (4 | ) | — | — | (4 | ) | |||||||||
Total liabilities accounted for at fair value on a recurring basis | $ | (2,451 | ) | $ | — | $ | (192 | ) | $ | (2,259 | ) |
December 31, 2011 | |||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets accounted for at fair value on a recurring basis | |||||||||||||||
Fixed maturities, AFS | |||||||||||||||
ABS | $ | 3,153 | $ | — | $ | 2,792 | $ | 361 | |||||||
CDOs | 2,487 | — | 2,119 | 368 | |||||||||||
CMBS | 6,951 | — | 6,363 | 588 | |||||||||||
Corporate | 44,011 | — | 41,756 | 2,255 | |||||||||||
Foreign government/government agencies | 2,161 | — | 2,112 | 49 | |||||||||||
States, municipalities and political subdivisions (“Municipal”) | 13,260 | — | 12,823 | 437 | |||||||||||
RMBS | 5,757 | — | 4,694 | 1,063 | |||||||||||
U.S. Treasuries | 4,029 | 750 | 3,279 | — | |||||||||||
Total fixed maturities | 81,809 | 750 | 75,938 | 5,121 | |||||||||||
Fixed maturities, FVO | 1,328 | — | 833 | 495 | |||||||||||
Equity securities, trading | 30,499 | 1,967 | 28,532 | — | |||||||||||
Equity securities, AFS | 921 | 352 | 476 | 93 | |||||||||||
Derivative assets | |||||||||||||||
Credit derivatives | (24 | ) | — | (11 | ) | (13 | ) | ||||||||
Equity derivatives | 31 | — | — | 31 | |||||||||||
Foreign exchange derivatives | 519 | — | 519 | — | |||||||||||
Interest rate derivatives | 195 | — | 147 | 48 | |||||||||||
U.S. GMWB hedging instruments | 494 | — | 11 | 483 | |||||||||||
U.S. macro hedge program | 357 | — | — | 357 | |||||||||||
International program hedging instruments | 731 | — | 692 | 39 | |||||||||||
Other derivative contracts | 28 | — | — | 28 | |||||||||||
Total derivative assets [1] | 2,331 | — | 1,358 | 973 | |||||||||||
Short-term investments | 7,736 | 750 | 6,986 | — | |||||||||||
Reinsurance recoverable for U.S. GMWB | 443 | — | — | 443 | |||||||||||
Separate account assets [2] | 139,432 | 101,644 | 36,757 | 1,031 | |||||||||||
Total assets accounted for at fair value on a recurring basis | $ | 264,499 | $ | 105,463 | $ | 150,880 | $ | 8,156 | |||||||
Percentage of level to total | 100 | % | 40 | % | 57 | % | 3 | % |
December 31, 2011 | |||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Liabilities accounted for at fair value on a recurring basis | |||||||||||||||
Other policyholder funds and benefits payable | |||||||||||||||
U.S guaranteed withdrawal benefits | $ | (2,538 | ) | $ | — | $ | — | $ | (2,538 | ) | |||||
International guaranteed withdrawal benefits | (66 | ) | — | — | (66 | ) | |||||||||
International other guaranteed living benefits | (5 | ) | — | — | (5 | ) | |||||||||
Equity linked notes | (9 | ) | — | — | (9 | ) | |||||||||
Total other policyholder funds and benefits payable | (2,618 | ) | — | — | (2,618 | ) | |||||||||
Derivative liabilities | |||||||||||||||
Credit derivatives | (573 | ) | — | (25 | ) | (548 | ) | ||||||||
Equity derivatives | 9 | — | — | 9 | |||||||||||
Foreign exchange derivatives | 134 | — | 134 | — | |||||||||||
Interest rate derivatives | (527 | ) | — | (421 | ) | (106 | ) | ||||||||
U.S. GMWB hedging instruments | 400 | — | — | 400 | |||||||||||
International program hedging instruments | 19 | — | 23 | (4 | ) | ||||||||||
Total derivative liabilities [3] | (538 | ) | — | (289 | ) | (249 | ) | ||||||||
Other Liabilities | (9 | ) | — | — | (9 | ) | |||||||||
Consumer notes [4] | (4 | ) | — | — | (4 | ) | |||||||||
Total liabilities accounted for at fair value on a recurring basis | $ | (3,169 | ) | $ | — | $ | (289 | ) | $ | (2,880 | ) |
[1] | Includes over-the-counter derivative instruments in a net asset value position which may require the counterparty to pledge collateral to the Company. As of June 30, 2012 and December 31, 2011, $337 and $1.4 billion, respectively, of cash collateral liability was netted against the derivative asset value in the Condensed Consolidated Balance Sheet and is excluded from the table above. See footnote 3 below for derivative liabilities. |
[2] | Approximately $3.6 billion and $4.0 billion of investment sales receivable that are not subject to fair value accounting are excluded as of June 30, 2012 and December 31, 2011, respectively. |
[3] | Includes over-the-counter derivative instruments in a net negative market value position (derivative liability). In the Level 3 roll-forward table included below in this Note 4, the derivative asset and liability are referred to as “freestanding derivatives” and are presented on a net basis. |
[4] | Represents embedded derivatives associated with non-funding agreement-backed consumer equity linked notes. |
Level 2 | The fair values of most of the Company’s Level 2 investments are determined by management after considering prices received from third party pricing services. These investments include most fixed maturities and preferred stocks, including those reported in separate account assets. |
• | ABS, CDOs, CMBS and RMBS – Primary inputs also include monthly payment information, collateral performance, which varies by vintage year and includes delinquency rates, collateral valuation loss severity rates, collateral refinancing assumptions, credit default swap indices and, for ABS and RMBS, estimated prepayment rates. |
• | Corporates, including investment grade private placements – Primary inputs also include observations of credit default swap curves related to the issuer. |
• | Foreign government/government agencies—Primary inputs also include observations of credit default swap curves related to the issuer and political events in emerging markets. |
• | Municipals – Primary inputs also include Municipal Securities Rulemaking Board reported trades and material event notices, and issuer financial statements. |
• | Short-term investments – Primary inputs also include material event notices and new issue money market rates. |
• | Equity securities, trading – Consist of investments in mutual funds. Primary inputs include net asset values obtained from third party pricing services. |
• | Credit derivatives – Primary inputs include the swap yield curve and credit default swap curves. |
• | Foreign exchange derivatives – Primary inputs include the swap yield curve, currency spot and forward rates, and cross currency basis curves. |
• | Interest rate derivatives – Primary input is the swap yield curve. |
Level 3 | Most of the Company’s securities classified as Level 3 include less liquid securities such as lower quality ABS, CMBS, commercial real estate (“CRE”) CDOs and RMBS primarily backed by below-prime loans. Securities included in level 3 are primarily valued based on broker prices or broker spreads, without adjustments. Primary inputs for non-broker priced investments, including structured securities, are consistent with the typical inputs used in Level 2 measurements noted above, but are Level 3 due to their less liquid markets. Additionally, certain long-dated securities are priced based on third party pricing services, including municipal securities, foreign government/government agencies, bank loans and below investment grade private placement securities. Primary inputs for these long-dated securities are consistent with the typical inputs used in Level 1 and Level 2 measurements noted above, but include benchmark interest rate or credit spread assumptions that are not observable in the marketplace. Also included in Level 3 are certain derivative instruments that either have significant unobservable inputs or are valued based on broker quotations. Significant inputs for these derivative contracts primarily include the typical inputs used in the Level 1 and Level 2 measurements noted above; but also include equity and interest rate volatility and swap yield curves beyond observable limits. |
Securities | As of June 30, 2012 | ||||||||||
Assets accounted for at fair value on a recurring basis | Fair Value | Predominant Valuation Method | Significant Unobservable Input | Range of Values – Unobservable Inputs (Weighted Average) [1] | Impact of Increase in Input on Fair Value [2] | ||||||
CMBS | $ | 986 | Discounted cash flows | Spread (encompasses prepayment, default risk and loss severity) | 300bps - 3,136bps (1,087bps) | Decrease | |||||
Corporate [3] | 802 | Discounted cash flows | Spread | 87bps - 790bps (344bps) | Decrease | ||||||
Municipal | 650 | Discounted cash flows | Spread | 88bps - 496bps (237bps) | Decrease | ||||||
RMBS | 1,208 | Discounted cash flows | Spread | 54bps - 1,900bps (635bps) | Decrease | ||||||
Constant prepayment rate | 0% -12% (2%) | Decrease [4] | |||||||||
Constant default rate | 1% - 28% (9%) | Decrease | |||||||||
Loss severity | 45% - 100% (77%) | Decrease |
[1] | The weighted average is determined based on the fair value of the securities. |
[2] | Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table above. |
[3] | Level 3 corporate securities excludes those for which the Company bases fair value on broker quotations as discussed below. |
[4] | Decrease for above market rate coupons and increase for below market rate coupons. |
Freestanding Derivatives | As of June 30, 2012 | ||||||||||
Fair Value | Predominant Valuation Method | Significant Unobservable Input | Range of Values – Unobservable Inputs | Impact of Increase in Input on Fair Value [1] | |||||||
Equity derivatives | |||||||||||
Equity options | $ | 53 | Option model | Equity volatility | 14% – 25% | Increase | |||||
Interest rate derivative | |||||||||||
Interest rate swaps | (90 | ) | Discounted cash flows | Swap curve beyond 30 years | 2.5% | Increase | |||||
Long interest rate swaptions | 24 | Option model | Interest rate volatility | 22% – 39% | Increase | ||||||
U.S. GMWB hedging instruments | |||||||||||
Equity options | 428 | Option model | Equity volatility | 25% – 34% | Increase | ||||||
Customized swaps | 328 | Discounted cash flows | Equity volatility | 10% – 50% | Increase | ||||||
U.S. macro hedge program | |||||||||||
Equity options | 180 | Option model | Equity volatility | 23% – 33% | Increase | ||||||
International program hedging | |||||||||||
Equity options | 192 | Option model | Equity volatility | 20% – 30% | Increase | ||||||
Short interest rate swaptions | (31 | ) | Option model | Interest rate volatility | 27% – 40% | Decrease |
[1] | Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. Changes are based on long positions, unless otherwise noted. Changes in fair value will be inversely impacted for short positions. |
• | risk-free rates as represented by the euro dollar futures, LIBOR deposits and swap rates to derive forward curve rates; |
• | market implied volatility assumptions for each underlying index based primarily on a blend of observed market “implied volatility” data; |
• | correlations of historical returns across underlying well known market indices based on actual observed returns over the ten years preceding the valuation date; and |
• | three years of history for fund indexes compared to separate account fund regression. |
Significant Unobservable Input | Range of Values-Unobservable Inputs | Impact of Increase in Input on Fair Value Measurement [1] | |
Withdrawal Utilization[2] | 20% to 100% | Increase | |
Withdrawal Rates [2] | 0% to 8% | Increase | |
Lapse Rates [3] | 0% to 75% | Decrease | |
Reset Elections [4] | 20% to 75% | Increase | |
Equity Volatility [5] | 10% to 50% | Increase |
[1] | Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. |
[2] | Ranges represent assumed cumulative percentages of policyholders taking withdrawals and the annual amounts withdrawn. |
[3] | Range represents assumed annual percentages of full surrender of the underlying variable annuity contracts across all policy durations for in force business. |
[4] | Range represents assumed cumulative percentages of policyholders that would elect to reset their guaranteed benefit base. |
[5] | Range represents implied market volatilities for equity indices based on multiple pricing sources. |
Fixed Maturities, AFS | |||||||||||||||||||||||||||||||||||
Assets | ABS | CDOs | CMBS | Corporate | Foreign govt./govt. agencies | Municipal | RMBS | Total Fixed Maturities, AFS | Fixed Maturities, FVO | ||||||||||||||||||||||||||
Fair value as of March 31, 2012 | $ | 299 | $ | 903 | $ | 1,001 | $ | 1,994 | $ | 55 | $ | 625 | $ | 1,109 | $ | 5,986 | $ | 508 | |||||||||||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||||||||||
Included in net income [1], [2], [6] | (1 | ) | (3 | ) | (29 | ) | — | — | — | 17 | (16 | ) | (6 | ) | |||||||||||||||||||||
Included in OCI [3] | 24 | 13 | 36 | (13 | ) | 2 | 35 | 21 | 118 | — | |||||||||||||||||||||||||
Purchases | 25 | — | 1 | 31 | — | 63 | 203 | 323 | — | ||||||||||||||||||||||||||
Settlements | (3 | ) | (13 | ) | (38 | ) | (33 | ) | (1 | ) | — | (37 | ) | (125 | ) | — | |||||||||||||||||||
Sales | (3 | ) | — | (71 | ) | (1 | ) | (1 | ) | (65 | ) | (105 | ) | (246 | ) | (9 | ) | ||||||||||||||||||
Transfers into Level 3 [4] | — | — | 151 | 120 | — | — | — | 271 | — | ||||||||||||||||||||||||||
Transfers out of Level 3 [4] | (18 | ) | — | (65 | ) | (293 | ) | — | (8 | ) | — | (384 | ) | — | |||||||||||||||||||||
Fair value as of June 30, 2012 | $ | 323 | $ | 900 | $ | 986 | $ | 1,805 | $ | 55 | $ | 650 | $ | 1,208 | $ | 5,927 | $ | 493 | |||||||||||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2012 [2] [7] | $ | (2 | ) | $ | (3 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (5 | ) | $ | 20 |
Freestanding Derivatives [5] | |||||||||||||||||||||||||||||||||||
Assets (Liabilities) | Equity Securities, AFS | Credit | Equity | Interest Rate | U.S. GMWB Hedging | U.S. Macro Hedge Program | Intl. Program Hedging Instr. | Other Contracts | Total Free- Standing Derivatives [5] | ||||||||||||||||||||||||||
Fair value as of March 31, 2012 | $ | 89 | $ | (474 | ) | $ | 39 | $ | (57 | ) | $ | 594 | $ | 173 | $ | 115 | $ | 27 | $ | 417 | |||||||||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||||||||||
Included in net income [1], [2], [6] | 8 | 36 | 3 | (11 | ) | 139 | 7 | 58 | (1 | ) | 231 | ||||||||||||||||||||||||
Included in OCI [3] | (4 | ) | — | — | 2 | — | — | — | — | 2 | |||||||||||||||||||||||||
Purchases | 12 | — | 11 | — | 23 | — | (12 | ) | — | 22 | |||||||||||||||||||||||||
Settlements | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Sales | (19 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Transfers into Level 3 [4] | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Transfers out of Level 3 [4] | — | (1 | ) | — | — | — | — | — | — | (1 | ) | ||||||||||||||||||||||||
Fair value as of June 30, 2012 | $ | 86 | $ | (439 | ) | $ | 53 | $ | (66 | ) | $ | 756 | $ | 180 | $ | 161 | $ | 26 | $ | 671 | |||||||||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2012 [2] [7] | $ | 8 | $ | 36 | $ | 3 | $ | (11 | ) | $ | 139 | $ | 7 | $ | 55 | $ | (1 | ) | $ | 228 |
Assets | Reinsurance Recoverable for U.S. GMWB | Separate Accounts | |||||
Fair value as of March 31, 2012 | $ | 308 | $ | 1,346 | |||
Total realized/unrealized gains (losses) | |||||||
Included in net income [1], [2], [6] | 62 | 16 | |||||
Included in OCI [3] | — | — | |||||
Purchases | — | 24 | |||||
Settlements | 6 | — | |||||
Sales | — | (58 | ) | ||||
Transfers into Level 3 [4] | — | 14 | |||||
Transfers out of Level 3 [4] | — | (7 | ) | ||||
Fair value as of June 30, 2012 | $ | 376 | $ | 1,335 | |||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2012 [2] [7] | $ | 62 | $ | 4 |
Other Policyholder Funds and Benefits Payable | |||||||||||||||||||||||||||
Liabilities | U.S. Guaranteed Withdrawal Benefits | International Guaranteed Living Benefits | International Other Living Benefits | Equity Linked Notes | Total Other Policyholder Funds and Benefits Payable | Other Liabilities | Consumer Notes | ||||||||||||||||||||
Fair value as of March 31, 2012 | $ | (1,683 | ) | $ | (37 | ) | $ | (1 | ) | $ | (10 | ) | $ | (1,731 | ) | $ | (21 | ) | $ | (4 | ) | ||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||
Included in net income [1], [2], [6] | (484 | ) | (14 | ) | (2 | ) | — | (500 | ) | (8 | ) | — | |||||||||||||||
Included in OCI [3] | — | — | — | — | — | — | — | ||||||||||||||||||||
Settlements | (36 | ) | (2 | ) | (1 | ) | — | (39 | ) | — | — | ||||||||||||||||
Fair value as of June 30, 2012 | $ | (2,203 | ) | $ | (53 | ) | $ | (4 | ) | $ | (10 | ) | $ | (2,270 | ) | $ | (29 | ) | $ | (4 | ) | ||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2012 [2] [7] | $ | (484 | ) | $ | (14 | ) | $ | (2 | ) | $ | — | $ | (500 | ) | $ | (8 | ) | $ | — |
Fixed Maturities, AFS | |||||||||||||||||||||||||||||||||||
Assets | ABS | CDOs | CMBS | Corporate | Foreign govt./govt. agencies | Municipal | RMBS | Total Fixed Maturities, AFS | Fixed Maturities, FVO | ||||||||||||||||||||||||||
Fair value as of January 1, 2012 | $ | 361 | $ | 368 | $ | 588 | $ | 2,255 | $ | 49 | $ | 437 | $ | 1,063 | $ | 5,121 | $ | 495 | |||||||||||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||||||||||
Included in net income [1], [2], [6] | (1 | ) | (1 | ) | (34 | ) | (3 | ) | — | — | 24 | (15 | ) | 21 | |||||||||||||||||||||
Included in OCI [3] | 33 | 76 | 59 | (3 | ) | 2 | 24 | 47 | 238 | — | |||||||||||||||||||||||||
Purchases | 25 | — | 13 | 165 | 7 | 275 | 283 | 768 | — | ||||||||||||||||||||||||||
Settlements | (38 | ) | (23 | ) | (70 | ) | (53 | ) | (2 | ) | — | (70 | ) | (256 | ) | — | |||||||||||||||||||
Sales | (15 | ) | (3 | ) | (71 | ) | (54 | ) | (1 | ) | (65 | ) | (139 | ) | (348 | ) | (23 | ) | |||||||||||||||||
Transfers into Level 3 [4] | — | 483 | 601 | 322 | — | — | — | 1,406 | — | ||||||||||||||||||||||||||
Transfers out of Level 3 [4] | (42 | ) | — | (100 | ) | (824 | ) | — | (21 | ) | — | (987 | ) | — | |||||||||||||||||||||
Fair value as of June 30, 2012 | $ | 323 | $ | 900 | $ | 986 | $ | 1,805 | $ | 55 | $ | 650 | $ | 1,208 | $ | 5,927 | $ | 493 | |||||||||||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2012 [2] [7] | $ | (2 | ) | $ | (3 | ) | $ | (1 | ) | $ | — | $ | — | $ | — | $ | (3 | ) | $ | (9 | ) | $ | 35 |
Freestanding Derivatives [5] | |||||||||||||||||||||||||||||||||||
Assets (Liabilities) | Equity Securities, AFS | Credit | Equity | Interest Rate | U.S. GMWB Hedging | U.S. Macro Hedge Program | Intl. Program Hedging Instr. | Other Contracts | Total Free- Standing Derivatives [5] | ||||||||||||||||||||||||||
Fair value as of January 1, 2012 | $ | 93 | $ | (561 | ) | $ | 40 | $ | (58 | ) | $ | 883 | $ | 357 | $ | 35 | $ | 28 | $ | 724 | |||||||||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||||||||||
Included in net income [1], [2], [6] | 11 | 128 | (14 | ) | (10 | ) | (173 | ) | (177 | ) | 143 | (2 | ) | (105 | ) | ||||||||||||||||||||
Included in OCI [3] | (4 | ) | — | — | 2 | — | — | — | — | 2 | |||||||||||||||||||||||||
Purchases | 14 | — | 46 | — | 23 | — | (65 | ) | — | 4 | |||||||||||||||||||||||||
Settlements | — | (5 | ) | (19 | ) | — | — | — | 40 | — | 16 | ||||||||||||||||||||||||
Sales | (28 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Transfers into Level 3 [4] | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Transfers out of Level 3 [4] | — | (1 | ) | — | — | 23 | — | 8 | — | 30 | |||||||||||||||||||||||||
Fair value as of June 30, 2012 | $ | 86 | $ | (439 | ) | $ | 53 | $ | (66 | ) | $ | 756 | $ | 180 | $ | 161 | $ | 26 | $ | 671 | |||||||||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2012 [2] [7] | $ | 8 | $ | 116 | $ | (2 | ) | $ | (10 | ) | $ | (173 | ) | $ | (176 | ) | $ | 140 | $ | (2 | ) | $ | (107 | ) |
Assets | Reinsurance Recoverable for U.S. GMWB | Separate Accounts | |||||
Fair value as of January 1, 2012 | $ | 443 | $ | 1,031 | |||
Total realized/unrealized gains (losses) | |||||||
Included in net income [1], [2], [6] | (81 | ) | 33 | ||||
Included in OCI [3] | — | — | |||||
Purchases | — | 239 | |||||
Settlements | 14 | — | |||||
Sales | — | (401 | ) | ||||
Transfers into Level 3 [4] | — | 454 | |||||
Transfers out of Level 3 [4] | — | (21 | ) | ||||
Fair value as of June 30, 2012 | $ | 376 | $ | 1,335 | |||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2012 [2] [7] | $ | (81 | ) | $ | 10 |
Other Policyholder Funds and Benefits Payable | |||||||||||||||||||||||||||
Liabilities | U.S. Guaranteed Withdrawal Benefits | International Guaranteed Living Benefits | International Other Living Benefits | Equity Linked Notes | Total Other Policyholder Funds and Benefits Payable | Other Liabilities | Consumer Notes | ||||||||||||||||||||
Fair value as of January 1, 2012 | $ | (2,538 | ) | $ | (66 | ) | $ | (5 | ) | $ | (9 | ) | $ | (2,618 | ) | $ | (9 | ) | $ | (4 | ) | ||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||
Included in net income [1], [2], [6] | 412 | 16 | 3 | (1 | ) | 430 | (20 | ) | — | ||||||||||||||||||
Included in OCI [3] | — | 1 | — | — | 1 | — | — | ||||||||||||||||||||
Settlements | (77 | ) | (4 | ) | (2 | ) | — | (83 | ) | — | — | ||||||||||||||||
Fair value as of June 30, 2012 | $ | (2,203 | ) | $ | (53 | ) | $ | (4 | ) | $ | (10 | ) | $ | (2,270 | ) | $ | (29 | ) | $ | (4 | ) | ||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2012 [2] [7] | $ | 412 | $ | 16 | $ | 3 | $ | (1 | ) | $ | 430 | $ | (20 | ) | $ | — |
Fixed Maturities, AFS | |||||||||||||||||||||||||||||||||||
Assets | ABS | CDOs | CMBS | Corporate | Foreign govt./govt. agencies | Municipal | RMBS | Total Fixed Maturities, AFS | Fixed Maturities, FVO | ||||||||||||||||||||||||||
Fair value as of March 31, 2011 | $ | 446 | $ | 2,674 | $ | 741 | $ | 2,096 | $ | 63 | $ | 276 | $ | 1,124 | $ | 7,420 | $ | 579 | |||||||||||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||||||||||
Included in net income [1], [2], [6] | (1 | ) | — | 13 | (6 | ) | — | — | — | 6 | (22 | ) | |||||||||||||||||||||||
Included in OCI [3] | 17 | 10 | 34 | 27 | 1 | 9 | (16 | ) | 82 | — | |||||||||||||||||||||||||
Purchases | — | — | — | 35 | — | — | 25 | 60 | — | ||||||||||||||||||||||||||
Settlements | (7 | ) | (43 | ) | (20 | ) | (42 | ) | (1 | ) | — | (33 | ) | (146 | ) | (1 | ) | ||||||||||||||||||
Sales | (2 | ) | (66 | ) | (193 | ) | (61 | ) | (3 | ) | (2 | ) | — | (327 | ) | — | |||||||||||||||||||
Transfers into Level 3 [4] | 19 | — | 79 | 78 | — | — | 14 | 190 | — | ||||||||||||||||||||||||||
Transfers out of Level 3 [4] | (20 | ) | — | — | (17 | ) | (9 | ) | (3 | ) | — | (49 | ) | — | |||||||||||||||||||||
Fair value as of June 30, 2011 | $ | 452 | $ | 2,575 | $ | 654 | $ | 2,110 | $ | 51 | $ | 280 | $ | 1,114 | $ | 7,236 | $ | 556 | |||||||||||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2011 [2] [7] | $ | (1 | ) | $ | — | $ | 13 | $ | (6 | ) | $ | — | $ | — | $ | — | $ | 6 | $ | (22 | ) |
Freestanding Derivatives [5] | |||||||||||||||||||||||||||||||||||
Assets (Liabilities) | Equity Securities, AFS | Credit | Equity | Interest Rate | U.S. GMWB Hedging | U.S. Macro Hedge Program | Intl. Program Hedging Instr. | Other Contracts | Total Free- Standing Derivatives [5] | ||||||||||||||||||||||||||
Fair value as of March 31, 2011 | $ | 80 | $ | (382 | ) | $ | 5 | $ | 9 | $ | 488 | $ | 123 | $ | 2 | $ | 31 | $ | 276 | ||||||||||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||||||||||
Included in net income [1], [2], [6] | — | (17 | ) | 1 | (2 | ) | 60 | (17 | ) | (1 | ) | (1 | ) | 23 | |||||||||||||||||||||
Included in OCI [3] | 2 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Purchases | 24 | — | — | — | — | 180 | 5 | — | 185 | ||||||||||||||||||||||||||
Settlements | — | (3 | ) | — | — | — | (35 | ) | — | — | (38 | ) | |||||||||||||||||||||||
Sales | (1 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Transfers into Level 3 [4] | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Transfers out of Level 3 [4] | (5 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Fair value as of June 30, 2011 | $ | 100 | $ | (402 | ) | $ | 6 | $ | 7 | $ | 548 | $ | 251 | $ | 6 | $ | 30 | $ | 446 | ||||||||||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2011 [2] [7] | $ | — | $ | (19 | ) | $ | 1 | $ | (2 | ) | $ | 52 | $ | — | $ | (3 | ) | $ | (1 | ) | $ | 28 |
Assets | Reinsurance Recoverable for U.S. GMWB | Separate Accounts | |||||
Fair value as of March 31, 2011 | $ | 224 | $ | 1,207 | |||
Total realized/unrealized gains (losses) | |||||||
Included in net income [1], [2], [6] | 4 | 5 | |||||
Included in OCI [3] | — | — | |||||
Purchases | — | (94 | ) | ||||
Settlements | 9 | — | |||||
Sales | — | (22 | ) | ||||
Transfers into Level 3 [4] | — | 3 | |||||
Transfers out of Level 3 [4] | — | (31 | ) | ||||
Fair value as of June 30, 2011 | $ | 237 | $ | 1,068 | |||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2011 [2] [7] | $ | 4 | $ | 4 |
Other Policyholder Funds and Benefits Payable | |||||||||||||||||||||||||||
Liabilities | U.S. Guaranteed Withdrawal Benefits | International Guaranteed Living Benefits | International Other Living Benefits | Equity Linked Notes | Total Other Policyholder Funds and Benefits Payable | Other Liabilities | Consumer Notes | ||||||||||||||||||||
Fair value as of March 31, 2011 | $ | (1,301 | ) | $ | (23 | ) | $ | 3 | $ | (10 | ) | $ | (1,331 | ) | $ | (51 | ) | $ | (5 | ) | |||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||
Included in net income [1], [2], [6] | (80 | ) | (4 | ) | (2 | ) | — | (86 | ) | 7 | 1 | ||||||||||||||||
Included in OCI [3] | — | — | — | — | — | — | — | ||||||||||||||||||||
Settlements | (39 | ) | (3 | ) | (1 | ) | — | (43 | ) | — | — | ||||||||||||||||
Fair value as of June 30, 2011 | $ | (1,420 | ) | $ | (30 | ) | $ | — | $ | (10 | ) | $ | (1,460 | ) | $ | (44 | ) | $ | (4 | ) | |||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2011 [2] [7] | $ | (80 | ) | $ | (4 | ) | $ | (2 | ) | $ | — | $ | (86 | ) | $ | 7 | $ | 1 |
Fixed Maturities, AFS | |||||||||||||||||||||||||||||||||||
Assets | ABS | CDOs | CMBS | Corporate | Foreign govt./govt. agencies | Municipal | RMBS | Total Fixed Maturities, AFS | Fixed Maturities, FVO | ||||||||||||||||||||||||||
Fair value as of January 1, 2011 | $ | 477 | $ | 2,581 | $ | 689 | $ | 2,129 | $ | 56 | $ | 272 | $ | 1,285 | $ | 7,489 | $ | 522 | |||||||||||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||||||||||
Included in net income [1], [2], [6] | (6 | ) | (15 | ) | 11 | (28 | ) | — | — | (9 | ) | (47 | ) | 36 | |||||||||||||||||||||
Included in OCI [3] | 37 | 123 | 147 | 19 | 1 | 9 | 25 | 361 | — | ||||||||||||||||||||||||||
Purchases | — | — | — | 52 | 2 | — | 25 | 79 | — | ||||||||||||||||||||||||||
Settlements | (18 | ) | (78 | ) | (30 | ) | (73 | ) | (2 | ) | — | (67 | ) | (268 | ) | (2 | ) | ||||||||||||||||||
Sales | (2 | ) | (66 | ) | (315 | ) | (134 | ) | (5 | ) | (2 | ) | (16 | ) | (540 | ) | — | ||||||||||||||||||
Transfers into Level 3 [4] | 68 | 30 | 152 | 273 | 11 | 4 | 14 | 552 | — | ||||||||||||||||||||||||||
Transfers out of Level 3 [4] | (104 | ) | — | — | (128 | ) | (12 | ) | (3 | ) | (143 | ) | (390 | ) | — | ||||||||||||||||||||
Fair value as of June 30, 2011 | $ | 452 | $ | 2,575 | $ | 654 | $ | 2,110 | $ | 51 | $ | 280 | $ | 1,114 | $ | 7,236 | $ | 556 | |||||||||||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2011 [2] [7] | $ | (6 | ) | $ | (15 | ) | $ | 11 | $ | (28 | ) | $ | — | $ | — | $ | (9 | ) | $ | (47 | ) | $ | 36 |
Freestanding Derivatives [5] | |||||||||||||||||||||||||||||||||||
Assets (Liabilities) | Equity Securities, AFS | Credit | Equity | Interest Rate | U.S. GMWB Hedging | U.S. Macro Hedge Program | Intl. Program Hedging Instr. | Other Contracts | Total Free- Standing Derivatives [5] | ||||||||||||||||||||||||||
Fair value as of January 1, 2011 | $ | 154 | $ | (390 | ) | $ | 4 | $ | (53 | ) | $ | 600 | $ | 203 | $ | 5 | $ | 32 | $ | 401 | |||||||||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||||||||||
Included in net income [1], [2], [6] | (10 | ) | (6 | ) | 2 | (5 | ) | (59 | ) | (97 | ) | (4 | ) | (2 | ) | (171 | ) | ||||||||||||||||||
Included in OCI [3] | 1 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Purchases | 37 | 1 | — | 64 | 23 | 180 | 5 | — | 273 | ||||||||||||||||||||||||||
Settlements | — | (7 | ) | — | 1 | (16 | ) | (35 | ) | — | — | (57 | ) | ||||||||||||||||||||||
Sales | (1 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Transfers into Level 3 [4] | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Transfers out of Level 3 [4] | (81 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Fair value as of June 30, 2011 | $ | 100 | $ | (402 | ) | $ | 6 | $ | 7 | $ | 548 | $ | 251 | $ | 6 | $ | 30 | $ | 446 | ||||||||||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2011 [2] [7] | $ | (10 | ) | $ | (8 | ) | $ | 2 | $ | (3 | ) | $ | (61 | ) | $ | (80 | ) | $ | (5 | ) | $ | (2 | ) | $ | (157 | ) |
Assets | Reinsurance Recoverable for U.S. GMWB | Separate Accounts | |||||
Fair value as of January 1, 2011 | $ | 280 | $ | 1,247 | |||
Total realized/unrealized gains (losses) | |||||||
Included in net income [1], [2], [6] | (61 | ) | 24 | ||||
Included in OCI [3] | — | — | |||||
Purchases | — | 34 | |||||
Settlements | 18 | — | |||||
Sales | — | (169 | ) | ||||
Transfers into Level 3 [4] | — | 12 | |||||
Transfers out of Level 3 [4] | — | (80 | ) | ||||
Fair value as of June 30, 2011 | $ | 237 | $ | 1,068 | |||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2011 [2] [7] | $ | (61 | ) | $ | 1 |
Other Policyholder Funds and Benefits Payable | |||||||||||||||||||||||||||
Liabilities | U.S. Guaranteed Withdrawal Benefits | International Guaranteed Living Benefits | International Other Living Benefits | Equity Linked Notes | Total Other Policyholder Funds and Benefits Payable | Other Liabilities | Consumer Notes | ||||||||||||||||||||
Fair value as of January 1, 2011 | $ | (1,611 | ) | $ | (36 | ) | $ | 3 | $ | (9 | ) | $ | (1,653 | ) | $ | (37 | ) | $ | (5 | ) | |||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||
Included in net income [1], [2], [6] | 268 | 11 | (1 | ) | — | 278 | (7 | ) | 1 | ||||||||||||||||||
Included in OCI [3] | — | — | — | — | — | — | — | ||||||||||||||||||||
Settlements | (77 | ) | (5 | ) | (2 | ) | (1 | ) | (85 | ) | — | — | |||||||||||||||
Fair value as of June 30, 2011 | $ | (1,420 | ) | $ | (30 | ) | $ | — | $ | (10 | ) | $ | (1,460 | ) | $ | (44 | ) | $ | (4 | ) | |||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2011 [2] [7] | $ | 268 | $ | 11 | $ | (1 | ) | $ | — | $ | 278 | $ | (7 | ) | $ | 1 |
[1] | The Company classifies gains and losses on GMWB reinsurance derivatives and Guaranteed Living Benefit embedded derivatives as unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract basis the realized gains (losses) for these derivatives and embedded derivatives. |
[2] | All amounts in these rows are reported in net realized capital gains/losses. The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. All amounts are before income taxes and amortization DAC. |
[3] | All amounts are before income taxes and amortization of DAC. |
[4] | Transfers in and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs. |
[5] | Derivative instruments are reported in this table on a net basis for asset/(liability) positions and reported in the Condensed Consolidated Balance Sheet in other investments and other liabilities. |
[6] | Includes both market and non-market impacts in deriving realized and unrealized gains (losses). |
[7] | Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Assets | |||||||||||||||
Fixed maturities, FVO | |||||||||||||||
Corporate | $ | (1 | ) | $ | 2 | $ | — | $ | 14 | ||||||
CRE CDOs | (10 | ) | (25 | ) | 9 | 21 | |||||||||
Foreign government | 20 | 17 | (29 | ) | 11 | ||||||||||
Other liabilities | |||||||||||||||
Credit-linked notes | (8 | ) | 7 | (20 | ) | (7 | ) | ||||||||
Total realized capital gains (losses) | $ | 1 | $ | 1 | $ | (40 | ) | $ | 39 |
As of | |||||||
June 30, 2012 | December 31, 2011 | ||||||
Assets | |||||||
Fixed maturities, FVO | |||||||
ABS | $ | 65 | $ | 65 | |||
CRE CDOs | 229 | 225 | |||||
Corporate | 266 | 272 | |||||
Foreign government | 605 | 766 | |||||
Total fixed maturities, FVO | $ | 1,165 | $ | 1,328 | |||
Other liabilities | |||||||
Credit-linked notes [1] | $ | 29 | $ | 9 |
[1] | As of June 30, 2012 and December 31, 2011, the outstanding principal balance of the notes was $243. |
June 30, 2012 | December 31, 2011 | ||||||||||||||||
Fair Value Hierarchy Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||
Assets | |||||||||||||||||
Policy loans | Level 3 | $ | 1,956 | $ | 2,156 | $ | 2,001 | $ | 2,153 | ||||||||
Mortgage loans | Level 3 | 6,875 | 7,211 | 5,728 | 5,977 | ||||||||||||
Liabilities | |||||||||||||||||
Other policyholder funds and benefits payable [1] | Level 3 | $ | 10,077 | $ | 10,207 | $ | 10,343 | $ | 11,238 | ||||||||
Senior notes [2] | Level 2 | 6,025 | 6,387 | 4,481 | 4,623 | ||||||||||||
Junior subordinated debentures [2] | Level 2 | 1,100 | 1,173 | 500 | 498 | ||||||||||||
Private placement junior subordinated debentures [2] | Level 3 | — | — | 1,235 | 1,932 | ||||||||||||
Consumer notes [3] | Level 3 | 250 | 257 | 310 | 305 |
[1] | Excludes guarantees on variable annuities, group accident and health and universal life insurance contracts, including corporate owned life insurance. |
[2] | Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are included in short-term debt. |
[3] | Excludes amounts carried at fair value and included in disclosures above. |
• | Fair value for policy loans and consumer notes were estimated using discounted cash flow calculations using current interest rates adjusted for estimated loan durations. |
• | Fair values for mortgage loans were estimated using discounted cash flow calculations based on current lending rates for similar type loans. Current lending rates reflect changes in credit spreads and the remaining terms of the loans. |
• | Fair values for other policyholder funds and benefits payable, not carried at fair value, are estimated based on the cash surrender values of the underlying policies or by estimating future cash flows discounted at current interest rates adjusted for credit risk. |
• | Fair values for senior notes and junior subordinated debentures are determined using the market approach based on reported trades, benchmark interest rates and issuer spread for the Company which may consider credit default swaps. |
• | Fair values for private placement junior subordinated debentures are based primarily on market quotations from independent third party brokers. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
OTTI losses recognized in OCI | $ | (8 | ) | $ | (8 | ) | $ | (15 | ) | $ | (72 | ) | |||
Changes in fair value and/or sales | 24 | 3 | 34 | 67 | |||||||||||
Tax and deferred acquisition costs | (3 | ) | 1 | (14 | ) | 6 | |||||||||
Change in OTTI losses recognized in OCI | $ | 13 | $ | (4 | ) | $ | 5 | $ | 1 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(Before-tax) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Gross gains on sales | $ | 246 | $ | 261 | $ | 505 | $ | 322 | |||||||
Gross losses on sales | (159 | ) | (98 | ) | (256 | ) | (231 | ) | |||||||
Net OTTI losses recognized in earnings | (98 | ) | (23 | ) | (127 | ) | (78 | ) | |||||||
Valuation allowances on mortgage loans | — | 26 | 1 | 23 | |||||||||||
Japanese fixed annuity contract hedges, net [1] | 2 | 6 | (18 | ) | (11 | ) | |||||||||
Periodic net coupon settlements on credit derivatives/Japan | 4 | (2 | ) | (1 | ) | (9 | ) | ||||||||
Results of variable annuity hedge program | |||||||||||||||
GMWB derivatives, net | (115 | ) | (33 | ) | 70 | 23 | |||||||||
U.S. macro hedge program | 6 | (17 | ) | (183 | ) | (101 | ) | ||||||||
Total U.S. program | (109 | ) | (50 | ) | (113 | ) | (78 | ) | |||||||
International program | 753 | 52 | (466 | ) | (267 | ) | |||||||||
Total results of variable annuity hedge program | 644 | 2 | (579 | ) | (345 | ) | |||||||||
Other, net [2] | (50 | ) | (103 | ) | 154 | (5 | ) | ||||||||
Net realized capital gains (losses) | $ | 589 | $ | 69 | $ | (321 | ) | $ | (334 | ) |
[1] | Relates to the Japanese fixed annuity product (adjustment of product liability for changes in spot currency exchange rates, related derivative hedging instruments, excluding net period coupon settlements, and Japan FVO securities). |
[2] | Primarily consists of gains and losses on non-qualifying derivatives and fixed maturities, FVO, Japan 3Win related foreign currency swaps, and other investment gains and losses. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(Before-tax) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Balance as of beginning of period | $ | (1,530 | ) | $ | (2,003 | ) | $ | (1,676 | ) | $ | (2,072 | ) | |||
Additions for credit impairments recognized on [1]: | |||||||||||||||
Securities not previously impaired | (4 | ) | (8 | ) | (16 | ) | (36 | ) | |||||||
Securities previously impaired | (5 | ) | (8 | ) | (10 | ) | (25 | ) | |||||||
Reductions for credit impairments previously recognized on: | |||||||||||||||
Securities that matured or were sold during the period | 128 | 83 | 288 | 192 | |||||||||||
Securities due to an increase in expected cash flows | 4 | 3 | 7 | 8 | |||||||||||
Balance as of end of period | $ | (1,407 | ) | $ | (1,933 | ) | $ | (1,407 | ) | $ | (1,933 | ) |
[1] | These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations. |
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Non-Credit OTTI [1] | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Non-Credit OTTI [1] | ||||||||||||||||||||||||||||||
ABS | $ | 3,190 | $ | 59 | $ | (247 | ) | $ | 3,002 | $ | (3 | ) | $ | 3,430 | $ | 55 | $ | (332 | ) | $ | 3,153 | $ | (7 | ) | |||||||||||||||
CDOs [2] | 3,311 | 45 | (268 | ) | 3,037 | (38 | ) | 2,819 | 16 | (348 | ) | 2,487 | (44 | ) | |||||||||||||||||||||||||
CMBS | 6,368 | 317 | (339 | ) | 6,346 | (17 | ) | 7,192 | 271 | (512 | ) | 6,951 | (31 | ) | |||||||||||||||||||||||||
Corporate [2] | 39,393 | 4,050 | (460 | ) | 42,983 | (2 | ) | 41,161 | 3,661 | (739 | ) | 44,011 | — | ||||||||||||||||||||||||||
Foreign govt./govt. agencies | 3,476 | 135 | (13 | ) | 3,598 | — | 2,030 | 141 | (10 | ) | 2,161 | — | |||||||||||||||||||||||||||
Municipal | 13,068 | 1,100 | (43 | ) | 14,125 | — | 12,557 | 775 | (72 | ) | 13,260 | — | |||||||||||||||||||||||||||
RMBS | 7,084 | 283 | (386 | ) | 6,981 | (108 | ) | 5,961 | 252 | (456 | ) | 5,757 | (105 | ) | |||||||||||||||||||||||||
U.S. Treasuries | 4,950 | 215 | (10 | ) | 5,155 | — | 3,828 | 203 | (2 | ) | 4,029 | — | |||||||||||||||||||||||||||
Total fixed maturities, AFS | 80,840 | 6,204 | (1,766 | ) | 85,227 | (168 | ) | 78,978 | 5,374 | (2,471 | ) | 81,809 | (187 | ) | |||||||||||||||||||||||||
Equity securities, AFS | 859 | 71 | (79 | ) | 851 | — | 1,056 | 68 | (203 | ) | 921 | — | |||||||||||||||||||||||||||
Total AFS securities | $ | 81,699 | $ | 6,275 | $ | (1,845 | ) | $ | 86,078 | $ | (168 | ) | $ | 80,034 | $ | 5,442 | $ | (2,674 | ) | $ | 82,730 | $ | (187 | ) |
[1] | Represents the amount of cumulative non-credit OTTI losses recognized in OCI on securities that also had credit impairments. These losses are included in gross unrealized losses as of June 30, 2012 and December 31, 2011. |
[2] | Gross unrealized gains (losses) exclude the change in fair value of bifurcated embedded derivative features of certain securities. Changes in fair value are recorded in net realized capital gains (losses). |
June 30, 2012 | |||||||
Contractual Maturity | Amortized Cost | Fair Value | |||||
One year or less | $ | 2,240 | $ | 2,277 | |||
Over one year through five years | 15,331 | 16,139 | |||||
Over five years through ten years | 15,641 | 16,905 | |||||
Over ten years | 27,675 | 30,540 | |||||
Subtotal | 60,887 | 65,861 | |||||
Mortgage-backed and asset-backed securities | 19,953 | 19,366 | |||||
Total fixed maturities, AFS | $ | 80,840 | $ | 85,227 |
June 30, 2012 | |||||||||||||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Unrealized Losses | Amortized Cost | Fair Value | Unrealized Losses | Amortized Cost | Fair Value | Unrealized Losses | |||||||||||||||||||||||||||
ABS | $ | 168 | $ | 167 | $ | (1 | ) | $ | 1,110 | $ | 864 | $ | (246 | ) | $ | 1,278 | $ | 1,031 | $ | (247 | ) | ||||||||||||||
CDOs [1] | 3 | 2 | (1 | ) | 3,208 | 2,891 | (267 | ) | 3,211 | 2,893 | (268 | ) | |||||||||||||||||||||||
CMBS | 400 | 366 | (34 | ) | 2,143 | 1,838 | (305 | ) | 2,543 | 2,204 | (339 | ) | |||||||||||||||||||||||
Corporate | 2,493 | 2,418 | (75 | ) | 2,576 | 2,191 | (385 | ) | 5,069 | 4,609 | (460 | ) | |||||||||||||||||||||||
Foreign govt./govt. agencies | 557 | 546 | (11 | ) | 30 | 28 | (2 | ) | 587 | 574 | (13 | ) | |||||||||||||||||||||||
Municipal | 699 | 689 | (10 | ) | 232 | 199 | (33 | ) | 931 | 888 | (43 | ) | |||||||||||||||||||||||
RMBS | 131 | 131 | — | 1,288 | 902 | (386 | ) | 1,419 | 1,033 | (386 | ) | ||||||||||||||||||||||||
U.S. Treasuries | 1,913 | 1,903 | (10 | ) | — | — | — | 1,913 | 1,903 | (10 | ) | ||||||||||||||||||||||||
Total fixed maturities | 6,364 | 6,222 | (142 | ) | 10,587 | 8,913 | (1,624 | ) | 16,951 | 15,135 | (1,766 | ) | |||||||||||||||||||||||
Equity securities | 183 | 178 | (5 | ) | 369 | 295 | (74 | ) | 552 | 473 | (79 | ) | |||||||||||||||||||||||
Total securities in an unrealized loss | $ | 6,547 | $ | 6,400 | $ | (147 | ) | $ | 10,956 | $ | 9,208 | $ | (1,698 | ) | $ | 17,503 | $ | 15,608 | $ | (1,845 | ) |
December 31, 2011 | |||||||||||||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Unrealized Losses | Amortized Cost | Fair Value | Unrealized Losses | Amortized Cost | Fair Value | Unrealized Losses | |||||||||||||||||||||||||||
ABS | $ | 629 | $ | 594 | $ | (35 | ) | $ | 1,169 | $ | 872 | $ | (297 | ) | $ | 1,798 | $ | 1,466 | $ | (332 | ) | ||||||||||||||
CDOs | 81 | 59 | (22 | ) | 2,709 | 2,383 | (326 | ) | 2,790 | 2,442 | (348 | ) | |||||||||||||||||||||||
CMBS | 1,297 | 1,194 | (103 | ) | 2,144 | 1,735 | (409 | ) | 3,441 | 2,929 | (512 | ) | |||||||||||||||||||||||
Corporate [1] | 4,388 | 4,219 | (169 | ) | 3,268 | 2,627 | (570 | ) | 7,656 | 6,846 | (739 | ) | |||||||||||||||||||||||
Foreign govt./govt. agencies | 218 | 212 | (6 | ) | 51 | 47 | (4 | ) | 269 | 259 | (10 | ) | |||||||||||||||||||||||
Municipal | 299 | 294 | (5 | ) | 627 | 560 | (67 | ) | 926 | 854 | (72 | ) | |||||||||||||||||||||||
RMBS | 415 | 330 | (85 | ) | 1,206 | 835 | (371 | ) | 1,621 | 1,165 | (456 | ) | |||||||||||||||||||||||
U.S. Treasuries | 343 | 341 | (2 | ) | — | — | — | 343 | 341 | (2 | ) | ||||||||||||||||||||||||
Total fixed maturities | 7,670 | 7,243 | (427 | ) | 11,174 | 9,059 | (2,044 | ) | 18,844 | 16,302 | (2,471 | ) | |||||||||||||||||||||||
Equity securities | 167 | 138 | (29 | ) | 439 | 265 | (174 | ) | 606 | 403 | (203 | ) | |||||||||||||||||||||||
Total securities in an unrealized loss | $ | 7,837 | $ | 7,381 | $ | (456 | ) | $ | 11,613 | $ | 9,324 | $ | (2,218 | ) | $ | 19,450 | $ | 16,705 | $ | (2,674 | ) |
[1] | Unrealized losses exclude the change in fair value of bifurcated embedded derivative features of certain securities. Changes in fair value are recorded in net realized capital gains (losses). |
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||||
Amortized Cost [1] | Valuation Allowance | Carrying Value | Amortized Cost [1] | Valuation Allowance | Carrying Value | ||||||||||||||||||
Commercial | $ | 6,962 | $ | (87 | ) | $ | 6,875 | $ | 5,830 | $ | (102 | ) | $ | 5,728 | |||||||||
Total mortgage loans | $ | 6,962 | $ | (87 | ) | $ | 6,875 | $ | 5,830 | $ | (102 | ) | $ | 5,728 |
[1] | Amortized cost represents carrying value prior to valuation allowances, if any. |
2012 | 2011 | ||||||
Balance as of January 1 | $ | (102 | ) | $ | (155 | ) | |
(Additions)/Reversals | 1 | (27 | ) | ||||
Deductions | 14 | 11 | |||||
Balance as of June 30 | $ | (87 | ) | $ | (171 | ) |
Commercial Mortgage Loans Credit Quality | |||||||||||
June 30, 2012 | December 31, 2011 | ||||||||||
Loan-to-value | Carrying Value | Avg. Debt-Service Coverage Ratio | Carrying Value | Avg. Debt-Service Coverage Ratio | |||||||
Greater than 80% | $ | 566 | 1.45x | $ | 707 | 1.45x | |||||
65% - 80% | 2,811 | 1.76x | 2,384 | 1.60x | |||||||
Less than 65% | 3,498 | 2.39x | 2,637 | 2.40x | |||||||
Total commercial mortgage loans | $ | 6,875 | 2.05x | $ | 5,728 | 1.94x |
Mortgage Loans by Region | |||||||||||||
June 30, 2012 | December 31, 2011 | ||||||||||||
Carrying Value | Percent of Total | Carrying Value | Percent of Total | ||||||||||
East North Central | $ | 148 | 2.2 | % | $ | 94 | 1.6 | % | |||||
Middle Atlantic | 499 | 7.3 | % | 508 | 8.9 | % | |||||||
Mountain | 124 | 1.8 | % | 125 | 2.2 | % | |||||||
New England | 336 | 4.9 | % | 294 | 5.1 | % | |||||||
Pacific | 1,976 | 28.7 | % | 1,690 | 29.5 | % | |||||||
South Atlantic | 1,434 | 20.9 | % | 1,149 | 20.1 | % | |||||||
West North Central | 16 | 0.2 | % | 30 | 0.5 | % | |||||||
West South Central | 414 | 6.0 | % | 224 | 3.9 | % | |||||||
Other [1] | 1,928 | 28.0 | % | 1,614 | 28.2 | % | |||||||
Total mortgage loans | $ | 6,875 | 100.0 | % | $ | 5,728 | 100.0 | % |
[1] | Primarily represents loans collateralized by multiple properties in various regions. |
Mortgage Loans by Property Type | |||||||||||||
June 30, 2012 | December 31, 2011 | ||||||||||||
Carrying Value | Percent of Total | Carrying Value | Percent of Total | ||||||||||
Commercial | |||||||||||||
Agricultural | $ | 179 | 2.6 | % | $ | 249 | 4.3 | % | |||||
Industrial | 2,065 | 30.1 | % | 1,747 | 30.5 | % | |||||||
Lodging | 91 | 1.3 | % | 93 | 1.6 | % | |||||||
Multifamily | 1,391 | 20.2 | % | 1,070 | 18.7 | % | |||||||
Office | 1,404 | 20.4 | % | 1,078 | 18.8 | % | |||||||
Retail | 1,494 | 21.7 | % | 1,234 | 21.5 | % | |||||||
Other | 251 | 3.7 | % | 257 | 4.6 | % | |||||||
Total mortgage loans | $ | 6,875 | 100.0 | % | $ | 5,728 | 100.0 | % |
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||||
Total Assets | Total Liabilities [1] | Maximum Exposure to Loss [2] | Total Assets | Total Liabilities [1] | Maximum Exposure to Loss [2] | ||||||||||||||||||
CDOs [3] | $ | 459 | $ | 438 | $ | 17 | $ | 491 | $ | 471 | $ | 29 | |||||||||||
Investment funds [4] | 157 | — | 157 | — | — | — | |||||||||||||||||
Limited partnerships | 7 | 1 | 6 | 7 | — | 7 | |||||||||||||||||
Total | $ | 623 | $ | 439 | $ | 180 | $ | 498 | $ | 471 | $ | 36 |
[1] | Included in other liabilities in the Company’s Condensed Consolidated Balance Sheets. |
[2] | The maximum exposure to loss represents the maximum loss amount that the Company could recognize as a reduction in net investment income or as a realized capital loss and is the cost basis of the Company’s investment. |
[3] | Total assets included in fixed maturities, AFS, and fixed maturities, FVO, in the Company’s Condensed Consolidated Balance Sheets. |
[4] | Total assets included in fixed maturities, AFS, and short-term investments in the Company’s Condensed Consolidated Balance Sheets. |
Notional Amount | Fair Value | ||||||||||||||
June 30, 2012 | December 31, 2011 | June 30, 2012 | December 31, 2011 | ||||||||||||
Customized swaps | $ | 8,142 | $ | 8,389 | $ | 329 | $ | 385 | |||||||
Equity swaps, options, and futures | 5,621 | 5,320 | 385 | 498 | |||||||||||
Interest rate swaps and futures | 4,390 | 2,697 | 96 | 11 | |||||||||||
Total | $ | 18,153 | $ | 16,406 | $ | 810 | $ | 894 |
Notional Amount | Fair Value | ||||||||||||||
June 30, 2012 | December 31, 2011 | June 30, 2012 | December 31, 2011 | ||||||||||||
Equity futures | $ | — | $ | 59 | $ | — | $ | — | |||||||
Equity options | 5,278 | 6,760 | 180 | 357 | |||||||||||
Total | $ | 5,278 | $ | 6,819 | $ | 180 | $ | 357 |
Notional Amount | Fair Value | ||||||||||||||
June 30, 2012 | December 31, 2011 | June 30, 2012 | December 31, 2011 | ||||||||||||
Currency forwards [1] | $ | 15,565 | $ | 8,622 | $ | 33 | $ | 446 | |||||||
Currency options | 10,842 | 7,357 | 142 | 127 | |||||||||||
Equity futures | 4,052 | 3,835 | — | — | |||||||||||
Equity options | 4,111 | 1,565 | 178 | 74 | |||||||||||
Equity swaps [2] | 1,910 | 392 | 21 | (8 | ) | ||||||||||
Interest rate futures | 983 | 739 | — | — | |||||||||||
Interest rate swaps and swaptions | 26,523 | 11,216 | 214 | 111 | |||||||||||
Total | $ | 63,986 | $ | 33,726 | $ | 588 | $ | 750 |
[1] | As of June 30, 2012 and December 31, 2011 net notional amounts are $5.0 billion and $7.2 billion, respectively, which include $10.3 billion and $7.9 billion, respectively, related to long positions and $5.3 billion and $0.7 billion, respectively, related to short positions. |
[2] | As of June 30, 2012 the net notional amount is $0.3 billion, which includes $1.1 billion related to long positions and $0.8 billion related to short positions. As of December 31, 2011 the net notional amount of $0.4 billion related to long positions only. |
Net Derivatives | Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||||
Notional Amount | Fair Value | Fair Value | Fair Value | ||||||||||||||||||||||||||||
Hedge Designation/ Derivative Type | Jun 30, 2012 | Dec 31, 2011 | Jun 30, 2012 | Dec 31, 2011 | Jun 30, 2012 | Dec 31, 2011 | Jun 30, 2012 | Dec 31, 2011 | |||||||||||||||||||||||
Cash flow hedges | |||||||||||||||||||||||||||||||
Interest rate swaps | $ | 8,286 | $ | 8,652 | $ | 328 | $ | 329 | $ | 328 | $ | 329 | $ | — | $ | — | |||||||||||||||
Foreign currency swaps | 195 | 291 | (17 | ) | 6 | 7 | 30 | (24 | ) | (24 | ) | ||||||||||||||||||||
Total cash flow hedges | 8,481 | 8,943 | 311 | 335 | 335 | 359 | (24 | ) | (24 | ) | |||||||||||||||||||||
Fair value hedges | |||||||||||||||||||||||||||||||
Interest rate swaps | 1,091 | 1,007 | (75 | ) | (78 | ) | — | — | (75 | ) | (78 | ) | |||||||||||||||||||
Foreign currency swaps | 185 | 677 | 57 | (39 | ) | 57 | 63 | — | (102 | ) | |||||||||||||||||||||
Total fair value hedges | 1,276 | 1,684 | (18 | ) | (117 | ) | 57 | 63 | (75 | ) | (180 | ) | |||||||||||||||||||
Non-qualifying strategies | |||||||||||||||||||||||||||||||
Interest rate contracts | |||||||||||||||||||||||||||||||
Interest rate swaps, caps, floors, and futures | 9,335 | 10,144 | (565 | ) | (583 | ) | 595 | 531 | (1,160 | ) | (1,114 | ) | |||||||||||||||||||
Foreign exchange contracts | |||||||||||||||||||||||||||||||
Foreign currency swaps and forwards | 436 | 380 | 4 | (12 | ) | 22 | 6 | (18 | ) | (18 | ) | ||||||||||||||||||||
Japan 3Win foreign currency swaps | 2,054 | 2,054 | 63 | 184 | 63 | 184 | — | — | |||||||||||||||||||||||
Japanese fixed annuity hedging instruments | 1,907 | 1,945 | 399 | 514 | 415 | 540 | (16 | ) | (26 | ) | |||||||||||||||||||||
Credit contracts | |||||||||||||||||||||||||||||||
Credit derivatives that purchase credit protection | 1,103 | 1,721 | 9 | 36 | 24 | 56 | (15 | ) | (20 | ) | |||||||||||||||||||||
Credit derivatives that assume credit risk [1] | 3,870 | 2,952 | (527 | ) | (648 | ) | 8 | 2 | (535 | ) | (650 | ) | |||||||||||||||||||
Credit derivatives in offsetting positions | 9,272 | 8,189 | (45 | ) | (57 | ) | 153 | 164 | (198 | ) | (221 | ) | |||||||||||||||||||
Equity contracts | |||||||||||||||||||||||||||||||
Equity index swaps and options | 631 | 1,501 | 39 | 27 | 53 | 40 | (14 | ) | (13 | ) | |||||||||||||||||||||
Variable annuity hedge program | |||||||||||||||||||||||||||||||
U.S. GMWB product derivatives [2] | 31,802 | 34,569 | (2,203 | ) | (2,538 | ) | — | — | (2,203 | ) | (2,538 | ) | |||||||||||||||||||
U.S. GMWB reinsurance contracts | 6,445 | 7,193 | 376 | 443 | 376 | 443 | — | — | |||||||||||||||||||||||
U.S. GMWB hedging instruments | 18,153 | 16,406 | 810 | 894 | 954 | 1,022 | (144 | ) | (128 | ) | |||||||||||||||||||||
U.S. macro hedge program | 5,278 | 6,819 | 180 | 357 | 180 | 357 | — | — | |||||||||||||||||||||||
International program product derivatives [2] | 2,573 | 2,710 | (57 | ) | (71 | ) | — | — | (57 | ) | (71 | ) | |||||||||||||||||||
International program hedging instruments | 63,986 | 33,726 | 588 | 750 | 1,340 | 887 | (752 | ) | (137 | ) | |||||||||||||||||||||
Other | |||||||||||||||||||||||||||||||
Contingent capital facility put option | 500 | 500 | 26 | 28 | 26 | 28 | — | — | |||||||||||||||||||||||
Total non-qualifying strategies | 157,345 | 130,809 | (903 | ) | (676 | ) | 4,209 | 4,260 | (5,112 | ) | (4,936 | ) | |||||||||||||||||||
Total cash flow hedges, fair value hedges, and non-qualifying strategies | $ | 167,102 | $ | 141,436 | $ | (610 | ) | $ | (458 | ) | $ | 4,601 | $ | 4,682 | $ | (5,211 | ) | $ | (5,140 | ) | |||||||||||
Balance Sheet Location | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale | $ | 703 | $ | 703 | $ | (50 | ) | $ | (72 | ) | $ | — | $ | — | $ | (50 | ) | $ | (72 | ) | |||||||||||
Other investments | 48,652 | 60,227 | 1,486 | 2,331 | 1,990 | 3,165 | (504 | ) | (834 | ) | |||||||||||||||||||||
Other liabilities | 76,837 | 35,944 | (148 | ) | (538 | ) | 2,235 | 1,074 | (2,383 | ) | (1,612 | ) | |||||||||||||||||||
Consumer notes | 35 | 35 | (4 | ) | (4 | ) | — | — | (4 | ) | (4 | ) | |||||||||||||||||||
Reinsurance recoverables | 6,445 | 7,193 | 376 | 443 | 376 | 443 | — | — | |||||||||||||||||||||||
Other policyholder funds and benefits payable | 34,430 | 37,334 | (2,270 | ) | (2,618 | ) | — | — | (2,270 | ) | (2,618 | ) | |||||||||||||||||||
Total derivatives | $ | 167,102 | $ | 141,436 | $ | (610 | ) | $ | (458 | ) | $ | 4,601 | $ | 4,682 | $ | (5,211 | ) | $ | (5,140 | ) |
[1] | The derivative instruments related to this strategy are held for other investment purposes. |
[2] | These derivatives are embedded within liabilities and are not held for risk management purposes. |
• | The $64.0 billion notional amount related to the international program hedging instruments as of June 30, 2012, consisted of $57.9 billion of long positions and $6.1 billion of offsetting short positions, resulting in a net notional amount of $51.8 billion. The $33.7 billion notional amount as of December 31, 2011, consisted of $33.0 billion of long positions and $0.7 billion of offsetting short positions, resulting in a net notional amount of $32.3 billion. The increase in net notional of $19.5 billion primarily resulted from The Company increasing its hedging of interest rate exposure. |
• | The fair value related to the international program hedging instruments decreased as a result an improvement in global and domestic equity markets and depreciation of the Japanese yen in relation to the euro and the U.S. dollar. |
• | The fair value related to the U.S. macro hedge program decreased due to an improvement in domestic equity markets, time decay, and lower equity volatility. |
• | The fair value related to the Japanese fixed annuity hedging instruments and Japan 3Win foreign currency swaps decreased primarily due to depreciation of the Japanese yen in relation to the U.S. dollar and strengthening of the currency basis swap spread between U.S. dollar and Japanese yen. |
• | The increase in fair value related to the combined U.S. GMWB hedging program, which includes the U.S. GMWB product, reinsurance, and hedging derivatives, was primarily due to favorable policyholder behavior. |
Gain (Loss) Recognized in OCI on Derivative (Effective Portion) | Net Realized Capital Gains (Losses) Recognized in Income on Derivative (Ineffective Portion) | ||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||
Interest rate swaps | $ | 176 | $ | 148 | $ | 143 | $ | 82 | $ | — | $ | — | $ | — | $ | (2 | ) | ||||||||||||||
Foreign currency swaps | (24 | ) | — | (29 | ) | — | — | — | — | — | |||||||||||||||||||||
Total | $ | 152 | $ | 148 | $ | 114 | $ | 82 | $ | — | $ | — | $ | — | $ | (2 | ) |
Gain or (Loss) Reclassified from AOCI into Income (Effective Portion) | |||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
Location | 2012 | 2011 | 2012 | 2011 | |||||||||||||
Interest rate swaps | Net realized capital gain/(loss) | $ | 1 | $ | 2 | $ | 6 | $ | 4 | ||||||||
Interest rate swaps | Net investment income | 38 | 31 | 74 | 63 | ||||||||||||
Foreign currency swaps | Net realized capital gain/(loss) | (11 | ) | 3 | (8 | ) | 8 | ||||||||||
Total | $ | 28 | $ | 36 | $ | 72 | $ | 75 |
Gain or (Loss) Recognized in Income [1] | |||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||||||
Derivative | Hedge Item | Derivative | Hedge Item | Derivative | Hedge Item | Derivative | Hedge Item | ||||||||||||||||||||||||
Interest rate swaps | |||||||||||||||||||||||||||||||
Net realized capital gain/(loss) | $ | (16 | ) | $ | 13 | $ | (27 | ) | $ | 26 | $ | (5 | ) | $ | 3 | $ | (17 | ) | $ | 17 | |||||||||||
Foreign currency swaps | |||||||||||||||||||||||||||||||
Net realized capital gain/(loss) | (11 | ) | 11 | 22 | (22 | ) | (2 | ) | 2 | 36 | (36 | ) | |||||||||||||||||||
Benefits, losses and loss adjustment expenses | 5 | (5 | ) | (1 | ) | 1 | 2 | (2 | ) | (9 | ) | 9 | |||||||||||||||||||
Total | $ | (22 | ) | $ | 19 | $ | (6 | ) | $ | 5 | $ | (5 | ) | $ | 3 | $ | 10 | $ | (10 | ) |
[1] | The amounts presented do not include the periodic net coupon settlements of the derivative or the coupon income (expense) related to the hedged item. The net of the amounts presented represents the ineffective portion of the hedge. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Interest rate contracts | |||||||||||||||
Interest rate swaps, caps, floors, and forwards | $ | (17 | ) | $ | (4 | ) | $ | (15 | ) | $ | 1 | ||||
Foreign exchange contracts | |||||||||||||||
Foreign currency swaps and forwards | 32 | (7 | ) | 27 | (12 | ) | |||||||||
Japan 3Win foreign currency swaps [1] | 60 | 33 | (121 | ) | (25 | ) | |||||||||
Japanese fixed annuity hedging instruments [2] | 58 | 57 | (70 | ) | (5 | ) | |||||||||
Credit contracts | |||||||||||||||
Credit derivatives that purchase credit protection | 5 | (3 | ) | (31 | ) | (20 | ) | ||||||||
Credit derivatives that assume credit risk | 24 | (14 | ) | 173 | 5 | ||||||||||
Equity contracts | |||||||||||||||
Equity index swaps and options | 3 | 2 | (16 | ) | 2 | ||||||||||
Variable annuity hedge program | |||||||||||||||
U.S. GMWB product derivatives | (484 | ) | (80 | ) | 412 | 268 | |||||||||
U.S. GMWB reinsurance contracts | 62 | 4 | (81 | ) | (61 | ) | |||||||||
U.S. GMWB hedging instruments | 307 | 43 | (261 | ) | (184 | ) | |||||||||
U.S. macro hedge program | 6 | (17 | ) | (183 | ) | (101 | ) | ||||||||
International program product derivatives | (16 | ) | (6 | ) | 19 | 10 | |||||||||
International program hedging instruments | 769 | 58 | (485 | ) | (277 | ) | |||||||||
Other | |||||||||||||||
Contingent capital facility put option | (1 | ) | (1 | ) | (3 | ) | (3 | ) | |||||||
Total | $ | 808 | $ | 65 | $ | (635 | ) | $ | (402 | ) |
[1] | The associated liability is adjusted for changes in spot rates through realized capital gains and was $(53) and $(49) for the three months ended June 30, 2012 and 2011, respectively, and $65 and $(7) for the six months ended June 30, 2012 and 2011, respectively. |
[2] | The associated liability is adjusted for changes in spot rates through realized capital gains and was $(70) and $(63) for the three months ended June 30, 2012 and 2011, respectively, and $87 and $(10) for the six months ended June 30, 2012 and 2011, respectively. |
• | The net gain for the three months ended June 30, 2012, associated with the international program hedging instruments was primarily driven by appreciation of the Japanese yen in relation to the euro and the U.S. dollar, a decrease in global and domestic equity markets, and a decrease in interest rates. The net loss for the six months ended June 30, 2012, associated with the international program hedging instruments was primarily driven by an improvement in global and domestic equity markets and depreciation of the Japanese yen in relation to the euro and the U.S. dollar, partially offset by a decrease in interest rates. |
• | For the three months ended June 30, 2012, the net gain related to the Japanese fixed annuity hedging instruments and Japan 3Win foreign currency swaps was primarily due to appreciation of the Japanese yen in relation to the U.S. dollar. For the six months ended June 30, 2012 the net loss related to the Japanese fixed annuity hedging instruments and Japan 3Win foreign currency swaps was primarily due to depreciation of the Japanese yen in relation to the U.S. dollar and strengthening of the currency basis swap spread between U.S. dollar and Japanese yen. |
• | For the three months ended June 30, 2012 the net loss related to the combined U.S. GMWB hedging program, which includes the U.S. GMWB product, reinsurance, and hedging derivatives, was primarily a result of an increase in equity and interest rate volatility and a general decrease in long-term interest rates. For the six months ended June 30, 2012 the net gain related to the combined U.S. GMWB hedging program, which includes the U.S. GMWB product, reinsurance, and hedging derivatives, was primarily a result of favorable policyholder behavior, partially offset by an increase in the domestic equity market and a credit standing adjustment. |
• | For the three months ended June 30, 2011, the net gain related to the Japanese fixed annuity hedging instruments is primarily due to the U.S. dollar weakening in comparison to the Japanese yen. |
• | For the three months ended June 30, 2011, the net gain associated with the international program hedging instruments is primarily due to a decline in Japanese interest rates and foreign currency movements. For the six months ended June 30, 2011, the net loss related to the international program hedging instruments is primarily the result of foreign currency movements and an improvement in the equity markets. |
• | For the three months ended June 30, 2011, the loss related to the combined U.S. GMWB hedging program, which includes the U.S. GMWB product, reinsurance, and hedging derivatives, is primarily a result of a general decrease in long-term interest rates. For the six months ended June 30, 2011, the gain related to the combined U.S. GMWB hedging program is primarily due to a lower implied market volatility and outperformance of the underlying actively managed funds as compared to their respective indices. |
Underlying Referenced Credit Obligation(s) [1] | |||||||||||||||||||||
Credit Derivative type by derivative risk exposure | Notional Amount [2] | Fair Value | Weighted Average Years to Maturity | Type | Average Credit Rating | Offsetting Notional Amount [3] | Offsetting Fair Value [3] | ||||||||||||||
Single name credit default swaps | |||||||||||||||||||||
Investment grade risk exposure | $ | 2,352 | $ | (37 | ) | 3 years | Corporate Credit/ Foreign Gov. | A | $ | 1,343 | $ | (18 | ) | ||||||||
Below investment grade risk exposure | 160 | (2 | ) | 1 year | Corporate Credit | BB- | 144 | (4 | ) | ||||||||||||
Basket credit default swaps [4] | |||||||||||||||||||||
Investment grade risk exposure | 4,391 | (56 | ) | 4 years | Corporate Credit | BBB+ | 2,624 | 24 | |||||||||||||
Investment grade risk exposure | 525 | (93 | ) | 5 years | CMBS Credit | BBB+ | 525 | 93 | |||||||||||||
Below investment grade risk exposure | 553 | (429 | ) | 3 years | Corporate Credit | BBB | — | — | |||||||||||||
Embedded credit derivatives | |||||||||||||||||||||
Investment grade risk exposure | 225 | 201 | 5 years | Corporate Credit | BBB- | — | — | ||||||||||||||
Below investment grade risk exposure | 300 | 257 | 4 years | Corporate Credit | BB+ | — | — | ||||||||||||||
Total | $ | 8,506 | $ | (159 | ) | $ | 4,636 | $ | 95 |
Underlying Referenced Credit Obligation(s) [1] | |||||||||||||||||||||
Credit Derivative type by derivative risk exposure | Notional Amount [2] | Fair Value | Weighted Average Years to Maturity | Type | Average Credit Rating | Offsetting Notional Amount [3] | Offsetting Fair Value [3] | ||||||||||||||
Single name credit default swaps | |||||||||||||||||||||
Investment grade risk exposure | $ | 1,628 | $ | (34 | ) | 3 years | Corporate Credit/ Foreign Gov. | A+ | $ | 1,424 | $ | (15 | ) | ||||||||
Below investment grade risk exposure | 170 | (7 | ) | 2 years | Corporate Credit | BB- | 144 | (5 | ) | ||||||||||||
Basket credit default swaps [4] | |||||||||||||||||||||
Investment grade risk exposure | 3,645 | (92 | ) | 3 years | Corporate Credit | BBB+ | 2,001 | 29 | |||||||||||||
Investment grade risk exposure | 525 | (98 | ) | 5 years | CMBS Credit | BBB+ | 525 | 98 | |||||||||||||
Below investment grade risk exposure | 553 | (509 | ) | 3 years | Corporate Credit | BBB+ | — | — | |||||||||||||
Embedded credit derivatives | |||||||||||||||||||||
Investment grade risk exposure | 25 | 24 | 3 years | Corporate Credit | BBB- | — | — | ||||||||||||||
Below investment grade risk exposure | 500 | 411 | 5 years | Corporate Credit | BB+ | — | — | ||||||||||||||
Total | $ | 7,046 | $ | (305 | ) | $ | 4,094 | $ | 107 |
[1] | The average credit ratings are based on availability and the midpoint of the applicable ratings among Moody’s, S&P, and Fitch. If no rating is available from a rating agency, then an internally developed rating is used. |
[2] | Notional amount is equal to the maximum potential future loss amount. There is no specific collateral related to these contracts or recourse provisions included in the contracts to offset losses. |
[3] | The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap. |
[4] | Includes $4.9 billion and $4.2 billion as of June 30, 2012 and December 31, 2011, respectively, of standard market indices of diversified portfolios of corporate issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index. Also includes $533 as of both June 30, 2012 and December 31, 2011 of customized diversified portfolios of corporate issuers referenced through credit default swaps. |
Changes in the DAC balance are as follows: | Six Months Ended June 30, | ||||||
2012 | 2011 | ||||||
Balance, beginning of period, as currently reported | $ | 6,556 | $ | 7,473 | |||
Deferred Costs | 852 | 844 | |||||
Amortization – DAC | (910 | ) | (991 | ) | |||
Amortization – Unlock benefit (charge), pre-tax | 35 | (51 | ) | ||||
Adjustments to unrealized gains and losses on securities available-for-sale and other | (159 | ) | (25 | ) | |||
Effect of currency translation | (38 | ) | 7 | ||||
Balance, end of period | $ | 6,336 | $ | 7,257 |
U.S. GMDB | International GMDB/GMIB | UL Secondary Guarantees | |||||||||
Liability balance as of January 1, 2012 | $ | 1,104 | $ | 975 | $ | 228 | |||||
Incurred | 112 | 65 | 53 | ||||||||
Paid | (99 | ) | (101 | ) | — | ||||||
Unlock | (102 | ) | (4 | ) | 8 | ||||||
Currency translation adjustment | — | (35 | ) | — | |||||||
Liability balance as of June 30, 2012 | $ | 1,015 | $ | 900 | $ | 289 | |||||
Reinsurance recoverable asset, as of January 1, 2012 | $ | 724 | $ | 40 | $ | 22 | |||||
Incurred | 65 | 5 | (2 | ) | |||||||
Paid | (63 | ) | (14 | ) | — | ||||||
Unlock | (49 | ) | 18 | — | |||||||
Currency translation adjustment | — | — | — | ||||||||
Reinsurance recoverable asset, as of June 30, 2012 | $ | 677 | $ | 49 | $ | 20 |
U.S. GMDB | International GMDB/GMIB | UL Secondary Guarantees | |||||||||
Liability balance as of January 1, 2011 | $ | 1,053 | $ | 696 | $ | 113 | |||||
Incurred | 110 | 61 | 27 | ||||||||
Paid | (95 | ) | (76 | ) | — | ||||||
Unlock | (63 | ) | 2 | — | |||||||
Currency translation adjustment | — | 2 | — | ||||||||
Liability balance as of June 30, 2011 | $ | 1,005 | $ | 685 | $ | 140 | |||||
Reinsurance recoverable asset, as of January 1, 2011 | $ | 686 | $ | 36 | $ | 30 | |||||
Incurred | 65 | (3 | ) | 5 | |||||||
Paid | (65 | ) | 1 | — | |||||||
Unlock | (27 | ) | 6 | — | |||||||
Currency translation adjustment | — | — | — | ||||||||
Reinsurance recoverable asset, as of June 30, 2011 | $ | 659 | $ | 40 | $ | 35 |
Individual Variable and Group Annuity Account Value by GMDB/GMIB Type | ||||||||||||||
Maximum anniversary value (“MAV”) [1] | Account Value (“AV”) [8] | Net Amount at Risk (“NAR”) [10] | Retained Net Amount at Risk (“RNAR”) [10] | Weighted Average Attained Age of Annuitant | ||||||||||
MAV only | $ | 20,104 | $ | 4,861 | $ | 1,086 | 69 | |||||||
With 5% rollup [2] | 1,469 | 444 | 145 | 69 | ||||||||||
With Earnings Protection Benefit Rider (“EPB”) [3] | 5,147 | 717 | 88 | 66 | ||||||||||
With 5% rollup & EPB | 572 | 145 | 30 | 69 | ||||||||||
Total MAV | 27,292 | 6,167 | 1,349 | |||||||||||
Asset Protection Benefit (“APB”) [4] | 20,992 | 2,002 | 1,306 | 66 | ||||||||||
Lifetime Income Benefit (“LIB”) – Death Benefit [5] | 1,066 | 73 | 73 | 65 | ||||||||||
Reset [6] (5-7 years) | 3,125 | 208 | 206 | 69 | ||||||||||
Return of Premium (“ROP”) [7]/Other | 21,816 | 578 | 557 | 66 | ||||||||||
Subtotal U.S. GMDB | 74,291 | 9,028 | 3,491 | 67 | ||||||||||
Less: General Account Value with U.S. GMDB | 7,329 | |||||||||||||
Subtotal Separate Account Liabilities with U.S. GMDB | 66,962 | |||||||||||||
Separate Account Liabilities without U.S. GMDB | 77,700 | |||||||||||||
Total Separate Account Liabilities | $ | 144,662 | ||||||||||||
Japan GMDB [9], [11] | $ | 27,977 | $ | 9,477 | $ | 8,236 | 70 | |||||||
Japan GMIB [9], [11] | $ | 26,119 | $ | 6,470 | $ | 6,470 | 70 |
[1] | MAV GMDB is the greatest of current AV, net premiums paid and the highest AV on any anniversary before age 80 years (adjusted for withdrawals). |
[2] | Rollup GMDB is the greatest of the MAV, current AV, net premium paid and premiums (adjusted for withdrawals) accumulated at generally 5% simple interest up to the earlier of age 80 years or 100% of adjusted premiums. |
[3] | EPB GMDB is the greatest of the MAV, current AV, or contract value plus a percentage of the contract’s growth. The contract’s growth is AV less premiums net of withdrawals, subject to a cap of 200% of premiums net of withdrawals. |
[4] | APB GMDB is the greater of current AV or MAV, not to exceed current AV plus 25% times the greater of net premiums and MAV (each adjusted for premiums in the past 12 months). |
[5] | LIB GMDB is the greatest of current AV, net premiums paid, or for certain contracts a benefit amount that ratchets over time, generally based on market performance. |
[6] | Reset GMDB is the greatest of current AV, net premiums paid and the most recent five to seven year anniversary AV before age 80 years (adjusted for withdrawals). |
[7] | ROP GMDB is the greater of current AV or net premiums paid. |
[8] | AV includes the contract holder’s investment in the separate account and the general account. |
[9] | GMDB includes a ROP and MAV (before age 80 years) paid in a single lump sum. GMIB is a guarantee to return initial investment, adjusted for earnings liquidity which allows for free withdrawal of earnings, paid through a fixed payout annuity, after a minimum deferral period of 10 years, 15 years or 20 years . The GRB related to the Japan GMIB was $31.9 billion and $34.1 billion as of June 30, 2012 and December 31, 2011, respectively. The GRB related to the Japan GMAB and GMWB was $652 as of June 30, 2012 and $701 as of December 31, 2011. These liabilities are not included in the Separate Account as they are not legally insulated from the general account liabilities of the insurance enterprise. As of June 30, 2012, 55% of the GMDB RNAR and 66% of the GMIB NAR is reinsured to a Hartford affiliate. |
[10] | NAR is defined as the guaranteed benefit in excess of the current AV. RNAR represents NAR reduced for reinsurance. NAR and RNAR are highly sensitive to equity markets movements and increase when equity markets decline. Additionally Japan’s NAR and RNAR are highly sensitive to currency movements and increase when the Yen strengthens. |
[11] | Policies with a guaranteed living benefit (GMIB in Japan) also have a guaranteed death benefit. The NAR for each benefit is shown in the table above, however these benefits are not additive. When a policy terminates due to death, any NAR related to GMWB or GMIB is released. Similarly, when a policy goes into benefit status on a GMWB or GMIB, its GMDB NAR is released. |
Asset type | As of June 30, 2012 | As of December 31, 2011 | |||||
Equity securities (including mutual funds) | $ | 60,286 | $ | 61,472 | |||
Cash and cash equivalents | 6,676 | 7,516 | |||||
Total | $ | 66,962 | $ | 68,988 |
Changes in sales inducement activity are as follows: | Six Months Ended June 30, | ||||||
2012 | 2011 | ||||||
Balance, January 1 | $ | 434 | $ | 459 | |||
Sales inducements deferred | 6 | 9 | |||||
Amortization—Unlock | (1 | ) | (8 | ) | |||
Amortization charged to income | (16 | ) | (20 | ) | |||
Balance, June 30 | $ | 423 | $ | 440 |
Pension Benefits | Other Postretirement Benefits | ||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Service cost | $ | 24 | $ | 24 | $ | 1 | $ | 1 | |||||||
Interest cost | 61 | 66 | 3 | 5 | |||||||||||
Expected return on plan assets | (78 | ) | (75 | ) | (3 | ) | (4 | ) | |||||||
Amortization of prior service credit | (3 | ) | (3 | ) | (1 | ) | — | ||||||||
Amortization of actuarial loss | 66 | 42 | — | — | |||||||||||
Curtailment gain due to plan freeze | (11 | ) | — | (1 | ) | — | |||||||||
Net periodic benefit cost | $ | 59 | $ | 54 | $ | (1 | ) | $ | 2 |
Pension Benefits | Other Postretirement Benefits | ||||||||||||||
Six Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Service cost | $ | 50 | $ | 52 | $ | 2 | $ | 2 | |||||||
Interest cost | 124 | 130 | 8 | 10 | |||||||||||
Expected return on plan assets | (156 | ) | (149 | ) | (7 | ) | (7 | ) | |||||||
Amortization of prior service credit | (5 | ) | (5 | ) | (1 | ) | — | ||||||||
Amortization of actuarial loss | 119 | 79 | — | — | |||||||||||
Curtailment gain due to plan freeze | (11 | ) | — | (1 | ) | — | |||||||||
Net periodic benefit cost | $ | 121 | $ | 107 | $ | 1 | $ | 5 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(After-tax) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Stock-based compensation plans expense | $ | 13 | $ | 25 | $ | 53 | $ | 46 | |||||||
Income tax benefit | (4 | ) | (9 | ) | (18 | ) | (16 | ) | |||||||
Total stock-based compensation plans expense | $ | 9 | $ | 16 | $ | 35 | $ | 30 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Revenues | |||||||||||||||
Fee income | $ | — | $ | 1 | $ | — | $ | 1 | |||||||
Net investment income | — | 3 | — | 11 | |||||||||||
Net realized capital losses | — | (1 | ) | — | (5 | ) | |||||||||
Other revenues | — | — | — | 47 | |||||||||||
Total revenues | — | 3 | — | 54 | |||||||||||
Benefits, losses and expenses | |||||||||||||||
Insurance operating costs and other expenses | 1 | 14 | 3 | 46 | |||||||||||
Total benefits, losses and expenses | 1 | 14 | 3 | 46 | |||||||||||
Income (loss) before income taxes | (1 | ) | (11 | ) | (3 | ) | 8 | ||||||||
Income tax expense (benefit) | — | (5 | ) | (1 | ) | 2 | |||||||||
Income (loss) from operations of discontinued operations, net of tax | (1 | ) | (6 | ) | (2 | ) | 6 | ||||||||
Net realized capital gain (loss) on disposal, net of tax | — | (74 | ) | — | 76 | ||||||||||
Income (loss) from discontinued operations, net of tax | $ | (1 | ) | $ | (80 | ) | $ | (2 | ) | $ | 82 |
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||||||||||||
Gross | Accumulated Impairments | Discontinued Operations | Carrying Value | Gross | Accumulated Impairments | Discontinued Operations [1] | Carrying Value | ||||||||||||||||||||||||
Commercial Markets | |||||||||||||||||||||||||||||||
Property and Casualty Commercial | $ | 30 | $ | (30 | ) | $ | — | $ | — | $ | 30 | $ | (30 | ) | $ | — | $ | — | |||||||||||||
Consumer Markets | 119 | — | — | 119 | 119 | — | — | 119 | |||||||||||||||||||||||
Wealth Management | |||||||||||||||||||||||||||||||
Individual Life | 224 | — | — | 224 | 224 | — | — | 224 | |||||||||||||||||||||||
Retirement Plans | 87 | — | — | 87 | 87 | — | — | 87 | |||||||||||||||||||||||
Mutual Funds | 159 | — | — | 159 | 159 | — | — | 159 | |||||||||||||||||||||||
Total Wealth Management | 470 | — | — | 470 | 470 | — | — | 470 | |||||||||||||||||||||||
Corporate | 772 | (355 | ) | — | 417 | 787 | (355 | ) | (15 | ) | 417 | ||||||||||||||||||||
Total Goodwill | $ | 1,391 | $ | (385 | ) | $ | — | $ | 1,006 | $ | 1,406 | $ | (385 | ) | $ | (15 | ) | $ | 1,006 |
[1] | Represents goodwill written off related to Federal Trust Corporation which is currently recorded in discontinued operations. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||
Severance benefits and related costs | $ | 29 | $ | — | $ | 38 | $ | — | |||||
Professional fees | 13 | — | 13 | — | |||||||||
Asset impairment charges | 5 | — | 5 | — | |||||||||
Other contract termination charges | 1 | — | 1 | — | |||||||||
Total restructuring and other costs | $ | 48 | $ | — | $ | 57 | $ | — |
Three Months Ended June 30, | Six Months Ended June 30, | Total Estimated Costs | |||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||
Commercial Markets | $ | 4 | $ | — | $ | 4 | $ | — | $ | 11 | |||||||
Consumer Markets | 1 | — | 1 | — | 3 | ||||||||||||
Individual Life | 7 | — | 7 | — | 22 | ||||||||||||
Retirement Plans | 4 | — | 4 | — | 15 | ||||||||||||
Mutual Funds | 1 | — | 1 | — | 4 | ||||||||||||
Life Other Operations | 3 | — | 3 | — | 11 | ||||||||||||
Corporate | 28 | — | 37 | — | 114 | ||||||||||||
Total restructuring and other costs | $ | 48 | $ | — | $ | 57 | $ | — | $ | 180 |
Six Months Ended June 30, 2012 | |||||||||||||||
Severance Benefits and Related Costs | Professional Fees | Asset impairment charges | Other Contract Termination Charges | Total Restructuring and Other Costs | |||||||||||
Balance, beginning of period | $ | 12 | $ | — | $ | — | $ | 5 | $ | 17 | |||||
Accruals/provisions | 38 | 13 | 5 | 1 | 57 | ||||||||||
Payments/ write-offs | (22 | ) | (9 | ) | (4 | ) | (3 | ) | (38 | ) | |||||
Balance, end of period | $ | 28 | $ | 4 | $ | 1 | $ | 3 | $ | 36 |
Description | Page |
Operating Summary | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||
Earned premiums | $ | 3,400 | $ | 3,545 | (4 | %) | $ | 6,842 | $ | 7,064 | (3 | %) | |||||||||
Fee income | 1,114 | 1,219 | (9 | %) | 2,248 | 2,428 | (7 | %) | |||||||||||||
Net investment income (loss): | |||||||||||||||||||||
Securities available-for-sale and other | 1,097 | 1,104 | (1 | %) | 2,167 | 2,212 | (2 | %) | |||||||||||||
Equity securities, trading [1] | (1,687 | ) | (597 | ) | (183 | %) | 1,179 | 206 | NM | ||||||||||||
Total net investment income (loss) | (590 | ) | 507 | NM | 3,346 | 2,418 | 38 | % | |||||||||||||
Net realized capital gains (losses) | 589 | 69 | NM | (321 | ) | (334 | ) | 4 | % | ||||||||||||
Other revenues | 61 | 61 | — | % | 120 | 125 | (4 | %) | |||||||||||||
Total revenues | 4,574 | 5,401 | (15 | %) | 12,235 | 11,701 | 5 | % | |||||||||||||
Benefits, losses and loss adjustment expenses | 3,621 | 3,976 | (9 | %) | 6,659 | 7,154 | (7 | %) | |||||||||||||
Benefits, losses and loss adjustment expenses – returns credited on international variable annuities [1] | (1,686 | ) | (597 | ) | (182 | %) | 1,178 | 206 | NM | ||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits (“DAC”) | 554 | 592 | (6 | %) | 875 | 1,042 | (16 | %) | |||||||||||||
Insurance operating costs and other expenses | 1,309 | 1,452 | (10 | %) | 2,621 | 2,806 | (7 | %) | |||||||||||||
Loss on extinguishment of debt | 910 | — | — | % | 910 | — | — | % | |||||||||||||
Interest expense | 115 | 128 | (10 | %) | 239 | 256 | (7 | %) | |||||||||||||
Total benefits, losses and expenses | 4,823 | 5,551 | (13 | %) | 12,482 | 11,464 | 9 | % | |||||||||||||
Income (loss) from continuing operations before income taxes | (249 | ) | (150 | ) | (66 | %) | (247 | ) | 237 | NM | |||||||||||
Income tax benefit | (149 | ) | (263 | ) | 43 | % | (244 | ) | (215 | ) | (13 | %) | |||||||||
Income (loss) from continuing operations, net of tax | (100 | ) | 113 | NM | (3 | ) | 452 | NM | |||||||||||||
Income (loss) from discontinued operations, net of tax | (1 | ) | (80 | ) | 99 | % | (2 | ) | 82 | NM | |||||||||||
Net income (loss) | $ | (101 | ) | $ | 33 | NM | $ | (5 | ) | $ | 534 | NM | |||||||||
Supplemental Operating Data | |||||||||||||||||||||
Income (loss) from continuing operations, net of tax, available to common shareholders per diluted common share | $ | (0.25 | ) | $ | 0.21 | NM | $ | (0.05 | ) | $ | 0.89 | NM | |||||||||
Net income (loss) available to common shareholders per diluted common share | (0.26 | ) | 0.05 | NM | (0.06 | ) | 1.06 | NM | |||||||||||||
Total revenues, excluding net investment income on equity securities, trading | 6,261 | 5,998 | 4 | % | 11,056 | 11,495 | (4 | %) |
June 30, | December 31, | ||||||
Summary of Financial Condition | 2012 | 2011 | |||||
Total assets | $ | 303,977 | $ | 302,609 | |||
Total investments, excluding equity securities, trading | 105,720 | 104,449 | |||||
Total stockholders’ equity | 21,961 | 21,486 |
[1] | Includes investment income and mark-to-market effects of equity securities, trading, supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within benefits, losses and loss adjustment expenses. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
Net income (loss) by segment | 2012 | 2011 | Increase (Decrease) From 2012 to 2011 | 2012 | 2011 | Increase (Decrease) From 2012 to 2011 | |||||||||||||||||
Property & Casualty Commercial | $ | 149 | $ | 118 | $ | 31 | $ | 338 | $ | 441 | $ | (103 | ) | ||||||||||
Group Benefits | 35 | 41 | (6 | ) | 53 | 52 | 1 | ||||||||||||||||
Commercial Markets | 184 | 159 | 25 | 391 | 493 | (102 | ) | ||||||||||||||||
Consumer Markets | (50 | ) | (172 | ) | 122 | 58 | (64 | ) | 122 | ||||||||||||||
Individual Life | 36 | 46 | (10 | ) | 55 | 64 | (9 | ) | |||||||||||||||
Retirement Plans | (2 | ) | 27 | (29 | ) | 16 | 32 | (16 | ) | ||||||||||||||
Mutual Funds | 18 | 27 | (9 | ) | 38 | 55 | (17 | ) | |||||||||||||||
Wealth Management | 52 | 100 | (48 | ) | 109 | 151 | (42 | ) | |||||||||||||||
Life Other Operations | 406 | 261 | 145 | 199 | 334 | (135 | ) | ||||||||||||||||
Property & Casualty Other Operations | (15 | ) | (164 | ) | 149 | 12 | (143 | ) | 155 | ||||||||||||||
Corporate | (678 | ) | (151 | ) | (527 | ) | (774 | ) | (237 | ) | (537 | ) | |||||||||||
Total net income (loss) | $ | (101 | ) | $ | 33 | $ | (134 | ) | $ | (5 | ) | $ | 534 | $ | (539 | ) |
• | A loss on extinguishment of debt of $587, after-tax, recognized in the second quarter of 2012 related to the repurchase of all outstanding 10% fixed-to-floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount held by Allianz. The loss consisted of the premium associated with repurchasing the 10% Debentures at an amount greater than the face amount, the write-off of the unamortized discount and debt issuance costs related to the 10% Debentures and other costs related to the repurchase transaction. |
• | An increase in the Unlock charge to $146, after-tax, in 2012 from $66, after-tax, in 2011. The Unlock charge in 2012 was primarily due to actual separate account returns being below our aggregated estimated returns. The Unlock charge in 2011 was driven by the impact of changes to the macro hedge program. For further discussion see Unlocks within the Estimated Gross Profits Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity and Other Universal Life-Type Contracts section in Critical Accounting Estimates. |
• | Net realized capital gains increased primarily due to the results of the international variable annuity hedge program. The gains resulted from appreciation of the yen, a decline in global and domestic equity markets, and a decrease in interest rates. For further discussion of the results, see Net Realized Capital Gains (Losses) within Investment Results of Key Performance Measures and Ratios. For information on the related sensitivities of the variable annuity hedging program, see Variable Product Guarantee Risks and Risk Management within Enterprise Risk Management. |
• | Current accident year catastrophe losses of $189, after-tax, in 2012, primarily due to severe thunderstorms and hail events in the South, Midwest and Mid-Atlantic states, compared to $290, after-tax in 2011, primarily due to severe tornadoes and windstorms in the Midwest and South. |
• | Net asbestos reserve strengthening of $31, after-tax, in 2012, compared to $189, after tax, in 2011 resulting from the Company's annual review of its asbestos liabilities. For further information, see Property & Casualty Other Operations Claims with the Property and Casualty Insurance Product Reserves, Net of Reinsurance section in Critical Accounting Estimates. |
• | A loss on extinguishment of debt of $587, after-tax, recognized in the second quarter of 2012 related to the repurchase of all outstanding 10% fixed-to-floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount held by Allianz. The loss consisted of the premium associated with repurchasing the 10% Debentures at an amount greater than the face amount, the write-off of the unamortized discount and debt issuance costs related to the 10% Debentures and other costs related to the repurchase transaction. |
• | Income (loss) from discontinued operations, net of tax, decreased, primarily due to the realized capital gain on the sale of Specialty Risk Services of $150, after-tax, in the first quarter of 2011, which was partially offset by a loss of $74, after-tax, from the disposition of Federal Trust Corporation in the second quarter of 2011. |
• | Current accident year catastrophe losses of $235, after-tax, in 2012, primarily due to severe thunderstorms, hail events, and tornadoes in the South, Midwest and Mid-Atlantic states, compared to $341, after-tax in 2011, primarily due to severe tornadoes and windstorms in the Midwest and South, as well as, winter storms in the Northeast and Midwest. |
• | Net asbestos reserve strengthening of $31, after-tax, in 2012, compared to $189, after tax, in 2011 resulting from the Company's annual review of its asbestos liabilities. For further information, see Property & Casualty Other Operations Claims with the Property and Casualty Insurance Product Reserves, Net of Reinsurance section in Critical Accounting Estimates. |
• | An Unlock benefit of $68, after-tax, in 2012, compared to an Unlock charge of $9, after-tax, in 2011. The Unlock benefit in 2012 was driven by actual separate account returns being above our aggregated estimated returns. The Unlock charge in 2011 was primarily due to the impact of changes to the macro hedge program. For further discussion of Unlocks see the Critical Accounting Estimates within the MD&A. |
• | property and casualty insurance product reserves, net of reinsurance; |
• | estimated gross profits used in the valuation and amortization of assets and liabilities associated with variable annuity and other universal life-type contracts; |
• | evaluation of other-than-temporary impairments on available-for-sale securities and valuation allowances on investments; |
• | living benefits required to be fair valued (in other policyholder funds and benefits payable); |
• | goodwill impairment; |
• | valuation of investments and derivative instruments; |
• | pension and other postretirement benefit obligations; |
• | valuation allowance on deferred tax assets; and |
• | contingencies relating to corporate litigation and regulatory matters. |
Six Months Ended June 30, 2012 | |||||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | ||||||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross | $ | 15,437 | $ | 2,061 | $ | 4,052 | $ | 21,550 | |||||||
Reinsurance and other recoverables | 2,343 | 9 | 681 | 3,033 | |||||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net | 13,094 | 2,052 | 3,371 | 18,517 | |||||||||||
Provision for unpaid losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 2,022 | 1,169 | — | 3,191 | |||||||||||
Current accident year catastrophes | 106 | 255 | — | 361 | |||||||||||
Prior accident years | 39 | (78 | ) | 59 | 20 | ||||||||||
Total provision for unpaid losses and loss adjustment expenses | 2,167 | 1,346 | 59 | 3,572 | |||||||||||
Less: Payments | 2,042 | 1,349 | 175 | 3,566 | |||||||||||
Ending liabilities for unpaid losses and loss adjustment expenses, net | 13,219 | 2,049 | 3,255 | 18,523 | |||||||||||
Reinsurance and other recoverables | 2,314 | 8 | 690 | 3,012 | |||||||||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross | $ | 15,533 | $ | 2,057 | $ | 3,945 | $ | 21,535 | |||||||
Earned premiums | $ | 3,109 | $ | 1,813 | |||||||||||
Loss and loss expense paid ratio [1] | 65.6 | 74.4 | |||||||||||||
Loss and loss expense incurred ratio | 69.7 | 74.2 | |||||||||||||
Prior accident years development (pts) [2] | 1.3 | (4.3 | ) |
[1] | The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums. |
[2] | “Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums. |
Three Months Ended June 30, 2012 | |||||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | ||||||||||||
Auto liability | $ | 19 | $ | (11 | ) | $ | — | $ | 8 | ||||||
Homeowners | — | (1 | ) | — | (1 | ) | |||||||||
Professional liability | 9 | — | — | 9 | |||||||||||
Package business | (16 | ) | — | — | (16 | ) | |||||||||
Workers’ compensation | 43 | — | — | 43 | |||||||||||
General liability | (24 | ) | — | — | (24 | ) | |||||||||
Fidelity and surety | 10 | — | — | 10 | |||||||||||
Commercial property | 4 | — | — | 4 | |||||||||||
Net asbestos reserves | — | — | 48 | 48 | |||||||||||
Net environmental reserves | — | — | 3 | 3 | |||||||||||
Change in workers’ compensation discount, including accretion | 8 | — | — | 8 | |||||||||||
Catastrophes | (39 | ) | (9 | ) | — | (48 | ) | ||||||||
Other reserve re-estimates, net | 5 | (2 | ) | 2 | 5 | ||||||||||
Total prior accident years development | $ | 19 | $ | (23 | ) | $ | 53 | $ | 49 |
Six Months Ended June 30, 2012 | |||||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | ||||||||||||
Auto liability | $ | 31 | $ | (41 | ) | $ | — | $ | (10 | ) | |||||
Homeowners | — | (6 | ) | — | (6 | ) | |||||||||
Professional liability | 18 | — | — | 18 | |||||||||||
Package business | (32 | ) | — | — | (32 | ) | |||||||||
Workers’ compensation | 51 | — | — | 51 | |||||||||||
General liability | (40 | ) | — | — | (40 | ) | |||||||||
Fidelity and surety | 11 | — | — | 11 | |||||||||||
Commercial property | (6 | ) | — | — | (6 | ) | |||||||||
Net asbestos reserves | — | — | 48 | 48 | |||||||||||
Net environmental reserves | — | — | 8 | 8 | |||||||||||
Change in workers’ compensation discount, including accretion | 37 | — | — | 37 | |||||||||||
Catastrophes | (36 | ) | (23 | ) | — | (59 | ) | ||||||||
Other reserve re-estimates, net | 5 | (8 | ) | 3 | — | ||||||||||
Total prior accident years development | $ | 39 | $ | (78 | ) | $ | 59 | $ | 20 |
• | Released reserves for personal auto liability claims, primarily for accident years 2008 through 2010. As these accident years matured, favorable bodily injury severity trends were observed and management has placed more weight on the emerged experience. |
• | Strengthened reserves for commercial auto liability claims, primarily for accident year 2011. Higher than expected bodily injury severity has been observed for this accident year. |
• | Strengthened reserves for professional liability directors and officers claims for accident years 2010 and prior as a result of higher severity, primarily for mid-sized accounts. |
• | Released reserves in package business liability coverages and general liability, primarily for accident years 2006 through 2011. Claim severity emergence for these years was lower than expected and management has placed more weight on the emerged experience. |
• | Strengthened reserves in workers' compensation primarily due to the emergence of lost time claims from 2011. |
• | Released reserves in commercial property for accident year 2011. Loss emergence for this accident year was favorable to expectations. |
• | The change in workers’ compensation discount, including accretion, primarily reflects a decrease in the number of tabular claims, and to a lesser extent, the decrease in interest rates. |
• | Reserve releases on certain prior year catastrophes, primarily related to 2001 World Trade Center worker's compensation claims. |
• | Refer to the Property & Casualty Other Operations Claims section for further discussion on net asbestos and net environmental reserves. |
Six Months Ended June 30, 2011 | |||||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | ||||||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross | $ | 14,727 | $ | 2,177 | $ | 4,121 | $ | 21,025 | |||||||
Reinsurance and other recoverables | 2,361 | 17 | 699 | 3,077 | |||||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net | 12,366 | 2,160 | 3,422 | 17,948 | |||||||||||
Provision for unpaid losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 1,912 | 1,239 | 1 | 3,152 | |||||||||||
Current accident year catastrophes | 212 | 313 | — | 525 | |||||||||||
Prior accident years | 25 | (49 | ) | 290 | 266 | ||||||||||
Total provision for unpaid losses and loss adjustment expenses | 2,149 | 1,503 | 291 | 3,943 | |||||||||||
Less: Payments | 1,852 | 1,494 | 198 | 3,544 | |||||||||||
Ending liabilities for unpaid losses and loss adjustment expenses, net | 12,663 | 2,169 | 3,515 | 18,347 | |||||||||||
Reinsurance and other recoverables | 2,356 | 6 | 751 | 3,113 | |||||||||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross | $ | 15,019 | $ | 2,175 | $ | 4,266 | $ | 21,460 | |||||||
Earned premiums | $ | 3,015 | $ | 1,895 | |||||||||||
Loss and loss expense paid ratio [1] | 61.4 | 78.8 | |||||||||||||
Loss and loss expense incurred ratio | 71.3 | 79.4 | |||||||||||||
Prior accident years development (pts) [2] | 0.8 | (2.6 | ) |
[1] | The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums. |
[2] | “Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums. |
Three Months Ended June 30, 2011 | |||||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | ||||||||||||
Auto liability | $ | — | $ | (9 | ) | $ | — | $ | (9 | ) | |||||
Homeowners | — | 1 | — | 1 | |||||||||||
Professional liability | 2 | — | — | 2 | |||||||||||
Package business | 3 | — | — | 3 | |||||||||||
Workers’ compensation | 4 | — | — | 4 | |||||||||||
General liability | 6 | — | — | 6 | |||||||||||
Fidelity and surety | (2 | ) | — | — | (2 | ) | |||||||||
Commercial property | (7 | ) | — | — | (7 | ) | |||||||||
Net asbestos reserves | — | — | 290 | 290 | |||||||||||
Change in workers’ compensation discount, including accretion | 10 | — | — | 10 | |||||||||||
Catastrophes | 10 | 9 | — | 19 | |||||||||||
Other reserve re-estimates, net | 5 | (1 | ) | (4 | ) | — | |||||||||
Total prior accident years development | $ | 31 | $ | — | $ | 286 | $ | 317 |
Six Months Ended June 30, 2011 | |||||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | ||||||||||||
Auto liability | $ | (1 | ) | $ | (64 | ) | $ | — | $ | (65 | ) | ||||
Homeowners | — | (13 | ) | — | (13 | ) | |||||||||
Professional liability | (7 | ) | — | — | (7 | ) | |||||||||
Package business | (4 | ) | — | — | (4 | ) | |||||||||
Workers’ compensation | 3 | — | — | 3 | |||||||||||
General liability | 12 | — | — | 12 | |||||||||||
Fidelity and surety | (2 | ) | — | — | (2 | ) | |||||||||
Commercial property | (5 | ) | — | — | (5 | ) | |||||||||
Net asbestos reserves | — | — | 290 | 290 | |||||||||||
Net environmental reserves | — | — | 2 | 2 | |||||||||||
Change in workers’ compensation discount, including accretion | 17 | — | — | 17 | |||||||||||
Catastrophes | 5 | 28 | — | 33 | |||||||||||
Other reserve re-estimates, net | 7 | — | (2 | ) | 5 | ||||||||||
Total prior accident years development | $ | 25 | $ | (49 | ) | $ | 290 | $ | 266 |
• | Released reserves for personal auto liability claims for both the three and six months ended June 30, 2011, primarily for accident years 2005 through 2010. Favorable trends in reported severity persisted over this time period. As these accident years developed, the uncertainty around the ultimate losses was reduced and management placed more weight on the emerged experience. |
• | Released homeowners’ reserves, for the six months ended June 30, 2011, due to favorable emergence losses primarily for accident years 2009 and 2010. This was partially driven by an increase in the speed at which claims are being settled, a trend that is expected to continue as these accident years develop. |
• | Strengthened reserves for general liability and high hazard liability, for both the three and six months ended June 30, 2011, driven by increasing indications for allocated claim handling cost primarily in accident years 2006 through 2010. |
• | Prior year catastrophe strengthening, for the three and six month period, primarily related to a severe wind and hail storm event in Arizona during the fourth quarter of 2010. |
• | Refer to the Property & Casualty Other Operations Claims section for further discussion on net asbestos and net environmental reserves. |
For the Three Months Ended June 30, 2012 | Asbestos | Environmental | All Other [1] | Total | |||||||||||
Beginning liability—net [2][3] | $ | 1,840 | $ | 311 | $ | 1,123 | $ | 3,274 | |||||||
Losses and loss adjustment expenses incurred | 48 | 3 | 2 | 53 | |||||||||||
Losses and loss adjustment expenses paid | (31 | ) | (10 | ) | (31 | ) | (72 | ) | |||||||
Ending liability – net [2][3] | $ | 1,857 | [4] | $ | 304 | $ | 1,094 | $ | 3,255 | ||||||
For the Six Months Ended June 30, 2012 | Asbestos | Environmental | All Other [1] | Total | |||||||||||
Beginning liability—net [2][3] | $ | 1,892 | $ | 320 | $ | 1,159 | $ | 3,371 | |||||||
Losses and loss adjustment expenses incurred | 48 | 8 | 3 | 59 | |||||||||||
Losses and loss adjustment expenses paid | (83 | ) | (24 | ) | (68 | ) | (175 | ) | |||||||
Ending liability – net [2][3] | $ | 1,857 | [4] | $ | 304 | $ | 1,094 | $ | 3,255 |
[1] | “All Other” includes unallocated loss adjustment expense reserves. “All Other” also includes The Company's allowance for uncollectible reinsurance. When the Company commutes a ceded reinsurance contract or settles a ceded reinsurance dispute, the portion of the allowance for uncollectible reinsurance attributable to that commutation or settlement, if any, is reclassified to the appropriate cause of loss. |
[2] | Excludes amounts reported in Property & Casualty Commercial and Consumer Markets reporting segments (collectively “Ongoing Operations”) for asbestos and environmental net liabilities of $14 and $8, respectively, as of June 30, 2012, $15 and $8, respectively, as of March 31, 2012 and $15 and $8, respectively, as of December 31, 2011; total net losses and loss adjustment expenses incurred for the three and six months ended June 30, 2012 includes $4 and $7, respectively, related to asbestos and environmental claims; and total net losses and loss adjustment expenses paid for the three and six months ended June 30, 2012 includes $8 and $8, respectively, related to asbestos and environmental claims. |
[3] | Gross of reinsurance, asbestos and environmental reserves, including liabilities in Ongoing Operations, were $2,421 and $350, respectively, as of June 30, 2012, $2,388 and $357, respectively, as of March 31, 2012 and $2,442 and $367, respectively, as of December 31, 2011. |
[4] | The one year and average three year net paid amounts for asbestos claims, including Ongoing Operations, are $181 and $232, respectively, resulting in a one year net survival ratio of 10.4 and a three year net survival ratio of 8.1. Net survival ratio is the quotient of the net carried reserves divided by the average annual payment amount and is an indication of the number of years that the net carried reserve would last (i.e. survive) if the future annual claim payments were consistent with the calculated historical average. |
Asbestos [1] | Environmental [1] | ||||||||||||||
Three Months Ended June 30, 2012 | Paid Losses & LAE | Incurred Losses & LAE | Paid Losses & LAE | Incurred Losses & LAE | |||||||||||
Gross | |||||||||||||||
Direct | $ | 27 | $ | 55 | $ | 5 | $ | 2 | |||||||
Assumed Reinsurance | 9 | 14 | 6 | — | |||||||||||
London Market | 4 | 5 | — | 3 | |||||||||||
Total | 40 | 74 | 11 | 5 | |||||||||||
Ceded | (9 | ) | (26 | ) | (1 | ) | (2 | ) | |||||||
Net | $ | 31 | $ | 48 | $ | 10 | $ | 3 | |||||||
Six Months Ended June 30, 2012 | Paid Losses & LAE | Incurred Losses & LAE | Paid Losses & LAE | Incurred Losses & LAE | |||||||||||
Gross | |||||||||||||||
Direct | $ | 65 | $ | 55 | $ | 19 | $ | 7 | |||||||
Assumed Reinsurance | 21 | 14 | 6 | — | |||||||||||
London Market | 8 | 5 | 1 | 3 | |||||||||||
Total | 94 | 74 | 26 | 10 | |||||||||||
Ceded | (11 | ) | (26 | ) | (2 | ) | (2 | ) | |||||||
Net | $ | 83 | $ | 48 | $ | 24 | $ | 8 |
[1] | Excludes asbestos and environmental paid and incurred loss and LAE reported in Ongoing Operations. Total gross losses and LAE incurred in Ongoing Operations for the three and six months ended June 30, 2012 includes $3 and $7, respectively, related to asbestos and environmental claims. Total gross losses and LAE paid in Ongoing Operations for the three and six months ended June 30, 2012 includes $5 and $9, respectively, related to asbestos and environmental claims. |
• | Major Asbestos Defendants represent the “Top 70” accounts in Tillinghast's published Tiers 1 and 2 and Wellington accounts. Major Asbestos Defendants have the fewest number of asbestos accounts and include reserves related to PPG Industries, Inc. (“PPG”). In January 2009, the Company, along with approximately three dozen other insurers, entered into a modified agreement in principle with PPG to resolve the Company's coverage obligations for all its PPG asbestos liabilities. The agreement is contingent on the fulfillment of certain conditions. Major Asbestos Defendants gross asbestos reserves account for approximately 30% of the Company's total Direct gross asbestos reserves as of June 30, 2012. |
• | Non-Major Accounts are all other open direct asbestos accounts and largely represent smaller and more peripheral defendants. These exposures represent 1,143 accounts and contain approximately 41% of the Company's total Direct gross asbestos reserves as of June 30, 2012. |
• | Unallocated Direct Accounts includes an estimate of the reserves necessary for asbestos claims related to direct insureds that have not previously tendered asbestos claims to the Company and exposures related to liability claims that may not be subject to an aggregate limit under the applicable policies. |
Asbestos [1] | Environmental [2] | Total A&E | |||||||
Gross | |||||||||
Direct | $ | 1,810 | $ | 258 | $ | 2,068 | |||
Assumed Reinsurance | 340 | 33 | 373 | ||||||
London Market | 271 | 59 | 330 | ||||||
Total | 2,421 | 350 | 2,771 | ||||||
Ceded | (548 | ) | (38 | ) | (586 | ) | |||
Net | $ | 1,873 | $ | 312 | $ | 2,185 |
[1] | The one year gross paid amount for total asbestos claims is $225, resulting in a one year gross survival ratio of 10.7. The three year average gross paid amount for total asbestos claims is $293, resulting in a three year gross survival ratio of 8.3. |
[2] | The one year gross paid amount for total environmental claims is $67, resulting in a one year gross survival ratio of 5.2. The three year average gross paid amount for total environmental claims is $60, resulting in a three year gross survival ratio of 5.8. |
Individual Life | Retirement Plans | Life Other Operations | |||||||||||||||||||||
June 30, 2012 | December 31, 2011 | June 30, 2012 | December 31, 2011 | June 30, 2012 | December 31, 2011 | ||||||||||||||||||
DAC | $ | 2,008 | $ | 2,002 | $ | 288 | $ | 304 | $ | 3,408 | $ | 3,625 | |||||||||||
SIA | $ | 48 | $ | 47 | $ | 22 | $ | 22 | $ | 353 | $ | 365 | |||||||||||
URR | $ | 1,675 | $ | 1,570 | $ | — | $ | — | $ | 109 | $ | 128 | |||||||||||
Death and Other Insurance Benefit Reserves | $ | 289 | $ | 228 | $ | — | $ | 1 | $ | 2,662 | $ | 3,449 |
Individual Life | Retirement Plans | Life Other Operations | Total | ||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||
DAC | $ | (3 | ) | $ | (2 | ) | $ | (3 | ) | $ | (3 | ) | $ | (52 | ) | $ | (53 | ) | $ | (58 | ) | $ | (58 | ) | |||||||
SIA | — | — | — | — | (3 | ) | (7 | ) | (3 | ) | (7 | ) | |||||||||||||||||||
URR | 2 | 1 | — | — | 3 | 2 | 5 | 3 | |||||||||||||||||||||||
Death and Other Insurance Benefit Reserves | 1 | — | — | — | (91 | ) | (4 | ) | (90 | ) | (4 | ) | |||||||||||||||||||
Total | $ | — | $ | (1 | ) | $ | (3 | ) | $ | (3 | ) | $ | (143 | ) | $ | (62 | ) | $ | (146 | ) | $ | (66 | ) |
Individual Life | Retirement Plans | Life Other Operations | Total | ||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||
DAC | $ | (4 | ) | $ | (3 | ) | $ | 4 | $ | (1 | ) | $ | 23 | $ | (28 | ) | $ | 23 | $ | (32 | ) | ||||||||||
SIA | — | — | — | — | — | (5 | ) | — | (5 | ) | |||||||||||||||||||||
URR | 2 | 1 | — | — | 2 | 1 | 4 | 2 | |||||||||||||||||||||||
Death and Other Insurance Benefit Reserves | (6 | ) | — | — | — | 47 | 26 | 41 | 26 | ||||||||||||||||||||||
Total | $ | (8 | ) | $ | (2 | ) | $ | 4 | $ | (1 | ) | $ | 72 | $ | (6 | ) | $ | 68 | $ | (9 | ) |
Segment Goodwill | Goodwill in Corporate | Total | |||||||||
Group Benefits | $ | — | $ | 138 | $ | 138 | |||||
Consumer Markets | 119 | — | 119 | ||||||||
Individual Life | 224 | 118 | 342 | ||||||||
Retirement Plans | 87 | 69 | 156 | ||||||||
Mutual Funds | 159 | 92 | 251 | ||||||||
Total | $ | 589 | $ | 417 | $ | 1,006 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net income (loss) | $ | (101 | ) | $ | 33 | $ | (5 | ) | $ | 534 | |||||
Less: Income (loss) from discontinued operations, net of tax | (1 | ) | (80 | ) | (2 | ) | 82 | ||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings | 368 | 99 | (147 | ) | (136 | ) | |||||||||
Less: Loss on extinguishment of debt, net of tax | (587 | ) | — | (587 | ) | — | |||||||||
Core earnings | $ | 119 | $ | 14 | 731 | 588 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||
Property & Casualty Commercial | |||||||||||
Combined ratio | 100.5 | 106.2 | 100.1 | 102.1 | |||||||
Catastrophe ratio | 2.3 | 11.6 | 2.3 | 7.2 | |||||||
Non-catastrophe prior year development | 3.7 | 1.4 | 2.4 | 0.7 | |||||||
Combined ratio before catastrophes and prior year development | 94.5 | 93.1 | 95.4 | 94.2 | |||||||
Consumer Markets | |||||||||||
Combined ratio | 112.6 | 121.1 | 99.8 | 104.1 | |||||||
Catastrophe ratio | 22.9 | 30.8 | 12.8 | 18.0 | |||||||
Non-catastrophe prior year development | (1.5 | ) | (1.0 | ) | (3.0 | ) | (4.1 | ) | |||
Combined ratio before catastrophes and prior year development | 91.3 | 91.2 | 90.0 | 90.1 |
• | Property & Casualty Commercial’s combined ratio before catastrophes and prior year development deteriorated primarily due to an increase in the current accident year loss and loss adjustment expense ratio before catastrophes particularly in workers' compensation, which, in 2011, did not include the change in the Company's 2011 accident year loss picks until the third and fourth quarter. Workers' compensation frequency has been improving since recognizing the increase in the latter six months of 2011, while severity has moderated and earned pricing has increased. |
• | Consumer Markets combined ratio before catastrophes and prior year development deteriorated slightly as an increase in the expense ratio was almost entirely offset by a decrease in the current accident year loss and loss adjustment expense ratio before catastrophes, driven by earned pricing increases and a decrease in the frequency of non-catastrophe weather claims in homeowners. |
• | Consumer Markets combined ratio before catastrophes and prior year development improved slightly primarily due to a lower ratio of current accident year loss and loss adjustment expenses before catastrophes for home, driven by earned pricing increases and a decrease in the frequency of non-catastrophe weather claims, almost entirely offset by an increase in the expense ratio. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Ratios | 2012 | 2011 | 2012 | 2011 | |||||||||||
Retirement Plans | |||||||||||||||
ROA | (1.4 | ) | bps | 19.5 | bps | 6.0 | bps | 11.8 | bps | ||||||
Effect of Unlock on ROA | (5.0 | ) | bps | 11.5 | bps | (0.4 | ) | bps | 3.7 | bps | |||||
Effect of net realized gains (losses), net of tax and DAC on ROA | (2.1 | ) | bps | (1.4 | ) | bps | 1.9 | bps | — | bps | |||||
ROA, core earnings excluding Unlock | 5.7 | bps | 9.4 | bps | 4.5 | bps | 8.1 | bps | |||||||
Mutual Funds | |||||||||||||||
ROA | 8.1 | bps | 10.6 | bps | 8.9 | bps | 11.0 | bps | |||||||
Effect of net realized gains /(losses), net of tax and DAC on ROA | — | bps | — | bps | — | bps | 0.2 | bps | |||||||
ROA, core earnings excluding Unlock | 8.1 | bps | 10.6 | bps | 8.9 | bps | 10.8 | bps | |||||||
Life Other Operations | |||||||||||||||
ROA | 95.6 | bps | 56.4 | bps | 23.6 | bps | 36.0 | bps | |||||||
Effect of Unlock on ROA | 86.9 | bps | 5.4 | bps | (25.1 | ) | bps | (16.3 | ) | bps | |||||
Effect of net realized gains (losses), net of tax and DAC on ROA | (29.5 | ) | bps | (3.0 | ) | bps | 7.9 | bps | 4.6 | bps | |||||
ROA, core earnings excluding Unlock | 38.2 | bps | 54.0 | bps | 40.8 | bps | 47.7 | bps |
• | Retirement Plans ROA, core earnings excluding Unlock, decreased in 2012 primarily due to lower fee income and other driven by lower AUM, compared to June 30, 2011, increased total benefits, losses and expenses including restructuring costs and a higher effective income tax rate. The lower 2011 effective income tax rate reflects the favorable impact (collectively, approximately 10 bps) of an additional DRD benefit related to resolution of a tax matter with the Internal Revenue Service and the release of the valuation allowance associated with investment realized capital losses due to the availability of tax planning strategies. |
• | Mutual Funds ROA, core earnings excluding Unlock, decreased in 2012 primarily due to lower fee income and other driven by lower AUM, compared to June 30, 2011. |
• | Life Other Operations ROA, core earnings excluding Unlock, decreased in 2012 primarily due to higher total benefits, losses and expenses and a higher effective income tax rate. The 2012 effective income tax rate of approximately 32% is higher as compared to the prior year period as the 2011 effective income tax rate reflects both the favorable impact (collectively, approximately 20 bps) of an additional DRD benefit related to resolution of a tax matter with the Internal Revenue Service and the release of the valuation allowance associated with investment realized capital losses due to the availability of tax planning strategies. In addition, ROA, core earnings excluding Unlock for 2011 reflects the favorable impact (approximately 4 bps) of the release of a deficiency reserve related to a product in Japan. |
• | Retirement Plans ROA, core earnings excluding Unlock, decreased in 2012 primarily due to lower fee income and other driven by lower AUM, compared to June 30, 2011 increased total benefits, losses and expenses including restructuring costs and a higher effective income tax rate in the first quarter of 2012. |
• | Mutual Funds ROA, core earnings excluding Unlock, decreased in 2012 primarily due to lower fee income and other driven by lower AUM, compared to June 30, 2011. |
• | Life Other Operations ROA, core earnings excluding Unlock, decreased in 2012 primarily due to lower fee income and a higher effective income tax rate. The 2012 effective income tax rate also reflects partial release in the first quarter of 2012 of the foreign deferred tax asset valuation allowance. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||
Individual Life | |||||||||||
After-tax margin | 9.8 | % | 13.8 | % | 7.7 | % | 10.3 | % | |||
Effect of Unlock | 2.5 | % | 1.2 | % | 0.3 | % | (1.6 | )% | |||
Effect of net realized losses, net of tax and DAC | 0.2 | % | (0.4 | )% | (1.0 | )% | (0.5 | )% | |||
After-tax margin, core earnings excluding Unlock | 7.1 | % | 13.0 | % | 8.4 | % | 12.4 | % | |||
Group Benefits | |||||||||||
After-tax margin, excluding buyouts | 3.3 | % | 3.6 | % | 2.5 | % | 2.3 | % | |||
Effect of net realized gains (losses), net of tax | 0.1 | % | 1.0 | % | 0.7 | % | 0.2 | % | |||
After-tax margin, excluding buyouts and realized gains (losses) | 3.2 | % | 2.6 | % | 1.8 | % | 2.1 | % |
• | The decrease in Individual Life after-tax margin, core earnings excluding Unlock, was primarily due to increased claim reserves and death benefits, as well as restructuring costs and a higher effective income tax rate. The 2012 effective income tax rate of approximately 24% is higher as compared to the prior year period as the 2011 effective income tax rate of approximately 14% primarily reflects both the favorable impact of an additional DRD benefit related to resolution of a tax matter with the Internal Revenue Service and the release of the valuation allowance associated with investment realized capital losses due to the availability of tax planning strategies. |
• | The increase in Group Benefits after-tax margin, excluding buyouts and realized gains (losses), was primarily driven by a decrease in fully insured ongoing premiums due to the Company's pricing actions and a challenging economic environment, as well as higher severity in group disability. The Company continues to experience stable but elevated claims incidence and lower than historical terminations in long-term disability. |
June 30, 2012 | December 31, 2011 | ||||||||||||
Amount | Percent | Amount | Percent | ||||||||||
Fixed maturities, AFS, at fair value | $ | 85,227 | 80.5 | % | $ | 81,809 | 78.3 | % | |||||
Fixed maturities, at fair value using the fair value option | 1,165 | 1.1 | % | 1,328 | 1.3 | % | |||||||
Equity securities, AFS, at fair value | 851 | 0.8 | % | 921 | 0.9 | % | |||||||
Mortgage loans | 6,875 | 6.5 | % | 5,728 | 5.5 | % | |||||||
Policy loans, at outstanding balance | 1,956 | 1.9 | % | 2,001 | 1.9 | % | |||||||
Limited partnerships and other alternative investments | 2,944 | 2.8 | % | 2,532 | 2.4 | % | |||||||
Other investments [1] | 1,548 | 1.5 | % | 2,394 | 2.3 | % | |||||||
Short-term investments | 5,154 | 4.9 | % | 7,736 | 7.4 | % | |||||||
Total investments excluding equity securities, trading | 105,720 | 100.0 | % | 104,449 | 100.0 | % | |||||||
Equity securities, trading, at fair value [2] | 29,215 | 30,499 | |||||||||||
Total investments | $ | 134,935 | $ | 134,948 |
[1] | Primarily relates to derivative instruments. |
[2] | As of June 30, 2012 and December 31, 2011, approximately $27.3 billion and $28.5 billion, respectively, of equity securities, trading, support Japan variable annuities. Those equity securities, trading, were invested in mutual funds, which, in turn, invested in the following asset classes, Japan equity 21%, Japan fixed income (primarily government securities) 15%, global equity 20%, global government bonds 43% and cash and other 1% for both periods presented. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||
(Before-tax) | Amount | Yield [1] | Amount | Yield [1] | Amount | Yield [1] | Amount | Yield [1] | |||||||||||||||||||
Fixed maturities [2] | $ | 848 | 4.2 | % | $ | 870 | 4.3 | % | $ | 1,706 | 4.2 | % | $ | 1,716 | 4.3 | % | |||||||||||
Equity securities, AFS | 8 | 3.3 | % | 8 | 3.3 | % | 18 | 3.6 | % | 19 | 3.8 | % | |||||||||||||||
Mortgage loans | 86 | 5.2 | % | 67 | 5.2 | % | 165 | 5.2 | % | 130 | 5.3 | % | |||||||||||||||
Policy loans | 30 | 6.1 | % | 34 | 6.2 | % | 60 | 6.1 | % | 67 | 6.1 | % | |||||||||||||||
Limited partnerships and other alternative investments | 72 | 10.4 | % | 78 | 16.6 | % | 124 | 9.3 | % | 178 | 18.9 | % | |||||||||||||||
Other [3] | 81 | 77 | 150 | 158 | |||||||||||||||||||||||
Investment expense | (28 | ) | (30 | ) | (56 | ) | (56 | ) | |||||||||||||||||||
Total securities AFS and other | 1,097 | 4.4 | % | 1,104 | 4.6 | % | 2,167 | 4.4 | % | 2,212 | 4.6 | % | |||||||||||||||
Equity securities, trading | (1,687 | ) | (597 | ) | 1,179 | 206 | |||||||||||||||||||||
Total net investment income (loss) | $ | (590 | ) | $ | 507 | 3,346 | 2,418 | ||||||||||||||||||||
Total securities, AFS and other excluding limited partnerships and other alternative investments | $ | 1,025 | 4.3 | % | $ | 1,026 | 4.3 | % | $ | 2,043 | 4.3 | % | $ | 2,034 | 4.3 | % |
[1] | Yields calculated using annualized investment income before investment expenses divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding consolidated variable interest entity noncontrolling interests. Included in the fixed maturity yield is other, which primarily relates to derivatives (see footnote [3] below). Included in the total net investment income yield is investment expense. |
[2] | Includes net investment income on short-term investments. |
[3] | Includes income from derivatives that qualify for hedge accounting and hedge fixed maturities. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(Before-tax) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Gross gains on sales | $ | 246 | $ | 261 | $ | 505 | $ | 322 | |||||||
Gross losses on sales | (159 | ) | (98 | ) | (256 | ) | (231 | ) | |||||||
Net OTTI losses recognized in earnings | (98 | ) | (23 | ) | (127 | ) | (78 | ) | |||||||
Valuation allowances on mortgage loans | — | 26 | 1 | 23 | |||||||||||
Japanese fixed annuity contract hedges, net [1] | 2 | 6 | (18 | ) | (11 | ) | |||||||||
Periodic net coupon settlements on credit derivatives/Japan | 4 | (2 | ) | (1 | ) | (9 | ) | ||||||||
Results of variable annuity hedge program | |||||||||||||||
GMWB derivatives, net | (115 | ) | (33 | ) | 70 | 23 | |||||||||
U.S. macro hedge program | 6 | (17 | ) | (183 | ) | (101 | ) | ||||||||
Total U.S. program | (109 | ) | (50 | ) | (113 | ) | (78 | ) | |||||||
International program | 753 | 52 | (466 | ) | (267 | ) | |||||||||
Total results of variable annuity hedge program | 644 | 2 | (579 | ) | (345 | ) | |||||||||
Other, net [2] | (50 | ) | (103 | ) | 154 | (5 | ) | ||||||||
Net realized capital gains (losses) | $ | 589 | $ | 69 | $ | (321 | ) | $ | (334 | ) |
[1] | Relates to the Japanese fixed annuity product (adjustment of product liability for changes in spot currency exchange rates, related derivative hedging instruments, excluding net period coupon settlements, and Japan FVO securities). |
[2] | Primarily consists of gains and losses on non-qualifying derivatives and fixed maturities, FVO, Japan 3Win related foreign currency swaps, and other investment gains and losses. |
• | For the three months ended June 30, 2012, the gain associated with the international program was primarily driven by gains of approximately $326 due to appreciation of the Japanese yen in relation to the euro and the U.S. dollar, gains of approximately $245 due to a decline in global and domestic equity markets, and gains of $169 due to a decrease in interest rates. For the six months ended June 30, 2012, the loss associated with the international program was primarily driven by losses of approximately $338 due to an improvement in global and domestic equity markets, losses of approximately $293 due to depreciation of the Japanese yen in relation to the euro and the U.S. dollar, partially offset by gains of approximately $77 due to a decline in interest rates. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Underwriting Summary | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Written premiums | $ | 1,516 | $ | 1,498 | 1 | % | $ | 3,203 | $ | 3,143 | 2 | % | |||||||||
Change in unearned premium reserve | (36 | ) | (19 | ) | (89 | %) | 94 | 128 | (27 | %) | |||||||||||
Earned premiums | 1,552 | 1,517 | 2 | % | 3,109 | 3,015 | 3 | % | |||||||||||||
Losses and loss adjustment expenses | |||||||||||||||||||||
Current accident year before catastrophes | 995 | 950 | 5 | % | 2,022 | 1,912 | 6 | % | |||||||||||||
Current accident year catastrophes | 74 | 166 | (55 | %) | 106 | 212 | (50 | %) | |||||||||||||
Prior accident years | 19 | 31 | (39 | %) | 39 | 25 | 56 | % | |||||||||||||
Total losses and loss adjustment expenses | 1,088 | 1,147 | (5 | %) | 2,167 | 2,149 | 1 | % | |||||||||||||
Amortization of deferred policy acquisition costs | 231 | 230 | — | % | 462 | 458 | 1 | % | |||||||||||||
Underwriting expenses | 235 | 230 | 2 | % | 480 | 464 | 3 | % | |||||||||||||
Dividends to policyholders | 5 | 4 | 25 | % | 3 | 8 | (63 | %) | |||||||||||||
Underwriting results | (7 | ) | (94 | ) | 93 | % | (3 | ) | (64 | ) | 95 | % | |||||||||
Net servicing income | 4 | 4 | — | % | 8 | 4 | 100 | % | |||||||||||||
Net investment income | 239 | 239 | — | % | 474 | 481 | (1 | %) | |||||||||||||
Net realized capital gains (losses) | (16 | ) | 13 | NM | 27 | (10 | ) | NM | |||||||||||||
Other expenses | (22 | ) | (38 | ) | 42 | % | (52 | ) | (78 | ) | 33 | % | |||||||||
Income from continuing operations before income taxes | 198 | 124 | 60 | % | 454 | 333 | 36 | % | |||||||||||||
Income tax expense | 48 | 3 | NM | 114 | 49 | 133 | % | ||||||||||||||
Income from continuing operations, net of tax | 150 | 121 | 24 | % | 340 | 284 | 20 | % | |||||||||||||
Income (loss) from discontinued operations, net of tax [1] | (1 | ) | (3 | ) | 67 | % | (2 | ) | 157 | NM | |||||||||||
Net income | $ | 149 | $ | 118 | 26 | % | $ | 338 | $ | 441 | (23 | %) |
[1] | Represents the income from operations and sale of Specialty Risk Services (“SRS”). For additional information, see Note 12 of the Notes to Condensed Consolidated Financial Statements. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Premium Measures [1] | 2012 | 2011 | 2012 | 2011 | |||||||||||
New business premium | $ | 249 | $ | 286 | $ | 517 | $ | 589 | |||||||
Standard commercial lines policy count retention | 81 | % | 82 | % | 82 | % | 83 | % | |||||||
Standard commercial lines renewal written pricing increase | 7 | % | 3 | % | 7 | % | 3 | % | |||||||
Standard commercial lines renewal earned pricing increase | 5 | % | 2 | % | 5 | % | 2 | % | |||||||
Standard commercial lines policies in-force as of end of period | 1,266,823 | 1,250,932 |
[1] | Standard commercial lines represents the Company’s small commercial and middle market property and casualty lines. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Ratios | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Loss and loss adjustment expense ratio | |||||||||||||||||||||
Current accident year before catastrophes | 64.1 | 62.6 | (1.4 | ) | 65.0 | 63.4 | (1.6 | ) | |||||||||||||
Current accident year catastrophes | 4.8 | 11.0 | 6.2 | 3.4 | 7.0 | 3.6 | |||||||||||||||
Prior accident years | 1.2 | 2.1 | 0.9 | 1.3 | 0.8 | (0.5 | ) | ||||||||||||||
Total loss and loss adjustment expense ratio | 70.1 | 75.6 | 5.5 | 69.7 | 71.3 | 1.6 | |||||||||||||||
Expense ratio | 30.0 | 30.3 | 0.3 | 30.3 | 30.6 | 0.3 | |||||||||||||||
Policyholder dividend ratio | 0.3 | 0.3 | — | 0.1 | 0.3 | 0.2 | |||||||||||||||
Combined ratio | 100.5 | 106.2 | 5.7 | 100.1 | 102.1 | 2.0 | |||||||||||||||
Catastrophe ratio | |||||||||||||||||||||
Current accident year | 4.8 | 11.0 | 6.2 | 3.4 | 7.0 | 3.6 | |||||||||||||||
Prior accident years | (2.5 | ) | 0.7 | 3.2 | (1.2 | ) | 0.2 | 1.4 | |||||||||||||
Total catastrophe ratio | 2.3 | 11.6 | 9.3 | 2.3 | 7.2 | 4.9 | |||||||||||||||
Combined ratio before catastrophes | 98.2 | 94.5 | (3.7 | ) | 97.8 | 94.9 | (2.9 | ) | |||||||||||||
Combined ratio before catastrophes and prior accident year development | 94.5 | 93.1 | (1.4 | ) | 95.4 | 94.2 | (1.2 | ) | |||||||||||||
Other revenues [1] | $ | 26 | $ | 26 | — | % | $ | 48 | $ | 49 | (2%) |
[1] | Represents servicing revenues. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Operating Summary | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Premiums and other considerations | $ | 966 | $ | 1,076 | (10 | %) | $ | 1,938 | $ | 2,120 | (9 | %) | |||||||||
Net investment income | 107 | 106 | 1 | % | 206 | 210 | (2 | %) | |||||||||||||
Net realized capital gains (losses) | — | 10 | (100 | %) | 20 | (4 | ) | NM | |||||||||||||
Total revenues | 1,073 | 1,192 | (10 | %) | 2,164 | 2,326 | (7 | %) | |||||||||||||
Benefits, losses and loss adjustment expenses | 759 | 850 | (11 | %) | 1,566 | 1,678 | (7 | %) | |||||||||||||
Amortization of deferred policy acquisition costs | 8 | 9 | (11 | %) | 16 | 18 | (11 | %) | |||||||||||||
Insurance operating costs and other expenses | 261 | 286 | (9 | %) | 519 | 577 | (10 | %) | |||||||||||||
Total benefits, losses and expenses | 1,028 | 1,145 | (10 | %) | 2,101 | 2,273 | (8 | %) | |||||||||||||
Income before income taxes | 45 | 47 | (4 | %) | 63 | 53 | 19 | % | |||||||||||||
Income tax expense | 10 | 6 | 67 | % | 10 | 1 | NM | ||||||||||||||
Net income | $ | 35 | $ | 41 | (15 | %) | $ | 53 | $ | 52 | 2 | % | |||||||||
Premiums and other considerations | |||||||||||||||||||||
Fully insured – ongoing premiums | $ | 950 | $ | 1,013 | (6 | %) | $ | 1,904 | $ | 2,041 | (7 | %) | |||||||||
Buyout premiums | — | 49 | (100 | %) | 3 | 49 | (94 | %) | |||||||||||||
Other | 16 | 14 | 14 | % | 31 | 30 | 3 | % | |||||||||||||
Total premiums and other considerations | $ | 966 | $ | 1,076 | (10 | %) | $ | 1,938 | $ | 2,120 | (9 | %) | |||||||||
Fully insured ongoing sales, excluding buyouts | $ | 66 | $ | 92 | (28 | %) | $ | 294 | $ | 336 | (13 | %) | |||||||||
Ratios, excluding buyouts | |||||||||||||||||||||
Loss ratio | 78.6 | % | 78.0 | % | 0.6 | 80.8 | % | 78.7 | % | 2.1 | |||||||||||
Loss ratio, excluding financial institutions | 83.6 | % | 83.5 | % | 0.1 | 85.5 | % | 84.0 | % | 1.5 | |||||||||||
Expense ratio | 27.8 | % | 28.7 | % | (0.9) | 27.6 | % | 28.7 | % | (1.1) | |||||||||||
Expense ratio, excluding financial institutions | 23.4 | % | 23.9 | % | (0.5) | 23.8 | % | 23.8 | % | 0.0 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Operating Summary | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Written premiums | $ | 950 | $ | 969 | (2 | %) | $ | 1,811 | $ | 1,853 | (2 | %) | |||||||||
Change in unearned premium reserve | 46 | 30 | 53 | % | (2 | ) | (42 | ) | 95 | % | |||||||||||
Earned premiums | 904 | 939 | (4 | %) | 1,813 | 1,895 | (4 | %) | |||||||||||||
Losses and loss adjustment expenses | |||||||||||||||||||||
Current accident year before catastrophes | 595 | 623 | (4 | %) | 1,169 | 1,239 | (6 | %) | |||||||||||||
Current accident year catastrophes | 216 | 281 | (23 | %) | 255 | 313 | (19 | %) | |||||||||||||
Prior accident years | (23 | ) | — | — | % | (78 | ) | (49 | ) | (59 | %) | ||||||||||
Total losses and loss adjustment expenses | 788 | 904 | (13 | %) | 1,346 | 1,503 | (10 | %) | |||||||||||||
Amortization of deferred policy acquisition costs | 84 | 85 | (1 | %) | 167 | 170 | (2 | )% | |||||||||||||
Underwriting expenses | 146 | 147 | (1 | %) | 296 | 296 | — | % | |||||||||||||
Underwriting results | (114 | ) | (197 | ) | 42 | % | 4 | (74 | ) | NM | |||||||||||
Net servicing income | 4 | 3 | 33 | % | 10 | 9 | 11 | % | |||||||||||||
Net investment income | 41 | 49 | (16 | %) | 84 | 99 | (15 | %) | |||||||||||||
Net realized capital gains (losses) | (2 | ) | 2 | NM | 5 | (2 | ) | NM | |||||||||||||
Other expenses | (11 | ) | (131 | ) | 92 | % | (26 | ) | (145 | ) | 82 | % | |||||||||
Income (loss) before income taxes | (82 | ) | (274 | ) | 70 | % | 77 | (113 | ) | NM | |||||||||||
Income tax expense (benefit) | (32 | ) | (102 | ) | 69 | % | 19 | (49 | ) | NM | |||||||||||
Net income (loss) | $ | (50 | ) | $ | (172 | ) | 71 | % | $ | 58 | $ | (64 | ) | NM | |||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Written Premiums | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Product Line | |||||||||||||||||||||
Automobile | $ | 649 | $ | 665 | (2 | %) | $ | 1,269 | $ | 1,306 | (3 | %) | |||||||||
Homeowners | 301 | 304 | (1 | %) | 542 | 547 | (1 | %) | |||||||||||||
Total | $ | 950 | $ | 969 | (2 | %) | $ | 1,811 | $ | 1,853 | (2 | %) | |||||||||
Earned Premiums | |||||||||||||||||||||
Product Line | |||||||||||||||||||||
Automobile | $ | 630 | $ | 657 | (4 | %) | $ | 1,262 | $ | 1,329 | (5 | %) | |||||||||
Homeowners | 274 | 282 | (3 | %) | 551 | 566 | (3 | %) | |||||||||||||
Total | $ | 904 | $ | 939 | (4 | %) | $ | 1,813 | $ | 1,895 | (4 | %) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Premium Measures | 2012 | 2011 | 2012 | 2011 | |||||||||||
Policies in-force end of period | |||||||||||||||
Automobile | 2,044,874 | 2,137,351 | |||||||||||||
Homeowners | 1,323,557 | 1,380,301 | |||||||||||||
Total policies in-force end of period | 3,368,431 | 3,517,652 | |||||||||||||
New business written premium | |||||||||||||||
Automobile | $ | 85 | $ | 75 | $ | 171 | $ | 141 | |||||||
Homeowners | $ | 30 | $ | 23 | $ | 55 | $ | 42 | |||||||
Policy count retention | |||||||||||||||
Automobile | 84 | % | 82 | % | 84 | % | 82 | % | |||||||
Homeowners | 86 | % | 84 | % | 85 | % | 83 | % | |||||||
Renewal written pricing increase | |||||||||||||||
Automobile | 4 | % | 6 | % | 4 | % | 6 | % | |||||||
Homeowners | 6 | % | 9 | % | 6 | % | 9 | % | |||||||
Renewal earned pricing increase | |||||||||||||||
Automobile | 5 | % | 7 | % | 5 | % | 7 | % | |||||||
Homeowners | 7 | % | 10 | % | 7 | % | 10 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Ratios and Supplemental Data | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Loss and loss adjustment expense ratio | |||||||||||||||||||||
Current accident year before catastrophes | 65.8 | 66.5 | 0.7 | 64.5 | 65.4 | 0.9 | |||||||||||||||
Current accident year catastrophes | 23.9 | 29.9 | 6.0 | 14.1 | 16.5 | 2.4 | |||||||||||||||
Prior accident years | (2.5 | ) | — | 2.5 | (4.3 | ) | (2.6 | ) | 1.7 | ||||||||||||
Total loss and loss adjustment expense ratio | 87.2 | 96.4 | 9.2 | 74.2 | 79.4 | 5.2 | |||||||||||||||
Expense ratio | 25.4 | 24.7 | (0.7 | ) | 25.5 | 24.7 | (0.8 | ) | |||||||||||||
Combined ratio | 112.6 | 121.1 | 8.5 | 99.8 | 104.1 | 4.3 | |||||||||||||||
Catastrophe ratio | |||||||||||||||||||||
Current year | 23.9 | 29.9 | 6.0 | 14.1 | 16.5 | 2.4 | |||||||||||||||
Prior years | (1.0 | ) | 1.0 | 2.0 | (1.3 | ) | 1.5 | 2.8 | |||||||||||||
Total catastrophe ratio | 22.9 | 30.8 | 7.9 | 12.8 | 18.0 | 5.2 | |||||||||||||||
Combined ratio before catastrophes | 89.7 | 90.2 | 0.5 | 87.0 | 86.0 | (1.0 | ) | ||||||||||||||
Combined ratio before catastrophes and prior accident years development | 91.3 | 91.2 | (0.1 | ) | 90.0 | 90.1 | 0.1 | ||||||||||||||
Other revenues [1] | $ | 35 | $ | 36 | (3 | %) | $ | 72 | $ | 76 | (5 | %) |
[1] | Represents servicing revenues. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
Product Line Combined Ratios | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||
Automobile | 98.8 | 98.0 | (0.8 | ) | 93.6 | 91.5 | (2.1 | ) | |||||||||
Homeowners | 144.1 | 175.0 | 30.9 | 113.9 | 133.1 | 19.2 | |||||||||||
Total | 112.6 | 121.1 | 8.5 | 99.8 | 104.1 | 4.3 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
Operating Summary | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||||
Fee income and other | $ | 248 | $ | 237 | 5 | % | $ | 503 | $ | 470 | 7 | % | |||||||||||
Earned premiums | (28 | ) | (25 | ) | (12%) | (56 | ) | (49 | ) | (14%) | |||||||||||||
Net investment income | 126 | 115 | 10 | % | 248 | 226 | 10 | % | |||||||||||||||
Net realized capital gains (losses) | 20 | 6 | NM | 19 | (24 | ) | NM | ||||||||||||||||
Total revenues | 366 | 333 | 10 | % | 714 | 623 | 15 | % | |||||||||||||||
Benefits, losses and loss adjustment expenses | 211 | 180 | 17 | % | 427 | 362 | 18 | % | |||||||||||||||
Amortization of DAC | 28 | 34 | (18%) | 67 | 59 | 14 | % | ||||||||||||||||
Insurance operating costs and other expenses | 78 | 67 | 16 | % | 148 | 128 | 16 | % | |||||||||||||||
Total benefits, losses and expenses | 317 | 281 | 13 | % | 642 | 549 | 17 | % | |||||||||||||||
Income before income taxes | 49 | 52 | (6%) | 72 | 74 | (3%) | |||||||||||||||||
Income tax expense | 13 | 6 | 117 | % | 17 | 10 | 70 | % | |||||||||||||||
Net income | $ | 36 | $ | 46 | (22%) | $ | 55 | $ | 64 | (14%) | |||||||||||||
Account Values | |||||||||||||||||||||||
Individual variable universal life insurance | $ | 5,699 | $ | 5,993 | (5%) | ||||||||||||||||||
Universal life, interest sensitive whole life, modified guaranteed life insurance and other | 7,059 | 6,373 | 11 | % | |||||||||||||||||||
Total account values | $ | 12,758 | $ | 12,366 | 3 | % | |||||||||||||||||
Individual Life Insurance In-force | |||||||||||||||||||||||
Variable universal life insurance | $ | 67,514 | $ | 71,977 | (6%) | ||||||||||||||||||
Universal life, interest sensitive whole life, modified guaranteed life insurance | 66,625 | 60,759 | 10 | % | |||||||||||||||||||
Term life | 83,291 | 78,714 | 6 | % | |||||||||||||||||||
Total life insurance in-force | $ | 217,430 | $ | 211,450 | 3 | % | |||||||||||||||||
Net Investment Spread | 173 bps | 175 bps | (2) bps | 156 bps | 161 bps | (5) bps | |||||||||||||||||
Death Benefits | $ | 113 | $ | 102 | $ | 11 | $ | 218 | $ | 207 | $ | 11 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Operating Summary | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Fee income and other | $ | 93 | $ | 99 | (6%) | $ | 187 | $ | 193 | (3%) | |||||||||||
Earned premiums | 1 | 2 | (50%) | 3 | 5 | (40%) | |||||||||||||||
Net investment income | 106 | 100 | 6 | % | 207 | 199 | 4 | % | |||||||||||||
Net realized capital gains (losses) | (12 | ) | 11 | NM | 2 | 2 | — | % | |||||||||||||
Total revenues | 188 | 212 | (11%) | 399 | 399 | — | % | ||||||||||||||
Benefits, losses and loss adjustment expenses | 83 | 75 | 11 | % | 164 | 147 | 12 | % | |||||||||||||
Amortization of DAC | 10 | 17 | (41 | )% | 10 | 24 | (58 | )% | |||||||||||||
Insurance operating costs and other expenses | 108 | 107 | 1 | % | 217 | 215 | 1 | % | |||||||||||||
Total benefits, losses and expenses | 201 | 199 | 1 | % | 391 | 386 | 1 | % | |||||||||||||
Income (loss) before income taxes | (13 | ) | 13 | NM | 8 | 13 | (38%) | ||||||||||||||
Income tax benefit | (11 | ) | (14 | ) | 21 | % | (8 | ) | (19 | ) | 58 | % | |||||||||
Net income (loss) | $ | (2 | ) | $ | 27 | NM | $ | 16 | $ | 32 | (50%) | ||||||||||
Assets Under Management | |||||||||||||||||||||
401(k) account values | $ | 23,085 | $ | 21,963 | 5% | ||||||||||||||||
403(b)/457 account values | 13,508 | 13,118 | 3% | ||||||||||||||||||
401(k)/403(b) mutual funds | 18,305 | 20,474 | (11%) | ||||||||||||||||||
Total assets under management | $ | 54,898 | $ | 55,555 | (1%) | ||||||||||||||||
Assets Under Management Roll Forward | |||||||||||||||||||||
Assets under management, beginning of period | $ | 52,302 | $ | 52,518 | — | ||||||||||||||||
Net flows | (200 | ) | 487 | NM | |||||||||||||||||
Transfers in and reclassifications | — | 267 | (100%) | ||||||||||||||||||
Change in market value and other | 2,796 | 2,283 | 22% | ||||||||||||||||||
Assets under management, end of period | $ | 54,898 | $ | 55,555 | (1%) | ||||||||||||||||
Net Investment Spread | 98 bps | 124 bps | (26) bps | 92 bps | 132 bps | (40) bps |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Operating Summary | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Fee income and other | $ | 148 | $ | 175 | (15%) | $ | 299 | $ | 353 | (15%) | |||||||||||
Net investment loss | — | (1 | ) | 100 | % | (1 | ) | (2 | ) | 50 | % | ||||||||||
Net realized capital gains | (2 | ) | — | — | % | (1 | ) | 1 | NM | ||||||||||||
Total revenues | 146 | 174 | (16%) | 297 | 352 | (16%) | |||||||||||||||
Amortization of DAC | 9 | 12 | (25 | )% | 18 | 24 | (25 | )% | |||||||||||||
Insurance operating costs and other expenses | 109 | 120 | (9%) | 220 | 243 | (9%) | |||||||||||||||
Total benefits, losses and expenses | 118 | 132 | (11%) | 238 | 267 | (11%) | |||||||||||||||
Income before income taxes | 28 | 42 | (33%) | 59 | 85 | (31%) | |||||||||||||||
Income tax expense | 10 | 15 | (33%) | 21 | 30 | (30%) | |||||||||||||||
Net income | $ | 18 | $ | 27 | (33%) | $ | 38 | $ | 55 | (31%) | |||||||||||
Assets Under Management | |||||||||||||||||||||
Retail mutual fund assets | $ | 40,942 | $ | 49,584 | (17%) | ||||||||||||||||
Investment Only mutual fund assets | 7,279 | 6,954 | 5% | ||||||||||||||||||
529 College Savings Plan assets | 1,723 | 1,612 | 7% | ||||||||||||||||||
Total non-proprietary assets | 49,944 | 58,150 | (14%) | ||||||||||||||||||
Proprietary mutual fund assets | 36,287 | 42,204 | (14%) | ||||||||||||||||||
Total mutual fund assets under management | $ | 86,231 | $ | 100,354 | (14%) | ||||||||||||||||
Non-Proprietary AUM Roll Forward | |||||||||||||||||||||
Non-Proprietary Mutual Fund AUM, beginning of period | $ | 48,768 | $ | 56,884 | (14%) | ||||||||||||||||
Net flows | (2,244 | ) | (188 | ) | NM | ||||||||||||||||
Change in market value and other | 3,420 | 1,454 | 135% | ||||||||||||||||||
Non-Proprietary Mutual Fund AUM, end of period | $ | 49,944 | $ | 58,150 | (14%) | ||||||||||||||||
Proprietary Mutual Fund AUM Roll Forward | |||||||||||||||||||||
Proprietary Mutual Fund AUM, beginning of period | $ | 36,770 | $ | 43,602 | (16%) | ||||||||||||||||
Net flows | (2,949 | ) | (3,111 | ) | 5% | ||||||||||||||||
Change in market value | 2,466 | 1,713 | 44% | ||||||||||||||||||
Proprietary Mutual Fund AUM, end of period | $ | 36,287 | $ | 42,204 | (14%) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Operating Summary | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Fee income and other | $ | 564 | $ | 641 | (12%) | $ | 1,131 | $ | 1,276 | (11%) | |||||||||||
Earned premiums | 23 | 49 | (53%) | 68 | 108 | (37%) | |||||||||||||||
Net investment income | |||||||||||||||||||||
Securities available-for-sale and other | 436 | 446 | (2%) | 875 | 894 | (2%) | |||||||||||||||
Equity securities trading [1] | (1,687 | ) | (597 | ) | (183 | %) | 1,178 | 206 | NM | ||||||||||||
Total net investment income | (1,251 | ) | (151 | ) | NM | 2,053 | 1,100 | 87 | % | ||||||||||||
Net realized capital gains (losses) | 587 | 17 | NM | (433 | ) | (293 | ) | (48%) | |||||||||||||
Total revenues | (77 | ) | 556 | NM | 2,819 | 2,191 | 29 | % | |||||||||||||
Benefits, losses and loss adjustment expenses | 640 | 533 | 20 | % | 931 | 1,023 | (9%) | ||||||||||||||
Benefits, losses and loss adjustment expenses – returns credited on international variable annuities [1] | (1,686 | ) | (597 | ) | (182 | %) | 1,178 | 206 | NM | ||||||||||||
Amortization of DAC | 184 | 205 | (10%) | 135 | 289 | (53%) | |||||||||||||||
Insurance operating costs and other expenses | 186 | 196 | (5%) | 370 | 402 | (8%) | |||||||||||||||
Total benefits, losses and expenses | (676 | ) | 337 | NM | 2,614 | 1,920 | 36 | % | |||||||||||||
Income before income taxes | 599 | 219 | 174 | % | 205 | 271 | (24%) | ||||||||||||||
Income tax expense (benefit) | 193 | (42 | ) | NM | 6 | (63 | ) | NM | |||||||||||||
Net income | $ | 406 | $ | 261 | 56 | % | $ | 199 | $ | 334 | (40%) | ||||||||||
Assets Under Management [2] | |||||||||||||||||||||
Variable annuity account values | $ | 96,369 | $ | 112,328 | (14%) | ||||||||||||||||
Fixed MVA annuity and other account values [3] | 15,689 | 16,802 | (7%) | ||||||||||||||||||
Institutional annuity account values [4] | 18,233 | 19,230 | (5%) | ||||||||||||||||||
Private Placement Life Insurance (“PPLI”) | 36,911 | 36,700 | 1 | % | |||||||||||||||||
Account Value Roll Forward | |||||||||||||||||||||
Variable Annuities | |||||||||||||||||||||
Account value, beginning of period | $ | 99,922 | $ | 116,520 | (14 | %) | |||||||||||||||
Net flows | (6,978 | ) | (7,461 | ) | 6 | % | |||||||||||||||
Change in market value and other | 4,497 | 3,069 | 47 | % | |||||||||||||||||
Effect of currency translation | (1,072 | ) | 200 | NM | |||||||||||||||||
Account value, end of period | $ | 96,369 | $ | 112,328 | (14 | %) | |||||||||||||||
Net Investment Spread | 35 bps | 33 bps | 2 bps | 44 bps | 32 bps | 12 bps | |||||||||||||||
Expense Ratios | |||||||||||||||||||||
General insurance expense ratio | 2.7 bps | 2.4 bps | 5.5 bps | 4.8 bps | |||||||||||||||||
DAC amortization ratio | 23.5 | % | 48.4 | % | 39.7 | % | 51.6 | % | |||||||||||||
Less: Effect of realized capital gains (losses) on DAC amortization | (68.2 | %) | 7.6 | % | 10.3 | % | 18.4 | % | |||||||||||||
Less: Effect of Unlocks on DAC amortization | 53.1 | % | 3.9 | % | (7.0 | %) | (4.4 | %) | |||||||||||||
DAC amortization ratio, core earnings, excluding Unlock | 38.6 | % | 36.9 | % | 36.4 | % | 37.6 | % |
[1] | Includes investment income and mark-to-market effects of equity securities, trading, supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within benefits, losses and loss adjustment expenses. |
[2] | International and institutional annuities were transferred retrospectively from Individual Annuity; PPLI was transferred retrospectively from Individual Life. |
[3] | Includes approximately $1.9 billion and $2.6 billion related to the triggering of the guaranteed minimum income benefit for the 3 Win product as of June 30, 2012 and 2011, respectively. This account value is not expected to generate material future profit or loss to the Company. |
[4] | Included in the balance is approximately $1.3 billion as of June 30, 2012 and $1.4 billion as of June 30, 2011 related to an intra-segment funding agreement which is eliminated in consolidation. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Operating Summary | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Earned Premium | (2 | ) | — | — | % | (2 | ) | — | — | % | |||||||||||
Net investment income | 39 | 37 | 5 | % | 78 | 76 | 3 | % | |||||||||||||
Net realized capital gains (losses) | (3 | ) | 4 | NM | 8 | 1 | NM | ||||||||||||||
Other revenue | — | (1 | ) | 100 | % | — | — | — | % | ||||||||||||
Total revenues | 34 | 40 | (15 | %) | 84 | 77 | 9 | % | |||||||||||||
Benefits, losses and loss adjustment expenses | 53 | 286 | (81 | %) | 59 | 290 | (80 | %) | |||||||||||||
Insurance operating costs and other expenses | 4 | 6 | (33 | %) | 12 | 13 | (8 | %) | |||||||||||||
Total benefits, losses and expenses | 57 | 292 | (80 | %) | 71 | 303 | (77 | %) | |||||||||||||
Income before income taxes | (23 | ) | (252 | ) | 91 | % | 13 | (226 | ) | NM | |||||||||||
Income tax benefit | (8 | ) | (88 | ) | 91 | % | 1 | (83 | ) | NM | |||||||||||
Net income (loss) | $ | (15 | ) | $ | (164 | ) | 91 | % | $ | 12 | $ | (143 | ) | NM |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
Operating Summary | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||
Earned premiums | $ | — | $ | 1 | (100 | %) | $ | — | $ | — | — | % | |||||||||
Fee income [1] | 45 | 53 | (15 | %) | 97 | 106 | (8 | %) | |||||||||||||
Net investment income | 3 | 13 | (77 | %) | (3 | ) | 29 | NM | |||||||||||||
Net realized capital gains (losses) | 17 | 6 | 183 | % | 32 | (5 | ) | NM | |||||||||||||
Total revenues | 65 | 73 | (11 | %) | 126 | 130 | (3 | %) | |||||||||||||
Benefits, losses and loss adjustment expenses | (1 | ) | 1 | NM | (1 | ) | 2 | NM | |||||||||||||
Insurance operating costs and other expenses | 91 | 65 | (40 | %) | 176 | 125 | 41 | % | |||||||||||||
Loss on extinguishment of debt | 910 | — | — | % | 910 | — | — | % | |||||||||||||
Interest expense | 115 | 128 | (10 | %) | 239 | 256 | (7 | %) | |||||||||||||
Total benefits, losses and expenses | 1,115 | 194 | NM | 1,324 | 383 | NM | |||||||||||||||
Loss from continuing operations before income taxes | (1,050 | ) | (121 | ) | NM | (1,198 | ) | (253 | ) | NM | |||||||||||
Income tax benefit | (372 | ) | (47 | ) | NM | (424 | ) | (91 | ) | NM | |||||||||||
Loss from continuing operations, net of tax | (678 | ) | (74 | ) | NM | (774 | ) | (162 | ) | NM | |||||||||||
Income (loss) from discontinued operations, net of tax [2] | — | (77 | ) | 100 | % | — | (75 | ) | 100 | % | |||||||||||
Net loss | $ | (678 | ) | $ | (151 | ) | NM | $ | (774 | ) | $ | (237 | ) | NM |
[1] | Fee income includes the income associated with the sales of non-proprietary insurance products in the Company’s broker-dealer subsidiaries that has an offsetting commission expense in insurance operating costs and other expenses. |
[2] | Represents the loss from operations and sale of Federal Trust Corporation. For additional information, see Note 12 of the Notes to Condensed Consolidated Financial Statements. |
• | Insurance Risk |
• | Operational Risk |
• | Financial Risk |
Coverage | Treaty term | % of layer(s) reinsured | Per occurrence limit | Retention | |||||||
Principal property catastrophe program covering property catastrophe losses from a single event | 1/1/2012 to 1/1/2013 | 90% | $ | 750 | $ | 350 | |||||
Reinsurance with the FHCF covering Florida Personal Lines property catastrophe losses from a single event | 6/1/2012 to 6/1/2013 | 90% | 145 | [1] | 55 | ||||||
Workers compensation losses arising from a single catastrophe event [2] | 7/1/2012 to 7/1/2013 | 95% | 350 | 100 |
[1] | The per occurrence limit on the FHCF treaty is $145 for the 6/1/2012 to 6/1/2013 treaty year based on the Company's election to purchase the required coverage from FHCF. Coverage is estimated based on the best available information until FHCF releases updated figures in October 2012. |
[2] | In addition, to the limit shown above, the workers compensation reinsurance includes a non-catastrophe, industrial accident layer, 80% of $30 excess a $20 retention. |
• | Liquidity Risk |
• | Interest Rate Risk |
• | Equity Risk |
• | Foreign Currency Exchange Risk |
• | Credit Risk |
• | reduce the value of assets under management and the amount of fee income generated from those assets; |
• | reduce the value of equity securities trading supporting the international variable annuities, the related policyholder funds and benefits payable, and the amount of fee income generated from those variable annuities; |
• | increase the liability for GMWB benefits resulting in realized capital losses; |
• | increase the value of derivative assets used to hedge product guarantees resulting in realized capital gains; |
• | increase the costs of the hedging instruments we use in our hedging program; |
• | increase the Company’s net amount at risk for GMDB and GMIB benefits; |
• | decrease the Company’s actual gross profits, resulting in increased DAC amortization; |
• | increase the amount of required assets to be held backing variable annuity guarantees to maintain required regulatory reserve levels and targeted risk based capital ratios; and |
• | decrease the Company’s estimated future gross profits. See Estimated Gross Profits Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity and Other Universal Life-Type Contracts within the Critical Accounting Estimates section of the MD&A for further information. |
Total Variable Annuity Guarantees | |||||||||||||||||
As of June 30, 2012 | |||||||||||||||||
($ in billions) | Account Value | Gross Net Amount at Risk | Retained Net Amount at Risk | % of Contracts In the Money [4] | % In the Money[5] | ||||||||||||
U. S. Variable Annuity [1] | |||||||||||||||||
GMDB [2] | $ | 66.2 | $ | 9.0 | $ | 3.5 | 69 | % | 12 | % | |||||||
GMWB | 35.1 | 1.2 | 1.0 | 36 | % | 10 | % | ||||||||||
Japan Variable Annuity [1] | |||||||||||||||||
GMDB | 28.0 | 9.5 | 8.2 | 99 | % | 25 | % | ||||||||||
GMIB [3] | 26.1 | 6.5 | 6.5 | 99 | % | 20 | % | ||||||||||
UK Variable Annuity [1] | |||||||||||||||||
GMDB | 1.9 | 0.06 | 0.06 | 100 | % | 3 | % | ||||||||||
GMWB | 1.7 | 0.05 | 0.05 | 44 | % | 3 | % |
Total Variable Annuity Guarantees | |||||||||||||||||
As of December 31, 2011 | |||||||||||||||||
($ in billions) | Account Value | Gross Net Amount at Risk | Retained Net Amount at Risk | % of Contracts In the Money [4] | % In the Money[5] | ||||||||||||
U. S. Variable Annuity [1] | |||||||||||||||||
GMDB [2] | $ | 68.7 | $ | 12.0 | $ | 5.1 | 77 | % | 15 | % | |||||||
GMWB | 36.6 | 1.9 | 1.6 | 45 | % | 12 | % | ||||||||||
Japan Variable Annuity [1] | |||||||||||||||||
GMDB | 29.2 | 10.9 | 9.4 | 99 | % | 27 | % | ||||||||||
GMIB [3] | 27.3 | 7.5 | 7.5 | 99 | % | 22 | % | ||||||||||
UK Variable Annuity [1] | |||||||||||||||||
GMDB | 1.9 | 0.08 | 0.08 | 100 | % | 4 | % | ||||||||||
GMWB | 1.8 | 0.07 | 0.07 | 57 | % | 3 | % |
[1] | Policies with a guaranteed living benefits (a GMWB in the US or UK, or a GMIB in Japan) also have a guaranteed death benefit. The net amount at risk (“NAR”) for each benefit is shown; however these benefits are not additive. When a policy terminates due to death, any NAR related to GMWB or GMIB is released. Similarly, when a policy goes into benefit status on a GMWB or, by contract, the GMDB NAR is reduced to $0. When a policy goes into benefit status on a GMIB, its GMDB NAR is released |
[2] | Excludes group annuity contracts with GMDB benefits. |
[3] | Includes small amount of GMWB and GMAB |
[4] | Excludes contracts that fully reinsured. |
[5] | For all contracts that are “in the money”, this represents the percentage by which the average contract was in the money. |
GMIB [1] | |||||||
($ in billions) | Account Value | Net Amount at Risk | |||||
2013 | $ | 0.3 | $ | — | |||
2014 | 4.3 | 0.8 | |||||
2015 | 7.0 | 1.7 | |||||
2016 | 2.4 | 0.7 | |||||
2017 | 2.7 | 0.8 | |||||
2018 & beyond [2] | 6.6 | 1.7 | |||||
Total | $ | 23.3 | $ | 5.7 |
[1] | Excludes certain non-GMIB living benefits of $2.8 billion of account value and $0.8 billion of NAR. |
[2] | In 2018 & beyond, $2.5 billion of the $6.6 billion is primarily associated with account value that is eligible in 2021. |
Variable Annuity Guarantees [1] | U.S. GAAP Treatment [1] | Primary Market Risk Exposures [1] | ||
U.S. Variable Guarantees | ||||
GMDB | Accumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paid | Equity Market Levels | ||
GMWB | Fair Value | Equity Market Levels / Implied Volatility / Interest Rates | ||
For Life Component of GMWB | Accumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paid | Equity Market Levels | ||
International Variable Guarantees | ||||
GMDB & GMIB | Accumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paid | Equity Market Levels / Interest Rates / Foreign Currency | ||
GMWB | Fair Value | Equity Market Levels / Implied Volatility / Interest Rates / Foreign Currency | ||
GMAB | Fair Value | Equity Market Levels / Implied Volatility / Interest Rates / Foreign Currency |
[1] | Each of these guarantees and the related U.S. GAAP accounting volatility will also be influenced by actual and estimated policyholder behavior. |
U.S. Programs | International Programs | |||||||
GMWB | Macro | Japan/UK | ||||||
Hedge Assets | Liabilities | Hedge Assets | Liabilities | Hedge Assets | Liabilities [1] | |||
Fair Value | Fair Value | Fair Value | Not Fair Value | Fair Value | Not Fair Value |
[1] | The liabilities for international variable annuity are primarily not measured on a fair value basis. However there is an immaterial portion of the international variable annuity with a GMWB or GMAB which is measured on a fair value basis. |
U.S. GAAP Sensitivity Analysis (pre Tax/DAC) [1] | U.S. Programs | International Programs | |||||||||||||||||||||||||||
GMWB | Macro | Japan/UK | |||||||||||||||||||||||||||
Equity Market Return | -20 | % | -10 | % | +10 | % | -20 | % | -10 | % | +10 | % | -20 | % | -10 | % | +10 | % | |||||||||||
Potential Net Fair Value Impact | $ | (119 | ) | $ | (45 | ) | $ | 19 | $ | 361 | $ | 112 | $ | (53 | ) | $ | 983 | $ | 490 | $ | (468 | ) | |||||||
Interest Rates | -50 bps | -25 bps | +25 bps | -50 bps | -25 bps | +25 bps | -50 bps | -25 bps | +25 bps | ||||||||||||||||||||
Potential Net Fair Value Impact | $ | (139 | ) | $ | (68 | ) | $ | 65 | $ | 6 | $ | 3 | $ | (3 | ) | $ | 319 | $ | 200 | $ | (308 | ) | |||||||
Implied Volatilities | +10 | % | +2 | % | -10 | % | +10 | % | +2 | % | -10 | % | +10 | % | +2 | % | -10 | % | |||||||||||
Potential Net Fair Value Impact | $ | (599 | ) | $ | (119 | ) | $ | 564 | $ | 99 | $ | 21 | $ | (110 | ) | $ | 103 | $ | 21 | $ | (113 | ) | |||||||
Yen Strengthens +/ Weakens - | +20 | % | +10 | % | -10 | % | +20 | % | +10 | % | -10 | % | +20 | % | +10 | % | -10 | % | |||||||||||
Potential Net Fair Value Impact | N/A | N/A | N/A | N/A | N/A | N/A | $ | 2,366 | $ | 921 | $ | (612 | ) |
[1] | These sensitivities are based on the following key market levels as of June 30, 2012: 1) S&P of 1,362.0; 2) 10yr US swap rate of 1.83%; 3) S&P 10yr volatility of 29.18% and 4) FX rates of USDJPY @79.80 and EURJPY @ 101.04. |
• | The sensitivity analysis is only valid as of the measurement date and assumes instantaneous changes in the capital market factors and no ability to rebalance hedge positions prior to the market changes; |
• | Changes to the underlying hedging program, policyholder behavior, and variation in underlying fund performance relative to the hedged index, which could materially impact the liability; and |
• | The impact of elapsed time on liabilities or hedge assets, any non-parallel shifts in capital market factors, or correlated moves across the sensitivities. |
• | In general, as equity market levels and interest rates decline, the amount and volatility of both our actual potential obligation, as well as the related statutory surplus and capital margin for death and living benefit guarantees associated with U.S. variable annuity contracts can be materially negatively affected, sometimes at a greater than linear rate. Other market factors that can impact statutory surplus, reserve levels and capital margin include differences in performance of variable subaccounts relative to indices and/or realized equity and interest rate volatilities. In addition, as equity market levels increase, generally surplus levels will increase. RBC ratios will also tend to increase when equity markets increase. However, as a result of a number of factors and market conditions, including the level of hedging costs and other risk transfer activities, reserve requirements for death and living benefit guarantees and RBC requirements could increase with rising equity markets, resulting in lower RBC ratios. Non-market factors, which can also impact the amount and volatility of both our actual potential obligation, as well as the related statutory surplus and capital margin, include actual and estimated policyholder behavior experience as it pertains to lapsation, partial withdrawals, and mortality. |
• | Similarly, for guaranteed benefits (GMDB, GMIB, and GMWB) reinsured from our international operations to our U.S. insurance subsidiaries, the amount and volatility of both our actual potential obligation, as well as the related statutory surplus and capital margin can be materially affected by a variety of factors, both market and non-market. Market factors include declines in various equity market indices and interest rates, changes in value of the yen versus other global currencies, difference in the performance of variable subaccounts relative to indices, and increases in realized equity, interest rate, and currency volatilities. Non-market factors include actual and estimated policyholder behavior experience as it pertains to lapsation, withdrawals, mortality, and annuitization. Risk mitigation activities, such as hedging, may also result in material and sometimes counterintuitive impacts on statutory surplus and capital margin. Notably, as changes in these market and non-market factors occur, both our potential obligation and the related statutory reserves and/or required capital can increase or decrease at a greater than linear rate. |
• | As the value of certain fixed-income and equity securities in our investment portfolio decreases, due in part to credit spread widening, statutory surplus and RBC ratios may decrease. |
• | As the value of certain derivative instruments that do not get hedge accounting decreases, statutory surplus and RBC ratios may decrease. |
• | The life insurance subsidiaries’ exposure to foreign currency exchange risk exists with respect to non-U.S. dollar denominated assets and liabilities. Assets and liabilities denominated in foreign currencies are accounted for at their U.S. dollar equivalent values using exchange rates at the balance sheet date. As foreign currency exchange rates vary in comparison to the U.S. dollar, the remeasured value of those non-dollar denominated assets or liabilities will also vary, causing an increase or decrease to statutory surplus. |
• | Our statutory surplus is also impacted by widening credit spreads as a result of the accounting for the assets and liabilities in our fixed market value adjusted (“MVA”) annuities. Statutory separate account assets supporting the fixed MVA annuities are recorded at fair value. In determining the statutory reserve for the fixed MVA annuities, we are required to use current crediting rates in the U.S. and Japanese LIBOR in Japan. In many capital market scenarios, current crediting rates in the U.S. are highly correlated with market rates implicit in the fair value of statutory separate account assets. As a result, the change in statutory reserve from period to period will likely substantially offset the change in the fair value of the statutory separate account assets. However, in periods of volatile credit markets, such as we have experienced, actual credit spreads on investment assets may increase sharply for certain sub-sectors of the overall credit market, resulting in statutory separate account asset market value losses. As actual credit spreads are not fully reflected in the current crediting rates in the U.S. or Japanese LIBOR in Japan, the calculation of statutory reserves will not substantially offset the change in fair value of the statutory separate account assets resulting in reductions in statutory surplus. This has resulted and may continue to result in the need to devote significant additional capital to support the product. |
• | With respect to our fixed annuity business, sustained low interest rates may result in a reduction in statutory surplus and an increase in National Association of Insurance Commissioners (“NAIC”) required capital. |
Fixed Maturities by Credit Quality | |||||||||||||||||||||
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||
Amortized Cost | Fair Value | Percent of Total Fair Value | Amortized Cost | Fair Value | Percent of Total Fair Value | ||||||||||||||||
United States Government/Government agencies | $ | 11,434 | $ | 11,980 | 14.1 | % | $ | 8,901 | $ | 9,364 | 11.4 | % | |||||||||
AAA | 8,502 | 9,002 | 10.6 | % | 9,631 | 10,113 | 12.4 | % | |||||||||||||
AA | 15,397 | 16,290 | 19.1 | % | 15,471 | 15,844 | 19.4 | % | |||||||||||||
A | 19,289 | 21,207 | 24.9 | % | 19,501 | 21,053 | 25.7 | % | |||||||||||||
BBB | 21,330 | 22,528 | 26.3 | % | 20,972 | 21,760 | 26.6 | % | |||||||||||||
BB & below | 4,888 | 4,220 | 5.0 | % | 4,502 | 3,675 | 4.5 | % | |||||||||||||
Total fixed maturities | $ | 80,840 | $ | 85,227 | 100.0 | % | $ | 78,978 | $ | 81,809 | 100.0 | % |
Securities by Type | |||||||||||||||||||||||||||||||||||||
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Percent of Total Fair Value | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Percent of Total Fair Value | ||||||||||||||||||||||||||||
Asset-backed securities (“ABS”) | |||||||||||||||||||||||||||||||||||||
Consumer loans | $ | 2,508 | $ | 33 | $ | (146 | ) | $ | 2,395 | 2.8 | % | $ | 2,688 | $ | 34 | $ | (208 | ) | $ | 2,514 | 3.1 | % | |||||||||||||||
Small business | 378 | — | (101 | ) | 277 | 0.3 | % | 418 | 1 | (123 | ) | 296 | 0.4 | % | |||||||||||||||||||||||
Other | 304 | 26 | — | 330 | 0.4 | % | 324 | 20 | (1 | ) | 343 | 0.4 | % | ||||||||||||||||||||||||
CDOs | — | % | |||||||||||||||||||||||||||||||||||
Collateralized loan obligations (“CLOs”) | 2,294 | 1 | (123 | ) | 2,172 | 2.5 | % | 2,334 | — | (181 | ) | 2,153 | 2.6 | % | |||||||||||||||||||||||
CREs | 460 | 28 | (129 | ) | 359 | 0.4 | % | 485 | 16 | (167 | ) | 334 | 0.4 | % | |||||||||||||||||||||||
Other [1] | 557 | 16 | (16 | ) | 506 | 0.6 | % | — | — | — | — | — | % | ||||||||||||||||||||||||
CMBS | |||||||||||||||||||||||||||||||||||||
Agency backed [2] | 913 | 71 | — | 984 | 1.2 | % | 637 | 40 | — | 677 | 0.8 | % | |||||||||||||||||||||||||
Bonds | 4,936 | 198 | (318 | ) | 4,816 | 5.7 | % | 5,992 | 182 | (487 | ) | 5,687 | 7.0 | % | |||||||||||||||||||||||
Interest only (“IOs”) | 519 | 48 | (21 | ) | 546 | 0.6 | % | 563 | 49 | (25 | ) | 587 | 0.7 | % | |||||||||||||||||||||||
Corporate | |||||||||||||||||||||||||||||||||||||
Basic industry [1] | 3,645 | 349 | (19 | ) | 3,975 | 4.7 | % | 3,690 | 309 | (19 | ) | 3,979 | 4.9 | % | |||||||||||||||||||||||
Capital goods | 3,096 | 366 | (7 | ) | 3,455 | 4.1 | % | 3,327 | 331 | (33 | ) | 3,625 | 4.4 | % | |||||||||||||||||||||||
Consumer cyclical | 2,225 | 239 | (5 | ) | 2,459 | 2.9 | % | 2,277 | 206 | (8 | ) | 2,475 | 3.0 | % | |||||||||||||||||||||||
Consumer non-cyclical | 5,512 | 706 | (8 | ) | 6,210 | 7.3 | % | 5,985 | 644 | (13 | ) | 6,616 | 8.1 | % | |||||||||||||||||||||||
Energy | 3,708 | 387 | (9 | ) | 4,086 | 4.8 | % | 3,338 | 381 | (15 | ) | 3,704 | 4.5 | % | |||||||||||||||||||||||
Financial services | 7,140 | 419 | (340 | ) | 7,219 | 8.5 | % | 7,763 | 334 | (526 | ) | 7,571 | 9.3 | % | |||||||||||||||||||||||
Tech./comm. | 4,045 | 469 | (22 | ) | 4,492 | 5.3 | % | 4,357 | 443 | (61 | ) | 4,739 | 5.8 | % | |||||||||||||||||||||||
Transportation | 1,343 | 149 | (4 | ) | 1,488 | 1.7 | % | 1,285 | 123 | (6 | ) | 1,402 | 1.7 | % | |||||||||||||||||||||||
Utilities | 8,370 | 922 | (39 | ) | 9,253 | 10.9 | % | 8,236 | 857 | (38 | ) | 9,055 | 11.2 | % | |||||||||||||||||||||||
Other [1] | 309 | 44 | (7 | ) | 346 | 0.3 | % | 903 | 33 | (20 | ) | 845 | 1.0 | % | |||||||||||||||||||||||
Foreign govt./govt. agencies | 3,476 | 135 | (13 | ) | 3,598 | 4.2 | % | 2,030 | 141 | (10 | ) | 2,161 | 2.6 | % | |||||||||||||||||||||||
Municipal Taxable | 2,211 | 190 | (37 | ) | 2,364 | 2.8 | % | 1,688 | 120 | (51 | ) | 1,757 | 2.1 | % | |||||||||||||||||||||||
Tax-exempt | 10,857 | 910 | (6 | ) | 11,761 | 13.8 | % | 10,869 | 655 | (21 | ) | 11,503 | 14.1 | % | |||||||||||||||||||||||
RMBS | |||||||||||||||||||||||||||||||||||||
Agency | 5,571 | 270 | — | 5,841 | 6.9 | % | 4,436 | 222 | — | 4,658 | 5.7 | % | |||||||||||||||||||||||||
Non-agency | 2 | — | — | 2 | — | % | 62 | — | (2 | ) | 60 | 0.1 | % | ||||||||||||||||||||||||
Alt-A | 46 | — | (12 | ) | 34 | — | % | 115 | 5 | (21 | ) | 99 | 0.1 | % | |||||||||||||||||||||||
Sub-prime | 1,465 | 13 | (374 | ) | 1,104 | 1.3 | % | 1,348 | 25 | (433 | ) | 940 | 1.1 | % | |||||||||||||||||||||||
U.S. Treasuries | 4,950 | 215 | (10 | ) | 5,155 | 6.0 | % | 3,828 | 203 | (2 | ) | 4,029 | 4.9 | % | |||||||||||||||||||||||
Fixed maturities, AFS | 80,840 | 6,204 | (1,766 | ) | 85,227 | 100 | % | 78,978 | 5,374 | (2,471 | ) | 81,809 | 100 | % | |||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||||||||||||||
Financial services | 348 | — | (64 | ) | 284 | 479 | 10 | (187 | ) | 302 | |||||||||||||||||||||||||||
Other | 511 | 71 | (15 | ) | 567 | 577 | 58 | (16 | ) | 619 | |||||||||||||||||||||||||||
Equity securities, AFS | 859 | 71 | (79 | ) | 851 | 1,056 | 68 | (203 | ) | 921 | |||||||||||||||||||||||||||
Total AFS securities | $ | 81,699 | $ | 6,275 | $ | (1,845 | ) | $ | 86,078 | $ | 80,034 | $ | 5,442 | $ | (2,674 | ) | $ | 82,730 | |||||||||||||||||||
Fixed maturities, FVO | $ | 1,165 | $ | 1,328 |
[1] | Gross unrealized gains (losses) exclude the fair value of bifurcated embedded derivative features of certain securities. Changes in value are recorded in net realized capital gains (losses). |
[2] | Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government. |
June 30, 2012 | |||||||||||||||||||||||||||||||
Corporate & Equity, AFS Non-Finan. [1] | Corporate & Equity, AFS Financials | Foreign Govt./ Govt. Agencies | Total | ||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||||||
Italy | $ | 95 | $ | 95 | $ | — | $ | — | $ | — | $ | — | $ | 95 | $ | 95 | |||||||||||||||
Spain [3] | 128 | 120 | 20 | 19 | — | — | 148 | 139 | |||||||||||||||||||||||
Ireland | 169 | 170 | — | — | — | — | 169 | 170 | |||||||||||||||||||||||
Portugal | 15 | 15 | — | — | — | — | 15 | 15 | |||||||||||||||||||||||
Greece | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Higher risk | 407 | 400 | 20 | 19 | — | — | 427 | 419 | |||||||||||||||||||||||
Europe excluding higher risk | 3,935 | 4,387 | 1,226 | 1,166 | 754 | 804 | 5,915 | 6,357 | |||||||||||||||||||||||
Total Europe | $ | 4,342 | $ | 4,787 | $ | 1,246 | 1,185 | $ | 754 | 804 | $ | 6,342 | $ | 6,776 | |||||||||||||||||
Europe exposure net of credit default swap protection [2] | $ | 5,979 | $ | 6,784 |
December 31, 2011 | |||||||||||||||||||||||||||||||
Corporate & Equity, AFS Non-Finan. [1] | Corporate & Equity, AFS Financials | Foreign Govt./ Govt. Agencies | Total | ||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||||||
Italy | $ | 314 | $ | 255 | $ | — | $ | — | $ | — | $ | — | $ | 314 | $ | 255 | |||||||||||||||
Spain [3] | 191 | 189 | 20 | 19 | — | — | 211 | 208 | |||||||||||||||||||||||
Ireland | 163 | 162 | — | — | — | — | 163 | 162 | |||||||||||||||||||||||
Portugal | 15 | 15 | — | — | — | — | 15 | 15 | |||||||||||||||||||||||
Greece | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Higher risk | 683 | 621 | 20 | 19 | — | — | 703 | 640 | |||||||||||||||||||||||
Europe excluding higher risk | 4,277 | 4,695 | 1,255 | 1,135 | 901 | 970 | 6,433 | 6,800 | |||||||||||||||||||||||
Total Europe | $ | 4,960 | $ | 5,316 | $ | 1,275 | $ | 1,154 | $ | 901 | $ | 970 | $ | 7,136 | $ | 7,440 | |||||||||||||||
Europe exposure net of credit default swap protection [2] | $ | 6,439 | $ | 7,467 |
[1] | Includes amortized cost and fair value of $62 as of June 30, 2012 and $67 as of December 31, 2011 related to limited partnerships and other alternative investments, the majority of which is domiciled in the United Kingdom. |
[2] | Includes a notional amount and fair value of $363 and $8, respectively, as of June 30, 2012 and $697 and $27, respectively, as of December 31, 2011 related to credit default swap protection. This includes a notional amount of $104 and $89 as of June 30, 2012 and December 31, 2011, respectively, related to single name corporate issuers i n the financial services sector. |
[3] | The Company has credit default swap protection with a notional amount of $20 related to the corporate and Equity, AFS Financials. |
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||||
Amortized Cost | Fair Value | Net Unrealized | Amortized Cost | Fair Value | Net Unrealized | ||||||||||||||||||
AAA | $ | 60 | $ | 61 | $ | 1 | $ | 240 | $ | 245 | $ | 5 | |||||||||||
AA | 1,085 | 1,156 | 71 | 1,698 | 1,675 | (23 | ) | ||||||||||||||||
A | 3,454 | 3,560 | 106 | 3,664 | 3,685 | 21 | |||||||||||||||||
BBB | 2,422 | 2,273 | (149 | ) | 2,335 | 1,998 | (337 | ) | |||||||||||||||
BB & below | 467 | 453 | (14 | ) | 305 | 270 | (35 | ) | |||||||||||||||
Total | $ | 7,488 | $ | 7,503 | $ | 15 | $ | 8,242 | $ | 7,873 | $ | (369 | ) |
June 30, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||
AAA | AA | A | BBB | BB and Below | Total | ||||||||||||||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 281 | $ | 287 | $ | 109 | $ | 109 | $ | 65 | $ | 63 | $ | 5 | $ | 5 | $ | 44 | $ | 41 | $ | 504 | $ | 505 | |||||||||||||||||||||||
2004 | 187 | 194 | 72 | 81 | 36 | 34 | 24 | 23 | 26 | 21 | 345 | 353 | |||||||||||||||||||||||||||||||||||
2005 | 445 | 478 | 97 | 97 | 153 | 144 | 187 | 160 | 74 | 57 | 956 | 936 | |||||||||||||||||||||||||||||||||||
2006 | 696 | 761 | 353 | 358 | 124 | 116 | 302 | 264 | 386 | 281 | 1,861 | 1,780 | |||||||||||||||||||||||||||||||||||
2007 | 200 | 221 | 385 | 382 | 108 | 99 | 35 | 27 | 284 | 235 | 1,012 | 964 | |||||||||||||||||||||||||||||||||||
2008 | 55 | 64 | — | — | — | — | — | — | — | — | 55 | 64 | |||||||||||||||||||||||||||||||||||
2009 | 28 | 29 | — | — | — | — | — | — | — | — | 28 | 29 | |||||||||||||||||||||||||||||||||||
2010 | 19 | 20 | — | — | — | — | — | — | — | — | 19 | 20 | |||||||||||||||||||||||||||||||||||
2011 | 122 | 130 | — | — | — | — | — | — | — | — | 122 | 130 | |||||||||||||||||||||||||||||||||||
2012 | $ | 34 | $ | 35 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 34 | $ | 35 | |||||||||||||||||||||||
Total | $ | 2,067 | $ | 2,219 | $ | 1,016 | $ | 1,027 | $ | 486 | $ | 456 | $ | 553 | $ | 479 | $ | 814 | $ | 635 | $ | 4,936 | $ | 4,816 | |||||||||||||||||||||||
Credit protection | 30.3% | 24.3% | 20.8% | 16.4% | 9.5% | 23.1% |
December 31, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||
AAA | AA | A | BBB | BB and Below | Total | ||||||||||||||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 408 | $ | 415 | $ | 148 | $ | 144 | $ | 83 | $ | 81 | $ | 16 | $ | 13 | $ | 33 | $ | 30 | $ | 688 | $ | 683 | |||||||||||||||||||||||
2004 | 333 | 349 | 68 | 75 | 45 | 41 | 30 | 28 | 26 | 21 | 502 | 514 | |||||||||||||||||||||||||||||||||||
2005 | 520 | 556 | 101 | 96 | 178 | 151 | 177 | 138 | 71 | 57 | 1,047 | 998 | |||||||||||||||||||||||||||||||||||
2006 | 713 | 762 | 516 | 493 | 180 | 159 | 362 | 298 | 430 | 302 | 2,201 | 2,014 | |||||||||||||||||||||||||||||||||||
2007 | 245 | 267 | 296 | 275 | 123 | 97 | 166 | 130 | 195 | 149 | 1,025 | 918 | |||||||||||||||||||||||||||||||||||
2008 | 55 | 60 | — | — | — | — | — | — | — | — | 55 | 60 | |||||||||||||||||||||||||||||||||||
2009 | 28 | 29 | — | — | — | — | — | — | — | — | 28 | 29 | |||||||||||||||||||||||||||||||||||
2010 | 29 | 31 | — | — | — | — | — | — | — | — | 29 | 31 | |||||||||||||||||||||||||||||||||||
2011 | 417 | 440 | — | — | — | — | — | — | — | — | 417 | 440 | |||||||||||||||||||||||||||||||||||
Total | $2,748 | $2,909 | $1,129 | $1,083 | $609 | $529 | $751 | $607 | $755 | $559 | $5,992 | $5,687 | |||||||||||||||||||||||||||||||||||
Credit protection | 27.3% | 22.7% | 19.7% | 13.8% | 8.2% | 21.6% |
[1] | The vintage year represents the year the pool of loans was originated. |
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||||
Amortized Cost [1] | Valuation Allowance | Carrying Value | Amortized Cost [1] | Valuation Allowance | Carrying Value | ||||||||||||||||||
Agricultural | $ | 186 | $ | (7 | ) | $ | 179 | $ | 268 | $ | (19 | ) | $ | 249 | |||||||||
Whole loans | 6,119 | (14 | ) | 6,105 | 4,892 | (17 | ) | 4,875 | |||||||||||||||
A-Note participations | 277 | — | 277 | 265 | — | 265 | |||||||||||||||||
B-Note participations | 272 | (66 | ) | 206 | 296 | (66 | ) | 230 | |||||||||||||||
Mezzanine loans | 108 | — | 108 | 109 | — | 109 | |||||||||||||||||
Total | $ | 6,962 | $ | (87 | ) | $ | 6,875 | $ | 5,830 | $ | (102 | ) | $ | 5,728 |
[1] | Amortized cost represents carrying value prior to valuation allowances, if any. |
June 30, 2012 | December 31, 2011 | ||||||||||||
Amount | Percent | Amount | Percent | ||||||||||
Hedge funds | $ | 1,234 | 41.9 | % | $ | 896 | 35.4 | % | |||||
Mortgage and real estate funds | 515 | 17.5 | % | 479 | 18.9 | % | |||||||
Mezzanine debt funds | 117 | 4.0 | % | 118 | 4.7 | % | |||||||
Private equity and other funds | 1,078 | 36.6 | % | 1,039 | 41.0 | % | |||||||
Total | $ | 2,944 | 100.0 | % | $ | 2,532 | 100.0 | % |
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||||||||||
Items | Cost or Amortized Cost | Fair Value | Unrealized Loss [1] | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss [1] | ||||||||||||||||||||||
Three months or less | 1,065 | $ | 4,939 | $ | 4,839 | $ | (100 | ) | 855 | $ | 3,933 | $ | 3,672 | $ | (261 | ) | |||||||||||||
Greater than three to six months | 283 | 911 | 882 | (29 | ) | 485 | 2,617 | 2,517 | (100 | ) | |||||||||||||||||||
Greater than six to nine months | 85 | 222 | 216 | (6 | ) | 224 | 1,181 | 1,097 | (84 | ) | |||||||||||||||||||
Greater than nine to eleven months | 92 | 475 | 463 | (12 | ) | 42 | 106 | 95 | (11 | ) | |||||||||||||||||||
Twelve months or more | 890 | 10,956 | 9,208 | (1,698 | ) | 943 | 11,613 | 9,324 | (2,218 | ) | |||||||||||||||||||
Total | 2,415 | $ | 17,503 | $ | 15,608 | $ | (1,845 | ) | 2,549 | $ | 19,450 | $ | 16,705 | $ | (2,674 | ) |
[1] | Unrealized losses exclude the fair value of bifurcated embedded derivative features of certain securities as changes in value are recorded in net realized capital gains (losses). |
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||||||||||
Consecutive Months | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss | |||||||||||||||||||||
Three months or less | 143 | $ | 416 | $ | 302 | $ | (114 | ) | 206 | $ | 1,823 | $ | 1,289 | $ | (500 | ) | |||||||||||||
Greater than three to six months | 33 | 58 | 45 | (13 | ) | 134 | 1,749 | 1,205 | (544 | ) | |||||||||||||||||||
Greater than six to nine months | 44 | 463 | 344 | (119 | ) | 42 | 406 | 269 | (137 | ) | |||||||||||||||||||
Greater than nine to eleven months | 53 | 617 | 441 | (176 | ) | 9 | 1 | — | (1 | ) | |||||||||||||||||||
Twelve months or more | 236 | 1,909 | 1,149 | (760 | ) | 239 | 1,806 | 1,057 | (749 | ) | |||||||||||||||||||
Total | 509 | $ | 3,463 | $ | 2,281 | $ | (1,182 | ) | 630 | $ | 5,785 | $ | 3,820 | $ | (1,931 | ) |
June 30, 2012 | December 31, 2011 | ||||||||||||||||||||||||||||
Consecutive Months | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss | |||||||||||||||||||||
Three months or less | 29 | $ | 32 | $ | 12 | $ | (20 | ) | 50 | $ | 152 | $ | 55 | $ | (97 | ) | |||||||||||||
Greater than three to six months | 16 | 64 | 29 | (35 | ) | 26 | 110 | 46 | (64 | ) | |||||||||||||||||||
Greater than six to nine months | 11 | 12 | 5 | (7 | ) | 7 | 33 | 11 | (22 | ) | |||||||||||||||||||
Greater than nine to eleven months | 13 | 53 | 22 | (31 | ) | 5 | 5 | 1 | (4 | ) | |||||||||||||||||||
Twelve months or more | 50 | 302 | 102 | (200 | ) | 54 | 227 | 71 | (156 | ) | |||||||||||||||||||
Total | 119 | $ | 463 | $ | 170 | $ | (293 | ) | 142 | $ | 527 | $ | 184 | $ | (343 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
ABS | $ | 16 | $ | 2 | $ | 25 | $ | 10 | |||||||
CRE CDOs | 3 | — | 3 | 15 | |||||||||||
CMBS | |||||||||||||||
Bonds | — | 14 | 5 | 14 | |||||||||||
IOs | — | 2 | — | 3 | |||||||||||
Corporate | 24 | 3 | 24 | 21 | |||||||||||
Equity | 53 | — | 61 | 10 | |||||||||||
RMBS sub-prime | 1 | — | 8 | 3 | |||||||||||
Other | 1 | 2 | 1 | 2 | |||||||||||
Total | $ | 98 | $ | 23 | $ | 127 | $ | 78 |
Effective | Expiration | Maximum Available as of June 30, | Outstanding as of June 30, | ||||||||||||||||
Description | Date | Date | 2012 | 2011 | 2012 | 2011 | |||||||||||||
Commercial Paper | |||||||||||||||||||
The Hartford | 11/10/1986 | N/A | $ | 2,000 | $ | 2,000 | $ | — | $ | — | |||||||||
Revolving Credit Facility | |||||||||||||||||||
4-year revolving credit facility | 1/6/2012 | 1/6/2016 | 1,750 | N/A | — | — | |||||||||||||
5-year revolving credit facility [1] | 8/9/2007 | 8/9/2012 | N/A | 1,900 | — | — | |||||||||||||
Total Commercial Paper and Revolving Credit Facility | $ | 3,750 | $ | 3,900 | $ | — | $ | — |
[1] | Terminated in January 2012. |
Fixed maturities | $ | 26,233 | |
Short-term investments | 466 | ||
Cash | 175 | ||
Less: Derivative collateral | (219 | ) | |
Total | $ | 26,655 |
Fixed maturities | $ | 60,045 | |
Short-term investments | 3,549 | ||
Cash | 2,163 | ||
Less: Derivative collateral | (1,932 | ) | |
Cash associated with Japan variable annuities | (653 | ) | |
Total | $ | 63,172 |
Contractholder Obligations | June 30, 2012 | ||
Total Life contractholder obligations | $ | 237,549 | |
Less: Separate account assets [1] | (144,662 | ) | |
International statutory separate accounts [1] | (29,174 | ) | |
General account contractholder obligations | $ | 63,713 | |
Composition of General Account Contractholder Obligations | |||
Contracts without a surrender provision and/or fixed payout dates [2] | $ | 58,954 | |
Fixed MVA annuities [3] | 9,278 | ||
Guaranteed investment contracts (“GIC”) [4] | 259 | ||
Other [5] | (4,778 | ) | |
General account contractholder obligations | $ | 63,713 |
[1] | In the event customers elect to surrender separate account assets or international statutory separate accounts, Life Operations will use the proceeds from the sale of the assets to fund the surrender, and Life Operations’ liquidity position will not be impacted. In many instances Life Operations will receive a percentage of the surrender amount as compensation for early surrender (surrender charge), increasing Life Operations’ liquidity position. In addition, a surrender of variable annuity separate account or general account assets (see below) will decrease Life Operations’ obligation for payments on guaranteed living and death benefits. |
[2] | Relates to contracts such as payout annuities or institutional notes, other than guaranteed investment products with an MVA feature (discussed below) or surrenders of term life, group benefit contracts or death and living benefit reserves for which surrenders will have no current effect on Life Operations’ liquidity requirements. |
[3] | Relates to annuities that are held in a statutory separate account, but under U.S. GAAP are recorded in the general account as Fixed MVA annuity contract holders are subject to the Company’s credit risk. In the statutory separate account, Life Operations is required to maintain invested assets with a fair value equal to the MVA surrender value of the Fixed MVA contract. In the event assets decline in value at a greater rate than the MVA surrender value of the Fixed MVA contract, Life Operations is required to contribute additional capital to the statutory separate account. Life Operations will fund these required contributions with operating cash flows or short-term investments. In the event that operating cash flows or short-term investments are not sufficient to fund required contributions, the Company may have to sell other invested assets at a loss, potentially resulting in a decrease in statutory surplus. As the fair value of invested assets in the statutory separate account are generally equal to the MVA surrender value of the Fixed MVA contract, surrender of Fixed MVA annuities will have an insignificant impact on the liquidity requirements of Life Operations. |
[4] | GICs are subject to discontinuance provisions which allow the policyholders to terminate their contracts prior to scheduled maturity at the lesser of the book value or market value. Generally, the market value adjustment reflects changes in interest rates and credit spreads. As a result, the market value adjustment feature in the GIC serves to protect the Company from interest rate risks and limit Life Operations’ liquidity requirements in the event of surrender. |
[5] | Surrenders of, or policy loans taken from, as applicable, these general account liabilities, which include the general account option for Individual Annuity’s individual variable annuities and Individual Life variable life contracts, the general account option for Retirement Plans’ annuities and universal life contracts sold by Individual Life may be funded through operating cash flows of Life Operations, available short-term investments, or Life Operations may be required to sell fixed maturity investments to fund the surrender payment. Sales of fixed maturity investments could result in the recognition of significant realized losses and insufficient proceeds to fully fund the surrender amount. In this circumstance, Life Operations may need to take other actions, including enforcing certain contract provisions which could restrict surrenders and/or slow or defer payouts. |
June 30, 2012 | December 31, 2011 | Change | ||||||||
Long-term debt | $ | 7,125 | $ | 6,216 | 15 | % | ||||
Total debt [1] | 7,125 | 6,216 | 15 | % | ||||||
Stockholders’ equity excluding accumulated other comprehensive income (loss), net of tax (“AOCI”) | 19,705 | 20,235 | (3 | )% | ||||||
AOCI, net of tax | 2,256 | 1,251 | 80 | % | ||||||
Total stockholders’ equity | $ | 21,961 | $ | 21,486 | 2 | % | ||||
Total capitalization including AOCI | $ | 29,086 | $ | 27,702 | 5 | % | ||||
Debt to stockholders’ equity | 32 | % | 29 | % | ||||||
Debt to capitalization | 24 | % | 22 | % |
[1] | Total debt of the Company excludes $254 and $314 of consumer notes as of June 30, 2012 and December 31, 2011, respectively. |
Six Months Ended June 30, | |||||||
2012 | 2011 | ||||||
Net cash provided by operating activities | $ | 1,236 | $ | 964 | |||
Net cash used for investing activities | $ | (1,551 | ) | $ | (807 | ) | |
Net cash provided by (used for) financing activities | $ | 109 | $ | (319 | ) | ||
Cash – end of period | $ | 2,338 | $ | 1,898 |
Insurance Financial Strength Ratings: | A.M. Best | Fitch | Standard & Poor’s | Moody’s | |||
Hartford Fire Insurance Company | A | A+ | A | A2 | |||
Hartford Life Insurance Company | A | A- | A- | A3 | |||
Hartford Life and Accident Insurance Company | A | A- | A- | A3 | |||
Hartford Life and Annuity Insurance Company | A | A- | BBB+ | A3 | |||
Other Ratings: | |||||||
The Hartford Financial Services Group, Inc.: | |||||||
Senior debt | bbb+ | BBB | BBB | Baa3 | |||
Commercial paper | AMB-2 | F2 | A-2 | P-3 |
June 30, 2012 | December 31, 2011 | ||||||
U.S. life insurance subsidiaries, includes domestic captive insurance subsidiaries | $ | 7,666 | $ | 7,388 | |||
Property and casualty insurance subsidiaries | 7,732 | 7,412 | |||||
Total | $ | 15,398 | $ | 14,800 |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||
(in millions) | |||||||||||||
April 1, 2012-April 30, 2012 | — | $ | — | — | $ | 106 | |||||||
May 1, 2012-May 31, 2012 | 5,494,724 | $ | 19.35 | 5,494,724 | $ | — | |||||||
June 1, 2012-June 30, 3012 | 4,580 | [1] | $ | 20.51 | — | $ | — | ||||||
Total | 5,499,304 | $ | 19.35 | 5,494,724 | N/A |
[1] | Primarily represents shares acquired from employees of the Company for tax withholding purposes in connection with the Company’s stock compensation plans. |
See Exhibits Index on page | 141. |
The Hartford Financial Services Group, Inc. | ||||
(Registrant) | ||||
Date: | August 1, 2012 | /s/ Beth A. Bombara | ||
Beth A. Bombara | ||||
Senior Vice President and Controller | ||||
(Chief accounting officer and duly authorized signatory) |
Exhibit No. | Description | |
*10.01 | The Hartford Excess Pension Plan II (as amended and restated on July 23, 2012)** | |
*10.02 | The Hartford Excess Savings Plan IA (as amended and restated June 1, 2012)** | |
15.01 | Deloitte & Touche LLP Letter of Awareness.** | |
31.01 | Certification of Liam E. McGee pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.** | |
31.02 | Certification of Christopher J. Swift pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.** | |
32.01 | Certification of Liam E. McGee pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** | |
32.02 | Certification of Christopher J. Swift pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** | |
101.INS | XBRL Instance Document.** | |
101.SCH | XBRL Taxonomy Extension Schema.** | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase.** | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase.** | |
101.LAB | XBRL Taxonomy Extension Label Linkbase.** | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase.** | |
* | Management contract, compensatory plan or arrangement. | |
** | Filed with the Securities and Exchange Commission as an exhibit to this report. |
1.01 | Act shall mean the Securities Exchange Act of 1934, as amended. |
1.02 | Annuity Commencement Date shall mean a Participant's annuity starting date with respect to benefits payable to him or her on his or her behalf under this Plan. |
1.03 | Associated Company shall mean any division, subsidiary or affiliated company of the Corporation not participating in the Plan which is an Associated Company, as defined in the Retirement Plan. |
1.04 | Beneficial Owner shall mean any Person who, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” (within the meaning of Rule 13d-3 under the Act) of any securities of a company, including any such right pursuant to any agreement, arrangement or understanding (whether or not in writing), provided that: (a) a Person shall not be deemed the Beneficial Owner of any security as a result of an agreement, arrangement or understanding to vote such security (i) arising solely from a revocable proxy or consent given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the Act and the applicable rules and regulations thereunder, or (ii) made in connection with, or to otherwise participate in, a proxy or consent solicitation made, or to be made, pursuant to, and in accordance with, the applicable provisions of the Act and the applicable rules and regulations thereunder, in either case described in clause (i) or (ii) |
1.05 | Beneficiary shall mean the spouse to whom the Member is married on his or her Annuity Commencement Date or his or her date of death, if earlier. |
1.06 | Board of Directors shall mean the Board of Directors of the Corporation. |
1.07 | Change of Control shall mean: |
(i) | a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Act disclosing that any Person, other than the Corporation or a subsidiary of the Corporation or any employee benefit plan sponsored by the Corporation or a subsidiary of the Corporation is the Beneficial Owner of forty percent or more of the outstanding stock of the Corporation entitled to vote in the election of directors of the Corporation; |
(ii) | any Person other than the Corporation or a subsidiary of the Corporation or any employee benefit plan sponsored by the Corporation or a subsidiary of the Corporation shall purchase shares pursuant to a tender offer or exchange offer to acquire any stock of the Corporation (or securities convertible into stock) for cash, securities or any other consideration, provided that after consummation of the offer, the Person in question is the Beneficial Owner of fifteen percent or more of the outstanding stock of the Corporation entitled to vote in the election of directors of |
(iii) | any merger, consolidation, recapitalization or reorganization of the Corporation approved by the stockholders of the Corporation shall be consummated, other than any such transaction immediately following which the persons who were the Beneficial Owners of the outstanding securities of the Corporation entitled to vote in the election of directors of the Corporation immediately prior to such transaction are the Beneficial Owners of at least 55% of the total voting power represented by the securities of the entity surviving such transaction entitled to vote in the election of directors of such entity (or the ultimate parent of such entity) in substantially the same relative proportions as their ownership of the securities of the Corporation entitled to vote in the election of directors of the Corporation immediately prior to such transaction; provided that, such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such threshold (or to preserve such relative voting power) is due solely to the acquisition of voting securities by an employee benefit plan of the Corporation, such surviving entity or any subsidiary of such surviving entity; |
(iv) | any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Corporation approved by the stockholders of the Corporation shall be consummated; or |
(v) | within any 24 month period, the persons who were directors of the Corporation immediately before the beginning of such period (the “Incumbent Directors”) shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of any successor to the Corporation, provided that any |
1.08 | Code shall mean the Internal Revenue Code of 1986, as amended from time to time. |
1.09 | Committee shall mean the Pension Administration Committee under the Retirement Plan. |
1.10 | Company shall mean Hartford Fire or any successor by merger, purchase or otherwise with respect to its employees and any other Employer (as that term is defined in the Retirement Plan) authorized by the Board of Directors to participate in the Plan with respect to its employees. |
1.11 | Company Pension Plan shall mean any tax qualified defined benefit plan other than the Retirement Plan maintained by the Corporation, the Company, an Associated Company, New ITT or one of its associated companies, or ITT Industries or one its associated companies. |
1.12 | Corporation (the “Plan sponsor”) shall mean The Hartford Financial Services Group, Inc. or any successor by merger, purchase or otherwise. The Hartford Financial Services Group, Inc. is the sponsor of the Plan. |
1.13 | Deferred Compensation Program shall mean any nonqualified deferred compensation plan maintained by the Corporation, the Company, an Associated Company, New ITT or one of its associated companies, or ITT Industries or one of its associated companies. |
1.14 | Eligible Employee shall mean a person who is a member of the Retirement Plan not |
1.15 | ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. |
1.16 | Excess Benefit Portion shall mean the portion of the Plan which is intended to constitute an unfunded excess benefit plan under Sections 3(36) and 4(b)(5) of Title I of ERISA which provides benefits not otherwise payable under the Retirement Plan due to restrictions imposed by Section 415 of the Code. |
1.17 | Hartford Fire shall mean Hartford Fire Insurance Company or a successor by merger, purchase or otherwise with respect to its employees. |
1.18 | ITT Industries shall mean the ITT Industries, Inc., an Indiana corporation, as constituted on and after December 19, 1995. |
1.19 | New ITT shall mean ITT Corporation, a Nevada corporation, as constituted on and after December 19, 1995. |
1.20 | Participant shall mean an Eligible Employee who is participating in the Plan pursuant to Section 2.01 hereof. |
1.21 | Person shall have the meaning ascribed to such term in Section 3(a)(9) of the Act, as supplemented by Section 13(d)(3) of the Act; provided, however, that Person shall not include: (a) the Corporation, any subsidiary of the Corporation or any other Person controlled by the Corporation, (b) any trustee or other fiduciary holding securities under any employee benefit plan of the Corporation or of any subsidiary of the Corporation, or (c) a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of securities of the Corporation. |
1.22 | Plan shall mean the Hartford Excess Pension Plan II effective January 1, 2009, as set forth herein or as amended from time to time. |
1.23 | Plan Year shall mean the calendar year. |
1.24 | Retirement Plan shall mean The Hartford Retirement Plan for U.S. Employees, as amended from time to time. |
1.25 | Select Management Portion shall mean the portion of the Plan, other than the Excess Benefit Portion, which is intended to constitute an unfunded deferred compensation plan for a select group of management or highly compensated employees under Title I of ERISA. |
(a) | An Eligible Employee shall participate in the Excess Benefit Portion of the Plan provided such Eligible Employee's annual retirement allowance or vested benefit at the time of payment under the Retirement Plan exceeds the limitations imposed by Code Section 415(b) or 415(e). |
(b) | An Eligible Employee shall participate in the Select Management Portion of the Plan provided such Eligible Employee's annual retirement allowance or vested benefit at the time of payment under the Retirement Plan is limited by reason of the Code Section 401(a)(17) limitation on Compensation (as that term is defined in the Retirement Plan). |
(c) | (i) A former Eligible Employee who was a Participant in the Hartford Excess Benefit Plan II receiving benefit payments thereunder as of December 18, 1995 shall continue to be a Participant in the Excess Benefit Portion of this Plan. |
(ii) | A former Eligible Employee who was a Participant in the Hartford Select Management Plan II receiving benefit payments thereunder as of December 18, 1995 shall continue to be a Participant in the Select Management Portion of this Plan. |
(d) | A Participant's participation in the Plan shall terminate upon the earlier of the Participant's death or other termination of employment with the Company and all Associated Companies unless a benefit is payable under the Plan with respect to the Participant or his or her Beneficiary under the provisions of this Article II. |
2.02 | Amount of Benefits. A Participant's benefit under this Article II shall be equal to the excess, if any, of (a) over (b) as determined below: |
(a) | the monthly retirement allowance or vested benefit which would have been payable under the Retirement Plan (including any severance pay period that may be taken into account under the Retirement Plan for purposes of determining eligibility for Final Average Pay formula early retirement benefits), commencing as of the date that payments hereunder commence, determined |
(i) | prior to the application of any offset required pursuant to an applicable Appendix of the Retirement Plan with respect to benefits payable under any other Company Pension Plan (as defined in Section 1.11); |
(ii) | without regard to the provisions contained in the Retirement Plan relating to the maximum limitation on benefits under Section 415 of the Code; |
(iii) | without regard to the limitation on Compensation resulting from the Annual Dollar Limit applicable under Section 401(a)(17) of the Code; |
(1) | prior to the application of any offset required pursuant to an applicable Appendix of the Retirement Plan with respect to benefits payable under any other Company Pension Plan (as defined in Section 1.11); |
(2) | with regard to the provisions contained in the Retirement Plan relating to the maximum limitation on benefits under Section 415 of the Code; and |
(3) | with regard to the limitation on Compensation resulting from the Annual Dollar Limit applicable under Section 401(a)(17) of the Code; and |
(ii) | the amount of the benefit payable to the Participant under the ITT Corporation Excess Pension Plan II (or any successor plan thereto) or the ITT Industries Excess Pension Plan II (or any successor plan thereto) or any other nonqualified defined benefit plan maintained by an Associated Company with respect to any service which is recognized as Benefit Service for purposes of the computation of benefits under the Retirement Plan. |
(a) | A Participant shall be vested in, and have a nonforfeitable right to, the benefit payable under this Article II to the same extent as the Participant is vested in his or her Accrued Benefit (as that term is defined in the Retirement Plan) under the provisions of the Retirement Plan. |
(b) | Notwithstanding any provision of this Plan to the contrary, in the event of a Change of Control, all Participants and their Beneficiaries shall become fully vested in the benefits provided under this Plan. |
(a) | Benefits That Commenced Prior to January 1, 2009 |
(b) | Benefit Commencement Date on or After January 1, 2009 |
• | the new election cannot take effect until at least 12 months after the date of the new election, |
• | the election change must provide for a new payment date that is at least five years after the originally scheduled payment date, and |
• | the new election may not be made less than 12 months prior to the date of the first scheduled payment. |
• | the new election can not take effect until at least 12 months after the date of the new election, |
• | the election change must provide for a new payment date that is at least five years after the originally scheduled payment date, and |
• | the new election may not be made less than 12 months prior to the date of the first scheduled payment. |
(i) | Final Average Pay Formula -- Pre-Retirement Survivor’s Benefit |
(ii) | Final Average Pay Formula: Dependent Spouse/Dependent Domestic Partner Benefit |
• | Was married to the dependent spouse (or was the domestic partner) for at least five years before death occurs; |
• | Was married to the dependent spouse (or was the domestic partner) before the Participant reaches age 60; and |
• | Had 20 years of Eligibility Service, as defined in the Retirement Plan, and was age 50, or had 25 years of Eligibility Service regardless of age. |
• | The retirement of the spouse or domestic partner; |
• | The retirement of a retiree; or |
• | The death of the employee or retiree. |
(d) | Cash Balance Pay Formula -- Death Benefits |
(a) | All amounts payable in accordance with this Plan shall constitute a general unsecured obligation of the Company. Such amounts, as well as any administrative costs relating to the Plan, shall be paid out of the general assets of the Company, to the extent not paid from the assets of any trust established pursuant to paragraph (b) below. |
(b) | The Company may, for administrative reasons, establish a grantor trust for the benefit of Participants in the Plan. The assets placed in said trust shall be held separate and apart from other Company funds and shall be used exclusively for the purposes set forth in the Plan and the applicable trust agreement, subject to the following conditions: |
(i) | the creation of said trust shall not cause the Plan to be other than "unfunded" for purposes of Title I of ERISA; |
(ii) | the Company shall be treated as "grantor" of said trust for purposes of Section 677 of the Code; and |
(iii) | the agreement of said trust shall provide that its assets may be used upon the insolvency or bankruptcy of the Company to satisfy claims of the Company's general creditors and that the rights of such general creditors are enforceable by them under federal and state law. |
3.02 | Duration of Benefits. Benefits shall accrue under the Plan on behalf of a Participant only for so long as (a) the provisions of Section 415 or 401(a)(17) of the Code limit the benefits that are payable under the Retirement Plan. |
3.03 | Discontinuance and Amendment. The Board of Directors reserves the right to modify, amend, or discontinue in whole or in part, benefit accruals under the Plan at any time. However, no modification, amendment, or discontinuance shall adversely affect the right of any Participant to receive the benefits accrued as of the date of such modification, amendment or discontinuance and after the occurrence of a Change of Control, no modification or amendment shall be made to Section 2.05. Notwithstanding the foregoing, following any amendment and except as provided in Article II with respect to lump sum payments hereunder, benefits may be adjusted as required to take into account the amount of benefits payable under the Retirement Plan after the application of the limitations referred to in Section 2.02 hereof. |
3.04 | Termination of Plan. The Board of Directors reserves the right to terminate the Plan at any time, provided, however, that no termination shall be effective retroactively. As of the effective date of termination of the Plan, |
(a) | the benefits of any Participant or Beneficiary whose benefit payments have commenced shall continue to be paid, but only to the extent such benefits are not otherwise payable under the Retirement Plan because of the limitations referred to in Section 2.02 hereof, and |
(b) | no further benefits shall accrue on behalf of any Participant whose benefits have not commenced, and such Participant and his or her Beneficiary shall retain the right to benefits hereunder; provided that, on or after the effective date of termination, |
(i) | the Participant is vested under the Retirement Plan and |
(ii) | such benefits are not at any time otherwise payable under the Retirement |
3.05 | Plan Not a Contract of Employment. This Plan is not a contract of employment, and the terms of employment of any Participant shall not be affected in any way by this Plan or related instruments, except as specifically provided therein. The establishment of this Plan shall not be construed as conferring any legal rights upon any person for a continuation of employment, nor shall it interfere with the rights of the Company to discharge any person and to treat him or her without regard to the effect which such treatment might have upon him or her under this Plan. Each Participant and all persons who may have or claim any right by reason of his or her participation shall be bound by the terms of this Plan and all agreements entered into pursuant thereto. |
3.06 | Facility of Payment. In the event that the Committee shall find that a Participant is unable to care for his or her affairs because of illness or accident or is a minor or has died, the Committee may, unless claim shall have been made therefor by a duly appointed legal representative, direct that any benefit payment due him, to the extent not payable from a grantor trust, be paid on his or her behalf to his or her spouse, a child, a parent or other blood relative, or to a person with whom he or she resides, and any such payment so made shall be a complete discharge of the liabilities of the Company and the Plan therefor. |
3.07 | Withholding Taxes. The Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes, including FICA taxes. |
3.08 | Nonalienation. Subject to any applicable law, and except as may be required under the terms of a qualified domestic relations order regarding which the Committee or its delegate received notice prior to July 1, 2012, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void, nor shall any such benefit be in any manner liable for or subject to garnishment, attachment, execution or levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled to such benefits. Effective July 1, 2012, no domestic relations order, other than an order which the Committee or its delegate received notice of prior to July 1, 2012, shall be accepted for this Plan. |
3.09 | Forfeiture for Cause. In the event that a Participant shall at any time be convicted of a crime involving dishonesty or fraud on the part of such Participant in his or her relationship with the Company, all benefits that would otherwise be payable to him or her to his or her spouse or a Beneficiary under the Plan shall be forfeited. |
3.10 | Claims Procedure |
(iii) | a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and |
3.11 | Construction |
(a) | The Plan is intended to constitute both an excess benefit arrangement and an unfunded deferred compensation arrangement maintained for a select group of management or highly compensated employees within the meaning of Section 201(2), Section 301(a)(3), and Section 401(a)(1) of ERISA. Subject to the preceding sentence, the Plan shall be construed, regulated and administered under the laws of the State of Connecticut, to the extent such laws are not superseded by applicable federal law. |
(b) | The Plan is intended to satisfy the applicable requirements of Section 409A of the Code and regulations and guidance thereunder, and shall be operated and interpreted |
(c) | The masculine pronoun shall mean the feminine wherever appropriate. |
(d) | The illegality of any particular provision of this document shall not affect the other provisions and the document shall be construed in all respects as if such invalid provision were omitted. |
(e) | The headings and subheadings in the Plan have been inserted for convenience of reference only, and are to be ignored in any construction of the provisions thereof. |
1.1 | Purpose. The purpose of the Plan is to provide a means of restoring the contributions lost by certain Members under the Qualified Plan due to the application of the limitation imposed by Code Section 401(a)(17) (which limits the amount of an employee's compensation that may be taken into account annually under a qualified plan), and, prior to January 1, 2013, Code Section 402(g)(1) (which limits the amount of compensation an employee may defer annually under a qualified plan), and Code Section 415 (which limits the amount of contributions that may be made annually under a qualified plan on behalf of a particular employee). The Plan is intended to constitute an unfunded deferred compensation arrangement maintained for a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms by the Qualified Plan. |
Form S-3 Registration No. | Form S-8 Registration Nos. | ||
333-168532 | 333-12563 | ||
333-49170 | |||
333-34092 | |||
033-80665 | |||
333-105706 | |||
333-105707 333-125489 333-157372 333-160173 333-168537 |
1. | I have reviewed this Quarterly Report on Form 10-Q of The Hartford Financial Services Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | August 1, 2012 | /s/ Liam E. McGee |
Liam E. McGee | ||
Chairman, President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of The Hartford Financial Services Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | August 1, 2012 | /s/ Christopher J. Swift |
Christopher J. Swift | ||
Executive Vice President and Chief Financial Officer |
1) | The Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and |
2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 1, 2012 | /s/ Liam E. McGee |
Liam E. McGee | ||
Chairman, President and Chief Executive Officer |
1) | The Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and |
2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 1, 2012 | /s/ Christopher J. Swift |
Christopher J. Swift | ||
Executive Vice President and Chief Financial Officer |
Fair Value Measurements (Details) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2012
|
Dec. 31, 2011
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | $ 85,227 | $ 81,809 | ||||||||||
Fixed maturities, FVO | 1,165 | 1,328 | ||||||||||
Equity securities, trading | 29,215 | 30,499 | ||||||||||
Equity securities, AFS | 851 | 921 | ||||||||||
Short-term investments | 5,154 | 7,736 | ||||||||||
Fair Value, Measurements, Recurring [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 85,227 | 81,809 | ||||||||||
Fixed maturities, FVO | 1,165 | 1,328 | ||||||||||
Equity securities, trading | 29,215 | 30,499 | ||||||||||
Equity securities, AFS | 851 | 921 | ||||||||||
Derivative assets | 1,486 | [1] | ||||||||||
Short-term investments | 5,154 | 7,736 | ||||||||||
Reinsurance recoverable for U.S. GMWB | 376 | 443 | ||||||||||
Separate account assets | 141,110 | [2] | 139,432 | [2] | ||||||||
Total assets accounted for at fair value on a recurring basis | 264,584 | 264,499 | ||||||||||
Percentage of level to total | 100.00% | 100.00% | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (2,451) | (3,169) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Other policyholder funds and benefits payable [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (2,270) | (2,618) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Other liabilities [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (29) | (9) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Consumer Notes [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (4) | [3] | (4) | [3] | ||||||||
Fair Value, Measurements, Recurring [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 494 | |||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (2,203) | (2,538) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | International [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (53) | (66) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Other Guaranteed Living Benefits [Member] | International [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (4) | (5) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Equity linked notes [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (10) | (9) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Macro Hedge Program [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 70 | 357 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 110 | |||||||||||
Fair Value, Measurements, Recurring [Member] | Hedging Derivatives [Member] | International [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 565 | 731 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 23 | 19 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Hedging Derivatives [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 213 | |||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 597 | 400 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Derivative Liabilities [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 2,331 | [1] | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (148) | [4] | (538) | [4] | ||||||||
Fair Value, Measurements, Recurring [Member] | Credit derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | (19) | (24) | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (494) | (573) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Equity derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 28 | 31 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 25 | 9 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Foreign exchange derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 293 | 519 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 213 | 134 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Interest rate derivatives [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 310 | 195 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (622) | (527) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Other Derivatives Contracts [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 26 | 28 | ||||||||||
Fair Value, Measurements, Recurring [Member] | ABS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 3,002 | 3,153 | ||||||||||
Fair Value, Measurements, Recurring [Member] | CDOs [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 3,037 | 2,487 | ||||||||||
Fair Value, Measurements, Recurring [Member] | CMBS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 6,346 | 6,951 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Corporate [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 42,983 | 44,011 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Foreign govt./govt. agencies [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 3,598 | 2,161 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Municipal [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 14,125 | 13,260 | ||||||||||
Fair Value, Measurements, Recurring [Member] | RMBS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 6,981 | 5,757 | ||||||||||
Fair Value, Measurements, Recurring [Member] | U.S. Treasuries [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 5,155 | 4,029 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 1,080 | 750 | ||||||||||
Fixed maturities, FVO | 0 | 0 | ||||||||||
Equity securities, trading | 1,902 | 1,967 | ||||||||||
Equity securities, AFS | 328 | 352 | ||||||||||
Derivative assets | [1] | |||||||||||
Short-term investments | 309 | 750 | ||||||||||
Reinsurance recoverable for U.S. GMWB | 0 | 0 | ||||||||||
Separate account assets | 102,608 | [2] | 101,644 | [2] | ||||||||
Total assets accounted for at fair value on a recurring basis | 106,227 | 105,463 | ||||||||||
Percentage of level to total | 40.00% | 40.00% | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Other policyholder funds and benefits payable [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Other liabilities [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Consumer Notes [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | [3] | 0 | [3] | ||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | |||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | International [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Other Guaranteed Living Benefits [Member] | International [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Equity linked notes [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Macro Hedge Program [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | |||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Hedging Derivatives [Member] | International [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Hedging Derivatives [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | |||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Derivative Liabilities [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | [1] | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | [4] | 0 | [4] | ||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Credit derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Equity derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Foreign exchange derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Interest rate derivatives [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Other Derivatives Contracts [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | ABS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | CDOs [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | CMBS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Corporate [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Foreign govt./govt. agencies [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Municipal [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | RMBS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | U.S. Treasuries [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 1,080 | 750 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 78,220 | 75,938 | ||||||||||
Fixed maturities, FVO | 672 | 833 | ||||||||||
Equity securities, trading | 27,313 | 28,532 | ||||||||||
Equity securities, AFS | 437 | 476 | ||||||||||
Derivative assets | 859 | [1] | ||||||||||
Short-term investments | 4,845 | 6,986 | ||||||||||
Reinsurance recoverable for U.S. GMWB | 0 | 0 | ||||||||||
Separate account assets | 37,167 | [2] | 36,757 | [2] | ||||||||
Total assets accounted for at fair value on a recurring basis | 149,513 | 150,880 | ||||||||||
Percentage of level to total | 57.00% | 57.00% | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (192) | (289) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Other policyholder funds and benefits payable [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Other liabilities [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Consumer Notes [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | [3] | 0 | [3] | ||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 11 | |||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | International [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Other Guaranteed Living Benefits [Member] | International [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Equity linked notes [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Macro Hedge Program [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | |||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Hedging Derivatives [Member] | International [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 362 | 692 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 65 | 23 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Hedging Derivatives [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 11 | |||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 43 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Derivative Liabilities [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 1,358 | [1] | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (192) | [4] | (289) | [4] | ||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Credit derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | (29) | (11) | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (45) | (25) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Equity derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | |||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Foreign exchange derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 293 | 519 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 213 | 134 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Interest rate derivatives [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 222 | 147 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (468) | (421) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Other Derivatives Contracts [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | ABS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 2,679 | 2,792 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | CDOs [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 2,137 | 2,119 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | CMBS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 5,360 | 6,363 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Corporate [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 41,178 | 41,756 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Foreign govt./govt. agencies [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 3,543 | 2,112 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Municipal [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 13,475 | 12,823 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | RMBS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 5,773 | 4,694 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | U.S. Treasuries [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 4,075 | 3,279 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 5,927 | 5,121 | ||||||||||
Fixed maturities, FVO | 493 | 495 | ||||||||||
Equity securities, trading | 0 | 0 | ||||||||||
Equity securities, AFS | 86 | 93 | ||||||||||
Derivative assets | 627 | [1] | ||||||||||
Short-term investments | 0 | 0 | ||||||||||
Reinsurance recoverable for U.S. GMWB | 376 | 443 | ||||||||||
Separate account assets | 1,335 | [2] | 1,031 | [2] | ||||||||
Total assets accounted for at fair value on a recurring basis | 8,844 | 8,156 | ||||||||||
Percentage of level to total | 3.00% | 3.00% | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (2,259) | (2,880) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Other policyholder funds and benefits payable [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (2,270) | (2,618) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Other liabilities [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (29) | (9) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Consumer Notes [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (4) | [3] | (4) | [3] | ||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 483 | |||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (2,203) | (2,538) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | International [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (53) | (66) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Other Guaranteed Living Benefits [Member] | International [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (4) | (5) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Equity linked notes [Member]
|
||||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (10) | (9) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Macro Hedge Program [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 70 | 357 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 110 | |||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Hedging Derivatives [Member] | International [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 203 | 39 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (42) | (4) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Hedging Derivatives [Member] | Guaranteed Minimum Withdrawal Benefit [Member] | U.S. [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 202 | |||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 554 | 400 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Derivative Liabilities [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 973 | [1] | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 44 | [4] | (249) | [4] | ||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Credit derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 10 | (13) | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (449) | (548) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Equity derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 28 | 31 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 25 | 9 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Foreign exchange derivative [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 0 | 0 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | 0 | 0 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Interest rate derivatives [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 88 | 48 | ||||||||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Total liabilities accounted for at fair value on a recurring basis | (154) | (106) | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Other Derivatives Contracts [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Derivative assets | 26 | 28 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | ABS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 323 | 361 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | CDOs [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 900 | 368 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | CMBS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 986 | 588 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Corporate [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 1,805 | 2,255 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Foreign govt./govt. agencies [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 55 | 49 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Municipal [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 650 | 437 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | RMBS [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | 1,208 | 1,063 | ||||||||||
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | U.S. Treasuries [Member]
|
||||||||||||
Assets accounted for at fair value on a recurring basis | ||||||||||||
Total fixed maturities | $ 0 | $ 0 | ||||||||||
|
Investments and Derivative Instruments (Details 10) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Mortgage Loans by Property Type | ||
Carrying Value | $ 6,875 | $ 5,728 |
Percent of Total | 100.00% | 100.00% |
Agricultural [Member]
|
||
Mortgage Loans by Property Type | ||
Carrying Value | 179 | 249 |
Percent of Total | 2.60% | 4.35% |
Industrial [Member]
|
||
Mortgage Loans by Property Type | ||
Carrying Value | 2,065 | 1,747 |
Percent of Total | 30.14% | 30.50% |
Lodging [Member]
|
||
Mortgage Loans by Property Type | ||
Carrying Value | 91 | 93 |
Percent of Total | 1.32% | 1.62% |
Multifamily [Member]
|
||
Mortgage Loans by Property Type | ||
Carrying Value | 1,391 | 1,070 |
Percent of Total | 20.23% | 18.68% |
Office [Member]
|
||
Mortgage Loans by Property Type | ||
Carrying Value | 1,404 | 1,078 |
Percent of Total | 20.42% | 18.82% |
Retail [Member]
|
||
Mortgage Loans by Property Type | ||
Carrying Value | 1,494 | 1,234 |
Percent of Total | 21.73% | 21.54% |
Other [Member]
|
||
Mortgage Loans by Property Type | ||
Carrying Value | $ 251 | $ 257 |
Percent of Total | 3.65% | 4.60% |
Fair Value Measurements (Details 7) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Changes in fair value of assets and liabilities accounted for using the fair value option | $ 1 | $ 1 | $ (40) | $ 39 |
Corporate [Member] | Fixed Maturities, FVO [Member]
|
||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Changes in fair value of assets and liabilities accounted for using the fair value option | (1) | 2 | 0 | 14 |
CRE CDOs [Member] | Fixed Maturities, FVO [Member]
|
||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Changes in fair value of assets and liabilities accounted for using the fair value option | (10) | (25) | 9 | 21 |
Foreign government [Member] | Fixed Maturities, FVO [Member]
|
||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Changes in fair value of assets and liabilities accounted for using the fair value option | 20 | 17 | (29) | 11 |
Credit-linked notes [Member]
|
||||
Fair Value, Option, Quantitative Disclosures [Line Items] | ||||
Changes in fair value of assets and liabilities accounted for using the fair value option | $ (8) | $ 7 | $ (20) | $ (7) |
Investments and Derivative Instruments (Details 18) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | $ 808 | $ 65 | $ (635) | $ (402) | ||||||||
Interest rate swaps, swap options , caps, floors and forwards [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | (17) | (4) | (15) | 1 | ||||||||
Foreign currency swaps and forwards [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | 32 | (7) | 27 | (12) | ||||||||
3 Win Related Foreign Currency Swaps [Member] | JAPAN [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | 60 | [1] | 33 | [1] | (121) | [1] | (25) | [1] | ||||
Fixed annuity hedging instruments [Member] | JAPAN [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | 58 | [2] | 57 | [2] | (70) | [2] | (5) | [2] | ||||
Credit Derivatives that Purchase Credit Protection [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | 5 | (3) | (31) | (20) | ||||||||
Credit Derivatives that Assume Credit Risk [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | 24 | (14) | 173 | 5 | ||||||||
Equity index swaps and options [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | 3 | 2 | (16) | 2 | ||||||||
GMWB product derivatives [Member] | U.S. [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | (484) | (80) | 412 | 268 | ||||||||
GMWB Reinsurance [Member] | U.S. [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | 62 | 4 | (81) | (61) | ||||||||
GMWB hedging instruments [Member] | U.S. [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | 307 | 43 | (261) | (184) | ||||||||
Macro Hedge Program [Member] | U.S. [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | 6 | (17) | (183) | (101) | ||||||||
International program product derivatives [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | (16) | (6) | 19 | 10 | ||||||||
International program hedging instruments [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | 769 | 58 | (485) | (277) | ||||||||
Contingent Capital Facility Put Option [Member]
|
||||||||||||
Derivative Instruments Gain (Loss) [Line Items] | ||||||||||||
Total | $ (1) | $ (1) | $ (3) | $ (3) | ||||||||
|
Segment Information (Details 1) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | $ 4,514 | $ 4,764 | $ 9,090 | $ 9,492 |
Net investment income: | ||||
Securities available-for-sale and other | 1,097 | 1,104 | 2,167 | 2,212 |
Equity securities, trading | (1,687) | (597) | 1,179 | 206 |
Total net investment income (loss) | (590) | 507 | 3,346 | 2,418 |
Net realized capital gains (losses) | 589 | 69 | (321) | (334) |
Other revenues | 61 | 61 | 120 | 125 |
Total revenues | 4,574 | 5,401 | 12,235 | 11,701 |
Property & Casualty Commercial [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 1,552 | 1,517 | 3,109 | 3,015 |
Workers' Compensation [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 737 | 685 | 1,470 | 1,350 |
Property [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 126 | 134 | 251 | 269 |
Automobiles [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 146 | 145 | 292 | 291 |
Package Business [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 289 | 285 | 581 | 568 |
Liability [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 136 | 134 | 277 | 269 |
Fidelity and Surety [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 51 | 54 | 103 | 109 |
Professional Liability [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 67 | 80 | 135 | 159 |
Group Benefits [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 966 | 1,076 | 1,938 | 2,120 |
Group Disability [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 439 | 516 | 882 | 993 |
Group life and accident [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 478 | 511 | 957 | 1,028 |
Other [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 49 | 49 | 99 | 99 |
Consumer Markets [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 904 | 939 | 1,813 | 1,895 |
Automobiles [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 630 | 657 | 1,262 | 1,329 |
Homeowners [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 274 | 282 | 551 | 566 |
Individual Life [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 220 | 212 | 447 | 421 |
Variable Life [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 85 | 91 | 172 | 182 |
Universal Life [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 122 | 109 | 248 | 215 |
Term / other life [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 13 | 12 | 27 | 24 |
Retirement Plans [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 94 | 101 | 190 | 198 |
401(k) [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 81 | 88 | 165 | 172 |
Government Plans [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 13 | 13 | 25 | 26 |
Mutual Funds [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 148 | 175 | 299 | 353 |
Non-proprietary [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 134 | 161 | 270 | 323 |
Proprietary [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 14 | 14 | 29 | 30 |
Life Other Operations [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | 587 | 690 | 1,199 | 1,384 |
Property and Casualty Other Operations [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | (2) | 0 | (2) | 0 |
Corporate [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Earned premiums, fees and other considerations | $ 45 | $ 54 | $ 97 | $ 106 |
Sales Inducements (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
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Deferred Sales Inducements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Deferred Sales Inducements |
|
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