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, a sustained low interest rate environment, higher tax rates, and other potentially adverse developments on financial, commodity and credit markets and consumer spending and investment and the effect of these events on our returns in investment portfolios and our hedging costs associated with our variable annuities business; |
• | the risks, challenges and uncertainties associated with our capital management plan and our strategic realignment to focus on our property and casualty, group benefits and mutual fund businesses, place our Individual Annuity business into run-off and the sales of the Individual Life, Woodbury Financial Services, Retirement Plans, and U.K. variable annuity businesses; |
• | the risks, challenges and uncertainties associated with actions beyond the capital management plan and strategic realignment, which may include acquisitions, divestitures or restructurings, and the potential that any such actions may negatively impact our business, financial condition, results of operations and liquidity; |
• | execution risk related to the continued reinvestment of our investment portfolios and refinement of our hedge program for our runoff annuity block; |
• | the future capital self-sufficiency of the Company's Talcott Resolution businesses; |
• | 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 possibility of unfavorable loss development including with respect to long-tailed exposures; |
• | the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses; |
• | 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; |
• | risk associated with the use of analytical models in making decisions in key areas such as underwriting, capital, hedging, reserving, and catastrophe risk management; |
• | the uncertain effects of emerging claim and coverage issues; |
• | 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 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 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 economic value; |
• | 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 difficulty in predicting the Company’s potential exposure for asbestos and environmental claims; |
• | 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, vests a Financial Services Oversight Council with the power to designate “systemically important” institutions, requires central clearing of, and/or imposes 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 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; |
• | regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends; |
• | 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 operational 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 changes in federal or state tax laws; |
• | regulatory requirements that could delay, deter or prevent a takeover attempt that shareholders might consider in their best interests; |
• | the impact of potential changes in accounting principles and related financial reporting requirements; |
• | the impact of any future errors in financial reporting; |
• | the Company’s ability to protect its intellectual property and defend against claims of infringement; |
• | the Company's ability to implement its capital plan; and |
• | other factors described in such forward-looking statements. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(In millions, except for per share data) | 2013 | 2012 | 2013 | 2012 | |||||||||
(Unaudited) | |||||||||||||
Revenues | |||||||||||||
Earned premiums | $ | 3,337 | $ | 3,401 | $ | 9,882 | $ | 10,243 | |||||
Fee income | 708 | 1,109 | 2,106 | 3,338 | |||||||||
Net investment income (loss): | |||||||||||||
Securities available-for-sale and other | 812 | 1,028 | 2,535 | 3,189 | |||||||||
Equity securities, trading | 878 | 635 | 4,629 | 1,734 | |||||||||
Total net investment income | 1,690 | 1,663 | 7,164 | 4,923 | |||||||||
Net realized capital gains (losses): | |||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (28 | ) | (59 | ) | (78 | ) | (201 | ) | |||||
OTTI losses recognized in other comprehensive income (“OCI”) | 2 | 22 | 19 | 37 | |||||||||
Net OTTI losses recognized in earnings | (26 | ) | (37 | ) | (59 | ) | (164 | ) | |||||
Net realized capital gains on business dispositions | — | — | 1,575 | — | |||||||||
Other net realized capital gains (losses) | (136 | ) | 132 | (720 | ) | (102 | ) | ||||||
Total net realized capital gains (losses) | (162 | ) | 95 | 796 | (266 | ) | |||||||
Other revenues | 68 | 64 | 201 | 184 | |||||||||
Total revenues | 5,641 | 6,332 | 20,149 | 18,422 | |||||||||
Benefits, losses and expenses | |||||||||||||
Benefits, losses and loss adjustment expenses | 2,739 | 3,270 | 8,289 | 9,927 | |||||||||
Benefits, losses and loss adjustment expenses – returns credited on international variable annuities | 878 | 635 | 4,628 | 1,733 | |||||||||
Amortization of deferred policy acquisition costs and present value of future profits | 594 | 566 | 2,321 | 1,441 | |||||||||
Insurance operating costs and other expenses | 993 | 1,267 | 3,137 | 3,871 | |||||||||
Loss on extinguishment of debt | — | — | 213 | 910 | |||||||||
Reinsurance loss on dispositions | — | 533 | 1,574 | 533 | |||||||||
Interest expense | 94 | 109 | 301 | 348 | |||||||||
Total benefits, losses and expenses | 5,298 | 6,380 | 20,463 | 18,763 | |||||||||
Income (loss) from continuing operations before income taxes | 343 | (48 | ) | (314 | ) | (341 | ) | ||||||
Income tax expense (benefit) | 45 | (41 | ) | (308 | ) | (286 | ) | ||||||
Income (loss) from continuing operations, net of tax | 298 | (7 | ) | (6 | ) | (55 | ) | ||||||
Income (loss) from discontinued operations, net of tax | (5 | ) | 20 | (132 | ) | 63 | |||||||
Net income (loss) | $ | 293 | $ | 13 | $ | (138 | ) | $ | 8 | ||||
Preferred stock dividends | — | 10 | 10 | 31 | |||||||||
Net income (loss) available to common shareholders | $ | 293 | $ | 3 | $ | (148 | ) | $ | (23 | ) | |||
Loss from continuing operations, net of tax, available to common shareholders per common share | |||||||||||||
Basic | $ | 0.66 | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.20 | ) | ||
Diluted | $ | 0.61 | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.20 | ) | ||
Net income (loss) available to common shareholders per common share | |||||||||||||
Basic | $ | 0.65 | $ | 0.01 | $ | (0.33 | ) | $ | (0.05 | ) | |||
Diluted | $ | 0.60 | $ | 0.01 | $ | (0.33 | ) | $ | (0.05 | ) | |||
Cash dividends declared per common share | $ | 0.15 | $ | 0.10 | $ | 0.35 | $ | 0.30 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(In millions) | 2013 | 2012 | 2013 | 2012 | |||||||||
(Unaudited) | |||||||||||||
Comprehensive Income (Loss) | |||||||||||||
Net income (loss) | $ | 293 | $ | 13 | $ | (138 | ) | $ | 8 | ||||
Other comprehensive income (loss): | |||||||||||||
Change in net unrealized gain on securities | (174 | ) | 882 | (2,430 | ) | 1,870 | |||||||
Change in OTTI losses recognized in other comprehensive income | 3 | 35 | 27 | 40 | |||||||||
Change in net gain (loss) on cash-flow hedging instruments | (21 | ) | (1 | ) | (261 | ) | 27 | ||||||
Change in foreign currency translation adjustments | 92 | 88 | (222 | ) | 8 | ||||||||
Change in pension and other postretirement plan adjustments | 9 | 35 | 26 | 99 | |||||||||
Total other comprehensive income (loss) | (91 | ) | 1,039 | (2,860 | ) | 2,044 | |||||||
Total comprehensive income (loss) | $ | 202 | $ | 1,052 | $ | (2,998 | ) | $ | 2,052 |
(In millions, except for share and per share data) | September 30, 2013 | December 31, 2012 | ||||
(Unaudited) | ||||||
Assets | ||||||
Investments: | ||||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $62,227 and $79,747) (includes variable interest entity assets, at fair value, of $33 and $89) | $ | 64,023 | $ | 85,922 | ||
Fixed maturities, at fair value using the fair value option (includes variable interest entity assets of $147 and $163) | 994 | 1,087 | ||||
Equity securities, trading, at fair value (cost of $17,601 and $26,820) | 22,343 | 28,933 | ||||
Equity securities, available-for-sale, at fair value (cost of $843 and $866) (includes variable interest entity assets of $1 as of September 30, 2013) | 862 | 890 | ||||
Mortgage loans (net of allowances for loan losses of $67 and $68) | 5,575 | 6,711 | ||||
Policy loans, at outstanding balance | 1,415 | 1,997 | ||||
Limited partnerships and other alternative investments (includes variable interest entity assets of $4 and $6) | 3,059 | 3,015 | ||||
Other investments | 647 | 1,114 | ||||
Short-term investments (includes variable interest entity assets, at fair value, of $9 as of September 30, 2013) | 4,146 | 4,581 | ||||
Total investments | 103,064 | 134,250 | ||||
Cash | 1,422 | 2,421 | ||||
Premiums receivable and agents’ balances, net | 3,673 | 3,542 | ||||
Reinsurance recoverables, net | 23,115 | 4,666 | ||||
Deferred policy acquisition costs and present value of future profits | 2,249 | 5,725 | ||||
Deferred income taxes, net | 3,893 | 1,942 | ||||
Goodwill | 498 | 654 | ||||
Property and equipment, net | 895 | 977 | ||||
Other assets | 3,260 | 2,767 | ||||
Assets held for sale | 2,002 | — | ||||
Separate account assets | 139,876 | 141,569 | ||||
Total assets | $ | 283,947 | $ | 298,513 | ||
Liabilities | ||||||
Reserve for future policy benefits and unpaid losses and loss adjustment expenses | $ | 41,545 | $ | 40,992 | ||
Other policyholder funds and benefits payable | 40,101 | 41,979 | ||||
Other policyholder funds and benefits payable – international variable annuities | 22,332 | 28,922 | ||||
Unearned premiums | 5,445 | 5,145 | ||||
Debt | 6,306 | 7,126 | ||||
Consumer notes | 83 | 161 | ||||
Other liabilities (includes variable interest entity liabilities of $36 and $89) | 7,608 | 10,172 | ||||
Liabilities held for sale | 1,723 | — | ||||
Separate account liabilities | 139,876 | 141,569 | ||||
Total liabilities | 265,019 | 276,066 | ||||
Commitments and Contingencies (Note 11) | ||||||
Stockholders’ Equity | ||||||
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 575,000 shares issued as of December 31, 2012, liquidation preference $1,000 per share | — | 556 | ||||
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 490,923,222 and 469,744,822 shares issued | 5 | 5 | ||||
Additional paid-in capital | 10,414 | 10,038 | ||||
Retained earnings | 10,439 | 10,745 | ||||
Treasury stock, at cost — 42,430,177 and 33,439,044 shares | (1,913 | ) | (1,740 | ) | ||
Accumulated other comprehensive income (loss), net of tax | (17 | ) | 2,843 | |||
Total stockholders’ equity | 18,928 | 22,447 | ||||
Total liabilities and stockholders’ equity | $ | 283,947 | $ | 298,513 |
Nine Months Ended September 30, | ||||||
(In millions, except for share data) | 2013 | 2012 | ||||
(Unaudited) | ||||||
Preferred Stock | ||||||
Balance at beginning of year | $ | 556 | $ | 556 | ||
Conversion of shares to common stock | (556 | ) | — | |||
Balance at end of year | $ | — | $ | 556 | ||
Common Stock | 5 | 5 | ||||
Additional Paid-in Capital, beginning of period | 10,038 | 10,391 | ||||
Repurchase of warrants | (33 | ) | (300 | ) | ||
Issuance of shares under incentive and stock compensation plans | (47 | ) | (58 | ) | ||
Tax expense on employee stock options and awards | 3 | (1 | ) | |||
Conversion of mandatory convertible preferred stock | 556 | — | ||||
Issuance of shares for warrant exercise | (103 | ) | — | |||
Additional Paid-in Capital, end of period | 10,414 | 10,032 | ||||
Retained Earnings, beginning of period | 10,745 | 11,001 | ||||
Net income (loss) | (138 | ) | 8 | |||
Dividends on preferred stock | (10 | ) | (31 | ) | ||
Dividends declared on common stock | (158 | ) | (131 | ) | ||
Retained Earnings, end of period | 10,439 | 10,847 | ||||
Treasury Stock, at Cost, beginning of period | (1,740 | ) | (1,718 | ) | ||
Treasury stock acquired | (375 | ) | (149 | ) | ||
Issuance of shares under incentive and stock compensation plans from treasury stock | 114 | 121 | ||||
Return of shares under incentive and stock compensation plans and other to treasury stock | (15 | ) | (7 | ) | ||
Issuance of shares for warrant exercise | 103 | — | ||||
Treasury Stock, at Cost, end of period | (1,913 | ) | (1,753 | ) | ||
Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period | 2,843 | 1,251 | ||||
Total other comprehensive income | (2,860 | ) | 2,044 | |||
Accumulated Other Comprehensive Income (Loss), net of tax, end of period | (17 | ) | 3,295 | |||
Total Stockholders’ Equity | $ | 18,928 | $ | 22,982 | ||
Preferred Shares Outstanding (in thousands) | — | 575 | ||||
Common Shares Outstanding, at beginning of period (in thousands) | 436,306 | 442,539 | ||||
Treasury stock acquired | (12,680 | ) | (8,045 | ) | ||
Issuance of shares under incentive and stock compensation plans | 2,101 | 1,905 | ||||
Return of shares under incentive and stock compensation plans and other to treasury stock | (548 | ) | (333 | ) | ||
Conversion of mandatory convertible preferred shares | 21,178 | — | ||||
Issuance of shares for warrant exercise | 2,136 | — | ||||
Common Shares Outstanding, at end of period | 448,493 | 436,066 |
Nine Months Ended September 30, | ||||||
(In millions) | 2013 | 2012 | ||||
Operating Activities | (Unaudited) | |||||
Net income (loss) | $ | (138 | ) | $ | 8 | |
Adjustments to reconcile net income to net cash provided by operating activities | ||||||
Amortization of deferred policy acquisition costs and present value of future profits | 2,321 | 1,441 | ||||
Additions to deferred policy acquisition costs and present value of future profits | (1,003 | ) | (1,251 | ) | ||
Change in reserve for future policy benefits and unpaid losses and loss adjustment expenses and unearned premiums | (104 | ) | 153 | |||
Change in reinsurance recoverables | (405 | ) | (332 | ) | ||
Change in receivables and other assets | (664 | ) | (442 | ) | ||
Change in payables and accruals | 572 | 778 | ||||
Change in accrued and deferred income taxes | (755 | ) | (263 | ) | ||
Net realized capital (gains) losses | (796 | ) | 202 | |||
Net receipts (disbursements) from investment contracts related to policyholder funds—international variable annuities | (4,858 | ) | (523 | ) | ||
Net (increase) decrease in equity securities, trading | 4,858 | 519 | ||||
Depreciation and amortization | 140 | 366 | ||||
Loss on extinguishment of debt | 213 | 910 | ||||
Reinsurance loss on dispositions | 1,574 | 533 | ||||
Other operating activities, net | (52 | ) | 113 | |||
Net cash provided by operating activities | 903 | 2,212 | ||||
Investing Activities | ||||||
Proceeds from the sale/maturity/prepayment of: | ||||||
Fixed maturities, available-for-sale | 25,906 | 35,928 | ||||
Fixed maturities, fair value option | 60 | 191 | ||||
Equity securities, available-for-sale | 196 | 213 | ||||
Mortgage loans | 349 | 332 | ||||
Partnerships | 200 | 124 | ||||
Payments for the purchase of: | ||||||
Fixed maturities, available-for-sale | (22,857 | ) | (34,556 | ) | ||
Fixed maturities, fair value option | (95 | ) | (182 | ) | ||
Equity securities, available-for-sale | (144 | ) | (74 | ) | ||
Mortgage loans | (575 | ) | (1,467 | ) | ||
Partnerships | (192 | ) | (728 | ) | ||
Proceeds from business sold (excluding $485 of non-cash proceeds) | 485 | — | ||||
Derivatives, net | (1,690 | ) | (1,593 | ) | ||
Change in policy loans, net | 44 | 1 | ||||
Other investing activities, net | 1 | (51 | ) | |||
Net cash provided by (used for) investing activities | 1,688 | (1,862 | ) | |||
Financing Activities | ||||||
Deposits and other additions to investment and universal life-type contracts | 7,186 | 8,907 | ||||
Withdrawals and other deductions from investment and universal life-type contracts | (20,179 | ) | (18,373 | ) | ||
Net transfers from separate accounts related to investment and universal life-type contracts | 12,242 | 8,406 | ||||
Repayments at maturity or settlement of consumer notes | (78 | ) | (124 | ) | ||
Net increase (decrease) in securities loaned or sold under agreements to repurchase | (1,036 | ) | 1,585 | |||
Repurchase of warrants | (33 | ) | (300 | ) | ||
Repayment of debt | (1,338 | ) | (2,133 | ) | ||
Proceeds from the issuance of debt | 295 | 2,123 | ||||
Proceeds from net issuance of shares under incentive and stock compensation plans, excess tax benefit and other | 17 | 10 | ||||
Treasury stock acquired | (375 | ) | (154 | ) | ||
Dividends paid on preferred stock | (21 | ) | (32 | ) | ||
Dividends paid on common stock | (134 | ) | (132 | ) | ||
Net cash provided by (used for) financing activities | (3,454 | ) | (217 | ) | ||
Foreign exchange rate effect on cash | (21 | ) | (9 | ) | ||
Transfer of cash to held for sale | (115 | ) | — | |||
Net decrease in cash | (999 | ) | 124 | |||
Cash – beginning of period | 2,421 | 2,581 | ||||
Cash – end of period | $ | 1,422 | $ | 2,705 | ||
Supplemental Disclosure of Cash Flow Information | ||||||
Income taxes paid (received) | $ | 140 | $ | (448 | ) | |
Interest paid | $ | 293 | $ | 314 | ||
Supplemental Disclosure of Non-Cash Investing Activity | ||||||
Conversion of fixed maturities, available-for-sale to equity securities, available-for-sale | $ | — | $ | 67 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Tax benefit at U.S. Federal statutory rate | $ | 120 | $ | (17 | ) | $ | (110 | ) | $ | (119 | ) | ||
Tax-exempt interest | (34 | ) | (35 | ) | (103 | ) | (106 | ) | |||||
Dividends received deduction | (36 | ) | (28 | ) | (101 | ) | (91 | ) | |||||
Other [1] | (5 | ) | 39 | 6 | 30 | ||||||||
Income tax expense (benefit) | $ | 45 | $ | (41 | ) | $ | (308 | ) | $ | (286 | ) |
[1] | Includes a permanent difference of $25 related to non-deductible goodwill for the nine months ended September 30, 2013. |
Carrying Value | |||
As of Closing | |||
Asset-backed securities ("ABS") | $ | 289 | |
Collaterialized debt obligations ("CDOs") [1] | 474 | ||
Commercial mortgage-backed securities ("CMBS") | 949 | ||
Corporate | 11,651 | ||
Foreign government/government agencies | 263 | ||
States, municipalities and political subdivisions ("Municipal") | 900 | ||
Residential mortgage-backed securities ("RMBS") | 707 | ||
U.S. Treasuries | 116 | ||
Total fixed maturities, available-for-sale ("AFS") at fair value (amortized cost of $13,916) [2] | 15,349 | ||
Equity securities, AFS, at fair value (cost of $35) [3] | 37 | ||
Fixed maturities, at fair value using the fair value option ("FVO") [4] | 16 | ||
Mortgage loans (net of allowances for loan losses of $1) | 1,364 | ||
Policy loans, at outstanding balance | 582 | ||
Total invested assets transferred | $ | 17,348 |
[1] | The market value includes the fair value of bifurcated embedded derivative features of certain securities. Changes in fair value are recorded in the net realized capital gains (losses). |
[2] | Includes $14.7 billion and $670 of securities in level 2 and 3 of the fair value hierarchy, respectively. |
[3] | All equity securities transferred are included in level 2 of the fair value hierarchy. |
[4] | All FVO securities transferred are included in level 3 of the fair value hierarchy. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(In millions, except for per share data) | 2013 | 2012 | 2013 | 2012 | |||||||||
Earnings | |||||||||||||
Income (loss) from continuing operations | |||||||||||||
Income (loss) from continuing operations, net of tax | $ | 298 | $ | (7 | ) | $ | (6 | ) | $ | (55 | ) | ||
Less: Preferred stock dividends | — | 10 | 10 | 31 | |||||||||
Income (loss) from continuing operations, net of tax, available to common shareholders | $ | 298 | $ | (17 | ) | $ | (16 | ) | $ | (86 | ) | ||
Income (loss) from discontinued operations, net of tax | $ | (5 | ) | $ | 20 | $ | (132 | ) | $ | 63 | |||
Net income (loss) | |||||||||||||
Net income (loss) | $ | 293 | $ | 13 | $ | (138 | ) | $ | 8 | ||||
Less: Preferred stock dividends | — | 10 | 10 | 31 | |||||||||
Net income (loss) available to common shareholders | $ | 293 | $ | 3 | $ | (148 | ) | $ | (23 | ) | |||
Shares | |||||||||||||
Weighted average common shares outstanding, basic | 452.1 | 435.8 | 446.6 | 438.2 | |||||||||
Dilutive effect of warrants | 33.9 | 23.8 | — | — | |||||||||
Dilutive effect of stock compensation plans | 4.6 | 2.1 | — | — | |||||||||
Weighted average shares outstanding and dilutive potential common shares | 490.6 | 461.7 | 446.6 | 438.2 | |||||||||
Earnings (loss) per common share | |||||||||||||
Basic | |||||||||||||
Income (loss) from continuing operations, net of tax, available to common shareholders | $ | 0.66 | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.20 | ) | ||
Income (loss) from discontinued operations, net of tax | (0.01 | ) | 0.05 | (0.29 | ) | 0.15 | |||||||
Net income (loss) available to common shareholders | $ | 0.65 | $ | 0.01 | $ | (0.33 | ) | $ | (0.05 | ) | |||
Diluted | |||||||||||||
Income (loss) from continuing operations, net of tax, available to common shareholders | $ | 0.61 | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.20 | ) | ||
Income (loss) from discontinued operations, net of tax | (0.01 | ) | 0.05 | (0.29 | ) | 0.15 | |||||||
Net income (loss) available to common shareholders | $ | 0.60 | $ | 0.01 | $ | (0.33 | ) | $ | (0.05 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
Net income (loss) | 2013 | 2012 | 2013 | 2012 | |||||||||
Property & Casualty Commercial | $ | 174 | $ | 164 | $ | 619 | $ | 502 | |||||
Consumer Markets | 68 | 94 | 160 | 152 | |||||||||
Property & Casualty Other Operations | 22 | 24 | (28 | ) | 36 | ||||||||
Group Benefits | 31 | 30 | 134 | 83 | |||||||||
Mutual Funds | 19 | 18 | 57 | 56 | |||||||||
Talcott Resolution | 7 | (121 | ) | (619 | ) | 149 | |||||||
Corporate | (28 | ) | (196 | ) | (461 | ) | (970 | ) | |||||
Net income (loss) | $ | 293 | $ | 13 | $ | (138 | ) | $ | 8 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
Revenues | 2013 | 2012 | 2013 | 2012 | |||||||||
Earned premiums, fees, and other considerations | |||||||||||||
Property & Casualty Commercial | |||||||||||||
Workers’ compensation | $ | 751 | $ | 762 | $ | 2,225 | $ | 2,232 | |||||
Property | 132 | 127 | 384 | 378 | |||||||||
Automobile | 146 | 148 | 434 | 440 | |||||||||
Package business | 285 | 290 | 851 | 871 | |||||||||
Liability | 142 | 142 | 421 | 419 | |||||||||
Fidelity and surety | 51 | 53 | 152 | 156 | |||||||||
Professional liability | 56 | 60 | 170 | 195 | |||||||||
Total Property & Casualty Commercial | 1,563 | 1,582 | 4,637 | 4,691 | |||||||||
Consumer Markets | |||||||||||||
Automobile | 637 | 632 | 1,882 | 1,894 | |||||||||
Homeowners | 288 | 280 | 847 | 831 | |||||||||
Total Consumer Markets [1] | 925 | 912 | 2,729 | 2,725 | |||||||||
Property & Casualty Other Operations | — | — | — | (2 | ) | ||||||||
Group Benefits | |||||||||||||
Group disability | 357 | 426 | 1,086 | 1,308 | |||||||||
Group life | 435 | 468 | 1,289 | 1,425 | |||||||||
Other | 39 | 47 | 120 | 146 | |||||||||
Total Group Benefits | 831 | 941 | 2,495 | 2,879 | |||||||||
Mutual Funds | |||||||||||||
Retail | 131 | 120 | 392 | 363 | |||||||||
Annuity and other | 40 | 28 | 113 | 84 | |||||||||
Total Mutual Funds | 171 | 148 | 505 | 447 | |||||||||
Talcott Resolution | 553 | 882 | 1,615 | 2,699 | |||||||||
Corporate | 2 | 45 | 7 | 142 | |||||||||
Total earned premiums, fees, and other considerations | 4,045 | 4,510 | 11,988 | 13,581 | |||||||||
Net investment income (loss): | |||||||||||||
Securities available-for-sale and other | 812 | 1,028 | 2,535 | 3,189 | |||||||||
Equity securities, trading | 878 | 635 | 4,629 | 1,734 | |||||||||
Total net investment income | 1,690 | 1,663 | 7,164 | 4,923 | |||||||||
Net realized capital gains (losses) | (162 | ) | 95 | 796 | (266 | ) | |||||||
Other revenues | 68 | 64 | 201 | 184 | |||||||||
Total revenues | $ | 5,641 | $ | 6,332 | $ | 20,149 | $ | 18,422 |
[1] | For the three months ended September 30, 2013 and 2012, AARP members accounted for earned premiums of $729 and $706, respectively. For the nine months ended September 30, 2013 and 2012, AARP members accounted for earned premiums of $2.1 billion. |
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 exchange-traded derivative instruments. |
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. Also included are limited partnerships and other alternative assets measured at fair value where an investment can be redeemed, or substantially redeemed, at the NAV at the measurement date or in the near-term, not to exceed 90 days. |
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 instruments, as well as limited partnerships and other alternative investments carried at fair value that cannot be redeemed in the near-term at the NAV. 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. |
September 30, 2013 | ||||||||||||
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") | $ | 2,362 | $ | — | $ | 2,156 | $ | 206 | ||||
Collateralized debt obligations ("CDOs") | 2,550 | — | 1,752 | 798 | ||||||||
Commercial mortgage-backed securities ("CMBS") | 4,489 | — | 3,698 | 791 | ||||||||
Corporate | 28,770 | — | 27,490 | 1,280 | ||||||||
Foreign government/government agencies | 3,968 | — | 3,895 | 73 | ||||||||
Municipal | 12,543 | — | 12,410 | 133 | ||||||||
Residential mortgage-backed securities ("RMBS") | 5,086 | — | 3,740 | 1,346 | ||||||||
U.S. Treasuries | 4,255 | 370 | 3,885 | — | ||||||||
Total fixed maturities | 64,023 | 370 | 59,026 | 4,627 | ||||||||
Fixed maturities, FVO | 994 | — | 783 | 211 | ||||||||
Equity securities, trading | 22,343 | 11 | 22,332 | — | ||||||||
Equity securities, AFS | 862 | 407 | 366 | 89 | ||||||||
Derivative assets | ||||||||||||
Credit derivatives | 28 | — | 9 | 19 | ||||||||
Equity derivatives | 6 | — | (1 | ) | 7 | |||||||
Foreign exchange derivatives | (51 | ) | — | (51 | ) | — | ||||||
Interest rate derivatives | 5 | — | (33 | ) | 38 | |||||||
U.S. guaranteed minimum withdrawal benefit ("GMWB") hedging instruments | 79 | — | (18 | ) | 97 | |||||||
U.S. macro hedge program | 160 | — | — | 160 | ||||||||
International program hedging instruments | 314 | — | 257 | 57 | ||||||||
Other derivative contracts | 19 | — | — | 19 | ||||||||
Total derivative assets [1] | 560 | — | 163 | 397 | ||||||||
Short-term investments | 4,146 | 546 | 3,600 | — | ||||||||
Limited partnerships and other alternative investments [2] | 996 | — | 660 | 336 | ||||||||
Reinsurance recoverable for U.S. GMWB | 46 | — | — | 46 | ||||||||
Modified coinsurance reinsurance contracts | 60 | — | 60 | — | ||||||||
Separate account assets [3] | 136,459 | 98,161 | 37,563 | 735 | ||||||||
Assets held for sale | 2,203 | 1,732 | 471 | — | ||||||||
Total assets accounted for at fair value on a recurring basis | $ | 232,692 | $ | 101,227 | $ | 125,024 | $ | 6,441 | ||||
Percentage of level to total | 100 | % | 44 | % | 54 | % | 3 | % | ||||
Liabilities accounted for at fair value on a recurring basis | ||||||||||||
Other policyholder funds and benefits payable | ||||||||||||
U.S guaranteed withdrawal benefits | $ | (210 | ) | $ | — | $ | — | $ | (210 | ) | ||
International guaranteed withdrawal benefits | 1 | — | — | 1 | ||||||||
International other guaranteed living benefits | 3 | — | — | 3 | ||||||||
Equity linked notes | (13 | ) | — | — | (13 | ) | ||||||
Total other policyholder funds and benefits payable | (219 | ) | — | — | (219 | ) | ||||||
Derivative liabilities | ||||||||||||
Credit derivatives | (27 | ) | — | (11 | ) | (16 | ) | |||||
Equity derivatives | 16 | — | — | 16 | ||||||||
Foreign exchange derivatives | (212 | ) | — | (212 | ) | — | ||||||
Interest rate derivatives | (578 | ) | — | (552 | ) | (26 | ) | |||||
U.S. GMWB hedging instruments | 79 | — | (43 | ) | 122 | |||||||
U.S. macro hedge program | 21 | — | — | 21 | ||||||||
International program hedging instruments | (403 | ) | — | (245 | ) | (158 | ) | |||||
Total derivative liabilities [4] | (1,104 | ) | — | (1,063 | ) | (41 | ) | |||||
Consumer notes [5] | (1 | ) | — | — | (1 | ) | ||||||
Liabilities held for sale | (31 | ) | — | — | (31 | ) | ||||||
Total liabilities accounted for at fair value on a recurring basis | $ | (1,355 | ) | $ | — | $ | (1,063 | ) | $ | (292 | ) |
December 31, 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 | ||||||||||||
ABS | $ | 2,763 | $ | — | $ | 2,485 | $ | 278 | ||||
CDOs | 3,040 | — | 2,096 | 944 | ||||||||
CMBS | 6,321 | — | 5,462 | 859 | ||||||||
Corporate | 44,049 | — | 42,048 | 2,001 | ||||||||
Foreign government/government agencies | 4,136 | — | 4,080 | 56 | ||||||||
Municipal | 14,361 | — | 14,134 | 227 | ||||||||
RMBS | 7,480 | — | 6,107 | 1,373 | ||||||||
U.S. Treasuries | 3,772 | 115 | 3,657 | — | ||||||||
Total fixed maturities | 85,922 | 115 | 80,069 | 5,738 | ||||||||
Fixed maturities, FVO | 1,087 | 8 | 865 | 214 | ||||||||
Equity securities, trading | 28,933 | 1,847 | 27,086 | — | ||||||||
Equity securities, AFS | 890 | 337 | 469 | 84 | ||||||||
Derivative assets | ||||||||||||
Credit derivatives | (19 | ) | — | (8 | ) | (11 | ) | |||||
Equity derivatives | 32 | — | — | 32 | ||||||||
Foreign exchange derivatives | 104 | — | 104 | — | ||||||||
Interest rate derivatives | 235 | — | 268 | (33 | ) | |||||||
U.S. GMWB hedging instruments | 36 | — | (53 | ) | 89 | |||||||
U.S. macro hedge program | 186 | — | — | 186 | ||||||||
International program hedging instruments | 448 | — | 318 | 130 | ||||||||
Other derivative contracts | 23 | — | — | 23 | ||||||||
Total derivative assets [1] | 1,045 | — | 629 | 416 | ||||||||
Short-term investments | 4,581 | 342 | 4,239 | — | ||||||||
Limited partnerships and other alternative investments [2] | 907 | — | 593 | 314 | ||||||||
Reinsurance recoverable for U.S. GMWB | 191 | — | — | 191 | ||||||||
Separate account assets [3] | 138,509 | 97,988 | 39,938 | 583 | ||||||||
Total assets accounted for at fair value on a recurring basis | $ | 262,065 | $ | 100,637 | $ | 153,888 | $ | 7,540 | ||||
Percentage of level to total | 100 | % | 38 | % | 59 | % | 3 | % |
December 31, 2012 | ||||||||||||
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 | $ | (1,249 | ) | $ | — | $ | — | $ | (1,249 | ) | ||
International guaranteed withdrawal benefits | (50 | ) | — | — | (50 | ) | ||||||
International other guaranteed living benefits | 2 | — | — | 2 | ||||||||
Equity linked notes | (7 | ) | — | — | (7 | ) | ||||||
Total other policyholder funds and benefits payable | (1,304 | ) | — | — | (1,304 | ) | ||||||
Derivative liabilities | ||||||||||||
Credit derivatives | (18 | ) | — | (33 | ) | 15 | ||||||
Equity derivatives | 25 | — | — | 25 | ||||||||
Foreign exchange derivatives | (24 | ) | — | (24 | ) | — | ||||||
Interest rate derivatives | (517 | ) | — | (518 | ) | 1 | ||||||
U.S. GMWB hedging instruments | 536 | — | 106 | 430 | ||||||||
U.S Macro hedge program | 100 | — | — | 100 | ||||||||
International program hedging instruments | (279 | ) | — | (217 | ) | (62 | ) | |||||
Total derivative liabilities [4] | (177 | ) | — | (686 | ) | 509 | ||||||
Consumer notes [5] | (2 | ) | — | — | (2 | ) | ||||||
Total liabilities accounted for at fair value on a recurring basis | $ | (1,483 | ) | $ | — | $ | (686 | ) | $ | (797 | ) |
[1] | Includes over-the-counter("OTC") and OTC-cleared derivative instruments in a net asset value position after consideration of the impact of collateral posting requirements which may be imposed by agreements, clearing house rules and applicable law. As of September 30, 2013 and December 31, 2012, $128 and $160, 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 4 below for derivative liabilities. |
[2] | Represents hedge funds where investment company accounting has been applied to a wholly-owned fund of funds measured at fair value. |
[3] | Approximately $3.4 billion and $3.1 billion of investment sales receivable that are not subject to fair value accounting are excluded as of September 30, 2013 and December 31, 2012, respectively. |
[4] | Includes OTC and OTC-cleared 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. |
[5] | 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, as well as certain limited partnerships and other alternative investments and derivative instruments. |
• | 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. |
• | Limited partnerships and other alternative investments — Primary inputs include a NAV for investment companies with no redemption restrictions as reported on their U.S. GAAP financial statements. |
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. Level 3 investments also include certain limited partnerships and other alternative investments measured at fair value where the Company does not have the ability to redeem the investment in the near-term at the NAV. 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. |
As of September 30, 2013 | ||||||||||||
Securities | Unobservable Inputs | |||||||||||
Assets accounted for at fair value on a recurring basis | Fair Value | Predominant Valuation Method | Significant Unobservable Input | Minimum | Maximum | Weighted Average [1] | Impact of Increase in Input on Fair Value [2] | |||||
CMBS | $ | 791 | Discounted cash flows | Spread (encompasses prepayment, default risk and loss severity) | 67 | bps | 3,087 | bps | 761 | bps | Decrease | |
Corporate [3] | 662 | Discounted cash flows | Spread | 175 | bps | 5,014 | bps | 403 | bps | Decrease | ||
Municipal | 133 | Discounted cash flows | Spread | 192 | bps | 290 | bps | 235 | bps | Decrease | ||
RMBS | 1,346 | Discounted cash flows | Spread | 64 | bps | 1,992 | bps | 268 | bps | Decrease | ||
Constant prepayment rate | — | % | 13.0 | % | 5.0 | % | Decrease [4] | |||||
Constant default rate | 1.0 | % | 17.0 | % | 8.0 | % | Decrease | |||||
Loss severity | — | % | 100.0 | % | 79.0 | % | Decrease | |||||
As of December 31, 2012 | ||||||||||||
CMBS | $ | 859 | Discounted cash flows | Spread (encompasses prepayment, default risk and loss severity) | 320 | bps | 3,615 | bps | 1,031 | bps | Decrease | |
Corporate [3] | 1,371 | Discounted cash flows | Spread | 106 | bps | 900 | bps | 328 | bps | Decrease | ||
Municipal | 227 | Discounted cash flows | Spread | 227 | bps | 344 | bps | 258 | bps | Decrease | ||
RMBS | 1,373 | Discounted cash flows | Spread | 54 | bps | 1,689 | bps | 367 | bps | Decrease | ||
Constant prepayment rate | — | % | 12.0 | % | 2.0 | % | Decrease [4] | |||||
Constant default rate | 1.0 | % | 24.0 | % | 8.0 | % | Decrease | |||||
Loss severity | — | % | 100.0 | % | 80.0 | % | 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. |
As of September 30, 2013 | |||||||||
Freestanding Derivatives | Unobservable Inputs | ||||||||
Fair Value | Predominant Valuation Method | Significant Unobservable Input | Minimum | Maximum | Impact of Increase in Input on Fair Value [1] | ||||
Interest rate derivative | |||||||||
Interest rate swaps | (26 | ) | Discounted cash flows | Swap curve beyond 30 years | 3.4 | % | 3.4 | % | Increase |
Long interest rate swaptions | 38 | Option model | Interest rate volatility | 1 | % | 1 | % | Increase | |
U.S. GMWB hedging instruments | |||||||||
Equity options | 108 | Option model | Equity volatility | 21 | % | 36 | % | Increase | |
Customized swaps | 111 | Discounted cash flows | Equity volatility | 10 | % | 50 | % | Increase | |
U.S. macro hedge program | |||||||||
Equity options | 181 | Option model | Equity volatility | 22 | % | 32 | % | Increase | |
International program hedging | |||||||||
Equity options | (101 | ) | Option model | Equity volatility | 26 | % | 39 | % | Increase |
As of December 31, 2012 | |||||||||
Equity derivatives | |||||||||
Equity options | 57 | Option model | Equity volatility | 13 | % | 24 | % | Increase | |
Interest rate derivative | |||||||||
Interest rate swaps | (55 | ) | Discounted cash flows | Swap curve beyond 30 years | 2.8 | % | 2.8 | % | Increase |
Long interest rate swaptions | 23 | Option model | Interest rate volatility | — | % | 1 | % | Increase | |
U.S. GMWB hedging instruments | |||||||||
Equity options | 281 | Option model | Equity volatility | 10 | % | 31 | % | Increase | |
Customized swaps | 238 | Discounted cash flows | Equity volatility | 10 | % | 50 | % | Increase | |
U.S. macro hedge program | |||||||||
Equity options | 286 | Option model | Equity volatility | 24 | % | 43 | % | Increase | |
International program hedging | |||||||||
Equity options | 26 | Option model | Equity volatility | 19 | % | 27 | % | Increase | |
Long interest rate swaptions | 42 | Option model | Interest rate volatility | — | % | 1 | % | 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. 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 | Unobservable Inputs (Minimum) | Unobservable Inputs (Maximum) | Impact of Increase in Input on Fair Value Measurement [1] |
Withdrawal Utilization[2] | 20% | 100% | Increase |
Withdrawal Rates [2] | —% | 8% | Increase |
Lapse Rates [3] | —% | 75% | Decrease |
Reset Elections [4] | 20% | 75% | Increase |
Equity Volatility [5] | 10% | 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 June 30, 2013 | $ | 232 | $ | 912 | $ | 818 | $ | 1,251 | $ | 69 | $ | 127 | $ | 1,352 | $ | 4,761 | $ | 211 | |||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||
Included in net income [1], [2], [6] | — | — | (11 | ) | (2 | ) | — | — | (3 | ) | (16 | ) | (3 | ) | |||||||||||||
Included in OCI [3] | 1 | 2 | 42 | 6 | — | (1 | ) | (4 | ) | 46 | — | ||||||||||||||||
Purchases | 11 | 8 | 20 | 39 | 5 | 7 | 100 | 190 | 6 | ||||||||||||||||||
Settlements | (1 | ) | (51 | ) | (31 | ) | (14 | ) | (1 | ) | — | (51 | ) | (149 | ) | — | |||||||||||
Sales | — | — | (39 | ) | (8 | ) | — | — | (48 | ) | (95 | ) | (1 | ) | |||||||||||||
Transfers into Level 3 [4] | — | — | 5 | 41 | — | — | — | 46 | — | ||||||||||||||||||
Transfers out of Level 3 [4] | (37 | ) | (73 | ) | (13 | ) | (33 | ) | — | — | — | (156 | ) | (2 | ) | ||||||||||||
Fair value as of September 30, 2013 | $ | 206 | $ | 798 | $ | 791 | $ | 1,280 | $ | 73 | $ | 133 | $ | 1,346 | $ | 4,627 | $ | 211 | |||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2013 [2] [7] | $ | — | $ | — | $ | (8 | ) | $ | (2 | ) | $ | — | $ | — | $ | (5 | ) | $ | (15 | ) | $ | (3 | ) |
Freestanding Derivatives [5] | |||||||||||||||||||||||||||
Assets (Liabilities) | Equity Securities, AFS | Credit | Equity | Interest Rate | U.S. GMWB Hedging | U.S. Macro Hedge Program | Intl. Program Hedging | Other Contracts | Total Free- Standing Derivatives [5] | ||||||||||||||||||
Fair value as of June 30, 2013 | $ | 95 | $ | 2 | $ | 29 | $ | (15 | ) | $ | 329 | $ | 209 | $ | (43 | ) | $ | — | $ | 511 | |||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||
Included in net income [1], [2], [6] | (6 | ) | 1 | (6 | ) | 3 | (109 | ) | (39 | ) | (72 | ) | (1 | ) | (223 | ) | |||||||||||
Included in OCI [3] | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Purchases | — | — | — | — | — | 11 | (4 | ) | — | 7 | |||||||||||||||||
Settlements | — | — | — | — | (1 | ) | — | 46 | — | 45 | |||||||||||||||||
Sales | — | — | — | — | — | — | — | — | |||||||||||||||||||
Transfers into Level 3 [4] | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Transfers out of Level 3 [4] | — | — | — | 24 | — | — | (28 | ) | 20 | 16 | |||||||||||||||||
Fair value as of September 30, 2013 | $ | 89 | $ | 3 | $ | 23 | $ | 12 | $ | 219 | $ | 181 | $ | (101 | ) | $ | 19 | $ | 356 | ||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2013 [2] [7] | $ | (6 | ) | $ | — | $ | (5 | ) | $ | 1 | $ | (111 | ) | $ | (39 | ) | $ | (138 | ) | $ | (4 | ) | $ | (296 | ) |
Assets | Limited Partnerships and Other Alternative Investments | Reinsurance Recoverable for U.S. GMWB | Separate Accounts | ||||||
Fair value as of June 30, 2013 | $ | 363 | $ | 113 | $ | 820 | |||
Total realized/unrealized gains (losses) | |||||||||
Included in net income [1], [2], [6] | (20 | ) | (74 | ) | (9 | ) | |||
Included in OCI [3] | — | — | — | ||||||
Purchases | 35 | — | (19 | ) | |||||
Settlements | — | 7 | — | ||||||
Sales | — | — | (35 | ) | |||||
Transfers into Level 3 [4] | — | — | 35 | ||||||
Transfers out of Level 3 [4] | (42 | ) | — | (57 | ) | ||||
Fair value as of September 30, 2013 | $ | 336 | $ | 46 | $ | 735 | |||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2013 [2] [7] | $ | (20 | ) | $ | (74 | ) | $ | 3 |
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 | Liabilities held for sale | Consumer Notes | ||||||||||||||
Fair value as of June 30, 2013 | $ | (632 | ) | $ | 1 | $ | 3 | $ | (12 | ) | $ | (640 | ) | $ | (28 | ) | $ | (1 | ) | ||
Transfers to liabilities held for sale | — | — | — | — | — | — | — | ||||||||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||
Included in net income [1], [2], [6] | 451 | — | 1 | (1 | ) | 451 | (2 | ) | — | ||||||||||||
Included in OCI [3] | — | — | — | — | — | — | — | ||||||||||||||
Settlements | (29 | ) | (1 | ) | — | (30 | ) | (1 | ) | — | |||||||||||
Fair value as of September 30, 2013 | $ | (210 | ) | $ | 1 | $ | 3 | $ | (13 | ) | $ | (219 | ) | $ | (31 | ) | $ | (1 | ) | ||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2013 [2] [7] | $ | 451 | $ | — | $ | 1 | $ | (1 | ) | $ | 451 | $ | (2 | ) | $ | — |
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, 2013 | $ | 278 | $ | 944 | $ | 859 | $ | 2,001 | $ | 56 | $ | 227 | $ | 1,373 | $ | 5,738 | $ | 214 | |||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||
Included in net income [1], [2], [6] | 3 | (11 | ) | (22 | ) | 11 | — | 1 | 26 | 8 | 6 | ||||||||||||||||
Included in OCI [3] | 15 | 120 | 122 | (29 | ) | (10 | ) | (11 | ) | 39 | 246 | — | |||||||||||||||
Purchases | 71 | 82 | 33 | 132 | 44 | 13 | 289 | 664 | 16 | ||||||||||||||||||
Settlements | (8 | ) | (96 | ) | (102 | ) | (83 | ) | (3 | ) | — | (141 | ) | (433 | ) | (2 | ) | ||||||||||
Sales | (94 | ) | (200 | ) | (115 | ) | (356 | ) | (8 | ) | (53 | ) | (240 | ) | (1,066 | ) | (22 | ) | |||||||||
Transfers into Level 3 [4] | — | 32 | 39 | 117 | — | — | — | 188 | 2 | ||||||||||||||||||
Transfers out of Level 3 [4] | (59 | ) | (73 | ) | (23 | ) | (513 | ) | (6 | ) | (44 | ) | — | (718 | ) | (3 | ) | ||||||||||
Fair value as of September 30, 2013 | $ | 206 | $ | 798 | $ | 791 | $ | 1,280 | $ | 73 | $ | 133 | $ | 1,346 | $ | 4,627 | $ | 211 | |||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2013 [2] [7] | $ | (4 | ) | $ | (2 | ) | $ | (16 | ) | $ | (6 | ) | $ | — | $ | — | $ | (5 | ) | $ | (33 | ) | $ | 27 |
Freestanding Derivatives [5] | |||||||||||||||||||||||||||
Assets (Liabilities) | Equity Securities, AFS | Credit | Equity | Interest Rate | U.S. GMWB Hedging | U.S. Macro Hedge Program | Intl. Program Hedging | Other Contracts | Total Free- Standing Derivatives [5] | ||||||||||||||||||
Fair value as of January 1, 2013 | $ | 84 | $ | 4 | $ | 57 | $ | (32 | ) | $ | 519 | $ | 286 | $ | 68 | $ | 23 | $ | 925 | ||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||
Included in net income [1], [2], [6] | (12 | ) | 1 | (31 | ) | 18 | (299 | ) | (139 | ) | (247 | ) | (4 | ) | (701 | ) | |||||||||||
Included in OCI [3] | 7 | — | — | — | — | — | — | — | — | ||||||||||||||||||
Purchases | 13 | — | — | (3 | ) | — | 34 | (42 | ) | — | (11 | ) | |||||||||||||||
Settlements | — | (2 | ) | (3 | ) | 3 | (1 | ) | — | 63 | — | 60 | |||||||||||||||
Sales | (3 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||
Transfers into Level 3 [4] | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Transfers out of Level 3 [4] | — | — | — | 26 | — | — | 57 | — | 83 | ||||||||||||||||||
Fair value as of September 30, 2013 | $ | 89 | $ | 3 | $ | 23 | $ | 12 | $ | 219 | $ | 181 | $ | (101 | ) | $ | 19 | $ | 356 | ||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2013 [2] [7] | $ | (13 | ) | $ | — | $ | (27 | ) | $ | 4 | $ | (296 | ) | $ | (136 | ) | $ | (292 | ) | $ | (8 | ) | $ | (755 | ) |
Assets | Limited Partnerships and Other Alternative Investments | Reinsurance Recoverable for U.S. GMWB | Separate Accounts | ||||||
Fair value as of January 1, 2013 | $ | 314 | $ | 191 | $ | 583 | |||
Total realized/unrealized gains (losses) | |||||||||
Included in net income [1], [2], [6] | (16 | ) | (166 | ) | 7 | ||||
Included in OCI [3] | — | — | — | ||||||
Purchases | 125 | — | 240 | ||||||
Settlements | — | 21 | (1 | ) | |||||
Sales | (22 | ) | — | (66 | ) | ||||
Transfers into Level 3 [4] | — | — | 39 | ||||||
Transfers out of Level 3 [4] | (65 | ) | — | (67 | ) | ||||
Fair value as of September 30, 2013 | $ | 336 | $ | 46 | $ | 735 | |||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2013 [2] [7] | $ | (16 | ) | $ | (166 | ) | $ | 15 |
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 | Liabilities held for sale | Consumer Notes | ||||||||||||||
Fair value as of January 1, 2013 | $ | (1,249 | ) | $ | (50 | ) | $ | 2 | $ | (7 | ) | $ | (1,304 | ) | $ | — | $ | (2 | ) | ||
Transfers to liabilities held for sale | — | 43 | — | — | 43 | (43 | ) | — | |||||||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||
Included in net income [1], [2], [6] | 1,099 | 8 | 4 | (6 | ) | 1,105 | 14 | 1 | |||||||||||||
Included in OCI [3] | — | — | — | — | 1 | — | |||||||||||||||
Settlements | (60 | ) | — | (3 | ) | — | (63 | ) | (3 | ) | — | ||||||||||
Fair value as of September 30, 2013 | $ | (210 | ) | $ | 1 | $ | 3 | $ | (13 | ) | $ | (219 | ) | $ | (31 | ) | $ | (1 | ) | ||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2013 [2] [7] | $ | 1,099 | $ | 8 | $ | 4 | $ | (6 | ) | $ | 1,105 | $ | 14 | $ | 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 June 30, 2012 | $ | 323 | $ | 900 | $ | 986 | $ | 1,805 | $ | 55 | $ | 650 | $ | 1,208 | $ | 5,927 | $ | 493 | |||||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||
Included in net income [1], [2], [6] | 1 | (8 | ) | (33 | ) | (4 | ) | — | (4 | ) | (17 | ) | (65 | ) | 32 | ||||||||||||
Included in OCI [3] | 10 | 46 | 53 | (47 | ) | 1 | 14 | 155 | 232 | — | |||||||||||||||||
Purchases | 11 | — | 8 | 40 | 11 | — | 81 | 151 | — | ||||||||||||||||||
Settlements | (5 | ) | (8 | ) | (36 | ) | (3 | ) | (1 | ) | — | (41 | ) | (94 | ) | — | |||||||||||
Sales | (9 | ) | — | (127 | ) | (9 | ) | (16 | ) | (22 | ) | (56 | ) | (239 | ) | — | |||||||||||
Transfers into Level 3 [4] | 9 | — | 20 | 283 | — | — | 1 | 313 | — | ||||||||||||||||||
Transfers out of Level 3 [4] | (25 | ) | — | — | (45 | ) | — | (434 | ) | (39 | ) | (543 | ) | — | |||||||||||||
Fair value as of September 30, 2012 | $ | 315 | $ | 930 | $ | 871 | $ | 2,020 | $ | 50 | $ | 204 | $ | 1,292 | $ | 5,682 | $ | 525 | |||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7] | $ | 1 | $ | (8 | ) | $ | (26 | ) | $ | (4 | ) | $ | — | $ | (4 | ) | $ | 1 | $ | (40 | ) | $ | 23 |
Freestanding Derivatives [5] | |||||||||||||||||||||||||||
Assets (Liabilities) | Equity Securities, AFS | Credit | Equity | Interest Rate | U.S. GMWB Hedging | U.S. Macro Hedge Program | Intl. Program Hedging | Other Contracts | Total Free- Standing Derivatives [5] | ||||||||||||||||||
Fair value as of June 30, 2012 | $ | 86 | $ | (439 | ) | $ | 53 | $ | (66 | ) | $ | 756 | $ | 180 | $ | 161 | $ | 26 | $ | 671 | |||||||
Total realized/unrealized gains (losses) | |||||||||||||||||||||||||||
Included in net income [1], [2], [6] | (4 | ) | 64 | (16 | ) | 1 | (159 | ) | (98 | ) | (92 | ) | (1 | ) | (301 | ) | |||||||||||
Included in OCI [3] | 1 | — | — | — | — | — | — | — | — | ||||||||||||||||||
Purchases | 5 | — | 31 | 1 | 19 | — | 6 | — | 57 | ||||||||||||||||||
Settlements | — | 94 | — | — | — | — | 18 | — | 112 | ||||||||||||||||||
Sales | (2 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||
Transfers into Level 3 [4] | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Transfers out of Level 3 [4] | — | — | — | 32 | — | — | — | — | 32 | ||||||||||||||||||
Fair value as of September 30, 2012 | $ | 86 | $ | (281 | ) | $ | 68 | $ | (32 | ) | $ | 616 | $ | 82 | $ | 93 | $ | 25 | $ | 571 | |||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7] | $ | (3 | ) | $ | 26 | $ | (14 | ) | $ | 1 | $ | (159 | ) | $ | (98 | ) | $ | (69 | ) | $ | (1 | ) | $ | (314 | ) |
Assets | Reinsurance Recoverable for U.S. GMWB | Separate Accounts | ||||
Fair value as of June 30, 2012 | $ | 376 | $ | 1,335 | ||
Total realized/unrealized gains (losses) | ||||||
Included in net income [1], [2], [6] | (184 | ) | (2 | ) | ||
Included in OCI [3] | — | — | ||||
Purchases | — | 97 | ||||
Settlements | 7 | — | ||||
Sales | — | (41 | ) | |||
Transfers into Level 3 [4] | — | (3 | ) | |||
Transfers out of Level 3 [4] | — | (7 | ) | |||
Fair value as of September 30, 2012 | $ | 199 | $ | 1,379 | ||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7] | $ | (184 | ) | $ | 8 |
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 June 30, 2012 | $ | (2,203 | ) | $ | (53 | ) | $ | (4 | ) | $ | (10 | ) | $ | (2,270 | ) | $ | (29 | ) | $ | (4 | ) |
Total realized/unrealized gains (losses) | |||||||||||||||||||||
Included in net income [1], [2], [6] | 823 | 20 | 6 | — | 849 | (14 | ) | 2 | |||||||||||||
Included in OCI [3] | — | (1 | ) | — | — | (1 | ) | — | — | ||||||||||||
Settlements | (33 | ) | (3 | ) | (1 | ) | — | (37 | ) | — | — | ||||||||||
Fair value as of September 30, 2012 | $ | (1,413 | ) | $ | (37 | ) | $ | 1 | $ | (10 | ) | $ | (1,459 | ) | $ | (43 | ) | $ | (2 | ) | |
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7] | $ | 823 | $ | 20 | $ | 6 | $ | — | $ | 849 | $ | (14 | ) | $ | 2 |
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] | — | (9 | ) | (67 | ) | (7 | ) | — | (4 | ) | 7 | (80 | ) | 53 | |||||||||||||
Included in OCI [3] | 43 | 122 | 112 | (50 | ) | 3 | 38 | 202 | 470 | — | |||||||||||||||||
Purchases | 36 | — | 21 | 205 | 18 | 275 | 364 | 919 | — | ||||||||||||||||||
Settlements | (43 | ) | (31 | ) | (106 | ) | (56 | ) | (3 | ) | — | (111 | ) | (350 | ) | — | |||||||||||
Sales | (24 | ) | (3 | ) | (198 | ) | (63 | ) | (17 | ) | (87 | ) | (195 | ) | (587 | ) | (23 | ) | |||||||||
Transfers into Level 3 [4] | 9 | 483 | 621 | 605 | — | — | 1 | 1,719 | — | ||||||||||||||||||
Transfers out of Level 3 [4] | (67 | ) | — | (100 | ) | (869 | ) | — | (455 | ) | (39 | ) | (1,530 | ) | — | ||||||||||||
Fair value as of September 30, 2012 | $ | 315 | $ | 930 | $ | 871 | $ | 2,020 | $ | 50 | $ | 204 | $ | 1,292 | $ | 5,682 | $ | 525 | |||||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7] | $ | (2 | ) | $ | (10 | ) | $ | (27 | ) | $ | (4 | ) | $ | — | $ | (4 | ) | $ | 1 | $ | (46 | ) | $ | 62 |
Freestanding Derivatives [5] | |||||||||||||||||||||||||||
Assets (Liabilities) | Equity Securities, AFS | Credit | Equity | Interest Rate | U.S. GMWB Hedging | U.S. Macro Hedge Program | Intl. Program Hedging | 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] | 7 | 192 | (30 | ) | (9 | ) | (332 | ) | (275 | ) | 51 | (3 | ) | (406 | ) | ||||||||||||
Included in OCI [3] | (3 | ) | — | — | 2 | — | — | — | — | 2 | |||||||||||||||||
Purchases | 19 | — | 77 | 1 | 42 | — | (59 | ) | — | 61 | |||||||||||||||||
Settlements | — | 89 | (19 | ) | — | — | — | 58 | — | 128 | |||||||||||||||||
Sales | (30 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||
Transfers into Level 3 [4] | — | — | — | — | — | — | — | — | — | ||||||||||||||||||
Transfers out of Level 3 [4] | — | (1 | ) | — | 32 | 23 | — | 8 | — | 62 | |||||||||||||||||
Fair value as of September 30, 2012 | $ | 86 | $ | (281 | ) | $ | 68 | $ | (32 | ) | $ | 616 | $ | 82 | $ | 93 | $ | 25 | $ | 571 | |||||||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7] | $ | 4 | $ | 142 | $ | (16 | ) | $ | (9 | ) | $ | (332 | ) | $ | (274 | ) | $ | 71 | $ | (3 | ) | $ | (421 | ) |
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] | (265 | ) | 31 | |||
Included in OCI [3] | — | — | ||||
Purchases | — | 336 | ||||
Settlements | 21 | (1 | ) | |||
Sales | — | (442 | ) | |||
Transfers into Level 3 [4] | — | 451 | ||||
Transfers out of Level 3 [4] | — | (27 | ) | |||
Fair value as of September 30, 2012 | $ | 199 | $ | 1,379 | ||
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7] | $ | (265 | ) | $ | (18 | ) |
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] | 1,235 | 36 | 9 | (1 | ) | 1,279 | (34 | ) | 2 | ||||||||||||
Included in OCI [3] | — | — | — | — | — | — | — | ||||||||||||||
Settlements | (110 | ) | (7 | ) | (3 | ) | — | (120 | ) | — | — | ||||||||||
Fair value as of September 30, 2012 | $ | (1,413 | ) | $ | (37 | ) | $ | 1 | $ | (10 | ) | $ | (1,459 | ) | $ | (43 | ) | $ | (2 | ) | |
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7] | $ | 1,235 | $ | 36 | $ | 9 | $ | (1 | ) | $ | 1,279 | $ | (34 | ) | $ | 2 |
[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 September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Assets | |||||||||||||
Fixed maturities, FVO | |||||||||||||
Corporate | $ | 1 | $ | 6 | $ | (13 | ) | $ | 6 | ||||
CDOs | — | 17 | — | 26 | |||||||||
Foreign government | 8 | 13 | (80 | ) | (16 | ) | |||||||
Other liabilities | |||||||||||||
Credit-linked notes | — | (14 | ) | — | (34 | ) | |||||||
Total realized capital gains (losses) | $ | 9 | $ | 22 | $ | (93 | ) | $ | (18 | ) |
As of | ||||||
September 30, 2013 | December 31, 2012 | |||||
Assets | ||||||
Fixed maturities, FVO | ||||||
ABS | $ | 3 | $ | — | ||
CDOs | 200 | 205 | ||||
CMBS | 8 | 5 | ||||
Corporate | 87 | 140 | ||||
Foreign government | 673 | 730 | ||||
U.S government | 17 | 2 | ||||
Municipals | 1 | 1 | ||||
RMBS | 5 | 4 | ||||
Total fixed maturities, FVO | $ | 994 | $ | 1,087 |
September 30, 2013 | December 31, 2012 | ||||||||||||
Fair Value Hierarchy Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||
Assets | |||||||||||||
Policy loans | Level 3 | $ | 1,415 | $ | 1,483 | $ | 1,997 | $ | 2,165 | ||||
Mortgage loans | Level 3 | 5,575 | 5,616 | 6,711 | 6,933 | ||||||||
Liabilities | |||||||||||||
Other policyholder funds and benefits payable [1] | Level 3 | $ | 9,426 | $ | 9,636 | $ | 9,558 | $ | 9,910 | ||||
Senior notes [2] | Level 2 | 5,206 | 5,863 | 5,706 | 7,071 | ||||||||
Junior subordinated debentures [2] | Level 2 | 1,100 | 1,242 | 1,100 | 1,265 | ||||||||
Consumer notes [3] | Level 3 | 82 | 82 | 159 | 159 |
[1] | Excludes guarantees on variable annuities, group accident and health and universal life insurance contracts, including corporate owned life insurance. |
[2] | Included in debt in the Condensed Consolidated Balance Sheets. |
[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. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(Before tax) | 2013 | 2012 | 2013 | 2012 | |||||||||
Gross gains on sales [1] | $ | 106 | $ | 194 | $ | 2,034 | $ | 666 | |||||
Gross losses on sales | (139 | ) | (131 | ) | (339 | ) | (386 | ) | |||||
Net OTTI losses recognized in earnings | (26 | ) | (37 | ) | (59 | ) | (164 | ) | |||||
Valuation allowances on mortgage loans | — | — | — | 1 | |||||||||
Japanese fixed annuity contract hedges, net [2] | (8 | ) | (24 | ) | (4 | ) | (42 | ) | |||||
Periodic net coupon settlements on credit derivatives/Japan | 3 | 2 | (3 | ) | 1 | ||||||||
Results of variable annuity hedge program | |||||||||||||
GMWB derivatives, net | 203 | 381 | 219 | 451 | |||||||||
U.S. macro hedge program | (50 | ) | (109 | ) | (182 | ) | (292 | ) | |||||
Total U.S. program | 153 | 272 | 37 | 159 | |||||||||
International program | (286 | ) | (176 | ) | (1,199 | ) | (657 | ) | |||||
Total results of variable annuity hedge program | (133 | ) | 96 | (1,162 | ) | (498 | ) | ||||||
Other, net [3] | 35 | (5 | ) | 329 | 156 | ||||||||
Net realized capital gains (losses) | $ | (162 | ) | $ | 95 | $ | 796 | $ | (266 | ) |
[1] | Includes $1.5 billion of gains relating to the sales of the Retirement Plans and Individual Life businesses for the nine months ended September 30, 2013. |
[2] | Relates to the Japanese fixed annuity product (adjustment of product liability for changes in spot currency exchange rates, related derivative hedging instruments, excluding net periodic coupon settlements, and Japan FVO securities). |
[3] | Primarily consists of transactional foreign currency re-valuation associated with the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, and change in value of non-qualifying derivatives. Includes $71 of gains relating to the sales of the Retirement Plans and Individual Life businesses for the nine months ended September 30, 2013. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(Before-tax) | 2013 | 2012 | 2013 | 2012 | |||||||||
Balance as of beginning of period | $ | (902 | ) | $ | (1,407 | ) | $ | (1,013 | ) | $ | (1,676 | ) | |
Additions for credit impairments recognized on [1]: | |||||||||||||
Securities not previously impaired | (1 | ) | (5 | ) | (14 | ) | (21 | ) | |||||
Securities previously impaired | (2 | ) | (9 | ) | (11 | ) | (19 | ) | |||||
Reductions for credit impairments previously recognized on: | |||||||||||||
Securities that matured or were sold during the period | 58 | 104 | 184 | 392 | |||||||||
Securities the Company made the decision to sell or more likely than not will be required to sell | 2 | — | 2 | — | |||||||||
Securities due to an increase in expected cash flows | 8 | 2 | 15 | 9 | |||||||||
Balance as of end of period | $ | (837 | ) | $ | (1,315 | ) | $ | (837 | ) | $ | (1,315 | ) |
[1] | These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations. |
September 30, 2013 | December 31, 2012 | ||||||||||||||||||||||||||||||
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 | $ | 2,445 | $ | 24 | $ | (107 | ) | $ | 2,362 | $ | (3 | ) | $ | 2,883 | $ | 63 | $ | (183 | ) | $ | 2,763 | $ | (4 | ) | |||||||
CDOs [2] | 2,530 | 118 | (92 | ) | 2,550 | (5 | ) | 3,170 | 60 | (159 | ) | 3,040 | (14 | ) | |||||||||||||||||
CMBS | 4,311 | 256 | (78 | ) | 4,489 | (7 | ) | 6,083 | 417 | (179 | ) | 6,321 | (11 | ) | |||||||||||||||||
Corporate | 27,277 | 1,932 | (439 | ) | 28,770 | (9 | ) | 39,694 | 4,631 | (276 | ) | 44,049 | (19 | ) | |||||||||||||||||
Foreign govt./govt. agencies | 4,039 | 98 | (169 | ) | 3,968 | — | 3,985 | 191 | (40 | ) | 4,136 | — | |||||||||||||||||||
Municipal | 12,235 | 487 | (179 | ) | 12,543 | — | 13,001 | 1,379 | (19 | ) | 14,361 | — | |||||||||||||||||||
RMBS | 5,079 | 119 | (112 | ) | 5,086 | (11 | ) | 7,318 | 295 | (133 | ) | 7,480 | (32 | ) | |||||||||||||||||
U.S. Treasuries | 4,311 | 42 | (98 | ) | 4,255 | — | 3,613 | 175 | (16 | ) | 3,772 | — | |||||||||||||||||||
Total fixed maturities, AFS | 62,227 | 3,076 | (1,274 | ) | 64,023 | (35 | ) | 79,747 | 7,211 | (1,005 | ) | 85,922 | (80 | ) | |||||||||||||||||
Equity securities, AFS | 843 | 78 | (59 | ) | 862 | — | 866 | 81 | (57 | ) | 890 | — | |||||||||||||||||||
Total AFS securities [3] | $ | 63,070 | $ | 3,154 | $ | (1,333 | ) | $ | 64,885 | $ | (35 | ) | $ | 80,613 | $ | 7,292 | $ | (1,062 | ) | $ | 86,812 | $ | (80 | ) |
[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 September 30, 2013 and December 31, 2012. |
[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). |
[3] | As of December 31, 2012, includes fixed maturities, AFS and equity securities, AFS relating to the sales of the Retirement Plans and Individual Life Businesses; see Note 2 - Business Dispositions of the Notes to Condensed Consolidated Financial Statements for further discussion of this transaction. |
September 30, 2013 | ||||||
Contractual Maturity | Amortized Cost | Fair Value | ||||
One year or less | $ | 2,111 | $ | 2,146 | ||
Over one year through five years | 11,317 | 11,856 | ||||
Over five years through ten years | 11,870 | 12,263 | ||||
Over ten years | 22,564 | 23,271 | ||||
Subtotal | 47,862 | 49,536 | ||||
Mortgage-backed and asset-backed securities | 14,365 | 14,487 | ||||
Total fixed maturities, AFS | $ | 62,227 | $ | 64,023 |
September 30, 2013 | |||||||||||||||||||||||||||||
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 | $ | 721 | $ | 715 | $ | (6 | ) | $ | 604 | $ | 503 | $ | (101 | ) | $ | 1,325 | $ | 1,218 | $ | (107 | ) | ||||||||
CDOs [1] | 148 | 146 | (2 | ) | 2,231 | 2,135 | (90 | ) | 2,379 | 2,281 | (92 | ) | |||||||||||||||||
CMBS | 603 | 580 | (23 | ) | 736 | 681 | (55 | ) | 1,339 | 1,261 | (78 | ) | |||||||||||||||||
Corporate | 5,358 | 5,106 | (252 | ) | 1,369 | 1,182 | (187 | ) | 6,727 | 6,288 | (439 | ) | |||||||||||||||||
Foreign govt./govt. agencies | 1,683 | 1,517 | (166 | ) | 18 | 15 | (3 | ) | 1,701 | 1,532 | (169 | ) | |||||||||||||||||
Municipal | 2,957 | 2,787 | (170 | ) | 119 | 110 | (9 | ) | 3,076 | 2,897 | (179 | ) | |||||||||||||||||
RMBS | 1,869 | 1,818 | (51 | ) | 646 | 585 | (61 | ) | 2,515 | 2,403 | (112 | ) | |||||||||||||||||
U.S. Treasuries | 2,407 | 2,340 | (67 | ) | 129 | 98 | (31 | ) | 2,536 | 2,438 | (98 | ) | |||||||||||||||||
Total fixed maturities, AFS | 15,746 | 15,009 | (737 | ) | 5,852 | 5,309 | (537 | ) | 21,598 | 20,318 | (1,274 | ) | |||||||||||||||||
Equity securities, AFS | 208 | 202 | (6 | ) | 241 | 188 | (53 | ) | 449 | 390 | (59 | ) | |||||||||||||||||
Total securities in an unrealized loss | $ | 15,954 | $ | 15,211 | $ | (743 | ) | $ | 6,093 | $ | 5,497 | $ | (590 | ) | $ | 22,047 | $ | 20,708 | $ | (1,333 | ) |
December 31, 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 | $ | 163 | $ | 161 | $ | (2 | ) | $ | 886 | $ | 705 | $ | (181 | ) | $ | 1,049 | $ | 866 | $ | (183 | ) | ||||||||
CDOs [1] | 5 | 4 | (1 | ) | 2,567 | 2,389 | (158 | ) | 2,572 | 2,393 | (159 | ) | |||||||||||||||||
CMBS | 339 | 322 | (17 | ) | 1,248 | 1,086 | (162 | ) | 1,587 | 1,408 | (179 | ) | |||||||||||||||||
Corporate | 1,261 | 1,218 | (43 | ) | 1,823 | 1,590 | (233 | ) | 3,084 | 2,808 | (276 | ) | |||||||||||||||||
Foreign govt./govt. agencies | 1,380 | 1,343 | (37 | ) | 20 | 17 | (3 | ) | 1,400 | 1,360 | (40 | ) | |||||||||||||||||
Municipal | 271 | 265 | (6 | ) | 157 | 144 | (13 | ) | 428 | 409 | (19 | ) | |||||||||||||||||
RMBS | 910 | 908 | (2 | ) | 869 | 738 | (131 | ) | 1,779 | 1,646 | (133 | ) | |||||||||||||||||
U.S. Treasuries | 583 | 567 | (16 | ) | — | — | — | 583 | 567 | (16 | ) | ||||||||||||||||||
Total fixed maturities, AFS | 4,912 | 4,788 | (124 | ) | 7,570 | 6,669 | (881 | ) | 12,482 | 11,457 | (1,005 | ) | |||||||||||||||||
Equity securities, AFS | 69 | 67 | (2 | ) | 280 | 225 | (55 | ) | 349 | 292 | (57 | ) | |||||||||||||||||
Total securities in an unrealized loss | $ | 4,981 | $ | 4,855 | $ | (126 | ) | $ | 7,850 | $ | 6,894 | $ | (936 | ) | $ | 12,831 | $ | 11,749 | $ | (1,062 | ) |
[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). |
September 30, 2013 | December 31, 2012 | ||||||||||||||||||
Amortized Cost [1] | Valuation Allowance | Carrying Value | Amortized Cost [1] | Valuation Allowance | Carrying Value | ||||||||||||||
Total commercial mortgage loans [2] | $ | 5,642 | $ | (67 | ) | $ | 5,575 | $ | 6,779 | $ | (68 | ) | $ | 6,711 |
[1] | Amortized cost represents carrying value prior to valuation allowances, if any. |
[2] | As of December 31, 2012, includes commercial mortgage loans relating to the sales of the Retirement Plans and Individual Life businesses; see Note 2 - Business Dispositions of the Notes to Condensed Consolidated Financial Statements for further discussion of this transaction. |
2013 | 2012 | |||||
Balance, as of January 1 | $ | (68 | ) | $ | (102 | ) |
(Additions)/Reversals | (1 | ) | 1 | |||
Deductions | 2 | 18 | ||||
Balance, as of September 30 | $ | (67 | ) | $ | (83 | ) |
Commercial Mortgage Loans Credit Quality | |||||||||
September 30, 2013 | December 31, 2012 | ||||||||
Loan-to-value | Carrying Value | Avg. Debt-Service Coverage Ratio | Carrying Value | Avg. Debt-Service Coverage Ratio | |||||
Greater than 80% | $ | 148 | 1.11x | $ | 253 | 0.95x | |||
65% - 80% | 1,365 | 1.91x | 2,220 | 2.12x | |||||
Less than 65% | 4,062 | 2.38x | 4,238 | 2.40x | |||||
Total commercial mortgage loans | $ | 5,575 | 2.22x | $ | 6,711 | 2.24x |
Mortgage Loans by Region | |||||||||||
September 30, 2013 | December 31, 2012 | ||||||||||
Carrying Value | Percent of Total | Carrying Value | Percent of Total | ||||||||
East North Central | $ | 127 | 2.3 | % | $ | 145 | 2.2 | % | |||
Middle Atlantic | 414 | 7.4 | % | 477 | 7.1 | % | |||||
Mountain | 77 | 1.4 | % | 99 | 1.5 | % | |||||
New England | 354 | 6.3 | % | 350 | 5.2 | % | |||||
Pacific | 1,642 | 29.5 | % | 1,978 | 29.5 | % | |||||
South Atlantic | 902 | 16.2 | % | 1,378 | 20.5 | % | |||||
West North Central | 47 | 0.8 | % | 16 | 0.2 | % | |||||
West South Central | 335 | 6.0 | % | 398 | 5.9 | % | |||||
Other [1] | 1,677 | 30.1 | % | 1,870 | 27.9 | % | |||||
Total mortgage loans | $ | 5,575 | 100.0 | % | $ | 6,711 | 100.0 | % |
[1] | Primarily represents loans collateralized by multiple properties in various regions. |
Mortgage Loans by Property Type | |||||||||||
September 30, 2013 | December 31, 2012 | ||||||||||
Carrying Value | Percent of Total | Carrying Value | Percent of Total | ||||||||
Commercial | |||||||||||
Agricultural | $ | 130 | 2.3 | % | $ | 142 | 2.1 | % | |||
Industrial | 1,742 | 31.2 | % | 2,079 | 30.9 | % | |||||
Lodging | 27 | 0.5 | % | 81 | 1.2 | % | |||||
Multifamily | 1,146 | 20.6 | % | 1,200 | 17.9 | % | |||||
Office | 1,213 | 21.8 | % | 1,510 | 22.5 | % | |||||
Retail | 1,162 | 20.8 | % | 1,460 | 21.8 | % | |||||
Other | 155 | 2.8 | % | 239 | 3.6 | % | |||||
Total mortgage loans | $ | 5,575 | 100.0 | % | $ | 6,711 | 100.0 | % |
September 30, 2013 | December 31, 2012 | ||||||||||||||||||
Total Assets | Total Liabilities [1] | Maximum Exposure to Loss [2] | Total Assets | Total Liabilities [1] | Maximum Exposure to Loss [2] | ||||||||||||||
CDOs [3] | $ | 33 | $ | 36 | $ | — | $ | 89 | $ | 88 | $ | 7 | |||||||
Investment funds [4] | 157 | — | 166 | 163 | — | 162 | |||||||||||||
Limited partnerships | 4 | — | 4 | 6 | 1 | 5 | |||||||||||||
Total | $ | 194 | $ | 36 | $ | 170 | $ | 258 | $ | 89 | $ | 174 |
[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, in the Company’s Condensed Consolidated Balance Sheets. |
[4] | Total assets included in fixed maturities, FVO, short-term investments, and equity, AFS in the Company’s Condensed Consolidated Balance Sheets. |
Notional Amount | Fair Value | ||||||||||||
September 30, 2013 | December 31, 2012 | September 30, 2013 | December 31, 2012 | ||||||||||
Customized swaps | $ | 7,659 | $ | 7,787 | $ | 111 | $ | 238 | |||||
Equity swaps, options, and futures | 4,548 | 5,130 | 107 | 267 | |||||||||
Interest rate swaps and futures | 6,924 | 5,705 | (60 | ) | 67 | ||||||||
Total | $ | 19,131 | $ | 18,622 | $ | 158 | $ | 572 |
Notional Amount | Fair Value | ||||||||||||
September 30, 2013 | December 31, 2012 | September 30, 2013 | December 31, 2012 | ||||||||||
Equity options | 6,599 | 7,442 | 181 | 286 | |||||||||
Total | $ | 6,599 | $ | 7,442 | $ | 181 | $ | 286 |
Notional Amount | Fair Value | ||||||||||||
September 30, 2013 | December 31, 2012 | September 30, 2013 | December 31, 2012 | ||||||||||
Credit derivatives | $ | 350 | $ | 350 | $ | 18 | $ | 28 | |||||
Currency forwards [1] | 6,681 | 9,327 | (151 | ) | (87 | ) | |||||||
Currency options | 11,882 | 10,342 | (9 | ) | (24 | ) | |||||||
Equity futures | 2,377 | 2,332 | — | — | |||||||||
Equity options | 4,267 | 3,952 | (138 | ) | 47 | ||||||||
Equity swaps | 4,619 | 2,617 | (10 | ) | (12 | ) | |||||||
Customized swaps | — | 899 | — | (11 | ) | ||||||||
Interest rate futures | 1,033 | 634 | — | — | |||||||||
Interest rate swaps and swaptions | 46,584 | 32,632 | 201 | 228 | |||||||||
Total | $ | 77,793 | $ | 63,085 | $ | (89 | ) | $ | 169 |
[1] | As of September 30, 2013 and December 31, 2012 net notional amounts are $1.3 billion and $0.1 billion, respectively, which include $4.0 billion and $4.7 billion, respectively, related to long positions and $2.7 billion and $4.6 billion, respectively, related to short positions. |
Net Derivatives | Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||
Notional Amount | Fair Value | Fair Value | Fair Value | ||||||||||||||||||||||||
Hedge Designation/ Derivative Type | Sep 30, 2013 | Dec 31, 2012 | Sep 30, 2013 | Dec 31, 2012 | Sep 30, 2013 | Dec 31, 2012 | Sep 30, 2013 | Dec 31, 2012 | |||||||||||||||||||
Cash flow hedges | |||||||||||||||||||||||||||
Interest rate swaps | $ | 5,282 | $ | 6,063 | $ | (29 | ) | $ | 271 | $ | 66 | $ | 271 | $ | (95 | ) | $ | — | |||||||||
Foreign currency swaps | 143 | 163 | (8 | ) | (17 | ) | 2 | 3 | (10 | ) | (20 | ) | |||||||||||||||
Total cash flow hedges | 5,425 | 6,226 | (37 | ) | 254 | 68 | 274 | (105 | ) | (20 | ) | ||||||||||||||||
Fair value hedges | |||||||||||||||||||||||||||
Interest rate swaps | 2,055 | 753 | (31 | ) | (55 | ) | 3 | — | (34 | ) | (55 | ) | |||||||||||||||
Foreign currency swaps | 40 | 40 | 15 | 16 | 15 | 16 | — | — | |||||||||||||||||||
Total fair value hedges | 2,095 | 793 | (16 | ) | (39 | ) | 18 | 16 | (34 | ) | (55 | ) | |||||||||||||||
Non-qualifying strategies | |||||||||||||||||||||||||||
Interest rate contracts | |||||||||||||||||||||||||||
Interest rate swaps, caps, floors, and futures | 8,601 | 17,117 | (512 | ) | (497 | ) | 220 | 556 | (732 | ) | (1,053 | ) | |||||||||||||||
Foreign exchange contracts | |||||||||||||||||||||||||||
Foreign currency swaps and forwards | 253 | 355 | (11 | ) | (16 | ) | 6 | 5 | (17 | ) | (21 | ) | |||||||||||||||
Japan 3Win foreign currency swaps | 1,816 | 1,816 | (311 | ) | (127 | ) | — | — | (311 | ) | (127 | ) | |||||||||||||||
Japanese fixed annuity hedging instruments | 1,503 | 1,652 | 52 | 224 | 114 | 228 | (62 | ) | (4 | ) | |||||||||||||||||
Credit contracts | |||||||||||||||||||||||||||
Credit derivatives that purchase credit protection | 1,561 | 1,823 | (12 | ) | (8 | ) | 4 | 5 | (16 | ) | (13 | ) | |||||||||||||||
Credit derivatives that assume credit risk [1] | 2,082 | 2,745 | 18 | (29 | ) | 25 | 19 | (7 | ) | (48 | ) | ||||||||||||||||
Credit derivatives in offsetting positions | 8,225 | 9,497 | (11 | ) | (32 | ) | 83 | 94 | (94 | ) | (126 | ) | |||||||||||||||
Equity contracts | |||||||||||||||||||||||||||
Equity index swaps and options | 951 | 994 | 8 | 47 | 23 | 57 | (15 | ) | (10 | ) | |||||||||||||||||
Variable annuity hedge program | |||||||||||||||||||||||||||
U.S. GMWB product derivatives [2] | 26,532 | 28,868 | (210 | ) | (1,249 | ) | — | — | (210 | ) | (1,249 | ) | |||||||||||||||
U.S. GMWB reinsurance contracts | 4,795 | 5,773 | 46 | 191 | 46 | 191 | — | — | |||||||||||||||||||
U.S. GMWB hedging instruments | 19,131 | 18,622 | 158 | 572 | 408 | 743 | (250 | ) | (171 | ) | |||||||||||||||||
U.S. macro hedge program | 6,599 | 7,442 | 181 | 286 | 228 | 356 | (47 | ) | (70 | ) | |||||||||||||||||
International program product derivatives [2] | 439 | 2,454 | 3 | (48 | ) | 3 | — | — | (48 | ) | |||||||||||||||||
International program hedging instruments | 77,793 | 63,085 | (89 | ) | 169 | 698 | 1,020 | (787 | ) | (851 | ) | ||||||||||||||||
Other | |||||||||||||||||||||||||||
Contingent capital facility put option | 500 | 500 | 19 | 23 | 19 | 23 | — | — | |||||||||||||||||||
Modified coinsurance reinsurance contracts | 1,291 | — | 60 | — | 60 | — | — | — | |||||||||||||||||||
Total non-qualifying strategies | 162,072 | 162,743 | (611 | ) | (494 | ) | 1,937 | 3,297 | (2,548 | ) | (3,791 | ) | |||||||||||||||
Total cash flow hedges, fair value hedges, and non-qualifying strategies | $ | 169,592 | $ | 169,762 | $ | (664 | ) | $ | (279 | ) | $ | 2,023 | $ | 3,587 | $ | (2,687 | ) | $ | (3,866 | ) | |||||||
Balance Sheet Location | |||||||||||||||||||||||||||
Fixed maturities, available-for-sale | $ | 464 | $ | 703 | $ | (6 | ) | $ | (32 | ) | $ | — | $ | — | $ | (6 | ) | $ | (32 | ) | |||||||
Other investments | 67,619 | 54,504 | 560 | 1,045 | 1,116 | 1,581 | (556 | ) | (536 | ) | |||||||||||||||||
Other liabilities | 68,394 | 77,384 | (1,104 | ) | (177 | ) | 798 | 1,815 | (1,902 | ) | (1,992 | ) | |||||||||||||||
Consumer notes | 9 | 26 | (1 | ) | (2 | ) | — | — | (1 | ) | (2 | ) | |||||||||||||||
Reinsurance recoverables | 6,086 | 5,773 | 106 | 191 | 106 | 191 | — | — | |||||||||||||||||||
Other policyholder funds and benefits payable | 27,020 | 31,372 | (219 | ) | (1,304 | ) | 3 | — | (222 | ) | (1,304 | ) | |||||||||||||||
Total derivatives | $ | 169,592 | $ | 169,762 | $ | (664 | ) | $ | (279 | ) | $ | 2,023 | $ | 3,587 | $ | (2,687 | ) | $ | (3,866 | ) |
[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 decrease in notional amount of non-qualifying interest rate contracts primarily resulted from the termination of interest rate swaptions purchased during the third quarter of 2012 designed to hedge the interest rate risk of the securities being transferred related to the sale of the Retirement Plan business segment. |
• | The decrease in notional amount related to the U.S. GMWB product derivatives was primarily driven by lapses and partial withdrawals. |
• | The decrease in notional amount related to the international program product derivatives was due to the announced sale of HLIL and the subsequent termination of the customized swap. Also related to the sale were certain derivatives included in international program hedging instruments that were reclassified to discontinued operations. For additional information on the sale agreement, refer to Note 2 - Business Dispositions of Notes to Condensed Consolidated Financial Statements. |
• | The increase in notional amount related to the international program hedging instruments resulted from the Company expanding its hedging program to effectively eliminate equity and foreign currency exchange risk related to international product program guarantees. |
• | The fair value related to the Japanese fixed annuity hedging instruments and Japan 3Win foreign currency swaps decreased primarily due to a depreciation of the Japanese yen in relation to the U.S. dollar. |
• | The fair value associated with the international program hedging instruments decreased primarily due to an improvement in global equity markets and depreciation of the Japanese yen in relation to the euro and the U.S. dollar. |
• | 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 largely related to increased surrenders, liability assumption updates for lapses and withdrawal rates, and the passage of time. |
(i) | (ii) | (iii) = (i) - (ii) | (iv) | (v) = (iii) - (iv) | |||||||||||||||||||
Net Amounts Presented in the Statement of Financial Position | Gross Amounts Not Offset in the Statement of Financial Position | ||||||||||||||||||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Financial Position | Derivative Assets [1] | Accrued Interest and Cash Collateral Received [2] | Financial Collateral Received [4] | Net Amount | ||||||||||||||||||
Description | |||||||||||||||||||||||
Other investments | $ | 1,914 | $ | 1,377 | $ | 560 | $ | (23 | ) | $ | 365 | $ | 172 |
Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Financial Position | Derivative Liabilities [3] | Accrued Interest and Cash Collateral Pledged [3] | Financial Collateral Pledged [4] | Net Amount | ||||||||||||||||||
Description | |||||||||||||||||||||||
Other liabilities | $ | (2,458 | ) | $ | (1,399 | ) | $ | (1,104 | ) | $ | 45 | $ | (1,232 | ) | $ | 173 |
(i) | (ii) | (iii) = (i) - (ii) | (iv) | (v) = (iii) - (iv) | |||||||||||||||||||
Net Amounts Presented in the Statement of Financial Position | Gross Amounts Not Offset in the Statement of Financial Position | ||||||||||||||||||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Financial Position | Derivative Assets [1] | Accrued Interest and Cash Collateral Received [2] | Financial Collateral Received [4] | Net Amount | ||||||||||||||||||
Description | |||||||||||||||||||||||
Other investments | $ | 3,396 | $ | 2,503 | $ | 1,045 | $ | (152 | ) | $ | 759 | $ | 134 |
Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Financial Position | Derivative Liabilities [3] | Accrued Interest and Cash Collateral Pledged [3] | Financial Collateral Pledged [4] | Net Amount | ||||||||||||||||||
Description | |||||||||||||||||||||||
Other liabilities | $ | (2,528 | ) | $ | (1,895 | ) | $ | (177 | ) | $ | (456 | ) | $ | (541 | ) | $ | (92 | ) |
[1] | Included in other invested assets in the Company's Condensed Consolidated Balance Sheets. |
[2] | Included in other assets in the Company's Condensed Consolidated Balance Sheets. |
[3] | Included in other liabilities in the Company's Condensed Consolidated Balance Sheets. |
[4] | Excludes exchange-traded futures which are settled daily. |
Gain (Loss) Recognized in OCI on Derivative (Effective Portion) | Net Realized Capital Gains(Losses) Recognized in Income on Derivative (Ineffective Portion) | ||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||
Interest rate swaps | $ | (5 | ) | $ | 42 | $ | (254 | ) | $ | 185 | $ | (1 | ) | $ | — | $ | (3 | ) | $ | — | |||||||
Foreign currency swaps | 3 | (2 | ) | 9 | (31 | ) | — | — | — | — | |||||||||||||||||
Total | $ | (2 | ) | $ | 40 | $ | (245 | ) | $ | 154 | $ | (1 | ) | $ | — | $ | (3 | ) | $ | — |
Gain or (Loss) Reclassified from AOCI into Income (Effective Portion) | ||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
Location | 2013 | 2012 | 2013 | 2012 | ||||||||||
Interest rate swaps | Net realized capital gain/(loss) | $ | 4 | $ | 4 | $ | 84 | $ | 10 | |||||
Interest rate swaps | Net investment income | 24 | 36 | 73 | 110 | |||||||||
Foreign currency swaps | Net realized capital gain/(loss) | 4 | 1 | 3 | (7 | ) | ||||||||
Total | $ | 32 | $ | 41 | $ | 160 | $ | 113 |
Gain or (Loss) Recognized in Income [1] | |||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||||||
Derivative | Hedge Item | Derivative | Hedge Item | Derivative | Hedge Item | Derivative | Hedge Item | ||||||||||||||||||||
Interest rate swaps | |||||||||||||||||||||||||||
Net realized capital gain/(loss) | $ | (2 | ) | $ | 12 | $ | (2 | ) | $ | 1 | $ | 27 | $ | (25 | ) | $ | (7 | ) | $ | 4 | |||||||
Foreign currency swaps | |||||||||||||||||||||||||||
Net realized capital gain/(loss) | 2 | (2 | ) | (6 | ) | 6 | — | — | (8 | ) | 8 | ||||||||||||||||
Benefits, losses and loss adjustment expenses | (1 | ) | 1 | — | — | (2 | ) | 2 | (6 | ) | 6 | ||||||||||||||||
Total | $ | (1 | ) | $ | 11 | $ | (8 | ) | $ | 7 | $ | 25 | $ | (23 | ) | $ | (21 | ) | $ | 18 |
[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 September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Interest rate contracts | |||||||||||||
Interest rate swaps, caps, floors, and forwards | $ | 15 | $ | 3 | $ | 20 | $ | (12 | ) | ||||
Foreign exchange contracts | |||||||||||||
Foreign currency swaps and forwards | (5 | ) | (4 | ) | 3 | 23 | |||||||
Japan 3Win foreign currency swaps [1] | — | 15 | (184 | ) | (106 | ) | |||||||
Japanese fixed annuity hedging instruments [2] | 6 | 24 | (150 | ) | (46 | ) | |||||||
Credit contracts | |||||||||||||
Credit derivatives that purchase credit protection | (10 | ) | (18 | ) | (22 | ) | (49 | ) | |||||
Credit derivatives that assume credit risk | 49 | 99 | 51 | 272 | |||||||||
Equity contracts | |||||||||||||
Equity index swaps and options | (6 | ) | (13 | ) | (30 | ) | (29 | ) | |||||
Variable annuity hedge program | |||||||||||||
U.S. GMWB product derivatives | 451 | 823 | 1,099 | 1,235 | |||||||||
U.S. GMWB reinsurance contracts | (74 | ) | (184 | ) | (166 | ) | (265 | ) | |||||
U.S. GMWB hedging instruments | (174 | ) | (258 | ) | (714 | ) | (519 | ) | |||||
U.S. macro hedge program | (50 | ) | (109 | ) | (182 | ) | (292 | ) | |||||
International program product derivatives | 1 | 21 | 12 | 32 | |||||||||
International program hedging instruments | (287 | ) | (197 | ) | (1,211 | ) | (689 | ) | |||||
Other | |||||||||||||
Contingent capital facility put option | (1 | ) | (2 | ) | (5 | ) | (5 | ) | |||||
Modified coinsurance reinsurance contracts | 7 | — | 61 | — | |||||||||
Total | $ | (78 | ) | $ | 200 | $ | (1,418 | ) | $ | (450 | ) |
[1] | The associated liability is adjusted for changes in spot rates through realized capital gains and was $(16) and $(46) for the three months ended September 30, 2013 and 2012, respectively, and $173 and $19 for the nine months ended September 30, 2013 and 2012, respectively. |
[2] | The associated liability is adjusted for changes in spot rates through realized capital gains and was $(19) and $(54) for the three months ended September 30, 2013 and 2012, respectively, and $222 and $33 for the nine months ended September 30, 2013 and 2012, respectively. |
• | For the three and nine months ended September 30, 2013 the net losses associated with the international program hedging instruments were primarily driven by an improvement in global equity markets and depreciation of the Japanese yen in relation to the euro. |
• | For the three and nine months ended September 30, 2013 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 due to favorable policyholder behavior largely related to increased surrenders, liability assumption updates for lapses and withdrawal rates, and the passage of time. |
• | For the nine months ended September 30, 2013 the net loss related to the Japanese fixed annuity hedging instruments and the Japan 3Win foreign currency swaps was primarily due to a depreciation of the Japanese yen in relation to the U.S. dollar. |
• | For the three and nine months ended September 30, 2013 the net loss on the U.S. macro hedge program was primarily due to an improvement in domestic equity markets, passage of time and an increase in long term interest rates. |
• | The net loss for the three months ended September 30, 2012 associated with the international program hedging instruments was primarily driven by an improvement in global and domestic equity markets, partially offset by appreciation of the Japanese yen in relation to the euro and the U.S. dollar. The net loss for the nine months ended September 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 and nine months ended September 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 a liability model assumption update, a decrease in equity volatility, and outperformance of the underlying actively managed funds as compared to their respective indices. |
• | For the three and nine months ended September 30, 2012 the net gain related to credit derivatives that assume credit risk was primarily due to credit spread tightening. |
• | For the nine months ended September 30, 2012 the net loss related to the Japan 3Win foreign currency swaps was primarily due to a decline in U.S. interest rates, 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. |
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 | $ | 1,974 | $ | 13 | 2 years | Corporate Credit/ Foreign Gov. | A | $ | 1,271 | $ | (12 | ) | |||
Below investment grade risk exposure | 67 | (1 | ) | 1 year | Corporate Credit | CCC+ | 67 | — | |||||||
Basket credit default swaps [4] | |||||||||||||||
Investment grade risk exposure | 3,183 | 32 | 4 years | Corporate Credit | BBB- | 2,252 | (26 | ) | |||||||
Below investment grade risk exposure | 98 | 7 | 5 years | Corporate Credit | BB- | — | — | ||||||||
Investment grade risk exposure | 328 | (14 | ) | 3 years | CMBS Credit | A | 328 | 14 | |||||||
Below investment grade risk exposure | 195 | (40 | ) | 3 years | CMBS Credit | B | 195 | 40 | |||||||
Embedded credit derivatives | |||||||||||||||
Investment grade risk exposure | 350 | 335 | 4 years | Corporate Credit | BBB+ | — | — | ||||||||
Total | $ | 6,195 | $ | 332 | $ | 4,113 | $ | 16 |
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 | $ | 2,321 | $ | 7 | 3 years | Corporate Credit/ Foreign Gov. | A | $ | 1,367 | $ | (26 | ) | |||
Below investment grade risk exposure | 145 | (1 | ) | 1 year | Corporate Credit | B+ | 145 | (3 | ) | ||||||
Basket credit default swaps [4] | |||||||||||||||
Investment grade risk exposure | 3,978 | 7 | 3 years | Corporate Credit | BBB+ | 2,712 | (13 | ) | |||||||
Investment grade risk exposure | 330 | (17 | ) | 4 years | CMBS Credit | A | 330 | 17 | |||||||
Below investment grade risk exposure | 195 | (46 | ) | 4 years | CMBS Credit | B+ | 195 | 46 | |||||||
Embedded credit derivatives | |||||||||||||||
Investment grade risk exposure | 525 | 478 | 4 years | Corporate Credit | BBB- | — | — | ||||||||
Total | $ | 7,494 | $ | 428 | $ | 4,749 | $ | 21 |
[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. These derivatives are governed by agreements and clearing house rules and applicable law which include collateral posting requirements. There is no additional 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 going forward. |
[4] | Includes $3.8 billion and $4.5 billion as of September 30, 2013 and December 31, 2012, 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. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
Premiums Written | 2013 | 2012 | 2013 | 2012 | |||||||||
Direct | $ | 2,790 | $ | 2,725 | $ | 8,120 | $ | 7,991 | |||||
Assumed | 96 | 64 | 207 | 186 | |||||||||
Ceded | (330 | ) | (277 | ) | (747 | ) | (644 | ) | |||||
Net | $ | 2,556 | $ | 2,512 | $ | 7,580 | $ | 7,533 | |||||
Premiums Earned | |||||||||||||
Direct | $ | 2,651 | $ | 2,640 | $ | 7,829 | $ | 7,848 | |||||
Assumed | 87 | 54 | 196 | 151 | |||||||||
Ceded | (250 | ) | (200 | ) | (659 | ) | (585 | ) | |||||
Net | $ | 2,488 | $ | 2,494 | $ | 7,366 | $ | 7,414 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Gross fee income, earned premiums and other | $ | 1,880 | $ | 2,099 | $ | 5,612 | $ | 6,403 | |||||
Reinsurance assumed | 49 | 50 | 147 | 148 | |||||||||
Reinsurance ceded | (374 | ) | (136 | ) | (1,144 | ) | (392 | ) | |||||
Net fee income, earned premiums and other | $ | 1,555 | $ | 2,013 | $ | 4,615 | $ | 6,159 |
Nine Months Ended September 30, | ||||||
2013 | 2012 | |||||
Balance, beginning of period | $ | 5,725 | $ | 6,556 | ||
Deferred costs | 1,003 | 1,251 | ||||
Amortization — DAC | (1,230 | ) | (1,397 | ) | ||
Amortization — Unlock benefit (charge), pre-tax [1] | (1,091 | ) | (44 | ) | ||
Amortization — DAC related to business dispositions [2] [3] | (2,229 | ) | — | |||
Adjustments to unrealized gains and losses on securities AFS and other | 157 | (408 | ) | |||
Effect of currency translation | (86 | ) | (11 | ) | ||
Balance, end of period | $ | 2,249 | $ | 5,947 |
[1] | Includes Unlock charge of $887 related to elimination of future estimated gross profits on the Japan variable annuity block in the first quarter of 2013 due to the increased costs associated with expanding the Japan variable annuity hedging program. |
[2] | Includes accelerated amortization of $352 and $2,374 recognized upon the sale of the Retirement Plans and Individual Life businesses, respectively, in the first quarter of 2013. For further information, see Note 2 - Business Dispositions of Notes to Consolidated Financial Statements. |
[3] | Includes previously unrealized gains on securities AFS of $148 and $349 recognized upon the sale of the Retirement Plans and Individual Life businesses, respectively, in the first quarter of 2013. |
U.S. GMDB | International GMDB/GMIB | UL Secondary Guarantees | |||||||
Liability balance as of January 1, 2013 | $ | 918 | $ | 661 | $ | 363 | |||
Incurred | 138 | 70 | 238 | ||||||
Paid | (105 | ) | (58 | ) | — | ||||
Unlock | (112 | ) | (221 | ) | — | ||||
Impact of reinsurance transaction | — | — | 1,145 | ||||||
Currency translation adjustment | — | (77 | ) | — | |||||
Liability balance as of September 30, 2013 | $ | 839 | $ | 375 | $ | 1,746 | |||
Reinsurance recoverable asset, as of January 1, 2013 | $ | 608 | $ | 36 | $ | 21 | |||
Incurred | 79 | 7 | 240 | ||||||
Paid | (76 | ) | (12 | ) | — | ||||
Unlock | (73 | ) | 7 | — | |||||
Impact of reinsurance transaction | — | — | 1,485 | ||||||
Currency translation adjustment | — | (4 | ) | — | |||||
Reinsurance recoverable asset, as of September 30, 2013 | $ | 538 | $ | 34 | $ | 1,746 |
U.S. GMDB | International GMDB/GMIB | UL Secondary Guarantees | |||||||
Liability balance as of January 1, 2012 | $ | 1,104 | $ | 975 | $ | 228 | |||
Incurred | 159 | 100 | 84 | ||||||
Paid | (141 | ) | (146 | ) | — | ||||
Unlock | (198 | ) | 13 | 21 | |||||
Currency translation adjustment | — | (17 | ) | — | |||||
Liability balance as of September 30, 2012 | $ | 924 | $ | 925 | $ | 333 | |||
Reinsurance recoverable asset, as of January 1, 2012 | $ | 724 | $ | 40 | $ | 22 | |||
Incurred | 90 | 8 | (2 | ) | |||||
Paid | (90 | ) | (21 | ) | — | ||||
Unlock | (108 | ) | 18 | — | |||||
Currency translation adjustment | — | — | — | ||||||
Reinsurance recoverable asset, as of September 30, 2012 | $ | 616 | $ | 45 | $ | 20 |
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 | $ | 19,367 | $ | 3,112 | $ | 562 | 69 | |||
With 5% rollup [2] | 1,579 | 271 | 76 | 69 | ||||||
With Earnings Protection Benefit Rider (“EPB”) [3] | 4,828 | 582 | 82 | 67 | ||||||
With 5% rollup & EPB | 573 | 117 | 26 | 70 | ||||||
Total MAV | 26,347 | 4,082 | 746 | |||||||
Asset Protection Benefit (“APB”) [4] | 18,669 | 383 | 257 | 67 | ||||||
Lifetime Income Benefit (“LIB”) — Death Benefit [5] | 878 | 11 | 11 | 66 | ||||||
Reset [6] (5-7 years) | 3,205 | 84 | 83 | 69 | ||||||
Return of Premium (“ROP”) [7]/Other | 20,733 | 108 | 86 | 67 | ||||||
Subtotal U.S. GMDB | 69,832 | 4,668 | 1,183 | 68 | ||||||
Less: General Account Value with U.S. GMDB | 7,412 | |||||||||
Subtotal Separate Account Liabilities with GMDB | 62,420 | |||||||||
Separate Account Liabilities without U.S. GMDB | 77,456 | |||||||||
Total Separate Account Liabilities | $ | 139,876 | ||||||||
Japan GMDB [9], [11] | $ | 22,846 | $ | 1,624 | $ | 1,250 | 71 | |||
Japan GMIB [9], [11] | $ | 21,102 | $ | 509 | $ | 509 | 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 $20.4 billion and $28.6 billion as of September 30, 2013 and December 31, 2012, respectively. The GRB related to the Japan GMAB and GMWB was $440 as of September 30, 2013 and $578 as of December 31, 2012. 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 September 30, 2013, 46% of the GMDB RNAR and 89% of the GMIB NAR is reinsured to a Hartford affiliate, as a result, the effects of the reinsurance are not reflected in this disclosure. |
[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 September 30, 2013 | As of December 31, 2012 | ||||
Equity securities (including mutual funds) | $ | 56,808 | $ | 58,208 | ||
Cash and cash equivalents | 5,612 | 6,940 | ||||
Total | $ | 62,420 | $ | 65,148 |
Nine Months Ended September 30, | ||||||
2013 | 2012 | |||||
Balance, beginning of period | $ | 325 | $ | 434 | ||
Sales inducements deferred | 3 | 10 | ||||
Amortization — Unlock benefit (charge) [1] | (71 | ) | (68 | ) | ||
Amortization charged to income | (22 | ) | (26 | ) | ||
Amortization related to business dispositions [2] | (71 | ) | — | |||
Balance end of period | $ | 164 | $ | 350 |
[1] | Includes Unlock charge of $52 in the first quarter of 2013 related to elimination of future estimated gross profits on the Japan variable annuity block due to the increased costs associated with expanding the Japan variable annuity hedging program. |
[2] | Represents accelerated amortization of $22 and $49 in the first quarter of 2013 recognized upon the sale of the Retirement Plans and Individual Life businesses, respectively. For further information, see Note 2 - Business Dispositions of Notes to Condensed Consolidated Financial Statements. |
Pension Benefits | Other Postretirement Benefits | ||||||||||||
Three Months Ended September 30, | Three Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Service cost | $ | 1 | $ | 20 | $ | — | $ | — | |||||
Interest cost | 59 | 64 | 3 | 3 | |||||||||
Expected return on plan assets | (80 | ) | (78 | ) | (4 | ) | (4 | ) | |||||
Amortization of prior service credit | — | (2 | ) | (2 | ) | (2 | ) | ||||||
Amortization of actuarial loss | 15 | 52 | 1 | — | |||||||||
Net periodic benefit cost | $ | (5 | ) | $ | 56 | $ | (2 | ) | $ | (3 | ) |
Pension Benefits | Other Postretirement Benefits | ||||||||||||
Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Service cost | $ | 1 | $ | 70 | $ | — | $ | 2 | |||||
Interest cost | 178 | 188 | 8 | 11 | |||||||||
Expected return on plan assets | (237 | ) | (234 | ) | (11 | ) | (11 | ) | |||||
Amortization of prior service credit | — | (7 | ) | (5 | ) | (3 | ) | ||||||
Amortization of actuarial loss | 44 | 171 | 2 | — | |||||||||
Curtailment gain due to plan freeze | — | (11 | ) | — | — | ||||||||
Net periodic benefit cost | $ | (14 | ) | $ | 177 | $ | (6 | ) | $ | (1 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Stock-based compensation plans expense | $ | 19 | $ | 20 | $ | 51 | $ | 73 | |||||
Income tax benefit | (7 | ) | (7 | ) | (18 | ) | (25 | ) | |||||
Total stock-based compensation plans expense, after-tax | $ | 12 | $ | 13 | $ | 33 | $ | 48 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Revenues | |||||||||||||
Earned premiums | $ | 2 | $ | — | $ | 4 | $ | — | |||||
Fee income | — | 9 | 8 | 28 | |||||||||
Net investment income (loss) | |||||||||||||
Securities available-for-sale and other | (1 | ) | 2 | (3 | ) | 8 | |||||||
Equity securities, trading | — | 75 | 138 | 155 | |||||||||
Total Net Investment Income | (1 | ) | 77 | 135 | 163 | ||||||||
Net realized capital gains (losses) | (11 | ) | 24 | (53 | ) | 64 | |||||||
Total revenues | (10 | ) | 110 | 94 | 255 | ||||||||
Benefits, losses and expenses | |||||||||||||
Benefits losses and loss adjustment expenses | — | 1 | 1 | 3 | |||||||||
Benefits, losses and loss adjustment expenses - returns credited on international variable annuities | — | 75 | 138 | 155 | |||||||||
Insurance operating costs and other expenses | (2 | ) | 10 | 12 | 30 | ||||||||
Total benefits, losses and expenses | (2 | ) | 86 | 151 | 188 | ||||||||
Income (loss) before income taxes | (8 | ) | 24 | (57 | ) | 67 | |||||||
Income tax expense (benefit) | (3 | ) | 3 | (27 | ) | 3 | |||||||
Income (loss) from operations of discontinued operations, net of tax | (5 | ) | 21 | (30 | ) | 64 | |||||||
Net realized capital (loss) on disposal, net of tax [1] | — | (1 | ) | (102 | ) | (1 | ) | ||||||
Income (loss) from discontinued operations, net of tax | $ | (5 | ) | $ | 20 | $ | (132 | ) | $ | 63 |
As of | |||
September 30, 2013 | |||
Assets | |||
Fixed maturities | $ | 469 | |
Equity securities, trading | 1,732 | ||
Short-term investments | 2 | ||
Cash | 115 | ||
Other assets | (316 | ) | |
Total assets held for sale | $ | 2,002 | |
Liabilities | |||
Other policyholder funds and benefits payable – international variable annuities | 1,732 | ||
Other liabilities | (9 | ) | |
Total liabilities held for sale | $ | 1,723 |
Nine Months Ended September 30, 2013 | Year Ended December 31, 2012 | ||||||||||||||||||||||
Beginning of Period | Business Dispositions [1] | End of Period | Beginning of Period | Business Dispositions [2] | End of Period | ||||||||||||||||||
Consumer Markets | 119 | — | 119 | 119 | — | 119 | |||||||||||||||||
Mutual Funds | 149 | — | 149 | 159 | (10 | ) | 149 | ||||||||||||||||
Talcott Resolution: | |||||||||||||||||||||||
Individual Life [3] | — | — | — | 224 | (224 | ) | — | ||||||||||||||||
Retirement Plans [3] | 87 | (87 | ) | — | 87 | — | 87 | ||||||||||||||||
Total Talcott Resolution | 87 | (87 | ) | — | 311 | (224 | ) | 87 | |||||||||||||||
Corporate [3] [4] | 299 | (69 | ) | 230 | 417 | (118 | ) | 299 | |||||||||||||||
Total | $ | 654 | $ | (156 | ) | $ | 498 | $ | 1,006 | $ | (352 | ) | $ | 654 |
[1] | Represents a reduction in goodwill recognized in connection with the sale of Retirement Plans. |
[2] | Represents a reduction in goodwill recognized in connection with the sale of WFS and a goodwill impairment recognized in connection with the sale of ILD. |
[3] | For further information, see Note 2 - Business Dispositions of Notes to Condensed Consolidated Financial Statements. |
[4] | Carrying value as of September 30, 2013 and December 31, 2012 includes $138 for the Group Benefits and $92 for Mutual Funds reporting units. Carrying value as of December 31, 2012 also includes $69 for the Retirement Plans reporting unit. |
As of | |||||||
September 30, 2013 | December 31, 2012 | ||||||
Senior Notes and Debentures | |||||||
4.625% Notes, due 2013 | $ | — | $ | 320 | |||
4.75% Notes, due 2014 | 200 | 200 | |||||
4.0% Notes, due 2015 | 289 | 300 | |||||
7.3% Notes, due 2015 | 167 | 200 | |||||
5.5% Notes, due 2016 | 275 | 300 | |||||
5.375% Notes, due 2017 | 415 | 499 | |||||
4.0% Notes, due 2017 | 295 | 325 | |||||
6.3% Notes, due 2018 | 320 | 500 | |||||
6.0% Notes, due 2019 | 413 | 500 | |||||
5.5% Notes, due 2020 | 499 | 499 | |||||
5.125% Notes, due 2022 | 796 | 796 | |||||
7.65% Notes, due 2027 | 80 | 149 | |||||
7.375% Notes, due 2031 | 63 | 92 | |||||
5.95% Notes, due 2036 | 298 | 298 | |||||
6.625% Notes, due 2040 | 295 | 299 | |||||
6.1% Notes, due 2041 | 326 | 325 | |||||
6.625% Notes, due 2042 | 177 | 424 | |||||
4.3% Notes, due 2043 | 298 | — | |||||
Junior Subordinated Debentures | |||||||
7.875% Notes, due 2042 | 600 | 600 | |||||
8.125% Notes, due 2068 | 500 | 500 | |||||
Total Debt | 6,306 | 7,126 | |||||
Less: Current maturities of long-term debt | 200 | 320 | |||||
Long-term Debt | $ | 6,106 | $ | 6,806 |
Property & Casualty Commercial | $ | 7 | |
Consumer Markets | 3 | ||
Group Benefits | 1 | ||
Mutual Funds | 4 | ||
Talcott Resolution | 69 | ||
Corporate | 261 | ||
Total restructuring and other costs, pre-tax | $ | 345 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Severance benefits and related costs | $ | 2 | $ | 38 | $ | 22 | $ | 76 | |||||
Professional fees | 3 | 15 | 13 | 28 | |||||||||
Asset impairment charges | 10 | — | 17 | 5 | |||||||||
Other contract termination charges | — | — | — | 1 | |||||||||
Total restructuring and other costs | $ | 15 | $ | 53 | $ | 52 | $ | 110 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Property & Casualty Commercial | $ | 1 | $ | 1 | $ | 1 | $ | 5 | |||||
Consumer Markets | — | — | — | 1 | |||||||||
Group Benefits | — | 1 | — | 1 | |||||||||
Mutual Funds | (1 | ) | 1 | 1 | 2 | ||||||||
Talcott Resolution | 1 | 33 | 1 | 47 | |||||||||
Corporate | 14 | 17 | 49 | 54 | |||||||||
Total restructuring and other costs | $ | 15 | $ | 53 | $ | 52 | $ | 110 |
Nine Months Ended September 30, 2013 | |||||||||||||||
Severance Benefits and Related Costs | Professional Fees | Asset impairment charges | Other Contract Termination Charges | Total Restructuring and Other Costs | |||||||||||
Balance, beginning of period | $ | 70 | $ | — | $ | — | $ | — | $ | 70 | |||||
Accruals/provisions | 22 | 13 | 17 | — | 52 | ||||||||||
Payments/write-offs | (68 | ) | (13 | ) | — | — | (81 | ) | |||||||
Balance, end of period | $ | 24 | $ | — | $ | 17 | $ | — | $ | 41 |
Nine Months Ended September 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 | 76 | 28 | 5 | 1 | 110 | ||||||||||
Payments/write-offs | (67 | ) | (19 | ) | (5 | ) | (5 | ) | (96 | ) | |||||
Balance, end of period | $ | 21 | $ | 9 | $ | — | $ | 1 | $ | 31 |
Net Unrealized Gain on Securities [1] | OTTI Losses in OCI [1] | Net Gain (Loss) on Cash Flow Hedging Instruments [1] | Foreign Currency Translation Adjustments [1] | Pension and Other Postretirement Plan Adjustments [1] | Total AOCI [1] | |||||||||||||
Beginning balance | $ | 1,162 | $ | (23 | ) | $ | 188 | $ | 92 | $ | (1,345 | ) | $ | 74 | ||||
OCI before reclassifications | (212 | ) | 5 | — | 92 | — | (115 | ) | ||||||||||
Amounts reclassified from AOCI | 38 | (2 | ) | (21 | ) | — | 9 | 24 | ||||||||||
Net OCI | (174 | ) | 3 | (21 | ) | 92 | 9 | (91 | ) | |||||||||
Ending balance | $ | 988 | $ | (20 | ) | $ | 167 | $ | 184 | $ | (1,336 | ) | $ | (17 | ) |
Net Unrealized Gain on Securities [1] | OTTI Losses in OCI [1] | Net Gain (Loss) on Cash Flow Hedging Instruments [1] | Foreign Currency Translation Adjustments [1] | Pension and Other Postretirement Plan Adjustments [1] | Total AOCI [1] | |||||||||||||
Beginning balance | $ | 3,418 | $ | (47 | ) | $ | 428 | $ | 406 | $ | (1,362 | ) | $ | 2,843 | ||||
OCI before reclassifications | (1,367 | ) | 43 | (157 | ) | (222 | ) | (1 | ) | (1,704 | ) | |||||||
Amounts reclassified from AOCI | (1,063 | ) | (16 | ) | (104 | ) | — | 27 | (1,156 | ) | ||||||||
Net OCI | (2,430 | ) | 27 | (261 | ) | (222 | ) | 26 | (2,860 | ) | ||||||||
Ending balance | $ | 988 | $ | (20 | ) | $ | 167 | $ | 184 | $ | (1,336 | ) | $ | (17 | ) |
AOCI | Amount Reclassified from AOCI | Affected Line Item in the Condensed Consolidated Statement of Operations | |||||
Three months ended September 30, 2013 | Nine months ended September 30, 2013 | ||||||
Net Unrealized Gain on Securities | |||||||
Available-for-sale securities [1] | $ | (59 | ) | $ | 1,636 | Net realized capital gains (losses) | |
(59 | ) | 1,636 | Total before tax | ||||
(21 | ) | 573 | Income tax expense | ||||
$ | (38 | ) | $ | 1,063 | Net income (loss) | ||
OTTI Losses in OCI | |||||||
Other than temporary impairments | $ | 3 | $ | 24 | Net realized capital gains (losses) | ||
3 | 24 | Total before tax | |||||
1 | 8 | Income tax expense (benefit) | |||||
$ | 2 | $ | 16 | Net income (loss) | |||
Net Gains on Cash Flow Hedging Instruments | |||||||
Interest rate swaps [2] | $ | 4 | $ | 84 | Net realized capital gains (losses) | ||
Interest rate swaps | 24 | 73 | Net investment income | ||||
Foreign currency swaps | 4 | 3 | Net realized capital gains (losses) | ||||
32 | 160 | Total before tax | |||||
11 | 56 | Income tax expense | |||||
$ | 21 | $ | 104 | Net income (loss) | |||
Pension and Other Postretirement Plan Adjustments | |||||||
Amortization of prior service costs | $ | 2 | $ | 5 | Insurance operating costs and other expenses | ||
Amortization of actuarial gains (losses) | (16 | ) | (46 | ) | Insurance operating costs and other expenses | ||
(14 | ) | (41 | ) | Total before tax | |||
(5 | ) | (14 | ) | Income tax expense | |||
(9 | ) | (27 | ) | Net income (loss) | |||
Total amounts reclassified from AOCI | $ | (24 | ) | $ | 1,156 | Net income (loss) |
[1] | The nine months ended September 30, 2013 includes $1.5 billion of net unrealized gains on securities relating to the sales of the Retirement Plans and Individual Life businesses. |
[2] | The nine months ended September 30, 2013 includes $71 of net gains on cash flow hedging instruments relating to the sales of the Retirement Plans and Individual Life businesses. |
Description | Page |
Operating Summary | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2013 | 2012 | Change | 2013 | 2012 | Change | ||||||||||||
Earned premiums | $ | 3,337 | $ | 3,401 | (2 | %) | $ | 9,882 | $ | 10,243 | (4 | %) | |||||
Fee income | 708 | 1,109 | (36 | %) | 2,106 | 3,338 | (37 | %) | |||||||||
Net investment income (loss): | |||||||||||||||||
Securities available-for-sale and other | 812 | 1,028 | (21 | %) | 2,535 | 3,189 | (21 | %) | |||||||||
Equity securities, trading [1] | 878 | 635 | 38 | % | 4,629 | 1,734 | 167 | % | |||||||||
Total net investment income | 1,690 | 1,663 | 2 | % | 7,164 | 4,923 | 46 | % | |||||||||
Net realized capital gains (losses) [2] | (162 | ) | 95 | NM | 796 | (266 | ) | NM | |||||||||
Other revenues | 68 | 64 | 6 | % | 201 | 184 | 9 | % | |||||||||
Total revenues | 5,641 | 6,332 | (11 | %) | 20,149 | 18,422 | 9 | % | |||||||||
Benefits, losses and loss adjustment expenses | 2,739 | 3,270 | (16 | %) | 8,289 | 9,927 | (17 | %) | |||||||||
Benefits, losses and loss adjustment expenses – returns credited on international variable annuities [1] | 878 | 635 | 38 | % | 4,628 | 1,733 | 167 | % | |||||||||
Amortization of deferred policy acquisition costs and present value of future profits (“DAC”) | 594 | 566 | 5 | % | 2,321 | 1,441 | 61 | % | |||||||||
Insurance operating costs and other expenses | 993 | 1,267 | (22 | %) | 3,137 | 3,871 | (19 | %) | |||||||||
Loss on extinguishment of debt | — | — | — | % | 213 | 910 | (77 | %) | |||||||||
Reinsurance loss on dispositions | — | 533 | (100 | %) | 1,574 | 533 | 195 | % | |||||||||
Interest expense | 94 | 109 | (14 | %) | 301 | 348 | (14 | %) | |||||||||
Total benefits, losses and expenses | 5,298 | 6,380 | (17 | %) | 20,463 | 18,763 | 9 | % | |||||||||
Income (loss) from continuing operations before income taxes | 343 | (48 | ) | NM | (314 | ) | (341 | ) | (8 | %) | |||||||
Income tax benefit | 45 | (41 | ) | NM | (308 | ) | (286 | ) | 8 | % | |||||||
Income (loss) from continuing operations, net of tax | 298 | (7 | ) | NM | (6 | ) | (55 | ) | (89 | %) | |||||||
Income (loss) from discontinued operations, net of tax | (5 | ) | 20 | (125 | %) | (132 | ) | 63 | NM | ||||||||
Net income (loss) | $ | 293 | $ | 13 | NM | $ | (138 | ) | $ | 8 | NM | ||||||
Supplemental Operating Data | |||||||||||||||||
Income (loss) from continuing operations, net of tax, available to common shareholders per diluted common share | $ | 0.61 | $ | (0.04 | ) | NM | $ | (0.04 | ) | $ | (0.20 | ) | (80 | %) | |||
Net income (loss) available to common shareholders per diluted common share | 0.60 | 0.01 | NM | (0.33 | ) | (0.05 | ) | NM | |||||||||
Total revenues, excluding net investment income on equity securities, trading | 4,763 | 5,697 | (16 | %) | 15,520 | 16,688 | (7 | %) |
September 30, | December 31, | |||||
Summary of Financial Condition | 2013 | 2012 | ||||
Total assets | $ | 283,947 | $ | 298,513 | ||
Total investments, excluding equity securities, trading | 80,721 | 105,317 | ||||
Total stockholders’ equity | 18,928 | 22,447 |
[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] | Includes net realized gains (losses) on business dispositions of $1,575 for the nine months ended September 30, 2013. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
Net income (loss) by segment | 2013 | 2012 | Increase (Decrease) From 2012 to 2013 | 2013 | 2012 | Increase (Decrease) From 2012 to 2013 | |||||||||||||
Property & Casualty Commercial | $ | 174 | $ | 164 | $ | 10 | $ | 619 | $ | 502 | $ | 117 | |||||||
Consumer Markets | 68 | 94 | (26 | ) | 160 | 152 | 8 | ||||||||||||
Property & Casualty Other Operations | 22 | 24 | (2 | ) | (28 | ) | 36 | (64 | ) | ||||||||||
Group Benefits | 31 | 30 | 1 | 134 | 83 | 51 | |||||||||||||
Mutual Funds | 19 | 18 | 1 | 57 | 56 | 1 | |||||||||||||
Talcott Resolution | 7 | (121 | ) | 128 | (619 | ) | 149 | (768 | ) | ||||||||||
Corporate | (28 | ) | (196 | ) | 168 | (461 | ) | (970 | ) | 509 | |||||||||
Net income (loss) | $ | 293 | $ | 13 | $ | 280 | $ | (138 | ) | $ | 8 | $ | (146 | ) |
• | Reinsurance loss on disposition of $533, before tax, in 2012 consisting of an impairment of goodwill and a loss accrual for premium deficiency related to the disposition of the Individual Life business, and losses in 2012 from the operations of the Retirement Plans and Individual Life businesses sold in the first quarter of 2013. For further discussion of the sale of these businesses, see Note 2 - Business Dispositions of Condensed Consolidated Financial Statements |
• | A decrease in insurance operating costs and other expenses due to a benefit of $57, before tax, for an insurance recovery from the Company's insurers for past legal expenses associated with closed litigation and a benefit of $19, before tax, from the resolution of an item under the Company's spin-off agreement with its former parent company. |
• | Current accident year loss and loss adjustment expenses before catastrophes of $1.6 billion, before tax, decreased in 2013, compared to $1.7 billion, before tax, in 2012 driven by lower loss and loss adjustment expense ratios in P&C Commercial workers’ compensation and professional liability, and for the three month period, lower non-catastrophe property losses in Middle Market. |
• | A decrease in the Unlock charge to $104, before tax in 2013 compared to $124, before tax, in 2012, primarily due to assumption changes in connection with the annual policyholder behavior assumption study, partially offset by actual separate account returns above our aggregated estimated returns during both periods. For further discussion of Unlocks, see MD&A - Critical Accounting Estimates, Estimated Gross Profits Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity and Other Universal Life-Type Contracts and MD&A - Talcott Resolution. |
• | Current accident year catastrophe losses of $66, before tax, increased in 2013, compared to $10, before tax, in 2012. Losses in 2013 were primarily due to thunderstorms and tornadoes in the Midwest, South and mid-Atlantic states. Losses in 2012 were primarily due to a hurricane event in the South. |
• | Unfavorable current accident year prior year loss reserve development of $17, before tax, in 2013, compared to favorable prior year loss reserve development of $33, before tax, in 2012. |
• | Net realized capital gains (losses) decreased to a net realized capital loss of $162 in 2013 compared to net realized capital gains of $95 in 2012, primarily due to losses on the international variable annuity hedge program in 2013. The losses in 2013 primarily resulted from the rising equity markets. Certain hedge assets generated realized capital losses on rising equity markets and weakening of the yen and are used to hedge liabilities that are not carried at fair value. For further discussion of investment results, see MD&A - Key Performance Measures and Ratios, Net Realized Capital Gains (Losses). For information on the related sensitivities of the variable annuity hedging program, see Enterprise Risk Management, Variable Product Guarantee Risks and Risk Management. |
• | An increase in the Unlock charge of $881, before tax, in 2013 compared to $18, before tax, in 2012. The Unlock charge in 2013 was primarily due to Japan hedge cost assumption changes, partially offset by actual separate account returns being above our aggregated estimated returns during the period. The Unlock charge in 2012 was driven by assumption changes in connection with the annual policyholder behavior assumption study in the third quarter, partially offset by actual separate account returns above our aggregated estimated returns during the period. For further discussion of Unlocks, see MD&A - Critical Accounting Estimates, Estimated Gross Profits Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity and Other Universal Life-Type Contracts and MD&A - Talcott Resolution. |
• | Net realized capital gains (losses), excluding the realized capital gain on business dispositions, decreased to a loss of $779, before tax, from a loss in the prior year of $266, before tax, primarily due to losses on the international variable annuity hedge program in 2013. The losses in 2013 primarily resulted from the weakening of the yen and rising equity markets. Certain hedge assets generated realized capital losses on rising equity markets and weakening of the yen and are used to hedge liabilities that are not carried at fair value. For further discussion of investment results, see MD&A - Key Performance Measures and Ratios, Net Realized Capital Gains (Losses). For information on the related sensitivities of the variable annuity hedging program, see Enterprise Risk Management, Variable Product Guarantee Risks and Risk Management. |
• | Income (loss) from discontinued operations, net of tax, decreased, primarily due to the realized capital loss on the sale of Hartford Life International, Ltd. ("HLIL") of $102, after-tax, in the second quarter of 2013. |
• | Net asbestos reserve strengthening of $130, before tax in 2013, compared to $48, before tax in 2012, resulting from the Company's annual review of its asbestos liabilities. For further information, see Critical Accounting Estimates, Property & Casualty Other Operations Claims with the Property and Casualty Insurance Product Reserves, Net of Reinsurance. |
• | Reinsurance loss on disposition of $533, before tax, in 2012 consisting of an impairment of goodwill and a loss accrual for premium deficiency related to the disposition of the Individual Life business, and losses in 2012 from the operations of the Retirement Plans and Individual Life businesses sold in the first quarter of 2013. For further discussion of the sale of these businesses, see Note 2 - Business Dispositions of Condensed Consolidated Financial Statements. |
• | A loss on extinguishment of debt of $213, before tax, in 2013, compared to $910, before tax in 2012. The loss in 2013 related to the repurchase of approximately $800 of senior notes at a premium to the face amount of the then outstanding debt. The resulting loss on extinguishment of debt consists of the repurchase premium, the write-off of the unamortized discount, and debt issuance and other costs related to the repurchase transaction. The loss in 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 all held by Allianz. The loss in 2012 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. |
• | Current accident year catastrophe losses of $284, before tax, in 2013, compared to $371, before tax, in 2012. Losses in 2013 were primarily due to hail, tornadoes and wind in the South and Midwest and winter storms in the South. Losses in 2012 were primarily due to severe thunderstorms, hail events, and tornadoes in the South, Midwest and Mid-Atlantic states. |
• | 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 mortgage loans; |
• | living benefits required to be fair valued (in other policyholder funds and benefits payable); |
• | goodwill impairment; |
• | valuation of investments and derivative instruments; |
• | valuation allowance on deferred tax assets; and |
• | contingencies relating to corporate litigation and regulatory matters. |
Nine Months Ended September 30, 2013 | ||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | |||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross | $ | 16,020 | $ | 1,926 | $ | 3,770 | $ | 21,716 | ||||
Reinsurance and other recoverables | 2,365 | 16 | 646 | 3,027 | ||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net | 13,655 | 1,910 | 3,124 | 18,689 | ||||||||
Provision for unpaid losses and loss adjustment expenses | ||||||||||||
Current accident year before catastrophes | 2,925 | 1,769 | — | 4,694 | ||||||||
Current accident year catastrophes [3] | 98 | 186 | — | 284 | ||||||||
Prior accident years | 71 | (39 | ) | 145 | 177 | |||||||
Total provision for unpaid losses and loss adjustment expenses | 3,094 | 1,916 | 145 | 5,155 | ||||||||
Less: Payments | 2,973 | 2,027 | 225 | 5,225 | ||||||||
Ending liabilities for unpaid losses and loss adjustment expenses, net | 13,776 | 1,799 | 3,044 | 18,619 | ||||||||
Reinsurance and other recoverables | 2,481 | 14 | 600 | 3,095 | ||||||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross | $ | 16,257 | $ | 1,813 | $ | 3,644 | $ | 21,714 | ||||
Earned premiums | $ | 4,637 | $ | 2,729 | ||||||||
Loss and loss expense paid ratio [1] | 64.1 | 74.3 | ||||||||||
Loss and loss expense incurred ratio | 66.7 | 70.2 | ||||||||||
Prior accident years development (pts) [2] | 1.5 | (1.4 | ) |
[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. |
[3] | Contributing to the current accident year catastrophes losses were the following events: |
Nine Months Ended September 30, 2013 | ||||||||||||
Category [1] | Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | ||||||||
Wind and hail | $ | 69 | $ | 106 | $ | — | $ | 175 | ||||
Tornadoes | 17 | 42 | — | 59 | ||||||||
Other [2] | 12 | 38 | — | 50 | ||||||||
Total | $ | 98 | $ | 186 | $ | — | $ | 284 |
Three Months Ended September 30, 2013 | ||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | |||||||||
Auto liability | $ | 86 | $ | — | $ | — | $ | 86 | ||||
Homeowners | — | 1 | — | 1 | ||||||||
Professional liability | — | — | — | — | ||||||||
Package business | — | — | — | — | ||||||||
General liability | (45 | ) | — | — | (45 | ) | ||||||
Fidelity and surety | — | — | — | — | ||||||||
Commercial property | (1 | ) | — | — | (1 | ) | ||||||
Net asbestos reserves | — | — | — | — | ||||||||
Net environmental reserves | — | — | 1 | 1 | ||||||||
Uncollectible reinsurance | — | — | — | — | ||||||||
Workers’ compensation | (10 | ) | — | — | (10 | ) | ||||||
Workers’ compensation - NY 25A Fund for Reopened Cases | — | — | — | — | ||||||||
Change in workers’ compensation discount, including accretion | 8 | — | — | 8 | ||||||||
Catastrophes | (12 | ) | (8 | ) | — | (20 | ) | |||||
Other reserve re-estimates, net | — | (4 | ) | 1 | (3 | ) | ||||||
Total prior accident years development | $ | 26 | $ | (11 | ) | $ | 2 | $ | 17 |
Nine Months Ended September 30, 2013 | ||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | |||||||||
Auto liability | $ | 141 | $ | 2 | $ | — | $ | 143 | ||||
Homeowners | — | (9 | ) | — | (9 | ) | ||||||
Professional liability | (29 | ) | — | — | (29 | ) | ||||||
Package business | (14 | ) | — | — | (14 | ) | ||||||
General liability | (74 | ) | — | — | (74 | ) | ||||||
Fidelity and surety | (5 | ) | — | — | (5 | ) | ||||||
Commercial property | (7 | ) | — | — | (7 | ) | ||||||
Net asbestos reserves | — | — | 130 | 130 | ||||||||
Net environmental reserves | — | — | 12 | 12 | ||||||||
Uncollectible reinsurance | (25 | ) | — | — | (25 | ) | ||||||
Workers’ compensation | 9 | — | — | 9 | ||||||||
Workers’ compensation - NY 25A Fund for Reopened Cases | 80 | — | — | 80 | ||||||||
Change in workers’ compensation discount, including accretion | 23 | — | — | 23 | ||||||||
Catastrophes | (21 | ) | (37 | ) | — | (58 | ) | |||||
Other reserve re-estimates, net | (7 | ) | 5 | 3 | 1 | |||||||
Total prior accident years development | $ | 71 | $ | (39 | ) | $ | 145 | $ | 177 |
• | Strengthened reserves in commercial auto liability, primarily related to specialty lines claims, arising from a higher frequency of large loss bodily injury claims in accident years 2010 through 2012. |
• | Released reserves in general liability in accident years 2006 through 2011. The emergence of claim severity as well as the frequency of late reported claims for these years was lower than expected and management has placed more weight on the emerged experience. |
• | Released reserves in professional liability for accident years 2008 through 2012 due to lower than expected claim severity, primarily for large-sized accounts. |
• | Released reserves for catastrophes primarily related to Storm Sandy. |
• | Other reserve re-estimates, net includes an $18 recovery related to a class action settlement with American International Group involving prior accident years involuntary workers compensation pool loss and loss adjustment expense. |
• | Reserve strengthening in the nine months ended September 30, 2013 related to the closing of the New York Section 25A Fund for Reopened Cases (the "Fund"). These claims were previously funded through assessments and paid by the Fund. The claims will become payable by the Company effective January 1, 2014. |
• | The Company reviewed its allowance for uncollectible reinsurance in the second quarter of 2013 and reduced its allowance as a result of favorable collections compared to expectations. |
• | Refer to the Property & Casualty Other Operations Claims section for further discussion on net asbestos and net environmental reserves. |
Nine Months Ended September 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 | 3,111 | 1,797 | — | 4,908 | ||||||||
Current accident year catastrophes [3] | 116 | 255 | — | 371 | ||||||||
Prior accident years | 54 | (127 | ) | 60 | (13 | ) | ||||||
Total provision for unpaid losses and loss adjustment expenses | 3,281 | 1,925 | 60 | 5,266 | ||||||||
Less: Payments | 3,001 | 2,049 | 234 | 5,284 | ||||||||
Ending liabilities for unpaid losses and loss adjustment expenses, net | 13,374 | 1,928 | 3,197 | 18,499 | ||||||||
Reinsurance and other recoverables | 2,345 | 10 | 678 | 3,033 | ||||||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross | $ | 15,719 | $ | 1,938 | $ | 3,875 | $ | 21,532 | ||||
Earned premiums | $ | 4,691 | $ | 2,725 | ||||||||
Loss and loss expense paid ratio [1] | 64.0 | 75.2 | ||||||||||
Loss and loss expense incurred ratio | 69.9 | 70.6 | ||||||||||
Prior accident years development (pts) [2] | 1.2 | (4.7 | ) |
[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. |
[3] | Contributing to the current accident year catastrophes losses were the following events: |
Nine Months Ended September 30, 2012 | ||||||||||||
Category | Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | ||||||||
Wind and Hail [1] | $ | 65 | $ | 159 | $ | — | $ | 224 | ||||
Tornadoes [1] | 30 | 43 | — | 73 | ||||||||
Hail [1] | 20 | 35 | — | 55 | ||||||||
Wildfire | 1 | 18 | — | 19 | ||||||||
Total | $ | 116 | $ | 255 | $ | — | $ | 371 |
Three Months Ended September 30, 2012 | ||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | |||||||||
Auto liability | $ | 14 | $ | (38 | ) | $ | — | $ | (24 | ) | ||
Homeowners | — | (4 | ) | — | (4 | ) | ||||||
Professional liability | 22 | — | — | 22 | ||||||||
Package business | (2 | ) | — | — | (2 | ) | ||||||
General liability | (36 | ) | — | — | (36 | ) | ||||||
Fidelity and surety | (8 | ) | — | — | (8 | ) | ||||||
Commercial property | 1 | — | — | 1 | ||||||||
Net asbestos reserves | — | — | — | — | ||||||||
Net environmental reserves | — | — | — | — | ||||||||
Workers’ compensation | 18 | — | — | 18 | ||||||||
Workers’ compensation - NY 25a Fund for Reopened Cases | — | — | — | — | ||||||||
Change in workers’ compensation discount, including accretion | 8 | — | — | 8 | ||||||||
Catastrophes | (2 | ) | (6 | ) | — | (8 | ) | |||||
Other reserve re-estimates, net | — | (1 | ) | 1 | — | |||||||
Total prior accident years development | $ | 15 | $ | (49 | ) | $ | 1 | $ | (33 | ) |
Nine Months Ended September 30, 2012 | ||||||||||||
Property & Casualty Commercial | Consumer Markets | Property & Casualty Other Operations | Total Property and Casualty Insurance | |||||||||
Auto liability | $ | 45 | $ | (79 | ) | $ | — | $ | (34 | ) | ||
Homeowners | — | (10 | ) | — | (10 | ) | ||||||
Professional liability | 40 | — | — | 40 | ||||||||
Package business | (34 | ) | — | — | (34 | ) | ||||||
General liability | (76 | ) | — | — | (76 | ) | ||||||
Fidelity and surety | 3 | — | — | 3 | ||||||||
Commercial property | (5 | ) | — | — | (5 | ) | ||||||
Net asbestos reserves | — | — | 48 | 48 | ||||||||
Net environmental reserves | — | — | 8 | 8 | ||||||||
Workers’ compensation | 69 | — | — | 69 | ||||||||
Workers’ compensation - NY 25a Fund for Reopened Cases | — | — | — | — | ||||||||
Change in workers’ compensation discount, including accretion | 45 | — | — | 45 | ||||||||
Catastrophes | (38 | ) | (29 | ) | — | (67 | ) | |||||
Other reserve re-estimates, net | 5 | (9 | ) | 4 | — | |||||||
Total prior accident years development | $ | 54 | $ | (127 | ) | $ | 60 | $ | (13 | ) |
• | 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 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 had 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 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 reflected 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. |
Three Months Ended September 30, 2013 | Asbestos | Environmental | All Other [1] | Total | |||||||||
Beginning liability—net [2][3] | $ | 1,805 | $ | 289 | $ | 1,007 | $ | 3,101 | |||||
Losses and loss adjustment expenses incurred | — | 1 | 1 | 2 | |||||||||
Less : losses and loss adjustment expenses paid | 42 | 7 | 10 | 59 | |||||||||
Ending liability – net [2][3] | $ | 1,763 | [4] | $ | 283 | $ | 998 | $ | 3,044 | ||||
Nine Months Ended September 30, 2013 | Asbestos | Environmental | All Other [1] | Total | |||||||||
Beginning liability—net [2][3] | $ | 1,776 | $ | 290 | $ | 1,058 | $ | 3,124 | |||||
Losses and loss adjustment expenses incurred | 130 | 12 | 3 | 145 | |||||||||
Less : losses and loss adjustment expenses paid | 143 | 19 | 63 | 225 | |||||||||
Ending liability – net [2][3] | $ | 1,763 | [4] | $ | 283 | $ | 998 | $ | 3,044 |
[1] | In addition to various insurance and assumed reinsurance exposures, “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 $6, respectively, as of September 30, 2013, $14 and $7, respectively, as of March 31, 2013 and June 30, 2013 and $15 and 7, respectively, as of December 31, 2012; total net losses and loss adjustment expenses incurred for the three and nine months ended September 30, 2013 includes $2 and $6, respectively, related to asbestos and environmental claims, and total net losses and loss adjustment expenses paid for the three and nine months ended September 30, 2013 includes $3 and $8, respectively, related to asbestos and environmental claims. |
[3] | Gross of reinsurance, asbestos and environmental reserves, including liabilities in Ongoing Operations, were $2,257 and $325, respectively, as of September 30, 2013, $2,310 and $333, respectively, as of June 30, 2013, $2,226 and $330, respectively, as of March 31, 2013 and $2,294 and $334, respectively as of December 31, 2012. |
[4] | The one year and average three year net paid amounts for asbestos claims, including Ongoing Operations, are $201 and $214, respectively, resulting in a one year net survival ratio of 8.8 and a three year net survival ratio of 8.3. 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 September 30, 2013 | Paid Losses & LAE | Incurred Losses & LAE | Paid Losses & LAE | Incurred Losses & LAE | ||||||||
Gross | ||||||||||||
Direct | $ | 35 | $ | — | $ | 7 | $ | 1 | ||||
Assumed Reinsurance | 12 | — | 1 | — | ||||||||
London Market | 4 | — | 1 | — | ||||||||
Total | 51 | — | 9 | 1 | ||||||||
Ceded | (9 | ) | — | (2 | ) | — | ||||||
Net | $ | 42 | $ | — | $ | 7 | $ | 1 | ||||
Nine Months Ended September 30, 2013 | Paid Losses & LAE | Incurred Losses & LAE | Paid Losses & LAE | Incurred Losses & LAE | ||||||||
Gross | ||||||||||||
Direct | $ | 107 | $ | 72 | $ | 16 | $ | 6 | ||||
Assumed Reinsurance | 44 | 50 | 2 | 6 | ||||||||
London Market | 13 | 8 | 3 | — | ||||||||
Total | 164 | 130 | 21 | 12 | ||||||||
Ceded | (21 | ) | — | (2 | ) | — | ||||||
Net | $ | 143 | $ | 130 | $ | 19 | $ | 12 |
[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 nine months ended September 30, 2013 includes $2 and $6, respectively, related to asbestos and environmental claims. Total gross losses and LAE paid in Ongoing Operations for the three and nine months ended September 30, 2013 includes $3 and $8, respectively, related to asbestos and environmental claims. |
Talcott Resolution | |||||||
As of September 30, 2013 | As of December 31, 2012 | ||||||
DAC [1] | $ | 1,632 | $ | 5,112 | |||
SIA [1] | $ | 164 | $ | 325 | |||
URR [2] | $ | 53 | $ | 1,880 | |||
Death and Other Insurance Benefit Reserves [3] | $ | 1,214 | $ | 1,942 |
[1] | For additional information on DAC and SIA, see Note 8 - Deferred Policy Acquisition Costs and Present Value of Future Profits and Note 10 - Sales Inducements, respectively, of Notes to Condensed Consolidated Financial Statements. |
[2] | URR associated with the Retirement Plans and Individual Life businesses are no longer included in EGP based balances due to the sales of these business in January 2013. As of December 31, 2012, URR included approximately $1.8 billion related to the Retirement Plans and Individual Life businesses. For additional information regarding business dispositions, see Note 2 - Business Dispositions of Notes to Condensed Consolidated Financial Statements. |
[3] | Universal life ("UL") secondary guarantee benefits associated with the Retirement Plans and Individual Life businesses are no longer considered EGP based balances as the sales of these businesses were structured as reinsurance transactions. As of December 31, 2012, death and other insurance benefit reserves included $363 of UL secondary guarantee benefits. For additional information on death and other insurance benefit reserves, see Note 9 - Separate Accounts, Death Benefits and Other Insurance Benefit Features of Notes to Condensed Consolidated Financial Statements. |
Talcott Resolution | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
DAC | $ | (170 | ) | $ | (79 | ) | $ | (1,091 | ) | $ | (44 | ) | |
SIA | (12 | ) | (67 | ) | (71 | ) | (68 | ) | |||||
URR | 12 | 14 | 15 | 19 | |||||||||
Death and Other Insurance Benefit Reserves | 66 | 8 | 266 | 75 | |||||||||
Total (before tax) | $ | (104 | ) | $ | (124 | ) | $ | (881 | ) | $ | (18 | ) | |
Income tax effect | (37 | ) | (45 | ) | (309 | ) | (7 | ) | |||||
Total (after-tax) | $ | (67 | ) | $ | (79 | ) | $ | (572 | ) | $ | (11 | ) |
Talcott Resolution | ||||||||||||
Three Months Ended September 30, 2013 | ||||||||||||
U.S. Annuity | Japan Annuity | PPLI [1] | Total | |||||||||
Assumption changes | $ | (108 | ) | $ | 4 | $ | (4 | ) | $ | (108 | ) | |
Market performance and other attributes [2] | 8 | 33 | — | 41 | ||||||||
Total (after-tax) | $ | (100 | ) | $ | 37 | $ | (4 | ) | $ | (67 | ) |
[1] | Private Placement Life Insurance. |
[2] | Other attributes include non-market components such as lapses. |
As of September 30, 2013 | As of December 31, 2012 | ||||||||||||||||||
Segment Goodwill | Goodwill in Corporate | Total | Segment Goodwill | Goodwill in Corporate | Total | ||||||||||||||
Group Benefits | $ | — | $ | 138 | $ | 138 | $ | — | $ | 138 | $ | 138 | |||||||
Consumer Markets | 119 | — | 119 | 119 | — | 119 | |||||||||||||
Mutual Funds [2] | 149 | 92 | 241 | 149 | 92 | 241 | |||||||||||||
Talcott Resolution: | |||||||||||||||||||
Retirement Plans [1] [2] | — | — | — | 87 | 69 | 156 | |||||||||||||
Total | $ | 268 | $ | 230 | $ | 498 | $ | 355 | $ | 299 | $ | 654 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||
Net income (loss) | $ | 293 | $ | 13 | $ | (138 | ) | $ | 8 | ||||
Less: Unlock charge, after-tax | (67 | ) | (79 | ) | (572 | ) | (11 | ) | |||||
Less: Restructuring and other costs, after-tax | (10 | ) | (34 | ) | (34 | ) | (71 | ) | |||||
Less: Income (loss) from discontinued operations, after-tax | (5 | ) | 20 | (132 | ) | 63 | |||||||
Less: Loss on extinguishment of debt, after-tax | — | — | (138 | ) | (587 | ) | |||||||
Less: Net reinsurance loss on dispositions, after-tax | — | (388 | ) | (24 | ) | (388 | ) | ||||||
Less: Net realized capital gains (losses), after-tax and DAC, excluded from core earnings [1] | (130 | ) | 61 | (524 | ) | (128 | ) | ||||||
Core earnings | $ | 505 | $ | 433 | $ | 1,286 | $ | 1,130 |
[1] | Excludes net realized gain on dispositions of $1.0 billion, after-tax, for the nine months ended September 30, 2013 relating to the sales of the Retirement Plans and Individual Life businesses which are included in net reinsurance loss on dispositions, after-tax. |
September 30, 2013 | December 31, 2012 | ||||||||||
Amount | Percent | Amount | Percent | ||||||||
Fixed maturities, available-for-sale ("AFS"), at fair value | $ | 64,023 | 79.3 | % | $ | 85,922 | 81.6 | % | |||
Fixed maturities, at fair value using the fair value option ("FVO") | 994 | 1.2 | % | 1,087 | 1.0 | % | |||||
Equity securities, AFS, at fair value | 862 | 1.1 | % | 890 | 0.8 | % | |||||
Mortgage loans | 5,575 | 6.9 | % | 6,711 | 6.4 | % | |||||
Policy loans, at outstanding balance | 1,415 | 1.8 | % | 1,997 | 1.9 | % | |||||
Limited partnerships and other alternative investments | 3,059 | 3.8 | % | 3,015 | 2.9 | % | |||||
Other investments [1] | 647 | 0.8 | % | 1,114 | 1.1 | % | |||||
Short-term investments | 4,146 | 5.1 | % | 4,581 | 4.3 | % | |||||
Total investments excluding equity securities, trading | 80,721 | 100 | % | 105,317 | 100 | % | |||||
Equity securities, trading, at fair value [2] | 22,343 | 28,933 | |||||||||
Total investments | $ | 103,064 | $ | 134,250 |
[1] | Primarily relates to derivative instruments. |
[2] | As of September 30, 2013 and December 31, 2012, approximately $22.3 billion and $27.1 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 as of September 30, 2013 and December 31, 2012, respectively, Japan equity 21% and 20%, Japan fixed income (primarily government securities) 15% and 15%, global equity 22% and 21%, global government bonds 41% and 43%, and cash and other 1% and 1%. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
(Before-tax) | Amount | Yield [1] | Amount | Yield [1] | Amount | Yield [1] | Amount | Yield [1] | |||||||||||||
Fixed maturities [2] | $ | 657 | 4.2 | % | $ | 828 | 4.2 | % | $ | 1,991 | 4.2 | % | $ | 2,527 | 4.2 | % | |||||
Equity securities, AFS | 7 | 2.8 | % | 5 | 2.3 | % | 21 | 3.3 | % | 23 | 3.2 | % | |||||||||
Mortgage loans | 65 | 4.7 | % | 88 | 5.1 | % | 192 | 4.8 | % | 253 | 5.2 | % | |||||||||
Policy loans | 20 | 5.6 | % | 30 | 6.1 | % | 62 | 5.9 | % | 90 | 6.1 | % | |||||||||
Limited partnerships and other alternative investments | 46 | 6.1 | % | 28 | 3.8 | % | 207 | 9.1 | % | 152 | 7.8 | % | |||||||||
Other [3] | 47 | 75 | 150 | 226 | |||||||||||||||||
Investment expense | (30 | ) | (26 | ) | (88 | ) | (82 | ) | |||||||||||||
Total securities AFS and other | 812 | 4.2 | % | 1,028 | 4.2 | % | 2,535 | 4.3 | % | 3,189 | 4.4 | % | |||||||||
Equity securities, trading | 878 | 635 | 4,629 | 1,734 | |||||||||||||||||
Total net investment income (loss) | $ | 1,690 | $ | 1,663 | 7,164 | 4,923 | |||||||||||||||
Total securities, AFS and other excluding limited partnerships and other alternative investments | $ | 766 | 4.1 | % | $ | 1,000 | 4.2 | % | $ | 2,328 | 4.1 | % | $ | 3,037 | 4.3 | % |
[1] | Yields calculated using annualized net investment income (excluding income related to equity securities, trading) before investment expenses divided by the monthly average invested assets at cost, or adjusted carrying value, as applicable, excluding equity securities, trading, repurchase agreement and dollar roll collateral, and consolidated variable interest entity non-controlling interests. Yield calculations for the nine months ended September 30, 2013 exclude assets transfered due to the sale of the Retirement Plans and Individual Life businesses. Yield calculations for all periods exclude income and assets associated with the disposal of the HLIL business. |
[2] | Includes net investment income on short-term investments. |
[3] | Primarily includes income from derivatives that qualify for hedge accounting and hedge fixed maturities. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
(Before-tax) | 2013 | 2012 | 2013 | 2012 | |||||||||
Gross gains on sales | $ | 106 | $ | 194 | $ | 2,034 | $ | 666 | |||||
Gross losses on sales | (139 | ) | (131 | ) | (339 | ) | (386 | ) | |||||
Net OTTI losses recognized in earnings | (26 | ) | (37 | ) | (59 | ) | (164 | ) | |||||
Valuation allowances on mortgage loans | — | — | — | 1 | |||||||||
Japanese fixed annuity contract hedges, net [1] | (8 | ) | (24 | ) | (4 | ) | (42 | ) | |||||
Periodic net coupon settlements on credit derivatives/Japan | 3 | 2 | (3 | ) | 1 | ||||||||
Results of variable annuity hedge program | |||||||||||||
GMWB derivatives, net | 203 | 381 | 219 | 451 | |||||||||
U.S. macro hedge program | (50 | ) | (109 | ) | (182 | ) | (292 | ) | |||||
Total U.S. program | 153 | 272 | 37 | 159 | |||||||||
International program | (286 | ) | (176 | ) | (1,199 | ) | (657 | ) | |||||
Total results of variable annuity hedge program | (133 | ) | 96 | (1,162 | ) | (498 | ) | ||||||
Other, net [2] | 35 | (5 | ) | 329 | 156 | ||||||||
Net realized capital gains (losses) | $ | (162 | ) | $ | 95 | $ | 796 | $ | (266 | ) |
[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 periodic coupon settlements, and Japan FVO securities). |
[2] | Primarily consists of transactional foreign currency re-valuation associated with the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, gains and losses on non-qualifying derivatives. |
• | For the nine months ended September 30, 2013 the loss on the U.S. macro hedge program was primarily due to losses of $98 related to an improvement in domestic equity markets, losses of $44 due to passage of time, and losses of $44 driven by an increase in long term interest rates. |
• | For the three and nine months ended September 30, 2013 the losses associated with the international program were primarily driven by losses of $271 and $808, respectively, due to an improvement in global equity markets, and losses of $107 and $505, respectively, due to a depreciation of the Japanese yen in relation to the euro. |
• | Other, net gain for the nine months ended September 30, 2013 was primarily due to gains of $197 on transactional foreign currency re-valuation associated with the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, due to depreciation of the Japanese yen versus the U.S. dollar. Additional gains of $71 on interest derivatives were primarily associated with fixed rate bonds sold as part of the Individual Life and Retirement Plans business dispositions. For further information on the business dispositions, see Note 2. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Underwriting Summary | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
Written premiums | $ | 1,567 | $ | 1,552 | 1 | % | $ | 4,745 | $ | 4,755 | — | % | |||||
Change in unearned premium reserve | 4 | (30 | ) | NM | 108 | 64 | 69 | % | |||||||||
Earned premiums | 1,563 | 1,582 | (1 | %) | 4,637 | 4,691 | (1 | %) | |||||||||
Losses and loss adjustment expenses | |||||||||||||||||
Current accident year before catastrophes | 991 | 1,089 | (9 | %) | 2,925 | 3,111 | (6 | %) | |||||||||
Current accident year catastrophes | 48 | 10 | NM | 98 | 116 | (16 | %) | ||||||||||
Prior accident years | 26 | 15 | 73 | % | 71 | 54 | 31 | % | |||||||||
Total losses and loss adjustment expenses | 1,065 | 1,114 | (4 | %) | 3,094 | 3,281 | (6 | %) | |||||||||
Amortization of DAC | 226 | 231 | (2 | %) | 679 | 693 | (2 | %) | |||||||||
Underwriting expenses | 238 | 218 | 9 | % | 706 | 698 | 1 | % | |||||||||
Dividends to policyholders | 4 | 5 | (20 | %) | 12 | 8 | 50 | % | |||||||||
Underwriting gain | 30 | 14 | 114 | % | 146 | 11 | NM | ||||||||||
Net servicing income | 5 | 5 | — | % | 18 | 13 | 38 | % | |||||||||
Net investment income | 230 | 222 | 4 | % | 732 | 696 | 5 | % | |||||||||
Net realized capital gains (losses) | (1 | ) | 10 | NM | 35 | 37 | (5 | %) | |||||||||
Other expenses | (29 | ) | (31 | ) | (6 | %) | (87 | ) | (83 | ) | 5 | % | |||||
Income from continuing operations before income taxes | 235 | 220 | 7 | % | 844 | 674 | 25 | % | |||||||||
Income tax expense | 62 | 54 | 15 | % | 224 | 168 | 33 | % | |||||||||
Income from continuing operations, net of tax | 173 | 166 | 4 | % | 620 | 506 | 23 | % | |||||||||
Income (loss) from discontinued operations, net of tax [1] | 1 | (2 | ) | NM | (1 | ) | (4 | ) | 75 | % | |||||||
Net income | $ | 174 | $ | 164 | 6 | % | $ | 619 | $ | 502 | 23 | % |
[1] | Represents the income from operations and sale of Specialty Risk Services (“SRS”). For additional information, see Note 14 of Notes to Condensed Consolidated Financial Statements. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
Premium Measures [1] | 2013 | 2012 | 2013 | 2012 | |||||||||
New business premium | $ | 253 | $ | 230 | $ | 797 | $ | 747 | |||||
Standard commercial lines policy count retention | 81 | % | 84 | % | 81 | % | 83 | % | |||||
Standard commercial lines renewal written pricing increase | 8 | % | 8 | % | 8 | % | 7 | % | |||||
Standard commercial lines renewal earned pricing increase | 8 | % | 6 | % | 8 | % | 5 | % | |||||
Standard commercial lines policies in-force as of end of period | 1,254,532 | 1,268,823 |
[1] | Standard commercial lines represents the Company’s small commercial and middle market property and casualty lines. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Ratios | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
Loss and loss adjustment expense ratio | |||||||||||||||||
Current accident year before catastrophes | 63.4 | 68.8 | 5.4 | 63.1 | 66.3 | 3.2 | |||||||||||
Current accident year catastrophes | 3.1 | 0.6 | (2.5 | ) | 2.1 | 2.5 | 0.4 | ||||||||||
Prior accident years | 1.7 | 0.9 | (0.8 | ) | 1.5 | 1.2 | (0.3 | ) | |||||||||
Total loss and loss adjustment expense ratio | 68.1 | 70.4 | 2.3 | 66.7 | 69.9 | 3.2 | |||||||||||
Expense ratio | 29.7 | 28.4 | (1.3 | ) | 29.9 | 29.7 | (0.2 | ) | |||||||||
Policyholder dividend ratio | 0.3 | 0.3 | — | 0.3 | 0.2 | (0.1 | ) | ||||||||||
Combined ratio | 98.1 | 99.1 | 1.0 | 96.9 | 99.8 | 2.9 | |||||||||||
Catastrophe ratio | |||||||||||||||||
Current accident year | 3.1 | 0.6 | (2.5 | ) | 2.1 | 2.5 | 0.4 | ||||||||||
Prior accident years | (0.8 | ) | (0.1 | ) | 0.7 | (0.5 | ) | (0.8 | ) | (0.3 | ) | ||||||
Total catastrophe ratio | 2.3 | 0.5 | (1.8 | ) | 1.7 | 1.7 | — | ||||||||||
Combined ratio before catastrophes | 95.8 | 98.6 | 2.8 | 95.2 | 98.1 | 2.9 | |||||||||||
Non-catastrophe prior year development | 2.4 | 1.1 | (1.3 | ) | 2.0 | 2.0 | — | ||||||||||
Combined ratio before catastrophes and prior accident year development | 93.3 | 97.5 | 4.2 | 93.2 | 96.1 | 2.9 | |||||||||||
Other revenues [1] | $ | 29 | $ | 27 | 7 | % | $ | 88 | $ | 75 | 17 | % |
[1] | Represents servicing revenues. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Operating Summary | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
Written premiums | $ | 988 | $ | 960 | 3 | % | $ | 2,833 | $ | 2,771 | 2 | % | |||||
Change in unearned premium reserve | 63 | 48 | 31 | % | 104 | 46 | 126 | % | |||||||||
Earned premiums | 925 | 912 | 1 | % | 2,729 | 2,725 | — | % | |||||||||
Losses and loss adjustment expenses | |||||||||||||||||
Current accident year before catastrophes | 616 | 628 | (2 | %) | 1,769 | 1,797 | (2 | %) | |||||||||
Current accident year catastrophes | 18 | — | — | % | 186 | 255 | (27 | %) | |||||||||
Prior accident years | (11 | ) | (49 | ) | (78 | %) | (39 | ) | (127 | ) | (69 | %) | |||||
Total losses and loss adjustment expenses | 623 | 579 | 8 | % | 1,916 | 1,925 | — | % | |||||||||
Amortization of DAC | 82 | 82 | — | % | 248 | 249 | — | % | |||||||||
Underwriting expenses | 145 | 141 | 3 | % | 427 | 437 | (2 | %) | |||||||||
Underwriting gain | 75 | 110 | (32 | %) | 138 | 114 | 21 | % | |||||||||
Net servicing income | 5 | 2 | 150 | % | 20 | 12 | 67 | % | |||||||||
Net investment income | 33 | 38 | (13 | %) | 109 | 122 | (11 | %) | |||||||||
Net realized capital gains | 1 | 2 | (50 | %) | 5 | 7 | (29 | %) | |||||||||
Other expenses | (14 | ) | (13 | ) | 8 | % | (42 | ) | (39 | ) | 8 | % | |||||
Income (loss) before income taxes | 100 | 139 | (28 | %) | 230 | 216 | 6 | % | |||||||||
Income tax expense | 32 | 45 | (29 | %) | 70 | 64 | 9 | % | |||||||||
Net income | $ | 68 | $ | 94 | (28 | %) | $ | 160 | $ | 152 | 5 | % | |||||
Written Premiums | |||||||||||||||||
Product Line | |||||||||||||||||
Automobile | $ | 668 | $ | 650 | 3 | % | $ | 1,954 | $ | 1,919 | 2 | % | |||||
Homeowners | 320 | 310 | 3 | % | 879 | 852 | 3 | % | |||||||||
Total | $ | 988 | $ | 960 | 3 | % | $ | 2,833 | $ | 2,771 | 2 | % | |||||
Earned Premiums | |||||||||||||||||
Product Line | |||||||||||||||||
Automobile | $ | 637 | $ | 632 | 1 | % | $ | 1,882 | $ | 1,894 | (1 | %) | |||||
Homeowners | 288 | 280 | 3 | % | 847 | 831 | 2 | % | |||||||||
Total | $ | 925 | $ | 912 | 1 | % | $ | 2,729 | $ | 2,725 | — | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
Premium Measures | 2013 | 2012 | 2013 | 2012 | |||||||||
Policies in-force end of period | |||||||||||||
Automobile | 2,021,480 | 2,029,078 | |||||||||||
Homeowners | 1,320,833 | 1,321,149 | |||||||||||
Total policies in-force end of period | 3,342,313 | 3,350,227 | |||||||||||
New business written premium | |||||||||||||
Automobile | $ | 100 | $ | 84 | $ | 280 | $ | 255 | |||||
Homeowners | $ | 35 | $ | 32 | $ | 99 | $ | 87 | |||||
Policy count retention | |||||||||||||
Automobile | 86 | % | 85 | % | 86 | % | 85 | % | |||||
Homeowners | 86 | % | 87 | % | 87 | % | 86 | % | |||||
Renewal written pricing increase | |||||||||||||
Automobile | 5 | % | 4 | % | 5 | % | 4 | % | |||||
Homeowners | 8 | % | 6 | % | 7 | % | 6 | % | |||||
Renewal earned pricing increase | |||||||||||||
Automobile | 5 | % | 4 | % | 5 | % | 5 | % | |||||
Homeowners | 6 | % | 6 | % | 6 | % | 7 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
Ratios and Supplemental Data | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||
Loss and loss adjustment expense ratio | |||||||||||||||
Current accident year before catastrophes | 66.6 | 68.9 | 2.3 | 64.8 | 65.9 | 1.1 | |||||||||
Current accident year catastrophes | 1.9 | — | (1.9 | ) | 6.8 | 9.4 | 2.6 | ||||||||
Prior accident years | (1.2 | ) | (5.4 | ) | (4.2 | ) | (1.4 | ) | (4.7 | ) | (3.3 | ) | |||
Total loss and loss adjustment expense ratio | 67.4 | 63.5 | (3.9 | ) | 70.2 | 70.6 | 0.4 | ||||||||
Expense ratio | 24.5 | 24.5 | — | 24.7 | 25.2 | 0.5 | |||||||||
Combined ratio | 91.9 | 87.9 | (4.0 | ) | 94.9 | 95.8 | 0.9 | ||||||||
Catastrophe ratio | |||||||||||||||
Current year | 1.9 | — | (1.9 | ) | 6.8 | 9.4 | 2.6 | ||||||||
Prior years | (0.9 | ) | (0.7 | ) | 0.2 | (1.4 | ) | (1.1 | ) | 0.3 | |||||
Total catastrophe ratio | 1.1 | (0.7 | ) | (1.8 | ) | 5.5 | 8.3 | 2.8 | |||||||
Combined ratio before catastrophes | 90.8 | 88.6 | (2.2 | ) | 89.5 | 87.5 | (2.0 | ) | |||||||
Non-catastrophe prior year development | (0.3 | ) | (4.7 | ) | (4.4 | ) | (0.1 | ) | (3.6 | ) | (3.5 | ) | |||
Combined ratio before catastrophes and prior accident years development | 91.1 | 93.3 | 2.2 | 89.6 | 91.1 | 1.5 | |||||||||
Other revenues [1] | $ | 39 | $ | 37 | 5 | % | 114 | 109 | 5 | % | |||||
Product Line Combined Ratios | |||||||||||||||
Automobile | 96.3 | 93.9 | (2.4 | ) | 95.6 | 93.7 | (1.9 | ) | |||||||
Homeowners | 81.2 | 74.5 | (6.7 | ) | 92.9 | 100.6 | 7.7 | ||||||||
Total | 91.9 | 87.9 | (4.0 | ) | 94.9 | 95.8 | 0.9 |
[1] | Represents servicing revenues. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Underwriting Summary | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
Written premiums | $ | 1 | $ | — | 100 | % | $ | 2 | $ | 7 | (71 | %) | |||||
Change in unearned premium reserve | 1 | — | 100 | % | 2 | 9 | (78 | %) | |||||||||
Earned premiums | — | — | NM | — | (2 | ) | NM | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||||
Prior accident years | 2 | 1 | 100 | % | 145 | 60 | 142 | % | |||||||||
Total losses and loss adjustment expenses | 2 | 1 | 100 | % | 145 | 60 | 142 | % | |||||||||
Underwriting expenses | 8 | 8 | — | % | 22 | 23 | (4 | %) | |||||||||
Underwriting loss | (10 | ) | (9 | ) | 11 | % | (167 | ) | (85 | ) | 96 | % | |||||
Net servicing expense | — | — | NM | (1 | ) | — | 100 | % | |||||||||
Net investment income | 33 | 35 | (6 | %) | 105 | 113 | (7 | %) | |||||||||
Net realized capital gains (losses) | 2 | 4 | (50 | %) | 6 | 12 | (50 | %) | |||||||||
Other income | 1 | 1 | — | % | 2 | 4 | (50 | %) | |||||||||
Income (loss) before income taxes | 26 | 31 | (16 | %) | (55 | ) | 44 | NM | |||||||||
Income tax expense (benefit) | 4 | 7 | (43 | %) | (27 | ) | 8 | NM | |||||||||
Net income (loss) | $ | 22 | $ | 24 | (8 | %) | $ | (28 | ) | $ | 36 | (178 | %) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Operating Summary | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
Premiums and other considerations | $ | 831 | $ | 941 | (12 | %) | $ | 2,495 | $ | 2,879 | (13 | %) | |||||
Net investment income | 96 | 98 | (2 | %) | 293 | 304 | (4 | %) | |||||||||
Net realized capital gains (losses) | (8 | ) | 11 | (173 | %) | 47 | 31 | 52 | % | ||||||||
Total revenues | 919 | 1,050 | (12 | %) | 2,835 | 3,214 | (12 | %) | |||||||||
Benefits, losses and loss adjustment expenses | 637 | 746 | (15 | %) | 1,911 | 2,312 | (17 | %) | |||||||||
Amortization of DAC | 8 | 9 | (11 | %) | 24 | 25 | (4 | %) | |||||||||
Insurance operating costs and other expenses | 237 | 258 | (8 | %) | 725 | 777 | (7 | %) | |||||||||
Total benefits, losses and expenses | 882 | 1,013 | (13 | %) | 2,660 | 3,114 | (15 | %) | |||||||||
Income before income taxes | 37 | 37 | — | % | 175 | 100 | 75 | % | |||||||||
Income tax expense | 6 | 7 | (14 | %) | 41 | 17 | 141 | % | |||||||||
Net income | $ | 31 | $ | 30 | 3 | % | $ | 134 | $ | 83 | 61 | % | |||||
Premiums and other considerations | |||||||||||||||||
Fully insured – ongoing premiums | $ | 817 | $ | 926 | (12 | %) | $ | 2,451 | $ | 2,830 | (13 | %) | |||||
Buyout premiums | — | — | — | % | 1 | 3 | (67 | %) | |||||||||
Other | 14 | 15 | (7 | %) | 43 | 46 | (7 | %) | |||||||||
Total premiums and other considerations | $ | 831 | $ | 941 | (12 | %) | $ | 2,495 | $ | 2,879 | (13 | %) | |||||
Fully insured ongoing sales, excluding buyouts | $ | 63 | $ | 55 | 15 | % | $ | 335 | $ | 349 | (4 | %) | |||||
Ratios, excluding buyouts | |||||||||||||||||
Loss ratio | 76.7 | % | 79.3 | % | 2.6 | 76.6 | % | 80.3 | % | 3.7 | |||||||
Loss ratio, excluding financial institutions | 80.9 | % | 83.8 | % | 2.9 | 80.9 | % | 84.9 | % | 4.0 | |||||||
Expense ratio | 29.5 | % | 28.4 | % | (1.1) | 30.0 | % | 27.9 | % | (2.1) | |||||||
Expense ratio, excluding financial institutions | 25.8 | % | 24.5 | % | (1.3) | 26.4 | % | 24.0 | % | (2.4) | |||||||
After-tax margin | |||||||||||||||||
After-tax margin | 3.4 | % | 2.9 | % | 0.5 | 4.7 | % | 2.6 | % | 2.1 | |||||||
Effect of net capital realized gains (losses), net of tax on after-tax margin | (0.5 | )% | 0.7 | % | (1.2) | 1.0 | % | 0.6 | % | 0.4 | |||||||
After-tax margin, excluding buyouts and net realized capital gains (losses) | 3.9 | % | 2.2 | % | 1.7 | 3.7 | % | 2.0 | % | 1.7 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Operating Summary | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
Fee income and other | $ | 171 | $ | 148 | 16 | % | $ | 505 | $ | 447 | 13 | % | |||||
Net investment loss | — | (1 | ) | — | % | — | (2 | ) | (100 | )% | |||||||
Net realized capital losses | — | 1 | (100 | )% | — | — | — | % | |||||||||
Total revenues | 171 | 148 | 16 | % | 505 | 445 | 13 | % | |||||||||
Amortization of DAC | 11 | 8 | 38 | % | 30 | 26 | 15 | % | |||||||||
Insurance operating costs and other expenses [1] | 131 | 113 | 16 | % | 387 | 333 | 16 | % | |||||||||
Total benefits, losses and expenses | 142 | 121 | 17 | % | 417 | 359 | 16 | % | |||||||||
Income before income taxes | 29 | 27 | 7 | % | 88 | 86 | 2 | % | |||||||||
Income tax expense | 10 | 9 | 11 | % | 31 | 30 | 3 | % | |||||||||
Net income | $ | 19 | $ | 18 | 6 | % | $ | 57 | $ | 56 | 2 | % | |||||
MUTUAL FUNDS AUM by DISTRIBUTION CHANNEL | |||||||||||||||||
Retail Mutual Funds [2] | |||||||||||||||||
AUM, beginning of period | $ | 47,617 | $ | 42,665 | 12 | % | $ | 45,013 | $ | 41,785 | 8 | % | |||||
Sales | 2,864 | 2,136 | 34 | % | $ | 8,815 | $ | 6,377 | 38 | % | |||||||
Redemptions | (2,901 | ) | (2,436 | ) | 19 | % | (10,152 | ) | (8,361 | ) | 21 | % | |||||
Net Flows | $ | (37 | ) | $ | (300 | ) | (88 | )% | $ | (1,337 | ) | $ | (1,984 | ) | (33 | )% | |
Change in market value and other | 2,358 | 1,902 | 24 | % | 6,262 | 4,466 | 40 | % | |||||||||
AUM, end of period | $ | 49,938 | $ | 44,267 | 13 | % | $ | 49,938 | $ | 44,267 | 13 | % | |||||
Defined Contribution Investment Only Mutual Funds [3] | |||||||||||||||||
AUM, beginning of period | $ | 15,991 | $ | 16,678 | (4 | )% | 16,598 | 16,140 | 3 | % | |||||||
Sales | 923 | 662 | 39 | % | 2,802 | 2,311 | 21 | % | |||||||||
Redemptions | (1,531 | ) | (1,144 | ) | 34 | % | (5,547 | ) | (3,687 | ) | 50 | % | |||||
Net Flows | (608 | ) | (482 | ) | 26 | % | (2,745 | ) | (1,376 | ) | 99 | % | |||||
Change in market value and other | 1,438 | 819 | 76 | % | 2,968 | 2,251 | 32 | % | |||||||||
AUM, end of period | $ | 16,821 | $ | 17,015 | (1 | )% | 16,821 | 17,015 | (1 | )% | |||||||
Total Mutual Funds | |||||||||||||||||
AUM, beginning of period | $ | 63,608 | $ | 59,343 | 7 | % | 61,611 | 57,925 | 6 | % | |||||||
Sales | 3,787 | 2,798 | 35 | % | 11,617 | 8,688 | 34 | % | |||||||||
Redemptions [4] | (4,432 | ) | (3,580 | ) | 24 | % | (15,699 | ) | (12,048 | ) | 30 | % | |||||
Net Flows | (645 | ) | (782 | ) | (18 | )% | (4,082 | ) | (3,360 | ) | 21 | % | |||||
Change in market value and other | 3,796 | 2,721 | 40 | % | 9,230 | 6,717 | 37 | % | |||||||||
AUM, end of period | $ | 66,759 | $ | 61,282 | 9 | % | 66,759 | 61,282 | 9 | % | |||||||
Average Mutual Funds Assets Under Management | 65,183 | 60,313 | 8 | % | 64,185 | 59,603 | 8 | % | |||||||||
Annuity Mutual Fund Assets [5] | 25,638 | 26,839 | (4 | )% | 25,638 | 26,839 | (4 | )% | |||||||||
Total Assets Under Management | $ | 92,397 | $ | 88,121 | 5 | % | $ | 92,397 | $ | 88,121 | 5 | % | |||||
Average Assets Under Management | $ | 90,953 | $ | 87,176 | 4 | % | 90,022 | 86,830 | 4 | % |
[1] | Includes compensation to servicing intermediaries of approximately $5 and $15 for the three and nine months ended September 30, 2013, respectively. |
[2] | Includes mutual funds offered within 529 college savings plans previously categorized as Other. |
[3] | Includes mutual funds offered within employee directed retirement plans including on-going business related to the Company's Retirement Plans and Individual Life businesses sold in January 2013. |
[4] | Includes an institutional redemption as well as a portfolio rebalance at a key distributor, together totaling $2.5 billion in the nine months ended September 30, 2013. |
[5] | Includes Company-sponsored mutual fund assets held in separate accounts supporting variable insurance and investment products. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2013 | 2012 | Change | 2013 | 2012 | Change | ||||||||||||
MUTUAL FUNDS AUM by ASSET CLASS | |||||||||||||||||
Equity | 39,057 | 36,341 | 7 | % | 39,057 | 36,341 | 7 | % | |||||||||
Fixed Income | 14,595 | 13,941 | 5 | % | 14,595 | 13,941 | 5 | % | |||||||||
Multi-Strategy Investments | 13,107 | 11,000 | 19 | % | 13,107 | 11,000 | 19 | % | |||||||||
Total Mutual Funds AUM, end of period | $ | 66,759 | $ | 61,282 | 9 | % | $ | 66,759 | $ | 61,282 | 9 | % | |||||
RETURN ON ASSETS | |||||||||||||||||
ROA | 8.4 | 8.3 | 1 | % | 8.4 | 8.6 | (2 | )% | |||||||||
Effect of restructuring, net of tax | 0.4 | (0.4 | ) | — | % | (0.2 | ) | (0.3 | ) | (33 | )% | ||||||
ROA, core earnings | 8.0 | 8.7 | (8 | )% | 8.6 | 8.9 | (3 | )% |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Operating Summary | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
Earned premiums, fees and other | $ | 553 | $ | 882 | (37 | %) | $ | 1,615 | $ | 2,699 | (40 | %) | |||||
Net investment income: | |||||||||||||||||
Securities available-for-sale and other | 414 | 628 | (34 | %) | 1,277 | 1,951 | (35 | %) | |||||||||
Equity securities trading [2] | 878 | 635 | 38 | % | 4,629 | 1,734 | 167 | % | |||||||||
Total net investment income | 1,292 | 1,263 | 2 | % | 5,906 | 3,685 | 60 | % | |||||||||
Realized capital gains (losses): | |||||||||||||||||
Net realized capital gains on business dispositions | — | — | — | % | 1,575 | — | NM | ||||||||||
Other net realized capital gains (losses) | (151 | ) | 58 | NM | (781 | ) | (394 | ) | 98 | % | |||||||
Net realized capital gains (losses) | (151 | ) | 58 | NM | 794 | (394 | ) | NM | |||||||||
Total revenues [1] | 1,694 | 2,203 | (23 | %) | 8,315 | 5,990 | 39 | % | |||||||||
Benefits, losses and loss adjustment expenses | 412 | 829 | (50 | %) | 1,223 | 2,349 | (48 | %) | |||||||||
Benefits, losses and loss adjustment expenses – returns credited on international variable annuities [2] | 878 | 635 | 38 | % | 4,628 | 1,733 | 167 | % | |||||||||
Amortization of DAC | 267 | 236 | 13 | % | 1,340 | 448 | 199 | % | |||||||||
Insurance operating costs and other expenses | 176 | 350 | (50 | %) | 538 | 1,068 | (50 | %) | |||||||||
Reinsurance loss on dispositions | — | 415 | (100 | %) | 1,505 | 415 | NM | ||||||||||
Total benefits, losses and expenses | 1,733 | 2,465 | (30 | %) | 9,234 | 6,013 | 54 | % | |||||||||
Loss from continuing operations before income taxes | (39 | ) | (262 | ) | (85 | %) | (919 | ) | (23 | ) | NM | ||||||
Income tax benefit | (52 | ) | (119 | ) | (56 | %) | (431 | ) | (105 | ) | NM | ||||||
Income (loss) from continuing operations, net of tax | $ | 13 | $ | (143 | ) | (109 | %) | $ | (488 | ) | $ | 82 | NM | ||||
Income (loss) from discontinued operations, net of tax [5] | $ | (6 | ) | $ | 22 | (127 | %) | $ | (131 | ) | $ | 67 | NM | ||||
Net income (loss) [1] | $ | 7 | $ | (121 | ) | (106 | %) | $ | (619 | ) | $ | 149 | NM | ||||
Assets Under Management (end of period) | |||||||||||||||||
U.S. and Japan variable annuity account value | $ | 84,358 | $ | 95,432 | (12 | %) | |||||||||||
Fixed Market Value Adjusted annuity and other account value | 13,839 | 15,541 | (11 | %) | |||||||||||||
Institutional annuity account value [3] | 17,118 | 18,204 | (6 | %) | |||||||||||||
Other account value [4] | 107,935 | 107,492 | — | % | |||||||||||||
Total account value [3] | 222,049 | 235,323 | (6 | %) | |||||||||||||
U.S. and Japan Variable Annuity Account Value | |||||||||||||||||
Account value, beginning of period | $ | 86,500 | $ | 94,515 | (8 | %) | $ | 92,540 | $ | 97,993 | (6 | %) | |||||
Net outflows | (6,270 | ) | (3,139 | ) | 100 | % | (16,682 | ) | (9,961 | ) | 67 | % | |||||
Change in market value and other | 3,839 | 3,341 | 15 | % | 11,947 | 7,776 | 54 | % | |||||||||
Effect of currency translation | 289 | 715 | (60 | %) | (3,447 | ) | (376 | ) | NM | ||||||||
Account value, end of period | $ | 84,358 | $ | 95,432 | (12 | %) | $ | 84,358 | $ | 95,432 | (12 | %) |
[1] | For the three and nine months ended September 30, 2012 includes Retirement Plans total revenues of $193 and $592, respectively and net income (loss) of ($7) and $9, respectively. Also includes Individual Life total revenues of $325 and $1,039, respectively and net loss of $(259) and $(204), respectively for the three and nine months ended September 30, 2012. |
[2] | 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. |
[3] | Included in the balance is approximately $(1.2) billion as of September 30, 2013 and $(1.3) billion as of September 30, 2012 related to an intra-segment funding agreement which is eliminated in consolidation. |
[4] | Other account value includes $53.7 billion, $14.2 billion, $38.3 billion and $1.7 billion as of September 30, 2013 and $55.3 billion, $13.1 billion, $37.3 billion and $1.8 billion at September 30, 2012 for the Retirement Plans, Individual Life, Private Placement Life Insurance and the discontinued U.K variable annuity businesses, respectively. Account values associated with the Retirement Plans, Individual Life and the U.K. variable annuity businesses no longer generate asset-based fee income due to the sales of these businesses. |
[5] | Represents the loss from operations and sale of Hartford Life International Limited ("HLIL"). For additional information, see Note 14 Discontinued Operations of Notes to Condensed Consolidated Financial Statements. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Operating Summary | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
Fee income [1] | $ | 2 | $ | 45 | (96 | %) | $ | 7 | $ | 142 | (95 | %) | |||||
Net investment income | 6 | 8 | (25 | %) | 19 | 5 | NM | ||||||||||
Net realized capital gains (losses) | (5 | ) | 9 | (156 | %) | (91 | ) | 41 | NM | ||||||||
Total revenues | 3 | 62 | (95 | %) | (65 | ) | 188 | (135 | %) | ||||||||
Benefits, losses and loss adjustment expenses | — | 1 | (100 | %) | — | — | — | % | |||||||||
Insurance operating costs and other expenses [1] | (46 | ) | 74 | (162 | %) | 29 | 250 | (88 | %) | ||||||||
Loss on extinguishment of debt | — | — | — | % | 213 | 910 | (77 | %) | |||||||||
Reinsurance loss on disposition | — | 118 | (100 | %) | 69 | 118 | (42 | %) | |||||||||
Interest expense | 94 | 109 | (14 | %) | 301 | 348 | (14 | %) | |||||||||
Total benefits, losses and expenses | 48 | 302 | (84 | %) | 612 | 1,626 | (62 | %) | |||||||||
Loss from continuing operations before income taxes | (45 | ) | (240 | ) | (81 | %) | (677 | ) | (1,438 | ) | (53 | %) | |||||
Income tax benefit | (17 | ) | (44 | ) | (61 | %) | (216 | ) | (468 | ) | (54 | %) | |||||
Net loss | $ | (28 | ) | $ | (196 | ) | (86 | %) | $ | (461 | ) | $ | (970 | ) | (52 | %) |
[1] | Fee income in the three and nine months ended September 30, 2012 represents 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. As WFS was sold in November 2012, fee income and insurance operating costs and other expenses decreased accordingly in the three and nine months ended September 30, 2013. |
• | Insurance Risk |
• | Operational Risk |
• | Financial Risk |
Coverage | Treaty term | % of layer(s) reinsurance | Per occurrence limit | Retention | |||||
Principal property catastrophe program covering property catastrophe losses from a single event | 1/1/2013 to 1/1/2014 | 90% | $ | 750 | $ | 350 | |||
Reinsurance with the FHCF covering Florida Personal Lines property catastrophe losses from a single event | 6/1/2013 to 6/1/2014 | 90% | 124 | [1] | 47 | ||||
Workers compensation losses arising from a single catastrophe event [2] | 7/1/2013 to 7/1/2014 | 80% | 350 | 100 |
[1] | The per occurrence limit on the FHCF treaty is $124. Coverage is estimated based on the best available information from FHCF, which only includes updated retention multiples and payout factors for October 2013. Premiums will be available in the later part of October 2013 for the 6/1/13 to 6/1/14 treaty year and is based on the Company's election to purchase the required coverage from FHCF. |
[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. |
As of September 30, 2013 | As of December 31, 2012 | |||||
Gross reinsurance recoverable | $ | 2,996 | $ | 3,022 | ||
Less: Allowance for uncollectible reinsurance | 246 | 268 | ||||
Net reinsurance recoverable | $ | 2,750 | $ | 2,754 |
As of September 30, 2013 | As of December 31, 2012 | |||||
Gross reinsurance recoverable | $ | 20,365 | $ | 1,912 | ||
Less: Allowance for uncollectible reinsurance | — | — | ||||
Net reinsurance recoverable | $ | 20,365 | $ | 1,912 |
• | Liquidity Risk |
• | Interest Rate Risk |
• | Foreign Currency Exchange Risk |
• | Equity 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 September 30, 2013 | |||||||||||||
($ in billions) | Account Value | Gross Net Amount at Risk | Retained Net Amount at Risk | % of Contracts In the Money [4] | % In the Money [4] [5] | ||||||||
U. S. Variable Annuity [1] | |||||||||||||
GMDB [2] | $ | 61.5 | $ | 4.7 | $ | 1.2 | 22 | % | 19 | % | |||
GMWB | 30.9 | 0.2 | 0.2 | 9 | % | 9 | % | ||||||
Japan Variable Annuity [1] | |||||||||||||
GMDB | 22.8 | 1.6 | 1.3 | 56 | % | 9 | % | ||||||
GMIB [3] | 21.1 | 0.5 | 0.5 | 47 | % | 5 | % | ||||||
U.K. Variable Annuity [1] | |||||||||||||
GMDB | 1.7 | — | — | 100 | % | 1 | % | ||||||
GMWB | 1.6 | — | — | 21 | % | 5 | % |
Total Variable Annuity Guarantees | |||||||||||||
As of December 31, 2012 | |||||||||||||
($ in billions) | Account Value | Gross Net Amount at Risk | Retained Net Amount at Risk | % of Contracts In the Money [4] | % In the Money [4] [5] | ||||||||
U. S. Variable Annuity [1] | |||||||||||||
GMDB [2] | $ | 64.8 | $ | 6.6 | $ | 2.2 | 48 | % | 13 | % | |||
GMWB | 34.2 | 0.7 | 0.5 | 23 | % | 9 | % | ||||||
Japan Variable Annuity [1] | |||||||||||||
GMDB | 27.7 | 5.7 | 4.8 | 97 | % | 16 | % | ||||||
GMIB [3] | 26.0 | 3.3 | 3.3 | 97 | % | 12 | % | ||||||
UK Variable Annuity [1] | |||||||||||||
GMDB | 1.9 | — | — | 100 | % | 2 | % | ||||||
GMWB | 1.7 | — | — | 24 | % | 7 | % |
[1] | Policies with a guaranteed living benefit (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 zero. 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 reinsured contracts. |
[5] | For all contracts that are “in the money”, this represents the percentage by which the average contract was in the money. |
As of September 30, 2013 | ||||||
GMIB [1] | ||||||
($ in billions) | Account Value | Net Amount at Risk | ||||
2013 | $ | 0.1 | $ | — | ||
2014 | 2.7 | — | ||||
2015 | 5.3 | — | ||||
2016 | 2.2 | 0.1 | ||||
2017 | 2.5 | 0.2 | ||||
2018 & beyond [2] | 5.8 | 0.1 | ||||
Total | $ | 18.6 | $ | 0.4 |
[1] | Excludes certain non-GMIB living benefits of $2.5 billion of account value and $0.10 billion of NAR. |
[2] | In 2018 & beyond, $2.20 billion of the $5.80 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 | Japan Program | ||||
GMWB | Macro | ||||
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 Japan 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. |
As of September 30, 2013 | |||||||||||||||||||||||||||
U.S. GAAP Sensitivity Analysis (pre Tax/DAC) [1] | U.S. Programs | Japan Program | |||||||||||||||||||||||||
GMWB | Macro | ||||||||||||||||||||||||||
Equity Market Return | -20 | % | -10 | % | +10 | % | -20 | % | -10 | % | +10 | % | -20 | % | -10 | % | +10 | % | |||||||||
Potential Net Fair Value Impact | $ | (1 | ) | $ | (3 | ) | $ | 4 | $ | 244 | $ | 54 | $ | (21 | ) | $ | 629 | $ | 334 | $ | (343 | ) | |||||
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 | $ | (4 | ) | $ | (2 | ) | $ | (3 | ) | $ | 20 | $ | 10 | $ | (9 | ) | $ | 159 | $ | 70 | $ | (76 | ) | ||||
Implied Volatilities | +10 | % | +2 | % | -10 | % | +10 | % | +2 | % | -10 | % | +10 | % | +2 | % | -10 | % | |||||||||
Potential Net Fair Value Impact | $ | 6 | $ | 1 | $ | (12 | ) | $ | 73 | $ | 15 | $ | (81 | ) | $ | 54 | $ | 8 | $ | 12 | |||||||
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 | $ | 788 | $ | 262 | $ | (258 | ) |
[1] | These sensitivities are based on the following key market levels as of September 30, 2013: 1) S&P of 1682; 2) 10yr US swap rate of 2.91%; 3) S&P 10yr volatility of 25.34% and 4) FX rates of USDJPY @ 98.27 and EURJPY @ 132.93. |
• | 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. |
• | For guaranteed benefits (GMDB, GMIB, and GMWB) reinsured from our international operations to our U.S. insurance subsidiaries, or guaranteed by our U.S. insurance subsidiaries, the Company hedges its aggregate economic exposure to the various risks arising out of the product guarantees, with a focus on the underlying economics of the exposure to the entire Company, rather than the direct liability of the underlying issuer of the related products. The Company believes that hedging economic exposure in this manner is consistent with certain intercompany reinsurance agreements and guarantees, results in increased capital efficiency and results in a better risk profile than taking alternative approaches to hedging that might emphasize statutory or GAAP measures or considerations. 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 | ||||||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||||
Amortized Cost | Fair Value | Percent of Total Fair Value | Amortized Cost | Fair Value | Percent of Total Fair Value | |||||||||||
United States Government/Government agencies | $ | 8,929 | $ | 8,923 | 13.9 | % | $ | 10,481 | $ | 10,975 | 12.8 | % | ||||
AAA | 6,190 | 6,377 | 10.0 | % | 8,646 | 9,220 | 10.7 | % | ||||||||
AA | 12,614 | 12,923 | 20.2 | % | 14,939 | 16,104 | 18.7 | % | ||||||||
A | 14,623 | 15,412 | 24.1 | % | 20,396 | 22,650 | 26.4 | % | ||||||||
BBB | 15,691 | 16,187 | 25.2 | % | 20,833 | 22,689 | 26.4 | % | ||||||||
BB & below | 4,180 | 4,201 | 6.6 | % | 4,452 | 4,284 | 5.0 | % | ||||||||
Total fixed maturities | $ | 62,227 | $ | 64,023 | 100 | % | $ | 79,747 | $ | 85,922 | 100.0 | % |
Securities by Type | |||||||||||||||||||||||||||||||||||||
September 30, 2013 | December 31, 2012 | ||||||||||||||||||||||||||||||||||||
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 | $ | 1,928 | $ | 11 | $ | (70 | ) | $ | 1,869 | 2.9 | % | $ | 2,234 | $ | 29 | $ | (116 | ) | $ | 2,147 | 2.5 | % | |||||||||||||||
Small business | 248 | 3 | (37 | ) | 214 | 0.3 | % | 336 | 7 | (67 | ) | 276 | 0.3 | % | |||||||||||||||||||||||
Other | 269 | 10 | — | 279 | 0.4 | % | 313 | 27 | — | 340 | 0.4 | % | |||||||||||||||||||||||||
Collateralized debt obligations ("CDOs") | |||||||||||||||||||||||||||||||||||||
Collateralized loan obligations (“CLOs”) | 1,809 | 1 | (42 | ) | 1,768 | 2.8 | % | 2,197 | — | (68 | ) | 2,129 | 2.5 | % | |||||||||||||||||||||||
Commercial real estate ("CREs") | 338 | 100 | (41 | ) | 397 | 0.6 | % | 420 | 44 | (80 | ) | 384 | 0.4 | % | |||||||||||||||||||||||
Other [1] | 383 | 17 | (9 | ) | 385 | 0.6 | % | 553 | 16 | (11 | ) | 527 | 0.6 | % | |||||||||||||||||||||||
Commercial mortgage-backed securities ("CMBS") | |||||||||||||||||||||||||||||||||||||
Agency backed [2] | 886 | 24 | (10 | ) | 900 | 1.4 | % | 962 | 79 | — | 1,041 | 1.2 | % | ||||||||||||||||||||||||
Bonds | 3,083 | 181 | (53 | ) | 3,211 | 5.0 | % | 4,535 | 293 | (160 | ) | 4,668 | 5.4 | % | |||||||||||||||||||||||
Interest only (“IOs”) | 342 | 51 | (15 | ) | 378 | 0.6 | % | 586 | 45 | (19 | ) | 612 | 0.7 | % | |||||||||||||||||||||||
Corporate | |||||||||||||||||||||||||||||||||||||
Basic industry | 2,265 | 109 | (57 | ) | 2,317 | 3.6 | % | 3,741 | 369 | (6 | ) | 4,104 | 4.8 | % | |||||||||||||||||||||||
Capital goods | 2,068 | 175 | (13 | ) | 2,230 | 3.5 | % | 3,109 | 389 | (2 | ) | 3,496 | 4.1 | % | |||||||||||||||||||||||
Consumer cyclical | 1,817 | 128 | (16 | ) | 1,929 | 3.0 | % | 2,423 | 266 | (5 | ) | 2,684 | 3.1 | % | |||||||||||||||||||||||
Consumer non-cyclical | 3,463 | 310 | (23 | ) | 3,750 | 5.9 | % | 5,927 | 759 | (7 | ) | 6,679 | 7.8 | % | |||||||||||||||||||||||
Energy | 2,384 | 181 | (20 | ) | 2,545 | 4.0 | % | 3,816 | 499 | (3 | ) | 4,312 | 5.0 | % | |||||||||||||||||||||||
Financial services | 5,229 | 275 | (184 | ) | 5,320 | 8.3 | % | 7,230 | 604 | (211 | ) | 7,623 | 8.9 | % | |||||||||||||||||||||||
Tech./comm. | 3,209 | 244 | (42 | ) | 3,411 | 5.3 | % | 3,971 | 526 | (16 | ) | 4,481 | 5.2 | % | |||||||||||||||||||||||
Transportation | 989 | 71 | (12 | ) | 1,048 | 1.6 | % | 1,393 | 163 | (2 | ) | 1,554 | 1.8 | % | |||||||||||||||||||||||
Utilities | 5,606 | 425 | (66 | ) | 5,965 | 9.3 | % | 7,792 | 1,017 | (24 | ) | 8,785 | 10.2 | % | |||||||||||||||||||||||
Other | 247 | 14 | (6 | ) | 255 | 0.4 | % | 292 | 39 | — | 331 | 0.4 | % | ||||||||||||||||||||||||
Foreign govt./govt. agencies | 4,039 | 98 | (169 | ) | 3,968 | 6.2 | % | 3,985 | 191 | (40 | ) | 4,136 | 4.8 | % | |||||||||||||||||||||||
Municipal | |||||||||||||||||||||||||||||||||||||
Taxable | 1,504 | 43 | (70 | ) | 1,477 | 2.3 | % | 2,235 | 246 | (15 | ) | 2,466 | 2.9 | % | |||||||||||||||||||||||
Tax-exempt | 10,731 | 444 | (109 | ) | 11,066 | 17.5 | % | 10,766 | 1,133 | (4 | ) | 11,895 | 13.9 | % | |||||||||||||||||||||||
Residential mortgage-backed securities ("RMBS") | |||||||||||||||||||||||||||||||||||||
Agency | 3,732 | 83 | (47 | ) | 3,768 | 5.9 | % | 5,906 | 259 | (3 | ) | 6,162 | 7.2 | % | |||||||||||||||||||||||
Non-agency | 73 | — | (1 | ) | 72 | 0.1 | % | — | — | — | — | — | % | ||||||||||||||||||||||||
Alt-A | — | — | — | — | — | % | 38 | — | (1 | ) | 37 | — | % | ||||||||||||||||||||||||
Sub-prime | 1,274 | 36 | (64 | ) | 1,246 | 1.9 | % | 1,374 | 36 | (129 | ) | 1,281 | 1.5 | % | |||||||||||||||||||||||
U.S. Treasuries | 4,311 | 42 | (98 | ) | 4,255 | 6.6 | % | 3,613 | 175 | (16 | ) | 3,772 | 4.4 | % | |||||||||||||||||||||||
Fixed maturities, AFS | 62,227 | 3,076 | (1,274 | ) | 64,023 | 100 | % | 79,747 | 7,211 | (1,005 | ) | 85,922 | 100 | % | |||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||||||||||||||
Financial services | 256 | 11 | (42 | ) | 225 | 26.1 | % | 331 | 15 | (42 | ) | 304 | 34.2 | % | |||||||||||||||||||||||
Other | 587 | 67 | (17 | ) | 637 | 73.9 | % | 535 | 66 | (15 | ) | 586 | 65.8 | % | |||||||||||||||||||||||
Equity securities, AFS | 843 | 78 | (59 | ) | 862 | 100 | % | 866 | 81 | (57 | ) | 890 | 100 | % | |||||||||||||||||||||||
Total AFS securities | $ | 63,070 | $ | 3,154 | $ | (1,333 | ) | $ | 64,885 | $ | 80,613 | $ | 7,292 | $ | (1,062 | ) | $ | 86,812 | |||||||||||||||||||
Fixed maturities, FVO | $ | 994 | $ | 1,087 |
[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. |
September 30, 2013 | |||||||||||||||||||||||||||||||
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 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Spain [3] | 35 | 34 | 21 | 21 | — | — | 56 | 55 | |||||||||||||||||||||||
Ireland | 80 | 79 | 3 | 3 | — | — | 83 | 82 | |||||||||||||||||||||||
Portugal | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Greece | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Higher risk | 115 | 113 | 24 | 24 | — | — | 139 | 137 | |||||||||||||||||||||||
Europe excluding higher risk | 2,997 | 3,236 | 1,035 | 1,063 | 599 | 593 | 4,631 | 4,892 | |||||||||||||||||||||||
Total Europe | $ | 3,112 | $ | 3,349 | $ | 1,059 | 1,087 | $ | 599 | 593 | $ | 4,770 | $ | 5,029 | |||||||||||||||||
Europe exposure net of credit default swap protection [2] | $ | 4,263 | $ | 5,029 |
December 31, 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 | $ | 4 | $ | 4 | $ | — | $ | — | $ | — | $ | — | $ | 4 | $ | 4 | |||||||||||||||
Spain [3] | 53 | 52 | 20 | 20 | — | — | 73 | 72 | |||||||||||||||||||||||
Ireland | 143 | 145 | — | — | — | — | 143 | 145 | |||||||||||||||||||||||
Portugal | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Greece | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Higher risk | 200 | 201 | 20 | 20 | — | — | 220 | 221 | |||||||||||||||||||||||
Europe excluding higher risk | 4,022 | 4,525 | 1,158 | 1,182 | 751 | 827 | 5,931 | 6,534 | |||||||||||||||||||||||
Total Europe | $ | 4,222 | $ | 4,726 | $ | 1,178 | $ | 1,202 | $ | 751 | $ | 827 | $ | 6,151 | $ | 6,755 | |||||||||||||||
Europe exposure net of credit default swap protection [2] | $ | 5,767 | $ | 6,752 |
[1] | Includes amortized cost and fair value of $49 as of September 30, 2013 and $74 as of December 31, 2012 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 $368 and $0, respectively, as of September 30, 2013 and $384 and $(3), respectively, as of December 31, 2012 related to credit default swap protection. This includes a notional amount of $70 and $56 as of September 30, 2013 and December 31, 2012, respectively, related to single name corporate issuers in 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 Financial Services. |
September 30, 2013 | December 31, 2012 | ||||||||||||||||||||||
Amortized Cost | Fair Value | Net Unrealized | Amortized Cost | Fair Value | Net Unrealized | ||||||||||||||||||
AAA | $ | 37 | $ | 38 | $ | 1 | $ | 47 | $ | 49 | $ | 2 | |||||||||||
AA | 485 | 513 | 28 | 1,039 | 1,125 | 86 | |||||||||||||||||
A | 2,659 | 2,727 | 68 | 3,539 | 3,763 | 224 | |||||||||||||||||
BBB | 1,984 | 1,932 | (52 | ) | 2,537 | 2,563 | 26 | ||||||||||||||||
BB & below | 320 | 335 | 15 | 399 | 427 | 28 | |||||||||||||||||
Total | $ | 5,485 | $ | 5,545 | $ | 60 | $ | 7,561 | $ | 7,927 | $ | 366 |
September 30, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||
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 | $ | 49 | $ | 49 | $ | 46 | $ | 46 | $ | 22 | $ | 22 | $ | 18 | $ | 18 | $ | 32 | $ | 34 | $ | 167 | $ | 169 | |||||||||||||||||||||||
2004 | 90 | 92 | 74 | 82 | 31 | 32 | 19 | 19 | 13 | 17 | 227 | 242 | |||||||||||||||||||||||||||||||||||
2005 | 311 | 329 | 79 | 83 | 101 | 103 | 115 | 111 | 92 | 98 | 698 | 724 | |||||||||||||||||||||||||||||||||||
2006 | 358 | 386 | 124 | 135 | 116 | 123 | 157 | 161 | 263 | 272 | 1,018 | 1,077 | |||||||||||||||||||||||||||||||||||
2007 | 190 | 206 | 214 | 214 | 133 | 149 | 1 | 1 | 156 | 146 | 694 | 716 | |||||||||||||||||||||||||||||||||||
2008 | 44 | 49 | — | — | 1 | 1 | — | — | — | — | 45 | 50 | |||||||||||||||||||||||||||||||||||
2009 | 11 | 11 | — | — | — | — | — | — | — | — | 11 | 11 | |||||||||||||||||||||||||||||||||||
2010 | 18 | 20 | — | — | — | — | — | — | — | — | 18 | 20 | |||||||||||||||||||||||||||||||||||
2011 | 63 | 67 | — | — | — | — | 6 | 5 | — | — | 69 | 72 | |||||||||||||||||||||||||||||||||||
2012 | 35 | 34 | — | — | 8 | 8 | 11 | 10 | — | — | 54 | 52 | |||||||||||||||||||||||||||||||||||
2013 | 5 | 5 | 42 | 40 | 26 | 25 | 8 | 7 | 1 | 1 | 82 | 78 | |||||||||||||||||||||||||||||||||||
Total | $ | 1,174 | $ | 1,248 | $ | 579 | $ | 600 | $ | 438 | $ | 463 | $ | 335 | $ | 332 | $ | 557 | $ | 568 | $ | 3,083 | $ | 3,211 | |||||||||||||||||||||||
Credit protection | 31.6% | 24.5% | 22.6% | 15.4% | 13.1% | 23.9% |
December 31, 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 | $ | 180 | $ | 184 | $ | 102 | $ | 103 | $ | 57 | $ | 56 | $ | 5 | $ | 5 | $ | 42 | $ | 43 | $ | 386 | $ | 391 | |||||||||||||||||||||||
2004 | 171 | 178 | 73 | 82 | 36 | 36 | 24 | 24 | 20 | 12 | 324 | 332 | |||||||||||||||||||||||||||||||||||
2005 | 446 | 485 | 105 | 107 | 121 | 122 | 152 | 139 | 100 | 82 | 924 | 935 | |||||||||||||||||||||||||||||||||||
2006 | 682 | 757 | 167 | 178 | 129 | 135 | 235 | 229 | 316 | 278 | 1,529 | 1,577 | |||||||||||||||||||||||||||||||||||
2007 | 371 | 409 | 289 | 301 | 150 | 154 | 31 | 31 | 188 | 160 | 1,029 | 1,055 | |||||||||||||||||||||||||||||||||||
2008 | 55 | 66 | — | — | — | — | — | — | — | — | 55 | 66 | |||||||||||||||||||||||||||||||||||
2009 | 28 | 30 | — | — | — | — | — | — | — | — | 28 | 30 | |||||||||||||||||||||||||||||||||||
2010 | 18 | 21 | — | — | 22 | 23 | — | — | — | — | 40 | 44 | |||||||||||||||||||||||||||||||||||
2011 | 121 | 135 | — | — | — | — | — | — | — | — | 121 | 135 | |||||||||||||||||||||||||||||||||||
2012 | 98 | 102 | — | — | — | — | 1 | 1 | — | — | 99 | 103 | |||||||||||||||||||||||||||||||||||
Total | $ | 2,170 | $ | 2,367 | $ | 736 | $ | 771 | $ | 515 | $ | 526 | $ | 448 | $ | 429 | $ | 666 | $ | 575 | $ | 4,535 | $ | 4,668 | |||||||||||||||||||||||
Credit protection | 29.7% | 23.4% | 23.3% | 16.8% | 9.2% | 23.7% |
[1] | The vintage year represents the year the pool of loans was originated. |
September 30, 2013 | December 31, 2012 | ||||||||||||||||||||||
Amortized Cost [1] | Valuation Allowance | Carrying Value | Amortized Cost [1] | Valuation Allowance | Carrying Value | ||||||||||||||||||
Agricultural | $ | 138 | $ | (8 | ) | $ | 130 | $ | 150 | $ | (8 | ) | $ | 142 | |||||||||
Whole loans | 5,176 | (9 | ) | 5,167 | 6,023 | (10 | ) | 6,013 | |||||||||||||||
A-Note participations | 192 | — | 192 | 255 | — | 255 | |||||||||||||||||
B-Note participations | 117 | (50 | ) | 67 | 263 | (50 | ) | 213 | |||||||||||||||
Mezzanine loans | 19 | — | 19 | 88 | — | 88 | |||||||||||||||||
Total | $ | 5,642 | $ | (67 | ) | $ | 5,575 | $ | 6,779 | $ | (68 | ) | $ | 6,711 |
[1] | Amortized cost represents carrying value prior to valuation allowances, if any. |
September 30, 2013 | December 31, 2012 | ||||||||||||||||||
Amortized Cost | Market Value | Weighted Average Credit Quality | Amortized Cost | Market Value | Weighted Average Credit Quality | ||||||||||||||
General Obligation | $ | 2,398 | $ | 2,500 | AA | $ | 2,947 | $ | 3,293 | AA | |||||||||
Pre-Refunded [1] | 615 | 655 | AAA | 629 | 678 | AAA | |||||||||||||
Revenue | |||||||||||||||||||
Transportation | 1,903 | 1,909 | A | 1,652 | 1,799 | A+ | |||||||||||||
Water & Sewer | 1,430 | 1,463 | AA- | 1,380 | 1,531 | AA | |||||||||||||
Health Care | 1,321 | 1,358 | AA | 1,302 | 1,443 | AA- | |||||||||||||
Education | 1,127 | 1,159 | AA | 1,288 | 1,446 | AA | |||||||||||||
Leasing [2] | 903 | 933 | AA- | 1,028 | 1,133 | A+ | |||||||||||||
Sales Tax | 811 | 824 | AA | 862 | 966 | AA | |||||||||||||
Power | 750 | 768 | A+ | 892 | 976 | A+ | |||||||||||||
Housing | 236 | 231 | AA- | 333 | 344 | AA- | |||||||||||||
Other | 741 | 743 | A+ | 688 | 752 | AA- | |||||||||||||
Total Revenue | 9,222 | 9,388 | AA- | 9,425 | 10,390 | AA- | |||||||||||||
Total Municipal | $ | 12,235 | $ | 12,543 | AA- | $ | 13,001 | $ | 14,361 | AA- |
[1] | Pre-refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the remaining payment of principal and interest. |
[2] | Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases municipal facilities to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments. |
September 30, 2013 | December 31, 2012 | ||||||||||||
Amount | Percent | Amount | Percent | ||||||||||
Hedge funds | $ | 1,375 | 45.0 | % | $ | 1,309 | 43.4 | % | |||||
Mortgage and real estate funds | 525 | 17.2 | % | 501 | 16.6 | % | |||||||
Mezzanine debt funds | 93 | 3.0 | % | 108 | 3.6 | % | |||||||
Private equity and other funds | 1,066 | 34.8 | % | 1,097 | 36.4 | % | |||||||
Total | $ | 3,059 | 100 | % | $ | 3,015 | 100 | % |
September 30, 2013 | December 31, 2012 | ||||||||||||||||||||||||||||
Consecutive Months | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss [1] | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss [1] | |||||||||||||||||||||
Three months or less | 1,086 | $ | 3,696 | $ | 3,631 | $ | (65 | ) | 771 | $ | 3,964 | $ | 3,893 | $ | (71 | ) | |||||||||||||
Greater than three to six months | 1,283 | 10,770 | 10,253 | (517 | ) | 306 | 764 | 730 | (34 | ) | |||||||||||||||||||
Greater than six to nine months | 202 | 537 | 489 | (48 | ) | 183 | 157 | 142 | (15 | ) | |||||||||||||||||||
Greater than nine to eleven months | 132 | 951 | 838 | (113 | ) | 64 | 96 | 90 | (6 | ) | |||||||||||||||||||
Twelve months or more | 587 | 6,093 | 5,497 | (590 | ) | 687 | 7,850 | 6,894 | (936 | ) | |||||||||||||||||||
Total | 3,290 | $ | 22,047 | $ | 20,708 | $ | (1,333 | ) | 2,011 | $ | 12,831 | $ | 11,749 | $ | (1,062 | ) |
[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). |
September 30, 2013 | December 31, 2012 | ||||||||||||||||||||||||||||
Consecutive Months | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss [2] | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss [1] | |||||||||||||||||||||
Three months or less | 59 | $ | 321 | $ | 242 | $ | (79 | ) | 68 | $ | 54 | $ | 36 | $ | (18 | ) | |||||||||||||
Greater than three to six months | 37 | 617 | 478 | (139 | ) | 27 | 22 | 16 | (6 | ) | |||||||||||||||||||
Greater than six to nine months | 12 | 10 | 7 | (3 | ) | 20 | 72 | 55 | (17 | ) | |||||||||||||||||||
Greater than nine to eleven months | 5 | — | — | — | 12 | 33 | 25 | (8 | ) | ||||||||||||||||||||
Twelve months or more | 81 | 332 | 221 | (111 | ) | 157 | 1,329 | 877 | (452 | ) | |||||||||||||||||||
Total | 194 | $ | 1,280 | $ | 948 | $ | (332 | ) | 284 | $ | 1,510 | $ | 1,009 | $ | (501 | ) |
[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). |
September 30, 2013 | December 31, 2012 | ||||||||||||||||||||||||||||
Consecutive Months | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss [1] | Items | Cost or Amortized Cost | Fair Value | Unrealized Loss [1] | |||||||||||||||||||||
Three months or less | 5 | $ | 2 | $ | 1 | $ | (1 | ) | 20 | $ | 48 | $ | 22 | $ | (26 | ) | |||||||||||||
Greater than three to six months | 6 | 6 | 3 | (3 | ) | 4 | 1 | — | (1 | ) | |||||||||||||||||||
Greater than six to nine months | 1 | — | — | — | 4 | 2 | — | (2 | ) | ||||||||||||||||||||
Greater than nine to eleven months | 5 | 1 | — | (1 | ) | 7 | 1 | — | (1 | ) | |||||||||||||||||||
Twelve months or more | 15 | 19 | 8 | (11 | ) | 27 | 147 | 57 | (90 | ) | |||||||||||||||||||
Total | 32 | $ | 28 | $ | 12 | $ | (16 | ) | 62 | $ | 199 | $ | 79 | $ | (120 | ) |
[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). |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
ABS | $ | — | $ | — | $ | 4 | $ | 25 | ||||
CRE CDOs | — | 7 | 2 | 10 | ||||||||
CMBS | ||||||||||||
Bonds | 8 | 19 | 17 | 24 | ||||||||
IOs | 1 | 1 | 2 | 1 | ||||||||
Corporate | 5 | 4 | 15 | 28 | ||||||||
Equity | 7 | 4 | 13 | 65 | ||||||||
RMBS sub-prime | 5 | 2 | 6 | 10 | ||||||||
Other | — | — | — | 1 | ||||||||
Total | $ | 26 | $ | 37 | $ | 59 | $ | 164 |
Fixed maturities | $ | 24,905 | |
Short-term investments | 801 | ||
Cash | 175 | ||
Less: Derivative collateral | 230 | ||
Total | $ | 25,651 |
Fixed maturities | $ | 39,013 | |
Short-term investments | 2,624 | ||
Cash | 1,270 | ||
Less: Derivative collateral | 1,325 | ||
Less: Cash associated with Japan variable annuities | 431 | ||
Total | $ | 41,151 |
Contractholder Obligations | September 30, 2013 | ||
Total Life contractholder obligations | $ | 223,993 | |
Less: Separate account assets [1] | 139,876 | ||
International statutory separate accounts [1] | 24,064 | ||
General account contractholder obligations | $ | 60,052 | |
Composition of General Account Contractholder Obligations | |||
Contracts without a surrender provision and/or fixed payout dates [2] | $ | 27,891 | |
U.S. Fixed MVA annuities and Other [3] | 10,455 | ||
International Fixed MVA annuities | 1,654 | ||
Guaranteed investment contracts (“GIC”) [4] | 76 | ||
Other [5] | 19,975 | ||
General account contractholder obligations | $ | 60,052 |
[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 recorded in the general account (under U.S. GAAP), although these annuities are held in a statutory separate account, as the contractholders 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 a surrender. |
[5] | Surrenders of, or policy loans taken from, as applicable, these general account liabilities, which include the general account option for Talcott Resolution’s individual variable annuities and the variable life contracts of the former Individual Life business, the general account option for annuities of the former Retirement Plans business and universal life contracts sold by the former Individual Life business, 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 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. See Note 2 - Business Dispositions of Notes to Consolidated Financial Statements as to the sale of the Retirement Plans and Individual Life businesses and related transfer of invested assets in January 2013. |
September 30, 2013 | December 31, 2012 | Change | ||||||
Short-term debt (includes current maturities of long-term debt) | $ | 200 | $ | 320 | (38 | )% | ||
Long-term debt | 6,106 | 6,806 | (10 | )% | ||||
Total debt [1] | 6,306 | 7,126 | (12 | )% | ||||
Stockholders’ equity excluding accumulated other comprehensive income (loss), net of tax (“AOCI”) | 18,945 | 19,604 | (3 | )% | ||||
AOCI, net of tax | (17 | ) | 2,843 | (101 | )% | |||
Total stockholders’ equity | $ | 18,928 | $ | 22,447 | (16 | )% | ||
Total capitalization including AOCI | $ | 25,234 | $ | 29,573 | (15 | )% | ||
Debt to stockholders’ equity | 33 | % | 32 | % | ||||
Debt to capitalization | 25 | % | 24 | % |
[1] | Total debt of the Company excludes $83 and $161 of consumer notes as of September 30, 2013 and December 31, 2012, respectively. |
Nine Months Ended September 30, | ||||||
2013 | 2012 | |||||
Net cash provided by operating activities | $ | 903 | $ | 2,212 | ||
Net cash provided by (used for) investing activities | $ | 1,688 | $ | (1,862 | ) | |
Net cash used for financing activities | $ | (3,454 | ) | $ | (217 | ) |
Cash – end of period | $ | 1,422 | $ | 2,705 |
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- | BBB+ | A3 | |||
Hartford Life and Accident Insurance Company | A- | A- | A- | A3 | |||
Hartford Life and Annuity Insurance Company | A- | A- | BBB+ | Baa2 | |||
Other Ratings: | |||||||
The Hartford Financial Services Group, Inc.: | |||||||
Senior debt | bbb+ | BBB | BBB | Baa3 | |||
Commercial paper | AMB-2 | F2 | A-2 | P-3 |
September 30, 2013 | December 31, 2012 | |||||
U.S. life insurance subsidiaries, includes domestic captive insurance subsidiaries | $ | 6,885 | $ | 6,410 | ||
Property and casualty insurance subsidiaries | 7,782 | 7,645 | ||||
Total | $ | 14,667 | $ | 14,055 |
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 [1] | |||||||
(in millions) | |||||||||||
July 1, 2013 - July 31, 2013 | — | $ | — | — | $ | 1,084 | |||||
August 1, 2013 - August 31, 2013 | 6,559,131 | $ | 30.69 | 6,296,396 | $ | 879 | |||||
September 1, 2013 - September 30, 2013 | 1,178,840 | $ | 30.85 | 1,178,896 | $ | 842 | |||||
Total | 7,737,971 | $ | 30.71 | 7,475,292 | N/A |
[1] | On January 31, 2013 the Company’s Board of Directors authorized a $500 equity repurchase program. In June 2013, the Board of Directors approved a $750 increase in the Company's authorized equity repurchase program, bringing the total authorization to $1.25 billion. The Company’s repurchase authorization, which expires on December 31, 2014, permits purchases of common stock, as well as warrants or other derivative securities. Repurchases may be made in the open market, through derivative, accelerated share repurchase and other privately negotiated transactions, and through plans designed to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended. The timing of any future repurchases will be dependent upon several factors, including the market price of the Company’s securities, the Company’s capital position, consideration of the effect of any repurchases on the Company’s financial strength or credit ratings, and other corporate considerations. The repurchase program may be modified, extended or terminated by the Board of Directors at any time. |
See Exhibits Index on page | 141. |
The Hartford Financial Services Group, Inc. | ||||
(Registrant) | ||||
Date: | October 28, 2013 | /s/ Scott R. Lewis | ||
Scott R. Lewis | ||||
Senior Vice President and Controller | ||||
(Chief accounting officer and duly authorized signatory) |
Exhibit No. | Description | |
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. |
Form S-3 Registration No. | Form S-8 Registration Nos. | ||
333-190506 | 333-105707 | ||
333-49170 | |||
333-105706 | |||
333-34092 | |||
033-80665 | |||
333-12563 | |||
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: | October 28, 2013 | /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: | October 28, 2013 | /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: | October 28, 2013 | /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: | October 28, 2013 | /s/ Christopher J. Swift |
Christopher J. Swift | ||
Executive Vice President and Chief Financial Officer |
Investments and Derivative Instruments (Details Textual 2) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2013
|
Dec. 31, 2012
|
||||||
---|---|---|---|---|---|---|---|---|
Variable Interest Entity [Line Items] | ||||||||
Assets | $ 194 | $ 258 | ||||||
Other liabilities, variable interest entity liabilities | 36 | [1] | 89 | [1] | ||||
Company's maximum exposure to the loss of the contingent capital facility | 170 | [2] | 174 | [2] | ||||
Non-Consolidated VIEs [Member]
|
||||||||
Variable Interest Entity [Line Items] | ||||||||
Assets | 19 | 23 | ||||||
Other liabilities, variable interest entity liabilities | 18 | 23 | ||||||
Company's maximum exposure to the loss of the contingent capital facility | $ 3 | $ 3 | ||||||
|
Investments and Derivative Instruments (Details 11) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
GMWB reinsurance contracts | ||
Notional amount | $ 169,592 | $ 169,762 |
Fair Value | (664) | (279) |
UNITED STATES | GMWB hedging instruments [Member]
|
||
GMWB reinsurance contracts | ||
Notional amount | 19,131 | 18,622 |
Fair Value | 158 | 572 |
UNITED STATES | Macro Hedge Program [Member]
|
||
GMWB reinsurance contracts | ||
Notional amount | 6,599 | 7,442 |
Fair Value | 181 | 286 |
UNITED STATES | Macro Hedge Program [Member] | Stock Option [Member]
|
||
GMWB reinsurance contracts | ||
Notional amount | 6,599 | 7,442 |
Fair Value | 181 | 286 |
UNITED STATES | Customized swaps [Member] | GMWB hedging instruments [Member]
|
||
GMWB reinsurance contracts | ||
Notional amount | 7,659 | 7,787 |
Fair Value | 111 | 238 |
UNITED STATES | Equity swaps, options and futures [Member] | GMWB hedging instruments [Member]
|
||
GMWB reinsurance contracts | ||
Notional amount | 4,548 | 5,130 |
Fair Value | 107 | 267 |
UNITED STATES | Interest rate swaps and futures [Member] | GMWB hedging instruments [Member]
|
||
GMWB reinsurance contracts | ||
Notional amount | 6,924 | 5,705 |
Fair Value | $ (60) | $ 67 |
Restructuring and Other Costs (Details 2) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2013
|
Sep. 30, 2012
|
Sep. 30, 2013
|
Sep. 30, 2012
|
|
Restructuring Cost and Reserve [Line Items] | ||||
Balance, beginning of period | $ 70 | $ 17 | ||
Accruals/provisions | 15 | 53 | 52 | 110 |
Payments/ write-offs | (81) | (96) | ||
Balance, end of period | 41 | 31 | 41 | 31 |
Severance Benefit and Related Costs [Member]
|
||||
Restructuring Cost and Reserve [Line Items] | ||||
Balance, beginning of period | 70 | 12 | ||
Accruals/provisions | 22 | 76 | ||
Payments/ write-offs | (68) | (67) | ||
Balance, end of period | 24 | 21 | 24 | 21 |
Professional Fees [Member]
|
||||
Restructuring Cost and Reserve [Line Items] | ||||
Balance, beginning of period | 0 | 0 | ||
Accruals/provisions | 13 | 28 | ||
Payments/ write-offs | (13) | (19) | ||
Balance, end of period | 0 | 9 | 0 | 9 |
Asset Impairment Charges [Member]
|
||||
Restructuring Cost and Reserve [Line Items] | ||||
Balance, beginning of period | 0 | 0 | ||
Accruals/provisions | 17 | 5 | ||
Payments/ write-offs | 0 | (5) | ||
Balance, end of period | 17 | 0 | 17 | 0 |
Other Contract Termination Charges [Member]
|
||||
Restructuring Cost and Reserve [Line Items] | ||||
Balance, beginning of period | 0 | 5 | ||
Accruals/provisions | 0 | 1 | ||
Payments/ write-offs | 0 | (5) | ||
Balance, end of period | $ 0 | $ 1 | $ 0 | $ 1 |
Separate Accounts, Death Benefits and Other Insurance Benefit Features (Details) (USD $)
In Millions, unless otherwise specified |
9 Months Ended | |
---|---|---|
Sep. 30, 2013
|
Sep. 30, 2012
|
|
Guaranteed Minimum Death Benefit [Member] | U.S. [Member]
|
||
Changes in the gross U.S. GMDB, International GMDB/GMIB, and UL secondary guarantee benefits | ||
Liability, balance as of January 1 | $ 918 | $ 1,104 |
Incurred | 138 | 159 |
Paid | (105) | (141) |
Unlock | (112) | (198) |
Liabilities for Guarantees on Long-Duration contracts, Reinsurance Transaction Impact | 0 | |
Currency translation adjustment | ||
Liability balance as of September 30 | 839 | 924 |
Reinsurance recoverable asset, as of January 1 | 608 | 724 |
Incurred | 79 | 90 |
Paid | (76) | (90) |
Unlock | 73 | 108 |
Reinsurance Recoverable Asset Impact of Reinsurance Transaction | ||
Currency translation adjustment | ||
Reinsurance recoverable asset, as of September 30 | 538 | 616 |
GMDB/GMIB [Member] | International [Member]
|
||
Changes in the gross U.S. GMDB, International GMDB/GMIB, and UL secondary guarantee benefits | ||
Liability, balance as of January 1 | 661 | 975 |
Incurred | 70 | 100 |
Paid | (58) | (146) |
Unlock | (221) | 13 |
Liabilities for Guarantees on Long-Duration contracts, Reinsurance Transaction Impact | 0 | |
Currency translation adjustment | (77) | (17) |
Liability balance as of September 30 | 375 | 925 |
Reinsurance recoverable asset, as of January 1 | 36 | 40 |
Incurred | 7 | 8 |
Paid | (12) | (21) |
Unlock | (7) | (18) |
Reinsurance Recoverable Asset Impact of Reinsurance Transaction | ||
Currency translation adjustment | (4) | |
Reinsurance recoverable asset, as of September 30 | 34 | 45 |
Universal Life [Member] | UL Secondary Guarantees [Member]
|
||
Changes in the gross U.S. GMDB, International GMDB/GMIB, and UL secondary guarantee benefits | ||
Liability, balance as of January 1 | 363 | 228 |
Incurred | 238 | 84 |
Paid | ||
Unlock | 21 | |
Liabilities for Guarantees on Long-Duration contracts, Reinsurance Transaction Impact | 1,145 | |
Currency translation adjustment | ||
Liability balance as of September 30 | 1,746 | 333 |
Reinsurance recoverable asset, as of January 1 | 21 | 22 |
Incurred | 240 | (2) |
Paid | ||
Unlock | ||
Reinsurance Recoverable Asset Impact of Reinsurance Transaction | 1,485 | |
Currency translation adjustment | ||
Reinsurance recoverable asset, as of September 30 | $ 1,746 | $ 20 |
Stock Compensation Plans (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2013
|
Sep. 30, 2012
|
Sep. 30, 2013
|
Sep. 30, 2012
|
|
Stock based Compensation Plans | ||||
Stock-based compensation plans expense | $ 19 | $ 20 | $ 51 | $ 73 |
Income tax benefit | (7) | (7) | (18) | (25) |
Total stock-based compensation plans expense, after-tax | 12 | 13 | 33 | 48 |
Stock Compensation Plans (Textual) [Abstract] | ||||
Total compensation cost related to non-vested awards not yet recognized | $ 95 | $ 95 | ||
Weighted average period of compensation cost recognized (in years) | 1 year 292 days |
Commitments and Contingencies
|
9 Months Ended |
---|---|
Sep. 30, 2013
|
|
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the establishment of unpaid loss and loss adjustment expense reserves. Subject to the uncertainties discussed below under the caption “Asbestos and Environmental Claims,” management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of The Hartford. The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. These actions include, among others, and in addition to the matters described below, putative state and federal class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper underwriting practices in connection with various kinds of insurance policies, such as personal and commercial automobile, property, disability, life and inland marine. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims or other allegedly unfair or improper business practices. Like many other insurers, The Hartford also has been joined in actions by asbestos plaintiffs asserting, among other things, that insurers had a duty to protect the public from the dangers of asbestos and that insurers committed unfair trade practices by asserting defenses on behalf of their policyholders in the underlying asbestos cases. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for estimated losses, will not be material to the consolidated financial condition of The Hartford. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, the outcome in certain matters could, from time to time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual periods. 11. Commitments and Contingencies (continued) Apart from the inherent difficulty of predicting litigation outcomes, the Mutual Funds Litigation identified below purports to seek substantial damages for unsubstantiated conduct spanning a multi-year period based on novel applications of complex legal theories. The alleged damages are not quantified or factually supported in the complaint, and, in any event, the Company’s experience shows that demands for damages often bear little relation to a reasonable estimate of potential loss. The matter is in the earliest stages of litigation, with no substantive legal decisions by the court defining the scope of the claims or the potentially available damages; fact discovery is also in its early stages. Accordingly, management cannot reasonably estimate the possible loss or range of loss, if any, or predict the timing of the eventual resolution of this matter. Mutual Funds Litigation — In February 2011, a derivative action was brought on behalf of six Hartford retail mutual funds in the United States District Court for the District of New Jersey, alleging that Hartford Investment Financial Services, LLC (“HIFSCO”), an indirect subsidiary of the Company, received excessive advisory and distribution fees in violation of its statutory fiduciary duty under Section 36(b) of the Investment Company Act of 1940. HIFSCO moved to dismiss and, in September 2011, the motion was granted in part and denied in part, with leave to amend the complaint. In November 2011, plaintiffs filed an amended complaint on behalf of The Hartford Global Health Fund, The Hartford Conservative Allocation Fund, The Hartford Growth Opportunities Fund, The Hartford Inflation Plus Fund, The Hartford Advisors Fund, and The Hartford Capital Appreciation Fund. Plaintiffs seek to rescind the investment management agreements and distribution plans between HIFSCO and these funds and to recover the total fees charged thereunder or, in the alternative, to recover any improper compensation HIFSCO received, in addition to lost earnings. HIFSCO filed a partial motion to dismiss the amended complaint and, in December 2012, the court dismissed without prejudice the claims regarding distribution fees and denied the motion with respect to the advisory fees claims. HIFSCO disputes the allegations and intends to defend vigorously. Asbestos and Environmental Claims – As discussed in Note 12, Commitments and Contingencies, of the Notes to Consolidated Financial Statements under the caption “Asbestos and Environmental Claims”, included in the Company’s 2012 Form 10-K Annual Report, The Hartford continues to receive asbestos and environmental claims that involve significant uncertainty regarding policy coverage issues. Regarding these claims, The Hartford continually reviews its overall reserve levels and reinsurance coverages, as well as the methodologies it uses to estimate its exposures. Because of the significant uncertainties that limit the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses, particularly those related to asbestos, the ultimate liabilities may exceed the currently recorded reserves. Any such additional liability cannot be reasonably estimated now but could be material to The Hartford’s consolidated operating results and liquidity. Derivative Commitments Certain of the Company’s derivative agreements contain provisions that are tied to the financial strength ratings of the individual legal entity that entered into the derivative agreement as set by nationally recognized statistical rating agencies. If the legal entity’s financial strength were to fall below certain ratings, the counterparties to the derivative agreements could demand immediate and ongoing full collateralization and in certain instances demand immediate settlement of all outstanding derivative positions traded under each impacted bilateral agreement. The settlement amount is determined by netting the derivative positions transacted under each agreement. If the termination rights were to be exercised by the counterparties, it could impact the legal entity’s ability to conduct hedging activities by increasing the associated costs and decreasing the willingness of counterparties to transact with the legal entity. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a net liability position as of September 30, 2013 is $1.1 billion. Of this $1.1 billion the legal entities have posted collateral of $1.3 billion in the normal course of business. In addition, the Company has posted collateral of $44 associated with a customized GMWB derivative. Based on derivative market values as of September 30, 2013 a downgrade of one level below the current financial strength ratings by either Moody’s or S&P could require approximately an additional $6 to be posted as collateral. Based on derivative market values as of September 30, 2013 a downgrade by either Moody’s or S&P of two levels below the legal entities’ current financial strength ratings could require approximately an additional $27 of assets to be posted as collateral. These collateral amounts could change as derivative market values change, as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated. The nature of the collateral that we would post, if required, would be primarily in the form of U.S. Treasury bills, U.S. Treasury notes and government agencies. On June 17, 2013 S&P lowered its counterparty credit and insurer financial strength ratings on Hartford Life Insurance Company to BBB+. Given this downgrade action, termination rating triggers of one derivative counterparty relationship was impacted. This counterparty has the right to terminate this relationship and would have to settle the outstanding derivatives prior to exercising its termination right. The Company is in the process of re-negotiating the rating trigger which it expects to successfully complete. Accordingly, the Company's hedging programs have not been adversely impacted by the announcement of the downgrade of Hartford Life Insurance Company. As of September 30, 2013 the notional amount and fair value related to this counterparty is $1.3 billion and $(6), respectively. |
Fair Value Measurements (Details) (USD $)
|
3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2013
|
Dec. 31, 2012
|
Sep. 30, 2013
Other policyholder funds and benefits payable [Member]
|
Sep. 30, 2013
Other policyholder funds and benefits payable [Member]
|
Sep. 30, 2013
Consumer Notes [Member]
|
Sep. 30, 2013
Guaranteed Minimum Withdrawal Benefit [Member]
Other policyholder funds and benefits payable [Member]
U.S. [Member]
|
Sep. 30, 2013
Guaranteed Minimum Withdrawal Benefit [Member]
Other policyholder funds and benefits payable [Member]
International [Member]
|
Sep. 30, 2013
Guaranteed Minimum Withdrawal Benefit [Member]
Other policyholder funds and benefits payable [Member]
International [Member]
|
Sep. 30, 2013
Other Living Benefits [Member]
Other policyholder funds and benefits payable [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Other policyholder funds and benefits payable [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Other policyholder funds and benefits payable [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Consumer Notes [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Consumer Notes [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Other Guaranteed Living Benefits [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Other Guaranteed Living Benefits [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Equity linked notes [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Equity linked notes [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Macro Hedge Program [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Macro Hedge Program [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Hedging Derivatives [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Hedging Derivatives [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Hedging Derivatives [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Hedging Derivatives [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Derivative Liabilities [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Derivative Liabilities [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Credit derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Credit derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Equity derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Equity derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Foreign exchange derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Foreign exchange derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Interest rate derivatives [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Interest rate derivatives [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Other Derivatives Contracts [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Other Derivatives Contracts [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
ABS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
ABS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Collateralized Debt Obligations [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Collateralized Debt Obligations [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
CMBS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
CMBS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Corporate [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Corporate [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Foreign Government Debt Securities [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Foreign Government Debt Securities [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Municipal [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Municipal [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
RMBS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
RMBS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
U.S. Treasuries [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
U.S. Treasuries [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Other policyholder funds and benefits payable [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Other policyholder funds and benefits payable [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Consumer Notes [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Consumer Notes [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Other Guaranteed Living Benefits [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Other Guaranteed Living Benefits [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Equity linked notes [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Equity linked notes [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Macro Hedge Program [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Macro Hedge Program [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Hedging Derivatives [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Hedging Derivatives [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Hedging Derivatives [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Hedging Derivatives [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Derivative Liabilities [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Derivative Liabilities [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Credit derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Credit derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Equity derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Equity derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Foreign exchange derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Foreign exchange derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Interest rate derivatives [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Interest rate derivatives [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Other Derivatives Contracts [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Other Derivatives Contracts [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
ABS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
ABS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Collateralized Debt Obligations [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Collateralized Debt Obligations [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
CMBS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
CMBS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Corporate [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Corporate [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Foreign Government Debt Securities [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Foreign Government Debt Securities [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Municipal [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
Municipal [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
RMBS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
RMBS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
U.S. Treasuries [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 1 [Member]
U.S. Treasuries [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Other policyholder funds and benefits payable [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Other policyholder funds and benefits payable [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Consumer Notes [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Consumer Notes [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Other Guaranteed Living Benefits [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Other Guaranteed Living Benefits [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Equity linked notes [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Equity linked notes [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Macro Hedge Program [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Macro Hedge Program [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Hedging Derivatives [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Hedging Derivatives [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Hedging Derivatives [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Hedging Derivatives [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Derivative Liabilities [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Derivative Liabilities [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Credit derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Credit derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Equity derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Equity derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Foreign exchange derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Foreign exchange derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Interest rate derivatives [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Interest rate derivatives [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Other Derivatives Contracts [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Other Derivatives Contracts [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
ABS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
ABS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Collateralized Debt Obligations [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Collateralized Debt Obligations [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
CMBS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
CMBS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Corporate [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Corporate [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Foreign Government Debt Securities [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Foreign Government Debt Securities [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Municipal [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
Municipal [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
RMBS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
RMBS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
U.S. Treasuries [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 2 [Member]
U.S. Treasuries [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Other policyholder funds and benefits payable [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Other policyholder funds and benefits payable [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Consumer Notes [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Consumer Notes [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Other Guaranteed Living Benefits [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Other Guaranteed Living Benefits [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Equity linked notes [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Equity linked notes [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Macro Hedge Program [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Macro Hedge Program [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Hedging Derivatives [Member]
International [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Hedging Derivatives [Member]
International [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Hedging Derivatives [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Hedging Derivatives [Member]
Guaranteed Minimum Withdrawal Benefit [Member]
U.S. [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Derivative Liabilities [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Derivative Liabilities [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Credit derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Credit derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Equity derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Equity derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Foreign exchange derivative [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Foreign exchange derivative [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Interest rate derivatives [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Interest rate derivatives [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Other Derivatives Contracts [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Other Derivatives Contracts [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
ABS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
ABS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Collateralized Debt Obligations [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Collateralized Debt Obligations [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
CMBS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
CMBS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Corporate [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Corporate [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Foreign Government Debt Securities [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Foreign Government Debt Securities [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Municipal [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
Municipal [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
RMBS [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
RMBS [Member]
|
Sep. 30, 2013
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
U.S. Treasuries [Member]
|
Dec. 31, 2012
Fair Value, Measurements, Recurring [Member]
Level 3 [Member]
U.S. Treasuries [Member]
|
Sep. 30, 2013
Equity Linked Notes [Member]
Other policyholder funds and benefits payable [Member]
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Transfer to from Liabilities Held for Sale | $ 0 | $ 43,000,000 | [1],[2],[3] | $ 0 | $ 0 | $ 0 | $ 43,000,000 | [1],[2],[3] | $ 0 | $ 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets accounted for at fair value on a recurring basis | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total fixed maturities | 64,023,000,000 | 85,922,000,000 | 64,023,000,000 | 85,922,000,000 | 2,362,000,000 | 2,763,000,000 | 2,550,000,000 | 3,040,000,000 | 4,489,000,000 | 6,321,000,000 | 28,770,000,000 | 44,049,000,000 | 3,968,000,000 | 4,136,000,000 | 12,543,000,000 | 14,361,000,000 | 5,086,000,000 | 7,480,000,000 | 4,255,000,000 | 3,772,000,000 | 370,000,000 | 115,000,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 370,000,000 | 115,000,000 | 59,026,000,000 | 80,069,000,000 | 2,156,000,000 | 2,485,000,000 | 1,752,000,000 | 2,096,000,000 | 3,698,000,000 | 5,462,000,000 | 27,490,000,000 | 42,048,000,000 | 3,895,000,000 | 4,080,000,000 | 12,410,000,000 | 14,134,000,000 | 3,740,000,000 | 6,107,000,000 | 3,885,000,000 | 3,657,000,000 | 4,627,000,000 | 5,738,000,000 | 206,000,000 | 278,000,000 | 798,000,000 | 944,000,000 | 791,000,000 | 859,000,000 | 1,280,000,000 | 2,001,000,000 | 73,000,000 | 56,000,000 | 133,000,000 | 227,000,000 | 1,346,000,000 | 1,373,000,000 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed maturities, FVO | 994,000,000 | 1,087,000,000 | 994,000,000 | 1,087,000,000 | 0 | 8,000,000 | 783,000,000 | 865,000,000 | 211,000,000 | 214,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity securities, trading | 22,343,000,000 | 28,933,000,000 | 22,343,000,000 | 28,933,000,000 | 11,000,000 | 1,847,000,000 | 22,332,000,000 | 27,086,000,000 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity securities, AFS | 862,000,000 | 890,000,000 | 862,000,000 | 890,000,000 | 407,000,000 | 337,000,000 | 366,000,000 | 469,000,000 | 89,000,000 | 84,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Assets | 560,000,000 | 36,000,000 | 160,000,000 | 186,000,000 | 314,000,000 | 448,000,000 | 79,000,000 | 1,045,000,000 | 28,000,000 | (19,000,000) | 6,000,000 | 32,000,000 | (51,000,000) | 104,000,000 | 5,000,000 | 235,000,000 | 19,000,000 | 23,000,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 163,000,000 | (53,000,000) | 0 | 0 | 257,000,000 | 318,000,000 | (18,000,000) | 629,000,000 | 9,000,000 | (8,000,000) | (1,000,000) | 0 | (51,000,000) | 104,000,000 | (33,000,000) | 268,000,000 | 0 | 0 | 397,000,000 | 89,000,000 | 160,000,000 | 186,000,000 | 57,000,000 | 130,000,000 | 97,000,000 | 416,000,000 | 19,000,000 | (11,000,000) | 7,000,000 | 32,000,000 | 0 | 0 | 38,000,000 | (33,000,000) | 19,000,000 | 23,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-term investments | 4,146,000,000 | 4,581,000,000 | 4,146,000,000 | 4,581,000,000 | 546,000,000 | 342,000,000 | 3,600,000,000 | 4,239,000,000 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Limited Partnerships and Other Alternative Investments | 3,059,000,000 | 3,015,000,000 | 996,000,000 | 907,000,000 | 0 | 0 | 660,000,000 | 593,000,000 | 336,000,000 | 314,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance recoverable for U.S. GMWB | 46,000,000 | 191,000,000 | 0 | 0 | 0 | 0 | 46,000,000 | 191,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Embedded Derivative, Fair Value of Embedded Derivative Asset | 60,000,000 | 0 | 60,000,000 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Separate account assets | 136,459,000,000 | 138,509,000,000 | 98,161,000,000 | 97,988,000,000 | 37,563,000,000 | 39,938,000,000 | 735,000,000 | 583,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets Held-for-sale | 2,203,000,000 | 1,732,000,000 | 471,000,000 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities held for sale | (31,000,000) | 0 | 0 | (31,000,000) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets accounted for at fair value on a recurring basis | 232,692,000,000 | 262,065,000,000 | 101,227,000,000 | 100,637,000,000 | 125,024,000,000 | 153,888,000,000 | 6,441,000,000 | 7,540,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Percentage of level to total | 100.00% | 100.00% | 44.00% | 38.00% | 54.00% | 59.00% | 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 | $ (1,355,000,000) | $ (1,483,000,000) | $ (219,000,000) | $ (1,304,000,000) | $ (1,000,000) | $ (2,000,000) | [4] | $ (210,000,000) | $ (1,249,000,000) | $ 1,000,000 | $ (50,000,000) | $ 3,000,000 | $ 2,000,000 | $ (13,000,000) | $ (7,000,000) | $ 21,000,000 | $ 100,000,000 | $ (403,000,000) | $ (279,000,000) | $ 79,000,000 | $ 536,000,000 | $ (1,104,000,000) | $ (177,000,000) | [5] | $ (27,000,000) | $ (18,000,000) | $ 16,000,000 | $ 25,000,000 | $ (212,000,000) | $ (24,000,000) | $ (578,000,000) | $ (517,000,000) | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [4],[6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [4],[6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [6] | $ 0 | $ 0 | [6] | $ (1,063,000,000) | $ (686,000,000) | [7] | $ 0 | $ 0 | [7] | $ 0 | $ 0 | [4],[7] | $ 0 | $ 0 | [7] | $ 0 | $ 0 | [7] | $ 0 | $ 0 | [7] | $ 0 | $ 0 | [7] | $ 0 | $ 0 | [7] | $ (245,000,000) | $ (217,000,000) | [7] | $ (43,000,000) | $ 106,000,000 | [7] | $ (1,063,000,000) | $ (686,000,000) | [4],[7] | $ (11,000,000) | $ (33,000,000) | [7] | $ 0 | [7] | $ (212,000,000) | $ (24,000,000) | [7] | $ (552,000,000) | $ (518,000,000) | [7] | $ (292,000,000) | $ (797,000,000) | [8] | $ (219,000,000) | $ (1,304,000,000) | [8] | $ (1,000,000) | $ (2,000,000) | [4],[8] | $ (210,000,000) | $ (1,249,000,000) | [8] | $ 1,000,000 | $ (50,000,000) | [8] | $ 3,000,000 | $ 2,000,000 | [8] | $ (13,000,000) | $ (7,000,000) | [8] | $ 21,000,000 | $ 100,000,000 | [8] | $ (158,000,000) | $ (62,000,000) | [8] | $ 122,000,000 | $ 430,000,000 | [8] | $ (41,000,000) | $ 509,000,000 | [4],[8] | $ (16,000,000) | $ 15,000,000 | [8] | $ 16,000,000 | $ 25,000,000 | [8] | $ 0 | $ 0 | [8] | $ (26,000,000) | $ 1,000,000 | [8] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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