Investments and Derivative Instruments

3 Months Ended

Mar. 31, 2014

Investments and Derivative Instruments [Abstract]

Investments and Derivative Instruments

Investments and Derivative Instruments

Net Realized Capital Gains (Losses)

	Three Months Ended March 31,
(Before tax)	2014			2013
Gross gains on sales [1]	$	197		$	1,717
Gross losses on sales	(148		)	(82		)
Net OTTI losses recognized in earnings	(22		)	(21		)
Valuation allowances on mortgage loans	—			—
Japanese fixed annuity contract hedges, net [2]	(9		)	3
Periodic net coupon settlements on credit derivatives/Japan	3			(6		)
Results of variable annuity hedge program
GMWB derivatives, net	15			47
U.S. macro hedge program	(10		)	(85		)
Total U.S. program	5			(38		)
International program [3]	(32		)	(171		)
Total results of variable annuity hedge program	(27		)	(209		)
Other, net [4]	(80		)	204
Net realized capital gains (losses)	$	(86	)	$	1,606

[1] Includes $1.5 billion of gains relating to the sales of the Retirement Plans and Individual Life businesses for the three months endedMarch 31, 2013.

[2] Includes for the three months ended March 31, 2014 and 2013, transactional foreign currency re-valuation related to the Japan fixed annuity

product of $(30) and $151, respectively, as well as the change in value related to the derivative hedging instruments and the Japan

government FVO securities of $21 and $(148), respectively.

[3] Includes $6 and (34) of transactional foreign currency re-valuation for the three months ended March 31, 2014 and 2013, respectively.

[4] For the three months ended March 31, 2014 and 2013, other, net gains and losses includes $(11) and $134, respectively, of transactional

foreign currency re-valuation associated with the internal reinsurance of the Japan GMIB variable annuity business, which is offset in AOCI. Also includes for the three months ended March 31, 2014 and 2013, $(28) and $116, respectively, of other transactional foreign currency revaluation, primarily associated with the internal reinsurance of the Japan 3 wins variable annuity business, of which a portion is offset within realized gains and losses by the change in value of the associated hedging derivatives. Includes $71 of gains relating to the sales of the Retirement Plans and Individual Life businesses for the three months endedMarch 31, 2013.

Net realized capital gains and losses from investment sales are reported as a component of revenues and are determined on a specific identification basis. Before tax, net gains and losses on sales and impairments previously reported as unrealized gains in AOCI were $28 and $1.6 billion, respectively, for the three months endedMarch 31, 2014 and 2013. Proceeds from sales of AFS securities totaled $8.6 billion and $8.7 billion, respectively, for the three months endedMarch 31, 2014 and 2013.

Other-Than-Temporary Impairment Losses

The following table presents a roll-forward of the Company’s cumulative credit impairments on debt securities held.

	Three Months Ended March 31,
(Before-tax)	2014			2013
Balance as of beginning of period	$	(552	)	$	(1,013	)
Additions for credit impairments recognized on [1]:
Securities not previously impaired	(7		)	(8		)
Securities previously impaired	(11		)	(2		)
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	33			114
Securities due to an increase in expected cash flows	6			3
Balance as of end of period	$	(531	)	$	(906	)

[1] These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.

Available-for-Sale Securities

The following table presents the Company’s AFS securities by type.

	March 31, 2014												December 31, 2013
	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	$	2,274	$	29	$	(51	)	$	2,252	$	(2	)	$	2,404	$	25	$	(64	)	$	2,365	$	(2	)
CDOs [2]	2,343		107		(53		)	2,394		—			2,340		108		(59		)	2,387		—
CMBS	4,411		198		(41		)	4,568		(7		)	4,288		216		(58		)	4,446		(6		)
Corporate	27,037		2,211		(208		)	29,040		(4		)	27,013		1,823		(346		)	28,490		(7		)
Foreign govt./govt. agencies	4,092		73		(115		)	4,050		—			4,228		52		(176		)	4,104		—
Municipal	12,052		688		(58		)	12,682		—			11,932		425		(184		)	12,173		—
RMBS	4,515		95		(54		)	4,556		(3		)	4,639		90		(82		)	4,647		(4		)
U.S. Treasuries	3,731		86		(20		)	3,797		—			3,797		7		(59		)	3,745		—
Total fixed maturities, AFS	60,455		3,487		(600		)	63,339		(16		)	60,641		2,746		(1,028		)	62,357		(19		)
Equity securities, AFS	745		72		(38		)	779		—			850		67		(49		)	868		—
Total AFS securities	$	61,200	$	3,559	$	(638	)	$	64,118	$	(16	)	$	61,491	$	2,813	$	(1,077	)	$	63,225	$	(19	)

[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 March 31, 2014 and December 31, 2013.

[2] Gross unrealized gains (losses) exclude the change in fair value of bifurcated embedded derivative features of certain securities. Subsequent changes in fair value will be recorded in net realized capital gains (losses).

The following table presents the Company’s fixed maturities, AFS, by contractual maturity year.

	March 31, 2014
Contractual Maturity	Amortized Cost		Fair Value
One year or less	$	2,580	$	2,618
Over one year through five years	11,931		12,526
Over five years through ten years	10,294		10,770
Over ten years	22,107		23,655
Subtotal	46,912		49,569
Mortgage-backed and asset-backed securities	13,543		13,770
Total fixed maturities, AFS	$	60,455	$	63,339

Estimated maturities may differ from contractual maturities due to security call or prepayment provisions. Due to the potential for variability in payment speeds (i.e. prepayments or extensions), mortgage-backed and asset-backed securities are not categorized by contractual maturity.

Securities Unrealized Loss Aging

The following tables present the Company’s unrealized loss aging for AFS securities by type and length of time the security was in a continuous unrealized loss position.

	March 31, 2014
	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	$	595	$	592	$	(3	)	$	454	$	406	$	(48	)	$	1,049	$	998	$	(51	)
CDOs [1]	222		219		(3		)	1,842		1,789		(50		)	2,064		2,008		(53		)
CMBS	619		605		(14		)	567		540		(27		)	1,186		1,145		(41		)
Corporate	2,884		2,812		(72		)	1,241		1,105		(136		)	4,125		3,917		(208		)
Foreign govt./govt. agencies	1,173		1,139		(34		)	390		309		(81		)	1,563		1,448		(115		)
Municipal	1,089		1,053		(36		)	252		230		(22		)	1,341		1,283		(58		)
RMBS	1,292		1,274		(18		)	533		497		(36		)	1,825		1,771		(54		)
U.S. Treasuries	1,275		1,260		(15		)	33		28		(5		)	1,308		1,288		(20		)
Total fixed maturities, AFS	9,149		8,954		(195		)	5,312		4,904		(405		)	14,461		13,858		(600		)
Equity securities, AFS	100		94		(6		)	217		185		(32		)	317		279		(38		)
Total securities in an unrealized loss position	$	9,249	$	9,048	$	(201	)	$	5,529	$	5,089	$	(437	)	$	14,778	$	14,137	$	(638	)

	December 31, 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	$	893	$	888	$	(5	)	$	477	$	418	$	(59	)	$	1,370	$	1,306	$	(64	)
CDOs [1]	137		135		(2		)	1,933		1,874		(57		)	2,070		2,009		(59		)
CMBS	812		788		(24		)	610		576		(34		)	1,422		1,364		(58		)
Corporate	4,922		4,737		(185		)	1,225		1,064		(161		)	6,147		5,801		(346		)
Foreign govt./govt. agencies	2,961		2,868		(93		)	343		260		(83		)	3,304		3,128		(176		)
Municipal	3,150		2,994		(156		)	190		162		(28		)	3,340		3,156		(184		)
RMBS	2,046		2,008		(38		)	591		547		(44		)	2,637		2,555		(82		)
U.S. Treasuries	2,914		2,862		(52		)	33		26		(7		)	2,947		2,888		(59		)
Total fixed maturities, AFS	17,835		17,280		(555		)	5,402		4,927		(473		)	23,237		22,207		(1,028		)
Equity securities, AFS	196		188		(8		)	223		182		(41		)	419		370		(49		)
Total securities in an unrealized loss position	$	18,031	$	17,468	$	(563	)	$	5,625	$	5,109	$	(514	)	$	23,656	$	22,577	$	(1,077	)

[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).

As of March 31, 2014, AFS securities in an unrealized loss position, consisted of 2,713 securities, primarily related to corporate securities, municipal securities, and foreign government and government agencies, which are depressed primarily due to an increase in interest rates since the securities were purchased and/or declines in the value of the currency in which the assets are denominated. As of March 31, 2014, 94% of these securities were depressed less than 20% of cost or amortized cost. The decrease in unrealized losses during 2014 was primarily attributable to a decrease in interest rates and tighter credit spreads.

Most of the securities depressed for twelve months or more relate to certain floating rate corporate securities with greater than 10 years to maturity concentrated in the financial services sector, foreign government and government agencies, and structured securities with exposure to commercial and residential real estate. Corporate financial services securities are primarily depressed because the securities have floating-rate coupons and/or long-dated maturities. Unrealized losses on foreign government securities are primarily due to depreciation of the Japanese yen in relation to the U.S. dollar. Although credit spreads have continued to tighten over the past five years, current market spreads continue to be wider than spreads at the securities' respective purchase dates for structured securities with exposure to commercial and residential real estate largely due to reduced liquidity as a result of economic and market uncertainties regarding future performance of certain commercial and residential real estate backed securities. The majority of these securities have a floating-rate coupon referenced to a market index that has declined substantially. In addition, equity securities include investment grade perpetual preferred securities that contain “debt-like” characteristics where the decline in fair value is not attributable to issuer-specific credit deterioration, none of which have, nor are expected to, miss a periodic dividend payment. These securities have been depressed due to the securities’ floating-rate coupon in the current low interest rate environment, general market credit spread widening since the date of purchase and the long-dated nature of the securities. The Company neither has an intention to sell nor does it expect to be required to sell the securities outlined above.

Mortgage Loans

	March 31, 2014							December 31, 2013
	Amortized Cost [1]		Valuation Allowance			Carrying Value		Amortized Cost [1]		Valuation Allowance			Carrying Value
Total commercial mortgage loans	$	5,724	$	(17	)	$	5,707	$	5,665	$	(67	)	$	5,598

[1] Amortized cost represents carrying value prior to valuation allowances, if any.

As of March 31, 2014 and December 31, 2013, the carrying value of mortgage loans associated with the valuation allowance was $198 and $191, respectively. Included in the table above are mortgage loans held-for-sale with a carrying value and valuation allowance of $48 and $1, respectively, as of March 31, 2014 and $61 and $3, respectively, as of December 31, 2013. The carrying value of these loans is included in mortgage loans in the Company’s Condensed Consolidated Balance Sheets. As of March 31, 2014, loans within the Company’s mortgage loan portfolio that have had extensions or restructurings other than what is allowable under the original terms of the contract are immaterial.

The following table presents the activity within the Company’s valuation allowance for mortgage loans. These loans have been evaluated both individually and collectively for impairment. Loans evaluated collectively for impairment are immaterial.

	2014			2013
Balance, as of January 1	$	(67	)	$	(68	)
(Additions)/Reversals	—			(2		)
Deductions	50			2
Balance, as of March 31	$	(17	)	$	(68	)

The decline in the valuation allowance as compared to December 31, 2013 resulted from the sale of the underlying collateral supporting a commercial mortgage loan. The loan was fully reserved for and the Company did not recover any funds as a result of the sale.

The weighted-average LTV ratio of the Company’s commercial mortgage loan portfolio was 58% as of March 31, 2014, while the weighted-average LTV ratio at origination of these loans was 63%. LTV ratios compare the loan amount to the value of the underlying property collateralizing the loan. The loan values are updated no less than annually through property level reviews of the portfolio. Factors considered in the property valuation include, but are not limited to, actual and expected property cash flows, geographic market data and capitalization rates. DSCR compare a property’s net operating income to the borrower’s principal and interest payments. The weighted average DSCR of the Company’s commercial mortgage loan portfolio was 2.35x as of March 31, 2014. The Company held no delinquent commercial mortgage loans as of March 31, 2014.

The following table presents the carrying value of the Company’s commercial mortgage loans by LTV and DSCR.

Commercial Mortgage Loans Credit Quality
	March 31, 2014			December 31, 2013
Loan-to-value	Carrying Value		Avg. Debt-Service Coverage Ratio	Carrying Value		Avg. Debt-Service Coverage Ratio
Greater than 80%	$	95	0.96x	$	101	0.99x
65% - 80%	1,047		1.90x	1,195		1.82x
Less than 65%	4,565		2.49x	4,302		2.53x
Total commercial mortgage loans	$	5,707	2.35x	$	5,598	2.34x

The following tables present the carrying value of the Company’s mortgage loans by region and property type.

Mortgage Loans by Region
	March 31, 2014				December 31, 2013
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
East North Central	$	181	3.2	%	$	187	3.3	%
Middle Atlantic	408		7.1	%	409		7.3	%
Mountain	104		1.8	%	104		1.9	%
New England	383		6.7	%	353		6.3	%
Pacific	1,543		27.0	%	1,587		28.3	%
South Atlantic	1,025		18.0	%	899		16.1	%
West North Central	46		0.8	%	47		0.8	%
West South Central	338		5.9	%	338		6.0	%
Other [1]	1,679		29.5	%	1,674		30.0	%
Total mortgage loans	$	5,707	100.0	%	$	5,598	100.0	%

[1] Primarily represents loans collateralized by multiple properties in various regions.

Mortgage Loans by Property Type
	March 31, 2014				December 31, 2013
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
Commercial
Agricultural	$	89	1.6	%	$	125	2.2	%
Industrial	1,721		30.1	%	1,718		30.7	%
Lodging	27		0.5	%	27		0.5	%
Multifamily	1,241		21.7	%	1,155		20.6	%
Office	1,373		24.1	%	1,278		22.8	%
Retail	1,104		19.3	%	1,140		20.4	%
Other	152		2.7	%	155		2.8	%
Total mortgage loans	$	5,707	100.0	%	$	5,598	100.0	%

Variable Interest Entities

The Company is involved with various special purpose entities and other entities that are deemed to be VIEs primarily as a collateral or investment manager and as an investor through normal investment activities, as well as a means of accessing capital through a contingent capital facility. For further information on the contingent capital facility, see Note 15 - Debt of Notes to Condensed Consolidated Financial Statements.

A VIE is an entity that either has investors that lack certain essential characteristics of a controlling financial interest or lacks sufficient funds to finance its own activities without financial support provided by other entities.

The Company performs ongoing qualitative assessments of its VIEs to determine whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is deemed to have a controlling financial interest when it has both the ability to direct the activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s Condensed Consolidated Financial Statements.

Consolidated VIEs

The following table presents the carrying value of assets and liabilities, and the maximum exposure to loss relating to the VIEs for which the Company is the primary beneficiary. Creditors have no recourse against the Company in the event of default by these VIEs nor does the Company have any implied or unfunded commitments to these VIEs. The Company’s financial or other support provided to these VIEs is limited to its collateral or investment management services and original investment.

	March 31, 2014						December 31, 2013
	Total Assets		Total Liabilities [1]		Maximum Exposure to Loss [2]		Total Assets		Total Liabilities [1]		Maximum Exposure to Loss [2]
CDOs [3]	$	18	$	20	$	—	$	31	$	33	$	—
Investment funds [4]	167		—		175		164		—		173
Limited partnerships	3		—		3		4		—		4
Total	$	188	$	20	$	178	$	199	$	33	$	177

[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.

CDOs represent structured investment vehicles for which the Company has a controlling financial interest as it provides collateral management services, earns a fee for those services and also holds investments in the securities issued by these vehicles. Investment funds represent wholly-owned fixed income funds for which the Company has management and control of the investments which is the activity that most significantly impacts its economic performance. Limited partnerships represent one hedge fund of funds for which the Company holds a majority interest in the fund as an investment.

Non-Consolidated VIEs

The Company holds a significant variable interest for one VIE for which it is not the primary beneficiary and, therefore, was not consolidated on the Company’s Condensed Consolidated Balance Sheets. This VIE represents a contingent capital facility that has been held by the Company since February 2007 for which the Company has no implied or unfunded commitments. Assets and liabilities recorded for the contingent capital facility were $16 and $16, respectively as of March 31, 2014 and $17 and $19, respectively, as of December 31, 2013. Additionally, the Company has a maximum exposure to loss of $3 and $3, respectively, as of March 31, 2014 and December 31, 2013, which represents the issuance costs that were incurred to establish the facility. The Company does not have a controlling financial interest as it does not manage the assets of the facility nor does it have the obligation to absorb losses or the right to receive benefits that could potentially be significant to the facility, as the asset manager has significant variable interest in the vehicle. The Company’s financial or other support provided to the facility is limited to providing ongoing support to cover the facility’s operating expenses. For further information on the facility, see Note 15 of Notes to Condensed Consolidated Financial Statements included in The Hartford’s 2013 Form 10-K Annual Report.

In addition, the Company, through normal investment activities, makes passive investments in structured securities issued by VIEs for which the Company is not the manager which are included in ABS, CDOs, CMBS and RMBS in the Available-for-Sale Securities table and fixed maturities, FVO, in the Company’s Condensed Consolidated Balance Sheets. The Company has not provided financial or other support with respect to these investments other than its original investment. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the principal amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment.

Repurchase Agreements and Dollar Roll Agreements and Other Collateral Transactions

The Company enters into repurchase agreements and dollar roll transactions to manage liquidity or to earn incremental spread income. A repurchase agreement is a transaction in which one party (transferor) agrees to sell securities to another party (transferee) in return for cash (or securities), with a simultaneous agreement to repurchase the same securities at a specified price at a later date. A dollar roll is a type of repurchase agreement where a mortgage backed security is sold with an agreement to repurchase substantially the same security at a specified time in the future. These transactions are generally short-term in nature, and therefore, the carrying amounts of these instruments approximate fair value.

As part of repurchase agreements and dollar roll transactions, the Company transfers collateral of U.S. government and government agency securities and receives cash. For the repurchase agreements, the Company obtains cash in an amount equal to at least 95% of the fair value of the securities transferred. The agreements contain contractual provisions that require additional collateral to be transferred when necessary and provide the counterparty the right to sell or re-pledge the securities transferred. The cash received from the repurchase program is typically invested in short-term investments or fixed maturities. Repurchase agreements include master netting provisions that provide the counterparties the right to offset claims and apply securities held by them in respect of their obligations in the event of a default. Although the Company has the contractual right to offset claims, fixed maturities do not meet the specific conditions for net presentation under U.S. GAAP. The Company accounts for the repurchase agreements and dollar roll transactions as collateralized borrowings. The securities transferred under repurchase agreements and dollar roll transactions are included in fixed maturities, AFS with the obligation to repurchase those securities recorded in other liabilities on the Company's Condensed Consolidated Balance Sheets.

As of March 31, 2014, the Company reported financial collateral pledged relating to repurchase agreements of $50 in fixed maturities, AFS on the Condensed Consolidated Balance sheets. The Company reported a corresponding obligation to repurchase these securities of $50 in other liabilities on the Condensed Consolidated Balance sheets. With respect to dollar roll transactions, the Company reported financial collateral pledged with a fair value of $97 in fixed maturities, AFS with a corresponding obligation to repurchase $97 reported in other liabilities, as of March 31, 2014. The Company had no outstanding repurchase agreements or dollar roll transactions as of December 31, 2013.

The Company is required by law to deposit securities with government agencies in states where it conducts business. As of March 31, 2014 and December 31, 2013, the fair value of securities on deposit was approximately $2.4 billion and $1.9 billion, respectively.

As of March 31, 2014 and December 31, 2013, the Company has pledged as collateral $282 and $272, respectively, in Japan government bonds reported in fixed maturities, AFS, associated with short-term debt of $243 and $238, respectively.

As of March 31, 2014 and December 31, 2013, the Company has pledged as collateral $34 and $34, respectively, of U.S. government securities and government agency securities or cash for letters of credit.

Refer to Derivative Collateral Arrangements section of this note for disclosure of collateral in support of derivative transactions.

Derivative Instruments

The Company utilizes a variety of OTC, OTC-cleared and exchange traded derivative instruments as a part of its overall risk management strategy as well as to enter into replication transactions. Derivative instruments are used to manage risk associated with interest rate, equity market, credit spread, issuer default, price, and currency exchange rate risk or volatility. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that would be permissible investments under the Company’s investment policies. The Company also may enter into and has previously issued financial instruments and products that either are accounted for as free-standing derivatives, such as certain reinsurance contracts, or may contain features that are deemed to be embedded derivative instruments, such as the GMWB rider included with certain variable annuity products.

Strategies that qualify for hedge accounting

Certain derivatives that the Company enters into satisfy the hedge accounting requirements as outlined in Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements, included in The Hartford’s 2013 Form 10-K Annual Report. Typically, these hedge relationships include interest rate and foreign currency swaps where the terms or expected cash flows of the hedged item closely match the terms of the swap. The swaps are typically used to manage interest rate duration of certain fixed maturity securities or liability contracts. The Company also formerly entered into swaps to convert securities or liabilities denominated in a foreign currency to U.S. dollars. The hedge strategies by hedge accounting designation include:

Cash flow hedges

Interest rate swaps are predominantly used to manage portfolio duration and better match cash receipts from assets with cash disbursements required to fund liabilities. These derivatives primarily convert interest receipts on floating-rate fixed maturity securities to fixed rates. The Company also enters into forward starting swap agreements primarily to hedge interest rate risk inherent in the assumptions used to price certain liabilities.

Foreign currency swaps are used to convert foreign currency-denominated cash flows related to certain investment receipts and liability payments to U.S. dollars in order to reduce cash flow fluctuations due to changes in currency rates.

Fair value hedges

Interest rate swaps are used to hedge the changes in fair value of fixed maturity securities due to fluctuations in interest rates. Foreign currency swaps were formally used to hedge the changes in fair value of certain foreign currency-denominated fixed rate liabilities due to changes in foreign currency rates by swapping the fixed foreign payments to floating rate U.S. dollar denominated payments.

Non-qualifying strategies

Derivative relationships that do not qualify for hedge accounting (“non-qualifying strategies”) primarily include the hedge programs for the Company's U.S. and international variable annuity products as well as the hedging and replication strategies that utilize credit default swaps. In addition, hedges of interest rate and foreign currency risk of certain fixed maturities and liabilities do not qualify for hedge accounting. The non-qualifying strategies include:

Interest rate swaps, swaptions and futures

The Company uses interest rate swaps, swaptions and futures to manage duration between assets and liabilities in certain investment portfolios. In addition, the Company enters into interest rate swaps to terminate existing swaps, thereby offsetting the changes in value of the original swap. As of March 31, 2014 and December 31, 2013 the notional amount of interest rate swaps in offsetting relationships was $6.9 billion.

Foreign currency swaps and forwards

The Company enters into foreign currency swaps and forwards to convert the foreign currency exposures of certain foreign currency-denominated fixed maturity investments to U.S. dollars.

Japan 3Win foreign currency swaps

The Company formerly offered certain variable annuity products with a guaranteed minimum income benefit ("GMIB") rider through a wholly-owned Japanese subsidiary. The GMIB rider is reinsured to a wholly-owned U.S. subsidiary which invests in U.S. dollar denominated assets to support the liability. The U.S. subsidiary entered into pay U.S. dollar, receive yen swap contracts to hedge the currency and yen interest rate exposure between the U.S. dollar denominated assets and the yen denominated fixed liability reinsurance payments.

Japanese fixed annuity hedging instruments

The Company formerly offered a yen denominated fixed annuity product through a wholly-owned Japanese subsidiary and reinsured to a wholly-owned U.S. subsidiary. The U.S. subsidiary invests in U.S. dollar denominated securities to support the yen denominated fixed liability payments and entered into currency rate swaps to hedge the foreign currency exchange rate and yen interest rate exposures that exist as a result of U.S. dollar assets backing the yen denominated liability.

Credit contracts

Credit default swaps are used to purchase credit protection on an individual entity or referenced index to economically hedge against default risk and credit-related changes in value on fixed maturity securities. Credit default swaps are also used to assume credit risk related to an individual entity or referenced index as a part of replication transactions. These contracts require the Company to pay or receive a periodic fee in exchange for compensation from the counterparty should the referenced security issuers experience a credit event, as defined in the contract. The Company is also exposed to credit risk related to credit derivatives embedded within certain fixed maturity securities. These securities are primarily comprised of structured securities that contain credit derivatives that reference a standard index of corporate securities. In addition, the Company enters into credit default swaps to terminate existing credit default swaps, thereby offsetting the changes in value of the original swap going forward.

Equity index swaps and options

The Company formerly offered certain equity indexed products which may contain an embedded derivative that requires bifurcation. The Company has entered into equity index swaps and options to economically hedge the equity volatility risk associated with these embedded derivatives. The Company also enters into equity index options and futures with the purpose of hedging the impact of an adverse equity market environment on the investment portfolio.

U.S. GMWB derivatives, net

The Company formerly offered certain variable annuity products with GMWB riders in the U.S. The GMWB product is a bifurcated embedded derivative (“U.S. GMWB product derivatives”) that has a notional value equal to the guaranteed remaining balance ("GRB"). The Company uses reinsurance contracts to transfer a portion of its risk of loss due to U.S GMWB. The reinsurance contracts covering U.S. GMWB (“U.S. GMWB reinsurance contracts”) are accounted for as free-standing derivatives with a notional amount equal to the GRB amount.

The Company utilizes derivatives (“U.S. GMWB hedging instruments”) as part of an actively managed program designed to hedge a portion of the capital market risk exposures of the non-reinsured GMWB riders due to changes in interest rates, equity market levels, and equity volatility. These derivatives include customized swaps, interest rate swaps and futures, and equity swaps, options and futures, on certain indices including the S&P 500 index, EAFE index and NASDAQ index. The following table presents notional and fair value for U.S. GMWB hedging instruments.

	Notional Amount				Fair Value
	March 31, 2014		December 31, 2013		March 31, 2014			December 31, 2013
Customized swaps	$	7,561	$	7,839	$	71		$	74
Equity swaps, options, and futures	3,888		4,237		32			44
Interest rate swaps and futures	3,975		6,615		(2		)	(77		)
Total	$	15,424	$	18,691	$	101		$	41

U.S. macro hedge program

The Company utilizes equity options and swaps to partially hedge against a decline in the equity markets and the resulting statutory surplus and capital impact primarily arising from GMDB and GMWB obligations. The following table presents notional and fair value for the U.S. macro hedge program.

	Notional Amount				Fair Value
	March 31, 2014		December 31, 2013		March 31, 2014		December 31, 2013
Equity options and swaps	7,596		9,934		133		139
Total	$	7,596	$	9,934	$	133	$	139

International program

The Company formerly offered certain variable annuity products in Japan with GMWB or GMAB riders, which are bifurcated embedded derivatives (“International program product derivatives”). The GMWB provides the policyholder with a guaranteed remaining balance (“GRB”) which is generally equal to premiums less withdrawals.  If the policyholder’s account value is reduced to the specified level through a combination of market declines and withdrawals but the GRB still has value, the Company is obligated to continue to make annuity payments to the policyholder until the GRB is exhausted. The GMAB provides the policyholder with their initial deposit in a lump sum after a specified waiting period. The notional amount of the International program product derivatives are the foreign currency denominated GRBs converted to U.S. dollars at the current foreign spot exchange rate as of the reporting period date.

The Company enters into derivative contracts (“International program hedging instruments”) to hedge a portion of the capital market risk exposures associated with the guaranteed benefits associated with the international variable annuity contracts. The hedging derivatives are comprised of equity futures, options, swaps and currency forwards and options to hedge against a decline in the debt and equity markets or changes in foreign currency exchange rates and the resulting statutory surplus and capital impact primarily arising from guaranteed minimum death benefits ("GMDB"), GMIB and GMWB obligations issued in Japan. The Company also enters into foreign currency denominated interest rate swaps and swaptions to hedge the interest rate exposure related to the potential annuitization of certain benefit obligations.

The following table presents notional and fair value for the international program hedging instruments.

	Notional Amount				Fair Value
	March 31, 2014		December 31, 2013		March 31, 2014			December 31, 2013
Credit derivatives	$	350	$	350	$	—		$	5
Currency forwards [1]	15,474		13,410		44			(60		)
Currency options	5,432		12,066		(12		)	(54		)
Equity futures	473		999		—			—
Equity options	2,912		3,051		(30		)	(30		)
Equity swaps	2,120		4,269		(50		)	(119		)
Interest rate futures	551		952		—			—
Interest rate swaps and swaptions	34,216		37,951		146			225
Total	$	61,528	$	73,048	$	98		$	(33	)

[1] As of March 31, 2014 and December 31, 2013 net notional amounts are $(0.9) billion and $(1.8) billion, respectively, which include $7.3 billion and $5.8 billion, respectively, related to long positions and $8.2 billion and $7.6 billion, respectively, related to short positions.

Contingent capital facility put option

The Company entered into a put option agreement that provides the Company the right to require a third-party trust to purchase, at any time, The Hartford’s junior subordinated notes in a maximum aggregate principal amount of $500. Under the put option agreement, The Hartford will pay premiums on a periodic basis and will reimburse the trust for certain fees and ordinary expenses.

Modified coinsurance reinsurance contracts

As of March 31, 2014 and December 31, 2013 the Company had approximately $1.3 billion of invested assets supporting other policyholder funds and benefits payable reinsured under a modified coinsurance arrangement in connection with the sale of the Individual Life business structured as a reinsurance transaction. The assets are primarily held in a trust established by the Company. The Company pays or receives cash quarterly to settle the results of the reinsured business, including the investment results. As a result of this modified coinsurance arrangement, the Company has an embedded derivative that transfers to the reinsurer certain unrealized changes in fair value due to interest rate and credit risks of these assets. The notional amounts of the reinsurance contracts are the invested assets that are carried at fair value supporting the reinsured reserves.

Derivative Balance Sheet Classification

The following table summarizes the balance sheet classification of the Company’s derivative related fair value amounts as well as the gross asset and liability fair value amounts. For reporting purposes, the Company has elected to offset the fair value amounts, income accruals, and related cash collateral receivables and payables of OTC derivative instruments executed in a legal entity and with the same counterparty under a master netting agreement, which provides the Company with the legal right of offset. The Company has also elected to offset the fair value amounts, income accruals and related cash collateral receivables and payables of OTC-cleared derivative instruments based on clearing house agreements. The fair value amounts presented below do not include income accruals or related cash collateral receivables and payables, which are netted with derivative fair value amounts to determine balance sheet presentation. Derivative fair value reported as liabilities after taking into account the master netting agreements, is $0.9 billion and $1.3 billion as of March 31, 2014, and December 31, 2013, respectively. Derivatives in the Company’s separate accounts, where the associated gains and losses accrue directly to policyholders, are not included. The Company’s derivative instruments are held for risk management purposes, unless otherwise noted in the following table. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and is presented in the table to quantify the volume of the Company’s derivative activity. Notional amounts are not necessarily reflective of credit risk. The tables below exclude investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements.

	Net Derivatives										Asset Derivatives				Liability Derivatives
	Notional Amount				Fair Value						Fair Value				Fair Value
Hedge Designation/ Derivative Type	Mar. 31, 2014		Dec. 31, 2013		Mar. 31, 2014			Dec. 31, 2013			Mar. 31, 2014		Dec. 31, 2013		Mar. 31, 2014			Dec. 31, 2013
Cash flow hedges
Interest rate swaps	$	4,716	$	5,026	$	(49	)	$	(92	)	$	44	$	50	$	(93	)	$	(142	)
Foreign currency swaps	143		143		(7		)	(5		)	2		2		(9		)	(7		)
Total cash flow hedges	4,859		5,169		(56		)	(97		)	46		52		(102		)	(149		)
Fair value hedges
Interest rate swaps	1,031		1,799		(25		)	(24		)	1		3		(26		)	(27		)
Total fair value hedges	1,031		1,799		(25		)	(24		)	1		3		(26		)	(27		)
Non-qualifying strategies
Interest rate contracts
Interest rate swaps and futures	11,106		8,453		(502		)	(487		)	230		171		(732		)	(658		)
Foreign exchange contracts
Foreign currency swaps and forwards	247		258		(12		)	(9		)	6		6		(18		)	(15		)
Japan 3Win foreign currency swaps	1,571		1,571		(338		)	(354		)	—		—		(338		)	(354		)
Japanese fixed annuity hedging instruments	1,381		1,436		(2		)	(6		)	88		88		(90		)	(94		)
Credit contracts
Credit derivatives that purchase credit protection	550		938		(10		)	(15		)	1		1		(11		)	(16		)
Credit derivatives that assume credit risk [1]	1,724		1,886		22			33			26		36		(4		)	(3		)
Credit derivatives in offsetting positions	6,339		7,764		(5		)	(7		)	69		76		(74		)	(83		)
Equity contracts
Equity index swaps and options	362		358		(2		)	(1		)	19		19		(21		)	(20		)
Variable annuity hedge program
U.S. GMWB product derivatives [2]	21,195		21,512		(24		)	(36		)	—		—		(24		)	(36		)
U.S. GMWB reinsurance contracts	4,280		4,508		30			29			30		29		—			—
U.S. GMWB hedging instruments	15,424		18,691		101			41			278		333		(177		)	(292		)
U.S. macro hedge program	7,596		9,934		133			139			166		178		(33		)	(39		)
International program product derivatives [2]	353		366		4			6			4		6		—			—
International program hedging instruments	61,528		73,048		98			(33		)	542		866		(444		)	(899		)
Other
Contingent capital facility put option	500		500		16			17			16		17		—			—
Modified coinsurance reinsurance contracts	1,261		1,250		(19		)	67			—		67		(19		)	—
Total non-qualifying strategies	135,417		152,473		(510		)	(616		)	1,475		1,893		(1,985		)	(2,509		)
Total cash flow hedges, fair value hedges, and non-qualifying strategies	$	141,307	$	159,441	$	(591	)	$	(737	)	$	1,522	$	1,948	$	(2,113	)	$	(2,685	)
Balance Sheet Location
Fixed maturities, available-for-sale	$	479	$	473	$	(4	)	$	(2	)	$	—	$	1	$	(4	)	$	(3	)
Other investments	53,415		53,219		249			442			674		909		(425		)	(467		)
Other liabilities	60,266		78,055		(806		)	(1,223		)	814		936		(1,620		)	(2,159		)
Consumer notes	9		9		(2		)	(2		)	—		—		(2		)	(2		)
Reinsurance recoverables	5,541		5,758		11			96			30		96		(19		)	—
Other policyholder funds and benefits payable	21,597		21,927		(39		)	(48		)	4		6		(43		)	(54		)
Total derivatives	$	141,307	$	159,441	$	(591	)	$	(737	)	$	1,522	$	1,948	$	(2,113	)	$	(2,685	)

[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.

Change in Notional Amount

The net decrease in notional amount of derivatives since December 31, 2013 was primarily due to the following:

• The decrease in notional amount related to the international program hedging instruments resulted from a reduction in the liability position due to continued elevated surrender and withdrawal rates as well as portfolio re-balancing including the termination of offsetting positions and the expiration of certain out-of-the-money options.

• The decrease in notional amount related to the U.S. GMWB hedging instruments was primarily driven by the expiration of certain out-of-the-money options.

• These declines in notional amount were partially offset by an increase in notional amount related to non-qualifying interest rate swaps and futures related to duration shortening positions.

Change in Fair Value

The net increase in the total fair value of derivative instruments since December 31, 2013 was primarily related to the following:

• The fair value associated with the international program hedging instruments increased primarily from re-balancing of the portfolio, partially offset by a decrease in volatility and interest rates.

• The fair value related to the combined U.S. GMWB hedging program, which includes the GMWB product, reinsurance, and hedging derivatives, was primarily driven by outperformance of underlying actively managed funds compared to their respective indices.

Offsetting of Derivative Assets/Liabilities

The following tables present the gross fair value amounts, the amounts offset, and net position of derivative instruments eligible for

offset in the Company's Condensed Consolidated Balance Sheets. Amounts offset include fair value amounts, income accruals and related cash collateral receivables and payables associated with derivative instruments that are traded under a common master netting agreement, as described above. Also included in the tables are financial collateral receivables and payables, which are contractually permitted to be offset upon an event of default, although are disallowed for offsetting under U.S. GAAP.

As of March 31, 2014

	(i)		(ii)		(iii) = (i) - (ii)				(iv)			(v) = (iii) - (iv)
					Net Amounts Presented in the Statement of Financial Position					Collateral Disallowed for 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	$	1,488	$	1,212	$	249	$	27		$	184	$	92

	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	$	(2,045	)	$	(1,104	)	$	(806	)	$	(135	)	$	(1,017	)	$	76

As of December 31, 2013

	(i)		(ii)		(iii) = (i) - (ii)					(iv)			(v) = (iii) - (iv)
					Net Amounts Presented in the Statement of Financial Position						Collateral Disallowed for 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	$	1,845	$	1,463	$	442	$	(60	)		$	242	$	140

	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	$	(2,626	)	$	(1,496	)	$	(1,223	)	$	93	$	(1,204	)	$	74

[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 and is limited to the net derivative receivable associated with each counterparty.

[3] Included in other liabilities in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty.

[4] Excludes collateral associated with exchange-traded derivative instruments.

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current period earnings. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

The following table presents the components of the gain or loss on derivatives that qualify as cash flow hedges:

Derivatives in Cash Flow Hedging Relationships

	Gain (Loss) Recognized in OCI on Derivative (Effective Portion)						Net Realized Capital Gains(Losses) Recognized in Income on Derivative (Ineffective Portion)
	Three Months Ended March 31,						Three Months Ended March 31,
	2014			2013			2014			2013
Interest rate swaps	$	44		$	(71	)	$	(1	)	$	—
Foreign currency swaps	(1		)	1			—			—
Total	$	43		$	(70	)	$	(1	)	$	—

Derivatives in Cash Flow Hedging Relationships

		Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
		Three Months Ended March 31,
	Location	2014		2013
Interest rate swaps	Net realized capital gain/(loss)	$	1	$	73
Interest rate swaps	Net investment income	23		24
Foreign currency swaps	Net realized capital gain/(loss)	—		(3		)
Total		$	24	$	94

As of March 31, 2014 the before-tax deferred net gains on derivative instruments recorded in AOCI that are expected to be reclassified to earnings during the next twelve months are $78. This expectation is based on the anticipated interest payments on hedged investments in fixed maturity securities that will occur over the next twelve months, at which time the Company will recognize the deferred net gains (losses) as an adjustment to interest income over the term of the investment cash flows. The maximum term over which the Company is hedging its exposure to the variability of future cash flows (for forecasted transactions, excluding interest payments on existing variable-rate financial instruments) is approximately two years.

During the three months ended March 31, 2014 and March 31, 2013 the Company had no net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring.

Fair Value Hedges

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. The Company includes the gain or loss on the derivative in the same line item as the offsetting loss or gain on the hedged item. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

The Company recognized in income gains (losses) representing the ineffective portion of fair value hedges as follows:

Derivatives in Fair-Value Hedging Relationships

	Gain or (Loss) Recognized in Income [1]
	Three Months Ended March 31,
	2014					2013
	Derivative			Hedge Item		Derivative			Hedge Item
Interest rate swaps
Net realized capital gain/(loss)	$	(2	)	$	2	$	6		$	(8	)
Foreign currency swaps
Net realized capital gain/(loss)	—			—		(2		)	2
Benefits, losses and loss adjustment expenses	—			—		(1		)	1
Total	$	(2	)	$	2	$	3		$	(5	)

[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.

Non-qualifying Strategies

For non-qualifying strategies, including embedded derivatives that are required to be bifurcated from their host contracts and accounted for as derivatives, the gain or loss on the derivative is recognized currently in earnings within net realized capital gains (losses). The following table presents the gain or loss recognized in income on non-qualifying strategies:

Derivatives Used in Non-Qualifying Strategies

Gain or (Loss) Recognized within Net Realized Capital Gains and Losses

	Three Months Ended March 31,
	2014			2013
Interest rate contracts
Interest rate swaps and forwards	$	(56	)	$	18
Foreign exchange contracts
Foreign currency swaps and forwards	1			2
Japan 3Win foreign currency swaps [1]	15			(130		)
Japanese fixed annuity hedging instruments [2]	12			(101		)
Credit contracts
Credit derivatives that purchase credit protection	(4		)	(9		)
Credit derivatives that assume credit risk	(1		)	14
Equity contracts
Equity index swaps and options	—			(20		)
Variable annuity hedge program
U.S. GMWB product derivatives	36			456
U.S. GMWB reinsurance contracts	(4		)	(60		)
U.S. GMWB hedging instruments	(17		)	(349		)
U.S. macro hedge program	(10		)	(85		)
International program product derivatives	(1		)	8
International program hedging instruments	(31		)	(179		)
Other
Contingent capital facility put option	(1		)	(2		)
Modified coinsurance reinsurance contracts	(19		)	5
Total [3]	$	(80	)	$	(432	)

[1] The associated liability is adjusted for changes in foreign exchange spot rates through realized capital gains and was $(28) and $116 for the three months ended March 31, 2014 and 2013, respectively.

[2] The associated liability is adjusted for changes in foreign exchange spot rates through realized capital gains and was $(30) and $151 for the three months ended March 31, 2014 and 2013, respectively.

[3] Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements.

For the three months endedMarch 31, 2014 the net realized capital gain (loss) related to derivatives used in non-qualifying strategies was primarily comprised of the following:

• The net losses related to interest rate contracts were driven by a decline in U.S interest rates.

• The net losses associated with the international program hedging instruments were primarily driven by a decrease in volatility and interest rates.

• The net loss on the U.S. macro hedge program was primarily due to decreased volatility and an improvement in domestic equity markets.

• The loss associated with modified coinsurance reinsurance contracts, which are accounted for as embedded derivatives and transfer to the reinsurer the investment experience related to the assets supporting the reinsured policies, was driven by a decline in interest rates and credit spread tightening during the quarter. The assets remain on the Company's books and the Company recorded an offsetting gain in AOCI as a result of the increase in market value of the bonds.

• 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 outperformance of underlying actively managed funds compared to their respective indices.

In addition, for the three months ended March 31, 2014, the Company received gains of $7 on derivative instruments as a result of prior counterparty losses related to the bankruptcy of Lehman Brothers Inc. The losses were the result of the contractual collateral threshold amounts and open collateral calls prior to the bankruptcy filing as well as interest rate and credit spread movements from the date of the last collateral call to the date of the bankruptcy filing.

For the three months endedMarch 31, 2013 the net realized capital gain (loss) related to derivatives used in non-qualifying strategies was primarily comprised of the following:

• The net loss associated with the international program hedging instruments was primarily driven by an improvement in global equity markets and depreciation of the Japanese yen in relation to the euro and the U.S. dollar. These losses were partially offset by gains due to a decrease in Japanese interest rates.

• 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.

• 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 favorable policyholder behavior.

• The net loss on the U.S. macro hedge program was primarily due to an improvement in domestic equity markets, passage of time and lower equity volatility.

For additional disclosures regarding contingent credit related features in derivative agreements, see Note 10 - Separate Accounts, Death Benefits and Other Insurance Benefit Features of Notes to Condensed Consolidated Financial Statements.

Credit Risk Assumed through Credit Derivatives

The Company enters into credit default swaps that assume credit risk of a single entity or referenced index in order to synthetically replicate investment transactions. The Company will receive periodic payments based on an agreed upon rate and notional amount and will only make a payment if there is a credit event. A credit event payment will typically be equal to the notional value of the swap contract less the value of the referenced security issuer’s debt obligation after the occurrence of the credit event. A credit event is generally defined as a default on contractually obligated interest or principal payments or bankruptcy of the referenced entity. The credit default swaps in which the Company assumes credit risk primarily reference investment grade single corporate issuers and baskets, which include standard and customized diversified portfolios of corporate issuers. The diversified portfolios of corporate issuers are established within sector concentration limits and may be divided into tranches that possess different credit ratings.

The following tables present the notional amount, fair value, weighted average years to maturity, underlying referenced credit obligation type and average credit ratings, and offsetting notional amounts and fair value for credit derivatives in which the Company is assuming credit risk as of March 31, 2014 and December 31, 2013.

As of March 31, 2014

							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	$	466	$	7		3 years	Corporate Credit/ Foreign Gov.	A-	$	282	$	(7	)
Below investment grade risk exposure	24		—			Less than 1 year	Corporate Credit	CCC	24		—
Basket credit default swaps [4]
Investment grade risk exposure	3,468		50			3 years	Corporate Credit	BBB+	2,343		(34		)
Below investment grade risk exposure	60		4			5 years	Corporate Credit	B	—		—
Investment grade risk exposure	331		(5		)	3 years	CMBS Credit	AA-	326		6
Below investment grade risk exposure	195		(28		)	3 years	CMBS Credit	B	195		28
Embedded credit derivatives
Investment grade risk exposure	350		338			3 years	Corporate Credit	A-	—		—
Total [5]	$	4,894	$	366					$	3,170	$	(7	)

As of December 31, 2013

							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	$	1,259	$	8		1 year	Corporate Credit/ Foreign Gov.	A-	$	1,066	$	(9	)
Below investment grade risk exposure	24		—			1 year	Corporate Credit	CCC	24		(1		)
Basket credit default swaps [4]
Investment grade risk exposure	3,447		50			3 years	Corporate Credit	BBB	2,270		(35		)
Below investment grade risk exposure	166		15			5 years	Corporate Credit	BB-	—		—
Investment grade risk exposure	327		(7		)	3 years	CMBS Credit	A	327		7
Below investment grade risk exposure	195		(31		)	3 years	CMBS Credit	B-	195		31
Embedded credit derivatives
Investment grade risk exposure	350		339			3 years	Corporate Credit	BBB+	—		—
Total [5]	$	5,768	$	374					$	3,882	$	(7	)

[1] The average credit ratings are based on availability and the midpoint of the applicable ratings among Moody’s, S&P, Fitch and Morningstar. 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.

[4] Includes $4.1 billion and $4.1 billion as of March 31, 2014 and December 31, 2013, 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.

[5] Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements.

Derivative Collateral Arrangements

The Company enters into various collateral arrangements in connection with its derivative instruments, which require both the pledging and accepting of collateral. As of March 31, 2014 and December 31, 2013 the Company pledged securities collateral associated with derivative instruments with a fair value of $1.1 billion and $1.3 billion, respectively, which have been included in fixed maturities on the Consolidated Balance Sheets. The counterparties have the right to sell or re-pledge these securities. The Company also pledged cash collateral associated with derivative instruments with a fair value of $107 and $347, respectively, as of March 31, 2014 and December 31, 2013 which have been primarily included within other assets on the Company's Condensed Consolidated Balance Sheets.

As of March 31, 2014 and December 31, 2013 the Company accepted cash collateral associated with derivative instruments with a fair value of $235 and $180, respectively, which was invested and recorded in the Consolidated Balance Sheets in fixed maturities and short-term investments with corresponding amounts recorded in other liabilities. The Company also accepted securities collateral as of March 31, 2014 and December 31, 2013 of $184 and $243, respectively, of which the Company has the ability to sell or repledge $136 and $191, respectively. As of March 31, 2014 and December 31, 2013 the fair value of repledged securities totaled $0 and $39, respectively, and the Company did not sell any securities. In addition, as of March 31, 2014 and December 31, 2013 non-cash collateral accepted was held in separate custodial accounts and was not included in the Company’s Consolidated Balance Sheets.