Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Volume and fair value positions of derivative instruments and location in the Consolidated Statement of Financial Position



Summary of the volume and fair value positions of derivative instruments as of March 31, 2020
($ in millions, except number of contracts)		Volume ⁽¹⁾
($ in millions, except number of contracts)	Balance sheet location	Notional amount		Number of contracts	Fair value, net			Gross asset		Gross liability
Asset derivatives
Derivatives designated as fair value accounting hedging instruments
Other	Other assets	$	2	n/a	$	—		$	—	$	—
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Futures	Other assets	—		568	—			—		—
Equity and index contracts
Options	Other investments	—		3,262	21			21		—
Futures	Other assets	—		12	—			—		—
Total return index contracts
Total return swap agreements – fixed income	Other investments	83		n/a	(5		)	—		(5		)
Foreign currency contracts
Foreign currency forwards	Other investments	629		n/a	42			44		(2		)
Credit default contracts
Credit default swaps – buying protection	Other investments	114		n/a	1			4		(3		)
Credit default swaps – selling protection	Other investments	7		n/a	—			—		—
Subtotal		833		3,842	59			69		(10		)
Total asset derivatives		$	835	3,842	$	59		$	69	$	(10	)

Liability derivatives
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other liabilities & accrued expenses	$	33	n/a	$	—		$	—	$	—
Futures	Other liabilities & accrued expenses	—		6,808	(1		)	—		(1		)
Equity and index contracts
Options	Other liabilities & accrued expenses	—		3,016	(4		)	—		(4		)
Futures	Other liabilities & accrued expenses	—		1,476	(2		)	—		(2		)
Total return index contracts
Total return swap agreements – fixed income	Other liabilities & accrued expenses	2		n/a	—			—		—
Total return swap agreements – equity index	Other liabilities & accrued expenses	6		n/a	(1		)	—		(1		)
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	145		n/a	6			7		(1		)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds	127		n/a	(33		)	—		(33		)
Guaranteed withdrawal benefits	Contractholder funds	164		n/a	(23		)	—		(23		)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds	1,768		n/a	(361		)	—		(361		)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	54		n/a	—			1		(1		)
Credit default swaps – selling protection	Other liabilities & accrued expenses	752		n/a	(2		)	—		(2		)
Total liability derivatives		3,051		11,300	(421		)	$	8	$	(429	)
Total derivatives		$	3,886	15,142	$	(362	)


⁽¹⁾	Volume for OTC and cleared derivative contracts is represented by their notional amounts. Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded. (n/a = not applicable)



Summary of the volume and fair value positions of derivative instruments as of December 31, 2019
($ in millions, except number of contracts)		Volume
($ in millions, except number of contracts)	Balance sheet location	Notional amount		Number of contracts	Fair value, net			Gross asset		Gross liability
Asset derivatives
Derivatives designated as accounting hedging instruments
Other	Other assets	$	2	n/a	$	—		$	—	$	—
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Futures	Other assets	—		3,668	—			—		—
Equity and index contracts
Options	Other investments	—		5,539	140			140		—
Futures	Other assets	—		1,533	1			1		—
Total return index contracts
Total return swap agreements – fixed income	Other investments	56		n/a	1			1		—
Credit default contracts
Credit default swaps – buying protection	Other investments	17		n/a	—			—		—
Subtotal		73		10,740	142			142		—
Total asset derivatives		$	75	10,740	$	142		$	142	$	—

Liability derivatives
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other liabilities & accrued expenses	$	34	n/a	$	—		$	—	$	—
Futures	Other liabilities & accrued expenses	—		1,089	—			—		—
Equity and index contracts
Options	Other liabilities & accrued expenses	—		5,400	(68		)	—		(68		)
Futures	Other liabilities & accrued expenses	—		3	—			—		—
Total return index contracts
Total return swap agreements – fixed income	Other liabilities & accrued expenses	119		n/a	—			—		—
Total return swap agreements – equity index	Other liabilities & accrued expenses	187		n/a	11			11		—
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	745		n/a	19			28		(9		)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds	161		n/a	(18		)	—		(18		)
Guaranteed withdrawal benefits	Contractholder funds	205		n/a	(14		)	—		(14		)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds	1,791		n/a	(430		)	—		(430		)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	152		n/a	(7		)	—		(7		)
Credit default swaps – selling protection	Other liabilities & accrued expenses	9		n/a	—			—		—
Total liability derivatives		3,403		6,492	(507		)	$	39	$	(546	)
Total derivatives		$	3,478	17,232	$	(365	)

Schedule of gross and net amount for the Company's OTC derivatives subject to enforceable master netting arrangements



Gross and net amounts for OTC derivatives ⁽¹⁾
($ in millions)				Offsets
($ in millions)	Gross amount			Counter-party netting			Cash collateral (received) pledged			Net amount on balance sheet			Securities collateral (received) pledged		Net amount
March 31, 2020
Asset derivatives	$	56		$	(18	)	$	(35	)	$	3		$	—	$	3
Liability derivatives	(13		)	18			(6		)	(1		)	—		(1		)

December 31, 2019
Asset derivatives	$	40		$	(39	)	$	(1	)	$	—		$	—	$	—
Liability derivatives	(16		)	39			(27		)	(4		)	—		(4		)

⁽¹⁾

All OTC derivatives are subject to enforceable master netting agreements.

Gains and losses from valuation, settlements, and hedge ineffectiveness, fair value hedges and derivatives not designated as hedges



Gains (losses) from valuation and settlements reported on derivatives not designated as accounting hedges
($ in millions)	Realized capital gains (losses)			Life contract benefits			Interest credited to contractholder funds			Operating costs and expenses			Total gain (loss) recognized in net income on derivatives
Three months ended March 31, 2020
Interest rate contracts	$	39		$	—		$	—		$	—		$	39
Equity and index contracts	28			—			(50		)	(45		)	(67		)
Embedded derivative financial instruments	—			(24		)	69			—			45
Foreign currency contracts	36			—			—			—			36
Credit default contracts	(8		)	—			—			—			(8		)
Total return swaps - fixed income	(9		)	—			—			—			(9		)
Total return swaps - equity index	2			—			—			—			2
Total	$	88		$	(24	)	$	19		$	(45	)	$	38

Three months ended March 31, 2019
Interest rate contracts	$	7		$	—		$	—		$	—		$	7
Equity and index contracts	(71		)	—			31			21			(19		)
Embedded derivative financial instruments	—			8			(35		)	—			(27		)
Foreign currency contracts	5			—			—			—			5
Credit default contracts	(4		)	—			—			—			(4		)
Total return swaps - fixed income	2			—			—			—			2
Total return swaps - equity index	15			—			—			—			15
Total	$	(46	)	$	8		$	(4	)	$	21		$	(21	)

Counterparty credit exposure by counterparty credit rating



OTC derivatives counterparty credit exposure by counterparty credit rating
($ in millions)	March 31, 2020							December 31, 2019
Rating ⁽¹⁾	Number of counter- parties	Notional amount⁽²⁾		Credit exposure⁽²⁾		Exposure, net of collateral⁽²⁾		Number of counter- parties	Notional amount⁽²⁾		Credit exposure⁽²⁾		Exposure, net of collateral⁽²⁾
A+	4	$	718	$	40	$	2	6	$	868	$	29	$	—
A	1	221		6		—		—	—		—		—
Total	5	$	939	$	46	$	2	6	$	868	$	29	$	—


⁽¹⁾	Allstate uses the lower of S&P’s or Moody’s long-term debt issuer ratings.

⁽²⁾

Only OTC derivatives with a net positive fair value are included for each counterparty.

Derivative instruments with credit features in a liability position, including fair value of assets and collateral netted against the liability



($ in millions)	March 31, 2020			December 31, 2019
Gross liability fair value of contracts containing credit-risk-contingent features	$	13		$	16
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs	(10		)	(11		)
Collateral posted under MNAs for contracts containing credit-risk-contingent features	(3		)	(3		)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	—		$	2

Schedule of derivative CDS notional amount by credit rating and fair value of protection sold



CDS notional amounts by credit rating and fair value of protection sold
($ in millions)	Notional amount
($ in millions)	AAA		AA		A		BBB		BB and lower		Total		Fair value
March 31, 2020
Single name
Corporate debt	$	—	$	—	$	—	$	—	$	9	$	9	$	—
Index
Corporate debt	6		12		168		510		54		750		(2		)
Total	$	6	$	12	$	168	$	510	$	63	$	759	$	(2	)

December 31, 2019
Single name
Corporate debt	$	—	$	—	$	—	$	—	$	9	$	9	$	—
Total	$	—	$	—	$	—	$	—	$	9	$	9	$	—