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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2011

Derivative Financial Instruments

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

($ in millions, except number of contracts)		Asset derivatives
				Volume (1)
		Balance sheet location		Notional amount		Number of contracts		Fair value, net		Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Interest rate swap agreements		Other investments	$	207		n/a	$	(15)	$	--	$	(15)
Foreign currency swap agreements		Other investments		50		n/a		(5)		2		(7)
Total			$	257		n/a	$	(20)	$	2	$	(22)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements		Other investments	$	5,585		n/a	$	138	$	161	$	(23)
Interest rate swaption agreements		Other investments		2,250		n/a		13		13		--
Interest rate cap and floor agreements		Other investments		1,383		n/a		(5)		--		(5)
Financial futures contracts and options		Other investments		n/a		9,000		5		5		--
Financial futures contracts and options		Other assets		n/a		840		--		--		--
Equity and index contracts
Options, futures and warrants (2)		Other investments		160		14,931		221		221		--
Options, futures and warrants		Other assets		n/a		1,183		2		2		--
Embedded derivative financial instruments
Conversion options		Fixed income securities		5		n/a		--		--		--
Equity-indexed call options		Fixed income securities		150		n/a		16		16		--
Credit default swaps		Fixed income securities		172		n/a		(78)		--		(78)
Other embedded derivative financial instruments		Other investments		1,000		n/a		--		--		--
Credit default contracts
Credit default swaps - buying protection		Other investments		121		n/a		(1)		1		(2)
Credit default swaps - selling protection		Other investments		60		n/a		(1)		1		(2)
Other contracts
Other contracts		Other investments		6		n/a		--		--		--
Other contracts		Other assets		5		n/a		1		1		--
Total			$	10,897		25,954	$	311	$	421	$	(110)

Total asset derivatives			$	11,154		25,954	$	291	$	423	$	(132)

(1) Volume for OTC 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)

(2) In addition to the number of contracts presented in the table, the Company held 308,430 stock rights and 4,389,707 stock warrants. Stock rights and warrants can be converted to cash upon sale of those instruments or exercised for shares of common stock.

		Liability derivatives
				Volume (1)
		Balance sheet location		Notional amount		Number of contracts		Fair value, net		Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Interest rate swap agreements		Other liabilities & accrued expenses	$	39		n/a	$	(2)	$	--	$	(2)
Foreign currency swap agreements		Other liabilities & accrued expenses		152		n/a		(27)		--		(27)
Total			$	191		n/a	$	(29)	$	--	$	(29)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements		Other liabilities & accrued expenses	$	2,479		n/a	$	15	$	28	$	(13)
Interest rate swaption agreements		Other liabilities & accrued expenses		940		n/a		5		5		--
Interest rate cap and floor agreements		Other liabilities & accrued expenses		1,669		n/a		(19)		1		(20)
Financial futures contracts and options		Other liabilities & accrued expenses		n/a		270		--		--		--
Equity and index contracts
Options and futures		Other liabilities & accrued expenses		n/a		15,316		(104)		--		(104)
Foreign currency contracts
Foreign currency swap agreements		Other liabilities & accrued expenses		50		n/a		--		--		--
Foreign currency forwards and options		Other liabilities & accrued expenses		277		n/a		(2)		2		(4)
Embedded derivative financial instruments
Guaranteed accumulation benefits		Contractholder funds		1,085		n/a		(62)		--		(62)
Guaranteed withdrawal benefits		Contractholder funds		737		n/a		(31)		--		(31)
Equity-indexed and forward starting options in life and annuity product contracts		Contractholder funds		4,432		n/a		(528)		--		(528)
Other embedded derivative financial instruments		Contractholder funds		85		n/a		(8)		--		(8)
Credit default contracts
Credit default swaps – buying protection		Other liabilities & accrued expenses		1,020		n/a		(10)		5		(15)
Credit default swaps – selling protection		Other liabilities & accrued expenses		605		n/a		(54)		2		(56)
Total			$	13,379		15,586	$	(798)	$	43	$	(841)

Total liability derivatives			$	13,570		15,586	$	(827)	$	43	$	(870)

Total derivatives			$	24,724		41,540	$	(536)

(1) Volume for OTC 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)

($ in millions, except number of contracts)		Asset derivatives
				Volume (1)
		Balance sheet location		Notional amount		Number of contracts		Fair value, net		Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Interest rate swap agreements		Other investments	$	156		n/a	$	(18)	$	--	$	(18)
Foreign currency swap agreements		Other investments		64		n/a		2		3		(1)
Total			$	220		n/a	$	(16)	$	3	$	(19)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements		Other investments	$	1,469		n/a	$	65	$	81	$	(16)
Interest rate swaption agreements		Other investments		4,161		n/a		50		50		--
Interest rate cap and floor agreements		Other investments		226		n/a		(2)		1		(3)
Financial futures contracts and options		Other investments		n/a		8,000		3		3		--
Financial futures contracts and options		Other assets		n/a		1,420		--		--		--
Equity and index contracts
Options, futures and warrants (2)		Other investments		64		38,451		359		359		--
Options, futures and warrants		Other assets		n/a		292		--		--		--
Foreign currency contracts
Foreign currency swap agreements		Other investments		90		n/a		6		6		--
Foreign currency forwards and options		Other investments		257		n/a		6		7		(1)
Embedded derivative financial instruments
Conversion options		Fixed income securities		820		n/a		236		238		(2)
Equity-indexed call options		Fixed income securities		300		n/a		47		47		--
Credit default swaps		Fixed income securities		181		n/a		(88)		--		(88)
Other embedded derivative financial instruments		Other investments		1,000		n/a		--		--		--
Credit default contracts
Credit default swaps - buying protection		Other investments		299		n/a		(5)		2		(7)
Credit default swaps - selling protection		Other investments		150		n/a		(8)		2		(10)
Other contracts
Other contracts		Other investments		13		n/a		--		--		--
Other contracts		Other assets		5		n/a		1		1		--
Total			$	9,035		48,163	$	670	$	797	$	(127)

Total asset derivatives			$	9,255		48,163	$	654	$	800	$	(146)

(1) Volume for OTC 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)

(2) In addition to the number of contracts presented in the table, the Company held 2,768 stock rights and 1,379,932 stock warrants. Stock warrants can be converted to cash upon sale of those instruments or exercised for shares of common stock.

		Liability derivatives
				Volume (1)
		Balance sheet location		Notional amount		Number of contracts		Fair value, net		Gross asset		Gross liability
Derivatives designated as accounting hedging instruments
Interest rate swap agreements		Other liabilities & accrued expenses	$	3,345		n/a	$	(181)	$	20	$	(201)
Interest rate swap agreements		Contractholder funds		--		n/a		2		2		--
Foreign currency swap agreements		Other liabilities & accrued expenses		138		n/a		(20)		--		(20)
Foreign currency and interest rate swap agreements		Other liabilities & accrued expenses		435		n/a		34		34		--
Foreign currency and interest rate swap agreements		Contractholder funds		--		n/a		28		28		--
Total			$	3,918		n/a	$	(137)	$	84	$	(221)

Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements		Other liabilities & accrued expenses	$	4,543		n/a	$	29	$	97	$	(68)
Interest rate swaption agreements		Other liabilities & accrued expenses		4,400		n/a		18		18		--
Interest rate cap and floor agreements		Other liabilities & accrued expenses		3,216		n/a		(22)		1		(23)
Financial futures contracts and options		Other liabilities & accrued expenses		n/a		15,150		(1)		--		(1)
Equity and index contracts
Options and futures		Other liabilities & accrued expenses		64		21,585		(168)		2		(170)
Foreign currency contracts
Foreign currency forwards and options		Other liabilities & accrued expenses		316		n/a		1		2		(1)
Embedded derivative financial instruments
Guaranteed accumulation benefits		Contractholder funds		1,067		n/a		(88)		--		(88)
Guaranteed withdrawal benefits		Contractholder funds		739		n/a		(47)		--		(47)
Equity-indexed and forward starting options in life and annuity product contracts		Contractholder funds		4,694		n/a		(515)		--		(515)
Other embedded derivative financial instruments		Contractholder funds		85		n/a		(3)		--		(3)
Credit default contracts
Credit default swaps – buying protection		Other liabilities & accrued expenses		1,127		n/a		(13)		6		(19)
Credit default swaps – selling protection		Other liabilities & accrued expenses		482		n/a		(66)		1		(67)
Total			$	20,733		36,735	$	(875)	$	127	$	(1,002)

Total liability derivatives			$	24,651		36,735	$	(1,012)	$	211	$	(1,223)

Total derivatives			$	33,906		84,898	$	(358)

(1) Volume for OTC 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)

Impacts on operations and AOCI from foreign currency contracts, cash flow hedges

($ in millions)		Three months ended June 30,				Six months ended June 30,
Effective portion		2011		2010		2011		2010
(Loss) gain recognized in OCI on derivatives during the period	$	(5)	$	22	$	(13)	$	28
(Loss) gain recognized in OCI on derivatives during the term of the hedging relationship		(36)		2		(36)		2
Gain reclassified from AOCI into income (net investment income)		1		--		1		1
Gain reclassified from AOCI into income (realized capital gains and losses)		--		2		--		2
Ineffective portion and amount excluded from effectiveness
Gain recognized in income on derivatives (realized capital gains and losses)

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

($ in millions)		Three months ended June 30, 2011
		Net investment income		Realized capital gains and losses		Life and annuity contract benefits		Interest credited to contractholder funds		Operating costs and expenses		Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	(2)	$	--	$	--	$	--	$	--	$	(2)
Subtotal		(2)		--		--		--		--		(2)

Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(53)		--		--		--		(53)
Equity and index contracts		--		--		--		8		--		8
Embedded derivative financial instruments		--		(3)		(8)		9		--		(2)
Credit default contracts		--		3		--		--		--		3
Other contracts		--		--		--		3		--		3
Subtotal		--		(53)		(8)		20		--		(41)
Total	$	(2)	$	(53)	$	(8)	$	20	$	--	$	(43)

		Six months ended June 30, 2011
		Net investment income		Realized capital gains and losses		Life and annuity contract benefits		Interest credited to contractholder funds		Operating costs and expenses		Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	(1)	$	(8)	$	--	$	(5)	$	--	$	(14)
Foreign currency and interest rate contracts		--		--		--		(32)		--		(32)
Subtotal		(1)		(8)		--		(37)		--		(46)

Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(104)		--		--		--		(104)
Equity and index contracts		--		(19)		--		46		7		34
Embedded derivative financial instruments		--		5		37		(13)		--		29
Foreign currency contracts		--		(5)		--		--		2		(3)
Credit default contracts		--		11		--		--		--		11
Other contracts		--		--		--		5		--		5
Subtotal		--		(112)		37		38		9		(28)
Total	$	(1)	$	(120)	$	37	$	1	$	9	$	(74)

		Three months ended June 30, 2010
		Net investment income		Realized capital gains and losses		Life and annuity contract benefits		Interest credited to contractholder funds		Operating costs and expenses		Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	(72)	$	2	$	--	$	13	$	--	$	(57)
Foreign currency and interest rate contracts		--		(1)		--		(16)		--		(17)
Subtotal		(72)		1		--		(3)		--		(74)

Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(282)		--		--		--		(282)
Equity and index contracts		--		82		--		(70)		(14)		(2)
Embedded derivative financial instruments		--		(106)		(28)		112		--		(22)
Foreign currency contracts		--		3		--		--		(1)		2
Credit default contracts		--		(9)		--		--		--		(9)
Other contracts		--		1		--		2		--		3
Subtotal		--		(311)		(28)		44		(15)		(310)
Total	$	(72)	$	(310)	$	(28)	$	41	$	(15)	$	(384)

		Six months ended June 30, 2010
		Net investment income		Realized capital gains and losses		Life and annuity contract benefits		Interest credited to contractholder funds		Operating costs and expenses		Total gain (loss) recognized in net income on derivatives
Derivatives in fair value accounting hedging relationships
Interest rate contracts	$	(113)	$	2	$	--	$	12	$	--	$	(99)
Foreign currency and interest rate contracts		--		(1)		--		(40)		--		(41)
Subtotal		(113)		1		--		(28)		--		(140)

Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(438)		--		--		--		(438)
Equity and index contracts		--		43		--		(36)		(8)		(1)
Embedded derivative financial instruments		--		(119)		(8)		110		--		(17)
Foreign currency contracts		--		20		--		--		(6)		14
Credit default contracts		--		(3)		--		--		--		(3)
Other contracts		--		1		--		2		--		3
Subtotal		--		(496)		(8)		76		(14)		(442)
Total	$	(113)	$	(495)	$	(8)	$	48	$	(14)	$	(582)

Impact on operations, changes in fair value, fair value hedges

($ in millions)		Three months ended June 30, 2011
		Gain (loss) on derivatives				Gain (loss) on hedged risk
Location of gain or (loss) recognized in net income on derivatives		Interest rate contracts		Foreign currency & interest rate contracts		Contractholder funds		Investments
Net investment income	$	2	$	--	$	--	$	(2)
Realized capital gains and losses		--		--		--		--
Total	$	2	$	--	$	--	$	(2)

		Six months ended June 30, 2011
		Gain (loss) on derivatives				Gain (loss) on hedged risk
Location of gain or (loss) recognized in net income on derivatives		Interest rate contracts		Foreign currency & interest rate contracts		Contractholder funds		Investments
Interest credited to contractholder funds	$	(7)	$	(34)	$	41	$	--
Net investment income		23		--		--		(23)
Realized capital gains and losses		(8)		--		--		--
Total	$	8	$	(34)	$	41	$	(23)

		Three months ended June 30, 2010
		Gain (loss) on derivatives				Gain (loss) on hedged risk
Location of gain or (loss) recognized in net income on derivatives		Interest rate contracts		Foreign currency & interest rate contracts		Contractholder funds		Investments
Interest credited to contractholder funds	$	9	$	(24)	$	15	$	--
Net investment income		(43)		--		--		43
Realized capital gains and losses		2		(1)		--		--
Total	$	(32)	$	(25)	$	15	$	43

		Six months ended June 30, 2010
		Gain (loss) on derivatives				Gain (loss) on hedged risk
Location of gain or (loss) recognized in net income on derivatives		Interest rate contracts		Foreign currency & interest rate contracts		Contractholder funds		Investments
Interest credited to contractholder funds	$	8	$	(57)	$	49	$	--
Net investment income		(56)		--		--		56
Realized capital gains and losses		2		(1)		--		--
Total	$	(46)	$	(58)	$	49	$	56

Counterparty credit exposure by counterparty credit rating

($ in millions)		June 30, 2011								December 31, 2010
Rating (1)		Number of counterparties		Notional amount (2)		Credit exposure (2)		Exposure, net of collateral (2)		Number of counterparties		Notional amount (2)		Credit exposure (2)		Exposure, net of collateral (2)
AA-		1	$	567	$	16	$	--		2	$	2,322	$	43	$	16
A+		3		5,140		28		8		5		3,189		16		10
A		4		4,161		50		4		3		3,479		17		17
A-		--		--		--		--		1		89		31		31
BBB+		1		5		35		35		--		--		--		--
Total		9	$	9,873	$	129	$	47		11	$	9,079	$	107	$	74

(1) Rating is the lower of S&P or Moody’s 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)		June 30, 2011		December 31, 2010
Gross liability fair value of contracts containing credit-risk-contingent features	$	146	$	448
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs		(90)		(255)
Collateral posted under MNAs for contracts containing credit-risk-contingent features		(48)		(171)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	8	$	22

CDS notional amounts by credit rating and fair value of protection sold

The following table shows the CDS notional amounts by credit rating and fair value of protection sold as of June 30, 2011:

($ in millions)		Notional amount
		AA		A		BBB		BB and lower		Total		Fair value
Single name
Investment grade corporate debt	$	50	$	138	$	130	$	45	$	363	$	(1)
High yield debt		--		--		--		2		2		--
Municipal		135		--		--		--		135		(8)
Subtotal		185		138		130		47		500		(9)
Baskets
Tranche
Investment grade corporate debt		--		--		--		65		65		(18)
First-to-default
Municipal		--		100		--		--		100		(28)
Subtotal		--		100		--		65		165		(46)
Total	$	185	$	238	$	130	$	112	$	665	$	(55)

The following table shows the CDS notional amounts by credit rating and fair value of protection sold as of December 31, 2010:

($ in millions)		Notional amount
		AA		A		BBB		BB and lower		Total		Fair value
Single name
Investment grade corporate debt	$	50	$	148	$	103	$	25	$	326	$	(4)
High yield debt		--		--		--		6		6		--
Municipal		135		--		--		--		135		(14)
Subtotal		185		148		103		31		467		(18)
Baskets
Tranche
Investment grade corporate debt		--		--		--		65		65		(19)
First-to-default
Municipal		--		100		--		--		100		(37)
Subtotal		--		100		--		65		165		(56)
Total	$	185	$	248	$	103	$	96	$	632	$	(74)