Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2011

Derivative Financial Instruments

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

The following table provides a summary of the volume and fair value positions of derivative instruments as well as their reporting location in the Condensed Consolidated Statement of Financial Position as of September 30, 2011.

($ 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	$	101	n/a	$	(6)	$	--	$	(6)
Foreign currency swap agreements	Other investments		152	n/a		(7)		3		(10)
Total		$	253	n/a	$	(13)	$	3	$	(16)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other investments	$	4,404	n/a	$	114	$	114	$	--
Interest rate swaption agreements	Other investments		3,000	n/a		1		1		--
Interest rate cap and floor agreements	Other investments		1,726	n/a		(16)		--		(16)
Equity and index contracts
Options, futures and warrants (2)	Other investments		170	20,166		127		129		(2)
Options, futures and warrants	Other assets		n/a	1,014		3		3		--
Foreign currency contracts
Foreign currency swap agreements	Other investments		50	n/a		4		4		--
Foreign currency forwards and options	Other investments		136	n/a		2		2		--
Embedded derivative financial instruments
Conversion options	Fixed income securities		5	n/a		--		--		--
Equity-indexed call options	Fixed income securities		150	n/a		7		7		--
Credit default swaps	Fixed income securities		172	n/a		(119)		--		(119)
Other embedded derivative financial instruments	Other investments		1,000	n/a		--		--		--
Credit default contracts
Credit default swaps - buying protection	Other investments		1,312	n/a		43		47		(4)
Credit default swaps - selling protection	Other investments		255	n/a		(12)		--		(12)
Other contracts
Other contracts	Other investments		5	n/a		--		--		--
Other contracts	Other assets		4	n/a		1		1		--
Total		$	12,389	21,180	$	155	$	308	$	(153)
Total asset derivatives		$	12,642	21,180	$	142	$	311	$	(169)

_______________

(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 2,860 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	$	84	n/a	$	(9)	$	--	$	(9)
Foreign currency swap agreements	Other liabilities & accrued expenses		50	n/a		(4)		--		(4)
Total		$	134	n/a	$	(13)	$	--	$	(13)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses	$	4,922	n/a	$	(21)	$	71	$	(92)
Interest rate cap and floor agreements	Other liabilities & accrued expenses		1,117	n/a		(18)		--		(18)
Financial futures contracts and options	Other liabilities & accrued expenses		n/a	346		--		--		--
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		n/a	21,989		(69)		--		(69)
Foreign currency contracts
Foreign currency forwards and options	Other liabilities & accrued expenses		270	n/a		(13)		2		(15)
Embedded derivative financial    instruments
Guaranteed accumulation benefits	Contractholder funds		956	n/a		(97)		--		(97)
Guaranteed withdrawal benefits	Contractholder funds		647	n/a		(51)		--		(51)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		4,211	n/a		(441)		--		(441)
Other embedded derivative financial instruments	Contractholder funds		85	n/a		(8)		--		(8)
Credit default contracts								--
Credit default swaps – buying protection	Other liabilities & accrued expenses		311	n/a		7		10		(3)
Credit default swaps – selling protection	Other liabilities & accrued expenses		390	n/a		(78)		1		(79)
Total		$	12,909	22,335	$	(789)	$	84	$	(873)
Total liability derivatives		$	13,043	22,335	$	(802)	$	84	$	(886)
Total derivatives		$	25,685	43,515	$	(660)

_______________

(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)

The following table provides a summary of the volume and fair value positions of derivative instruments as well as their reporting location in the Condensed Consolidated Statement of Financial Position as of December 31, 2010.

($ 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 September 30,				Nine months ended September 30,
Effective portion		2011		2010		2011		2010
Gain (loss) recognized in OCI on derivatives during the period	$	20	$	(19)	$	7	$	9
Loss recognized in OCI on derivatives during the term of the hedging relationship		(15)		(17)		(15)		(17)
(Loss) gain reclassified from AOCI into income (net investment		(1)		--		--		1
Gain reclassified from AOCI into income (realized capital gains and losses)		--		--		--		2
Ineffective portion and amount excluded from effectiveness testing
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 September 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)	$	--	$	--	$	--	$	--	$	(1)
Subtotal		(1)		--		--		--		--		(1)
Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(202)		--		--		--		(202)
Equity and index contracts		--		1		--		(71)		(22)		(92)
Embedded derivative financial instruments		--		(50)		(55)		87		--		(18)
Foreign currency contracts		--		(9)		--		--		(1)		(10)
Credit default contracts		--		26		--		--		--		26
Other contracts		--		--		--		1		--		1
Subtotal		--		(234)		(55)		17		(23)		(295)
Total	$	(1)	$	(234)	$	(55)	$	17	$	(23)	$	(296)

		Nine months ended September 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)	$	(8)	$	--	$	(5)	$	--	$	(15)
Foreign currency and interest rate contracts		--		--		--		(32)		--		(32)
Subtotal		(2)		(8)		--		(37)		--		(47)
Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(306)		--		--		--		(306)
Equity and index contracts		--		(18)		--		(25)		(15)		(58)
Embedded derivative financial instruments		--		(45)		(18)		74		--		11
Foreign currency contracts		--		(14)		--		--		1		(13)
Credit default contracts		--		37		--		--		--		37
Other contracts		--		--		--		6		--		6
Subtotal		--		(346)		(18)		55		(14)		(323)
Total	$	(2)	$	(354)	$	(18)	$	18	$	(14)	$	(370)

		Three months ended September 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	$	(57)	$	2	$	--	$	9	$	--	$	(46)
Foreign currency and interest rate contracts		--		--		--		25		--		25
Subtotal		(57)		2		--		34		--		(21)
Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(183)		--		--		--		(183)
Equity and index contracts		--		(115)		--		70		13		(32)
Embedded derivative financial instruments		--		48		(22)		(39)		--		(13)
Foreign currency contracts		--		(41)		--		--		4		(37)
Credit default contracts		--		5		--		--		--		5
Other contracts		--		(1)		--		1		--		--
Subtotal		--		(287)		(22)		32		17		(260)
Total	$	(57)	$	(285)	$	(22)	$	66	$	17	$	(281)

		Nine months ended September 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	$	(170)	$	4	$	--	$	21	$	--	$	(145)
Foreign currency and interest rate contracts		--		(1)		--		(15)		--		(16)
Subtotal		(170)		3		--		6		--		(161)
Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(621)		--		--		--		(621)
Equity and index contracts		--		(72)		--		34		5		(33)
Embedded derivative financial instruments		--		(71)		(30)		71		--		(30)
Foreign currency contracts		--		(21)		--		--		(2)		(23)
Credit default contracts		--		2		--		--		--		2
Other contracts		--		--		--		3		--		3
Subtotal		--		(783)		(30)		108		3		(702)
Total	$	(170)	$	(780)	$	(30)	$	114	$	3	$	(863)

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

($ in millions)		Three months ended September 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	$	1	$	--	$	--	$	(1)
Total	$	1	$	--	$	--	$	(1)

		Nine months ended September 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		24		--		--		(24)
Realized capital gains and losses		(8)		--		--		--
Total	$	9	$	(34)	$	41	$	(24)

		Three months ended September 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	$	6	$	18	$	(24)	$	--
Net investment income		(32)		--		--		32
Realized capital gains and losses		2		--		--		--
Total	$	(24)	$	18	$	(24)	$	32

		Nine months ended September 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	$	14	$	(39)	$	25	$	--
Net investment income		(88)		--		--		88
Realized capital gains and losses		4		(1)		--		--
Total	$	(70)	$	(40)	$	25	$	88

Counterparty credit exposure by counterparty credit rating

($ in millions)	September 30, 2011							December 31, 2010
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)
AA	1	$	25	$	1	$	1	--	$	--	$	--	$	--
AA-	3		4,030		38		6	2		2,322		43		16
A+	4		5,056		18		6	5		3,189		16		10
A	3		2,022		28		5	3		3,479		17		17
A-	--		--		--		--	1		89		31		31
BBB+	2		57		40		40	--		--		--		--
Total	13	$	11,190	$	125	$	58	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)		September 30, 2011		December 31, 2010
Gross liability fair value of contracts containing credit-risk-contingent features	$	248	$	448
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs		(131)		(255)
Collateral posted under MNAs for contracts containing credit-risk-contingent features		(110)		(171)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	7	$	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 September 30, 2011:

($ in millions)		Notional amount
		AA		A		BBB		BB and lower		Total		Fair value
Single name
Investment grade corporate debt	$	50	$	93	$	160	$	40	$	343	$	(13)
High yield debt		--		--		--		2		2		--
Municipal		135		--		--		--		135		(12)
Subtotal		185		93		160		42		480		(25)
Baskets
Tranche
Investment grade corporate debt		--		--		--		65		65		(32)
First-to-default
Municipal		--		100		--		--		100		(33)
Subtotal		--		100		--		65		165		(65)
Total	$	185	$	193	$	160	$	107	$	645	$	(90)

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)