Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value of Assets and Liabilities

Schedule of assets and liabilities that are measured at fair value on a recurring and non-recurring basis

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of June 30, 2012:

($ in millions)		Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Counterparty and cash collateral		Balance as of June 30,
		(Level 1)		(Level 2)		(Level 3)		netting		2012
Assets
Fixed income securities:
U.S. government and agencies	$	3,367	$	1,871	$	8			$	5,246
Municipal		--		12,748		1,144				13,892
Corporate		--		45,730		1,524				47,254
Foreign government		--		2,169		--				2,169
RMBS		--		3,671		4				3,675
CMBS		--		1,669		47				1,716
ABS		--		3,615		334				3,949
Redeemable preferred stock		--		24		1				25
Total fixed income securities		3,367		71,497		3,062				77,926
Equity securities		2,650		839		192				3,681
Short-term investments		569		1,298		--				1,867
Other investments:
Free-standing derivatives		--		271		1	$	(85)		187
Separate account assets		6,790		--		--				6,790
Other assets		6		--		1				7
Total recurring basis assets		13,382		73,905		3,256		(85)		90,458
Non-recurring basis (1)		--		--		41				41
Total assets at fair value	$	13,382	$	73,905	$	3,297	$	(85)	$	90,499
% of total assets at fair value		14.8 %		81.7 %		3.6 %		(0.1) %		100.0 %
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(707)			$	(707)
Other liabilities:
Free-standing derivatives		(4)		(125)		(72)	$	49		(152)
Total liabilities at fair value	$	(4)	$	(125)	$	(779)	$	49	$	(859)
% of total liabilities at fair value		0.5 %		14.5 %		90.7 %		(5.7) %		100.0 %

(1)  Includes $28 million of mortgage loans, $6 million of limited partnership interests and $7 million of other investments written-down to fair value in connection with recognizing other-than-temporary impairments.

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2011:

($ in millions)		Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Counterparty and cash collateral		Balance as of December 31,
		(Level 1)		(Level 2)		(Level 3)		netting		2011
Assets
Fixed income securities:
U.S. government and agencies	$	4,707	$	1,608	$	--			$	6,315
Municipal		--		12,909		1,332				14,241
Corporate		--		42,176		1,405				43,581
Foreign government		--		2,081		--				2,081
RMBS		--		4,070		51				4,121
CMBS		--		1,724		60				1,784
ABS		--		3,669		297				3,966
Redeemable preferred stock		--		23		1				24
Total fixed income securities		4,707		68,260		3,146				76,113
Equity securities		3,433		887		43				4,363
Short-term investments		188		1,103		--				1,291
Other investments:
Free-standing derivatives		--		281		1	$	(114)		168
Separate account assets		6,984		--		--				6,984
Other assets		1		--		1				2
Total recurring basis assets		15,313		70,531		3,191		(114)		88,921
Non-recurring basis (1)		--		--		35				35
Total assets at fair value	$	15,313	$	70,531	$	3,226	$	(114)	$	88,956
% of total assets at fair value		17.2 %		79.3 %		3.6 %		(0.1) %		100.0 %
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(723)			$	(723)
Other liabilities:
Free-standing derivatives		(1)		(112)		(96)	$	77		(132)
Total liabilities at fair value	$	(1)	$	(112)	$	(819)	$	77	$	(855)
% of total liabilities at fair value		0.1 %		13.1 %		95.8 %		(9.0) %		100.0 %

(1)  Includes $19 million of mortgage loans and $16 million of other investments written-down to fair value in connection with recognizing other-than-temporary impairments.

Summary of quantitative information about the significant unobservable inputs

($ in millions)			Valuation	Unobservable		Weighted
	Fair value		technique	input	Range	average
ARS backed by student loans	$	604	Discounted cash flow model	Anticipated date liquidity will return to the market	18 - 60 months	33 - 45 months
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(551)	Stochastic cash flow model	Projected option cost	1.5 - 3.5 %	3.35 %

Schedule of the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the three months ended June 30, 2012.

($ in millions)				Total gains (losses) included in:
		Balance as of March 31, 2012		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	8	$	--
Municipal		1,267		(4)		10		--		(20)
Corporate		1,461		1		(5)		80		(20)
RMBS		4		--		--		--		--
CMBS		50		(1)		2		--		(5)
ABS		299		16		(1)		--		(16)
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		3,082		12		6		88		(61)
Equity securities		113		(4)		6		--		--
Other investments:
Free-standing derivatives, net		(70)		(3)		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	3,126	$	5	$	12	$	88	$	(61)
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(730)	$	16	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(730)	$	16	$	--	$	--	$	--
		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2012
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	--	$	8
Municipal		--		(100)		--		(9)		1,144
Corporate		55		(41)		--		(7)		1,524
RMBS		--		--		--		--		4
CMBS		2		(1)		--		--		47
ABS		58		(11)		--		(11)		334
Redeemable preferred stock		1		(1)		--		--		1
Total fixed income securities		116		(154)		--		(27)		3,062
Equity securities		92		(15)		--		--		192
Other investments:
Free-standing derivatives, net		3		--		--		(1)		(71)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	211	$	(169)	$	--	$	(28)	$	3,184
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(17)	$	24	$	(707)
Total recurring Level 3 liabilities	$	--	$	--	$	(17)	$	24	$	(707)

(1) The effect to net income totals $21 million and is reported in the Condensed Consolidated Statements of Operations as follows: $(3) million in realized capital gains and losses, $9 million in net investment income, $32 million in interest credited to contractholder funds and $(17) million in life and annuity contract benefits.

(2) Comprises $1 million of assets and $72 million of liabilities.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the six months ended June 30, 2012.

($ in millions)				Total gains (losses) included in:
		Balance as of December 31, 2011		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	8	$	--
Municipal		1,332		(6)		17	$	--		(26)
Corporate		1,405		6		23		136		(38)
RMBS		51		--		--		--		(47)
CMBS		60		(2)		8		--		(5)
ABS		297		29		12		--		(51)
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		3,146		27		60		144		(167)
Equity securities		43		(4)		6		--		--
Other investments:
Free-standing derivatives, net		(95)		14		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	3,095	$	37	$	66	$	144	$	(167)
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(723)	$	(9)	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(723)	$	(9)	$	--	$	--	$	--
		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2012
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	--	$	8
Municipal		42		(205)		--		(10)		1,144
Corporate		131		(99)		--		(40)		1,524
RMBS		--		--		--		--		4
CMBS		2		(1)		--		(15)		47
ABS		74		(11)		--		(16)		334
Redeemable preferred stock		1		(1)		--		--		1
Total fixed income securities		250		(317)		--		(81)		3,062
Equity securities		162		(15)		--		--		192
Other investments:
Free-standing derivatives, net		6		--		--		4		(71)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	418	$	(332)	$	--	$	(77)	$	3,184
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(29)	$	54	$	(707)
Total recurring Level 3 liabilities	$	--	$	--	$	(29)	$	54	$	(707)

(1) The effect to net income totals $28 million and is reported in the Condensed Consolidated Statements of Operations as follows: $23 million in realized capital gains and losses, $15 million in net investment income, $(24) million in interest credited to contractholder funds and $14 million in life and annuity contract benefits.

(2) Comprises $1 million of assets and $72 million of liabilities.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the three months ended June 30, 2011.

($ in millions)				Total gains (losses) included in:
		Balance as of March 31, 2011		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	1,864	$	(13)	$	45	$	--	$	(22)
Corporate		2,035		23		8		87		(117)
RMBS		1,398		(26)		1		--		(68)
CMBS		995		(21)		4		10		(10)
ABS		2,091		11		12		--		(9)
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		8,384		(26)		70		97		(226)
Equity securities		43		--		--		--		--
Other investments:
Free-standing derivatives, net		(71)		(3)		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	8,357	$	(29)	$	70	$	97	$	(226)
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(630)	$	(34)	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(630)	$	(34)	$	--	$	--	$	--
		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2011
Assets
Fixed income securities:
Municipal	$	3	$	(321)	$	--	$	(2)	$	1,554
Corporate		35		(347)		--		(4)		1,720
RMBS		--		(60)		--		(51)		1,194
CMBS		2		(41)		--		(1)		938
ABS		213		(49)		--		(102)		2,167
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		253		(818)		--		(160)		7,574
Equity securities		--		(1)		--		--		42
Other investments:
Free-standing derivatives, net		19		--		--		(1)		(56)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	272	$	(819)	$	--	$	(161)	$	7,561
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(13)	$	48	$	(629)
Total recurring Level 3 liabilities	$	--	$	--	$	(13)	$	48	$	(629)

(1) The effect to net income totals $(63) million and is reported in the Condensed Consolidated Statements of Operations as follows: $(38) million in realized capital gains and losses, $9 million in net investment income, $(26) million in interest credited to contractholder funds and $(8) million in life and annuity contract benefits.

(2) Comprises $22 million of assets and $78 million of liabilities.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the six months ended June 30, 2011.

($ in millions)				Total gains (losses) included in:
		Balance as of December 31, 2010		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	2,016	$	(24)	$	66	$	--	$	(59)
Corporate		1,908		35		18		182		(164)
RMBS		1,794		(87)		106		--		(113)
CMBS		923		(42)		118		66		(69)
ABS		2,417		55		28		--		(313)
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		9,059		(63)		336		248		(718)
Equity securities		63		(10)		--		--		(10)
Other investments:
Free-standing derivatives, net		(21)		(34)		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	9,102	$	(107)	$	336	$	248	$	(728)
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	(653)	$	(26)	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(653)	$	(26)	$	--	$	--	$	--
		Purchases		Sales		Issues		Settlements		Balance as of June 30, 2011
Assets
Fixed income securities:
Municipal	$	13	$	(455)	$	--	$	(3)	$	1,554
Corporate		131		(378)		--		(12)		1,720
RMBS		--		(378)		--		(128)		1,194
CMBS		10		(66)		--		(2)		938
ABS		303		(163)		--		(160)		2,167
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		457		(1,440)		--		(305)		7,574
Equity securities		--		(1)		--		--		42
Other investments:
Free-standing derivatives, net		67		--		--		(68)		(56)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	524	$	(1,441)	$	--	$	(373)	$	7,561
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	--	$	--	$	(27)	$	77	$	(629)
Total recurring Level 3 liabilities	$	--	$	--	$	(27)	$	77	$	(629)

(1) The effect to net income totals $(133) million and is reported in the Condensed Consolidated Statements of Operations as follows: $(123) million in realized capital gains and losses, $16 million in net investment income, $(63) million in interest credited to contractholder funds and $37 million in life and annuity contract benefits.

(2) Comprises $22 million of assets and $78 million of liabilities.

Schedule of gains and losses included in net income for Level 3 assets and liabilities still held at the balance sheet date

($ in millions)		Three months ended June 30,				Six months ended June 30,
		2012		2011		2012		2011
Assets
Fixed income securities:
Municipal	$	(5)	$	(5)	$	(5)	$	(15)
Corporate		1		6		9		10
RMBS		(1)		(27)		(1)		(63)
CMBS		(1)		(11)		(1)		(16)
ABS		5		5		18		7
Total fixed income securities		(1)		(32)		20		(77)
Equity securities		(4)		--		(4)		(10)
Other investments:
Free-standing derivatives, net		(4)		--		11		3
Total recurring Level 3 assets	$	(9)	$	(32)	$	27	$	(84)
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity contracts	$	16	$	(34)	$	(9)	$	(26)
Total recurring Level 3 liabilities	$	16	$	(34)	$	(9)	$	(26)

Schedule of carrying values and fair value estimates of financial instruments not carried at fair value

Financial assets

($ in millions)		June 30, 2012				December 31, 2011
		Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	$	6,928	$	7,239	$	7,139	$	7,350
Cost method limited partnerships		1,363		1,656		1,569		1,838
Bank loans		426		421		339		328

Financial liabilities

($ in millions)		June 30, 2012				December 31, 2011
		Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	$	28,694	$	29,883	$	30,192	$	30,499
Long-term debt		6,058		6,905		5,908		6,312
Liability for collateral		665		665		462		462