Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

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, 2012.

($ 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
Foreign currency swap agreements	Other investments	$	101	n/a	$	(6)	$	2	$	(8)
Total			101	n/a		(6)		2		(8)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other investments		7,941	n/a		56		74		(18)
Interest rate swaption agreements	Other investments		250	n/a		--		--		--
Interest rate cap and floor agreements	Other investments		673	n/a		2		2		--
Financial futures contracts and options	Other assets		--	2		--		--		--
Equity and index contracts
Options, futures and warrants (2)	Other investments		147	14,600		226		226		--
Options, futures and warrants	Other assets		--	1,667		1		1		--
Foreign currency contracts
Foreign currency forwards and options	Other investments		206	n/a		4		5		(1)
Embedded derivative financial instruments
Conversion options	Fixed income securities		5	n/a		1		1		--
Equity-indexed call options	Fixed income securities		90	n/a		10		10		--
Credit default swaps	Fixed income securities		12	n/a		(12)		--		(12)
Other embedded derivative financial instruments	Other investments		1,000	n/a		--		--		--
Credit default contracts
Credit default swaps - buying protection	Other investments		470	n/a		2		6		(4)
Credit default swaps - selling protection	Other investments		275	n/a		2		2		--
Other contracts
Other contracts	Other assets		4	n/a		1		1		--
Total			11,073	16,269		293		328		(35)
Total asset derivatives		$	11,174	16,269	$	287	$	330	$	(43)

(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 7,307 stock rights and 3,915,485 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
Foreign currency swap agreements	Other liabilities & accrued expenses	$	50	n/a	$	(9)	$	--	$	(9	)
Total			50	n/a		(9)		--		(9	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		85	n/a		9		9		--
Interest rate cap and floor agreements	Other liabilities & accrued expenses		359	n/a		--		--		--
Financial futures contracts and options	Other liabilities & accrued expenses		--	496		--		--		--
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		--	13,919		(106)		--		(106	)
Foreign currency contracts
Foreign currency forwards and options	Other liabilities & accrued expenses		222	n/a		6		6		--
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		853	n/a		(85)		--		(85	)
Guaranteed withdrawal benefits	Contractholder funds		573	n/a		(44)		--		(44	)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		3,835	n/a		(413)		--		(413	)
Other embedded derivative financial instruments	Contractholder funds		85	n/a		(9)		--		(9	)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		314	n/a		(1)		2		(3	)
Credit default swaps – selling protection	Other liabilities & accrued expenses		338	n/a		(33)		1		(34	)
Total			6,664	14,415		(676)		18		(694	)
Total liability derivatives			6,714	14,415		(685)	$	18	$	(703	)
Total derivatives		$	17,888	30,684	$	(398)

(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, 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	$	144	n/a	$	(8)	$	--	$	(8	)
Foreign currency swap agreements	Other investments		127	n/a		(5)		3		(8	)
Total			271	n/a		(13)		3		(16	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other investments		8,028	n/a		122		137		(15	)
Interest rate swaption agreements	Other investments		1,750	n/a		--		--		--
Interest rate cap and floor agreements	Other investments		1,591	n/a		(12)		--		(12	)
Financial futures contracts and options	Other assets		n/a	40		--		--		--
Equity and index contracts
Options, futures and warrants (2)	Other investments		163	15,180		104		104		--
Options, futures and warrants	Other assets		n/a	2,132		1		1		--
Foreign currency contracts
Foreign currency swap agreements	Other investments		50	n/a		6		6		--
Foreign currency forwards and options	Other investments		190	n/a		1		3		(2	)
Embedded derivative financial instruments
Conversion options	Fixed income securities		5	n/a		--		--		--
Equity-indexed call options	Fixed income securities		150	n/a		11		11		--
Credit default swaps	Fixed income securities		172	n/a		(115)		--		(115	)
Other embedded derivative financial instruments	Other investments		1,000	n/a		--		--		--
Credit default contracts
Credit default swaps - buying protection	Other investments		265	n/a		3		6		(3	)
Credit default swaps - selling protection	Other investments		167	n/a		(4)		1		(5	)
Other contracts
Other contracts	Other investments		5	n/a		--		--		--
Other contracts	Other assets		4	n/a		1		1		--
Total			13,540	17,352		118		270		(152	)
Total asset derivatives		$	13,811	17,352	$	105	$	273	$	(168	)

(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 10,798 stock rights and 4,392,937 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	$	28	n/a	$	(5)	$	--	$	(5	)
Foreign currency swap agreements	Other liabilities & accrued expenses		50	n/a		(7)		--		(7	)
Total			78	n/a		(12)		--		(12	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate swap agreements	Other liabilities & accrued expenses		85	n/a		8		8		--
Interest rate swaption agreements	Other liabilities & accrued expenses		1,250	n/a		--		--		--
Interest rate cap and floor agreements	Other liabilities & accrued expenses		914	n/a		(9)		--		(9	)
Equity and index contracts
Options and futures	Other liabilities & accrued expenses		n/a	15,677		(50)		--		(50	)
Foreign currency contracts
Foreign currency forwards and options	Other liabilities & accrued expenses		96	n/a		(1)		--		(1	)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds		917	n/a		(105)		--		(105	)
Guaranteed withdrawal benefits	Contractholder funds		613	n/a		(57)		--		(57	)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds		3,996	n/a		(553)		--		(553	)
Other embedded derivative financial instruments	Contractholder funds		85	n/a		(8)		--		(8	)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses		509	n/a		7		12		(5	)
Credit default swaps – selling protection	Other liabilities & accrued expenses		503	n/a		(77)		2		(79	)
Total			8,968	15,677		(845)		22		(867	)
Total liability derivatives			9,046	15,677		(857)	$	22	$	(879	)
Total derivatives		$	22,857	33,029	$	(752)

(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						Nine months ended
		September 30,						September 30,
Effective portion		2012			2011			2012			2011
(Loss) gain recognized in OCI on derivatives during the period	$	(3	)	$	20		$	(3	)	$	7
Loss recognized in OCI on derivatives during the term of the hedging relationship		(19	)		(15	)		(19	)		(15	)
Loss reclassified from AOCI into income (net investment income)		--			(1	)		--			--
Loss reclassified from AOCI into income (realized capital gains and losses)		--			--			(1	)		--
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 September 30, 2012
		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	$	--	$	--	$	--	$	--	$	--	$	--
Subtotal		--		--		--		--		--		--
Derivatives not designated as accounting hedging instruments
Interest rate contracts		--		(2)		--		--		--		(2	)
Equity and index contracts		--		(6)		--		19		6		19
Embedded derivative financial instruments		--		2		18		138		--		158
Foreign currency contracts		--		1		--		--		5		6
Credit default contracts		--		3		--		--		--		3
Other contracts		--		--		--		1		--		1
Subtotal		--		(2)		18		158		11		185
Total	$	--	$	(2)	$	18	$	158	$	11	$	185

		Nine months ended September 30, 2012
		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		--		(1)		--		--		--		(1	)
Equity and index contracts		--		(5)		--		56		15		66
Embedded derivative financial instruments		--		21		32		140		--		193
Foreign currency contracts		--		1		--		--		7		8
Credit default contracts		--		11		--		--		--		11
Other contracts		--		--		--		3		--		3
Subtotal		--		27		32		199		22		280
Total	$	(1)	$	27	$	32	$	199	$	22	$	279

		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	$	(1)	$	--	$	--	$	--	$	--	$	(1	)
Interest rate contracts		(1)		--		--		--		--		(1	)
Subtotal
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	)

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

($ in millions)		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
Three months ended September 30, 2012
Net investment income	$	1	$	--	$	--	$	(1	)
Total	$	1	$	--	$	--	$	(1	)
Nine months ended September 30, 2012
Net investment income	$	3	$	--	$	--	$	(3	)
Total	$	3	$	--	$	--	$	(3	)
Three months ended September 30, 2011
Net investment income	$	1	$	--	$	--	$	(1	)
Total	$	1	$	--	$	--	$	(1	)
Nine months ended September 30, 2011
Interest credited to contractholder funds	$	(7)	$	(34)	$	41	$	--
Net investment income		24		--		--		(24	)
Realized capital gains and losses		(8)		--		--		--
Total	$	9	$	(34)	$	41	$	(24	)

Counterparty credit exposure by counterparty credit rating

($ in millions)	September 30, 2012							December 31, 2011
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
A+	2		1,578		8		3	4		3,026		26		5
A	5		4,081		26		4	3		5,307		15		1
A-	3		892		9		1	2		3,815		25		--
BBB+	1		3,617		23		--	2		57		41		41
Total	11	$	10,168	$	66	$	8	12	$	12,230	$	108	$	48

(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, 2012		December 31, 2011
Gross liability fair value of contracts containing credit-risk-contingent features	$	61	$	153
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs		(40)		(69	)
Collateral posted under MNAs for contracts containing credit-risk-contingent features		(20)		(76	)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	1	$	8

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

($ in millions)		Notional amount
		AAA		AA		A		BBB		BB and lower		Total		Fair value
September 30, 2012
Single name
Investment grade corporate debt	$	5	$	20	$	48	$	105	$	10	$	188	$	--
Municipal		--		25		--		--		--		25		(4	)
Subtotal		5		45		48		105		10		213		(4	)
Baskets
First-to-default
Municipal		--		--		100		--		--		100		(28	)
Subtotal		--		--		100		--		--		100		(28	)
Index
Investment grade corporate debt		--		2		79		204		15		300		1
Total	$	5	$	47	$	227	$	309	$	25	$	613	$	(31	)
December 31, 2011
Single name
Investment grade corporate debt	$	--	$	90	$	88	$	160	$	30	$	368	$	(7	)
High yield debt		--		--		--		--		2		2		--
Municipal		--		135		--		--		--		135		(12	)
Subtotal		--		225		88		160		32		505		(19	)
Baskets
Tranche
Investment grade corporate debt		--		--		--		--		65		65		(29	)
First-to-default
Municipal		--		--		100		--		--		100		(33	)
Subtotal		--		--		100		--		65		165		(62	)
Total	$	--	$	225	$	188	$	160	$	97	$	670	$	(81	)