Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2014

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 September 30, 2014.

($ in millions)		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Counterparty and cash collateral netting		Balance  as of  September 30, 2014
Assets
Fixed income securities:
U.S. government and agencies	$	3,245	$	1,058	$	6			$	4,309
Municipal		--		8,245		290				8,535
Corporate		--		40,135		936				41,071
Foreign government		--		1,693		--				1,693
ABS		--		4,535		174				4,709
RMBS		--		1,288		1				1,289
CMBS		--		627		54				681
Redeemable preferred stock		--		26		--				26
Total fixed income securities		3,245		57,607		1,461				62,313
Equity securities		3,959		293		83				4,335
Short-term investments		584		1,879		--				2,463
Other investments: Free-standing derivatives		--		82		3	$	(12)		73
Separate account assets		4,521		--		--				4,521
Other assets		--		--		1				1
Total recurring basis assets		12,309		59,861		1,548		(12)		73,706
Non-recurring basis (1)		--		--		28				28
Total assets at fair value	$	12,309	$	59,861	$	1,576	$	(12)	$	73,734
% of total assets at fair value		16.7 %		81.2 %		2.1 %		-- %		100.0 %
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	--	$	--	$	(321)			$	(321)
Other liabilities: Free-standing derivatives		(1)		(52)		(9)	$	19		(43)
Total liabilities at fair value	$	(1)	$	(52)	$	(330)	$	19	$	(364)
% of total liabilities at fair value		0.3 %		14.3 %		90.6 %		(5.2) %		100.0 %

_______________

(1) Includes $28 million of limited partnership interests 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, 2013.

($ in millions)		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Counterparty and cash collateral netting		Balance as of December 31, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	1,801	$	1,105	$	7			$	2,913
Municipal		--		8,380		343				8,723
Corporate		--		39,494		1,109				40,603
Foreign government		--		1,824		--				1,824
ABS		--		4,326		192				4,518
RMBS		--		1,472		2				1,474
CMBS		--		786		43				829
Redeemable preferred stock		--		25		1				26
Total fixed income securities		1,801		57,412		1,697				60,910
Equity securities		4,268		697		132				5,097
Short-term investments		752		1,626		15				2,393
Other investments: Free-standing derivatives		--		284		9	$	(24)		269
Separate account assets		5,039		--		--				5,039
Other assets		1		--		--				1
Assets held for sale		1,854		9,812		362				12,028
Total recurring basis assets		13,715		69,831		2,215		(24)		85,737
Non-recurring basis (1)		--		--		24				24
Total assets at fair value	$	13,715	$	69,831	$	2,239	$	(24)	$	85,761
% of total assets at fair value		16.0 %		81.4 %		2.6 %		-- %		100.0 %
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	--	$	--	$	(307)			$	(307)
Other liabilities: Free-standing derivatives		--		(194)		(14)	$	11		(197)
Liabilities held for sale		--		--		(246)				(246)
Total recurring basis liabilities		--		(194)		(567)		11		(750)
Non-recurring basis (2)		--		--		(11,088)				(11,088)
Total liabilities at fair value	$	--	$	(194)	$	(11,655)	$	11	$	(11,838)
% of total liabilities at fair value		-- %		1.6 %		98.5 %		(0.1) %		100.0 %

_______________

(1)  Includes $8 million of mortgage loans and $16 million of limited partnership interests written-down to fair value in connection with recognizing other-than-temporary impairments.

(2) Relates to LBL business held for sale (see Note 3).  The total fair value measurement includes $15,593 million of assets held for sale and $(14,899) million of liabilities held for sale, less $12,028 million of assets and $(246) million of liabilities measured at fair value on a recurring basis.

Summary of quantitative information about the significant unobservable inputs

($ in millions)	Fair value		Valuation technique	Unobservable input	Range	Weighted average
September 30, 2014
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(269)	Stochastic cash flow model	Projected option cost	1.0 - 2.0 %	1.76 %
December 31, 2013
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(247)	Stochastic cash flow model	Projected option cost	1.0 - 2.0 %	1.75%
Liabilities held for sale – Equity-indexed and forward starting options	$	(246)	Stochastic cash flow model	Projected option cost	1.0 - 2.0 %	1.91%

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 September 30, 2014.

($ in millions)				Total gains (losses) included in:
		Balance as of June 30, 2014		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	6	$	--	$	--	$	--	$	--
Municipal		302		--		(7)		--		--
Corporate		965		4		(14)		23		--
ABS		142		1		1		--		(20)
RMBS		1		--		--		--		--
CMBS		55		(1)		--		--		--
Total fixed income securities		1,471		4		(20)		23		(20)
Equity securities		19		--		--		--		--
Free-standing derivatives, net		(5)		--		--		--		--
Other assets		1		--		--		--		--
Total recurring Level 3 assets	$	1,486	$	4	$	(20)	$	23	$	(20)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(331)	$	9	$	--	$	--	$	--
Total recurring Level 3 liabilities	$	(331)	$	9	$	--	$	--	$	--
		Purchases		Sales		Issues		Settlements		Balance as of September 30, 2014
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	--	$	6
Municipal		5		(15)		--		5		290
Corporate		24		(12)		--		(54)		936
ABS		55		--		--		(5)		174
RMBS		--		--		--		--		1
CMBS		3		--		--		(3)		54
Total fixed income securities		87		(27)		--		(57)		1,461
Equity securities		64		--		--		--		83
Free-standing derivatives, net		--		--		--		(1)		(6)	(2)
Other assets		--		--		--		--		1
Total recurring Level 3 assets	$	151	$	(27)	$	--	$	(58)	$	1,539
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	--	$	--	$	--	$	1	$	(321)
Total recurring Level 3 liabilities	$	--	$	--	$	--	$	1	$	(321)

_______________

(1) The effect to net income totals $13 million and is reported in the Condensed Consolidated Statements of Operations as follows: $4 million in net investment income, $5 million in interest credited to contractholder funds and $4 million in life and annuity contract benefits.

(2) Comprises $3 million of assets and $9 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 nine months ended September 30, 2014.

($ in millions)				Total gains (losses) included in:
		Balance as of December 31, 2013		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	7	$	--	$	--	$	--	$	--
Municipal		343		(4)		4		--		(17)
Corporate		1,109		17		(4)		23		(37)
ABS		192		1		1		--		(121)
RMBS		2		--		--		--		--
CMBS		43		(1)		--		5		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		1,697		13		1		28		(175)
Equity securities		132		22		(15)		--		--
Short-term investments		--		--		--		--		--
Free-standing derivatives, net		(5)		1		--		--		--
Other assets		--		1		--		--		--
Assets held for sale		362		(1)		2		4		(2)
Total recurring Level 3 assets	$	2,186	$	36	$	(12)	$	32	$	(177)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(307)	$	(5)	$	--	$	--	$	--
Liabilities held for sale		(246)		17		--		--		--
Total recurring Level 3 liabilities	$	(553)	$	12	$	--	$	--	$	--
		Sold in LBL disposition (3)		Purchases/ Issues (4)		Sales		Settlements		Balance as of September 30, 2014
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	(1)	$	6
Municipal		--		6		(41)		(1)		290
Corporate		--		56		(123)		(105)		936
ABS		--		119		--		(18)		174
RMBS		--		--		--		(1)		1
CMBS		4		8		(1)		(4)		54
Redeemable preferred stock		--		--		(1)		--		--
Total fixed income securities		4		189		(166)		(130)		1,461
Equity securities		--		67		(123)		--		83
Short-term investments		--		40		(40)		--		--
Free-standing derivatives, net		--		2		--		(4)		(6)	(2)
Other assets		--		--		--		--		1
Assets held for sale		(351)		--		(8)		(6)		--
Total recurring Level 3 assets	$	(347)	$	298	$	(337)	$	(140)	$	1,539
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	--	$	(13)	$	--	$	4	$	(321)
Liabilities held for sale		230		(4)		--		3		--
Total recurring Level 3 liabilities	$	230	$	(17)	$	--	$	7	$	(321)

______________________

(1) The effect to net income totals $48 million and is reported in the Condensed Consolidated Statements of Operations as follows: $29 million in realized capital gains and losses, $10 million in net investment income, $5 million in interest credited to contractholder funds $8 million in life and annuity contract benefits and $(4) million in loss on disposition of operations.

(2) Comprises $3 million of assets and $9 million of liabilities.

(3) Includes transfers from held for sale that took place in first quarter 2014 of $4 million for CMBS and $(4) million for Assets held for sale.

(4) Represents purchases for assets and issues for 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 September 30, 2013.

($ in millions)				Total gains (losses) included in:
		Balance as of June 30, 2013		Net income (1)		OCI		Transfers into Level 3		Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	7	$	--	$	--	$	--	$	--
Municipal		553		(6)		(1)		--		(56)
Corporate		1,383		10		1		21		(24)
ABS		288		--		15		--		(70)
RMBS		3		--		--		--		--
CMBS		41		--		1		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,276		4		16		21		(150)
Equity securities		125		--		3		--		--
Free-standing derivatives, net		(7)		(2)		--		--		--
Other assets		1		--		--		--		--
Assets held for sale		--		(1)		(8)		3		(2)
Total recurring Level 3 assets	$	2,395	$	1	$	11	$	24	$	(152)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(533)	$	8	$	--	$	--	$	--
Liabilities held for sale		--		16		--		--		--
Total recurring Level 3 liabilities	$	(533)	$	24	$	--	$	--	$	--
		Transfer to held for sale		Purchases/ Issues (2)		Sales		Settlements		Balance as of September 30, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	--	$	7
Municipal		(51)		2		(18)		--		423
Corporate		(244)		99		(75)		(49)		1,122
ABS		(85)		--		--		(8)		140
RMBS		--		--		--		(1)		2
CMBS		(5)		--		--		--		37
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		(385)		101		(93)		(58)		1,732
Equity securities		--		--		--		--		128
Free-standing derivatives, net		--		1		--		(2)		(10)	(3)
Other assets		--		--		--		--		1
Assets held for sale		385		--		(10)		(2)		365
Total recurring Level 3 assets	$	--	$	102	$	(103)	$	(62)	$	2,216
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	265	$	(24)	$	--	$	1	$	(283)
Liabilities held for sale		(265)		(2)		--		2		(249)
Total recurring Level 3 liabilities	$	--	$	(26)	$	--	$	3	$	(532)

______________________

(1) The effect to net income totals $25 million and is reported in the Condensed Consolidated Statements of Operations as follows: $(3) million in realized capital gains and losses, $3 million in net investment income, $15 million in interest credited to contractholder funds and $10 million in life and annuity contract benefits.

(2) Represents purchases for assets and issues for liabilities.

(3) Comprises $6 million of assets and $16 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 nine months ended September 30, 2013.

($ in millions)				Total gains (losses) included in:
		Balance as of December 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		965		(34)		48		6		(62)
Corporate		1,617		31		(38)		84		(299)
ABS		251		--		30		18		(86)
RMBS		3		--		--		--		--
CMBS		52		(1)		3		--		--
Redeemable preferred stock		1		--		--		--		--
Total fixed income securities		2,897		(4)		43		108		(447)
Equity securities		171		2		4		--		--
Free-standing derivatives, net		(27)		20		--		--		--
Other assets		1		--		--		--		--
Assets held for sale		--		(1)		(8)		3		(2)
Total recurring Level 3 assets	$	3,042	$	17	$	39	$	111	$	(449)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(553)	$	77	$	--	$	--	$	--
Liabilities held for sale		--		16		--		--		--
Total recurring Level 3 liabilities	$	(553)	$	93	$	--	$	--	$	--
		Transfer to held for sale		Purchases/ Issues (2)		Sales		Settlements		Balance as of September 30, 2013
Assets
Fixed income securities:
U.S. government and agencies	$	--	$	--	$	--	$	(1)	$	7
Municipal		(51)		54		(481)		(22)		423
Corporate		(244)		459		(351)		(137)		1,122
ABS		(85)		126		(81)		(33)		140
RMBS		--		--		--		(1)		2
CMBS		(5)		6		(17)		(1)		37
Redeemable preferred stock		--		--		--		--		1
Total fixed income securities		(385)		645		(930)		(195)		1,732
Equity securities		--		--		(49)		--		128
Free-standing derivatives, net		--		2		--		(5)		(10)	(3)
Other assets		--		--		--		--		1
Assets held for sale		385		--		(10)		(2)		365
Total recurring Level 3 assets	$	--	$	647	$	(989)	$	(202)	$	2,216
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	265	$	(74)	$	--	$	2	$	(283)
Liabilities held for sale		(265)		(2)		--		2		(249)
Total recurring Level 3 liabilities	$	--	$	(76)	$	--	$	4	$	(532)

______________________

(1) The effect to net income totals $110 million and is reported in the Condensed Consolidated Statements of Operations as follows: $(1) million in realized capital gains and losses, $15 million in net investment income, $40 million in interest credited to contractholder funds and $56 million in life and annuity contract benefits.

(2) Represents purchases for assets and issues for liabilities.

(3) Comprises $6 million of assets and $16 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 September 30,				Nine months ended September 30,
		2014		2013		2014		2013
Assets
Fixed income securities:
Municipal	$	(3)	$	(6)	$	(8)	$	(22)
Corporate		3		3		8		9
ABS		--		--		--		(1)
RMBS		--		--		(1)		(1)
CMBS		(1)		--		(1)		(1)
Total fixed income securities		(1)		(3)		(2)		(16)
Free-standing derivatives, net		--		(2)		6		14
Other assets		--		--		1		--
Assets held for sale		--		(1)		(1)		(1)
Total recurring Level 3 assets	$	(1)	$	(6)	$	4	$	(3)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	9	$	8	$	(5)	$	77
Liabilities held for sale		--		16		17		16
Total recurring Level 3 liabilities	$	9	$	24	$	12	$	93

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

Financial assets

($ in millions)		September 30, 2014						December 31, 2013
		Carrying value			Fair value			Carrying value			Fair value
Mortgage loans	$		4,143	$		4,379	$		4,721	$		4,871
Cost method limited partnerships		1,144			1,555			1,443			1,835
Bank loans		1,489			1,470			1,242			1,244
Agent loans		364			357			341			325
Assets held for sale		--			--			1,458			1,532

Financial liabilities

($ in millions)		September 30, 2014						December 31, 2013
		Carrying value			Fair value			Carrying value			Fair value
Contractholder funds on investment contracts	$		14,084	$		14,767	$		15,569	$		16,225
Long-term debt		5,195			5,770			6,201			6,509
Liability for collateral		779			779			624			624
Liabilities held for sale		--			--			7,417			7,298