ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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13-3317783
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Indicate by check mark:
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Yes
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No
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• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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ý
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¨
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• whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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ý
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¨
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• whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
x
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
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¨
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ý
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Item
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Description
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Page
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2.
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3.
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4.
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1.
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1A.
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2.
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6.
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•
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challenges related to the Company’s current operating environment, including global political, economic and market conditions, and the effect of financial market disruptions, economic downturns or other potentially adverse macroeconomic developments on the attractiveness of our products, the returns in our investment portfolios and the hedging costs associated with our variable annuities business;
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•
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the risks, challenges and uncertainties associated with the realignment of our business to focus on our property and casualty, group benefits and mutual fund businesses;
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•
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the risks, challenges and uncertainties associated with
our
capital management plan, expense reduction initiatives and other actions, which may include acquisitions, divestitures or restructurings;
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•
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execution risk related to the continued reinvestment of our investment portfolios and refinement of our hedge program for our run-off annuity block;
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•
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market risks associated with our business, including changes in interest rates, credit spreads, equity prices, market volatility and foreign exchange rates, and implied volatility levels, as well as continuing uncertainty in key sectors such as the global real estate market;
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•
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the possibility of unfavorable loss development including with respect to long-tailed exposures;
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•
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the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses;
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•
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weather and other natural physical events, including the severity and frequency of storms, hail, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns;
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•
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risk associated with the use of analytical models in making decisions in key areas such as underwriting, capital, hedging, reserving, and catastrophe risk management;
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•
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the uncertain effects of emerging claim and coverage issues;
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•
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the Company’s ability to effectively price its property and casualty policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines;
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•
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the impact on our statutory capital of various factors, including many that are outside the Company’s control, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results;
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•
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risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments;
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•
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the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;
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•
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volatility in our statutory and U.S. GAAP earnings and potential material changes to our results resulting from our adjustment of our risk management program to emphasize protection of economic value;
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•
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the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the valuation of the Company’s financial instruments that could result in changes to investment valuations;
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•
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the subjective determinations that underlie the Company’s evaluation of other-than-temporary impairments on available-for-sale securities;
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•
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losses due to nonperformance or defaults by others, including reinsurers, sourcing partners, derivative counterparties and other third parties;
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•
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the potential for further acceleration of deferred policy acquisition cost amortization;
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•
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the potential for further impairments of our goodwill or the potential for changes in valuation allowances against deferred tax assets;
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•
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the possible occurrence of terrorist attacks and the Company’s ability to contain its exposure, including the effect of the absence or insufficiency of applicable terrorism legislation on coverage;
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•
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the difficulty in predicting the Company’s potential exposure for asbestos and environmental claims;
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•
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the response of reinsurance companies under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses;
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•
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actions by our competitors, many of which are larger or have greater financial resources than we do;
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•
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the Company’s ability to distribute its products through distribution channels, both current and future;
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•
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the cost and other effects of increased regulation as a result of the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the potential effect of other domestic and foreign regulatory developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels;
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•
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unfavorable judicial or legislative developments;
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•
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regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends;
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•
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the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event;
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•
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the risk that our framework for managing operational risks may not be effective in mitigating material risk and loss to the Company;
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•
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the potential for difficulties arising from outsourcing and similar third-party relationships;
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•
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the impact of changes in federal or state tax laws;
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•
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regulatory requirements that could delay, deter or prevent a takeover attempt that shareholders might consider in their best interests;
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•
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the impact of potential changes in accounting principles and related financial reporting requirements;
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•
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the Company’s ability to protect its intellectual property and defend against claims of infringement; and
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•
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other factors described in such forward-looking statements.
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Three Months Ended June 30,
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Six Months Ended June 30,
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||||||||||
(In millions, except for per share data)
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2014
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2013
|
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2014
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2013
|
||||||||
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(Unaudited)
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||||||||||||
Revenues
|
|
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||||||||
Earned premiums
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$
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3,319
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$
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3,294
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|
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$
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6,621
|
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$
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6,547
|
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Fee income
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502
|
|
513
|
|
|
998
|
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1,023
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||||
Net investment income
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768
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|
841
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1,592
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1,666
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|
||||
Net realized capital gains (losses):
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||||||||
Total other-than-temporary impairment (“OTTI”) losses
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(8
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)
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(17
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)
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(31
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)
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(50
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)
|
||||
OTTI losses recognized in other comprehensive income (“OCI”)
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1
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5
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|
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2
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17
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|
||||
Net OTTI losses recognized in earnings
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(7
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)
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(12
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)
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(29
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)
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(33
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)
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Net realized capital gains on business dispositions
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—
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1
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—
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1,575
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Other net realized capital gains (losses)
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3
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32
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|
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(10
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)
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123
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|
||||
Total net realized capital gains (losses)
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(4
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)
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21
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|
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(39
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)
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1,665
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Other revenues
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31
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65
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56
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133
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|
||||
Total revenues
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4,616
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4,734
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9,228
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11,034
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Benefits, losses and expenses
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||||||||
Benefits, losses and loss adjustment expenses
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3,023
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2,922
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5,599
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5,581
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Amortization of deferred policy acquisition costs and present value of future profits
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372
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391
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768
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820
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|
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Insurance operating costs and other expenses
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977
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1,084
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1,913
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2,096
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|
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Loss on extinguishment of debt
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—
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—
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—
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213
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|
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Reinsurance loss on dispositions, including reduction in goodwill of $156 for the six months ended June 30, 2013
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—
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—
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—
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1,574
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||||
Interest expense
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94
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100
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|
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189
|
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207
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|
||||
Total benefits, losses and expenses
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4,466
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4,497
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|
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8,469
|
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10,491
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||||
Income from continuing operations before income taxes
|
150
|
|
237
|
|
|
759
|
|
543
|
|
||||
Income tax expense
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—
|
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4
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|
|
143
|
|
67
|
|
||||
Income from continuing operations, net of tax
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150
|
|
233
|
|
|
616
|
|
476
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|
||||
Loss from discontinued operations, net of tax
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(617
|
)
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(423
|
)
|
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(588
|
)
|
(907
|
)
|
||||
Net income (loss)
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$
|
(467
|
)
|
$
|
(190
|
)
|
|
$
|
28
|
|
$
|
(431
|
)
|
Preferred stock dividends
|
—
|
|
—
|
|
|
—
|
|
10
|
|
||||
Net income (loss) available to common shareholders
|
$
|
(467
|
)
|
$
|
(190
|
)
|
|
$
|
28
|
|
$
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(441
|
)
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Income (loss) from continuing operations, net of tax, available to common shareholders per common share
|
|
|
|
|
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||||||||
Basic
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$
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0.33
|
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$
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0.52
|
|
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$
|
1.37
|
|
$
|
1.05
|
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Diluted
|
$
|
0.32
|
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$
|
0.48
|
|
|
$
|
1.30
|
|
$
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0.97
|
|
Net income (loss) available to common shareholders per common share
|
|
|
|
|
|
||||||||
Basic
|
$
|
(1.04
|
)
|
$
|
(0.42
|
)
|
|
$
|
0.06
|
|
$
|
(0.99
|
)
|
Diluted
|
$
|
(1.00
|
)
|
$
|
(0.39
|
)
|
|
$
|
0.06
|
|
$
|
(0.87
|
)
|
Cash dividends declared per common share
|
$
|
0.15
|
|
$
|
0.10
|
|
|
$
|
0.30
|
|
$
|
0.20
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(In millions)
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
|
(Unaudited)
|
||||||||||||
Comprehensive Income
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
(467
|
)
|
$
|
(190
|
)
|
|
$
|
28
|
|
$
|
(431
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||||
Change in net unrealized gains on securities
|
569
|
|
(1,367
|
)
|
|
1,268
|
|
(2,256
|
)
|
||||
Change in OTTI losses recognized in other comprehensive income
|
3
|
|
9
|
|
|
5
|
|
24
|
|
||||
Change in net gain/loss on cash-flow hedging instruments
|
20
|
|
(132
|
)
|
|
33
|
|
(240
|
)
|
||||
Change in foreign currency translation adjustments
|
(95
|
)
|
(94
|
)
|
|
(78
|
)
|
(314
|
)
|
||||
Change in pension and other postretirement plan adjustments
|
6
|
|
9
|
|
|
13
|
|
17
|
|
||||
Total other comprehensive income (loss)
|
503
|
|
(1,575
|
)
|
|
1,241
|
|
(2,769
|
)
|
||||
Total comprehensive income (loss)
|
$
|
36
|
|
$
|
(1,765
|
)
|
|
$
|
1,269
|
|
$
|
(3,200
|
)
|
(In millions, except for share and per share data)
|
June 30,
2014 |
December 31, 2013
|
||||
|
(Unaudited)
|
|||||
Assets
|
|
|||||
Investments:
|
|
|
||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $56,318 and $60,641) (includes variable interest entity assets, at fair value, of $0 and $31)
|
$
|
60,246
|
|
$
|
62,357
|
|
Fixed maturities, at fair value using the fair value option (includes variable interest entity assets of $152 and $161)
|
410
|
|
844
|
|
||
Equity securities, trading, at fair value (cost of $11 and $14,504)
|
12
|
|
19,745
|
|
||
Equity securities, available-for-sale, at fair value (cost of $779 and $850)
|
823
|
|
868
|
|
||
Mortgage loans (net of allowances for loan losses of $19 and $67)
|
5,586
|
|
5,598
|
|
||
Policy loans, at outstanding balance
|
1,420
|
|
1,420
|
|
||
Limited partnerships and other alternative investments (includes variable interest entity assets of $3 and $4)
|
2,902
|
|
3,040
|
|
||
Other investments
|
329
|
|
521
|
|
||
Short-term investments (includes variable interest entity assets, at fair value, of $18 and $3)
|
4,511
|
|
4,008
|
|
||
Total investments
|
76,239
|
|
98,401
|
|
||
Cash (includes variable interest entity assets, at fair value, of $14 and $0)
|
1,512
|
|
1,428
|
|
||
Premiums receivable and agents’ balances, net
|
3,567
|
|
3,465
|
|
||
Reinsurance recoverables, net
|
22,949
|
|
23,330
|
|
||
Deferred policy acquisition costs and present value of future profits
|
2,026
|
|
2,161
|
|
||
Deferred income taxes, net
|
3,036
|
|
3,840
|
|
||
Goodwill
|
498
|
|
498
|
|
||
Property and equipment, net
|
807
|
|
877
|
|
||
Other assets
|
2,556
|
|
2,998
|
|
||
Separate account assets
|
141,523
|
|
140,886
|
|
||
Total assets
|
$
|
254,713
|
|
$
|
277,884
|
|
Liabilities
|
|
|
||||
Reserve for future policy benefits and unpaid losses and loss adjustment expenses
|
$
|
41,682
|
|
$
|
41,373
|
|
Other policyholder funds and benefits payable
|
33,475
|
|
39,029
|
|
||
Other policyholder funds and benefits payable – international variable annuities
|
—
|
|
19,734
|
|
||
Unearned premiums
|
5,348
|
|
5,225
|
|
||
Short-term debt
|
289
|
|
438
|
|
||
Long-term debt
|
5,819
|
|
6,106
|
|
||
Other liabilities (includes variable interest entity liabilities of $14 and $33)
|
7,149
|
|
6,188
|
|
||
Separate account liabilities
|
141,523
|
|
140,886
|
|
||
Total liabilities
|
235,285
|
|
258,979
|
|
||
Commitments and Contingencies (Note 11)
|
|
|
||||
Stockholders’ Equity
|
|
|
||||
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 490,923,222 and 490,923,222 shares issued
|
5
|
|
5
|
|
||
Additional paid-in capital
|
9,230
|
|
9,894
|
|
||
Retained earnings
|
10,577
|
|
10,683
|
|
||
Treasury stock, at cost — 40,172,549 and 37,632,782 shares
|
(1,546
|
)
|
(1,598
|
)
|
||
Accumulated other comprehensive income (loss), net of tax
|
1,162
|
|
(79
|
)
|
||
Total stockholders’ equity
|
19,428
|
|
18,905
|
|
||
Total liabilities and stockholders’ equity
|
$
|
254,713
|
|
$
|
277,884
|
|
|
Six Months Ended June 30,
|
|||||
(In millions, except for share data)
|
2014
|
2013
|
||||
|
(Unaudited)
|
|||||
Preferred Stock
|
|
|
||||
Balance, beginning of period
|
$
|
—
|
|
$
|
556
|
|
Conversion of shares to common stock
|
—
|
|
(556
|
)
|
||
Balance, end of period
|
$
|
—
|
|
$
|
—
|
|
Common Stock
|
5
|
|
5
|
|
||
Additional Paid-in Capital, beginning of period
|
9,894
|
|
10,038
|
|
||
Repurchase of warrants
|
—
|
|
(21
|
)
|
||
Issuance of shares under incentive and stock compensation plans
|
1
|
|
(29
|
)
|
||
Tax benefits on employee stock options and awards
|
4
|
|
—
|
|
||
Conversion of mandatory convertible preferred stock
|
—
|
|
556
|
|
||
Issuance of shares for warrant exercise
|
(669
|
)
|
—
|
|
||
Additional Paid-in Capital, end of period
|
9,230
|
|
10,544
|
|
||
Retained Earnings, beginning of period
|
10,683
|
|
10,745
|
|
||
Net income (loss)
|
28
|
|
(431
|
)
|
||
Dividends on preferred stock
|
—
|
|
(10
|
)
|
||
Dividends declared on common stock
|
(134
|
)
|
(91
|
)
|
||
Retained Earnings, end of period
|
10,577
|
|
10,213
|
|
||
Treasury Stock, at Cost, beginning of period
|
(1,598
|
)
|
(1,740
|
)
|
||
Treasury stock acquired
|
(651
|
)
|
(145
|
)
|
||
Issuance of shares under incentive and stock compensation plans from treasury stock
|
47
|
|
69
|
|
||
Return of shares under incentive and stock compensation plans and other to treasury stock
|
(13
|
)
|
(7
|
)
|
||
Issuance of shares for warrant exercise
|
669
|
|
—
|
|
||
Treasury Stock, at Cost, end of period
|
(1,546
|
)
|
(1,823
|
)
|
||
Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period
|
(79
|
)
|
2,843
|
|
||
Total other comprehensive income (loss)
|
1,241
|
|
(2,769
|
)
|
||
Accumulated Other Comprehensive Income, net of tax, end of period
|
1,162
|
|
74
|
|
||
Total Stockholders’ Equity
|
$
|
19,428
|
|
$
|
19,013
|
|
Common Shares Outstanding beginning of period (in thousands)
|
453,290
|
|
436,306
|
|
||
Treasury stock acquired
|
(18,968
|
)
|
(5,205
|
)
|
||
Issuance of shares under incentive and stock compensation plans
|
1,111
|
|
1,236
|
|
||
Return of shares under incentive and stock compensation plans and other to treasury stock
|
(378
|
)
|
(285
|
)
|
||
Conversion of mandatory convertible preferred shares
|
—
|
|
21,181
|
|
||
Issuance of shares for warrant exercise
|
15,696
|
|
694
|
|
||
Common Shares Outstanding, at end of period
|
450,751
|
|
453,927
|
|
|
Six Months Ended June 30,
|
|||||
(In millions)
|
2014
|
2013
|
||||
Operating Activities
|
(Unaudited)
|
|||||
Net income (loss)
|
$
|
28
|
|
$
|
(431
|
)
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
||||
Amortization of deferred policy acquisition costs and present value of future profits
|
768
|
|
1,727
|
|
||
Additions to deferred policy acquisition costs and present value of future profits
|
(689
|
)
|
(668
|
)
|
||
Change in reserve for future policy benefits and unpaid losses and loss adjustment expenses and unearned premiums
|
543
|
|
(233
|
)
|
||
Change in reinsurance recoverables
|
(146
|
)
|
(327
|
)
|
||
Change in receivables and other assets
|
352
|
|
(796
|
)
|
||
Change in payables and accruals
|
(1,768
|
)
|
607
|
|
||
Change in accrued and deferred income taxes
|
971
|
|
(316
|
)
|
||
Net realized capital (gains) losses
|
196
|
|
(1,279
|
)
|
||
Net receipts (disbursements) from investment contracts related to policyholder funds—international variable annuities
|
(3,961
|
)
|
(3,907
|
)
|
||
Net (increase) decrease in equity securities, trading
|
3,961
|
|
3,906
|
|
||
Depreciation and amortization
|
60
|
|
57
|
|
||
Loss on extinguishment of debt
|
—
|
|
213
|
|
||
Reinsurance loss on dispositions
|
—
|
|
1,574
|
|
||
Loss on sale of business
|
659
|
|
102
|
|
||
Other operating activities, net
|
(464
|
)
|
179
|
|
||
Net cash provided by operating activities
|
$
|
510
|
|
408
|
|
|
Investing Activities
|
|
|
||||
Proceeds from the sale/maturity/prepayment of:
|
|
|
||||
Fixed maturities, available-for-sale
|
14,620
|
|
17,128
|
|
||
Fixed maturities, fair value option
|
299
|
|
49
|
|
||
Equity securities, available-for-sale
|
166
|
|
191
|
|
||
Mortgage loans
|
214
|
|
263
|
|
||
Partnerships
|
319
|
|
175
|
|
||
Payments for the purchase of:
|
|
|
||||
Fixed maturities, available-for-sale
|
(12,612
|
)
|
(14,746
|
)
|
||
Fixed maturities, fair value option
|
(246
|
)
|
(95
|
)
|
||
Equity securities, available-for-sale
|
(103
|
)
|
(97
|
)
|
||
Mortgage loans
|
(204
|
)
|
(315
|
)
|
||
Partnerships
|
(130
|
)
|
(195
|
)
|
||
Proceeds from business sold
|
963
|
|
485
|
|
||
Derivatives, net
|
(40
|
)
|
(1,303
|
)
|
||
Change in policy loans, net
|
3
|
|
44
|
|
||
Additions to property and equipment, net
|
(14
|
)
|
—
|
|
||
Change in short-term investments, net
|
(1,501
|
)
|
(97
|
)
|
||
Other investing activities, net
|
(5
|
)
|
32
|
|
||
Net cash provided by investing activities
|
1,729
|
|
1,519
|
|
||
Financing Activities
|
|
|
||||
Deposits and other additions to investment and universal life-type contracts
|
3,785
|
|
4,736
|
|
||
Withdrawals and other deductions from investment and universal life-type contracts
|
(11,167
|
)
|
(13,292
|
)
|
||
Net transfers from separate accounts related to investment and universal life-type contracts
|
6,233
|
|
8,065
|
|
||
Repayments at maturity or settlement of consumer notes
|
(6
|
)
|
(51
|
)
|
||
Net increase (decrease) in securities loaned or sold under agreements to repurchase
|
99
|
|
(847
|
)
|
||
Repurchase of warrants
|
—
|
|
(21
|
)
|
||
Repayment of debt
|
(200
|
)
|
(1,018
|
)
|
||
Proceeds from the issuance of debt
|
—
|
|
295
|
|
||
Proceeds from net issuance of shares under incentive and stock compensation plans, excess tax benefit and other
|
1
|
|
15
|
|
||
Treasury stock acquired
|
(651
|
)
|
(145
|
)
|
||
Dividends paid on preferred stock
|
—
|
|
(21
|
)
|
||
Dividends paid on common stock
|
(134
|
)
|
(87
|
)
|
||
Net cash used for financing activities
|
(2,040
|
)
|
(2,371
|
)
|
||
Foreign exchange rate effect on cash
|
(115
|
)
|
(134
|
)
|
||
Transfer of cash to held for sale
|
—
|
|
(103
|
)
|
||
Net increase (decrease) in cash
|
84
|
|
(681
|
)
|
||
Cash – beginning of period
|
1,428
|
|
2,421
|
|
||
Cash – end of period
|
$
|
1,512
|
|
$
|
1,740
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
||||
Income taxes paid (received)
|
$
|
(79
|
)
|
$
|
142
|
|
Interest paid
|
$
|
191
|
|
$
|
132
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Tax provision at U.S. Federal statutory rate
|
$
|
53
|
|
$
|
83
|
|
|
$
|
266
|
|
$
|
190
|
|
Tax-exempt interest
|
(34
|
)
|
(35
|
)
|
|
(69
|
)
|
(69
|
)
|
||||
Dividends received deduction
|
(26
|
)
|
(33
|
)
|
|
(53
|
)
|
(65
|
)
|
||||
Valuation allowance
|
3
|
|
—
|
|
|
3
|
|
—
|
|
||||
Other [1]
|
4
|
|
(11
|
)
|
|
(4
|
)
|
11
|
|
||||
Income tax expense
|
$
|
—
|
|
$
|
4
|
|
|
$
|
143
|
|
$
|
67
|
|
[1]
|
Includes a permanent difference of
$25
related to non-deductible goodwill for the six months ended June 30, 2013.
|
|
|
||
|
As of Closing
|
||
|
Carrying Value
|
||
Assets
|
|
||
Cash and investments
|
$
|
18,733
|
|
Reinsurance recoverables
|
$
|
46
|
|
Property and equipment, net
|
$
|
18
|
|
Other assets
|
$
|
988
|
|
Liabilities
|
|
||
Reserve for future policy benefits and unpaid loss and loss adjustment expenses
|
$
|
320
|
|
Other policyholder funds and benefits payable
|
$
|
2,265
|
|
Other policyholder funds and benefits payable - international variable annuities
|
$
|
16,465
|
|
Short-term debt
|
$
|
247
|
|
Other liabilities
|
$
|
102
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(In millions, except for per share data)
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Earnings
|
|
|
|
|
|
||||||||
Income from continuing operations
|
|
|
|
|
|
||||||||
Income from continuing operations, net of tax
|
$
|
150
|
|
$
|
233
|
|
|
$
|
616
|
|
$
|
476
|
|
Less: Preferred stock dividends
|
—
|
|
—
|
|
|
—
|
|
10
|
|
||||
Income from continuing operations, net of tax, available to common shareholders
|
$
|
150
|
|
$
|
233
|
|
|
$
|
616
|
|
$
|
466
|
|
Add: Dilutive effect of preferred stock dividends
|
—
|
|
—
|
|
|
—
|
|
10
|
|
||||
Income from continuing operations, net of tax, available to common shareholders and assumed conversion of preferred shares
|
$
|
150
|
|
$
|
233
|
|
|
$
|
616
|
|
$
|
476
|
|
Loss from discontinued operations, net of tax
|
$
|
(617
|
)
|
$
|
(423
|
)
|
|
$
|
(588
|
)
|
$
|
(907
|
)
|
Net income (loss)
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
(467
|
)
|
$
|
(190
|
)
|
|
$
|
28
|
|
$
|
(431
|
)
|
Less: Preferred stock dividends
|
—
|
|
—
|
|
|
—
|
|
10
|
|
||||
Net income (loss) available to common shareholders
|
$
|
(467
|
)
|
$
|
(190
|
)
|
|
$
|
28
|
|
$
|
(441
|
)
|
Add: Dilutive effect of preferred stock dividends
|
—
|
|
—
|
|
|
—
|
|
10
|
|
||||
Net income (loss) available to common shareholders and assumed conversion of preferred shares
|
$
|
(467
|
)
|
$
|
(190
|
)
|
|
$
|
28
|
|
$
|
(431
|
)
|
Shares
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding, basic
|
450.6
|
|
451.4
|
|
|
450.2
|
|
443.8
|
|
||||
Dilutive effect of warrants
|
11.0
|
|
33.4
|
|
|
16.9
|
|
32.6
|
|
||||
Dilutive effect of stock compensation plans
|
6.3
|
|
4.2
|
|
|
6.2
|
|
4.0
|
|
||||
Dilutive effect of mandatory convertible preferred shares
|
—
|
|
—
|
|
|
—
|
|
12.4
|
|
||||
Weighted average shares outstanding and dilutive potential common shares
|
467.9
|
|
489.0
|
|
|
473.3
|
|
492.8
|
|
||||
Earnings (loss) per common share
|
|
|
|
|
|
||||||||
Basic
|
|
|
|
|
|
||||||||
Income from continuing operations, net of tax, available to common shareholders
|
$
|
0.33
|
|
$
|
0.52
|
|
|
$
|
1.37
|
|
$
|
1.05
|
|
Loss from discontinued operations, net of tax
|
(1.37
|
)
|
(0.94
|
)
|
|
(1.31
|
)
|
(2.04
|
)
|
||||
Net income (loss) available to common shareholders
|
$
|
(1.04
|
)
|
$
|
(0.42
|
)
|
|
$
|
0.06
|
|
$
|
(0.99
|
)
|
Diluted
|
|
|
|
|
|
||||||||
Income from continuing operations, net of tax, available to common shareholders
|
$
|
0.32
|
|
$
|
0.48
|
|
|
$
|
1.30
|
|
$
|
0.97
|
|
Loss from discontinued operations, net of tax
|
(1.32
|
)
|
(0.87
|
)
|
|
(1.24
|
)
|
(1.84
|
)
|
||||
Net income (loss) available to common shareholders
|
$
|
(1.00
|
)
|
$
|
(0.39
|
)
|
|
$
|
0.06
|
|
$
|
(0.87
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Net income (loss)
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Property & Casualty Commercial
|
$
|
199
|
|
$
|
192
|
|
|
$
|
441
|
|
$
|
445
|
|
Consumer Markets
|
(30
|
)
|
15
|
|
|
69
|
|
92
|
|
||||
Property & Casualty Other Operations
|
(144
|
)
|
(71
|
)
|
|
(122
|
)
|
(50
|
)
|
||||
Group Benefits
|
55
|
|
61
|
|
|
106
|
|
103
|
|
||||
Mutual Funds
|
21
|
|
20
|
|
|
42
|
|
38
|
|
||||
Talcott Resolution
|
(504
|
)
|
(332
|
)
|
|
(359
|
)
|
(626
|
)
|
||||
Corporate
|
(64
|
)
|
(75
|
)
|
|
(149
|
)
|
(433
|
)
|
||||
Net income (loss)
|
$
|
(467
|
)
|
$
|
(190
|
)
|
|
$
|
28
|
|
$
|
(431
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Revenues
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Earned premiums and fee income
|
|
|
|
|
|
||||||||
Property & Casualty Commercial
|
|
|
|
|
|
||||||||
Workers’ compensation
|
$
|
734
|
|
$
|
741
|
|
|
$
|
1,466
|
|
$
|
1,474
|
|
Property
|
137
|
|
127
|
|
|
273
|
|
252
|
|
||||
Automobile
|
145
|
|
144
|
|
|
289
|
|
288
|
|
||||
Package business
|
289
|
|
285
|
|
|
572
|
|
566
|
|
||||
Liability
|
146
|
|
141
|
|
|
291
|
|
279
|
|
||||
Fidelity and surety
|
52
|
|
52
|
|
|
103
|
|
101
|
|
||||
Professional liability
|
56
|
|
55
|
|
|
106
|
|
114
|
|
||||
Total Property & Casualty Commercial
|
1,559
|
|
1,545
|
|
|
3,100
|
|
3,074
|
|
||||
Consumer Markets
|
|
|
|
|
|
||||||||
Automobile
|
650
|
|
626
|
|
|
1,286
|
|
1,245
|
|
||||
Homeowners
|
296
|
|
282
|
|
|
588
|
|
559
|
|
||||
Total Consumer Markets [1]
|
946
|
|
908
|
|
|
1,874
|
|
1,804
|
|
||||
Group Benefits
|
|
|
|
|
|
||||||||
Group disability
|
365
|
|
370
|
|
|
734
|
|
729
|
|
||||
Group life
|
371
|
|
428
|
|
|
759
|
|
854
|
|
||||
Other
|
41
|
|
40
|
|
|
83
|
|
81
|
|
||||
Total Group Benefits
|
777
|
|
838
|
|
|
1,576
|
|
1,664
|
|
||||
Mutual Funds
|
|
|
|
|
|
||||||||
Retail and Retirement
|
148
|
|
128
|
|
|
286
|
|
252
|
|
||||
Annuity
|
35
|
|
37
|
|
|
71
|
|
73
|
|
||||
Total Mutual Funds
|
183
|
|
165
|
|
|
357
|
|
325
|
|
||||
Talcott Resolution
|
352
|
|
349
|
|
|
705
|
|
698
|
|
||||
Corporate
|
4
|
|
2
|
|
|
7
|
|
5
|
|
||||
Total earned premiums and fee income
|
3,821
|
|
3,807
|
|
|
7,619
|
|
7,570
|
|
||||
Net investment income
|
768
|
|
841
|
|
|
1,592
|
|
1,666
|
|
||||
Net realized capital gains (losses)
|
(4
|
)
|
21
|
|
|
(39
|
)
|
1,665
|
|
||||
Other revenues
|
31
|
|
65
|
|
|
56
|
|
133
|
|
||||
Total revenues
|
$
|
4,616
|
|
$
|
4,734
|
|
|
$
|
9,228
|
|
$
|
11,034
|
|
[1]
|
For the
three months ended
June 30, 2014
and
2013
, AARP members accounted for earned premiums of $
755
and
$714
, respectively. For the
six months ended
June 30, 2014
and
2013
, AARP members accounted for earned premiums of
$1.5
billion and
$1.4
billion, respectively.
|
Level 1
|
Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. Level 1 securities include highly liquid U.S. Treasuries, money market funds and exchange traded equity securities, open-ended mutual funds reported in separate account assets and exchange-traded derivative instruments.
|
Level 2
|
Observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities. Most fixed maturities and preferred stocks, including those reported in separate account assets, are model priced by vendors using observable inputs and are classified within Level 2. Also included are limited partnerships and other alternative assets measured at fair value w
here an investment can be redeemed, or substantially redeemed, at the NAV at the measurement date or in the near-term, not to exceed 90 days.
|
Level 3
|
Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Level 3 securities include less liquid securities, guaranteed product embedded and reinsurance derivatives and other complex derivative instruments, as well as limited partnerships and other alternative investments carried at fair value that cannot be redeemed in the near-term at the NAV. Because Level 3 fair values, by their nature, contain one or more significant unobservable inputs as there is little or no observable market for these assets and liabilities, considerable judgment is used to determine the Level 3 fair values. Level 3 fair values represent the Company’s best estimate of an amount that could be realized in a current market exchange absent actual market exchanges.
|
|
June 30, 2014
|
|||||||||||
|
Total
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
Significant
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Fixed maturities, AFS
|
|
|
|
|
||||||||
Asset-backed-securities ("ABS")
|
$
|
2,309
|
|
$
|
—
|
|
$
|
2,236
|
|
$
|
73
|
|
Collateralized debt obligations ("CDOs")
|
2,434
|
|
—
|
|
1,822
|
|
612
|
|
||||
Commercial mortgage-backed securities ("CMBS")
|
4,696
|
|
—
|
|
4,225
|
|
471
|
|
||||
Corporate
|
28,668
|
|
—
|
|
27,463
|
|
1,205
|
|
||||
Foreign government/government agencies
|
1,707
|
|
—
|
|
1,652
|
|
55
|
|
||||
Municipal
|
12,713
|
|
—
|
|
12,650
|
|
63
|
|
||||
Residential mortgage-backed securities ("RMBS")
|
4,426
|
|
—
|
|
3,131
|
|
1,295
|
|
||||
U.S. Treasuries
|
3,293
|
|
297
|
|
2,996
|
|
—
|
|
||||
Total fixed maturities
|
60,246
|
|
297
|
|
56,175
|
|
3,774
|
|
||||
Fixed maturities, FVO
|
410
|
|
—
|
|
271
|
|
139
|
|
||||
Equity securities, trading
|
12
|
|
12
|
|
—
|
|
—
|
|
||||
Equity securities, AFS
|
823
|
|
462
|
|
281
|
|
80
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Credit derivatives
|
34
|
|
—
|
|
34
|
|
—
|
|
||||
Equity derivatives
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Foreign exchange derivatives
|
(63
|
)
|
—
|
|
(63
|
)
|
—
|
|
||||
Interest rate derivatives
|
49
|
|
—
|
|
28
|
|
21
|
|
||||
Guaranteed minimum withdrawal benefit ("GMWB") hedging instruments
|
93
|
|
—
|
|
7
|
|
86
|
|
||||
Macro hedge program
|
38
|
|
—
|
|
—
|
|
38
|
|
||||
Derivative instruments formerly associated with Japan
|
73
|
|
—
|
|
73
|
|
—
|
|
||||
Other derivative contracts
|
15
|
|
—
|
|
—
|
|
15
|
|
||||
Total derivative assets [1]
|
239
|
|
—
|
|
79
|
|
160
|
|
||||
Short-term investments
|
4,511
|
|
719
|
|
3,792
|
|
—
|
|
||||
Limited partnerships and other alternative investments [2]
|
720
|
|
—
|
|
653
|
|
67
|
|
||||
Reinsurance recoverable for GMWB
|
31
|
|
—
|
|
—
|
|
31
|
|
||||
Modified coinsurance reinsurance contracts
|
32
|
|
—
|
|
32
|
|
—
|
|
||||
Separate account assets [3]
|
138,696
|
|
98,569
|
|
39,314
|
|
813
|
|
||||
Total assets accounted for at fair value on a recurring basis
|
$
|
205,720
|
|
$
|
100,059
|
|
$
|
100,597
|
|
$
|
5,064
|
|
Liabilities accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Other policyholder funds and benefits payable
|
|
|
|
|
||||||||
Guaranteed withdrawal benefits
|
$
|
2
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2
|
|
Equity linked notes
|
(22
|
)
|
—
|
|
—
|
|
(22
|
)
|
||||
Total other policyholder funds and benefits payable
|
(20
|
)
|
—
|
|
—
|
|
(20
|
)
|
||||
Derivative liabilities
|
|
|
|
|
||||||||
Credit derivatives
|
(36
|
)
|
—
|
|
(35
|
)
|
(1
|
)
|
||||
Equity derivatives
|
22
|
|
—
|
|
20
|
|
2
|
|
||||
Foreign exchange derivatives
|
(285
|
)
|
—
|
|
(285
|
)
|
—
|
|
||||
Interest rate derivatives
|
(598
|
)
|
—
|
|
(598
|
)
|
—
|
|
||||
GMWB hedging instruments
|
(20
|
)
|
—
|
|
(31
|
)
|
11
|
|
||||
Macro hedge program
|
82
|
|
—
|
|
—
|
|
82
|
|
||||
Derivative instruments formerly associated with Japan
|
14
|
|
—
|
|
14
|
|
—
|
|
||||
Total derivative liabilities [4]
|
(821
|
)
|
—
|
|
(915
|
)
|
94
|
|
||||
Consumer notes [5]
|
(2
|
)
|
—
|
|
—
|
|
(2
|
)
|
||||
Total liabilities accounted for at fair value on a recurring basis
|
$
|
(843
|
)
|
$
|
—
|
|
$
|
(915
|
)
|
$
|
72
|
|
|
December 31, 2013
|
|||||||||||
|
Total
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
Significant
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Fixed maturities, AFS
|
|
|
|
|
||||||||
ABS
|
$
|
2,365
|
|
$
|
—
|
|
$
|
2,218
|
|
$
|
147
|
|
CDOs
|
2,387
|
|
—
|
|
1,723
|
|
664
|
|
||||
CMBS
|
4,446
|
|
—
|
|
3,783
|
|
663
|
|
||||
Corporate
|
28,490
|
|
—
|
|
27,216
|
|
1,274
|
|
||||
Foreign government/government agencies
|
4,104
|
|
—
|
|
4,039
|
|
65
|
|
||||
Municipal
|
12,173
|
|
—
|
|
12,104
|
|
69
|
|
||||
RMBS
|
4,647
|
|
—
|
|
3,375
|
|
1,272
|
|
||||
U.S. Treasuries
|
3,745
|
|
1,311
|
|
2,434
|
|
—
|
|
||||
Total fixed maturities
|
62,357
|
|
1,311
|
|
56,892
|
|
4,154
|
|
||||
Fixed maturities, FVO
|
844
|
|
—
|
|
651
|
|
193
|
|
||||
Equity securities, trading
|
19,745
|
|
12
|
|
19,733
|
|
—
|
|
||||
Equity securities, AFS
|
868
|
|
454
|
|
337
|
|
77
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Credit derivatives
|
25
|
|
—
|
|
20
|
|
5
|
|
||||
Equity derivatives
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Foreign exchange derivatives
|
14
|
|
—
|
|
14
|
|
—
|
|
||||
Interest rate derivatives
|
(21
|
)
|
—
|
|
(63
|
)
|
42
|
|
||||
GMWB hedging instruments
|
26
|
|
—
|
|
(42
|
)
|
68
|
|
||||
Macro hedge program
|
109
|
|
—
|
|
—
|
|
109
|
|
||||
International program hedging instruments
|
272
|
|
—
|
|
241
|
|
31
|
|
||||
Other derivative contracts
|
17
|
|
—
|
|
—
|
|
17
|
|
||||
Total derivative assets [1]
|
442
|
|
—
|
|
170
|
|
272
|
|
||||
Short-term investments
|
4,008
|
|
427
|
|
3,581
|
|
—
|
|
||||
Limited partnerships and other alternative investments [2]
|
921
|
|
—
|
|
813
|
|
108
|
|
||||
Reinsurance recoverable for GMWB
|
29
|
|
—
|
|
—
|
|
29
|
|
||||
Modified coinsurance reinsurance contracts
|
67
|
|
—
|
|
67
|
|
—
|
|
||||
Separate account assets [3]
|
138,495
|
|
99,930
|
|
37,828
|
|
737
|
|
||||
Total assets accounted for at fair value on a recurring basis
|
$
|
227,776
|
|
$
|
102,134
|
|
$
|
120,072
|
|
$
|
5,570
|
|
|
December 31, 2013
|
|||||||||||
|
Total
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
Significant
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Liabilities accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Other policyholder funds and benefits payable
|
|
|
|
|
||||||||
Guaranteed withdrawal benefits
|
$
|
(36
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(36
|
)
|
International guaranteed withdrawal benefits
|
3
|
|
—
|
|
—
|
|
3
|
|
||||
International other guaranteed living benefits
|
3
|
|
—
|
|
—
|
|
3
|
|
||||
Equity linked notes
|
(18
|
)
|
—
|
|
—
|
|
(18
|
)
|
||||
Total other policyholder funds and benefits payable
|
(48
|
)
|
—
|
|
—
|
|
(48
|
)
|
||||
Derivative liabilities
|
|
|
|
|
||||||||
Credit derivatives
|
(12
|
)
|
—
|
|
(9
|
)
|
(3
|
)
|
||||
Equity derivatives
|
19
|
|
—
|
|
16
|
|
3
|
|
||||
Foreign exchange derivatives
|
(388
|
)
|
—
|
|
(388
|
)
|
—
|
|
||||
Interest rate derivatives
|
(582
|
)
|
—
|
|
(558
|
)
|
(24
|
)
|
||||
GMWB hedging instruments
|
15
|
|
—
|
|
(63
|
)
|
78
|
|
||||
Macro hedge program
|
30
|
|
—
|
|
—
|
|
30
|
|
||||
International program hedging instruments
|
(305
|
)
|
—
|
|
(245
|
)
|
(60
|
)
|
||||
Total derivative liabilities [4]
|
(1,223
|
)
|
—
|
|
(1,247
|
)
|
24
|
|
||||
Consumer notes [5]
|
(2
|
)
|
—
|
|
—
|
|
(2
|
)
|
||||
Total liabilities accounted for at fair value on a recurring basis
|
$
|
(1,273
|
)
|
$
|
—
|
|
$
|
(1,247
|
)
|
$
|
(26
|
)
|
[1]
|
Includes over-the-counter("OTC") and OTC-cleared derivative instruments in a net asset value position after consideration of the impact of collateral posting requirements which may be imposed by agreements, clearing house rules and applicable law. As of
June 30, 2014
and
December 31, 2013
,
$203
and
$128
, respectively, of cash collateral liability was netted against the derivative asset value in the Condensed Consolidated Balance Sheet and is excluded from the table above. See footnote 4 below for derivative liabilities.
|
[2]
|
Represents hedge funds where investment company accounting has been applied to a wholly-owned fund of funds measured at fair value.
|
[3]
|
Approximately
$2.8 billion
and
$2.4 billion
of investment sales receivable that are not subject to fair value accounting are excluded as of
June 30, 2014
and
December 31, 2013
, respectively.
|
[4]
|
Includes OTC and OTC-cleared derivative instruments in a net negative market value position (derivative liability) after consideration of the impact of collateral positing requirements which may be imposed by agreements, clearing house rules and applicable law. In the Level 3 roll-forward table included below in this Note 5, the derivative asset and liability are referred to as “freestanding derivatives” and are presented on a net basis.
|
[5]
|
Represents embedded derivatives associated with non-funding agreement-backed consumer equity linked notes.
|
Level 2
|
The fair values of most of the Company’s Level 2 investments are determined by management after considering prices received from third party pricing services. These investments include most fixed maturities and preferred stocks, including those reported in separate account assets
, as well as certain limited partnerships and other alternative investments and derivative instruments.
|
•
|
ABS, CDOs, CMBS and RMBS
– Primary inputs also include monthly payment information, collateral performance, which varies by vintage year and includes delinquency rates, collateral valuation loss severity rates, collateral refinancing assumptions, credit default swap indices and, for ABS and RMBS, estimated prepayment rates.
|
•
|
Corporates, including investment grade private placements
– Primary inputs also include observations of credit default swap curves related to the issuer.
|
•
|
Foreign government/government agencies
—Primary inputs also include observations of credit default swap curves related to the issuer and political events in emerging market economies.
|
•
|
Municipals
– Primary inputs also include Municipal Securities Rulemaking Board reported trades and material event notices, and issuer financial statements.
|
•
|
Short-term investments
– Primary inputs also include material event notices and new issue money market rates.
|
•
|
Equity securities, trading
– Consist of investments in mutual funds. Primary inputs include net asset values obtained from third party pricing services.
|
•
|
Credit derivatives –
Primary inputs include the swap yield curve and credit default swap curves.
|
•
|
Foreign exchange derivatives –
Primary inputs include the swap yield curve, currency spot and forward rates, and cross currency basis curves.
|
•
|
Interest rate derivatives –
Primary input is the swap yield curve.
|
•
|
Limited partnerships and other alternative investments —
Primary inputs include a NAV for investment companies with no redemption restrictions as reported on their U.S. GAAP financial statements.
|
Level 3
|
Most of the Company’s securities classified as Level 3 include less liquid securities such as lower quality ABS, CMBS, commercial real estate (“CRE”) CDOs and RMBS primarily backed by sub-prime loans. Securities included in level 3 are primarily valued based on broker prices or broker spreads, without adjustments. Primary inputs for non-broker priced investments, including structured securities, are consistent with the typical inputs used in Level 2 measurements noted above, but are Level 3 due to their less liquid markets. Additionally, certain long-dated securities are priced based on third party pricing services, including municipal securities, foreign government/government agencies, bank loans and below investment grade private placement securities. Primary inputs for these long-dated securities are consistent with the typical inputs used in Level 1 and Level 2 measurements noted above, but include benchmark interest rate or credit spread assumptions that are not observable in the marketplace. Level 3 investments also include certain limited partnerships and other alternative investments measured at fair value where the Company does not have the ability to redeem the investment in the near-term at the NAV. Also included in Level 3 are certain derivative instruments that either have significant unobservable inputs or are valued based on broker quotations. Significant inputs for these derivative contracts primarily include the typical inputs used in the Level 1 and Level 2 measurements noted above; but also include equity and interest rate volatility and swap yield curves beyond observable limits.
|
|
As of June 30, 2014
|
|||||||||||
Securities
|
Unobservable Inputs
|
|||||||||||
Assets accounted for at fair value on a recurring basis
|
Fair
Value
|
Predominant
Valuation
Method
|
Significant
Unobservable Input
|
Minimum
|
Maximum
|
Weighted Average [1]
|
Impact of
Increase in Input
on Fair Value [2]
|
|||||
CMBS
|
$
|
471
|
|
Discounted
cash flows |
Spread (encompasses prepayment, default risk and loss severity)
|
74
|
bps
|
2,418
|
bps
|
305
|
bps
|
Decrease
|
Corporate [3]
|
675
|
|
Discounted
cash flows |
Spread
|
108
|
bps
|
703
|
bps
|
251
|
bps
|
Decrease
|
|
Municipal [3]
|
31
|
|
Discounted
cash flows |
Spread
|
181
|
bps
|
181
|
bps
|
181
|
bps
|
Decrease
|
|
RMBS
|
1,295
|
|
Discounted
cash flows |
Spread
|
49
|
bps
|
1,633
|
bps
|
178
|
bps
|
Decrease
|
|
|
|
|
Constant prepayment rate
|
—
|
%
|
10.0
|
%
|
3.0
|
%
|
Decrease [4]
|
||
|
|
|
Constant default rate
|
1.0
|
%
|
22.0
|
%
|
8.0
|
%
|
Decrease
|
||
|
|
|
Loss severity
|
—
|
%
|
100.0
|
%
|
78.0
|
%
|
Decrease
|
||
|
As of December 31, 2013
|
|||||||||||
CMBS
|
$
|
663
|
|
Discounted
cash flows |
Spread (encompasses prepayment, default risk and loss severity)
|
99
|
bps
|
3,000
|
bps
|
527
|
bps
|
Decrease
|
Corporate [3]
|
665
|
|
Discounted
cash flows |
Spread
|
119
|
bps
|
5,594
|
bps
|
344
|
bps
|
Decrease
|
|
Municipal [3]
|
29
|
|
Discounted
cash flows |
Spread
|
184
|
bps
|
184
|
bps
|
184
|
bps
|
Decrease
|
|
RMBS
|
1,272
|
|
Discounted
cash flows |
Spread
|
62
|
bps
|
1,748
|
bps
|
232
|
bps
|
Decrease
|
|
|
|
|
Constant prepayment rate
|
—
|
%
|
10.0
|
%
|
3.0
|
%
|
Decrease [4]
|
||
|
|
|
Constant default rate
|
1.0
|
%
|
22.0
|
%
|
8.0
|
%
|
Decrease
|
||
|
|
|
Loss severity
|
—
|
%
|
100.0
|
%
|
80.0
|
%
|
Decrease
|
[1]
|
The weighted average is determined based on the fair value of the securities.
|
[2]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table above.
|
[3]
|
Level 3 corporate and municipal securities excludes those for which the Company bases fair value on broker quotations as discussed below.
|
[4]
|
Decrease for above market rate coupons and increase for below market rate coupons.
|
|
As of June 30, 2014
|
||||||||
Freestanding Derivatives
|
Unobservable Inputs
|
||||||||
|
Fair
Value
|
Predominant
Valuation
Method
|
Significant Unobservable Input
|
Minimum
|
Maximum
|
Impact of
Increase in Input on
Fair Value [1]
|
|||
Interest rate derivative
|
|
|
|
|
|
|
|||
Interest rate swaptions
|
21
|
|
Option model
|
Interest rate volatility
|
3.0
|
%
|
4.0
|
%
|
Increase
|
GMWB hedging instruments
|
|
|
|
|
|
|
|||
Equity options
|
33
|
|
Option model
|
Equity volatility
|
19
|
%
|
32
|
%
|
Increase
|
Customized swaps
|
64
|
|
Discounted
cash flows |
Equity volatility
|
10
|
%
|
50
|
%
|
Increase
|
Macro hedge program
|
|
|
|
|
|
|
|||
Equity options
|
120
|
|
Option model
|
Equity volatility
|
23
|
%
|
35
|
%
|
Increase
|
|
As of December 31, 2013
|
||||||||
Interest rate derivative
|
|
|
|
|
|
|
|||
Interest rate swaps
|
(24
|
)
|
Discounted
cash flows |
Swap curve beyond 30 years
|
4.0
|
%
|
4.0
|
%
|
Increase
|
Long interest rate swaptions
|
42
|
|
Option model
|
Interest rate volatility
|
1
|
%
|
1
|
%
|
Increase
|
GMWB hedging instruments
|
|
|
|
|
|
|
|||
Equity options
|
72
|
|
Option model
|
Equity volatility
|
21
|
%
|
29
|
%
|
Increase
|
Customized swaps
|
74
|
|
Discounted
cash flows |
Equity volatility
|
10
|
%
|
50
|
%
|
Increase
|
Macro hedge program
|
|
|
|
|
|
|
|||
Equity options
|
139
|
|
Option model
|
Equity volatility
|
24
|
%
|
31
|
%
|
Increase
|
International program hedging [2]
|
|
|
|
|
|
|
|||
Equity options
|
(35
|
)
|
Option model
|
Equity volatility
|
24
|
%
|
37
|
%
|
Increase
|
Short interest rate swaptions
|
(13
|
)
|
Option model
|
Interest rate volatility
|
—
|
%
|
1
|
%
|
Decrease
|
Long interest rate swaptions
|
50
|
|
Option model
|
Interest rate volatility
|
1
|
%
|
1
|
%
|
Increase
|
[1]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. Changes are based on long positions, unless otherwise noted. Changes in fair value will be inversely impacted for short positions.
|
[2]
|
Level 3 international program hedging instruments excludes those for which the Company based fair value on broker quotations.
|
•
|
risk-free rates as represented by the Eurodollar futures, LIBOR deposits and swap rates to derive forward curve rates;
|
•
|
market implied volatility assumptions for each underlying index based primarily on a blend of observed market “implied volatility” data;
|
•
|
correlations of historical returns across underlying well known market indices based on actual observed returns over the ten years preceding the valuation date; and
|
•
|
three years of history for fund indexes compared to separate account fund regression.
|
Significant Unobservable Input
|
Unobservable Inputs (Minimum)
|
Unobservable Inputs (Maximum)
|
Impact of Increase in Input
on Fair Value Measurement [1]
|
Withdrawal Utilization [2]
|
20%
|
100%
|
Increase
|
Withdrawal Rates [2]
|
—%
|
8%
|
Increase
|
Lapse Rates [3]
|
—%
|
75%
|
Decrease
|
Reset Elections [4]
|
20%
|
75%
|
Increase
|
Equity Volatility [5]
|
10%
|
50%
|
Increase
|
[1]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.
|
[2]
|
Ranges represent assumed cumulative percentages of policyholders taking withdrawals and the annual amounts withdrawn.
|
[3]
|
Range represents assumed annual percentages of full surrender of the underlying variable annuity contracts across all policy durations for in force business.
|
[4]
|
Range represents assumed cumulative percentages of policyholders that would elect to reset their guaranteed benefit base.
|
[5]
|
Range represents implied market volatilities for equity indices based on multiple pricing sources.
|
|
Fixed Maturities, AFS
|
|
|||||||||||||||||||||||||
Assets
|
ABS
|
CDOs
|
CMBS
|
Corporate
|
Foreign
govt./govt.
agencies
|
Municipal
|
RMBS
|
Total Fixed
Maturities,
AFS
|
Fixed
Maturities,
FVO
|
||||||||||||||||||
Fair value as of March 31, 2014
|
$
|
56
|
|
$
|
712
|
|
$
|
592
|
|
$
|
1,243
|
|
$
|
54
|
|
$
|
78
|
|
$
|
1,328
|
|
$
|
4,063
|
|
$
|
206
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1], [2], [6]
|
—
|
|
—
|
|
7
|
|
(4
|
)
|
—
|
|
—
|
|
9
|
|
12
|
|
5
|
|
|||||||||
Included in OCI [3]
|
1
|
|
8
|
|
(2
|
)
|
4
|
|
2
|
|
1
|
|
(4
|
)
|
10
|
|
—
|
|
|||||||||
Purchases
|
37
|
|
—
|
|
25
|
|
54
|
|
3
|
|
4
|
|
116
|
|
239
|
|
5
|
|
|||||||||
Settlements
|
(1
|
)
|
(21
|
)
|
(47
|
)
|
(26
|
)
|
(1
|
)
|
—
|
|
(50
|
)
|
(146
|
)
|
(75
|
)
|
|||||||||
Sales
|
(18
|
)
|
—
|
|
(16
|
)
|
(33
|
)
|
(3
|
)
|
(1
|
)
|
(65
|
)
|
(136
|
)
|
(2
|
)
|
|||||||||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
5
|
|
133
|
|
—
|
|
—
|
|
—
|
|
138
|
|
—
|
|
|||||||||
Transfers out of Level 3 [4]
|
(2
|
)
|
(87
|
)
|
(93
|
)
|
(166
|
)
|
—
|
|
(19
|
)
|
(39
|
)
|
(406
|
)
|
—
|
|
|||||||||
Fair value as of June 30, 2014
|
$
|
73
|
|
$
|
612
|
|
$
|
471
|
|
$
|
1,205
|
|
$
|
55
|
|
$
|
63
|
|
$
|
1,295
|
|
$
|
3,774
|
|
$
|
139
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2014 [2] [7]
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(4
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(1
|
)
|
$
|
(5
|
)
|
$
|
10
|
|
|
|
Freestanding Derivatives [5]
|
|||||||||||||||||||||||||
Assets (Liabilities)
|
Equity
Securities,
AFS
|
Credit
|
Equity
|
Interest
Rate
|
GMWB
Hedging
|
Macro
Hedge
Program
|
Intl. Program Hedging
|
Other
Contracts
|
Total Free-
Standing
Derivatives [5]
|
||||||||||||||||||
Fair value as of March 31, 2014
|
$
|
79
|
|
$
|
—
|
|
$
|
2
|
|
$
|
28
|
|
$
|
123
|
|
$
|
133
|
|
$
|
(5
|
)
|
$
|
16
|
|
$
|
297
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1], [2], [6]
|
—
|
|
(1
|
)
|
—
|
|
(7
|
)
|
(26
|
)
|
(15
|
)
|
12
|
|
(1
|
)
|
(38
|
)
|
|||||||||
Included in OCI [3]
|
1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Purchases
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
2
|
|
|||||||||
Settlements
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(41
|
)
|
—
|
|
(41
|
)
|
|||||||||
Sales
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Transfers out of Level 3 [4]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
34
|
|
—
|
|
34
|
|
|||||||||
Fair value as of June 30, 2014
|
$
|
80
|
|
$
|
(1
|
)
|
$
|
2
|
|
$
|
21
|
|
$
|
97
|
|
$
|
120
|
|
$
|
—
|
|
$
|
15
|
|
$
|
254
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2014 [2] [7]
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
$
|
(7
|
)
|
$
|
(26
|
)
|
$
|
(15
|
)
|
$
|
(35
|
)
|
$
|
(1
|
)
|
$
|
(83
|
)
|
Assets
|
Limited Partnerships and Other Alternative Investments
|
Reinsurance
Recoverable
for GMWB
|
Separate Accounts
|
||||||
Fair value as of March 31, 2014
|
$
|
107
|
|
$
|
30
|
|
$
|
762
|
|
Total realized/unrealized gains (losses)
|
|
|
|
||||||
Included in net income [1], [2], [6]
|
(8
|
)
|
(7
|
)
|
(1
|
)
|
|||
Included in OCI [3]
|
—
|
|
—
|
|
—
|
|
|||
Purchases
|
—
|
|
—
|
|
136
|
|
|||
Settlements
|
—
|
|
8
|
|
(1
|
)
|
|||
Sales
|
—
|
|
—
|
|
(78
|
)
|
|||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
3
|
|
|||
Transfers out of Level 3 [4]
|
(32
|
)
|
—
|
|
(8
|
)
|
|||
Fair value as of June 30, 2014
|
$
|
67
|
|
$
|
31
|
|
$
|
813
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2014 [2] [7]
|
$
|
(8
|
)
|
$
|
(7
|
)
|
$
|
1
|
|
|
Other Policyholder Funds and Benefits Payable
|
|
||||||||||||||||
Liabilities
|
Guaranteed
Withdrawal
Benefits
|
International
Guaranteed
Living
Benefits
|
International
Other Living
Benefits
|
Equity
Linked
Notes
|
Total Other
Policyholder
Funds and
Benefits
Payable
|
Consumer
Notes
|
||||||||||||
Fair value as of March 31, 2014
|
$
|
(24
|
)
|
$
|
2
|
|
$
|
2
|
|
$
|
(19
|
)
|
$
|
(39
|
)
|
$
|
(2
|
)
|
Transfers to liabilities held for sale
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
||||||||||||
Included in net income [1], [2], [6]
|
55
|
|
—
|
|
—
|
|
(3
|
)
|
52
|
|
—
|
|
||||||
Included in OCI [3]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||
Settlements
|
(29
|
)
|
(2
|
)
|
(2
|
)
|
—
|
|
(33
|
)
|
—
|
|
||||||
Fair value as of June 30, 2014
|
$
|
2
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(22
|
)
|
$
|
(20
|
)
|
$
|
(2
|
)
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2014 [2] [7]
|
$
|
55
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(3
|
)
|
$
|
52
|
|
$
|
—
|
|
|
Fixed Maturities, AFS
|
|
|||||||||||||||||||||||||
Assets
|
ABS
|
CDOs
|
CMBS
|
Corporate
|
Foreign
govt./govt.
agencies
|
Municipal
|
RMBS
|
Total Fixed
Maturities,
AFS
|
Fixed
Maturities,
FVO
|
||||||||||||||||||
Fair value as of January 1, 2014
|
$
|
147
|
|
$
|
664
|
|
$
|
663
|
|
$
|
1,274
|
|
$
|
65
|
|
$
|
69
|
|
$
|
1,272
|
|
$
|
4,154
|
|
$
|
193
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1], [2], [6]
|
—
|
|
—
|
|
30
|
|
(18
|
)
|
(2
|
)
|
—
|
|
8
|
|
18
|
|
15
|
|
|||||||||
Included in OCI [3]
|
3
|
|
8
|
|
(24
|
)
|
28
|
|
7
|
|
4
|
|
10
|
|
36
|
|
—
|
|
|||||||||
Purchases
|
37
|
|
—
|
|
90
|
|
91
|
|
3
|
|
16
|
|
263
|
|
500
|
|
10
|
|
|||||||||
Settlements
|
(2
|
)
|
(35
|
)
|
(80
|
)
|
(25
|
)
|
(2
|
)
|
—
|
|
(96
|
)
|
(240
|
)
|
(75
|
)
|
|||||||||
Sales
|
(18
|
)
|
—
|
|
(103
|
)
|
(111
|
)
|
(16
|
)
|
(1
|
)
|
(107
|
)
|
(356
|
)
|
(4
|
)
|
|||||||||
Transfers into Level 3 [4]
|
—
|
|
72
|
|
5
|
|
200
|
|
—
|
|
—
|
|
—
|
|
277
|
|
1
|
|
|||||||||
Transfers out of Level 3 [4]
|
(94
|
)
|
(97
|
)
|
(110
|
)
|
(234
|
)
|
—
|
|
(25
|
)
|
(55
|
)
|
(615
|
)
|
(1
|
)
|
|||||||||
Fair value as of June 30, 2014
|
$
|
73
|
|
$
|
612
|
|
$
|
471
|
|
$
|
1,205
|
|
$
|
55
|
|
$
|
63
|
|
$
|
1,295
|
|
$
|
3,774
|
|
$
|
139
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2014 [2] [7]
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(21
|
)
|
$
|
(2
|
)
|
$
|
—
|
|
$
|
(1
|
)
|
$
|
(24
|
)
|
$
|
20
|
|
|
|
Freestanding Derivatives [5]
|
|||||||||||||||||||||||||
Assets (Liabilities)
|
Equity
Securities,
AFS
|
Credit
|
Equity
|
Interest
Rate
|
GMWB
Hedging
|
Macro
Hedge
Program
|
Intl.
Program
Hedging
|
Other
Contracts
|
Total Free-
Standing
Derivatives [5]
|
||||||||||||||||||
Fair value as of January 1, 2014
|
$
|
77
|
|
$
|
2
|
|
$
|
3
|
|
$
|
18
|
|
$
|
146
|
|
$
|
139
|
|
$
|
(29
|
)
|
$
|
17
|
|
$
|
296
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1], [2], [6]
|
(2
|
)
|
3
|
|
(1
|
)
|
(21
|
)
|
(60
|
)
|
(25
|
)
|
28
|
|
(2
|
)
|
(78
|
)
|
|||||||||
Included in OCI [3]
|
5
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Purchases
|
—
|
|
(6
|
)
|
—
|
|
—
|
|
4
|
|
6
|
|
9
|
|
—
|
|
13
|
|
|||||||||
Settlements
|
—
|
|
—
|
|
—
|
|
—
|
|
7
|
|
—
|
|
(41
|
)
|
—
|
|
(34
|
)
|
|||||||||
Sales
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
|||||||||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Transfers out of Level 3 [4]
|
—
|
|
—
|
|
—
|
|
24
|
|
—
|
|
—
|
|
33
|
|
—
|
|
57
|
|
|||||||||
Fair value as of June 30, 2014
|
$
|
80
|
|
$
|
(1
|
)
|
$
|
2
|
|
$
|
21
|
|
$
|
97
|
|
$
|
120
|
|
$
|
—
|
|
$
|
15
|
|
$
|
254
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2014 [2] [7]
|
$
|
(2
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(23
|
)
|
$
|
(76
|
)
|
$
|
(25
|
)
|
$
|
(18
|
)
|
$
|
(1
|
)
|
$
|
(143
|
)
|
Assets
|
Limited Partnerships and Other Alternative Investments
|
Reinsurance Recoverable
for GMWB
|
Separate Accounts
|
||||||
Fair value as of January 1, 2014
|
$
|
108
|
|
$
|
29
|
|
$
|
737
|
|
Total realized/unrealized gains (losses)
|
|
|
|
||||||
Included in net income [1], [2], [6]
|
(5
|
)
|
(11
|
)
|
4
|
|
|||
Included in OCI [3]
|
—
|
|
—
|
|
—
|
|
|||
Purchases
|
30
|
|
—
|
|
265
|
|
|||
Settlements
|
(24
|
)
|
13
|
|
(1
|
)
|
|||
Sales
|
—
|
|
—
|
|
(163
|
)
|
|||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
4
|
|
|||
Transfers out of Level 3 [4]
|
(42
|
)
|
—
|
|
(33
|
)
|
|||
Fair value as of June 30, 2014
|
$
|
67
|
|
$
|
31
|
|
$
|
813
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2014 [2] [7]
|
$
|
(5
|
)
|
$
|
(11
|
)
|
$
|
6
|
|
|
Other Policyholder Funds and Benefits Payable
|
|
||||||||||||||||
Liabilities
|
Guaranteed
Withdrawal
Benefits
|
International
Guaranteed
Living
Benefits
|
International
Other Living
Benefits
|
Equity
Linked
Notes
|
Total Other
Policyholder
Funds and
Benefits
Payable
|
Consumer
Notes
|
||||||||||||
Fair value as of January 1, 2014
|
$
|
(36
|
)
|
$
|
3
|
|
$
|
3
|
|
$
|
(18
|
)
|
$
|
(48
|
)
|
$
|
(2
|
)
|
Transfers to liabilities held for sale
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
||||||||||||
Included in net income [1], [2], [6]
|
91
|
|
—
|
|
—
|
|
(4
|
)
|
87
|
|
—
|
|
||||||
Included in OCI [3]
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||
Settlements
|
(53
|
)
|
(3
|
)
|
(3
|
)
|
—
|
|
(59
|
)
|
—
|
|
||||||
Fair value as of June 30, 2014
|
$
|
2
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(22
|
)
|
$
|
(20
|
)
|
$
|
(2
|
)
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2014 [2] [7]
|
$
|
91
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(4
|
)
|
$
|
87
|
|
$
|
—
|
|
|
Fixed Maturities, AFS
|
|
|||||||||||||||||||||||||
Assets
|
ABS
|
CDOs
|
CMBS
|
Corporate
|
Foreign
govt./govt.
agencies
|
Municipal
|
RMBS
|
Total Fixed
Maturities,
AFS
|
Fixed
Maturities,
FVO
|
||||||||||||||||||
Fair value as of March 31, 2013
|
$
|
275
|
|
$
|
801
|
|
$
|
840
|
|
$
|
1,722
|
|
$
|
51
|
|
$
|
151
|
|
$
|
1,280
|
|
$
|
5,120
|
|
$
|
216
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1], [2], [6]
|
6
|
|
1
|
|
(6
|
)
|
(4
|
)
|
—
|
|
1
|
|
—
|
|
(2
|
)
|
(6
|
)
|
|||||||||
Included in OCI [3]
|
(11
|
)
|
73
|
|
35
|
|
(23
|
)
|
(8
|
)
|
(11
|
)
|
23
|
|
78
|
|
—
|
|
|||||||||
Purchases
|
37
|
|
73
|
|
13
|
|
67
|
|
27
|
|
—
|
|
98
|
|
315
|
|
4
|
|
|||||||||
Settlements
|
(2
|
)
|
(21
|
)
|
(47
|
)
|
(10
|
)
|
(1
|
)
|
—
|
|
(49
|
)
|
(130
|
)
|
(1
|
)
|
|||||||||
Sales
|
(60
|
)
|
(15
|
)
|
(15
|
)
|
(67
|
)
|
—
|
|
(14
|
)
|
—
|
|
(171
|
)
|
(3
|
)
|
|||||||||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
8
|
|
6
|
|
—
|
|
—
|
|
—
|
|
14
|
|
1
|
|
|||||||||
Transfers out of Level 3 [4]
|
(13
|
)
|
—
|
|
(10
|
)
|
(440
|
)
|
—
|
|
—
|
|
—
|
|
(463
|
)
|
—
|
|
|||||||||
Fair value as of June 30, 2013
|
$
|
232
|
|
$
|
912
|
|
$
|
818
|
|
$
|
1,251
|
|
$
|
69
|
|
$
|
127
|
|
$
|
1,352
|
|
$
|
4,761
|
|
$
|
211
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2013 [2] [7]
|
$
|
—
|
|
$
|
—
|
|
$
|
(7
|
)
|
$
|
(4
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(11
|
)
|
$
|
(7
|
)
|
|
|
Freestanding Derivatives [5]
|
|||||||||||||||||||||||||
Assets (Liabilities)
|
Equity
Securities,
AFS
|
Credit
|
Equity
|
Interest
Rate
|
GMWB
Hedging
|
Macro
Hedge
Program
|
Intl.
Program
Hedging
|
Other
Contracts
|
Total Free-
Standing
Derivatives [5]
|
||||||||||||||||||
Fair value as of March 31, 2013
|
$
|
85
|
|
$
|
6
|
|
$
|
32
|
|
$
|
(26
|
)
|
$
|
329
|
|
$
|
243
|
|
$
|
(45
|
)
|
$
|
22
|
|
$
|
561
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1], [2], [6]
|
—
|
|
(2
|
)
|
(3
|
)
|
8
|
|
—
|
|
(36
|
)
|
(91
|
)
|
(2
|
)
|
(126
|
)
|
|||||||||
Included in OCI [3]
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Purchases
|
12
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
(14
|
)
|
—
|
|
(12
|
)
|
|||||||||
Settlements
|
—
|
|
(2
|
)
|
—
|
|
3
|
|
—
|
|
—
|
|
22
|
|
—
|
|
23
|
|
|||||||||
Sales
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(20
|
)
|
(20
|
)
|
|||||||||
Transfers out of Level 3 [4]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
85
|
|
—
|
|
85
|
|
|||||||||
Fair value as of June 30, 2013
|
$
|
95
|
|
$
|
2
|
|
$
|
29
|
|
$
|
(15
|
)
|
$
|
329
|
|
$
|
209
|
|
$
|
(43
|
)
|
$
|
—
|
|
$
|
511
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2013 [2] [7]
|
$
|
—
|
|
$
|
(2
|
)
|
$
|
(1
|
)
|
$
|
2
|
|
$
|
—
|
|
$
|
(34
|
)
|
$
|
(113
|
)
|
$
|
(3
|
)
|
$
|
(151
|
)
|
Assets
|
Limited Partnerships and Other Alternative Investments
|
Reinsurance Recoverable
for GMWB
|
Separate Accounts
|
||||||
Fair value as of March 31, 2013
|
$
|
337
|
|
$
|
139
|
|
$
|
823
|
|
Total realized/unrealized gains (losses)
|
|
|
|
||||||
Included in net income [1], [2], [6]
|
(2
|
)
|
(32
|
)
|
1
|
|
|||
Included in OCI [3]
|
—
|
|
—
|
|
—
|
|
|||
Purchases
|
30
|
|
—
|
|
4
|
|
|||
Settlements
|
—
|
|
6
|
|
(1
|
)
|
|||
Sales
|
(2
|
)
|
—
|
|
(5
|
)
|
|||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
4
|
|
|||
Transfers out of Level 3 [4]
|
—
|
|
—
|
|
(6
|
)
|
|||
Fair value as of June 30, 2013
|
$
|
363
|
|
$
|
113
|
|
$
|
820
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2013 [2] [7]
|
$
|
(2
|
)
|
$
|
(32
|
)
|
$
|
1
|
|
|
Other Policyholder Funds and Benefits Payable
|
|
|
||||||||||||||||||
Liabilities
|
Guaranteed
Withdrawal
Benefits
|
International Guaranteed
Living
Benefits
|
International Other Living
Benefits
|
Equity
Linked
Notes
|
Total Other
Policyholder
Funds and
Benefits
Payable
|
Liabilities held for sale
|
Consumer
Notes
|
||||||||||||||
Fair value as of March 31, 2013
|
$
|
(795
|
)
|
$
|
(34
|
)
|
$
|
4
|
|
$
|
(10
|
)
|
$
|
(835
|
)
|
$
|
—
|
|
$
|
(2
|
)
|
Transfers to liabilities held for sale
|
—
|
|
32
|
|
—
|
|
—
|
|
32
|
|
(32
|
)
|
—
|
|
|||||||
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
||||||||||||||
Included in net income [1], [2], [6]
|
192
|
|
3
|
|
—
|
|
(2
|
)
|
193
|
|
5
|
|
1
|
|
|||||||
Included in OCI [3]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||
Settlements
|
(29
|
)
|
—
|
|
(1
|
)
|
—
|
|
(30
|
)
|
(1
|
)
|
—
|
|
|||||||
Fair value as of June 30, 2013
|
$
|
(632
|
)
|
$
|
1
|
|
$
|
3
|
|
$
|
(12
|
)
|
$
|
(640
|
)
|
$
|
(28
|
)
|
$
|
(1
|
)
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2013 [2] [7]
|
$
|
192
|
|
$
|
3
|
|
$
|
—
|
|
$
|
(2
|
)
|
$
|
193
|
|
$
|
5
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
Fixed Maturities, AFS
|
|
|||||||||||||||||||||||||
Assets
|
ABS
|
CDOs
|
CMBS
|
Corporate
|
Foreign
govt./govt.
agencies
|
Municipal
|
RMBS
|
Total Fixed
Maturities,
AFS
|
Fixed
Maturities,
FVO
|
||||||||||||||||||
Fair value as of January 1, 2013
|
$
|
278
|
|
$
|
944
|
|
$
|
859
|
|
$
|
2,001
|
|
$
|
56
|
|
$
|
227
|
|
$
|
1,373
|
|
$
|
5,738
|
|
$
|
214
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1], [2], [6]
|
3
|
|
(11
|
)
|
(11
|
)
|
13
|
|
—
|
|
1
|
|
29
|
|
24
|
|
9
|
|
|||||||||
Included in OCI [3]
|
14
|
|
118
|
|
80
|
|
(35
|
)
|
(10
|
)
|
(10
|
)
|
43
|
|
200
|
|
—
|
|
|||||||||
Purchases
|
60
|
|
74
|
|
13
|
|
93
|
|
39
|
|
6
|
|
189
|
|
474
|
|
10
|
|
|||||||||
Settlements
|
(7
|
)
|
(45
|
)
|
(71
|
)
|
(69
|
)
|
(2
|
)
|
—
|
|
(90
|
)
|
(284
|
)
|
(2
|
)
|
|||||||||
Sales
|
(94
|
)
|
(200
|
)
|
(76
|
)
|
(348
|
)
|
(8
|
)
|
(53
|
)
|
(192
|
)
|
(971
|
)
|
(21
|
)
|
|||||||||
Transfers into Level 3 [4]
|
—
|
|
32
|
|
34
|
|
76
|
|
—
|
|
—
|
|
—
|
|
142
|
|
2
|
|
|||||||||
Transfers out of Level 3 [4]
|
(22
|
)
|
—
|
|
(10
|
)
|
(480
|
)
|
(6
|
)
|
(44
|
)
|
—
|
|
(562
|
)
|
(1
|
)
|
|||||||||
Fair value as of June 30, 2013
|
$
|
232
|
|
$
|
912
|
|
$
|
818
|
|
$
|
1,251
|
|
$
|
69
|
|
$
|
127
|
|
$
|
1,352
|
|
$
|
4,761
|
|
$
|
211
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2013 [2] [7]
|
$
|
(4
|
)
|
$
|
(1
|
)
|
$
|
(9
|
)
|
$
|
(5
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(19
|
)
|
$
|
29
|
|
|
|
Freestanding Derivatives [5]
|
|||||||||||||||||||||||||
Assets (Liabilities)
|
Equity
Securities,
AFS
|
Credit
|
Equity
|
Interest
Rate
|
GMWB
Hedging
|
Macro
Hedge
Program
|
Intl.
Program
Hedging
|
Other
Contracts
|
Total Free-
Standing
Derivatives [5]
|
||||||||||||||||||
Fair value as of January 1, 2013
|
$
|
84
|
|
$
|
4
|
|
$
|
57
|
|
$
|
(32
|
)
|
$
|
519
|
|
$
|
286
|
|
$
|
68
|
|
$
|
23
|
|
$
|
925
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1], [2], [6]
|
(6
|
)
|
—
|
|
(25
|
)
|
15
|
|
(190
|
)
|
(100
|
)
|
(175
|
)
|
(3
|
)
|
(478
|
)
|
|||||||||
Included in OCI [3]
|
7
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Purchases
|
13
|
|
—
|
|
—
|
|
(3
|
)
|
—
|
|
23
|
|
(38
|
)
|
—
|
|
(18
|
)
|
|||||||||
Settlements
|
—
|
|
(2
|
)
|
(3
|
)
|
3
|
|
—
|
|
—
|
|
17
|
|
—
|
|
15
|
|
|||||||||
Sales
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(20
|
)
|
(20
|
)
|
|||||||||
Transfers out of Level 3 [4]
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
85
|
|
—
|
|
87
|
|
|||||||||
Fair value as of June 30, 2013
|
$
|
95
|
|
$
|
2
|
|
$
|
29
|
|
$
|
(15
|
)
|
$
|
329
|
|
$
|
209
|
|
$
|
(43
|
)
|
$
|
—
|
|
$
|
511
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2013 [2] [7]
|
$
|
(6
|
)
|
$
|
—
|
|
$
|
(22
|
)
|
$
|
3
|
|
$
|
(185
|
)
|
$
|
(97
|
)
|
$
|
(154
|
)
|
$
|
(4
|
)
|
$
|
(459
|
)
|
Assets
|
Limited Partnerships and Other Alternative Investments
|
Reinsurance Recoverable
for GMWB
|
Separate Accounts
|
||||||
Fair value as of January 1, 2013
|
$
|
314
|
|
$
|
191
|
|
$
|
583
|
|
Total realized/unrealized gains (losses)
|
|
|
|
||||||
Included in net income [1], [2], [6]
|
5
|
|
(92
|
)
|
16
|
|
|||
Included in OCI [3]
|
—
|
|
—
|
|
—
|
|
|||
Purchases
|
90
|
|
—
|
|
259
|
|
|||
Settlements
|
—
|
|
14
|
|
(1
|
)
|
|||
Sales
|
(23
|
)
|
—
|
|
(31
|
)
|
|||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
4
|
|
|||
Transfers out of Level 3 [4]
|
(23
|
)
|
—
|
|
(10
|
)
|
|||
Fair value as of June 30, 2013
|
$
|
363
|
|
$
|
113
|
|
$
|
820
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2013 [2] [7]
|
$
|
5
|
|
$
|
(92
|
)
|
$
|
16
|
|
|
Other Policyholder Funds and Benefits Payable
|
|
|
||||||||||||||||||
Liabilities
|
Guaranteed
Withdrawal
Benefits
|
International
Guaranteed
Living
Benefits
|
International
Other Living
Benefits
|
Equity
Linked
Notes
|
Total Other
Policyholder
Funds and
Benefits
Payable
|
Liabilities held for sale
|
Consumer
Notes
|
||||||||||||||
Fair value as of January 1, 2013
|
$
|
(1,249
|
)
|
$
|
(50
|
)
|
$
|
2
|
|
$
|
(7
|
)
|
$
|
(1,304
|
)
|
$
|
—
|
|
$
|
(2
|
)
|
Transfers to liabilities held for sale
|
—
|
|
43
|
|
—
|
|
—
|
|
43
|
|
(43
|
)
|
—
|
|
|||||||
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
||||||||||||||
Included in net income [1], [2], [6]
|
648
|
|
8
|
|
3
|
|
(5
|
)
|
654
|
|
14
|
|
1
|
|
|||||||
Included in OCI [3]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
—
|
|
|||||||
Settlements
|
(31
|
)
|
—
|
|
(2
|
)
|
—
|
|
(33
|
)
|
(2
|
)
|
—
|
|
|||||||
Fair value as of June 30, 2013
|
$
|
(632
|
)
|
$
|
1
|
|
$
|
3
|
|
$
|
(12
|
)
|
$
|
(640
|
)
|
$
|
(28
|
)
|
$
|
(1
|
)
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2013 [2] [7]
|
$
|
648
|
|
$
|
8
|
|
$
|
3
|
|
$
|
(5
|
)
|
$
|
654
|
|
$
|
14
|
|
$
|
1
|
|
[1]
|
The Company classifies gains and losses on GMWB reinsurance derivatives and Guaranteed Living Benefit embedded derivatives as unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract basis the realized gains (losses) for these derivatives and embedded derivatives.
|
[2]
|
All amounts in these rows are reported in net realized capital gains/(losses), with the exception of International Guaranteed Living Benefits and International Other Living Benefits, which are reported in loss from discontinued operations, net of tax. The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. All amounts within net realized capital gains/(losses) are before income taxes and DAC amortization, and all amounts within loss from discontinued operations, net of tax, are after income taxes and DAC amortization.
|
[3]
|
All amounts are before income taxes and amortization of DAC.
|
[4]
|
Transfers in and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.
|
[5]
|
Derivative instruments are reported in this table on a net basis for asset/(liability) positions and reported in the Condensed Consolidated Balance Sheet in other investments and other liabilities.
|
[6]
|
Includes both market and non-market impacts in deriving realized and unrealized gains (losses).
|
[7]
|
Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Assets
|
|
|
|
|
|
||||||||
Fixed maturities, FVO
|
|
|
|
|
|
||||||||
Corporate
|
$
|
2
|
|
$
|
(5
|
)
|
|
$
|
4
|
|
$
|
(14
|
)
|
CDOs
|
6
|
|
(6
|
)
|
|
14
|
|
—
|
|
||||
Foreign government
|
1
|
|
(4
|
)
|
|
2
|
|
(5
|
)
|
||||
RMBS
|
—
|
|
—
|
|
|
1
|
|
—
|
|
||||
Total realized capital gains (losses)
|
$
|
9
|
|
$
|
(15
|
)
|
|
$
|
21
|
|
$
|
(19
|
)
|
|
As of
|
|||||
|
June 30, 2014
|
December 31, 2013
|
||||
Assets
|
|
|
||||
Fixed maturities, FVO
|
|
|
||||
ABS
|
$
|
18
|
|
$
|
3
|
|
CDOs
|
122
|
|
183
|
|
||
CMBS
|
13
|
|
8
|
|
||
Corporate
|
92
|
|
92
|
|
||
Foreign government
|
28
|
|
518
|
|
||
U.S government
|
—
|
|
24
|
|
||
Municipals
|
3
|
|
1
|
|
||
RMBS
|
134
|
|
15
|
|
||
Total fixed maturities, FVO
|
$
|
410
|
|
$
|
844
|
|
|
|
June 30, 2014
|
December 31, 2013
|
||||||||||
|
Fair Value
Hierarchy Level |
Carrying
Amount |
Fair
Value |
Carrying
Amount |
Fair
Value |
||||||||
Assets
|
|
|
|
|
|
||||||||
Policy loans
|
Level 3
|
$
|
1,420
|
|
$
|
1,420
|
|
$
|
1,420
|
|
$
|
1,480
|
|
Mortgage loans
|
Level 3
|
5,586
|
|
5,745
|
|
5,598
|
|
5,641
|
|
||||
Liabilities
|
|
|
|
|
|
||||||||
Other policyholder funds and benefits payable [1]
|
Level 3
|
$
|
7,572
|
|
$
|
7,789
|
|
$
|
9,152
|
|
$
|
9,352
|
|
Senior notes [2]
|
Level 2
|
5,008
|
|
5,852
|
|
5,206
|
|
5,845
|
|
||||
Junior subordinated debentures [2]
|
Level 2
|
1,100
|
|
1,310
|
|
1,100
|
|
1,271
|
|
||||
Revolving Credit Facility
|
Level 2
|
—
|
|
—
|
|
238
|
|
238
|
|
||||
Consumer notes [3]
|
Level 3
|
77
|
|
75
|
|
82
|
|
82
|
|
[1]
|
Excludes guarantees on variable annuities, group accident and health and universal life insurance contracts, including corporate owned life insurance.
|
[2]
|
Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are included in short-term debt.
|
[3]
|
Excludes amounts carried at fair value and included in disclosures above.
|
•
|
During the second quarter of 2014, the Company changed the valuation technique used to estimate the fair value of policy loans. The fair value of policy loans was determined using current loan coupon rates which reflect the current rates available under the contracts. As a result, the fair value approximates the carrying value of the policy loans. Prior to the second quarter of 2014, the fair value of policy loans was estimated by utilizing discounted cash flow calculations using U.S. Treasury interest rates based on the loan durations.
|
•
|
Fair values for mortgage loans were estimated using discounted cash flow calculations based on current lending rates for similar type loans. Current lending rates reflect changes in credit spreads and the remaining terms of the loans.
|
•
|
Fair values for other policyholder funds and benefits payable, not carried at fair value, are estimated based on the cash surrender values of the underlying policies or by estimating future cash flows discounted at current interest rates adjusted for credit risk.
|
•
|
Fair values for senior notes and junior subordinated debentures are determined using the market approach based on reported trades, benchmark interest rates and issuer spread for the Company which may consider credit default swaps.
|
•
|
Fair values for consumer notes were estimated using discounted cash flow calculations using current interest rates adjusted for estimated loan durations.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(Before tax)
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Gross gains on sales [1]
|
$
|
122
|
|
$
|
207
|
|
|
$
|
305
|
|
$
|
1,916
|
|
Gross losses on sales
|
(33
|
)
|
(117
|
)
|
|
(162
|
)
|
(189
|
)
|
||||
Net OTTI losses recognized in earnings
|
(7
|
)
|
(12
|
)
|
|
(29
|
)
|
(33
|
)
|
||||
Valuation allowances on mortgage loans
|
(3
|
)
|
—
|
|
|
(3
|
)
|
—
|
|
||||
Periodic net coupon settlements on credit derivatives
|
2
|
|
—
|
|
|
1
|
|
(4
|
)
|
||||
Results of variable annuity hedge program
|
|
|
|
|
|
|
|||||||
GMWB derivatives, net
|
(6
|
)
|
(31
|
)
|
|
9
|
|
16
|
|
||||
Macro hedge program
|
(15
|
)
|
(47
|
)
|
|
(25
|
)
|
(132
|
)
|
||||
Total results of variable annuity hedge program
|
(21
|
)
|
(78
|
)
|
|
(16
|
)
|
(116
|
)
|
||||
Other, net [2]
|
(64
|
)
|
21
|
|
|
(135
|
)
|
91
|
|
||||
Net realized capital gains (losses)
|
(4
|
)
|
21
|
|
|
(39
|
)
|
1,665
|
|
[1]
|
Includes
$1.5 billion
of gains relating to the sales of the Retirement Plans and Individual Life businesses for the
six months ended
June 30, 2013
.
|
[2]
|
Primarily consists of changes in the value of non-qualifying derivatives, including interest rate derivatives used to manage duration, transactional foreign currency revaluation gains (losses) on the Japan 3Win fixed payout annuity liabilities assumed from HLIKK and gains (losses) on non-qualifying derivatives used to hedge the foreign currency exposure of the 3Win liabilities. Gains (losses) from transactional foreign currency revaluation of the 3Win liabilities were $
(18)
and $
(46)
, respectively, for the three and six months ended June 30, 2014, and $
72
and $
189
, respectively, for the three and six months ended June 30, 2013. Gains (losses) on instruments used to hedge the foreign currency exposure on the 3Win fixed payout annuities were $
13
and $
28
, respectively, for the three and six months ended June 30, 2014, and $
(54)
and $
(184)
, respectively, for the three and six months ended June 30, 2013. Also includes
$71
of gains relating to the sales of the Retirement Plans and Individual Life businesses for the six months ended June 30, 2013.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(Before-tax)
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Balance as of beginning of period
|
$
|
(531
|
)
|
$
|
(906
|
)
|
|
$
|
(552
|
)
|
$
|
(1,013
|
)
|
Additions for credit impairments recognized on [1]:
|
|
|
|
|
|
||||||||
Securities not previously impaired
|
(1
|
)
|
(5
|
)
|
|
(8
|
)
|
(13
|
)
|
||||
Securities previously impaired
|
(3
|
)
|
(7
|
)
|
|
(14
|
)
|
(9
|
)
|
||||
Reductions for credit impairments previously recognized on:
|
|
|
|
|
|
||||||||
Securities that matured or were sold during the period
|
40
|
|
12
|
|
|
73
|
|
126
|
|
||||
Securities due to an increase in expected cash flows
|
7
|
|
4
|
|
|
13
|
|
7
|
|
||||
Balance as of end of period
|
$
|
(488
|
)
|
$
|
(902
|
)
|
|
$
|
(488
|
)
|
$
|
(902
|
)
|
[1]
|
These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||||||||||||||||||
|
Cost or
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Non-Credit
OTTI [1]
|
|
Cost or
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Non-Credit
OTTI [1]
|
||||||||||||||||||||
ABS
|
$
|
2,313
|
|
$
|
36
|
|
$
|
(40
|
)
|
$
|
2,309
|
|
$
|
(1
|
)
|
|
$
|
2,404
|
|
$
|
25
|
|
$
|
(64
|
)
|
$
|
2,365
|
|
$
|
(2
|
)
|
CDOs [2]
|
2,360
|
|
118
|
|
(47
|
)
|
2,434
|
|
—
|
|
|
2,340
|
|
108
|
|
(59
|
)
|
2,387
|
|
—
|
|
||||||||||
CMBS
|
4,495
|
|
226
|
|
(25
|
)
|
4,696
|
|
(6
|
)
|
|
4,288
|
|
216
|
|
(58
|
)
|
4,446
|
|
(6
|
)
|
||||||||||
Corporate
|
26,223
|
|
2,570
|
|
(125
|
)
|
28,668
|
|
(3
|
)
|
|
27,013
|
|
1,823
|
|
(346
|
)
|
28,490
|
|
(7
|
)
|
||||||||||
Foreign govt./govt. agencies
|
1,650
|
|
79
|
|
(22
|
)
|
1,707
|
|
—
|
|
|
4,228
|
|
52
|
|
(176
|
)
|
4,104
|
|
—
|
|
||||||||||
Municipal
|
11,796
|
|
933
|
|
(16
|
)
|
12,713
|
|
—
|
|
|
11,932
|
|
425
|
|
(184
|
)
|
12,173
|
|
—
|
|
||||||||||
RMBS
|
4,324
|
|
135
|
|
(33
|
)
|
4,426
|
|
(2
|
)
|
|
4,639
|
|
90
|
|
(82
|
)
|
4,647
|
|
(4
|
)
|
||||||||||
U.S. Treasuries
|
3,157
|
|
146
|
|
(10
|
)
|
3,293
|
|
—
|
|
|
3,797
|
|
7
|
|
(59
|
)
|
3,745
|
|
—
|
|
||||||||||
Total fixed maturities, AFS
|
56,318
|
|
4,243
|
|
(318
|
)
|
60,246
|
|
(12
|
)
|
|
60,641
|
|
2,746
|
|
(1,028
|
)
|
62,357
|
|
(19
|
)
|
||||||||||
Equity securities, AFS
|
779
|
|
77
|
|
(33
|
)
|
823
|
|
—
|
|
|
850
|
|
67
|
|
(49
|
)
|
868
|
|
—
|
|
||||||||||
Total AFS securities
|
$
|
57,097
|
|
$
|
4,320
|
|
$
|
(351
|
)
|
$
|
61,069
|
|
$
|
(12
|
)
|
|
$
|
61,491
|
|
$
|
2,813
|
|
$
|
(1,077
|
)
|
$
|
63,225
|
|
$
|
(19
|
)
|
[1]
|
Represents the amount of cumulative non-credit OTTI losses recognized in OCI on securities that also had credit impairments. These losses are included in gross unrealized losses as of
June 30, 2014
and
December 31, 2013
.
|
[2]
|
Gross unrealized gains (losses) exclude the change in fair value of bifurcated embedded derivative features of certain securities. Changes in fair value are recorded in net realized capital gains (losses).
|
|
June 30, 2014
|
December 31, 2013
|
||||||||||
Contractual Maturity
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||
One year or less
|
$
|
2,125
|
|
$
|
2,162
|
|
$
|
2,195
|
|
$
|
2,228
|
|
Over one year through five years
|
11,279
|
|
12,022
|
|
11,930
|
|
12,470
|
|
||||
Over five years through ten years
|
9,257
|
|
9,844
|
|
10,814
|
|
11,183
|
|
||||
Over ten years
|
20,165
|
|
22,353
|
|
22,031
|
|
22,631
|
|
||||
Subtotal
|
42,826
|
|
46,381
|
|
46,970
|
|
48,512
|
|
||||
Mortgage-backed and asset-backed securities
|
13,492
|
|
13,865
|
|
13,671
|
|
13,845
|
|
||||
Total fixed maturities, AFS
|
$
|
56,318
|
|
$
|
60,246
|
|
$
|
60,641
|
|
$
|
62,357
|
|
|
June 30, 2014
|
||||||||||||||||||||||||||||
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
||||||||||||||||||
ABS
|
$
|
470
|
|
$
|
469
|
|
$
|
(1
|
)
|
|
$
|
559
|
|
$
|
520
|
|
$
|
(39
|
)
|
|
$
|
1,029
|
|
$
|
989
|
|
$
|
(40
|
)
|
CDOs [1]
|
237
|
|
236
|
|
(1
|
)
|
|
1,719
|
|
1,676
|
|
(46
|
)
|
|
1,956
|
|
1,912
|
|
(47
|
)
|
|||||||||
CMBS
|
100
|
|
98
|
|
(2
|
)
|
|
587
|
|
564
|
|
(23
|
)
|
|
687
|
|
662
|
|
(25
|
)
|
|||||||||
Corporate
|
682
|
|
673
|
|
(9
|
)
|
|
1,683
|
|
1,567
|
|
(116
|
)
|
|
2,365
|
|
2,240
|
|
(125
|
)
|
|||||||||
Foreign govt./govt. agencies
|
129
|
|
128
|
|
(1
|
)
|
|
322
|
|
301
|
|
(21
|
)
|
|
451
|
|
429
|
|
(22
|
)
|
|||||||||
Municipal
|
119
|
|
118
|
|
(1
|
)
|
|
490
|
|
475
|
|
(15
|
)
|
|
609
|
|
593
|
|
(16
|
)
|
|||||||||
RMBS
|
285
|
|
283
|
|
(2
|
)
|
|
645
|
|
614
|
|
(31
|
)
|
|
930
|
|
897
|
|
(33
|
)
|
|||||||||
U.S. Treasuries
|
289
|
|
288
|
|
(1
|
)
|
|
492
|
|
483
|
|
(9
|
)
|
|
781
|
|
771
|
|
(10
|
)
|
|||||||||
Total fixed maturities, AFS
|
2,311
|
|
2,293
|
|
(18
|
)
|
|
6,497
|
|
6,200
|
|
(300
|
)
|
|
8,808
|
|
8,493
|
|
(318
|
)
|
|||||||||
Equity securities, AFS
|
52
|
|
47
|
|
(5
|
)
|
|
228
|
|
200
|
|
(28
|
)
|
|
280
|
|
247
|
|
(33
|
)
|
|||||||||
Total securities in an unrealized loss position
|
$
|
2,363
|
|
$
|
2,340
|
|
$
|
(23
|
)
|
|
$
|
6,725
|
|
$
|
6,400
|
|
$
|
(328
|
)
|
|
$
|
9,088
|
|
$
|
8,740
|
|
$
|
(351
|
)
|
|
December 31, 2013
|
||||||||||||||||||||||||||||
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
||||||||||||||||||
ABS
|
$
|
893
|
|
$
|
888
|
|
$
|
(5
|
)
|
|
$
|
477
|
|
$
|
418
|
|
$
|
(59
|
)
|
|
$
|
1,370
|
|
$
|
1,306
|
|
$
|
(64
|
)
|
CDOs [1]
|
137
|
|
135
|
|
(2
|
)
|
|
1,933
|
|
1,874
|
|
(57
|
)
|
|
2,070
|
|
2,009
|
|
(59
|
)
|
|||||||||
CMBS
|
812
|
|
788
|
|
(24
|
)
|
|
610
|
|
576
|
|
(34
|
)
|
|
1,422
|
|
1,364
|
|
(58
|
)
|
|||||||||
Corporate
|
4,922
|
|
4,737
|
|
(185
|
)
|
|
1,225
|
|
1,064
|
|
(161
|
)
|
|
6,147
|
|
5,801
|
|
(346
|
)
|
|||||||||
Foreign govt./govt. agencies
|
2,961
|
|
2,868
|
|
(93
|
)
|
|
343
|
|
260
|
|
(83
|
)
|
|
3,304
|
|
3,128
|
|
(176
|
)
|
|||||||||
Municipal
|
3,150
|
|
2,994
|
|
(156
|
)
|
|
190
|
|
162
|
|
(28
|
)
|
|
3,340
|
|
3,156
|
|
(184
|
)
|
|||||||||
RMBS
|
2,046
|
|
2,008
|
|
(38
|
)
|
|
591
|
|
547
|
|
(44
|
)
|
|
2,637
|
|
2,555
|
|
(82
|
)
|
|||||||||
U.S. Treasuries
|
2,914
|
|
2,862
|
|
(52
|
)
|
|
33
|
|
26
|
|
(7
|
)
|
|
2,947
|
|
2,888
|
|
(59
|
)
|
|||||||||
Total fixed maturities, AFS
|
17,835
|
|
17,280
|
|
(555
|
)
|
|
5,402
|
|
4,927
|
|
(473
|
)
|
|
23,237
|
|
22,207
|
|
(1,028
|
)
|
|||||||||
Equity securities, AFS
|
196
|
|
188
|
|
(8
|
)
|
|
223
|
|
182
|
|
(41
|
)
|
|
419
|
|
370
|
|
(49
|
)
|
|||||||||
Total securities in an unrealized loss position
|
$
|
18,031
|
|
$
|
17,468
|
|
$
|
(563
|
)
|
|
$
|
5,625
|
|
$
|
5,109
|
|
$
|
(514
|
)
|
|
$
|
23,656
|
|
$
|
22,577
|
|
$
|
(1,077
|
)
|
[1]
|
Unrealized losses exclude the change in fair value of bifurcated embedded derivative features of certain securities. Changes in fair value are recorded in net realized capital gains (losses).
|
[1]
|
Amortized cost represents carrying value prior to valuation allowances, if any.
|
|
2014
|
2013
|
||||
Balance, as of January 1
|
$
|
(67
|
)
|
$
|
(68
|
)
|
(Additions)/Reversals
|
(3
|
)
|
(2
|
)
|
||
Deductions
|
51
|
|
2
|
|
||
Balance, as of June 30
|
$
|
(19
|
)
|
$
|
(68
|
)
|
Commercial Mortgage Loans Credit Quality
|
|||||||||
|
June 30, 2014
|
|
December 31, 2013
|
||||||
Loan-to-value
|
Carrying Value
|
Avg. Debt-Service Coverage Ratio
|
|
Carrying Value
|
Avg. Debt-Service Coverage Ratio
|
||||
Greater than 80%
|
$
|
64
|
|
1.00x
|
|
$
|
101
|
|
0.99x
|
65% - 80%
|
824
|
|
1.75x
|
|
1,195
|
|
1.82x
|
||
Less than 65%
|
4,698
|
|
2.59x
|
|
4,302
|
|
2.53x
|
||
Total commercial mortgage loans
|
$
|
5,586
|
|
2.44x
|
|
$
|
5,598
|
|
2.34x
|
Mortgage Loans by Region
|
|||||||||||
|
June 30, 2014
|
|
December 31, 2013
|
||||||||
|
Carrying Value
|
Percent of Total
|
|
Carrying Value
|
Percent of Total
|
||||||
East North Central
|
$
|
181
|
|
3.2
|
%
|
|
$
|
187
|
|
3.3
|
%
|
Middle Atlantic
|
403
|
|
7.2
|
%
|
|
409
|
|
7.3
|
%
|
||
Mountain
|
93
|
|
1.7
|
%
|
|
104
|
|
1.9
|
%
|
||
New England
|
382
|
|
6.8
|
%
|
|
353
|
|
6.3
|
%
|
||
Pacific
|
1,476
|
|
26.4
|
%
|
|
1,587
|
|
28.3
|
%
|
||
South Atlantic
|
1,006
|
|
18.0
|
%
|
|
899
|
|
16.1
|
%
|
||
West North Central
|
44
|
|
0.8
|
%
|
|
47
|
|
0.8
|
%
|
||
West South Central
|
337
|
|
6.0
|
%
|
|
338
|
|
6.0
|
%
|
||
Other [1]
|
1,664
|
|
29.9
|
%
|
|
1,674
|
|
30.0
|
%
|
||
Total mortgage loans
|
$
|
5,586
|
|
100.0
|
%
|
|
$
|
5,598
|
|
100.0
|
%
|
[1]
|
Primarily represents loans collateralized by multiple properties in various regions.
|
Mortgage Loans by Property Type
|
|||||||||||
|
June 30, 2014
|
|
December 31, 2013
|
||||||||
|
Carrying Value
|
Percent of Total
|
|
Carrying
Value |
Percent of Total
|
||||||
Commercial
|
|
|
|
|
|
||||||
Agricultural
|
$
|
62
|
|
1.1
|
%
|
|
$
|
125
|
|
2.2
|
%
|
Industrial
|
1,687
|
|
30.2
|
%
|
|
1,718
|
|
30.7
|
%
|
||
Lodging
|
26
|
|
0.5
|
%
|
|
27
|
|
0.5
|
%
|
||
Multifamily
|
1,211
|
|
21.7
|
%
|
|
1,155
|
|
20.6
|
%
|
||
Office
|
1,351
|
|
24.2
|
%
|
|
1,278
|
|
22.8
|
%
|
||
Retail
|
1,096
|
|
19.6
|
%
|
|
1,140
|
|
20.4
|
%
|
||
Other
|
153
|
|
2.7
|
%
|
|
155
|
|
2.8
|
%
|
||
Total mortgage loans
|
$
|
5,586
|
|
100.0
|
%
|
|
$
|
5,598
|
|
100.0
|
%
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||||||
|
Total Assets
|
Total Liabilities [1]
|
Maximum Exposure to Loss [2]
|
|
Total Assets
|
Total Liabilities [1]
|
Maximum Exposure to Loss [2]
|
||||||||||||
CDOs [3]
|
$
|
14
|
|
$
|
14
|
|
$
|
—
|
|
|
$
|
31
|
|
$
|
33
|
|
$
|
—
|
|
Investment funds [4]
|
170
|
|
—
|
|
179
|
|
|
164
|
|
—
|
|
173
|
|
||||||
Limited partnerships and other alternative investments
|
3
|
|
—
|
|
3
|
|
|
4
|
|
—
|
|
4
|
|
||||||
Total
|
$
|
187
|
|
$
|
14
|
|
$
|
182
|
|
|
$
|
199
|
|
$
|
33
|
|
$
|
177
|
|
[1]
|
Included in other liabilities in the Company’s Condensed Consolidated Balance Sheets.
|
[2]
|
The maximum exposure to loss represents the maximum loss amount that the Company could recognize as a reduction in net investment income or as a realized capital loss and is the cost basis of the Company’s investment.
|
[3]
|
Total assets included in fixed maturities, AFS and short-term investments, or cash in the Company’s Condensed Consolidated Balance Sheets.
|
[4]
|
Total assets included in fixed maturities, FVO, short-term investments, and equity, AFS in the Company’s Condensed Consolidated Balance Sheets.
|
|
Notional Amount
|
|
Fair Value
|
||||||||||
|
June 30,
2014 |
December 31, 2013
|
|
June 30,
2014 |
December 31, 2013
|
||||||||
Customized swaps
|
$
|
7,514
|
|
$
|
7,839
|
|
|
$
|
64
|
|
$
|
74
|
|
Equity swaps, options, and futures
|
4,104
|
|
4,237
|
|
|
16
|
|
44
|
|
||||
Interest rate swaps and futures
|
3,925
|
|
6,615
|
|
|
(7
|
)
|
(77
|
)
|
||||
Total
|
$
|
15,543
|
|
$
|
18,691
|
|
|
$
|
73
|
|
$
|
41
|
|
|
Notional Amount
|
|
Fair Value
|
||||||||||
|
June 30,
2014 |
December 31, 2013
|
|
June 30,
2014 |
December 31, 2013
|
||||||||
Equity options and swaps
|
4,374
|
|
9,934
|
|
|
120
|
|
139
|
|
||||
Foreign currency options
|
874
|
|
—
|
|
|
—
|
|
—
|
|
||||
Total
|
$
|
5,248
|
|
$
|
9,934
|
|
|
$
|
120
|
|
$
|
139
|
|
|
December 31, 2013
|
|||||
|
Notional Amount
|
Fair Value
|
||||
Credit derivatives
|
350
|
|
5
|
|
||
Currency forwards [1]
|
13,410
|
|
(60
|
)
|
||
Currency options
|
12,066
|
|
(54
|
)
|
||
Equity futures
|
999
|
|
—
|
|
||
Equity options
|
3,051
|
|
(30
|
)
|
||
Equity swaps
|
4,269
|
|
(119
|
)
|
||
Interest rate futures
|
952
|
|
—
|
|
||
Interest rate swaps and swaptions
|
37,951
|
|
225
|
|
||
Total
|
$
|
73,048
|
|
$
|
(33
|
)
|
[1]
|
As of
December 31, 2013
the net notional amount was $
(1.8) billion
which included $
5.8 billion
related to long positions and $
7.6 billion
related to short positions.
|
|
Net Derivatives
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||||||||||||
|
Notional Amount
|
|
Fair Value
|
|
Fair Value
|
|
Fair Value
|
||||||||||||||||||||
Hedge Designation/ Derivative Type
|
Jun. 30, 2014
|
Dec. 31, 2013
|
|
Jun. 30, 2014
|
Dec. 31, 2013
|
|
Jun. 30, 2014
|
Dec. 31, 2013
|
|
Jun. 30, 2014
|
Dec. 31, 2013
|
||||||||||||||||
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps
|
$
|
4,530
|
|
$
|
5,026
|
|
|
$
|
(4
|
)
|
$
|
(92
|
)
|
|
$
|
41
|
|
$
|
50
|
|
|
$
|
(45
|
)
|
$
|
(142
|
)
|
Foreign currency swaps
|
143
|
|
143
|
|
|
(9
|
)
|
(5
|
)
|
|
2
|
|
2
|
|
|
(11
|
)
|
(7
|
)
|
||||||||
Total cash flow hedges
|
4,673
|
|
5,169
|
|
|
(13
|
)
|
(97
|
)
|
|
43
|
|
52
|
|
|
(56
|
)
|
(149
|
)
|
||||||||
Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps
|
221
|
|
1,799
|
|
|
—
|
|
(24
|
)
|
|
—
|
|
3
|
|
|
—
|
|
(27
|
)
|
||||||||
Total fair value hedges
|
221
|
|
1,799
|
|
|
—
|
|
(24
|
)
|
|
—
|
|
3
|
|
|
—
|
|
(27
|
)
|
||||||||
Non-qualifying strategies
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps and futures
|
13,638
|
|
8,453
|
|
|
(545
|
)
|
(487
|
)
|
|
283
|
|
171
|
|
|
(828
|
)
|
(658
|
)
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Foreign currency swaps and forwards
|
239
|
|
258
|
|
|
(13
|
)
|
(9
|
)
|
|
6
|
|
6
|
|
|
(19
|
)
|
(15
|
)
|
||||||||
Japan 3Win fixed payout annuity hedge
|
1,571
|
|
1,571
|
|
|
(326
|
)
|
(354
|
)
|
|
—
|
|
—
|
|
|
(326
|
)
|
(354
|
)
|
||||||||
Japanese fixed annuity hedging instruments
|
—
|
|
1,436
|
|
|
—
|
|
(6
|
)
|
|
—
|
|
88
|
|
|
—
|
|
(94
|
)
|
||||||||
Credit contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Credit derivatives that purchase credit protection
|
639
|
|
938
|
|
|
(17
|
)
|
(15
|
)
|
|
—
|
|
1
|
|
|
(17
|
)
|
(16
|
)
|
||||||||
Credit derivatives that assume credit risk [1]
|
1,510
|
|
1,886
|
|
|
22
|
|
33
|
|
|
25
|
|
36
|
|
|
(3
|
)
|
(3
|
)
|
||||||||
Credit derivatives in offsetting positions
|
5,526
|
|
7,764
|
|
|
(4
|
)
|
(7
|
)
|
|
59
|
|
76
|
|
|
(63
|
)
|
(83
|
)
|
||||||||
Equity contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Equity index swaps and options
|
321
|
|
358
|
|
|
(2
|
)
|
(1
|
)
|
|
22
|
|
19
|
|
|
(24
|
)
|
(20
|
)
|
||||||||
Variable annuity hedge program
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
GMWB product derivatives [2]
|
19,596
|
|
21,512
|
|
|
2
|
|
(36
|
)
|
|
15
|
|
—
|
|
|
(13
|
)
|
(36
|
)
|
||||||||
GMWB reinsurance contracts
|
4,042
|
|
4,508
|
|
|
31
|
|
29
|
|
|
31
|
|
29
|
|
|
—
|
|
—
|
|
||||||||
GMWB hedging instruments
|
15,543
|
|
18,691
|
|
|
73
|
|
41
|
|
|
227
|
|
333
|
|
|
(154
|
)
|
(292
|
)
|
||||||||
Macro hedge program
|
5,248
|
|
9,934
|
|
|
120
|
|
139
|
|
|
149
|
|
178
|
|
|
(29
|
)
|
(39
|
)
|
||||||||
International program product derivatives [2]
|
—
|
|
366
|
|
|
—
|
|
6
|
|
|
—
|
|
6
|
|
|
—
|
|
—
|
|
||||||||
International program hedging instruments
|
—
|
|
73,048
|
|
|
—
|
|
(33
|
)
|
|
—
|
|
866
|
|
|
—
|
|
(899
|
)
|
||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Contingent capital facility put option
|
500
|
|
500
|
|
|
15
|
|
17
|
|
|
15
|
|
17
|
|
|
—
|
|
—
|
|
||||||||
Modified coinsurance reinsurance contracts
|
1,280
|
|
1,250
|
|
|
32
|
|
67
|
|
|
32
|
|
67
|
|
|
—
|
|
—
|
|
||||||||
Derivative instruments formerly associated with Japan [3]
|
19,904
|
|
—
|
|
|
87
|
|
—
|
|
|
188
|
|
—
|
|
|
(101
|
)
|
—
|
|
||||||||
Total non-qualifying strategies
|
89,557
|
|
152,473
|
|
|
(525
|
)
|
(616
|
)
|
|
1,052
|
|
1,893
|
|
|
(1,577
|
)
|
(2,509
|
)
|
||||||||
Total cash flow hedges, fair value hedges, and non-qualifying strategies
|
$
|
94,451
|
|
$
|
159,441
|
|
|
$
|
(538
|
)
|
$
|
(737
|
)
|
|
$
|
1,095
|
|
$
|
1,948
|
|
|
$
|
(1,633
|
)
|
$
|
(2,685
|
)
|
Balance Sheet Location
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturities, available-for-sale
|
$
|
475
|
|
$
|
473
|
|
|
$
|
3
|
|
$
|
(2
|
)
|
|
$
|
3
|
|
$
|
1
|
|
|
$
|
—
|
|
$
|
(3
|
)
|
Other investments
|
31,441
|
|
53,219
|
|
|
239
|
|
442
|
|
|
489
|
|
909
|
|
|
(250
|
)
|
(467
|
)
|
||||||||
Other liabilities
|
37,559
|
|
78,055
|
|
|
(821
|
)
|
(1,223
|
)
|
|
525
|
|
936
|
|
|
(1,346
|
)
|
(2,159
|
)
|
||||||||
Consumer notes
|
8
|
|
9
|
|
|
(2
|
)
|
(2
|
)
|
|
—
|
|
—
|
|
|
(2
|
)
|
(2
|
)
|
||||||||
Reinsurance recoverables
|
5,322
|
|
5,758
|
|
|
63
|
|
96
|
|
|
63
|
|
96
|
|
|
—
|
|
—
|
|
||||||||
Other policyholder funds and benefits payable
|
19,646
|
|
21,927
|
|
|
(20
|
)
|
(48
|
)
|
|
15
|
|
6
|
|
|
(35
|
)
|
(54
|
)
|
||||||||
Total derivatives
|
$
|
94,451
|
|
$
|
159,441
|
|
|
$
|
(538
|
)
|
$
|
(737
|
)
|
|
$
|
1,095
|
|
$
|
1,948
|
|
|
$
|
(1,633
|
)
|
$
|
(2,685
|
)
|
[1]
|
The derivative instruments related to this strategy are held for other investment purposes.
|
[2]
|
These derivatives are embedded within liabilities and are not held for risk management purposes.
|
[3]
|
The notional amount consists of $
9.8
billion related to long positions and $
10.1
billion related to short positions.
|
•
|
The decrease in notional amount related to the international program hedging instruments resulted from the termination of the hedging program associated with the Japan variable annuity product due to the sale of HLIKK. However, as discussed above, a portion of the derivatives associated with the Japan business remain open as of June 30, 2014. For further discussion on the sale, see the Sale of Hartford Life Insurance KK section in Note 2 - Business Dispositions of Notes to Condensed Consolidated Financial Statements.
|
•
|
The decrease in notional amount related to the GMWB hedging instruments primarily resulted from portfolio re-balancing.
|
•
|
The decrease in notional amount associated with the macro hedge program was primarily driven by the expiration of certain out-of-the-money options.
|
•
|
These declines in notional amount were partially offset by an increase in notional amount related to non-qualifying interest rate swaps and futures related to duration shortening positions.
|
•
|
The fair value associated with the international program hedging instruments resulted from the termination of the hedging program associated with the Japan variable annuity product due to the sale of HLIKK. For further discussion on the sale, Sale of Hartford Life Insurance KK section in Note 2 - Business Dispositions of Notes to Condensed Consolidated Financial Statements.
|
•
|
The fair value related to the combined GMWB hedging program, which includes the GMWB product, reinsurance, and hedging derivatives, was primarily driven by improving equity markets for the GMWB product and declining interest rates for the hedging derivatives.
|
•
|
These improvements in fair value were partially offset by a decrease in fair value associated with modified coinsurance reinsurance contracts, which are accounted for as embedded derivatives and transfer to the reinsurer the investment experience related to the assets supporting the reinsured policies, driven by a decline in interest rates and credit spread tightening during the period.
|
|
(i)
|
|
(ii)
|
|
(iii) = (i) - (ii)
|
(iv)
|
|
(v) = (iii) - (iv)
|
|||||||||||||||
|
|
|
|
|
Net Amounts Presented in the Statement of Financial Position
|
|
Collateral Disallowed for Offset in the Statement of Financial Position
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Derivative Assets [1]
|
|
Accrued Interest and Cash Collateral Received [2]
|
|
Financial Collateral Received [4]
|
|
Net Amount
|
||||||||||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other investments
|
$
|
1,014
|
|
|
$
|
818
|
|
|
$
|
239
|
|
|
$
|
(43
|
)
|
|
$
|
85
|
|
|
$
|
111
|
|
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Derivative Liabilities [3]
|
|
Accrued Interest and Cash Collateral Pledged [3]
|
|
Financial Collateral Pledged [4]
|
|
Net Amount
|
||||||||||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other liabilities
|
$
|
(1,596
|
)
|
|
$
|
(749
|
)
|
|
$
|
(821
|
)
|
|
$
|
(26
|
)
|
|
$
|
(1,005
|
)
|
|
$
|
158
|
|
|
(i)
|
|
(ii)
|
|
(iii) = (i) - (ii)
|
(iv)
|
|
(v) = (iii) - (iv)
|
|||||||||||||||
|
|
|
|
|
Net Amounts Presented in the Statement of Financial Position
|
|
Collateral Disallowed for Offset in the Statement of Financial Position
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Derivative Assets [1]
|
|
Accrued Interest and Cash Collateral Received [2]
|
|
Financial Collateral Received [4]
|
|
Net Amount
|
||||||||||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other investments
|
$
|
1,845
|
|
|
$
|
1,463
|
|
|
$
|
442
|
|
|
$
|
(60
|
)
|
|
$
|
242
|
|
|
$
|
140
|
|
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Derivative Liabilities [3]
|
|
Accrued Interest and Cash Collateral Pledged [3]
|
|
Financial Collateral Pledged [4]
|
|
Net Amount
|
||||||||||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other liabilities
|
$
|
(2,626
|
)
|
|
$
|
(1,496
|
)
|
|
$
|
(1,223
|
)
|
|
$
|
93
|
|
|
$
|
(1,204
|
)
|
|
$
|
74
|
|
[1]
|
Included in other invested assets in the Company's Condensed Consolidated Balance Sheets.
|
[2]
|
Included in other assets in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative receivable associated with each counterparty.
|
[3]
|
Included in other liabilities in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty.
|
[4]
|
Excludes collateral associated with exchange-traded derivative instruments.
|
|
Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
|
|
Net Realized Capital Gains(Losses) Recognized in Income on Derivative (Ineffective Portion)
|
||||||||||||||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
|
2014
|
2013
|
|
2014
|
2013
|
||||||||||||||||
Interest rate swaps
|
$
|
57
|
|
$
|
(178
|
)
|
|
$
|
101
|
|
$
|
(249
|
)
|
|
$
|
—
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
$
|
(2
|
)
|
Foreign currency swaps
|
(2
|
)
|
5
|
|
|
(3
|
)
|
6
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||||||||
Total
|
$
|
55
|
|
$
|
(173
|
)
|
|
$
|
98
|
|
$
|
(243
|
)
|
|
$
|
—
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
$
|
(2
|
)
|
|
Gain or (Loss) Recognized in Income [1]
|
||||||||||||||||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||||||||||||||
|
Derivative
|
Hedge Item
|
|
Derivative
|
Hedge Item
|
|
Derivative
|
Hedge Item
|
|
Derivative
|
Hedge Item
|
||||||||||||||||
Interest rate swaps
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net realized capital gain/(loss)
|
$
|
(1
|
)
|
$
|
—
|
|
|
$
|
11
|
|
$
|
(16
|
)
|
|
$
|
(2
|
)
|
$
|
—
|
|
|
$
|
11
|
|
$
|
(17
|
)
|
Foreign currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net realized capital gain/(loss)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
(2
|
)
|
2
|
|
||||||||
Benefits, losses and loss adjustment expenses
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
(1
|
)
|
1
|
|
||||||||
Total
|
$
|
(1
|
)
|
$
|
—
|
|
|
$
|
11
|
|
$
|
(16
|
)
|
|
$
|
(2
|
)
|
$
|
—
|
|
|
$
|
8
|
|
$
|
(14
|
)
|
[1]
|
The amounts presented do not include the periodic net coupon settlements of the derivative or the coupon income (expense) related to the hedged item. The net of the amounts presented represents the ineffective portion of the hedge.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Interest rate contracts
|
|
|
|
|
|
||||||||
Interest rate swaps and forwards
|
$
|
(89
|
)
|
$
|
(12
|
)
|
|
$
|
(145
|
)
|
$
|
5
|
|
Foreign exchange contracts
|
|
|
|
|
|
||||||||
Foreign currency swaps and forwards
|
(5
|
)
|
7
|
|
|
(4
|
)
|
8
|
|
||||
Japan 3Win fixed payout annuity hedge [1]
|
13
|
|
(54
|
)
|
|
28
|
|
(184
|
)
|
||||
Credit contracts
|
|
|
|
|
|
||||||||
Credit derivatives that purchase credit protection
|
(6
|
)
|
(5
|
)
|
|
(10
|
)
|
(12
|
)
|
||||
Credit derivatives that assume credit risk
|
20
|
|
(12
|
)
|
|
19
|
|
2
|
|
||||
Equity contracts
|
|
|
|
|
|
||||||||
Equity index swaps and options
|
(1
|
)
|
(4
|
)
|
|
(1
|
)
|
(24
|
)
|
||||
Variable annuity hedge program
|
|
|
|
|
|
||||||||
GMWB product derivatives
|
55
|
|
192
|
|
|
91
|
|
648
|
|
||||
GMWB reinsurance contracts
|
(7
|
)
|
(32
|
)
|
|
(11
|
)
|
(92
|
)
|
||||
GMWB hedging instruments
|
(54
|
)
|
(191
|
)
|
|
(71
|
)
|
(540
|
)
|
||||
Macro hedge program
|
(15
|
)
|
(47
|
)
|
|
(25
|
)
|
(132
|
)
|
||||
Other
|
|
|
|
|
|
||||||||
Contingent capital facility put option
|
(2
|
)
|
(2
|
)
|
|
(3
|
)
|
(4
|
)
|
||||
Modified coinsurance reinsurance contracts
|
(16
|
)
|
49
|
|
|
(35
|
)
|
54
|
|
||||
Total [2]
|
$
|
(107
|
)
|
$
|
(111
|
)
|
|
$
|
(167
|
)
|
$
|
(271
|
)
|
[1]
|
The associated liability is adjusted for changes in foreign exchange spot rates through realized capital gains and was $
(18)
and $
72
for the three months ended
June 30, 2014
and
2013
, respectively and $
(46)
and $
189
, for the six months ended
June 30, 2014
and
2013
, respectively.
|
[2]
|
Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements.
|
•
|
The net losses related to interest derivatives, primarily used to manage duration, were due to a decline in U.S. interest rates.
|
•
|
The loss associated with modified coinsurance reinsurance contracts, which are accounted for as embedded derivatives and transfer to the reinsurer the investment experience related to the assets supporting the reinsured policies, was driven by a decline in interest rates and credit spread tightening during the period. The assets remain on the Company's books and the Company recorded an offsetting gain in AOCI as a result of the increase in market value of the bonds.
|
•
|
The net loss on the macro hedge program was primarily due to an improvement in domestic equity markets, and lower equity volatility.
|
•
|
The net gain related to the Japan fixed annuity payout hedge was driven by an appreciation of the Japanese yen in relation to the U.S. dollar.
|
•
|
The net loss related to the Japan 3Win fixed payout annuity hedge was primarily due to a depreciation of the Japanese yen in relation to the U.S. dollar.
|
•
|
For the three months ended
June 30, 2013
the net loss related to the combined GMWB hedging program, which includes the GMWB product, reinsurance, and hedging derivatives, was primarily a result of an increase in fees for selected GMWB riders, partially offset by gains driven by favorable policyholder behavior. For the six months ended
June 30, 2013
the net gain related to the combined GMWB hedging program, which includes the GMWB product, reinsurance, and hedging derivatives, was primarily driven by favorable policyholder behavior, partially offset by an increase in interest rates, and an increase in fees for selected GMWB riders.
|
|
|
|
|
Underlying Referenced Credit
Obligation(s) [1]
|
|
|
|||||||||
Credit Derivative type by derivative risk exposure
|
Notional
Amount
[2]
|
Fair
Value
|
Weighted
Average
Years to
Maturity
|
Type
|
Average
Credit
Rating
|
Offsetting
Notional
Amount [3]
|
Offsetting
Fair
Value [3]
|
||||||||
Single name credit default swaps
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
$
|
281
|
|
$
|
5
|
|
3 years
|
Corporate Credit/
Foreign Gov. |
BBB+
|
$
|
270
|
|
$
|
(7
|
)
|
Below investment grade risk exposure
|
29
|
|
—
|
|
3 years
|
Corporate Credit
|
BB
|
4
|
|
—
|
|
||||
Basket credit default swaps [4]
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
2,844
|
|
47
|
|
4 years
|
Corporate Credit
|
BBB
|
2,062
|
|
(33
|
)
|
||||
Below investment grade risk exposure
|
57
|
|
5
|
|
5 years
|
Corporate Credit
|
B+
|
—
|
|
—
|
|
||||
Investment grade risk exposure
|
558
|
|
(6
|
)
|
6 years
|
CMBS Credit
|
AA
|
273
|
|
3
|
|
||||
Below investment grade risk exposure
|
154
|
|
(20
|
)
|
3 years
|
CMBS Credit
|
CCC+
|
154
|
|
20
|
|
||||
Embedded credit derivatives
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
350
|
|
340
|
|
3 years
|
Corporate Credit
|
A-
|
—
|
|
—
|
|
||||
Total [5]
|
$
|
4,273
|
|
$
|
371
|
|
|
|
|
$
|
2,763
|
|
$
|
(17
|
)
|
|
|
|
|
Underlying Referenced
Credit Obligation(s) [1]
|
|
|
|||||||||
Credit Derivative type by derivative risk exposure
|
Notional
Amount [2]
|
Fair
Value
|
Weighted
Average
Years to
Maturity
|
Type
|
Average
Credit
Rating
|
Offsetting
Notional
Amount [3]
|
Offsetting
Fair
Value [3]
|
||||||||
Single name credit default swaps
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
$
|
1,259
|
|
$
|
8
|
|
1 year
|
Corporate Credit/
Foreign Gov. |
A-
|
$
|
1,066
|
|
$
|
(9
|
)
|
Below investment grade risk exposure
|
24
|
|
—
|
|
1 year
|
Corporate Credit
|
CCC
|
24
|
|
(1
|
)
|
||||
Basket credit default swaps [4]
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
3,447
|
|
50
|
|
3 years
|
Corporate Credit
|
BBB
|
2,270
|
|
(35
|
)
|
||||
Below investment grade risk exposure
|
166
|
|
15
|
|
5 years
|
Corporate Credit
|
BB-
|
—
|
|
—
|
|
||||
Investment grade risk exposure
|
327
|
|
(7
|
)
|
3 years
|
CMBS Credit
|
A
|
327
|
|
7
|
|
||||
Below investment grade risk exposure
|
195
|
|
(31
|
)
|
3 years
|
CMBS Credit
|
B-
|
195
|
|
31
|
|
||||
Embedded credit derivatives
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
350
|
|
339
|
|
3 years
|
Corporate Credit
|
BBB+
|
—
|
|
—
|
|
||||
Total [5]
|
$
|
5,768
|
|
$
|
374
|
|
|
|
|
$
|
3,882
|
|
$
|
(7
|
)
|
[1]
|
The average credit ratings are based on availability and the midpoint of the applicable ratings among Moody’s, S&P, Fitch and Morningstar. If no rating is available from a rating agency, then an internally developed rating is used.
|
[2]
|
Notional amount is equal to the maximum potential future loss amount. These derivatives are governed by agreements, clearing house rules and applicable law which include collateral posting requirements. There is no additional specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.
|
[3]
|
The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap.
|
[4]
|
Includes $
3.6 billion
and $
4.1 billion
as of
June 30, 2014
and
December 31, 2013
, respectively, of standard market indices of diversified portfolios of corporate issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index.
|
[5]
|
Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements.
|
|
As of June 30,
|
As of December 31,
|
||||
|
2014
|
2013
|
||||
Property and Casualty Insurance Products:
|
|
|
||||
Paid loss and loss adjustment expenses
|
$
|
158
|
|
$
|
138
|
|
Unpaid loss and loss adjustment expenses
|
2,925
|
|
2,841
|
|
||
Gross reinsurance recoverable
|
3,083
|
|
2,979
|
|
||
Allowance for uncollectible reinsurance
|
(248
|
)
|
(244
|
)
|
||
Net reinsurance recoverables
|
$
|
2,835
|
|
$
|
2,735
|
|
Life Insurance Products:
|
|
|
||||
Future policy benefits and unpaid loss and loss adjustment expenses and other policyholder funds and benefits payable
|
|
|
||||
Sold businesses (MassMutual and Prudential)
|
$
|
18,884
|
|
$
|
19,374
|
|
Other reinsurers
|
1,230
|
|
1,221
|
|
||
Net reinsurance recoverables
|
$
|
20,114
|
|
$
|
20,595
|
|
Reinsurance recoverables, net
|
$
|
22,949
|
|
$
|
23,330
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Premiums Written
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Direct
|
$
|
2,660
|
|
$
|
2,534
|
|
|
$
|
5,377
|
|
$
|
5,330
|
|
Assumed
|
62
|
|
49
|
|
|
131
|
|
111
|
|
||||
Ceded
|
(148
|
)
|
(82
|
)
|
|
(337
|
)
|
(417
|
)
|
||||
Net
|
$
|
2,574
|
|
$
|
2,501
|
|
|
$
|
5,171
|
|
$
|
5,024
|
|
Premiums Earned
|
|
|
|
|
|
|
|
||||||
Direct
|
$
|
2,631
|
|
$
|
2,605
|
|
|
$
|
5,237
|
|
$
|
5,178
|
|
Assumed
|
64
|
|
49
|
|
|
129
|
|
109
|
|
||||
Ceded
|
(190
|
)
|
(201
|
)
|
|
(392
|
)
|
(409
|
)
|
||||
Net
|
$
|
2,505
|
|
$
|
2,453
|
|
|
$
|
4,974
|
|
$
|
4,878
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Gross earned premiums and fee income
|
$
|
1,493
|
|
$
|
1,559
|
|
|
$
|
3,035
|
|
$
|
3,132
|
|
Reinsurance assumed
|
50
|
|
65
|
|
|
98
|
|
98
|
|
||||
Reinsurance ceded
|
(414
|
)
|
(437
|
)
|
|
(852
|
)
|
(868
|
)
|
||||
Net
|
$
|
1,129
|
|
$
|
1,187
|
|
|
$
|
2,281
|
|
$
|
2,362
|
|
|
Six Months Ended June 30,
|
|||||
|
2014
|
2013
|
||||
Balance, beginning of period
|
$
|
2,161
|
|
$
|
5,725
|
|
Deferred costs
|
689
|
|
668
|
|
||
Amortization — DAC
|
(796
|
)
|
(806
|
)
|
||
Amortization — Unlock benefit (charge), pre-tax [1]
|
28
|
|
(921
|
)
|
||
Amortization — DAC related to business dispositions [2] [3]
|
—
|
|
(2,229
|
)
|
||
Adjustments to unrealized gains and losses on securities AFS and other
|
(56
|
)
|
121
|
|
||
Effect of currency translation
|
—
|
|
(86
|
)
|
||
Balance, end of period
|
$
|
2,026
|
|
$
|
2,472
|
|
[1]
|
Includes Unlock charge of
$887
related to elimination of future estimated gross profits on the Japan variable annuity block in the first quarter of 2013. As a result of the Japan annuity business sale completed in June 2014, this Unlock charge has been reclassified to discontinued operations. For further information regarding this transaction, see Note
2
-
Business Dispositions
of Notes to Condensed Consolidated Financial Statements.
|
[2]
|
Includes accelerated amortization of
$352
and
$2,374
recognized upon the sale of the Retirement Plans and Individual Life businesses, respectively, in 2013. For further information, see Note
2
-
Business Dispositions
of Notes to Condensed Consolidated Financial Statements.
|
[3]
|
Includes previously unrealized gains on securities AFS of
$148
and
$349
recognized upon the sale of the Retirement Plans and Individual Life businesses, respectively, in 2013.
|
|
Six Months Ended June 30,
|
|||||
|
2014
|
2013
|
||||
Balance, beginning of period
|
$
|
149
|
|
$
|
325
|
|
Sales inducements deferred
|
—
|
|
(3
|
)
|
||
Amortization — Unlock benefit (charge) [1]
|
6
|
|
(59
|
)
|
||
Amortization charged to income
|
(13
|
)
|
(11
|
)
|
||
Amortization related to business dispositions [2]
|
—
|
|
(71
|
)
|
||
Balance end of period
|
$
|
142
|
|
$
|
181
|
|
[1]
|
Includes Unlock charge of
$52
in the first quarter of 2013 related to elimination of future estimated gross profits on the Japan variable annuity block. As a result of the Japan annuity business sale completed in June 2014, this Unlock charge has been reclassified to discontinued operations. For further information regarding this transaction, see Note
2
-
Business Dispositions
of Notes to Condensed Consolidated Financial Statements.
|
[2]
|
Represents accelerated amortization of
$22
and
$49
in the first quarter of 2013 recognized upon the sale of the Retirement Plans and Individual Life businesses, respectively. For further information, see Note
2
-
Business Dispositions
of Notes to Condensed Consolidated Financial Statements.
|
|
U.S.
GMDB
|
International
GMDB/GMIB
|
UL Secondary
Guarantees
|
||||||
Liability balance as of January 1, 2014
|
$
|
849
|
|
$
|
272
|
|
$
|
1,802
|
|
Incurred
|
90
|
|
28
|
|
115
|
|
|||
Paid
|
(57
|
)
|
(15
|
)
|
—
|
|
|||
Unlock
|
(24
|
)
|
(41
|
)
|
—
|
|
|||
Impact of Japan business disposition
|
—
|
|
(254
|
)
|
—
|
|
|||
Currency translation adjustment
|
—
|
|
10
|
|
—
|
|
|||
Liability balance as of June 30, 2014
|
$
|
858
|
|
$
|
—
|
|
$
|
1,917
|
|
Reinsurance recoverable asset, as of January 1, 2014
|
$
|
533
|
|
$
|
23
|
|
$
|
1,802
|
|
Incurred
|
52
|
|
4
|
|
115
|
|
|||
Paid
|
(44
|
)
|
(4
|
)
|
—
|
|
|||
Unlock
|
(14
|
)
|
3
|
|
—
|
|
|||
Impact of Japan business disposition
|
—
|
|
(27
|
)
|
—
|
|
|||
Currency translation adjustment
|
—
|
|
1
|
|
—
|
|
|||
Reinsurance recoverable asset, as of June 30, 2014
|
$
|
527
|
|
$
|
—
|
|
$
|
1,917
|
|
|
U.S.
GMDB
|
International
GMDB/GMIB
|
UL Secondary
Guarantees
|
||||||
Liability balance as of January 1, 2013
|
$
|
918
|
|
$
|
661
|
|
$
|
363
|
|
Incurred
|
94
|
|
50
|
|
183
|
|
|||
Paid
|
(75
|
)
|
(47
|
)
|
—
|
|
|||
Unlock
|
(69
|
)
|
(189
|
)
|
—
|
|
|||
Impact of reinsurance transactions (MassMutual and Prudential)
|
—
|
|
—
|
|
1,145
|
|
|||
Currency translation adjustment
|
—
|
|
(78
|
)
|
—
|
|
|||
Liability balance as of June 30, 2013
|
$
|
868
|
|
$
|
397
|
|
$
|
1,691
|
|
Reinsurance recoverable asset, as of January 1, 2013
|
$
|
608
|
|
$
|
36
|
|
$
|
21
|
|
Incurred
|
55
|
|
5
|
|
185
|
|
|||
Paid
|
(54
|
)
|
(9
|
)
|
—
|
|
|||
Unlock
|
(39
|
)
|
(18
|
)
|
—
|
|
|||
Impact of reinsurance transactions (MassMutual and Prudential)
|
—
|
|
—
|
|
1,485
|
|
|||
Currency translation adjustment
|
—
|
|
(4
|
)
|
—
|
|
|||
Reinsurance recoverable asset, as of June 30, 2013
|
$
|
570
|
|
$
|
10
|
|
$
|
1,691
|
|
Individual Variable Annuity Account Value by GMDB
|
||||||||||
Maximum anniversary value (“MAV”) [1]
|
Account
Value
(“AV”) [8]
|
Net Amount
at Risk
(“NAR”) [9]
|
Retained Net
Amount at Risk
(“RNAR”) [9]
|
Weighted Average
Attained Age of
Annuitant
|
||||||
MAV only
|
$
|
18,744
|
|
$
|
2,728
|
|
$
|
463
|
|
70
|
With 5% rollup [2]
|
1,553
|
|
211
|
|
59
|
|
70
|
|||
With Earnings Protection Benefit Rider (“EPB”) [3]
|
4,698
|
|
634
|
|
87
|
|
68
|
|||
With 5% rollup & EPB
|
573
|
|
118
|
|
26
|
|
71
|
|||
Total MAV
|
25,568
|
|
3,691
|
|
635
|
|
|
|||
Asset Protection Benefit (“APB”) [4]
|
17,205
|
|
215
|
|
147
|
|
68
|
|||
Lifetime Income Benefit (“LIB”) — Death Benefit [5]
|
704
|
|
7
|
|
7
|
|
67
|
|||
Reset [6] (5-7 years)
|
3,194
|
|
53
|
|
52
|
|
69
|
|||
Return of Premium (“ROP”) [7]/Other
|
11,679
|
|
58
|
|
50
|
|
68
|
|||
Subtotal GMDB
|
58,350
|
|
4,024
|
|
891
|
|
68
|
|||
Less: General Account Value with GMDB
|
4,159
|
|
|
|
|
|||||
Subtotal Separate Account Liabilities with GMDB
|
54,191
|
|
|
|
|
|||||
Separate Account Liabilities without GMDB
|
87,332
|
|
|
|
|
|||||
Total Separate Account Liabilities
|
$
|
141,523
|
|
|
|
|
[1]
|
MAV GMDB is the greatest of current AV, net premiums paid and the highest AV on any anniversary before age
80 years
(adjusted for withdrawals).
|
[2]
|
Rollup GMDB is the greatest of the MAV, current AV, net premium paid and premiums (adjusted for withdrawals) accumulated at generally
5%
simple interest up to the earlier of age
80 years
or
100%
of adjusted premiums.
|
[3]
|
EPB GMDB is the greatest of the MAV, current AV, or contract value plus a percentage of the contract’s growth. The contract’s growth is AV less premiums net of withdrawals, subject to a cap of
200%
of premiums net of withdrawals.
|
[4]
|
APB GMDB is the greater of current AV or MAV, not to exceed current AV plus
25%
times the greater of net premiums and MAV (each adjusted for premiums in the past
12 months
).
|
[5]
|
LIB GMDB is the greatest of current AV, net premiums paid, or for certain contracts a benefit amount that ratchets over time, generally based on market performance.
|
[6]
|
Reset GMDB is the greatest of current AV, net premiums paid and the most recent
five
to
seven
year anniversary AV before age
80 years
(adjusted for withdrawals).
|
[7]
|
ROP GMDB is the greater of current AV or net premiums paid.
|
[8]
|
AV includes the contract holder’s investment in the separate account and the general account.
|
[9]
|
NAR is defined as the guaranteed benefit in excess of the current AV. RNAR represents NAR reduced for reinsurance. NAR and RNAR are highly sensitive to equity markets movements and increase when equity markets decline.
|
Asset type
|
As of June 30, 2014
|
As of December 31, 2013
|
||||
Equity securities (including mutual funds)
|
$
|
49,929
|
|
$
|
52,858
|
|
Cash and cash equivalents
|
4,262
|
|
4,605
|
|
||
Total
|
$
|
54,191
|
|
$
|
57,463
|
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||
|
Three Months Ended June 30,
|
|
Three Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Service cost
|
$
|
1
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
Interest cost
|
63
|
|
59
|
|
|
3
|
|
2
|
|
||||
Expected return on plan assets
|
(82
|
)
|
(78
|
)
|
|
(4
|
)
|
(4
|
)
|
||||
Amortization of prior service credit
|
—
|
|
—
|
|
|
(1
|
)
|
(1
|
)
|
||||
Amortization of actuarial loss
|
11
|
|
15
|
|
|
1
|
|
1
|
|
||||
Net periodic benefit
|
$
|
(7
|
)
|
$
|
(4
|
)
|
|
$
|
(1
|
)
|
$
|
(2
|
)
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||
|
Six Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Service cost
|
$
|
1
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
Interest cost
|
127
|
|
119
|
|
|
6
|
|
5
|
|
||||
Expected return on plan assets
|
(163
|
)
|
(157
|
)
|
|
(8
|
)
|
(7
|
)
|
||||
Amortization of prior service credit
|
—
|
|
—
|
|
|
(3
|
)
|
(3
|
)
|
||||
Amortization of actuarial loss
|
22
|
|
29
|
|
|
2
|
|
1
|
|
||||
Net periodic benefit
|
$
|
(13
|
)
|
$
|
(9
|
)
|
|
$
|
(3
|
)
|
$
|
(4
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Stock-based compensation plans expense
|
$
|
34
|
|
$
|
18
|
|
|
$
|
53
|
|
$
|
32
|
|
Income tax benefit
|
(12
|
)
|
(6
|
)
|
|
(19
|
)
|
(11
|
)
|
||||
Total stock-based compensation plans expense, after-tax
|
$
|
22
|
|
$
|
12
|
|
|
$
|
34
|
|
$
|
21
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Revenues
|
|
|
|
|
|
||||||||
Earned premiums
|
$
|
—
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
$
|
—
|
|
Fee income
|
114
|
|
$
|
165
|
|
|
239
|
|
343
|
|
|||
Net investment income:
|
|
|
|
|
|
||||||||
Securities available-for-sale and other
|
6
|
|
25
|
|
|
18
|
|
56
|
|
||||
Equity securities, trading
|
370
|
|
1,188
|
|
|
134
|
|
3,888
|
|
||||
Total net investment income
|
376
|
|
1,213
|
|
|
152
|
|
3,944
|
|
||||
Net realized capital losses
|
(106
|
)
|
(700
|
)
|
|
(157
|
)
|
(749
|
)
|
||||
Total revenues
|
384
|
|
679
|
|
|
233
|
|
3,538
|
|
||||
Benefits, losses and expenses
|
|
|
|
|
|
||||||||
Benefits losses and loss adjustment expenses
|
(21
|
)
|
(36
|
)
|
|
7
|
|
(30
|
)
|
||||
Benefits, losses and loss adjustment expenses - returns credited on international variable annuities
|
370
|
|
1,188
|
|
|
134
|
|
3,888
|
|
||||
Amortization of DAC
|
—
|
|
—
|
|
|
—
|
|
907
|
|
||||
Insurance operating costs and other expenses
|
12
|
|
20
|
|
|
23
|
|
22
|
|
||||
Total benefits, losses and expenses
|
361
|
|
1,172
|
|
|
164
|
|
4,787
|
|
||||
Income (loss) before income taxes
|
23
|
|
(493
|
)
|
|
69
|
|
(1,249
|
)
|
||||
Income tax benefit
|
(19
|
)
|
(172
|
)
|
|
(2
|
)
|
(444
|
)
|
||||
Income (loss) from operations of discontinued operations, net of tax
|
42
|
|
(321
|
)
|
|
71
|
|
(805
|
)
|
||||
Net realized loss on disposal, net of tax [1]
|
(659
|
)
|
(102
|
)
|
|
(659
|
)
|
(102
|
)
|
||||
Loss from discontinued operations, net of tax
|
$
|
(617
|
)
|
$
|
(423
|
)
|
|
$
|
(588
|
)
|
$
|
(907
|
)
|
|
As of
|
||||||
|
June 30, 2014
|
|
December 31, 2013
|
||||
Revolving Credit Facility
|
$
|
—
|
|
|
$
|
238
|
|
Senior Notes and Debentures
|
|
|
|
||||
4.75% Notes, due 2014
|
—
|
|
|
200
|
|
||
4.0% Notes, due 2015
|
289
|
|
|
289
|
|
||
7.3% Notes, due 2015
|
167
|
|
|
167
|
|
||
5.5% Notes, due 2016
|
275
|
|
|
275
|
|
||
5.375% Notes, due 2017
|
415
|
|
|
415
|
|
||
4.0% Notes, due 2017
|
295
|
|
|
295
|
|
||
6.3% Notes, due 2018
|
320
|
|
|
320
|
|
||
6.0% Notes, due 2019
|
413
|
|
|
413
|
|
||
5.5% Notes, due 2020
|
499
|
|
|
499
|
|
||
5.125% Notes, due 2022
|
796
|
|
|
796
|
|
||
7.65% Notes, due 2027
|
80
|
|
|
79
|
|
||
7.375% Notes, due 2031
|
63
|
|
|
63
|
|
||
5.95% Notes, due 2036
|
299
|
|
|
298
|
|
||
6.625% Notes, due 2040
|
295
|
|
|
295
|
|
||
6.1% Notes, due 2041
|
326
|
|
|
326
|
|
||
6.625% Notes, due 2042
|
178
|
|
|
178
|
|
||
4.3% Notes, due 2043
|
298
|
|
|
298
|
|
||
Junior Subordinated Debentures
|
|
|
|
||||
7.875% Notes, due 2042
|
600
|
|
|
600
|
|
||
8.125% Notes, due 2068
|
500
|
|
|
500
|
|
||
Total Notes and Debentures
|
$
|
6,108
|
|
|
$
|
6,306
|
|
Less: Current maturities
|
289
|
|
|
200
|
|
||
Long-term Debt
|
$
|
5,819
|
|
|
$
|
6,106
|
|
Total Debt
|
$
|
6,108
|
|
|
$
|
6,544
|
|
Property & Casualty Commercial
|
$
|
9
|
|
Consumer Markets
|
3
|
|
|
Group Benefits
|
1
|
|
|
Mutual Funds
|
4
|
|
|
Talcott Resolution
|
70
|
|
|
Corporate
|
287
|
|
|
Total restructuring and other costs, pre-tax
|
$
|
374
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Severance benefits and related costs
|
$
|
3
|
|
$
|
7
|
|
|
$
|
6
|
|
$
|
20
|
|
Professional fees
|
—
|
|
5
|
|
|
1
|
|
10
|
|
||||
Asset impairment charges
|
5
|
|
7
|
|
|
21
|
|
7
|
|
||||
Total restructuring and other costs
|
$
|
8
|
|
$
|
19
|
|
|
$
|
28
|
|
$
|
37
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Mutual Funds
|
$
|
—
|
|
$
|
1
|
|
|
$
|
—
|
|
$
|
2
|
|
Talcott Resolution
|
—
|
|
(1
|
)
|
|
—
|
|
—
|
|
||||
Corporate
|
8
|
|
19
|
|
|
28
|
|
35
|
|
||||
Total restructuring and other costs
|
$
|
8
|
|
$
|
19
|
|
|
$
|
28
|
|
$
|
37
|
|
|
Six Months Ended June 30, 2014
|
||||||||||||||
|
Severance Benefits and Related Costs
|
Professional Fees
|
Asset impairment charges
|
Other Contract Termination Charges
|
Total Restructuring and Other Costs
|
||||||||||
Balance, beginning of period
|
$
|
22
|
|
$
|
—
|
|
$
|
—
|
|
$
|
6
|
|
$
|
28
|
|
Accruals/provisions
|
6
|
|
1
|
|
21
|
|
—
|
|
28
|
|
|||||
Payments/write-offs
|
(22
|
)
|
(1
|
)
|
(21
|
)
|
(6
|
)
|
(50
|
)
|
|||||
Balance, end of period
|
$
|
6
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
6
|
|
|
Six Months Ended June 30, 2013
|
||||||||||||||
|
Severance Benefits and Related Costs
|
Professional Fees
|
Asset impairment charges
|
Other Contract Termination Charges
|
Total Restructuring and Other Costs
|
||||||||||
Balance, beginning of period
|
$
|
70
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
70
|
|
Accruals/provisions
|
20
|
|
10
|
|
7
|
|
—
|
|
37
|
|
|||||
Payments/write-offs
|
(37
|
)
|
(6
|
)
|
—
|
|
—
|
|
(43
|
)
|
|||||
Balance, end of period
|
$
|
53
|
|
$
|
4
|
|
$
|
7
|
|
$
|
—
|
|
$
|
64
|
|
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain (Loss) on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
Total AOCI
|
||||||||||||
Beginning balance
|
$
|
1,686
|
|
$
|
(10
|
)
|
$
|
121
|
|
$
|
108
|
|
$
|
(1,246
|
)
|
$
|
659
|
|
OCI before reclassifications
|
582
|
|
4
|
|
35
|
|
17
|
|
13
|
|
651
|
|
||||||
Amounts reclassified from AOCI
|
(13
|
)
|
(1
|
)
|
(15
|
)
|
(112
|
)
|
(7
|
)
|
(148
|
)
|
||||||
Net OCI
|
569
|
|
3
|
|
20
|
|
(95
|
)
|
6
|
|
503
|
|
||||||
Ending balance
|
$
|
2,255
|
|
$
|
(7
|
)
|
$
|
141
|
|
$
|
13
|
|
$
|
(1,240
|
)
|
$
|
1,162
|
|
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain (Loss) on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
Total AOCI
|
||||||||||||
Beginning balance
|
$
|
987
|
|
$
|
(12
|
)
|
$
|
108
|
|
$
|
91
|
|
$
|
(1,253
|
)
|
$
|
(79
|
)
|
OCI before reclassifications
|
1,299
|
|
7
|
|
64
|
|
34
|
|
27
|
|
1,431
|
|
||||||
Amounts reclassified from AOCI
|
(31
|
)
|
(2
|
)
|
(31
|
)
|
(112
|
)
|
(14
|
)
|
(190
|
)
|
||||||
Net OCI
|
1,268
|
|
5
|
|
33
|
|
(78
|
)
|
13
|
|
1,241
|
|
||||||
Ending balance
|
$
|
2,255
|
|
$
|
(7
|
)
|
$
|
141
|
|
$
|
13
|
|
$
|
(1,240
|
)
|
$
|
1,162
|
|
AOCI
|
Amount Reclassified from AOCI
|
Affected Line Item in the Condensed Consolidated Statement of Operations
|
|||||
|
Three months ended June 30, 2014
|
Six months ended June 30, 2014
|
|
||||
Net Unrealized Gain on Securities
|
|
|
|
||||
Available-for-sale securities
|
82
|
|
125
|
|
Net realized capital gains (losses)
|
||
|
82
|
|
125
|
|
Total before tax
|
||
|
29
|
|
44
|
|
Income tax expense
|
||
|
$
|
40
|
|
$
|
50
|
|
Loss from discontinued operations, net of tax
|
|
$
|
13
|
|
$
|
31
|
|
Net income (loss)
|
OTTI Losses in OCI
|
|
|
|
||||
Other than temporary impairments
|
$
|
1
|
|
$
|
3
|
|
Net realized capital gains (losses)
|
|
1
|
|
3
|
|
Total before tax
|
||
|
—
|
|
1
|
|
Income tax expense (benefit)
|
||
|
$
|
1
|
|
$
|
2
|
|
Net income (loss)
|
Net Gains on Cash Flow Hedging Instruments
|
|
|
|
||||
Interest rate swaps
|
$
|
1
|
|
$
|
2
|
|
Net realized capital gains (losses)
|
Interest rate swaps
|
22
|
|
45
|
|
Net investment income
|
||
Foreign currency swaps
|
—
|
|
—
|
|
Net realized capital gains (losses)
|
||
|
23
|
|
47
|
|
Total before tax
|
||
|
8
|
|
16
|
|
Income tax expense
|
||
|
$
|
15
|
|
$
|
31
|
|
Net income (loss)
|
Foreign Currency Translation Adjustments
|
|
|
|
||||
Currency translation adjustments [3]
|
172
|
|
172
|
|
Net realized capital gains (losses)
|
||
|
172
|
|
172
|
|
Total before tax
|
||
|
60
|
|
60
|
|
Income tax expense
|
||
|
$
|
112
|
|
$
|
112
|
|
Net income (loss)
|
Pension and Other Postretirement Plan Adjustments
|
|
|
|
||||
Amortization of prior service costs
|
$
|
(1
|
)
|
$
|
(3
|
)
|
Insurance operating costs and other expenses
|
Amortization of actuarial gains (losses)
|
12
|
|
24
|
|
Insurance operating costs and other expenses
|
||
|
11
|
|
21
|
|
Total before tax
|
||
|
4
|
|
7
|
|
Income tax expense
|
||
|
7
|
|
14
|
|
Net income (loss)
|
||
Total amounts reclassified from AOCI
|
$
|
148
|
|
$
|
190
|
|
Net income (loss)
|
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain (Loss) on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
Total AOCI
|
||||||||||||
Beginning balance
|
$
|
2,529
|
|
$
|
(32
|
)
|
$
|
320
|
|
$
|
186
|
|
$
|
(1,354
|
)
|
$
|
1,649
|
|
OCI before reclassifications
|
(1,314
|
)
|
14
|
|
(110
|
)
|
(94
|
)
|
(1
|
)
|
(1,505
|
)
|
||||||
Amounts reclassified from AOCI
|
(53
|
)
|
(5
|
)
|
(22
|
)
|
—
|
|
10
|
|
(70
|
)
|
||||||
Net OCI
|
(1,367
|
)
|
9
|
|
(132
|
)
|
(94
|
)
|
9
|
|
(1,575
|
)
|
||||||
Ending balance
|
$
|
1,162
|
|
$
|
(23
|
)
|
$
|
188
|
|
$
|
92
|
|
$
|
(1,345
|
)
|
$
|
74
|
|
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain (Loss) on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
Total AOCI
|
||||||||||||
Beginning balance
|
$
|
3,418
|
|
$
|
(47
|
)
|
$
|
428
|
|
$
|
406
|
|
$
|
(1,362
|
)
|
$
|
2,843
|
|
OCI before reclassifications
|
(1,154
|
)
|
38
|
|
(157
|
)
|
(314
|
)
|
(1
|
)
|
(1,588
|
)
|
||||||
Amounts reclassified from AOCI
|
(1,102
|
)
|
(14
|
)
|
(83
|
)
|
—
|
|
18
|
|
(1,181
|
)
|
||||||
Net OCI
|
(2,256
|
)
|
24
|
|
(240
|
)
|
(314
|
)
|
17
|
|
(2,769
|
)
|
||||||
Ending balance
|
$
|
1,162
|
|
$
|
(23
|
)
|
$
|
188
|
|
$
|
92
|
|
$
|
(1,345
|
)
|
$
|
74
|
|
AOCI
|
Amount Reclassified from AOCI
|
Affected Line Item in the Condensed Consolidated Statement of Operations
|
|||||
|
Three months ended June 30, 2013
|
Six months ended June 30, 2013
|
|
||||
Net Unrealized Gain on Securities
|
|
|
|
||||
Available-for-sale securities [1]
|
78
|
|
1,694
|
|
Net realized capital gains (losses)
|
||
|
78
|
|
1,694
|
|
Total before tax
|
||
|
27
|
|
593
|
|
Income tax expense
|
||
|
(2
|
)
|
(1
|
)
|
Loss from discontinued operations, net of tax
|
||
|
$
|
53
|
|
$
|
1,102
|
|
Net income (loss)
|
OTTI Losses in OCI
|
|
|
|
||||
Other than temporary impairments
|
$
|
8
|
|
$
|
21
|
|
Net realized capital gains (losses)
|
|
8
|
|
21
|
|
Total before tax
|
||
|
3
|
|
7
|
|
Income tax expense (benefit)
|
||
|
$
|
5
|
|
$
|
14
|
|
Net income (loss)
|
Net Gains on Cash Flow Hedging Instruments
|
|
|
|
||||
Interest rate swaps [2]
|
$
|
7
|
|
$
|
80
|
|
Net realized capital gains (losses)
|
Interest rate swaps
|
25
|
|
49
|
|
Net investment income
|
||
Foreign currency swaps
|
2
|
|
(1
|
)
|
Net realized capital gains (losses)
|
||
|
34
|
|
128
|
|
Total before tax
|
||
|
12
|
|
45
|
|
Income tax expense
|
||
|
$
|
22
|
|
$
|
83
|
|
Net income (loss)
|
Pension and Other Postretirement Plan Adjustments
|
|
|
|
||||
Amortization of prior service costs
|
$
|
1
|
|
$
|
3
|
|
Insurance operating costs and other expenses
|
Amortization of actuarial gains (losses)
|
(16
|
)
|
(30
|
)
|
Insurance operating costs and other expenses
|
||
|
(15
|
)
|
(27
|
)
|
Total before tax
|
||
|
(5
|
)
|
(9
|
)
|
Income tax expense
|
||
|
(10
|
)
|
(18
|
)
|
Net income (loss)
|
||
Total amounts reclassified from AOCI
|
$
|
70
|
|
$
|
1,181
|
|
Net income (loss)
|
[1]
|
The
six months ended
June 30, 2013
includes
$1.5 billion
of net unrealized gains on securities relating to the sales of the Retirement Plans and Individual Life businesses.
|
[2]
|
The
six months ended
June 30, 2013
includes
$71
of net gains on cash flow hedging instruments relating to the sales of the Retirement Plans and Individual Life businesses.
|
[3]
|
The
six months ended
June 30, 2014
amount relates to the sale of the HLIKK variable and fixed annuity business.
|
Description
|
Page
|
The Hartford's Operations Overview
|
|
Consolidated Results of Operations
|
|
Investment Results
|
|
Critical Accounting Estimates
|
|
•
|
Net loss of
$467
, or
$1.00
per diluted share, compared with
$190
net loss, or
$0.39
per diluted share, in the comparable prior year period.
|
•
|
Completed the sale of the Japan annuity business on June 30, 2014 for cash proceeds of
$963
resulting in an after-tax loss on disposition of
$659
which is included in loss on discontinued operations of
$617
.
|
•
|
Share repurchases totaled $352, or approximately 10.2 million common shares, in the quarter.
|
•
|
Book value per diluted common share excluding AOCI decreased to
$39.21
, from
$40.17
as of the prior quarter end largely as a result of the loss on disposition.
|
•
|
Net investment income decreased
9%
to
$768
compared with the comparable prior year period.
|
•
|
A decline in interest rates and credit spreads tightening in the quarter reduced the annualized investment yield after-tax to
3%
while increasing after-tax net unrealized gains in the investment portfolio
by
$569
in the quarter.
|
•
|
Property and Casualty written premiums increased
3%
over the comparable prior year period, comprised of
2%
growth in P&C Commercial and
4%
in Consumer Markets.
|
•
|
Property and Casualty combined ratio, before catastrophes and prior year development, improved
0.9
points to
90.9
from
91.8
in the comparable prior year period.
|
•
|
Catastrophe losses of
$196
, before tax, increased from catastrophe losses of
$186
, before tax, in the comparable prior year period.
|
•
|
Unfavorable prior year development totaled
$249
, before tax, including $239 for asbestos and environmental reserve strengthening in the quarter.
|
•
|
Group Benefits after-tax margin, excluding buyouts and realized capital gains (losses), increased to
6%
in the quarter.
|
•
|
Talcott Resolution after-tax income from continuing operations was
$113
in the quarter.
|
Operating Summary
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||||||
Earned premiums
|
$
|
3,319
|
|
$
|
3,294
|
|
1
|
%
|
|
$
|
6,621
|
|
$
|
6,547
|
|
1
|
%
|
Fee income
|
502
|
|
513
|
|
(2
|
%)
|
|
998
|
|
1,023
|
|
(2
|
%)
|
||||
Net investment income
|
768
|
|
841
|
|
(9
|
%)
|
|
1,592
|
|
1,666
|
|
(4
|
%)
|
||||
Net realized capital gains (losses) [1]
|
(4
|
)
|
21
|
|
(119
|
%)
|
|
(39
|
)
|
1,665
|
|
(102
|
%)
|
||||
Other revenues
|
31
|
|
65
|
|
(52
|
%)
|
|
56
|
|
133
|
|
(58
|
%)
|
||||
Total revenues
|
4,616
|
|
4,734
|
|
(2
|
%)
|
|
9,228
|
|
11,034
|
|
(16
|
%)
|
||||
Benefits, losses and loss adjustment expenses
|
3,023
|
|
2,922
|
|
3
|
%
|
|
5,599
|
|
5,581
|
|
—
|
%
|
||||
Amortization of deferred policy acquisition costs and present value of future profits (“DAC”)
|
372
|
|
391
|
|
(5
|
%)
|
|
768
|
|
820
|
|
(6
|
%)
|
||||
Insurance operating costs and other expenses
|
977
|
|
1,084
|
|
(10
|
%)
|
|
1,913
|
|
2,096
|
|
(9
|
%)
|
||||
Loss on extinguishment of debt
|
—
|
|
—
|
|
NM
|
|
|
—
|
|
213
|
|
(100
|
%)
|
||||
Reinsurance loss on dispositions, including reduction in goodwill of $156 for the six months ended June 30, 2013
|
—
|
|
—
|
|
NM
|
|
|
—
|
|
1,574
|
|
(100
|
%)
|
||||
Interest expense
|
94
|
|
100
|
|
(6
|
%)
|
|
189
|
|
207
|
|
(9
|
%)
|
||||
Total benefits, losses and expenses
|
4,466
|
|
4,497
|
|
(1
|
%)
|
|
8,469
|
|
10,491
|
|
(19
|
%)
|
||||
Income from continuing operations before income taxes
|
150
|
|
237
|
|
(37
|
%)
|
|
759
|
|
543
|
|
40
|
%
|
||||
Income tax expense
|
—
|
|
4
|
|
(100
|
%)
|
|
143
|
|
67
|
|
113
|
%
|
||||
Income from continuing operations, net of tax
|
150
|
|
233
|
|
(36
|
%)
|
|
616
|
|
476
|
|
29
|
%
|
||||
Loss from discontinued operations, net of tax
|
(617
|
)
|
(423
|
)
|
46
|
%
|
|
(588
|
)
|
(907
|
)
|
(35
|
%)
|
||||
Net income (loss)
|
$
|
(467
|
)
|
$
|
(190
|
)
|
146
|
%
|
|
$
|
28
|
|
$
|
(431
|
)
|
(106
|
%)
|
[1]
|
Includes net realized gains (losses) on business dispositions of
$1,575
for the
six months ended
June 30, 2013
.
|
•
|
An increase in the loss from discontinued operations to
$617
, net of tax, compared to
$423
, net of tax, for the prior year period, primarily due to the realized capital loss of
$659
on the sale of the Japan annuity business in June 2014. The loss from discontinued operations in 2013 includes the realized capital loss of
$102
on the sale of HLIL as well as losses from the operations of the Japan and U.K. annuity businesses. For further discussion of the sale of these businesses, see Note
2
-
Business Dispositions
and Note
14
-
Discontinued Operations
of Condensed Consolidated Financial Statements.
|
•
|
Net investment income of
$768
, before tax, for the
three months ended
June 30, 2014
, decreased compared to the
$841
, before tax, for the prior year period. The decrease in investment income is primarily due to lower income from fixed maturities and limited partnerships. For further discussion of investment results, see MD&A - Investment Results, Net Investment Income (Loss).
|
•
|
Prior accident year reserve strengthening of
$249
, before tax, for the
three months ended
June 30, 2014
, compared to reserve strengthening of
$146
, before tax, for the prior year period. Reserve strengthenings in
2014
were primarily related to an increase in reserves for asbestos and environmental claims, principally due to a higher than previously estimated number of mesothelioma claim filings and an increase in costs associated with asbestos litigation. Reserve strengthenings in
2013
were primarily related to an increase in net asbestos reserves due to higher claim frequency and severity. For additional information, see MD&A - Critical Accounting Estimates, Reserve Roll Forwards and Development.
|
•
|
An improvement in current accident year underwriting results before catastrophes in Property & Casualty Commercial Markets and an increase in after-tax margins in Group Benefits partially offset the net loss. Commercial Markets' current accident year underwriting results before catastrophes improved $32 before tax due primarily to improved results in Small Commercial and Specialty Commercial. For a discussion of the Company's operating results by segment, see the segment sections of MD&A.
|
•
|
Differences between the Company's effective income tax rate and the U.S. statutory rate of 35% are due primarily to tax-exempt interest earned on invested assets and the dividends received deduction ("DRD"). For further discussion of income taxes, see the Income Taxes section within Note
1
-
Basis of Presentation and Significant Accounting Policies
of Notes to Condensed Consolidated Financial Statements.
|
•
|
A decrease in the loss from discontinued operations to
$588
, net of tax, compared to
$907
, net of tax, for the prior year period, primarily due to the write-off of Japan DAC in 2013 and lower operating losses on Japan operations due to a decrease in hedging losses. The loss from discontinued operations in 2013 included the realized capital loss on the sale of HLIL.
|
•
|
A
$1,575
before tax realized capital gain in 2013 on the disposition of the Individual Life business and a
$1,574
before tax reinsurance loss in 2013 consisting of a reduction in goodwill and a loss accrual for premium deficiency related to the disposition of the Individual Life business and losses from the operations of the Retirement Plans and Individual Life businesses sold in the first quarter of 2013. For further discussion of the sale of these businesses, see Note
2
-
Business Dispositions
of Condensed Consolidated Financial Statements.
|
•
|
A loss on extinguishment of debt of
$213
, before tax, for the
six months ended
June 30, 2013
related to the repurchase of approximately $800 of senior notes at a premium to the face amount of the then outstanding debt. The resulting loss on extinguishment of debt consists of the repurchase premium, the write-off of the unamortized discount and debt issuance and other costs related to the repurchase transaction.
|
•
|
A $128 before tax improvement in current accident year underwriting results before catastrophes in Property & Casualty. Contributing to the improvement in underwriting results is an increase in earned premiums of 2% or $96, before tax, for the
six months ended
June 30, 2014
, compared to the prior year period, reflecting written premium growth of
2%
in P&C Commercial and
5%
in Consumer Markets. For a discussion of the Company's operating results by segment, see the segment sections of MD&A.
|
•
|
Current accident year catastrophe losses of
$282
, before tax, for the
six months ended
June 30, 2014
, compared to
$218
, before tax, for the prior year period. The increase in current accident year catastrophe losses was primarily due to an increase in winter storm frequency and severity across various U.S. geographic regions and an increase in the severity of thunderstorm and hail events, partially offset by a decrease in the number and severity of tornadoes.
|
•
|
Prior accident year reserve strengthening of
$209
, before tax, for the
six months ended
June 30, 2014
, compared to reserve strengthening of
$160
, before tax, for the prior year period. Reserve strengthenings in
2014
were primarily related to an increase in reserves for asbestos and environmental claims, principally due to a higher than previously estimated number of mesothelioma claim filings and an increase in costs associated with asbestos litigation. Reserve strengthenings in
2013
were primarily related increased net asbestos reserves due to higher claim frequency and severity.
|
•
|
Differences between the Company's effective income tax rate and the U.S. statutory rate of 35% are due primarily to tax-exempt interest earned on invested assets and the dividends received deduction ("DRD"). Income tax expense for the
six months ended
June 30, 2014
increased by $76 from an income tax expense of
$67
in the prior year period, primarily due to the $216, before tax, increase in income from continuing operations. The income tax expense in
2014
and
2013
includes separate account DRD benefits of
$53
and
$65
, respectively.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||
Net income (loss) by segment
|
2014
|
2013
|
Increase
(Decrease) From 2013 to 2014 |
|
2014
|
2013
|
Increase
(Decrease) From 2012 to 2013 |
||||||||||||
Property & Casualty Commercial
|
$
|
199
|
|
$
|
192
|
|
$
|
7
|
|
|
$
|
441
|
|
$
|
445
|
|
$
|
(4
|
)
|
Consumer Markets
|
(30
|
)
|
15
|
|
(45
|
)
|
|
69
|
|
92
|
|
(23
|
)
|
||||||
Property & Casualty Other Operations
|
(144
|
)
|
(71
|
)
|
(73
|
)
|
|
(122
|
)
|
(50
|
)
|
(72
|
)
|
||||||
Group Benefits
|
55
|
|
61
|
|
(6
|
)
|
|
106
|
|
103
|
|
3
|
|
||||||
Mutual Funds
|
21
|
|
20
|
|
1
|
|
|
42
|
|
38
|
|
4
|
|
||||||
Talcott Resolution
|
(504
|
)
|
(332
|
)
|
(172
|
)
|
|
(359
|
)
|
(626
|
)
|
267
|
|
||||||
Corporate
|
(64
|
)
|
(75
|
)
|
11
|
|
|
(149
|
)
|
(433
|
)
|
284
|
|
||||||
Net income (loss)
|
$
|
(467
|
)
|
$
|
(190
|
)
|
$
|
(277
|
)
|
|
$
|
28
|
|
$
|
(431
|
)
|
$
|
459
|
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||
|
Amount
|
Percent
|
|
Amount
|
Percent
|
||||||
Fixed maturities, available-for-sale ("AFS"), at fair value
|
$
|
60,246
|
|
79.1
|
%
|
|
$
|
62,357
|
|
79.2
|
%
|
Fixed maturities, at fair value using the fair value option ("FVO")
|
410
|
|
0.5
|
%
|
|
844
|
|
1.1
|
%
|
||
Equity securities, AFS, at fair value
|
823
|
|
1.1
|
%
|
|
868
|
|
1.1
|
%
|
||
Mortgage loans
|
5,586
|
|
7.3
|
%
|
|
5,598
|
|
7.1
|
%
|
||
Policy loans, at outstanding balance
|
1,420
|
|
1.9
|
%
|
|
1,420
|
|
1.8
|
%
|
||
Limited partnerships and other alternative investments
|
2,902
|
|
3.8
|
%
|
|
3,040
|
|
3.9
|
%
|
||
Other investments [1]
|
329
|
|
0.4
|
%
|
|
521
|
|
0.7
|
%
|
||
Short-term investments
|
4,511
|
|
5.9
|
%
|
|
4,008
|
|
5.1
|
%
|
||
Total investments excluding equity securities, trading
|
76,227
|
|
100
|
%
|
|
78,656
|
|
100
|
%
|
||
Equity securities, trading, at fair value [2]
|
12
|
|
|
|
19,745
|
|
|
||||
Total investments
|
$
|
76,239
|
|
|
|
$
|
98,401
|
|
|
[1]
|
Primarily relates to derivative instruments.
|
[2]
|
As of
December 31, 2013
, approximately $
19.7 billion
of equity securities, trading, supported Japan variable annuities. Those equity securities, trading, were invested in mutual funds, which, in turn, invested in the following asset classes as of
December 31, 2013
, Japan equity
22%
, Japan fixed income (primarily government securities)
15%
, global equity
22%
, global government bonds
40%
, and cash and other
1%
.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||||||||||
(Before-tax)
|
Amount
|
Yield [1]
|
Amount
|
Yield [1]
|
|
Amount
|
Yield [1]
|
Amount
|
Yield [1]
|
||||||||||||
Fixed maturities [2]
|
$
|
601
|
|
4.2
|
%
|
$
|
645
|
|
4.3
|
%
|
|
$
|
1,217
|
|
4.2
|
%
|
$
|
1,296
|
|
4.3
|
%
|
Equity securities, AFS
|
7
|
|
3.5
|
%
|
8
|
|
4.2
|
%
|
|
14
|
|
3.4
|
%
|
14
|
|
3.6
|
%
|
||||
Mortgage loans
|
66
|
|
4.7
|
%
|
62
|
|
4.8
|
%
|
|
132
|
|
4.7
|
%
|
126
|
|
4.9
|
%
|
||||
Policy loans
|
19
|
|
5.3
|
%
|
22
|
|
6.2
|
%
|
|
39
|
|
5.5
|
%
|
42
|
|
6.0
|
%
|
||||
Limited partnerships and other alternative investments
|
53
|
|
7.4
|
%
|
95
|
|
12.6
|
%
|
|
150
|
|
10.3
|
%
|
161
|
|
10.7
|
%
|
||||
Other [3]
|
48
|
|
|
37
|
|
|
|
91
|
|
|
83
|
|
|
||||||||
Investment expense
|
(26
|
)
|
|
(28
|
)
|
|
|
(51
|
)
|
|
(56
|
)
|
|
||||||||
Total securities AFS and other
|
768
|
|
4.3
|
%
|
841
|
|
4.6
|
%
|
|
1,592
|
|
4.4
|
%
|
1,666
|
|
4.5
|
%
|
||||
Total securities, AFS and other excluding limited partnerships and other alternative investments
|
$
|
715
|
|
4.1
|
%
|
$
|
746
|
|
4.2
|
%
|
|
$
|
1,442
|
|
4.2
|
%
|
$
|
1,505
|
|
4.3
|
%
|
[1]
|
Yields calculated using annualized net investment income divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding repurchase agreement collateral and derivatives book value. Yield calculations for each period exclude assets associated with the dispositions of HLIKK, the Retirement Plans and Individual Life businesses, and the Hartford Life International Limited business, as applicable.
|
[2]
|
Includes net investment income on short-term investments.
|
[3]
|
Primarily includes income from derivatives that qualify for hedge accounting and hedge fixed maturities.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
(Before-tax)
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Gross gains on sales
|
$
|
122
|
|
$
|
207
|
|
|
$
|
305
|
|
$
|
1,916
|
|
Gross losses on sales
|
(33
|
)
|
(117
|
)
|
|
(162
|
)
|
(189
|
)
|
||||
Net OTTI losses recognized in earnings
|
(7
|
)
|
(12
|
)
|
|
(29
|
)
|
(33
|
)
|
||||
Valuation allowances on mortgage loans
|
(3
|
)
|
—
|
|
|
(3
|
)
|
—
|
|
||||
Periodic net coupon settlements on credit derivatives
|
2
|
|
—
|
|
|
1
|
|
(4
|
)
|
||||
Results of variable annuity hedge program
|
|
|
|
|
|
||||||||
GMWB derivatives, net
|
(6
|
)
|
(31
|
)
|
|
9
|
|
16
|
|
||||
Macro hedge program
|
(15
|
)
|
(47
|
)
|
|
(25
|
)
|
(132
|
)
|
||||
Total results of variable annuity hedge program
|
(21
|
)
|
(78
|
)
|
|
(16
|
)
|
(116
|
)
|
||||
Other, net [1]
|
(64
|
)
|
21
|
|
|
(135
|
)
|
91
|
|
||||
Net realized capital gains (losses)
|
$
|
(4
|
)
|
$
|
21
|
|
|
$
|
(39
|
)
|
$
|
1,665
|
|
[1]
|
Primarily consists of changes in value of non-qualifying derivatives, including interest rate derivatives used to manage duration, and the Japan 3Win fixed payout annuity hedge.
|
•
|
For the three and six months ended
June 30, 2014
the loss on the macro hedge program was primarily due to losses of
$10
and
$15
, respectively, driven by an improvement in domestic equity markets, and losses of
$7
and
$16
, respectively, driven by decreased equity volatility.
|
•
|
For the three months ended
June 30, 2013
the net loss related to the combined GMWB derivatives, net, which includes the GMWB product, reinsurance, and hedging derivatives, was primarily driven by losses of
$39
resulting from an increase in interest rates, and losses of
$38
resulting from an increase in fees for selected GMWB riders, partially offset by gains of
$57
driven by favorable policyholder behavior. For the six months ended
June 30, 2013
the net gain related to the combined GMWB derivatives, net, which includes the GMWB product, reinsurance, and hedging derivatives, was primarily driven by gains of
$103
resulting from favorable policyholder behavior, partially offset by losses of
$42
from an increase in interest rates, and losses of
$39
resulting from an increase in fees for selected GMWB riders.
|
•
|
For the three and six months ended
June 30, 2013
the loss on the macro hedge program was primarily due to losses of
$23
and
$78
, respectively, related to an improvement in domestic equity markets, and losses of
$33
and
$42
, respectively, due to an increase in interest rates.
|
•
|
Other, net gain for the six months ended
June 30, 2013
was primarily due to gains of
$71
on interest derivatives primarily associated with fixed rate bonds sold as part of the Individual Life and Retirement Plans business dispositions. For further information on the business dispositions, see Note 2 of Notes to Condensed Consolidated Financial Statements. Additional gains of
$54
were due to modified coinsurance reinsurance contracts, which are accounted for as embedded derivatives and transfer to the reinsurer the investment experience related to the assets supporting the reinsured policies, driven by a decline in interest rates. These gains were partially offset by losses of
$27
related to equity futures and options used to hedge equity market risk in the investment portfolio, driven by an increase in equity markets during the hedged period.
|
•
|
property and casualty insurance product reserves, net of reinsurance;
|
•
|
estimated gross profits used in the valuation and amortization of assets and liabilities associated with variable annuity and other universal life-type contracts;
|
•
|
evaluation of other-than-temporary impairments on available-for-sale securities and valuation allowances on mortgage loans;
|
•
|
living benefits required to be fair valued (in other policyholder funds and benefits payable);
|
•
|
goodwill impairment;
|
•
|
valuation of investments and derivative instruments;
|
•
|
valuation allowance on deferred tax assets; and
|
•
|
contingencies relating to corporate litigation and regulatory matters.
|
Six Months Ended June 30, 2014
|
||||||||||||
|
Property &
Casualty
Commercial
|
Consumer
Markets
|
Property &
Casualty
Other
Operations
|
Total
Property and
Casualty
Insurance
|
||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
16,293
|
|
$
|
1,864
|
|
$
|
3,547
|
|
$
|
21,704
|
|
Reinsurance and other recoverables
|
2,442
|
|
13
|
|
573
|
|
3,028
|
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
13,851
|
|
1,851
|
|
2,974
|
|
18,676
|
|
||||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||||||||
Current accident year before catastrophes
|
1,868
|
|
1,219
|
|
—
|
|
3,087
|
|
||||
Current accident year catastrophes [3]
|
95
|
|
187
|
|
—
|
|
282
|
|
||||
Prior accident years
|
5
|
|
(37
|
)
|
241
|
|
209
|
|
||||
Total provision for unpaid losses and loss adjustment expenses
|
1,968
|
|
1,369
|
|
241
|
|
3,578
|
|
||||
Less: Payments
|
1,839
|
|
1,320
|
|
185
|
|
3,344
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
13,980
|
|
1,900
|
|
3,030
|
|
18,910
|
|
||||
Reinsurance and other recoverables
|
2,512
|
|
13
|
|
606
|
|
3,131
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
16,492
|
|
$
|
1,913
|
|
$
|
3,636
|
|
$
|
22,041
|
|
Earned premiums
|
$
|
3,100
|
|
$
|
1,874
|
|
|
|
||||
Loss and loss expense paid ratio [1]
|
59.3
|
|
70.4
|
|
|
|
||||||
Loss and loss expense incurred ratio
|
63.5
|
|
73.1
|
|
|
|
||||||
Prior accident years development (pts) [2]
|
0.2
|
|
(2.0
|
)
|
|
|
[1]
|
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
[2]
|
“Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums.
|
[3]
|
Contributing to the current accident year catastrophes losses were the following events:
|
Three Months Ended June 30, 2014
|
||||||||||||
|
Property &
Casualty
Commercial
|
Consumer
Markets
|
Property &
Casualty
Other
Operations
|
Total Property and
Casualty Insurance
|
||||||||
Auto liability
|
$
|
9
|
|
$
|
—
|
|
$
|
—
|
|
$
|
9
|
|
Homeowners
|
—
|
|
3
|
|
—
|
|
3
|
|
||||
Professional and general liability
|
(11
|
)
|
—
|
|
—
|
|
(11
|
)
|
||||
Net asbestos reserves
|
—
|
|
—
|
|
212
|
|
212
|
|
||||
Net environmental reserves
|
—
|
|
—
|
|
27
|
|
27
|
|
||||
Workers’ compensation
|
5
|
|
—
|
|
—
|
|
5
|
|
||||
Change in workers’ compensation discount, including accretion
|
7
|
|
—
|
|
—
|
|
7
|
|
||||
Catastrophes
|
(6
|
)
|
(5
|
)
|
—
|
|
(11
|
)
|
||||
Other reserve re-estimates, net
|
8
|
|
(1
|
)
|
1
|
|
8
|
|
||||
Total prior accident years development
|
$
|
12
|
|
$
|
(3
|
)
|
$
|
240
|
|
$
|
249
|
|
Six Months Ended June 30, 2014
|
||||||||||||
|
Property &
Casualty
Commercial
|
Consumer
Markets
|
Property &
Casualty
Other
Operations
|
Total Property and
Casualty Insurance
|
||||||||
Auto liability
|
$
|
14
|
|
$
|
—
|
|
$
|
—
|
|
$
|
14
|
|
Homeowners
|
—
|
|
(10
|
)
|
—
|
|
(10
|
)
|
||||
Professional and general liability
|
(19
|
)
|
—
|
|
—
|
|
(19
|
)
|
||||
Net asbestos reserves
|
—
|
|
—
|
|
212
|
|
212
|
|
||||
Net environmental reserves
|
—
|
|
—
|
|
27
|
|
27
|
|
||||
Workers’ compensation
|
5
|
|
—
|
|
—
|
|
5
|
|
||||
Change in workers’ compensation discount, including accretion
|
15
|
|
—
|
|
—
|
|
15
|
|
||||
Catastrophes
|
(18
|
)
|
(26
|
)
|
—
|
|
(44
|
)
|
||||
Other reserve re-estimates, net
|
8
|
|
(1
|
)
|
2
|
|
9
|
|
||||
Total prior accident years development
|
$
|
5
|
|
$
|
(37
|
)
|
$
|
241
|
|
$
|
209
|
|
•
|
Strengthened reserves in commercial auto liability due to an increased frequency of severe claims spread across several accident years.
|
•
|
Homeowners reserves emerged favorably in the six-month period for accident year 2013, primarily related to favorable development on fire and water-related claims.
|
•
|
Released reserves in professional liability for accident years 2013, 2012 and 2010 due to lower frequency of reported claims.
|
•
|
Released reserves primarily for accident year 2013 catastrophes as fourth quarter catastrophes have developed favorably.
|
•
|
Refer to the Property & Casualty Other Operations Claims section for discussion on the increase to net asbestos and net environmental reserves.
|
Six Months Ended June 30, 2013
|
||||||||||||
|
Property &
Casualty
Commercial
|
Consumer
Markets
|
Property &
Casualty
Other
Operations
|
Total
Property and
Casualty
Insurance
|
||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
16,020
|
|
$
|
1,926
|
|
$
|
3,770
|
|
$
|
21,716
|
|
Reinsurance and other recoverables
|
2,365
|
|
16
|
|
646
|
|
3,027
|
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
13,655
|
|
1,910
|
|
3,124
|
|
18,689
|
|
||||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||||||||
Current accident year before catastrophes
|
1,934
|
|
1,153
|
|
—
|
|
3,087
|
|
||||
Current accident year catastrophes [3]
|
50
|
|
168
|
|
—
|
|
218
|
|
||||
Prior accident years
|
45
|
|
(28
|
)
|
143
|
|
160
|
|
||||
Total provision for unpaid losses and loss adjustment expenses
|
2,029
|
|
1,293
|
|
143
|
|
3,465
|
|
||||
Less: Payments
|
1,975
|
|
1,341
|
|
166
|
|
3,482
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
13,709
|
|
1,862
|
|
3,101
|
|
18,672
|
|
||||
Reinsurance and other recoverables
|
2,422
|
|
13
|
|
607
|
|
3,042
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
16,131
|
|
$
|
1,875
|
|
$
|
3,708
|
|
$
|
21,714
|
|
Earned premiums
|
$
|
3,074
|
|
$
|
1,804
|
|
|
|
||||
Loss and loss expense paid ratio [1]
|
64.2
|
|
74.3
|
|
|
|
||||||
Loss and loss expense incurred ratio
|
66.0
|
|
71.7
|
|
|
|
||||||
Prior accident years development (pts) [2]
|
1.5
|
|
(1.6
|
)
|
|
|
[1]
|
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
[2]
|
“Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums.
|
[3]
|
Contributing to the current accident year catastrophes losses were the following events:
|
Three Months Ended June 30, 2013
|
||||||||||||
|
Property &
Casualty
Commercial
|
Consumer
Markets
|
Property &
Casualty
Other
Operations
|
Total Property and
Casualty Insurance
|
||||||||
Auto liability
|
$
|
40
|
|
$
|
2
|
|
$
|
—
|
|
$
|
42
|
|
Homeowners
|
—
|
|
(2
|
)
|
—
|
|
(2
|
)
|
||||
Professional and general liability
|
(40
|
)
|
—
|
|
—
|
|
(40
|
)
|
||||
Net asbestos reserves
|
—
|
|
—
|
|
130
|
|
130
|
|
||||
Net environmental reserves
|
—
|
|
—
|
|
10
|
|
10
|
|
||||
Workers’ compensation
|
1
|
|
—
|
|
—
|
|
1
|
|
||||
Workers’ compensation - NY 25a Fund for Reopened Cases
|
80
|
|
—
|
|
—
|
|
80
|
|
||||
Change in workers’ compensation discount, including accretion
|
7
|
|
—
|
|
—
|
|
7
|
|
||||
Catastrophes
|
(9
|
)
|
(31
|
)
|
—
|
|
(40
|
)
|
||||
Uncollectible reinsurance
|
(25
|
)
|
—
|
|
—
|
|
(25
|
)
|
||||
Other reserve re-estimates, net
|
(17
|
)
|
(1
|
)
|
1
|
|
(17
|
)
|
||||
Total prior accident years development
|
$
|
37
|
|
$
|
(32
|
)
|
$
|
141
|
|
$
|
146
|
|
Six Months Ended June 30, 2013
|
||||||||||||
|
Property &
Casualty
Commercial
|
Consumer
Markets
|
Property &
Casualty
Other
Operations
|
Total Property and
Casualty Insurance
|
||||||||
Auto liability
|
$
|
55
|
|
$
|
2
|
|
$
|
—
|
|
$
|
57
|
|
Homeowners
|
—
|
|
(10
|
)
|
—
|
|
(10
|
)
|
||||
Professional and general liability
|
(58
|
)
|
—
|
|
—
|
|
(58
|
)
|
||||
Net asbestos reserves
|
—
|
|
—
|
|
130
|
|
130
|
|
||||
Net environmental reserves
|
—
|
|
—
|
|
11
|
|
11
|
|
||||
Workers’ compensation
|
19
|
|
—
|
|
—
|
|
19
|
|
||||
Workers’ compensation - NY 25a Fund for Reopened Cases
|
80
|
|
—
|
|
—
|
|
80
|
|
||||
Change in workers’ compensation discount, including accretion
|
15
|
|
—
|
|
—
|
|
15
|
|
||||
Catastrophes
|
(9
|
)
|
(29
|
)
|
—
|
|
(38
|
)
|
||||
Uncollectible reinsurance
|
(25
|
)
|
—
|
|
—
|
|
(25
|
)
|
||||
Other reserve re-estimates, net
|
(32
|
)
|
9
|
|
2
|
|
(21
|
)
|
||||
Total prior accident years development
|
$
|
45
|
|
$
|
(28
|
)
|
$
|
143
|
|
$
|
160
|
|
•
|
Strengthened reserves in commercial auto liability, primarily related to specialty lines claims in accident years 2010 through 2012, primarily due to higher than expected bodily injury costs driven by the impact of frequency and severity of large loss activity.
|
•
|
Released reserves in professional liability for accident years 2008 through 2012 due to lower than expected claim severity.
|
•
|
Released reserves in package business liability coverages and general liability, primarily for accident years 2006 through 2011. Claim severity emergence for these years was lower than expected and management has placed more weight on the emerged experience.
|
•
|
Strengthened reserves in workers' compensation related to specialty lines claims for the 2010 and 2011 accident years. A slightly higher than expected large loss frequency has been observed in these accident years.
|
•
|
Included in the second quarter of 2013 is reserve strengthening related to the closing of the New York Section 25A Fund for Reopened Cases (the "Fund"). These claims were previously funded through assessments and paid by the Fund. The claims will become payable by the Company effective January 1, 2014.
|
•
|
The Company reviewed its allowance for uncollectible reinsurance in the second quarter of 2013 and reduced its allowance as a result of favorable collections compared to expectations.
|
•
|
Released reserves for catastrophes primarily related to Storm Sandy.
|
•
|
Other reserve re-estimates, net includes an $18 recovery related to a class action settlement with American International Group involving prior accident years involuntary workers compensation pool loss and loss adjustment expense.
|
•
|
Refer to the Property & Casualty Other Operations Claims section for further discussion on net asbestos and net environmental reserves.
|
Three Months Ended June 30, 2014
|
Asbestos
|
|
Environmental
|
All Other [1]
|
Total
|
||||||||
Beginning liability—net [2][3]
|
$
|
1,647
|
|
|
$
|
263
|
|
$
|
945
|
|
$
|
2,855
|
|
Losses and loss adjustment expenses incurred
|
212
|
|
|
27
|
|
1
|
|
240
|
|
||||
Less : losses and loss adjustment expenses paid
|
39
|
|
|
12
|
|
14
|
|
65
|
|
||||
Ending liability – net [2][3]
|
$
|
1,820
|
|
[4]
|
$
|
278
|
|
$
|
932
|
|
$
|
3,030
|
|
|
|
|
|
|
|
||||||||
Six Months Ended June 30, 2014
|
Asbestos
|
|
Environmental
|
All Other [1]
|
Total
|
||||||||
Beginning liability—net [2][3]
|
$
|
1,714
|
|
|
$
|
270
|
|
$
|
990
|
|
$
|
2,974
|
|
Losses and loss adjustment expenses incurred
|
212
|
|
|
27
|
|
2
|
|
241
|
|
||||
Less: losses and loss adjustment expenses paid
|
106
|
|
|
19
|
|
60
|
|
185
|
|
||||
Ending liability – net [2][3]
|
$
|
1,820
|
|
[4]
|
$
|
278
|
|
$
|
932
|
|
$
|
3,030
|
|
[1]
|
In addition to various insurance and assumed reinsurance exposures, “All Other” includes unallocated loss adjustment expense reserves. “All Other” also includes The Company's allowance for uncollectible reinsurance. When the Company commutes a ceded reinsurance contract or settles a ceded reinsurance dispute, the portion of the allowance for uncollectible reinsurance attributable to that commutation or settlement, if any, is reclassified to the appropriate cause of loss.
|
[2]
|
Excludes amounts reported in Property & Casualty Commercial and Consumer Markets reporting segments (collectively “Ongoing Operations”) for asbestos and environmental net liabilities of $14 and $6, respectively, as of
June 30, 2014
. Total net losses and loss adjustment expenses incurred for the three and
six months ended
June 30, 2014
includes $1 and $5, respectively, related to asbestos and environmental claims. Total net losses and loss adjustment expenses paid for the three and
six months ended
June 30, 2014
includes $5 and $8, respectively, related to asbestos and environmental claims.
|
[3]
|
Gross of reinsurance, asbestos and environmental reserves, including liabilities in Ongoing Operations, were $2,334 and $308.
|
[4]
|
The one year and average three year net paid amounts for asbestos claims, including Ongoing Operations, are $209 and $193, respectively, resulting in a one year net survival ratio of 8.8 and a three year net survival ratio of 9.5. Net survival ratio is the quotient of the net carried reserves divided by the average annual payment amount and is an indication of the number of years that the net carried reserve would last (i.e. survive) if the future annual claim payments were consistent with the calculated historical average.
|
|
Asbestos [1]
|
Environmental [1]
|
||||||||||
Three Months Ended June 30, 2014
|
Paid
Losses & LAE
|
Incurred
Losses & LAE
|
Paid
Losses & LAE
|
Incurred
Losses & LAE
|
||||||||
Gross
|
|
|
|
|
||||||||
Direct
|
$
|
56
|
|
$
|
206
|
|
$
|
17
|
|
$
|
20
|
|
Assumed Reinsurance
|
16
|
|
70
|
|
5
|
|
—
|
|
||||
London Market
|
4
|
|
28
|
|
1
|
|
7
|
|
||||
Total
|
76
|
|
304
|
|
23
|
|
27
|
|
||||
Ceded
|
(37
|
)
|
(92
|
)
|
(11
|
)
|
—
|
|
||||
Net
|
$
|
39
|
|
$
|
212
|
|
$
|
12
|
|
$
|
27
|
|
|
|
|
|
|
||||||||
Six Months Ended June 30, 2014
|
Paid
Losses & LAE
|
Incurred
Losses & LAE
|
Paid
Losses & LAE
|
Incurred
Losses & LAE
|
||||||||
Gross
|
|
|
|
|
||||||||
Direct
|
$
|
113
|
|
$
|
206
|
|
$
|
21
|
|
$
|
20
|
|
Assumed Reinsurance
|
27
|
|
70
|
|
5
|
|
—
|
|
||||
London Market
|
9
|
|
28
|
|
4
|
|
7
|
|
||||
Total
|
149
|
|
304
|
|
30
|
|
27
|
|
||||
Ceded
|
(43
|
)
|
(92
|
)
|
(11
|
)
|
—
|
|
||||
Net
|
$
|
106
|
|
$
|
212
|
|
$
|
19
|
|
$
|
27
|
|
[1]
|
Excludes asbestos and environmental paid and incurred loss and LAE reported in Ongoing Operations. Total gross losses and LAE incurred in Ongoing Operations for the three and
six months ended June 30,
2014
includes $2 and $8, respectively, related to asbestos and environmental claims. Total gross losses and LAE paid in Ongoing Operations for the three and
six months ended June 30,
2014
includes $6 and $11, respectively, related to asbestos and environmental claims.
|
•
|
Major Asbestos Defendants represent the “Top 70” accounts in Tillinghast's published Tiers 1 and 2 and Wellington accounts. Major Asbestos Defendants have the fewest number of asbestos accounts and include reserves related to PPG Industries, Inc. (“PPG”). In January 2009, the Company, along with approximately three dozen other insurers, entered into a modified agreement in principle with PPG to resolve the Company's coverage obligations for all its PPG asbestos liabilities. The agreement is contingent on the fulfillment of certain conditions. Major Asbestos Defendants gross asbestos reserves account for approximately 25% of the Company's total Direct gross asbestos reserves as of June 30, 2014.
|
•
|
Non-Major Accounts are all other open direct asbestos accounts and largely represent smaller and more peripheral defendants. These exposures represent 1,115 accounts and contain approximately 49% of the Company's total Direct gross asbestos reserves as of June 30, 2014.
|
•
|
Unallocated Direct Accounts includes an estimate of the reserves necessary for asbestos claims related to direct insureds that have not previously tendered asbestos claims to the Company and exposures related to liability claims that may not be subject to an aggregate limit under the applicable policies.
|
|
|
Asbestos [1]
|
Environmental [2]
|
Total A&E
|
|||||
Gross
|
|
|
|
|
|
|
|||
Direct
|
$
|
1,728
|
|
$
|
229
|
|
$
|
1,957
|
|
Assumed Reinsurance
|
|
334
|
|
|
28
|
|
|
362
|
|
London Market
|
|
272
|
|
|
51
|
|
|
323
|
|
Total
|
|
2,334
|
|
|
308
|
|
|
2,642
|
|
Ceded
|
|
(500
|
)
|
|
(24
|
)
|
|
(524
|
)
|
Net
|
$
|
1,834
|
|
$
|
284
|
|
$
|
2,118
|
|
|
|||||||
|
Talcott Resolution
|
||||||
|
As of June 30, 2014
|
|
As of December 31, 2013
|
||||
DAC [1]
|
$
|
1,400
|
|
|
$
|
1,552
|
|
SIA [1]
|
$
|
142
|
|
|
$
|
149
|
|
URR
|
$
|
47
|
|
|
$
|
50
|
|
Death and Other Insurance Benefit Reserves, net of reinsurance [2]
|
$
|
331
|
|
|
$
|
565
|
|
[1]
|
For additional information on DAC and SIA, see Note
8
-
Deferred Policy Acquisition Costs and Present Value of Future Profits
and Note
9
-
Sales Inducements
, respectively, of Notes to Condensed Consolidated Financial Statements.
|
[2]
|
For additional information on death and other insurance benefit reserves, see Note
10
-
Separate Accounts, Death Benefits and Other Insurance Benefit Features
of Notes to Condensed Consolidated Financial Statements.
|
|
Talcott Resolution
|
||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
DAC
|
$
|
16
|
|
$
|
(17
|
)
|
|
$
|
28
|
|
$
|
(34
|
)
|
SIA
|
5
|
|
(3
|
)
|
|
6
|
|
(7
|
)
|
||||
URR
|
(2
|
)
|
1
|
|
|
(2
|
)
|
3
|
|
||||
Death and Other Insurance Benefit Reserves
|
5
|
|
6
|
|
|
11
|
|
29
|
|
||||
Total (before tax)
|
$
|
24
|
|
$
|
(13
|
)
|
|
$
|
43
|
|
$
|
(9
|
)
|
Income tax effect
|
9
|
|
(4
|
)
|
|
16
|
|
(3
|
)
|
||||
Total (after-tax)
|
$
|
15
|
|
$
|
(9
|
)
|
|
$
|
27
|
|
$
|
(6
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Net income (loss)
|
$
|
(467
|
)
|
$
|
(190
|
)
|
|
$
|
28
|
|
$
|
(431
|
)
|
Less: Unlock benefit (charge), after-tax
|
15
|
|
(9
|
)
|
|
27
|
|
(6
|
)
|
||||
Less: Restructuring and other costs, after-tax
|
(5
|
)
|
(12
|
)
|
|
(18
|
)
|
(24
|
)
|
||||
Less: Loss from discontinued operations, after-tax
|
(617
|
)
|
(423
|
)
|
|
(588
|
)
|
(907
|
)
|
||||
Less: Loss on extinguishment of debt, after-tax
|
—
|
|
—
|
|
|
—
|
|
(138
|
)
|
||||
Less: Net reinsurance loss on dispositions, after-tax
|
—
|
|
1
|
|
|
—
|
|
(24
|
)
|
||||
Less: Net realized capital gains (losses), after-tax and DAC, excluded from core earnings [1]
|
(4
|
)
|
22
|
|
|
(38
|
)
|
47
|
|
||||
Core earnings
|
$
|
144
|
|
$
|
231
|
|
|
$
|
645
|
|
$
|
621
|
|
[1]
|
Excludes net realized gain on dispositions of $1.0 billion, after-tax, for the six months ended June 30, 2013 relating to the sales of the Retirement Plans and Individual Life businesses which are included in net reinsurance loss on dispositions, after-tax.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
Underwriting Summary
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||||||
Written premiums
|
$
|
1,571
|
|
$
|
1,533
|
|
2
|
%
|
|
$
|
3,240
|
|
$
|
3,178
|
|
2
|
%
|
Change in unearned premium reserve
|
12
|
|
(12
|
)
|
NM
|
|
|
140
|
|
104
|
|
35
|
%
|
||||
Earned premiums
|
1,559
|
|
1,545
|
|
1
|
%
|
|
3,100
|
|
3,074
|
|
1
|
%
|
||||
Losses and loss adjustment expenses
|
|
|
|
|
|
|
|
||||||||||
Current accident year before catastrophes
|
934
|
|
966
|
|
(3
|
%)
|
|
1,868
|
|
1,934
|
|
(3
|
%)
|
||||
Current accident year catastrophes
|
35
|
|
44
|
|
(20
|
%)
|
|
95
|
|
50
|
|
90
|
%
|
||||
Prior accident years
|
12
|
|
37
|
|
(68
|
%)
|
|
5
|
|
45
|
|
(89
|
%)
|
||||
Total losses and loss adjustment expenses
|
981
|
|
1,047
|
|
(6
|
%)
|
|
1,968
|
|
2,029
|
|
(3
|
%)
|
||||
Amortization of DAC
|
230
|
|
226
|
|
2
|
%
|
|
456
|
|
453
|
|
1
|
%
|
||||
Underwriting expenses
|
254
|
|
243
|
|
5
|
%
|
|
442
|
|
468
|
|
(6
|
%)
|
||||
Dividends to policyholders
|
3
|
|
4
|
|
(25
|
%)
|
|
7
|
|
8
|
|
(13
|
%)
|
||||
Underwriting gain
|
91
|
|
25
|
|
NM
|
|
|
227
|
|
116
|
|
96
|
%
|
||||
Net servicing income [1]
|
6
|
|
7
|
|
(14
|
%)
|
|
9
|
|
13
|
|
(31
|
%)
|
||||
Net investment income
|
230
|
|
262
|
|
(12
|
%)
|
|
486
|
|
502
|
|
(3
|
%)
|
||||
Net realized capital gains (losses)
|
(24
|
)
|
(7
|
)
|
NM
|
|
|
(56
|
)
|
36
|
|
NM
|
|
||||
Other expenses
|
(27
|
)
|
(30
|
)
|
10
|
%
|
|
(58
|
)
|
(58
|
)
|
—
|
%
|
||||
Income before income taxes
|
276
|
|
257
|
|
7
|
%
|
|
608
|
|
609
|
|
—
|
%
|
||||
Income tax expense
|
77
|
|
63
|
|
22
|
%
|
|
167
|
|
162
|
|
3
|
%
|
||||
Income from continuing operations, net of tax
|
199
|
|
194
|
|
3
|
%
|
|
441
|
|
447
|
|
(1
|
%)
|
||||
Loss from discontinued operations, net of tax
|
—
|
|
(2
|
)
|
100
|
%
|
|
—
|
|
(2
|
)
|
100
|
%
|
||||
Net income
|
$
|
199
|
|
$
|
192
|
|
4
|
%
|
|
$
|
441
|
|
$
|
445
|
|
(1
|
%)
|
[1]
|
Includes servicing revenues of $31 and $29 for the three months ended June 31, 2014 and 2013 and $56 and $59 for the six months ended June 31, 2014 and 2013, respectively.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Premium Measures [1]
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
New business premium
|
$
|
279
|
|
$
|
278
|
|
|
$
|
547
|
|
$
|
544
|
|
Standard commercial lines policy count retention
|
83
|
%
|
80
|
%
|
|
83
|
%
|
81
|
%
|
||||
Standard commercial lines renewal written pricing increase
|
6
|
%
|
7
|
%
|
|
6
|
%
|
7
|
%
|
||||
Standard commercial lines renewal earned pricing increase
|
7
|
%
|
8
|
%
|
|
7
|
%
|
8
|
%
|
||||
Standard commercial lines policies in-force as of end of period (in thousands)
|
|
|
|
1,260
|
|
1,255
|
|
[1]
|
Standard commercial lines consists of small commercial and middle market.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Underwriting Ratios
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||
Loss and loss adjustment expense ratio
|
|
|
|
|
|
|
|
||||||
Current accident year before catastrophes
|
59.9
|
|
62.5
|
|
2.6
|
|
|
60.3
|
|
62.9
|
|
2.6
|
|
Current accident year catastrophes
|
2.2
|
|
2.8
|
|
0.6
|
|
|
3.1
|
|
1.6
|
|
(1.5
|
)
|
Prior year development
|
0.8
|
|
2.4
|
|
1.6
|
|
|
0.2
|
|
1.5
|
|
1.3
|
|
Total loss and loss adjustment expense ratio
|
62.9
|
|
67.8
|
|
4.9
|
|
|
63.5
|
|
66.0
|
|
2.5
|
|
Expense ratio
|
31.0
|
|
30.4
|
|
(0.6
|
)
|
|
29.0
|
|
30.0
|
|
1.0
|
|
Policyholder dividend ratio
|
0.2
|
|
0.3
|
|
0.1
|
|
|
0.2
|
|
0.3
|
|
0.1
|
|
Combined ratio
|
94.2
|
|
98.4
|
|
4.2
|
|
|
92.7
|
|
96.2
|
|
3.5
|
|
Current accident year catastrophes and prior year development
|
3.0
|
|
5.2
|
|
2.2
|
|
|
3.3
|
|
3.1
|
|
(0.2
|
)
|
Combined ratio before catastrophes and prior year development
|
91.1
|
|
93.1
|
|
2.0
|
|
|
89.5
|
|
93.1
|
|
3.6
|
|
•
|
Favorable current accident year losses and loss adjustment expense ratios before catastrophes for the three months ended
June 30, 2014
, as compared to the prior year period, were primarily driven by lower loss and loss adjustment expense ratios in workers’ compensation due to favorable frequency and severity trends. The current accident year loss and loss adjustment expense ratio before catastrophes decreased accordingly by
2.6
points to
59.9
in
2014
from
62.5
in
2013
.
|
•
|
Current accident year catastrophe losses of
$35
, before tax, for the three months ended
June 30, 2014
, compared to
$44
, before tax, for the three months ended
June 30, 2013
. Decreased losses for the three months ended
June 30, 2014
, as compared to the prior year period, were primarily due to a reduction in tornado activity across various U.S. geographic regions.
|
•
|
Prior accident year reserve strengthening of
$12
, before tax, for the three months ended
June 30, 2014
, compared to reserve strengthening of
$37
, before tax, for the three months ended
June 30, 2013
. Development for the three months ended
June 30, 2014
was primarily due to reserve strengthening related to auto liability, as well as workers' compensation discount accretion, partially offset by reductions in reserves for professional and general liability and prior year catastrophes. Development for the three months ended
June 30, 2013
was primarily due to reserve strengthening related to workers' compensation and auto liability, partially offset by reserve releases related to professional and general liability and uncollectible reinsurance.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
Underwriting Summary
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||||||
Written premiums
|
$
|
1,003
|
|
$
|
967
|
|
4
|
%
|
|
$
|
1,930
|
|
$
|
1,845
|
|
5
|
%
|
Change in unearned premium reserve
|
57
|
|
59
|
|
(3
|
%)
|
|
56
|
|
41
|
|
37
|
%
|
||||
Earned premiums
|
946
|
|
908
|
|
4
|
%
|
|
1,874
|
|
1,804
|
|
4
|
%
|
||||
Losses and loss adjustment expenses
|
|
|
|
|
|
|
|
||||||||||
Current accident year before catastrophes
|
629
|
|
585
|
|
8
|
%
|
|
1,219
|
|
1,153
|
|
6
|
%
|
||||
Current accident year catastrophes
|
161
|
|
142
|
|
13
|
%
|
|
187
|
|
168
|
|
11
|
%
|
||||
Prior accident years
|
(3
|
)
|
(32
|
)
|
(91
|
%)
|
|
(37
|
)
|
(28
|
)
|
32
|
%
|
||||
Total losses and loss adjustment expenses
|
787
|
|
695
|
|
13
|
%
|
|
1,369
|
|
1,293
|
|
6
|
%
|
||||
Amortization of DAC
|
86
|
|
83
|
|
4
|
%
|
|
171
|
|
166
|
|
3
|
%
|
||||
Underwriting expenses
|
133
|
|
139
|
|
(4
|
%)
|
|
269
|
|
282
|
|
(5
|
%)
|
||||
Underwriting gain (loss)
|
(60
|
)
|
(9
|
)
|
NM
|
|
|
65
|
|
63
|
|
3
|
%
|
||||
Net servicing income [1]
|
—
|
|
6
|
|
(100
|
%)
|
|
—
|
|
15
|
|
(100
|
%)
|
||||
Net investment income
|
31
|
|
39
|
|
(21
|
%)
|
|
66
|
|
76
|
|
(13
|
%)
|
||||
Net realized capital gains (losses)
|
(3
|
)
|
(3
|
)
|
—
|
%
|
|
(8
|
)
|
4
|
|
NM
|
|
||||
Other expenses
|
(18
|
)
|
(16
|
)
|
13
|
%
|
|
(26
|
)
|
(28
|
)
|
(7
|
%)
|
||||
Income (loss) before income taxes
|
(50
|
)
|
17
|
|
NM
|
|
|
97
|
|
130
|
|
(25
|
)%
|
||||
Income tax expense (benefit)
|
(20
|
)
|
2
|
|
NM
|
|
|
28
|
|
38
|
|
(26
|
)%
|
||||
Net income (loss)
|
$
|
(30
|
)
|
$
|
15
|
|
NM
|
|
|
$
|
69
|
|
$
|
92
|
|
(25
|
)%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Written Premiums
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||
Product Line
|
|
|
|
|
|
|
|
||||||
Automobile
|
680
|
|
657
|
|
4
|
%
|
|
1,340
|
|
1,286
|
|
4
|
%
|
Homeowners
|
323
|
|
310
|
|
4
|
%
|
|
590
|
|
559
|
|
6
|
%
|
Total
|
1,003
|
|
967
|
|
4
|
%
|
|
1,930
|
|
1,845
|
|
5
|
%
|
Earned Premiums
|
|
|
|
|
|
|
|
|
|||||
Product Line
|
|
|
|
|
|
|
|
|
|||||
Automobile
|
650
|
|
626
|
|
4
|
%
|
|
1,286
|
|
1,245
|
|
3
|
%
|
Homeowners
|
296
|
|
282
|
|
5
|
%
|
|
588
|
|
559
|
|
5
|
%
|
Total
|
946
|
|
908
|
|
4
|
%
|
|
1,874
|
|
1,804
|
|
4
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Premium Measures
|
2014
|
2013
|
|
2014
|
2013
|
||||||||
Policies in-force end of period (in thousands)
|
|
|
|
|
|
||||||||
Automobile
|
|
|
|
2,041
|
|
2,020
|
|
||||||
Homeowners
|
|
|
|
1,325
|
|
1,322
|
|
||||||
New business written premium
|
|
|
|
|
|
||||||||
Automobile
|
$
|
103
|
|
$
|
93
|
|
|
$
|
207
|
|
$
|
180
|
|
Homeowners
|
$
|
35
|
|
$
|
34
|
|
|
$
|
67
|
|
$
|
64
|
|
Policy count retention
|
|
|
|
|
|
||||||||
Automobile
|
86
|
%
|
86
|
%
|
|
86
|
%
|
86
|
%
|
||||
Homeowners
|
87
|
%
|
87
|
%
|
|
87
|
%
|
87
|
%
|
||||
Renewal written pricing increase
|
|
|
|
|
|
||||||||
Automobile
|
5
|
%
|
5
|
%
|
|
5
|
%
|
5
|
%
|
||||
Homeowners
|
8
|
%
|
7
|
%
|
|
8
|
%
|
6
|
%
|
||||
Renewal earned pricing increase
|
|
|
|
|
|
||||||||
Automobile
|
5
|
%
|
5
|
%
|
|
5
|
%
|
5
|
%
|
||||
Homeowners
|
8
|
%
|
6
|
%
|
|
7
|
%
|
6
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Underwriting Ratios
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||
Loss and loss adjustment expense ratio
|
|
|
|
|
|
|
|
||||||
Current accident year before catastrophes
|
66.5
|
|
64.4
|
|
(2.1
|
)
|
|
65.0
|
|
63.9
|
|
(1.1
|
)
|
Current accident year catastrophes
|
17.0
|
|
15.6
|
|
(1.4
|
)
|
|
10.0
|
|
9.3
|
|
(0.7
|
)
|
Prior year development
|
(0.3
|
)
|
(3.5
|
)
|
(3.2
|
)
|
|
(2.0
|
)
|
(1.6
|
)
|
0.4
|
|
Total loss and loss adjustment expense ratio
|
83.2
|
|
76.5
|
|
(6.7
|
)
|
|
73.1
|
|
71.7
|
|
(1.4
|
)
|
Expense ratio
|
23.2
|
|
24.4
|
|
1.2
|
|
|
23.5
|
|
24.8
|
|
1.3
|
|
Combined ratio
|
106.3
|
|
101.0
|
|
(5.3
|
)
|
|
96.5
|
|
96.5
|
|
—
|
|
Current accident year catastrophes and prior year development
|
16.7
|
|
12.1
|
|
(4.6
|
)
|
|
8.0
|
|
7.7
|
|
(0.3
|
)
|
Combined ratio before catastrophes and prior year development
|
89.6
|
|
88.9
|
|
(0.7
|
)
|
|
88.5
|
|
88.7
|
|
0.2
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||
Product Combined Ratios
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||
Automobile
|
98.7
|
|
94.6
|
|
(4.1
|
)
|
|
95.1
|
|
95.3
|
|
0.2
|
|
Homeowners
|
123.8
|
|
115.0
|
|
(8.8
|
)
|
|
99.8
|
|
99.0
|
|
(0.8
|
)
|
•
|
Current accident year losses and loss adjustment expenses before catastrophes increased for the
three months ended
June 30, 2014
, compared to the prior year period, as a result of increased frequency in auto and homeowners related to hail activity and increased homeowners severity from large fire losses. The current accident year loss and loss adjustment expense ratio before catastrophes of
66.5
in 2014 increased
2.1
points from
64.4
in
2013
.
|
•
|
Current accident year catastrophe losses of
$161
, before tax, for the
three months ended
June 30, 2014
compared to
$142
for the prior year period. Losses for
2014
were primarily driven by multiple wind and hail events across various U.S. geographic regions. Losses for
2013
were primarily driven by multiple wind and hail events across various U.S. geographic regions and increased severity from tornadoes.
|
•
|
Prior accident years reserve release of
$3
, before tax, for the
three months ended
June 30, 2014
compared to a release of
$32
, before tax, for the prior year period. Reserve releases for 2013 were related to catastrophes primarily due to Storm Sandy.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
Underwriting Summary
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||||||
Losses and loss adjustment expenses [1]
|
240
|
|
141
|
|
70
|
%
|
|
241
|
|
143
|
|
69
|
%
|
||||
Underwriting expenses
|
7
|
|
7
|
|
—
|
%
|
|
14
|
|
14
|
|
—
|
%
|
||||
Underwriting loss
|
(247
|
)
|
(148
|
)
|
(67
|
%)
|
|
(255
|
)
|
(157
|
)
|
(62
|
%)
|
||||
Net servicing expense
|
—
|
|
(1
|
)
|
100
|
%
|
|
—
|
|
(1
|
)
|
100
|
%
|
||||
Net investment income
|
31
|
|
37
|
|
(16
|
%)
|
|
66
|
|
72
|
|
(8
|
%)
|
||||
Net realized capital gains
|
2
|
|
3
|
|
(33
|
%)
|
|
2
|
|
4
|
|
(50
|
%)
|
||||
Other income
|
2
|
|
—
|
|
NM
|
|
|
2
|
|
1
|
|
100
|
%
|
||||
Loss before income taxes
|
(212
|
)
|
(109
|
)
|
(94
|
%)
|
|
(185
|
)
|
(81
|
)
|
(128
|
%)
|
||||
Income tax benefit
|
(68
|
)
|
(38
|
)
|
(79
|
%)
|
|
(63
|
)
|
(31
|
)
|
(103
|
%)
|
||||
Net loss
|
$
|
(144
|
)
|
$
|
(71
|
)
|
(103
|
%)
|
|
$
|
(122
|
)
|
$
|
(50
|
)
|
(144
|
%)
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||||
Operating Summary
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||||||
Premiums and other considerations [1]
|
$
|
777
|
|
$
|
838
|
|
(7
|
)%
|
|
$
|
1,576
|
|
$
|
1,664
|
|
(5
|
)%
|
Net investment income
|
95
|
|
100
|
|
(5
|
)%
|
|
191
|
|
197
|
|
(3
|
)%
|
||||
Net realized capital gains
|
6
|
|
37
|
|
(84
|
)%
|
|
14
|
|
55
|
|
(75
|
)%
|
||||
Total revenues
|
878
|
|
975
|
|
(10
|
)%
|
|
1,781
|
|
1,916
|
|
(7
|
)%
|
||||
Benefits, losses and loss adjustment expenses
|
601
|
|
635
|
|
(5
|
)%
|
|
1,198
|
|
1,274
|
|
(6
|
)%
|
||||
Amortization of deferred policy acquisition costs
|
7
|
|
8
|
|
(13
|
)%
|
|
16
|
|
16
|
|
—
|
%
|
||||
Insurance operating costs and other expenses
|
195
|
|
248
|
|
(21
|
)%
|
|
423
|
|
488
|
|
(13
|
)%
|
||||
Total benefits, losses and expenses
|
803
|
|
891
|
|
(10
|
)%
|
|
1,637
|
|
1,778
|
|
(8
|
)%
|
||||
Income before income taxes
|
75
|
|
84
|
|
(11
|
)%
|
|
144
|
|
138
|
|
4
|
%
|
||||
Income tax expense
|
20
|
|
23
|
|
(13
|
)%
|
|
38
|
|
35
|
|
9
|
%
|
||||
Net income [1]
|
$
|
55
|
|
$
|
61
|
|
(10
|
)%
|
|
$
|
106
|
|
$
|
103
|
|
3
|
%
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||||
Premiums and other considerations
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||||||
Fully insured – ongoing premiums
|
$
|
761
|
|
$
|
822
|
|
(7
|
)%
|
|
$
|
1,537
|
|
$
|
1,634
|
|
(6
|
)%
|
Buyout premiums
|
—
|
|
1
|
|
(100
|
)%
|
|
8
|
|
1
|
|
NM
|
|
||||
Other
|
16
|
|
15
|
|
7
|
%
|
|
31
|
|
29
|
|
7
|
%
|
||||
Total premiums and other considerations
|
777
|
|
838
|
|
(7
|
)%
|
|
1,576
|
|
1,664
|
|
(5
|
)%
|
||||
Fully insured ongoing sales, excluding buyouts
|
45
|
|
103
|
|
(56
|
)%
|
|
225
|
|
272
|
|
(17
|
)%
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||
Ratios, excluding buyouts
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||
Group disability loss ratio
|
83.9
|
%
|
82.7
|
%
|
(1.2)
|
|
83.1
|
%
|
86.2
|
%
|
3.1
|
Group life loss ratio
|
72.4
|
%
|
70.8
|
%
|
(1.6)
|
|
70.1
|
%
|
69.4
|
%
|
(0.7)
|
Total loss ratio
|
77.3
|
%
|
75.7
|
%
|
(1.6)
|
|
75.9
|
%
|
76.5
|
%
|
0.6
|
Loss ratio, excluding Association - Financial Institutions
|
77.5
|
%
|
80.3
|
%
|
2.8
|
|
77.6
|
%
|
80.9
|
%
|
3.3
|
Expense ratio
|
26.0
|
%
|
30.6
|
%
|
4.6
|
|
28.0
|
%
|
30.3
|
%
|
2.3
|
Expense ratio, excluding Association - Financial Institutions
|
25.8
|
%
|
26.7
|
%
|
0.9
|
|
26.6
|
%
|
26.7
|
%
|
0.1
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||
After-tax margin
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||
After-tax margin (excluding buyouts)
|
6.3
|
%
|
6.3
|
%
|
—
|
|
|
6.0
|
%
|
5.4
|
%
|
0.6
|
|
Effect of net capital realized gains (losses), net of tax on after-tax margin
|
0.3
|
%
|
2.4
|
%
|
(2.1
|
)
|
|
0.5
|
%
|
1.8
|
%
|
(1.3
|
)
|
After-tax margin (excluding buyouts), excluding realized gains (losses)
|
6.0
|
%
|
3.9
|
%
|
2.1
|
|
|
5.5
|
%
|
3.6
|
%
|
1.9
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
Operating Summary
|
2014
|
2013 [1]
|
Change
|
|
2014
|
2013
|
Change
|
||||||||||
Fee income and other
|
183
|
|
165
|
|
11
|
%
|
|
357
|
|
325
|
|
10
|
%
|
||||
Total revenues
|
183
|
|
165
|
|
11
|
%
|
|
357
|
|
325
|
|
10
|
%
|
||||
Amortization of DAC
|
7
|
|
10
|
|
(30
|
)%
|
|
16
|
|
19
|
|
(16
|
)%
|
||||
Insurance operating costs and other expenses
|
144
|
|
124
|
|
16
|
%
|
|
276
|
|
247
|
|
12
|
%
|
||||
Total benefits, losses and expenses
|
151
|
|
134
|
|
13
|
%
|
|
292
|
|
266
|
|
10
|
%
|
||||
Income before income taxes
|
32
|
|
31
|
|
3
|
%
|
|
65
|
|
59
|
|
10
|
%
|
||||
Income tax expense
|
11
|
|
11
|
|
—
|
%
|
|
23
|
|
21
|
|
10
|
%
|
||||
Net income
|
$
|
21
|
|
$
|
20
|
|
5
|
%
|
|
$
|
42
|
|
$
|
38
|
|
11
|
%
|
MUTUAL FUNDS AUM by DISTRIBUTION CHANNEL
|
|
|
|
|
|
|
|
||||||||||
Retail Mutual Funds [2]
|
|
|
|
|
|
|
|
||||||||||
AUM, beginning of period
|
$
|
54,988
|
|
$
|
48,186
|
|
14
|
%
|
|
$
|
53,040
|
|
$
|
45,013
|
|
18
|
%
|
Sales
|
2,698
|
|
2,789
|
|
(3
|
)%
|
|
$
|
5,325
|
|
$
|
5,951
|
|
(11
|
)%
|
||
Redemptions
|
(2,619
|
)
|
(4,075
|
)
|
36
|
%
|
|
(5,307
|
)
|
(7,251
|
)
|
27
|
%
|
||||
Net Flows
|
$
|
79
|
|
$
|
(1,286
|
)
|
106
|
%
|
|
$
|
18
|
|
$
|
(1,300
|
)
|
101
|
%
|
Change in market value and other
|
635
|
|
717
|
|
(11
|
)%
|
|
2,644
|
|
3,904
|
|
(32
|
)%
|
||||
AUM, end of period
|
$
|
55,702
|
|
$
|
47,617
|
|
17
|
%
|
|
$
|
55,702
|
|
$
|
47,617
|
|
17
|
%
|
|
|
|
|
|
|
|
|
||||||||||
Retirement Mutual Funds [3]
|
|
|
|
|
|
|
|
||||||||||
AUM, beginning of period
|
$
|
18,358
|
|
$
|
17,622
|
|
4
|
%
|
|
17,878
|
|
16,598
|
|
8
|
%
|
||
Sales
|
1,212
|
|
937
|
|
29
|
%
|
|
2,277
|
|
1,879
|
|
21
|
%
|
||||
Redemptions
|
(1,729
|
)
|
(2,590
|
)
|
33
|
%
|
|
(2,715
|
)
|
(4,016
|
)
|
32
|
%
|
||||
Net Flows
|
(517
|
)
|
(1,653
|
)
|
69
|
%
|
|
(438
|
)
|
(2,137
|
)
|
80
|
%
|
||||
Change in market value and other
|
787
|
|
22
|
|
NM
|
|
|
1,188
|
|
1,530
|
|
(22
|
)%
|
||||
AUM, end of period
|
$
|
18,628
|
|
$
|
15,991
|
|
16
|
%
|
|
18,628
|
|
15,991
|
|
16
|
%
|
||
|
|
|
|
|
|
|
|
||||||||||
Total Mutual Funds
|
|
|
|
|
|
|
|
||||||||||
AUM, beginning of period
|
$
|
73,346
|
|
$
|
65,808
|
|
11
|
%
|
|
70,918
|
|
61,611
|
|
15
|
%
|
||
Sales
|
3,910
|
|
3,726
|
|
5
|
%
|
|
7,602
|
|
7,830
|
|
(3
|
)%
|
||||
Redemptions [4]
|
(4,348
|
)
|
(6,665
|
)
|
35
|
%
|
|
(8,022
|
)
|
(11,267
|
)
|
29
|
%
|
||||
Net Flows
|
(438
|
)
|
(2,939
|
)
|
85
|
%
|
|
(420
|
)
|
(3,437
|
)
|
88
|
%
|
||||
Change in market value and other
|
1,422
|
|
739
|
|
92
|
%
|
|
3,832
|
|
5,434
|
|
(29
|
)%
|
||||
AUM, end of period
|
$
|
74,330
|
|
$
|
63,608
|
|
17
|
%
|
|
74,330
|
|
63,608
|
|
17
|
%
|
||
Average Mutual Funds Assets Under Management
|
73,838
|
|
64,708
|
|
14
|
%
|
|
72,624
|
|
62,610
|
|
16
|
%
|
||||
Annuity Mutual Fund Assets [5]
|
24,529
|
|
25,901
|
|
(5
|
)%
|
|
24,529
|
|
25,901
|
|
(5
|
)%
|
||||
Total Assets Under Management
|
$
|
98,859
|
|
$
|
89,509
|
|
10
|
%
|
|
$
|
98,859
|
|
$
|
89,509
|
|
10
|
%
|
Average Assets Under Management
|
$
|
98,581
|
|
$
|
90,973
|
|
8
|
%
|
|
97,797
|
|
88,578
|
|
10
|
%
|
[1]
|
Retrospectively adjusted to conform to the current year method of reporting revenues and expenses. Fee income and directly related expenses previously reported as gross amounts are being reported as a net amount in insurance operating costs and other expenses. This change in the method of reporting revenues and expenses did not have a material impact on the segment’s operating results.
|
[2]
|
Includes mutual funds offered within 529 college savings plans.
|
[3]
|
Includes mutual funds offered within employee directed retirement plans including on-going business related to the Company's Retirement Plans and Individual Life businesses sold in January 2013.
|
[4]
|
Includes a
$0.7 billion
liquidation of the Company's target-date funds in the three months ended June 30,2014 and an institutional redemption as well as a portfolio rebalance at a key distributor, together totaling
$2.5 billion
in the three months ended June 30, 2013.
|
[5]
|
Includes Company-sponsored mutual fund assets held in separate accounts supporting variable insurance and investment products.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||||||
MUTUAL FUNDS AUM by ASSET CLASS
|
|
|
|
|
|
|
|
||||||||||
Equity
|
45,171
|
|
36,186
|
|
25
|
%
|
|
45,171
|
|
36,186
|
|
25
|
%
|
||||
Fixed Income
|
14,942
|
|
14,944
|
|
—
|
%
|
|
14,942
|
|
14,944
|
|
—
|
%
|
||||
Multi-Strategy Investments
|
14,217
|
|
12,478
|
|
14
|
%
|
|
14,217
|
|
12,478
|
|
14
|
%
|
||||
Total Mutual Funds AUM, end of period
|
$
|
74,330
|
|
$
|
63,608
|
|
17
|
%
|
|
$
|
74,330
|
|
$
|
63,608
|
|
17
|
%
|
RETURN ON ASSETS
|
|
|
|
|
|
|
|
||||||||||
ROA
|
8.5
|
|
8.8
|
|
(3
|
)%
|
|
8.6
|
|
8.6
|
|
—
|
%
|
||||
Effect of restructuring, net of tax
|
—
|
|
(0.4
|
)
|
100
|
%
|
|
—
|
|
(0.5
|
)
|
100
|
%
|
||||
Effect of net realized gains, net of tax and DAC
|
—
|
|
0.4
|
|
(100
|
)%
|
|
—
|
|
—
|
|
—
|
%
|
||||
ROA, core earnings
|
8.5
|
|
8.8
|
|
(3
|
)%
|
|
8.6
|
|
9.1
|
|
(5
|
)%
|
|
|||||||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
Operating Summary
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||||||
Earned premiums, fees and other
|
$
|
352
|
|
$
|
349
|
|
1
|
%
|
|
$
|
705
|
|
$
|
698
|
|
1
|
%
|
Net investment income
|
376
|
|
403
|
|
(7
|
%)
|
|
776
|
|
806
|
|
(4
|
%)
|
||||
Realized capital gains (losses):
|
|
|
|
|
|
|
|
|
|||||||||
Net realized capital gains on business dispositions
|
—
|
|
1
|
|
(100
|
%)
|
|
—
|
|
1,575
|
|
(100
|
%)
|
||||
Total other-than-temporary impairment (“OTTI”) losses
|
(3
|
)
|
—
|
|
NM
|
|
|
(7
|
)
|
—
|
|
NM
|
|
||||
Other net realized capital gains (losses)
|
4
|
|
(20
|
)
|
120
|
%
|
|
11
|
|
77
|
|
(86
|
%)
|
||||
Net realized capital gains (losses)
|
1
|
|
(19
|
)
|
105
|
%
|
|
4
|
|
1,652
|
|
(100
|
%)
|
||||
Total revenues
|
729
|
|
733
|
|
(1
|
%)
|
|
1,485
|
|
3,156
|
|
(53
|
%)
|
||||
Benefits, losses and loss adjustment expenses
|
414
|
|
404
|
|
2
|
%
|
|
823
|
|
842
|
|
(2
|
%)
|
||||
Amortization of DAC
|
42
|
|
64
|
|
(34
|
%)
|
|
109
|
|
166
|
|
(34
|
%)
|
||||
Insurance operating costs and other expenses
|
145
|
|
187
|
|
(22
|
%)
|
|
293
|
|
323
|
|
(9
|
%)
|
||||
Reinsurance loss on dispositions
|
—
|
|
—
|
|
—
|
%
|
|
—
|
|
1,505
|
|
(100
|
%)
|
||||
Total benefits, losses and expenses
|
601
|
|
655
|
|
(8
|
%)
|
|
1,225
|
|
2,836
|
|
(57
|
%)
|
||||
Income from continuing operations before income taxes
|
128
|
|
78
|
|
64
|
%
|
|
260
|
|
320
|
|
(19
|
%)
|
||||
Income tax expense (benefit)
|
15
|
|
(11
|
)
|
NM
|
|
|
31
|
|
41
|
|
(24
|
%)
|
||||
Income from continuing operations, net of tax
|
113
|
|
89
|
|
27
|
%
|
|
$
|
229
|
|
$
|
279
|
|
(18
|
%)
|
||
Loss from discontinued operations, net of tax [1]
|
(617
|
)
|
(421
|
)
|
(47
|
%)
|
|
$
|
(588
|
)
|
$
|
(905
|
)
|
35
|
%
|
||
Net loss
|
$
|
(504
|
)
|
$
|
(332
|
)
|
(52
|
%)
|
|
$
|
(359
|
)
|
$
|
(626
|
)
|
43
|
%
|
Assets Under Management (end of period)
|
|
|
|
|
|
|
|
||||||||||
Variable annuity account value
|
$
|
58,350
|
|
$
|
86,500
|
|
(33
|
%)
|
|
|
|
|
|
||||
Fixed Market Value Adjusted annuity and other account value
|
9,429
|
|
14,038
|
|
(33
|
%)
|
|
|
|
|
|
||||||
Institutional annuity account value
|
15,842
|
|
17,252
|
|
(8
|
%)
|
|
|
|
|
|
||||||
Other account value [2]
|
108,469
|
|
102,719
|
|
6
|
%
|
|
|
|
|
|
||||||
Total account value [3]
|
$
|
192,090
|
|
$
|
219,323
|
|
(12
|
%)
|
|
|
|
|
|
||||
U.S. Variable Annuity Account Value
|
|
|
|
|
|
|
|
||||||||||
Account value, beginning of period
|
$
|
59,547
|
|
$
|
65,500
|
|
(9
|
%)
|
|
$
|
61,812
|
|
$
|
64,824
|
|
(5
|
%)
|
Net outflows
|
(3,056
|
)
|
(3,728
|
)
|
18
|
%
|
|
(6,006
|
)
|
(7,035
|
)
|
15
|
%
|
||||
Change in market value and other
|
1,859
|
|
807
|
|
130
|
%
|
|
2,544
|
|
4,790
|
|
(47
|
)%
|
||||
Account value, end of period
|
$
|
58,350
|
|
$
|
62,579
|
|
(7
|
%)
|
|
$
|
58,350
|
|
$
|
62,579
|
|
(7
|
%)
|
[1]
|
Represents the loss from operations and sale of HLIKK in 2014 and HLIL in 2013. For additional information, see Note
14
-
Discontinued Operations
of Notes to Condensed Consolidated Financial Statements.
|
[2]
|
Other account value includes
$54.2 billion
,
$14.9 billion
, and
$39.3 billion
as of
June 30, 2014
and
$51.8 billion
,
$13.2 billion
, and
$36.1 billion
at
June 30, 2013
for the Retirement Plans, Individual Life, and Private Placement Life Insurance, respectively. Account
values
a
ssociated with the Retirement Plans, and Individual Life businesses no longer generate asset-based fee income due to the sales of these businesses through reinsurance transaction.
|
[3]
|
Included in the total account value is approximately
$(1.2) billion
as of
June 30, 2013
related to a Talcott Resolution intra-segment funding agreement which is eliminated in consolidation. Also included in the variable and fixed annuity account values as of
June 30, 2013
is account value related to the Japan and UK businesses sold on June 30, 2014, and December 12, 2013; respectively.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||
Operating Summary
|
2014
|
2013
|
Change
|
|
2014
|
2013
|
Change
|
||||||||||
Fee income [1]
|
$
|
4
|
|
$
|
2
|
|
100
|
%
|
|
$
|
7
|
|
$
|
5
|
|
40
|
%
|
Net investment income
|
5
|
|
—
|
|
(100
|
%)
|
|
7
|
|
13
|
|
(46
|
%)
|
||||
Net realized capital gains (losses)
|
14
|
|
10
|
|
40
|
%
|
|
5
|
|
(86
|
)
|
(106
|
%)
|
||||
Total revenues
|
23
|
|
12
|
|
92
|
%
|
|
19
|
|
(68
|
)
|
(128
|
%)
|
||||
Insurance operating costs and other expenses [1]
|
28
|
|
33
|
|
(15
|
%)
|
|
60
|
|
75
|
|
(20
|
%)
|
||||
Loss on extinguishment of debt
|
—
|
|
—
|
|
—
|
%
|
|
—
|
|
213
|
|
(100
|
%)
|
||||
Reinsurance loss on disposition
|
—
|
|
—
|
|
—
|
%
|
|
—
|
|
69
|
|
(100
|
%)
|
||||
Interest expense
|
94
|
|
100
|
|
(6
|
%)
|
|
189
|
|
207
|
|
(9
|
%)
|
||||
Total benefits, losses and expenses
|
122
|
|
133
|
|
(8
|
%)
|
|
249
|
|
564
|
|
(56
|
%)
|
||||
Loss from continuing operations before income taxes
|
(99
|
)
|
(121
|
)
|
(18
|
%)
|
|
(230
|
)
|
(632
|
)
|
(64
|
%)
|
||||
Income tax benefit
|
(35
|
)
|
(46
|
)
|
(24
|
%)
|
|
(81
|
)
|
(199
|
)
|
(59
|
%)
|
||||
Net loss
|
$
|
(64
|
)
|
$
|
(75
|
)
|
(15
|
%)
|
|
$
|
(149
|
)
|
$
|
(433
|
)
|
(66
|
%)
|
[1]
|
Fee income includes the income associated with the sales of non-proprietary insurance products in the Company’s broker-dealer subsidiaries that has an offsetting commission expense in insurance operating costs and other expenses.
|
•
|
Insurance Risk
|
•
|
Operational Risk
|
•
|
Financial Risk
|
Coverage
|
Treaty term
|
% of layer(s) reinsurance
|
Per occurrence limit
|
|
Retention
|
||||
Principal property catastrophe program covering property catastrophe losses from a single event
|
1/1/2014 to 1/1/2015
|
90%
|
$
|
850
|
|
|
$
|
350
|
|
Reinsurance with the FHCF covering Florida Personal Lines property catastrophe losses from a single event
|
6/1/2014 to 6/1/2015
|
90%
|
$
|
119
|
|
[1]
|
$
|
43
|
|
Workers compensation losses arising from a single catastrophe event [2]
|
7/1/2014 to 7/1/2015
|
80%
|
$
|
350
|
|
|
$
|
100
|
|
[1]
|
The per occurrence limit on the FHCF treaty is $119 for the 6/1/2014 to 6/1/2015 treaty year based on the Company's election to purchase the required coverage from FHCF. Coverage is based on the best available information from FHCF, which was updated in January 2014. Updated information will be made available by the CAT fund October of 2014.
|
[2]
|
In addition, to the limit shown above, the workers compensation reinsurance includes a non-catastrophe, industrial accident layer, 80% of $30 excess a $20 retention.
|
Reinsurance Recoverable
|
As of June 30, 2014
|
As of December 31, 2013
|
||||
Paid loss and loss adjustment expenses
|
$
|
158
|
|
$
|
138
|
|
Unpaid loss and loss adjustment expenses
|
2,925
|
|
2,841
|
|
||
Gross reinsurance recoverable
|
$
|
3,083
|
|
$
|
2,979
|
|
Less: Allowance for uncollectible reinsurance
|
(248
|
)
|
(244
|
)
|
||
Net reinsurance recoverable
|
$
|
2,835
|
|
$
|
2,735
|
|
Reinsurance Recoverable
|
As of June 30, 2014
|
As of December 31, 2013
|
||||
Future policy benefits and unpaid loss and loss adjustment expenses and other policyholder funds and benefits payable
|
20,114
|
|
20,595
|
|
||
Gross reinsurance recoverable [1]
|
$
|
20,114
|
|
$
|
20,595
|
|
•
|
Liquidity Risk
|
•
|
Interest Rate Risk
|
•
|
Foreign Currency Exchange Risk
|
•
|
Equity Risk
|
•
|
Credit Risk
|
•
|
reduce the value of assets under management and the amount of fee income generated from those assets;
|
•
|
increase the liability for GMWB benefits resulting in realized capital losses;
|
•
|
increase the value of derivative assets used to hedge product guarantees resulting in realized capital gains;
|
•
|
increase the costs of the hedging instruments we use in our hedging program;
|
•
|
increase the Company’s net amount at risk for GMDB;
|
•
|
decrease the Company’s projection of future estimated gross profits, resulting in a DAC unlock charge;
|
•
|
increase the amount of required assets to be held backing variable annuity guarantees to maintain required regulatory reserve levels and targeted risk based capital ratios; and
|
•
|
decrease the Company’s estimated future gross profits. See Estimated Gross Profits Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity Contracts within the Critical Accounting Estimates section of the MD&A for further information.
|
Total Variable Annuity Guarantees
|
|||||||||||||
As of June 30, 2014
|
|||||||||||||
($ in billions)
|
Account
Value
|
Gross Net
Amount at Risk
|
Retained Net
Amount at Risk
|
% of Contracts In
the Money [4]
|
% In the
Money [4] [5]
|
||||||||
U. S. Variable Annuity [1]
|
|
|
|
|
|
||||||||
GMDB [2]
|
$
|
58.4
|
|
$
|
4.0
|
|
$
|
0.9
|
|
14
|
%
|
27
|
%
|
GMWB
|
28.2
|
|
0.1
|
|
0.1
|
|
5
|
%
|
13
|
%
|
Total Variable Annuity Guarantees
|
|||||||||||||
As of December 31, 2013
|
|||||||||||||
($ in billions)
|
Account
Value
|
Gross Net
Amount at Risk
|
Retained Net
Amount at Risk
|
% of Contracts In
the Money [4]
|
% In the
Money [4] [5]
|
||||||||
U. S. Variable Annuity [1]
|
|
|
|
|
|
||||||||
GMDB [2]
|
$
|
61.8
|
|
$
|
4.3
|
|
$
|
1.0
|
|
16
|
%
|
26
|
%
|
GMWB
|
30.3
|
|
0.2
|
|
0.1
|
|
5
|
%
|
12
|
%
|
|||
Japan Variable Annuity [1] [6]
|
|
|
|
|
|
||||||||
GMDB
|
20.1
|
|
0.8
|
|
0.6
|
|
31
|
%
|
8
|
%
|
|||
GMIB [3]
|
18.5
|
|
0.1
|
|
0.1
|
|
20
|
%
|
3
|
%
|
[1]
|
Policies with a guaranteed living benefit also have a guaranteed death benefit. The net amount at risk (“NAR”) for each benefit is shown; however these benefits are not additive. When a policy terminates due to death, any NAR related to GMWB is released. Similarly, when a policy goes into benefit status on a GMWB, the GMDB NAR is reduced to zero.
|
[2]
|
Excludes group annuity contracts with GMDBs previously sold by Retirement Plans business. For further discussion of the sale of the Retirement Plans business, see Note
2
-
Business Dispositions
of Notes to Condensed Consolidated Financial Statements.
|
[3]
|
Includes small amount of GMWB and GMAB.
|
[4]
|
Excludes contracts that are fully reinsured.
|
[5]
|
For all contracts that are “in the money”, this represents the percentage by which the average contract was in the money.
|
[6]
|
On June 30, 2014, the Company completed the sale of the Japan variable annuity business of Hartford Life Insurance KK, ("HLIKK"), an indirect wholly-owned subsidiary. For further information of the sale of the Japan variable annuity business, HLIKK in 2014, see Note
2
-
Business Dispositions
of Notes to Condensed Consolidated Financial Statements.
|
Variable Annuity Guarantees [1]
|
U.S. GAAP Treatment [1]
|
Primary Market Risk Exposures [1]
|
U.S. Variable Guarantees
|
||
GMDB
|
Accumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paid
|
Equity Market Levels
|
GMWB
|
Fair Value
|
Equity Market Levels / Implied Volatility / Interest Rates
|
For Life Component of GMWB
|
Accumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paid
|
Equity Market Levels
|
[1]
|
Each of these guarantees and the related U.S. GAAP accounting volatility will also be influenced by actual and estimated policyholder behavior.
|
GAAP Sensitivity Analysis
|
As of June 30, 2014
|
|||||||||||||||||
(pre Tax/DAC) [1]
|
Programs
|
|||||||||||||||||
|
GMWB
|
Macro [2]
|
||||||||||||||||
Equity Market Return
|
-20
|
%
|
-10
|
%
|
10
|
%
|
-20
|
%
|
-10
|
%
|
10
|
%
|
||||||
Potential Net Fair Value Impact
|
$
|
5
|
|
$
|
—
|
|
$
|
2
|
|
$
|
91
|
|
$
|
31
|
|
$
|
(20
|
)
|
Interest Rates
|
-50 bps
|
|
-25 bps
|
|
+25 bps
|
|
-50 bps
|
|
-25 bps
|
|
+25 bps
|
|
||||||
Potential Net Fair Value Impact
|
$
|
3
|
|
$
|
2
|
|
$
|
(1
|
)
|
$
|
15
|
|
$
|
7
|
|
$
|
(7
|
)
|
Implied Volatilities
|
10
|
%
|
2
|
%
|
-10
|
%
|
10
|
%
|
2
|
%
|
-10
|
%
|
||||||
Potential Net Fair Value Impact
|
$
|
30
|
|
$
|
6
|
|
$
|
(17
|
)
|
$
|
86
|
|
$
|
17
|
|
$
|
(80
|
)
|
[1]
|
These sensitivities are based on the following key market levels as of
June 30, 2014
: 1) S&P of 1960; 2) 10yr US swap rate of 2.74%; and 3) S&P 10yr volatility of 22.71%
|
[2]
|
The GAAP sensitivity for US Macro Program reflects additional trades executed in July.
|
•
|
The sensitivity analysis is only valid as of the measurement date and assumes instantaneous changes in the capital market factors and no ability to rebalance hedge positions prior to the market changes;
|
•
|
Changes to the underlying hedging program, policyholder behavior, and variation in underlying fund performance relative to the hedged index, which could materially impact the liability; and
|
•
|
The impact of elapsed time on liabilities or hedge assets, any non-parallel shifts in capital market factors, or correlated moves across the sensitivities.
|
•
|
In general, as equity market levels and interest rates decline, the amount and volatility of both our actual potential obligation, as well as the related statutory surplus and capital margin for death and living benefit guarantees associated with U.S. variable annuity contracts can be materially negatively affected, sometimes at a greater than linear rate. Other market factors that can impact statutory surplus, reserve levels and capital margin include differences in performance of variable subaccounts relative to indices and/or realized equity and interest rate volatilities. In addition, as equity market levels increase, generally surplus levels will increase. RBC ratios will also tend to increase when equity markets increase. However, as a result of a number of factors and market conditions, including the level of hedging costs and other risk transfer activities, reserve requirements for death and living benefit guarantees and RBC requirements could increase with rising equity markets, resulting in lower RBC ratios. Non-market factors, which can also impact the amount and volatility of both our actual potential obligation, as well as the related statutory surplus and capital margin, include actual and estimated policyholder behavior experience as it pertains to lapsation, partial withdrawals, and mortality.
|
•
|
As the value of certain fixed-income and equity securities in our investment portfolio decreases, due in part to credit spread widening, statutory surplus and RBC ratios may decrease.
|
•
|
As the value of certain derivative instruments that do not get hedge accounting decreases, statutory surplus and RBC ratios may decrease.
|
•
|
Our statutory surplus is also impacted by widening credit spreads as a result of the accounting for the assets and liabilities in our fixed market value adjusted (“MVA”) annuities. Statutory separate account assets supporting the fixed MVA annuities are recorded at fair value. In determining the statutory reserve for the fixed MVA annuities, we are required to use current crediting rates in the U.S. In many capital market scenarios, current crediting rates in the U.S. are highly correlated with market rates implicit in the fair value of statutory separate account assets. As a result, the change in statutory reserve from period to period will likely substantially offset the change in the fair value of the statutory separate account assets. However, in periods of volatile credit markets, such as we have experienced in 2008 and 2009, actual credit spreads on investment assets may increase sharply for certain sub-sectors of the overall credit market, resulting in statutory separate account asset market value losses. As actual credit spreads are not fully reflected in the current crediting rates in the U.S. the calculation of statutory reserves will not substantially offset the change in fair value of the statutory separate account assets resulting in reductions in statutory surplus. This has resulted and may continue to result in the need to devote significant additional capital to support the product.
|
•
|
With respect to our fixed annuity business, sustained low interest rates may result in a reduction in statutory surplus and an increase in NAIC required capital.
|
Fixed Maturities by Credit Quality
|
||||||||||||||||
|
June 30, 2014
|
December 31, 2013
|
||||||||||||||
|
Amortized Cost
|
Fair Value
|
Percent of Total Fair Value
|
Amortized Cost
|
Fair Value
|
Percent of Total Fair Value
|
||||||||||
United States Government/Government agencies
|
$
|
7,295
|
|
$
|
7,569
|
|
12.5
|
%
|
$
|
8,231
|
|
$
|
8,208
|
|
13.2
|
%
|
AAA
|
6,468
|
|
6,731
|
|
11.2
|
%
|
6,215
|
|
6,376
|
|
10.2
|
%
|
||||
AA
|
9,754
|
|
10,458
|
|
17.4
|
%
|
12,054
|
|
12,273
|
|
19.7
|
%
|
||||
A
|
15,088
|
|
16,437
|
|
27.3
|
%
|
14,777
|
|
15,498
|
|
24.9
|
%
|
||||
BBB
|
14,249
|
|
15,402
|
|
25.5
|
%
|
15,555
|
|
16,087
|
|
25.7
|
%
|
||||
BB & below
|
3,464
|
|
3,649
|
|
6.1
|
%
|
3,809
|
|
3,915
|
|
6.3
|
%
|
||||
Total fixed maturities, AFS
|
$
|
56,318
|
|
$
|
60,246
|
|
100
|
%
|
$
|
60,641
|
|
$
|
62,357
|
|
100
|
%
|
Securities by Type
|
|||||||||||||||||||||||||||||||||||||
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||||||||||||||||||||||||
|
Cost or Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|
Cost or Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Percent of Total Fair Value
|
||||||||||||||||||
ABS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Consumer loans
|
$
|
1,903
|
|
|
$
|
13
|
|
|
$
|
(29
|
)
|
|
$
|
1,887
|
|
|
3.1
|
%
|
|
$
|
1,982
|
|
|
$
|
11
|
|
|
$
|
(48
|
)
|
|
$
|
1,945
|
|
|
3.1
|
%
|
Small business
|
177
|
|
|
12
|
|
|
(11
|
)
|
|
178
|
|
|
0.3
|
%
|
|
194
|
|
|
3
|
|
|
(16
|
)
|
|
181
|
|
|
0.3
|
%
|
||||||||
Other
|
233
|
|
|
11
|
|
|
—
|
|
|
244
|
|
|
0.4
|
%
|
|
228
|
|
|
11
|
|
|
—
|
|
|
239
|
|
|
0.4
|
%
|
||||||||
Collateralized debt obligations ("CDOs")
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Collateralized loan obligations (“CLOs”)
|
1,842
|
|
|
4
|
|
|
(23
|
)
|
|
1,823
|
|
|
3.0
|
%
|
|
1,781
|
|
|
3
|
|
|
(34
|
)
|
|
1,750
|
|
|
2.8
|
%
|
||||||||
Commercial real estate ("CREs")
|
135
|
|
|
96
|
|
|
(12
|
)
|
|
219
|
|
|
0.4
|
%
|
|
176
|
|
|
88
|
|
|
(16
|
)
|
|
248
|
|
|
0.4
|
%
|
||||||||
Other [1]
|
383
|
|
|
18
|
|
|
(12
|
)
|
|
392
|
|
|
0.7
|
%
|
|
383
|
|
|
17
|
|
|
(9
|
)
|
|
389
|
|
|
0.6
|
%
|
||||||||
Commercial mortgage-backed securities ("CMBS")
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Agency backed [2]
|
1,145
|
|
|
45
|
|
|
(3
|
)
|
|
1,187
|
|
|
2.0
|
%
|
|
1,068
|
|
|
20
|
|
|
(12
|
)
|
|
1,076
|
|
|
1.7
|
%
|
||||||||
Bonds
|
2,899
|
|
|
151
|
|
|
(11
|
)
|
|
3,039
|
|
|
5.0
|
%
|
|
2,836
|
|
|
168
|
|
|
(31
|
)
|
|
2,973
|
|
|
4.8
|
%
|
||||||||
Interest only (“IOs”)
|
451
|
|
|
30
|
|
|
(11
|
)
|
|
470
|
|
|
0.8
|
%
|
|
384
|
|
|
28
|
|
|
(15
|
)
|
|
397
|
|
|
0.6
|
%
|
||||||||
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Basic industry
|
1,868
|
|
|
133
|
|
|
(7
|
)
|
|
1,994
|
|
|
3.3
|
%
|
|
2,085
|
|
|
106
|
|
|
(38
|
)
|
|
2,153
|
|
|
3.5
|
%
|
||||||||
Capital goods
|
1,933
|
|
|
208
|
|
|
(2
|
)
|
|
2,139
|
|
|
3.6
|
%
|
|
2,077
|
|
|
161
|
|
|
(14
|
)
|
|
2,224
|
|
|
3.6
|
%
|
||||||||
Consumer cyclical
|
1,652
|
|
|
132
|
|
|
(2
|
)
|
|
1,782
|
|
|
3.0
|
%
|
|
1,801
|
|
|
119
|
|
|
(17
|
)
|
|
1,903
|
|
|
3.1
|
%
|
||||||||
Consumer non-cyclical
|
3,466
|
|
|
364
|
|
|
(1
|
)
|
|
3,829
|
|
|
6.4
|
%
|
|
3,600
|
|
|
288
|
|
|
(21
|
)
|
|
3,867
|
|
|
6.2
|
%
|
||||||||
Energy [3]
|
3,411
|
|
|
374
|
|
|
(3
|
)
|
|
3,782
|
|
|
6.3
|
%
|
|
2,384
|
|
|
174
|
|
|
(17
|
)
|
|
2,541
|
|
|
4.1
|
%
|
||||||||
Financial services
|
5,171
|
|
|
417
|
|
|
(88
|
)
|
|
5,500
|
|
|
9.1
|
%
|
|
5,044
|
|
|
287
|
|
|
(145
|
)
|
|
5,186
|
|
|
8.3
|
%
|
||||||||
Tech./comm.
|
3,197
|
|
|
368
|
|
|
(6
|
)
|
|
3,559
|
|
|
5.9
|
%
|
|
3,223
|
|
|
223
|
|
|
(28
|
)
|
|
3,418
|
|
|
5.5
|
%
|
||||||||
Transportation
|
891
|
|
|
85
|
|
|
(2
|
)
|
|
974
|
|
|
1.6
|
%
|
|
972
|
|
|
65
|
|
|
(13
|
)
|
|
1,024
|
|
|
1.6
|
%
|
||||||||
Utilities [3]
|
4,452
|
|
|
471
|
|
|
(14
|
)
|
|
4,909
|
|
|
8.1
|
%
|
|
5,605
|
|
|
386
|
|
|
(51
|
)
|
|
5,940
|
|
|
9.5
|
%
|
||||||||
Other
|
182
|
|
|
18
|
|
|
—
|
|
|
200
|
|
|
0.3
|
%
|
|
222
|
|
|
14
|
|
|
(2
|
)
|
|
234
|
|
|
0.4
|
%
|
||||||||
Foreign govt./govt. agencies
|
1,650
|
|
|
79
|
|
|
(22
|
)
|
|
1,707
|
|
|
2.8
|
%
|
|
4,228
|
|
|
52
|
|
|
(176
|
)
|
|
4,104
|
|
|
6.6
|
%
|
||||||||
Municipal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Taxable
|
1,129
|
|
|
101
|
|
|
(5
|
)
|
|
1,225
|
|
|
2.0
|
%
|
|
1,299
|
|
|
32
|
|
|
(67
|
)
|
|
1,264
|
|
|
2.0
|
%
|
||||||||
Tax-exempt
|
10,667
|
|
|
832
|
|
|
(11
|
)
|
|
11,488
|
|
|
19.1
|
%
|
|
10,633
|
|
|
393
|
|
|
(117
|
)
|
|
10,909
|
|
|
17.5
|
%
|
||||||||
RMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Agency
|
2,993
|
|
|
103
|
|
|
(7
|
)
|
|
3,089
|
|
|
5.1
|
%
|
|
3,366
|
|
|
59
|
|
|
(38
|
)
|
|
3,387
|
|
|
5.4
|
%
|
||||||||
Non-agency
|
120
|
|
|
5
|
|
|
—
|
|
|
125
|
|
|
0.2
|
%
|
|
86
|
|
|
—
|
|
|
—
|
|
|
86
|
|
|
0.1
|
%
|
||||||||
Sub-prime
|
1,211
|
|
|
27
|
|
|
(26
|
)
|
|
1,212
|
|
|
2.0
|
%
|
|
1,187
|
|
|
31
|
|
|
(44
|
)
|
|
1,174
|
|
|
1.9
|
%
|
||||||||
U.S. Treasuries
|
3,157
|
|
|
146
|
|
|
(10
|
)
|
|
3,293
|
|
|
5.5
|
%
|
|
3,797
|
|
|
7
|
|
|
(59
|
)
|
|
3,745
|
|
|
6.0
|
%
|
||||||||
Fixed maturities, AFS
|
56,318
|
|
|
4,243
|
|
|
(318
|
)
|
|
60,246
|
|
|
100
|
%
|
|
60,641
|
|
|
2,746
|
|
|
(1,028
|
)
|
|
62,357
|
|
|
100
|
%
|
||||||||
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Financial services
|
213
|
|
|
21
|
|
|
(16
|
)
|
|
218
|
|
|
26.5
|
%
|
|
233
|
|
|
11
|
|
|
(29
|
)
|
|
215
|
|
|
24.8
|
%
|
||||||||
Other
|
566
|
|
|
56
|
|
|
(17
|
)
|
|
605
|
|
|
73.5
|
%
|
|
617
|
|
|
56
|
|
|
(20
|
)
|
|
653
|
|
|
75.2
|
%
|
||||||||
Equity securities, AFS
|
779
|
|
|
77
|
|
|
(33
|
)
|
|
823
|
|
|
100
|
%
|
|
850
|
|
|
67
|
|
|
(49
|
)
|
|
868
|
|
|
100
|
%
|
||||||||
Total AFS securities
|
$
|
57,097
|
|
|
$
|
4,320
|
|
|
$
|
(351
|
)
|
|
$
|
61,069
|
|
|
|
|
$
|
61,491
|
|
|
$
|
2,813
|
|
|
$
|
(1,077
|
)
|
|
$
|
63,225
|
|
|
|
||
Fixed maturities, FVO
|
|
|
|
|
|
|
$
|
410
|
|
|
|
|
|
|
|
|
|
|
$
|
844
|
|
|
|
[1]
|
Gross unrealized gains (losses) exclude the fair value of bifurcated embedded derivative features of certain securities. Changes in value are recorded in net realized capital gains (losses).
|
[2]
|
Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
|
[3]
|
Securities with an amortized cost and fair value of $1.0 billion and $1.1 billion, respectively, as of December 31, 2013, were reclassified as of June 30, 2014 from utilities to energy as a result of an update to the Barclays bond index which is the primary component used in determining the classification in the above table.
|
|
June 30, 2014
|
December 31, 2013
|
||||||||||
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||
Argentina
|
$
|
3
|
|
$
|
3
|
|
$
|
38
|
|
$
|
40
|
|
Brazil
|
171
|
|
174
|
|
274
|
|
257
|
|
||||
India
|
57
|
|
60
|
|
62
|
|
62
|
|
||||
Indonesia
|
95
|
|
91
|
|
107
|
|
93
|
|
||||
Lebanon
|
29
|
|
29
|
|
26
|
|
26
|
|
||||
South Africa
|
56
|
|
55
|
|
65
|
|
60
|
|
||||
Turkey
|
64
|
|
65
|
|
88
|
|
79
|
|
||||
Ukraine
|
5
|
|
5
|
|
50
|
|
50
|
|
||||
Uruguay
|
26
|
|
27
|
|
27
|
|
25
|
|
||||
Venezuela
|
5
|
|
5
|
|
67
|
|
60
|
|
||||
Other
|
21
|
|
22
|
|
—
|
|
—
|
|
||||
Total
|
$
|
532
|
|
$
|
536
|
|
$
|
804
|
|
$
|
752
|
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||||||||||
|
Amortized Cost
|
|
Fair Value
|
|
Net Unrealized
|
|
Amortized Cost
|
|
Fair Value
|
|
Net Unrealized
|
||||||||||||
AAA
|
$
|
39
|
|
|
$
|
41
|
|
|
$
|
2
|
|
|
$
|
49
|
|
|
$
|
52
|
|
|
$
|
3
|
|
AA
|
494
|
|
|
531
|
|
|
37
|
|
|
468
|
|
|
493
|
|
|
25
|
|
||||||
A
|
2,696
|
|
|
2,880
|
|
|
184
|
|
|
2,518
|
|
|
2,616
|
|
|
98
|
|
||||||
BBB
|
1,890
|
|
|
1,957
|
|
|
67
|
|
|
1,978
|
|
|
1,952
|
|
|
(26
|
)
|
||||||
BB & below
|
265
|
|
|
309
|
|
|
44
|
|
|
264
|
|
|
288
|
|
|
24
|
|
||||||
Total
|
$
|
5,384
|
|
|
$
|
5,718
|
|
|
$
|
334
|
|
|
$
|
5,277
|
|
|
$
|
5,401
|
|
|
$
|
124
|
|
June 30, 2014
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
BB and Below
|
|
Total
|
||||||||||||||||||||||||||||||||||||
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||||||||||||||||||
2003 & Prior
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
19
|
|
|
$
|
20
|
|
|
$
|
17
|
|
|
$
|
18
|
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
22
|
|
|
$
|
25
|
|
|
$
|
78
|
|
|
$
|
83
|
|
2004
|
35
|
|
|
35
|
|
|
82
|
|
|
89
|
|
|
19
|
|
|
19
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
140
|
|
|
147
|
|
||||||||||||
2005
|
270
|
|
|
286
|
|
|
86
|
|
|
90
|
|
|
94
|
|
|
97
|
|
|
89
|
|
|
90
|
|
|
46
|
|
|
46
|
|
|
585
|
|
|
609
|
|
||||||||||||
2006
|
304
|
|
|
324
|
|
|
105
|
|
|
114
|
|
|
114
|
|
|
122
|
|
|
81
|
|
|
85
|
|
|
127
|
|
|
127
|
|
|
731
|
|
|
772
|
|
||||||||||||
2007
|
215
|
|
|
230
|
|
|
191
|
|
|
205
|
|
|
78
|
|
|
84
|
|
|
41
|
|
|
41
|
|
|
109
|
|
|
108
|
|
|
634
|
|
|
668
|
|
||||||||||||
2008
|
43
|
|
|
48
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43
|
|
|
48
|
|
||||||||||||
2009
|
11
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
12
|
|
||||||||||||
2010
|
18
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
20
|
|
||||||||||||
2011
|
56
|
|
|
62
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
68
|
|
||||||||||||
2012
|
44
|
|
|
45
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
14
|
|
|
11
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
69
|
|
|
70
|
|
||||||||||||
2013
|
29
|
|
|
29
|
|
|
94
|
|
|
97
|
|
|
71
|
|
|
75
|
|
|
12
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
206
|
|
|
214
|
|
||||||||||||
2014
|
294
|
|
|
299
|
|
|
21
|
|
|
22
|
|
|
7
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
322
|
|
|
328
|
|
||||||||||||
Total
|
$
|
1,328
|
|
|
$
|
1,399
|
|
|
$
|
598
|
|
|
$
|
637
|
|
|
$
|
414
|
|
|
$
|
436
|
|
|
$
|
255
|
|
|
$
|
261
|
|
|
$
|
304
|
|
|
$
|
306
|
|
|
$
|
2,899
|
|
|
$
|
3,039
|
|
Credit protection
|
32.7%
|
|
24.7%
|
|
20.2%
|
|
24.5%
|
|
9.4%
|
|
26.1%
|
December 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
BB and Below
|
|
Total
|
||||||||||||||||||||||||||||||||||||
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||||||||||||||||||
2003
& Prior |
$
|
10
|
|
|
$
|
10
|
|
|
$
|
35
|
|
|
$
|
36
|
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
31
|
|
|
$
|
33
|
|
|
$
|
92
|
|
|
$
|
95
|
|
2004
|
79
|
|
|
80
|
|
|
77
|
|
|
83
|
|
|
29
|
|
|
29
|
|
|
13
|
|
|
13
|
|
|
7
|
|
|
12
|
|
|
205
|
|
|
217
|
|
||||||||||||
2005
|
307
|
|
|
324
|
|
|
79
|
|
|
82
|
|
|
101
|
|
|
104
|
|
|
71
|
|
|
71
|
|
|
68
|
|
|
75
|
|
|
626
|
|
|
656
|
|
||||||||||||
2006
|
336
|
|
|
362
|
|
|
107
|
|
|
116
|
|
|
120
|
|
|
127
|
|
|
102
|
|
|
106
|
|
|
224
|
|
|
238
|
|
|
889
|
|
|
949
|
|
||||||||||||
2007
|
188
|
|
|
202
|
|
|
211
|
|
|
218
|
|
|
112
|
|
|
127
|
|
|
—
|
|
|
—
|
|
|
130
|
|
|
125
|
|
|
641
|
|
|
672
|
|
||||||||||||
2008
|
43
|
|
|
49
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43
|
|
|
49
|
|
||||||||||||
2009
|
11
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
||||||||||||
2010
|
18
|
|
|
19
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
19
|
|
||||||||||||
2011
|
63
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
69
|
|
|
71
|
|
||||||||||||
2012
|
35
|
|
|
34
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
|
11
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
52
|
|
||||||||||||
2013
|
30
|
|
|
29
|
|
|
89
|
|
|
86
|
|
|
59
|
|
|
58
|
|
|
10
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
188
|
|
|
182
|
|
||||||||||||
Total
|
$
|
1,120
|
|
|
$
|
1,186
|
|
|
$
|
598
|
|
|
$
|
621
|
|
|
$
|
435
|
|
|
$
|
459
|
|
|
$
|
223
|
|
|
$
|
224
|
|
|
$
|
460
|
|
|
$
|
483
|
|
|
$
|
2,836
|
|
|
$
|
2,973
|
|
Credit
protection |
31.9%
|
|
25.9%
|
|
19.7%
|
|
19.8%
|
|
12.2%
|
|
24.6%
|
[1]
|
The vintage year represents the year the pool of loans was originated.
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||||||||||
|
Amortized Cost [1]
|
|
Valuation Allowance
|
|
Carrying Value
|
|
Amortized Cost [1]
|
|
Valuation Allowance
|
|
Carrying Value
|
||||||||||||
Agricultural
|
$
|
68
|
|
|
$
|
(6
|
)
|
|
$
|
62
|
|
|
$
|
132
|
|
|
$
|
(7
|
)
|
|
$
|
125
|
|
Whole loans
|
5,345
|
|
|
(13
|
)
|
|
5,332
|
|
|
5,223
|
|
|
(10
|
)
|
|
5,213
|
|
||||||
A-Note participations
|
156
|
|
|
—
|
|
|
156
|
|
|
192
|
|
|
—
|
|
|
192
|
|
||||||
B-Note participations
|
17
|
|
|
—
|
|
|
17
|
|
|
99
|
|
|
(50
|
)
|
|
49
|
|
||||||
Mezzanine loans
|
19
|
|
|
—
|
|
|
19
|
|
|
19
|
|
|
—
|
|
|
19
|
|
||||||
Total
|
$
|
5,605
|
|
|
$
|
(19
|
)
|
|
$
|
5,586
|
|
|
$
|
5,665
|
|
|
$
|
(67
|
)
|
|
$
|
5,598
|
|
[1]
|
Amortized cost represents carrying value prior to valuation allowances, if any.
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||||||
|
Amortized Cost
|
|
Market Value
|
|
Weighted Average Credit Quality
|
|
Amortized Cost
|
|
Market Value
|
|
Weighted Average Credit Quality
|
||||||||
General Obligation
|
$
|
2,277
|
|
|
$
|
2,484
|
|
|
AA-
|
|
$
|
2,358
|
|
|
$
|
2,455
|
|
|
AA
|
Pre-Refunded [1]
|
597
|
|
|
630
|
|
|
AAA
|
|
567
|
|
|
605
|
|
|
AAA
|
||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transportation
|
1,715
|
|
|
1,857
|
|
|
A+
|
|
1,880
|
|
|
1,879
|
|
|
A
|
||||
Health Care
|
1,409
|
|
|
1,524
|
|
|
AA-
|
|
1,305
|
|
|
1,335
|
|
|
AA
|
||||
Water & Sewer
|
1,201
|
|
|
1,281
|
|
|
AA
|
|
1,455
|
|
|
1,476
|
|
|
AA-
|
||||
Education
|
1,141
|
|
|
1,229
|
|
|
AA
|
|
1,077
|
|
|
1,105
|
|
|
AA
|
||||
Leasing [2]
|
814
|
|
|
892
|
|
|
A+
|
|
877
|
|
|
897
|
|
|
AA-
|
||||
Sales Tax
|
874
|
|
|
949
|
|
|
AA-
|
|
793
|
|
|
795
|
|
|
AA-
|
||||
Power
|
724
|
|
|
779
|
|
|
A+
|
|
706
|
|
|
722
|
|
|
A+
|
||||
Housing
|
166
|
|
|
168
|
|
|
AA
|
|
177
|
|
|
171
|
|
|
AA
|
||||
Other
|
878
|
|
|
920
|
|
|
AA-
|
|
737
|
|
|
733
|
|
|
A+
|
||||
Total Revenue
|
8,922
|
|
|
9,599
|
|
|
AA-
|
|
9,007
|
|
|
9,113
|
|
|
AA-
|
||||
Total Municipal
|
$
|
11,796
|
|
|
$
|
12,713
|
|
|
AA-
|
|
$
|
11,932
|
|
|
$
|
12,173
|
|
|
AA-
|
[1]
|
Pre-refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the remaining payments of principal and interest.
|
[2]
|
Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments.
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
||||||
Hedge funds
|
$
|
1,135
|
|
|
39.2
|
%
|
|
$
|
1,341
|
|
|
44.1
|
%
|
Mortgage and real estate funds
|
576
|
|
|
19.8
|
%
|
|
534
|
|
|
17.6
|
%
|
||
Mezzanine debt funds
|
70
|
|
|
2.4
|
%
|
|
82
|
|
|
2.7
|
%
|
||
Private equity and other funds
|
1,121
|
|
|
38.6
|
%
|
|
1,083
|
|
|
35.6
|
%
|
||
Total
|
$
|
2,902
|
|
|
100
|
%
|
|
$
|
3,040
|
|
|
100
|
%
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||||||||||||||||
Consecutive Months
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss [1]
|
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss [1]
|
||||||||||||||
Three months or less
|
817
|
|
|
$
|
1,729
|
|
|
$
|
1,714
|
|
|
$
|
(15
|
)
|
|
1,184
|
|
|
$
|
10,056
|
|
|
$
|
9,939
|
|
|
$
|
(117
|
)
|
Greater than three to six months
|
284
|
|
|
379
|
|
|
375
|
|
|
(4
|
)
|
|
349
|
|
|
1,200
|
|
|
1,167
|
|
|
(33
|
)
|
||||||
Greater than six to nine months
|
129
|
|
|
158
|
|
|
157
|
|
|
(1
|
)
|
|
956
|
|
|
6,362
|
|
|
5,988
|
|
|
(374
|
)
|
||||||
Greater than nine to eleven months
|
99
|
|
|
97
|
|
|
94
|
|
|
(3
|
)
|
|
148
|
|
|
413
|
|
|
374
|
|
|
(39
|
)
|
||||||
Twelve months or more
|
872
|
|
|
6,725
|
|
|
6,400
|
|
|
(328
|
)
|
|
578
|
|
|
5,625
|
|
|
5,109
|
|
|
(514
|
)
|
||||||
Total
|
2,201
|
|
|
$
|
9,088
|
|
|
$
|
8,740
|
|
|
$
|
(351
|
)
|
|
3,215
|
|
|
$
|
23,656
|
|
|
$
|
22,577
|
|
|
$
|
(1,077
|
)
|
[1]
|
Unrealized losses exclude the fair value of bifurcated embedded derivative features of certain securities as changes in value are recorded in net realized capital gains (losses).
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||||||||||||||||||
Consecutive Months
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss [1]
|
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss [1]
|
||||||||||||||
Three months or less
|
43
|
|
|
$
|
29
|
|
|
$
|
22
|
|
|
$
|
(7
|
)
|
|
63
|
|
|
$
|
213
|
|
|
$
|
162
|
|
|
$
|
(51
|
)
|
Greater than three to six months
|
22
|
|
|
20
|
|
|
15
|
|
|
(5
|
)
|
|
20
|
|
|
177
|
|
|
130
|
|
|
(47
|
)
|
||||||
Greater than six to nine months
|
10
|
|
|
50
|
|
|
39
|
|
|
(11
|
)
|
|
28
|
|
|
449
|
|
|
336
|
|
|
(113
|
)
|
||||||
Greater than nine to eleven months
|
9
|
|
|
2
|
|
|
1
|
|
|
(1
|
)
|
|
10
|
|
|
4
|
|
|
3
|
|
|
(1
|
)
|
||||||
Twelve months or more
|
57
|
|
|
73
|
|
|
50
|
|
|
(23
|
)
|
|
58
|
|
|
132
|
|
|
93
|
|
|
(39
|
)
|
||||||
Total
|
141
|
|
|
$
|
174
|
|
|
$
|
127
|
|
|
$
|
(47
|
)
|
|
179
|
|
|
$
|
975
|
|
|
$
|
724
|
|
|
$
|
(251
|
)
|
[1]
|
Unrealized losses exclude the fair value of bifurcated embedded derivatives features of certain securities as changes in value are recorded in net realized capital gains (losses).
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||
|
2014
|
2013
|
2014
|
2013
|
||||||||
ABS
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
4
|
|
CRE CDOs
|
—
|
|
—
|
|
—
|
|
2
|
|
||||
CMBS
|
|
|
|
|
||||||||
Bonds
|
—
|
|
6
|
|
—
|
|
9
|
|
||||
IOs
|
—
|
|
1
|
|
—
|
|
1
|
|
||||
Corporate
|
4
|
|
5
|
|
22
|
|
10
|
|
||||
Equity
|
—
|
|
—
|
|
2
|
|
6
|
|
||||
Municipal
|
1
|
|
—
|
|
1
|
|
—
|
|
||||
RMBS
|
|
|
|
|
||||||||
Agency
|
1
|
|
—
|
|
3
|
|
—
|
|
||||
Sub-prime
|
1
|
|
—
|
|
1
|
|
1
|
|
||||
Other
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Total
|
$
|
7
|
|
$
|
12
|
|
$
|
29
|
|
$
|
33
|
|
Fixed maturities
|
$
|
25,399
|
|
Short-term investments
|
1,299
|
|
|
Cash
|
178
|
|
|
Less: Derivative collateral
|
199
|
|
|
Total
|
$
|
26,677
|
|
Fixed maturities
|
$
|
34,443
|
|
Short-term investments
|
2,741
|
|
|
Cash
|
1,330
|
|
|
Less: Derivative collateral
|
1,060
|
|
|
Total
|
$
|
37,454
|
|
Contractholder Obligations
|
June 30, 2014
|
||
Total Life contractholder obligations
|
$
|
194,716
|
|
Less: Separate account assets [1]
|
141,523
|
|
|
General account contractholder obligations
|
$
|
53,193
|
|
Composition of General Account Contractholder Obligations
|
|
||
Contracts without a surrender provision and/or fixed payout dates [2]
|
$
|
22,325
|
|
U.S. Fixed MVA annuities and Other [3]
|
9,429
|
|
|
Guaranteed investment contracts (“GIC”) [4]
|
30
|
|
|
Other [5]
|
21,409
|
|
|
General account contractholder obligations
|
$
|
53,193
|
|
[1]
|
In the event customers elect to surrender separate account assets or international statutory separate accounts, Life Operations will use the proceeds from the sale of the assets to fund the surrender, and Life Operations’ liquidity position will not be impacted. In many instances Life Operations will receive a percentage of the surrender amount as compensation for early surrender (surrender charge), increasing Life Operations’ liquidity position. In addition, a surrender of variable annuity separate account or general account assets (see below) will decrease Life Operations’ obligation for payments on guaranteed living and death benefits.
|
[2]
|
Relates to contracts such as payout annuities or institutional notes, other than guaranteed investment products with an MVA feature (discussed below) or surrenders of term life, group benefit contracts or death and living benefit reserves for which surrenders will have no current effect on Life Operations’ liquidity requirements.
|
[3]
|
Relates to annuities that are recorded in the general account (under U.S. GAAP), although these annuities are held in a statutory separate account, as the contractholders are subject to the Company's credit risk. In the statutory separate account, Life Operations is required to maintain invested assets with a fair value greater than or equal to the MVA surrender value of the Fixed MVA contract. In the event assets decline in value at a greater rate than the MVA surrender value of the Fixed MVA contract, Life Operations is required to contribute additional capital to the statutory separate account. Life Operations will fund these required contributions with operating cash flows or short-term investments. In the event that operating cash flows or short-term investments are not sufficient to fund required contributions, the Company may have to sell other invested assets at a loss, potentially resulting in a decrease in statutory surplus. As the fair value of invested assets in the statutory separate account are generally equal to the MVA surrender value of the Fixed MVA contract, surrender of Fixed MVA annuities will have an insignificant impact on the liquidity requirements of Life Operations.
|
[4]
|
GICs are subject to discontinuance provisions which allow the policyholders to terminate their contracts prior to scheduled maturity at the lesser of the book value or market value. Generally, the market value adjustment reflects changes in interest rates and credit spreads. As a result, the market value adjustment feature in the GIC serves to protect the Company from interest rate risks and limit Life Operations’ liquidity requirements in the event of a surrender.
|
[5]
|
Surrenders of, or policy loans taken from, as applicable, these general account liabilities, which include the general account option for Talcott Resolution’s individual variable annuities and the variable life contracts of the former Individual Life business, the general account option for annuities of the former Retirement Plans business and universal life contracts sold by the former Individual Life business, may be funded through operating cash flows of Life Operations, available short-term investments, or Life Operations may be required to sell fixed maturity investments to fund the surrender payment. Sales of fixed maturity investments could result in the recognition of realized losses and insufficient proceeds to fully fund the surrender amount. In this circumstance, Life Operations may need to take other actions, including enforcing certain contract provisions which could restrict surrenders and/or slow or defer payouts. See Note
2
-
Business Dispositions
of Notes to Condensed Consolidated Financial Statements as to the sale of the Retirement Plans and Individual Life businesses and related transfer of invested assets in January 2013.
|
|
June 30, 2014
|
December 31, 2013
|
Change
|
|||||
Short-term debt (includes current maturities of long-term debt)
|
$
|
289
|
|
$
|
200
|
|
45
|
%
|
Short-term due on revolving credit facility
|
—
|
|
238
|
|
(100
|
)%
|
||
Long-term debt
|
5,819
|
|
6,106
|
|
(5
|
)%
|
||
Total debt [1]
|
6,108
|
|
6,544
|
|
(7
|
)%
|
||
Stockholders’ equity excluding accumulated other comprehensive income (loss), net of tax (“AOCI”)
|
18,266
|
|
18,984
|
|
(4
|
)%
|
||
AOCI, net of tax
|
1,162
|
|
(79
|
)
|
NM
|
|
||
Total stockholders’ equity
|
$
|
19,428
|
|
$
|
18,905
|
|
3
|
%
|
Total capitalization including AOCI
|
$
|
25,536
|
|
$
|
25,449
|
|
—
|
%
|
Debt to stockholders’ equity
|
31
|
%
|
35
|
%
|
|
|||
Debt to capitalization
|
24
|
%
|
26
|
%
|
|
[1]
|
Total debt of the Company excludes
$77
and
$84
of consumer notes as of
June 30, 2014
and
December 31, 2013
, respectively
.
|
|
Six Months Ended June 30,
|
|||||
|
2014
|
2013
|
||||
Net cash provided by operating activities
|
$
|
510
|
|
$
|
408
|
|
Net cash provided by used for investing activities
|
$
|
1,729
|
|
$
|
1,519
|
|
Net cash used for financing activities
|
$
|
(2,040
|
)
|
$
|
(2,371
|
)
|
Cash – end of period
|
$
|
1,512
|
|
$
|
1,740
|
|
Insurance Financial Strength Ratings:
|
A.M. Best
|
|
Fitch
|
|
Standard & Poor’s
|
|
Moody’s
|
Hartford Fire Insurance Company
|
A
|
|
A+
|
|
A
|
|
A2
|
Hartford Life Insurance Company
|
A-
|
|
BBB+
|
|
BBB+
|
|
Baa2
|
Hartford Life and Accident Insurance Company
|
A
|
|
A
|
|
A
|
|
A3
|
Hartford Life and Annuity Insurance Company
|
A-
|
|
BBB+
|
|
BBB+
|
|
Baa2
|
Other Ratings:
|
|
|
|
|
|
|
|
The Hartford Financial Services Group, Inc.:
|
|
|
|
|
|
|
|
Senior debt
|
bbb+
|
|
BBB
|
|
BBB
|
|
Baa3
|
Commercial paper
|
AMB-2
|
|
F2
|
|
A-2
|
|
P-3
|
|
June 30,
2014 |
December 31, 2013
|
||||
U.S. life insurance subsidiaries, includes domestic captive insurance subsidiaries [1]
|
$
|
7,011
|
|
$
|
6,639
|
|
Property and casualty insurance subsidiaries
|
8,069
|
|
8,022
|
|
||
Total
|
$
|
15,080
|
|
$
|
14,661
|
|
Period
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid Per
Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Approximate Dollar Value
of Shares that May Yet Be
Purchased Under
the Plans or Programs [1]
|
||||||
|
|
|
|
|
(in millions)
|
||||||
April 1, 2014 - April 30, 2014
|
8,677,618
|
|
|
$
|
34.59
|
|
8,677,554
|
|
$
|
1,400
|
|
May 1, 2014 - May 31, 2014
|
1,490,558
|
|
|
$
|
34.22
|
|
1,469,600
|
|
$
|
1,350
|
|
June 1, 2014 - June 30, 2014
|
—
|
|
|
$
|
—
|
|
—
|
|
$
|
1,350
|
|
Total
|
10,168,176
|
|
|
$
|
34.54
|
|
10,147,154
|
|
|
[1]
|
In July 2014, the Board of Directors approved an increase in the Company's authorized equity repurchase program that provides the Company with the ability to repurchase
$2.775 billion
in equity during the period commencing on January 1, 2014 and ending on December 31, 2015. The Company’s repurchase authorization, which expires on December 31, 2015, permits purchases of common stock, as well as warrants or other derivative securities. Repurchases may be made in the open market, through derivative, accelerated share repurchase and other privately negotiated transactions, and through plans designed to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended. The timing of any future repurchases will be dependent upon several factors, including the market price of the Company’s securities, the Company’s capital position, consideration of the effect of any repurchases on the Company’s financial strength or credit ratings, and other corporate considerations. The repurchase program may be modified, extended or terminated by the Board of Directors at any time.
|
See Exhibits Index on page
|
152
.
|
|
|
The Hartford Financial Services Group, Inc.
|
||
|
|
(Registrant)
|
||
|
|
|||
Date:
|
July 30, 2014
|
/s/ Scott R. Lewis
|
||
|
|
Scott R. Lewis
|
||
|
|
Senior Vice President and Controller
|
||
|
|
(Chief accounting officer and duly
authorized signatory)
|
1.
|
Non-Competition and Non-Solicitation
. Executive agrees that:
|
Executive
/s/ Christopher J. Swift_________
Printed Name: Christopher Swift
Address: 49 Winfield Lane
New Canaan, CT 06840
Date:_______________________
|
On behalf of
The Hartford
/s/ Martha Gervasi_____________
Marty Gervasi
Executive Vice President,
Human Resources
Date:_______________________
|
Witness
/s/ Deborah M. Farrel__________
Witness Signature
Deborah M. Farrel
Printed Name
|
|
|
1
|
|
3.
|
Other Agreements
.
|
Title:
|
Executive Vice President – Human Resources
|
|
|
|
Notice of Award
|
|
[DATE]
|
|
|
|
[NAME]
|
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
RESTRICTED SHARES
:
[XXX] |
|
RESTRICTION PERIOD
:
[DATE] through the earlier of (i) the last day of the 20[XX] – 20[XX] Board service year (the period between dates of Annual Meetings of Stockholders) during which you were elected or (ii) the first anniversary of the award grant date. |
|
•
|
earnings per share,
|
|
•
|
return on equity,
|
|
•
|
cash flow,
|
|
•
|
return on total capital,
|
|
•
|
return on assets,
|
|
•
|
economic value added,
|
|
•
|
increase in surplus,
|
|
•
|
reductions in operating expenses,
|
|
•
|
increases in operating margins,
|
|
•
|
earnings before income taxes and depreciation,
|
|
•
|
total shareholder return,
|
|
•
|
return on invested capital,
|
|
•
|
cost reductions and savings,
|
|
•
|
earnings before interest, taxes, depreciation and amortization,
|
|
•
|
pre-tax operating income,
|
|
•
|
net income,
|
|
•
|
after-tax operating income,
|
|
•
|
core earnings or core earnings per share, or
|
|
•
|
productivity improvements,
|
|
•
|
determined solely by reference to any one or more of such Performance Factors,
|
|
•
|
based on any one or more of such Performance Factors, as compared with the Performance Factors of other companies or entities, or
|
|
•
|
based on an executive's attainment of personal objectives with respect to any one or more of such Performance Factors, or with respect to any one or more of the following:
|
|
|
growth and profitability,
|
|
|
customer satisfaction,
|
|
|
leadership effectiveness,
|
|
|
business development,
|
|
|
negotiating transactions and sales, or
|
|
|
developing long-term business goals.
|
|
|
|
|
Form S-3 Registration No.
|
|
|
Form S-8 Registration Nos.
|
|
|
|
|
333-190506
|
|
|
333-105707
|
|
|
|
333-49170
|
|
|
|
333-105706
|
|
|
|
333-34092
|
|
|
|
033-80665
|
|
|
|
333-12563
|
|
|
|
333-125489
|
|
|
|
333-157372
|
|
|
|
333-160173
|
|
|
|
333-168537
|
|
|
|
333-197671
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of The Hartford Financial Services Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
July 30, 2014
|
/s/ Christopher J. Swift
|
|
|
Christopher J. Swift
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of The Hartford Financial Services Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
July 30, 2014
|
/s/ Beth A Bombara
|
|
|
Beth A Bombara
|
|
|
Executive Vice President and Chief Financial Officer
|
1)
|
The Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
July 30, 2014
|
/s/ Christopher J. Swift
|
|
|
Christopher J. Swift
|
|
|
Chief Executive Officer
|
1)
|
The Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
July 30, 2014
|
/s/ Beth A Bombara
|
|
|
Beth A Bombara
|
|
|
Executive Vice President and Chief Financial Officer
|