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(1) Formation of Genworth and Basis of Presentation
Genworth Financial, Inc. ("Genworth") was incorporated in Delaware on October 23, 2003. The accompanying condensed financial statements include on a consolidated basis the accounts of Genworth and our affiliate companies in which we hold a majority voting interest or where we are the primary beneficiary of a variable interest entity, which we refer to as the "Company," "we," "us" or "our" unless the context otherwise requires. All intercompany accounts and transactions have been eliminated in consolidation.
We have the following three operating segments:
| • | Retirement and Protection. We offer and/or manage a variety of protection, wealth management and retirement income products. Our primary insurance products include life and long-term care insurance. Additionally, we offer other Medicare supplement insurance products, as well as care coordination services for our long-term care policyholders. Our wealth management and retirement income products include: a variety of managed account programs and advisor services, financial planning services and fixed deferred and immediate individual annuities. We previously offered variable deferred annuities and group variable annuities offered through retirement plans. |
| • | International. We offer mortgage and lifestyle protection insurance products and related services in multiple markets. We are a leading provider of mortgage insurance products in Canada, Australia, Mexico and multiple European countries. Our products predominantly insure prime-based, individually underwritten residential mortgage loans, also known as flow mortgage insurance. On a limited basis, we also provide mortgage insurance on a structured, or bulk, basis that aids in the sale of mortgages to the capital markets and helps lenders manage capital and risk. We are a leading provider of protection coverages primarily associated with certain financial obligations (referred to as lifestyle protection) in multiple European countries. These lifestyle protection insurance products primarily help consumers meet specified payment obligations should they become unable to pay due to accident, illness, involuntary unemployment, disability or death. |
| • | U.S. Mortgage Insurance. In the United States, we offer mortgage insurance products predominantly insuring prime-based, individually underwritten residential mortgage loans, also known as flow mortgage insurance. We selectively provide mortgage insurance on a structured, or bulk, basis with essentially all of our bulk writings prime-based. Additionally, we offer services, analytical tools and technology that enable lenders to operate efficiently and manage capital and risk. |
We also have Corporate and Other activities which include debt financing expenses that are incurred at our holding company level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of non-strategic products that are managed outside of our operating segments. Our non-strategic products include our institutional and corporate-owned life insurance products. Institutional products consist of: funding agreements, funding agreements backing notes ("FABNs") and guaranteed investment contracts ("GICs").
In January 2011, we discontinued new sales of retail and group variable annuities while continuing to service our existing blocks of business. We continue to offer fixed annuities.
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Preparing financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. These condensed consolidated financial statements include all adjustments considered necessary by management to present a fair statement of the financial position, results of operations and cash flows for the periods presented. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes contained in our 2010 Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation.
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(2) Accounting Pronouncements
Recently Adopted
In September 2011, the Financial Accounting Standards Board (the "FASB") issued new accounting guidance related to goodwill impairment testing. The new guidance permits the use of a qualitative assessment prior to, and potentially instead of, the two step quantitative goodwill impairment test. The new guidance has a mandatory effective date of January 1, 2012, with early adoption permitted in some cases. We elected to early adopt this new guidance effective on July 1, 2011 in order to apply the new guidance in our annual goodwill impairment testing performed during the third quarter. The adoption of this new accounting guidance did not have an impact on our consolidated financial statements.
On July 1, 2011, we adopted new accounting guidance related to additional disclosures for troubled debt restructurings. The adoption of this new accounting guidance did not have a material impact on our consolidated financial statements.
On January 1, 2011, we adopted new accounting guidance related to goodwill impairment testing when a reporting unit's carrying value is zero or negative. This guidance did not impact our consolidated financial statements upon adoption, as all of our reporting units with goodwill balances have positive carrying values.
On January 1, 2011, we adopted new accounting guidance related to how investments held through separate accounts affect an insurer's consolidation analysis of those investments. The adoption of this new accounting guidance did not have a material impact on our consolidated financial statements.
On January 1, 2011, we adopted new accounting guidance related to additional disclosures about purchases, sales, issuances and settlements in the rollforward of Level 3 fair value measurements. The adoption of this new accounting guidance did not have a material impact on our consolidated financial statements.
Not Yet Adopted
In June 2011, the FASB issued new accounting guidance requiring presentation of the components of net income (loss), the components of other comprehensive income (loss) ("OCI") and total comprehensive income either in a single continuous statement of comprehensive income (loss) or in two separate but consecutive statements. This new accounting guidance is effective for us on January 1, 2012. We do not expect the adoption of this accounting guidance to have a material impact on our consolidated financial results.
In May 2011, the FASB issued new accounting guidance for fair value measurements. This new accounting guidance clarifies existing fair value measurement requirements and changes certain fair value measurement principles and disclosure requirements that will be effective for us on January 1, 2012. We have not yet determined the impact this accounting guidance will have on our consolidated financial statements.
In April 2011, the FASB issued new accounting guidance for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The new guidance removes the requirement to consider a transferor's ability to fulfill its contractual rights from the criteria when determining effective control and is effective, for us, prospectively to any transactions occurring on or after January 1, 2012. We do not expect the adoption of this accounting guidance to have a material impact on our consolidated financial statements.
In October 2010, the FASB issued new accounting guidance related to accounting for costs associated with acquiring or renewing insurance contracts. This new accounting guidance will be effective for us on January 1, 2012. The new guidance is effective prospectively with retrospective adoption allowed. We intend to adopt this new guidance retrospectively. We expect that this new guidance, when adopted, will reduce retained earnings and stockholders' equity by approximately $1.3 billion to $1.6 billion, subject to other adjustments. When adopted in 2012, we expect to defer fewer costs and record lower amortization resulting in decreased earnings.
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(4) Investments
(a) Net Investment Income
Sources of net investment income were as follows for the periods indicated:
| Three months ended September 30, |
Nine months ended September 30, |
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|
(Amounts in millions) |
2011 | 2010 | 2011 | 2010 | ||||||||||||
|
Fixed maturity securities—taxable |
$ | 669 | $ | 658 | $ | 2,032 | $ | 1,930 | ||||||||
|
Fixed maturity securities—non-taxable |
8 | 14 | 29 | 46 | ||||||||||||
|
Commercial mortgage loans |
89 | 95 | 273 | 298 | ||||||||||||
|
Restricted commercial mortgage loans related to securitization entities |
11 | 10 | 30 | 30 | ||||||||||||
|
Equity securities |
3 | 4 | 16 | 11 | ||||||||||||
|
Other invested assets |
42 | 24 | 131 | 61 | ||||||||||||
|
Restricted other invested assets related to securitization entities |
— | 1 | — | 2 | ||||||||||||
|
Policy loans |
30 | 28 | 89 | 83 | ||||||||||||
|
Cash, cash equivalents and short-term investments |
12 | 6 | 24 | 15 | ||||||||||||
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|||||||||
|
Gross investment income before expenses and fees |
864 | 840 | 2,624 | 2,476 | ||||||||||||
|
Expenses and fees |
(22 | ) | (25 | ) | (71 | ) | (73 | ) | ||||||||
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|||||||||
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Net investment income |
$ | 842 | $ | 815 | $ | 2,553 | $ | 2,403 | ||||||||
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(b) Net Investment Gains (Losses)
The following table sets forth net investment gains (losses) for the periods indicated:
| Three months ended September 30, |
Nine months ended September 30, |
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|
(Amounts in millions) |
2011 | 2010 | 2011 | 2010 | ||||||||||||
|
Available-for-sale securities: |
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|
Realized gains |
$ | 59 | $ | 38 | $ | 113 | $ | 114 | ||||||||
|
Realized losses |
(23 | ) | (35 | ) | (88 | ) | (109 | ) | ||||||||
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Net realized gains (losses) on available-for-sale securities |
36 | 3 | 25 | 5 | ||||||||||||
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Impairments: |
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|
Total other-than-temporary impairments |
(39 | ) | (7 | ) | (98 | ) | (108 | ) | ||||||||
|
Portion of other-than-temporary impairments included in other comprehensive income (loss) |
(13 | ) | (30 | ) | (16 | ) | (60 | ) | ||||||||
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|
|
|
|
|
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|
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Net other-than-temporary impairments |
(52 | ) | (37 | ) | (114 | ) | (168 | ) | ||||||||
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|
Trading securities |
11 | 23 | 36 | 25 | ||||||||||||
|
Commercial mortgage loans |
3 | (9 | ) | 4 | (31 | ) | ||||||||||
|
Net gains (losses) related to securitization entities |
(57 | ) | 30 | (52 | ) | (6 | ) | |||||||||
|
Derivative instruments (1) |
(76 | ) | 94 | (101 | ) | 48 | ||||||||||
|
Contingent purchase price valuation change |
(22 | ) | — | (23 | ) | — | ||||||||||
|
Other |
— | 1 | — | 23 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net investment gains (losses) |
$ | (157 | ) | $ | 105 | $ | (225 | ) | $ | (104 | ) | |||||
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| (1) |
See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses). |
We generally intend to hold securities in unrealized loss positions until they recover. However, from time to time, our intent on an individual security may change, based upon market or other unforeseen developments. In such instances, we sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield and liquidity requirements. If a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we determined that we have the intent to sell the securities or it is more likely than not that we will be required to sell the securities prior to recovery. The aggregate fair value of securities sold at a loss during the three months ended September 30, 2011 and 2010 was $263 million and $275 million, respectively, which was approximately 93% and 89%, respectively, of book value. The aggregate fair value of securities sold at a loss during the nine months ended September 30, 2011 and 2010 was $954 million and $1,691 million, respectively, which was approximately 93% and 94%, respectively, of book value.
The following represents the activity for credit losses recognized in net income on debt securities where an other-than-temporary impairment was identified and a portion of other-than-temporary impairments was included in OCI as of or for the periods indicated:
| As of or for the three months ended September 30, |
As of or for the nine months ended September 30, |
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|
(Amounts in millions) |
2011 | 2010 | 2011 | 2010 | ||||||||||||
|
Beginning balance |
$ | 726 | $ | 978 | $ | 784 | $ | 1,059 | ||||||||
|
Additions: |
||||||||||||||||
|
Other-than-temporary impairments not previously recognized |
27 | 13 | 31 | 44 | ||||||||||||
|
Increases related to other-than-temporary impairments previously recognized |
24 | 22 | 72 | 100 | ||||||||||||
|
Reductions: |
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|
Securities sold, paid down or disposed |
(58 | ) | (126 | ) | (168 | ) | (316 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Ending balance |
$ | 719 | $ | 887 | $ | 719 | $ | 887 | ||||||||
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|
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(c) Unrealized Investment Gains and Losses
Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of the dates indicated:
|
(Amounts in millions) |
September 30, 2011 | December 31, 2010 | ||||||
|
Net unrealized gains (losses) on investment securities: |
||||||||
|
Fixed maturity securities |
$ | 3,553 | $ | 511 | ||||
|
Equity securities |
(4 | ) | 9 | |||||
|
Other invested assets |
(30 | ) | (22 | ) | ||||
|
|
|
|
|
|||||
|
Subtotal |
3,519 | 498 | ||||||
|
Adjustments to deferred acquisition costs, present value of future profits, sales inducements and benefit reserves |
(1,162 | ) | (583 | ) | ||||
|
Income taxes, net |
(820 | ) | 35 | |||||
|
|
|
|
|
|||||
|
Net unrealized investment gains (losses) |
1,537 | (50 | ) | |||||
|
Less: net unrealized investment gains (losses) attributable to noncontrolling interests |
84 | 50 | ||||||
|
|
|
|
|
|||||
|
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc. |
$ | 1,453 | $ | (100 | ) | |||
|
|
|
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|
|||||
The change in net unrealized gains (losses) on available-for-sale securities reported in accumulated other comprehensive income (loss) was as follows as of or for the periods indicated:
| As of or for the three months ended September 30, |
||||||||
|
(Amounts in millions) |
2011 | 2010 | ||||||
|
Beginning balance |
$ | 236 | $ | 29 | ||||
|
Cumulative effect of changes in accounting |
— | 169 | ||||||
|
Unrealized gains (losses) arising during the period: |
||||||||
|
Unrealized gains (losses) on investment securities |
2,365 | 1,486 | ||||||
|
Adjustment to deferred acquisition costs |
(44 | ) | (187 | ) | ||||
|
Adjustment to present value of future profits |
(61 | ) | (101 | ) | ||||
|
Adjustment to sales inducements |
6 | (21 | ) | |||||
|
Adjustment to benefit reserves |
(369 | ) | (581 | ) | ||||
|
Provision for income taxes |
(662 | ) | (210 | ) | ||||
|
|
|
|
|
|||||
|
Change in unrealized gains (losses) on investment securities |
1,235 | 386 | ||||||
|
Reclassification adjustments to net investment (gains) losses, net of taxes of $(5) and $(12) |
11 | 22 | ||||||
|
|
|
|
|
|||||
|
Change in net unrealized investment gains (losses) |
1,246 | 577 | ||||||
|
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests |
29 | 19 | ||||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 1,453 | $ | 587 | ||||
|
|
|
|
|
|||||
| As of or for the nine months ended September 30, |
||||||||
|
(Amounts in millions) |
2011 | 2010 | ||||||
|
Beginning balance |
$ | (100 | ) | $ | (1,398 | ) | ||
|
Cumulative effect of changes in accounting |
— | 260 | ||||||
|
Unrealized gains (losses) arising during the period: |
||||||||
|
Unrealized gains (losses) on investment securities |
2,932 | 3,747 | ||||||
|
Adjustment to deferred acquisition costs |
(101 | ) | (381 | ) | ||||
|
Adjustment to present value of future profits |
(77 | ) | (182 | ) | ||||
|
Adjustment to sales inducements |
(1 | ) | (46 | ) | ||||
|
Adjustment to benefit reserves |
(400 | ) | (581 | ) | ||||
|
Provision for income taxes |
(824 | ) | (910 | ) | ||||
|
|
|
|
|
|||||
|
Change in unrealized gains (losses) on investment securities |
1,529 | 1,647 | ||||||
|
Reclassification adjustments to net investment (gains) losses, net of taxes of $(31) and $(57) |
58 | 106 | ||||||
|
|
|
|
|
|||||
|
Change in net unrealized investment gains (losses) |
1,587 | 2,013 | ||||||
|
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests |
34 | 28 | ||||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 1,453 | $ | 587 | ||||
|
|
|
|
|
|||||
(d) Fixed Maturity and Equity Securities
As of September 30, 2011, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:
| Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
|
(Amounts in millions) |
Amortized cost or cost |
Not other-than- temporarily impaired |
Other-than- temporarily impaired |
Not other-than- temporarily impaired |
Other-than- temporarily impaired |
Fair value |
||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 3,973 | $ | 853 | $ | — | $ | (1 | ) | $ | — | $ | 4,825 | |||||||||||
|
Tax-exempt |
753 | 24 | — | (84 | ) | — | 693 | |||||||||||||||||
|
Government—non-U.S. |
1,990 | 178 | — | (3 | ) | — | 2,165 | |||||||||||||||||
|
U.S. corporate |
23,218 | 2,461 | 15 | (324 | ) | (2 | ) | 25,368 | ||||||||||||||||
|
Corporate—non-U.S. |
13,138 | 768 | — | (201 | ) | — | 13,705 | |||||||||||||||||
|
Residential mortgage-backed |
5,392 | 446 | 10 | (267 | ) | (201 | ) | 5,380 | ||||||||||||||||
|
Commercial mortgage-backed |
3,613 | 161 | 6 | (199 | ) | (38 | ) | 3,543 | ||||||||||||||||
|
Other asset-backed |
2,202 | 23 | — | (87 | ) | (1 | ) | 2,137 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total fixed maturity securities |
54,279 | 4,914 | 31 | (1,166 | ) | (242 | ) | 57,816 | ||||||||||||||||
|
Equity securities |
357 | 15 | — | (18 | ) | — | 354 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total available-for- sale securities |
$ | 54,636 | $ | 4,929 | $ | 31 | $ | (1,184 | ) | $ | (242 | ) | $ | 58,170 | ||||||||||
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As of December 31, 2010, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:
| Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
|
(Amounts in millions) |
Amortized cost or cost |
Not other-than- temporarily impaired |
Other-than- temporarily impaired |
Not other-than- temporarily impaired |
Other-than- temporarily impaired |
Fair value |
||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 3,568 | $ | 145 | $ | — | $ | (8 | ) | $ | — | $ | 3,705 | |||||||||||
|
Tax-exempt |
1,124 | 19 | — | (113 | ) | — | 1,030 | |||||||||||||||||
|
Government—non-U.S. |
2,257 | 118 | — | (6 | ) | — | 2,369 | |||||||||||||||||
|
U.S. corporate |
23,282 | 1,123 | 10 | (448 | ) | — | 23,967 | |||||||||||||||||
|
Corporate—non-U.S. |
13,180 | 485 | — | (167 | ) | — | 13,498 | |||||||||||||||||
|
Residential mortgage-backed |
4,821 | 116 | 18 | (304 | ) | (196 | ) | 4,455 | ||||||||||||||||
|
Commercial mortgage-backed |
3,936 | 132 | 6 | (286 | ) | (45 | ) | 3,743 | ||||||||||||||||
|
Other asset-backed |
2,494 | 18 | — | (94 | ) | (2 | ) | 2,416 | ||||||||||||||||
|
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|
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|
|
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|
|||||||||||||
|
Total fixed maturity securities |
54,662 | 2,156 | 34 | (1,426 | ) | (243 | ) | 55,183 | ||||||||||||||||
|
Equity securities |
323 | 13 | — | (4 | ) | — | 332 | |||||||||||||||||
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Total available-for-sale securities |
$ | 54,985 | $ | 2,169 | $ | 34 | $ | (1,430 | ) | $ | (243 | ) | $ | 55,515 | ||||||||||
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The following table presents the gross unrealized losses and fair values of our investment securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, as of September 30, 2011:
| Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses (1) |
Number of securities |
Fair value |
Gross unrealized losses (2) |
Number of securities |
|||||||||||||||||||||||||||
|
Description of Securities |
||||||||||||||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 263 | $ | (1 | ) | 3 | $ | — | $ | — | — | $ | 263 | $ | (1 | ) | 3 | |||||||||||||||||||
|
Tax-exempt |
— | — | — | 254 | (84 | ) | 79 | 254 | (84 | ) | 79 | |||||||||||||||||||||||||
|
Government—non-U.S. |
149 | (3 | ) | 31 | — | — | — | 149 | (3 | ) | 31 | |||||||||||||||||||||||||
|
U.S. corporate |
1,700 | (65 | ) | 204 | 1,526 | (261 | ) | 137 | 3,226 | (326 | ) | 341 | ||||||||||||||||||||||||
|
Corporate—non-U.S. |
1,774 | (78 | ) | 271 | 736 | (123 | ) | 73 | 2,510 | (201 | ) | 344 | ||||||||||||||||||||||||
|
Residential mortgage-backed |
155 | (4 | ) | 71 | 815 | (464 | ) | 365 | 970 | (468 | ) | 436 | ||||||||||||||||||||||||
|
Commercial mortgage-backed |
321 | (29 | ) | 52 | 940 | (208 | ) | 167 | 1,261 | (237 | ) | 219 | ||||||||||||||||||||||||
|
Other asset-backed |
182 | (1 | ) | 35 | 319 | (87 | ) | 36 | 501 | (88 | ) | 71 | ||||||||||||||||||||||||
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|||||||||||||||||||
|
Subtotal, fixed maturity securities |
4,544 | (181 | ) | 667 | 4,590 | (1,227 | ) | 857 | 9,134 | (1,408 | ) | 1,524 | ||||||||||||||||||||||||
|
Equity securities |
115 | (15 | ) | 50 | 20 | (3 | ) | 13 | 135 | (18 | ) | 63 | ||||||||||||||||||||||||
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|||||||||||||||||||
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Total for securities in an unrealized loss position |
$ | 4,659 | $ | (196 | ) | 717 | $ | 4,610 | $ | (1,230 | ) | 870 | $ | 9,269 | $ | (1,426 | ) | 1,587 | ||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
% Below cost—fixed maturity securities: |
||||||||||||||||||||||||||||||||||||
|
<20% Below cost |
$ | 4,477 | $ | (152 | ) | 622 | $ | 3,230 | $ | (322 | ) | 456 | $ | 7,707 | $ | (474 | ) | 1,078 | ||||||||||||||||||
|
20%-50% Below cost |
62 | (24 | ) | 34 | 1,207 | (585 | ) | 272 | 1,269 | (609 | ) | 306 | ||||||||||||||||||||||||
|
>50% Below cost |
5 | (5 | ) | 11 | 153 | (320 | ) | 129 | 158 | (325 | ) | 140 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total fixed maturity securities |
4,544 | (181 | ) | 667 | 4,590 | (1,227 | ) | 857 | 9,134 | (1,408 | ) | 1,524 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
% Below cost—equity securities: |
||||||||||||||||||||||||||||||||||||
|
<20% Below cost |
99 | (8 | ) | 41 | 16 | (1 | ) | 9 | 115 | (9 | ) | 50 | ||||||||||||||||||||||||
|
20%-50% Below cost |
16 | (7 | ) | 9 | 4 | (2 | ) | 4 | 20 | (9 | ) | 13 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total equity securities |
115 | (15 | ) | 50 | 20 | (3 | ) | 13 | 135 | (18 | ) | 63 | ||||||||||||||||||||||||
|
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|
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|
|
|
|
|
|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 4,659 | $ | (196 | ) | 717 | $ | 4,610 | $ | (1,230 | ) | 870 | $ | 9,269 | $ | (1,426 | ) | 1,587 | ||||||||||||||||||
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|
|||||||||||||||||||
|
Investment grade |
$ | 4,047 | $ | (151 | ) | 536 | $ | 3,237 | $ | (567 | ) | 486 | $ | 7,284 | $ | (718 | ) | 1,022 | ||||||||||||||||||
|
Below investment grade (3) |
612 | (45 | ) | 181 | 1,373 | (663 | ) | 384 | 1,985 | (708 | ) | 565 | ||||||||||||||||||||||||
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|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 4,659 | $ | (196 | ) | 717 | $ | 4,610 | $ | (1,230 | ) | 870 | $ | 9,269 | $ | (1,426 | ) | 1,587 | ||||||||||||||||||
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|
|||||||||||||||||||
| (1) |
Amounts included $236 million of unrealized losses on other-than-temporarily impaired securities. |
| (2) |
Amounts included $242 million of unrealized losses on other-than-temporarily impaired securities. |
| (3) |
Amounts that have been in a continuous loss position for 12 months or more included $220 million of unrealized losses on other-than-temporarily impaired securities. |
As indicated in the table above, the majority of the securities in a continuous unrealized loss position for less than 12 months were investment grade and less than 20% below cost. These unrealized losses were primarily attributable to credit spreads that have widened since acquisition for corporate securities across various industry sectors, including finance and insurance as well as consumer-non-cyclical. For securities that have been in a continuous unrealized loss for less than 12 months, the average fair value percentage below cost was approximately 4% as of September 30, 2011.
Fixed Maturity Securities In A Continuous Unrealized Loss Position For 12 Months Or More
Of the $322 million of unrealized losses on fixed maturity securities in a continuous unrealized loss for 12 months or more that were less than 20% below cost, the weighted-average rating was "BBB" and approximately 75% of the unrealized losses were related to investment grade securities as of September 30, 2011. These unrealized losses were attributable to the widening of credit spreads for these securities since acquisition, primarily associated with corporate securities in the finance and insurance sector as well as mortgage-backed and asset-backed securities. The average fair value percentage below cost for these securities was approximately 9% as of September 30, 2011. See below for additional discussion related to fixed maturity securities that have been in a continuous loss position for 12 months or more with a fair value that was more than 20% below cost.
The following tables present the concentration of gross unrealized losses and fair values of fixed maturity securities that were more than 20% below cost and in a continuous loss position for 12 months or more by asset class as of September 30, 2011:
| Investment Grade | ||||||||||||||||||||||||||||||||
| 20% to 50% | Greater than 50% | |||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||
|
Tax-exempt |
$ | 160 | $ | (73 | ) | 5 | % | 39 | $ | — | $ | — | — | % | — | |||||||||||||||||
|
U.S. corporate |
179 | (74 | ) | 5 | 12 | — | — | — | — | |||||||||||||||||||||||
|
Corporate—non-U.S. |
158 | (76 | ) | 5 | 14 | — | — | — | — | |||||||||||||||||||||||
|
Structured securities: |
||||||||||||||||||||||||||||||||
|
Residential mortgage-backed |
73 | (30 | ) | 2 | 28 | 11 | (27 | ) | 2 | 14 | ||||||||||||||||||||||
|
Commercial mortgage-backed |
68 | (29 | ) | 2 | 15 | 5 | (6 | ) | — | 7 | ||||||||||||||||||||||
|
Other asset-backed |
27 | (9 | ) | 1 | 3 | 1 | (1 | ) | — | 1 | ||||||||||||||||||||||
|
|
|
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|
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|
|
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|
|
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|
|||||||||||||||||
|
Total structured securities |
168 | (68 | ) | 5 | 46 | 17 | (34 | ) | 2 | 22 | ||||||||||||||||||||||
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|
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|
|
|
|
|
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|
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|
|
|||||||||||||||||
|
Total |
$ | 665 | $ | (291 | ) | 20 | % | 111 | $ | 17 | $ | (34 | ) | 2 | % | 22 | ||||||||||||||||
|
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|
|||||||||||||||||
| Below Investment Grade | ||||||||||||||||||||||||||||||||
| 20% to 50% | Greater than 50% | |||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||
|
Tax-exempt |
$ | — | $ | — | — | % | — | $ | — | $ | — | — | % | — | ||||||||||||||||||
|
U.S. corporate |
59 | (37 | ) | 3 | 9 | 9 | (11 | ) | 1 | 3 | ||||||||||||||||||||||
|
Structured securities: |
||||||||||||||||||||||||||||||||
|
Residential mortgage-backed |
310 | (170 | ) | 12 | 118 | 86 | (204 | ) | 14 | 86 | ||||||||||||||||||||||
|
Commercial mortgage-backed |
87 | (38 | ) | 3 | 30 | 29 | (59 | ) | 4 | 16 | ||||||||||||||||||||||
|
Other asset-backed |
86 | (49 | ) | 3 | 4 | 12 | (12 | ) | 1 | 2 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total structured securities |
483 | (257 | ) | 18 | 152 | 127 | (275 | ) | 19 | 104 | ||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
$ | 542 | $ | (294 | ) | 21 | % | 161 | $ | 136 | $ | (286 | ) | 20 | % | 107 | ||||||||||||||||
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|
|||||||||||||||||
For all securities in an unrealized loss position, we expect to recover the amortized cost based on our estimate of cash flows to be collected. We do not intend to sell and it is not more likely than not that we will be required to sell these securities prior to recovering our amortized cost. See below for further discussion of gross unrealized losses by asset class.
Tax-Exempt Securities
As indicated in the table above, $73 million of gross unrealized losses were related to tax-exempt securities that have been in a continuous unrealized loss position for more than 12 months and were more than 20% below cost. The unrealized losses for tax-exempt securities represent municipal bonds that were diversified by state as well as municipality or political subdivision within those states. Of these tax-exempt securities, the average unrealized loss was approximately $2 million which represented an average of 31% below cost. The unrealized losses primarily related to widening of credit spreads on these securities since acquisition as a result of higher risk premiums being attributed to these securities from uncertainty in many political subdivisions related to special revenues supporting these obligations as well as certain securities having longer duration that may be viewed as less desirable in the current market place. Additionally, the fair value of certain of these securities has been negatively impacted as a result of having certain bond insurers associated with the security. In our analysis of impairment for these securities, we expect to recover our amortized cost from the cash flows of the underlying securities before any guarantee support. However, the existence of these guarantees may negatively impact the value of the debt security in certain instances. We performed an analysis of these securities and the underlying activities that are expected to support the cash flows and determined we expect to recover our amortized cost.
Corporate Debt Securities
The following tables present the concentration of gross unrealized losses and fair values related to corporate debt fixed maturity securities that were more than 20% below cost and in a continuous loss position for 12 months or more by industry as of September 30, 2011:
| Investment Grade | ||||||||||||||||||||||||||||||||
| 20% to 50% | Greater than 50% | |||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
||||||||||||||||||||||||
|
Industry: |
||||||||||||||||||||||||||||||||
|
Finance and insurance |
$ | 290 | $ | (133 | ) | 9 | % | 24 | $ | — | $ | — | — | % | — | |||||||||||||||||
|
Utilities and energy |
17 | (6 | ) | — | 1 | — | — | — | — | |||||||||||||||||||||||
|
Consumer-non-cyclical |
30 | (11 | ) | 1 | 1 | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
$ | 337 | $ | (150 | ) | 10 | % | 26 | $ | — | $ | — | — | % | — | |||||||||||||||||
|
|
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|
|||||||||||||||||
| Below Investment Grade | ||||||||||||||||||||||||||||||||
| 20% to 50% | Greater than 50% | |||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
||||||||||||||||||||||||
|
Industry: |
||||||||||||||||||||||||||||||||
|
Finance and insurance |
$ | 57 | $ | (36 | ) | 3 | % | 7 | $ | 9 | $ | (11 | ) | 1 | % | 3 | ||||||||||||||||
|
Technology and communications |
2 | (1 | ) | — | 2 | — | — | — | — | |||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
$ | 59 | $ | (37 | ) | 3 | % | 9 | $ | 9 | $ | (11 | ) | 1 | % | 3 | ||||||||||||||||
|
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|
|||||||||||||||||
Of the total unrealized losses of $198 million for corporate fixed maturity securities presented in the preceding tables, $180 million, or 91%, of the unrealized losses related to issuers in the finance and insurance sector that were 34% below cost on average. Given the current market conditions, including current financial industry events and uncertainty around global economic conditions, the fair value of these debt securities has declined due to credit spreads that have widened since acquisition. In our examination of these securities, we considered all available evidence, including the issuers' financial condition and current industry events to develop our conclusion on the amount and timing of the cash flows expected to be collected. Based on this evaluation, we determined that the unrealized losses on these debt securities represented temporary impairments as of September 30, 2011. Of the $180 million of unrealized losses related to the finance and insurance industry, $141 million related to financial hybrid securities on which a debt impairment model was employed. Most of our hybrid securities retained a credit rating of investment grade. The fair value of these hybrid securities has been impacted by credit spreads that have widened since acquisition and reflect uncertainty surrounding the extent and duration of government involvement, potential capital restructuring of these institutions, and continued but diminishing risk that income payments may be deferred. We continue to receive our contractual payments and expect to fully recover our amortized cost.
We expect that our investments in corporate securities will continue to perform in accordance with our expectations about the amount and timing of estimated cash flows. Although we do not anticipate such events, it is at least reasonably possible that issuers of our investments in corporate securities will perform worse than current expectations. Such events may lead us to recognize write-downs within our portfolio of corporate securities in the future.
Structured Securities
Of the $634 million of unrealized losses related to structured securities that have been in an unrealized loss position for 12 months or more and were more than 20% below cost, $202 million related to other-than-temporarily-impaired securities where the unrealized losses represented the non-credit portion of the impairment. The extent and duration of the unrealized loss position on our structured securities is due to the ongoing concern and uncertainty about the residential and commercial real estate market and unemployment, resulting in credit spreads that have widened since acquisition. Additionally, the fair value of certain structured securities has been significantly impacted from high risk premiums being incorporated into the valuation as a result of the amount of potential losses that may be absorbed by the security in the event of additional deterioration in the housing market.
While we considered the length of time each security had been in an unrealized loss position, the extent of the unrealized loss position and any significant declines in fair value subsequent to the balance sheet date in our evaluation of impairment for each of these individual securities, the primary factor in our evaluation of impairment is the expected performance for each of these securities. Our evaluation of expected performance is based on the historical performance of the associated securitization trust as well as the historical performance of the underlying collateral. Our examination of the historical performance of the securitization trust included consideration of the following factors for each class of securities issued by the trust: i) the payment history, including failure to make scheduled payments; ii) current payment status; iii) current and historical outstanding balances; iv) current levels of subordination and losses incurred to-date; and v) characteristics of the underlying collateral. Our examination of the historical performance of the underlying collateral included: i) historical default rates, delinquency rates, voluntary and involuntary prepayments and severity of losses, including recent trends in this information; ii) current payment status; iii) loan to collateral value ratios, as applicable; iv) vintage; and v) other underlying characteristics such as current financial condition.
We used our assessment of the historical performance of both the securitization trust and the underlying collateral for each security, along with third-party sources, when available, to develop our best estimate of cash flows expected to be collected. These estimates reflect projections for future delinquencies, prepayments, defaults and losses for the assets that collateralize the securitization trust and are used to determine the expected cash flows for our security, based on the payment structure of the trust. Our projection of expected cash flows is primarily based on the expected performance of the underlying assets that collateralize the securitization trust and is not directly impacted by the rating of our security. While we consider the rating of the security as an indicator of the financial condition of the issuer, this factor does not have a significant impact on our expected cash flows for each security. In limited circumstances, our expected cash flows include expected payments from reliable financial guarantors where we believe the financial guarantor will have sufficient assets to pay claims under the financial guarantee when the cash flows from the securitization trust are not sufficient to make scheduled payments. We then discount the expected cash flows using the effective yield of each security to determine the present value of expected cash flows.
Based on this evaluation, the present value of expected cash flows was greater than or equal to the amortized cost for each security. Accordingly, we determined that the unrealized losses on each of our structured securities represented temporary impairments as of September 30, 2011.
Despite the considerable analysis and rigor employed on our structured securities, it is at least reasonably possible that the underlying collateral of these investments will perform worse than current market expectations. Such events may lead to adverse changes in cash flows on our holdings of structured securities and future write-downs within our portfolio of structured securities.
The following table presents the gross unrealized losses and fair values of our investment securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, as of December 31, 2010:
| Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses (1) |
Number of securities |
Fair value |
Gross unrealized losses (2) |
Number of securities |
|||||||||||||||||||||||||||
|
Description of Securities |
||||||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 545 | $ | (8 | ) | 36 | $ | — | $ | — | — | $ | 545 | $ | (8 | ) | 36 | |||||||||||||||||||
|
Tax-exempt |
285 | (12 | ) | 101 | 244 | (101 | ) | 90 | 529 | (113 | ) | 191 | ||||||||||||||||||||||||
|
Government—non-U.S. |
431 | (5 | ) | 69 | 21 | (1 | ) | 7 | 452 | (6 | ) | 76 | ||||||||||||||||||||||||
|
U.S. corporate |
3,615 | (125 | ) | 443 | 2,338 | (323 | ) | 191 | 5,953 | (448 | ) | 634 | ||||||||||||||||||||||||
|
Corporate—non-U.S. |
2,466 | (53 | ) | 296 | 1,141 | (114 | ) | 102 | 3,607 | (167 | ) | 398 | ||||||||||||||||||||||||
|
Residential mortgage-backed |
461 | (23 | ) | 92 | 1,031 | (477 | ) | 416 | 1,492 | (500 | ) | 508 | ||||||||||||||||||||||||
|
Commercial mortgage-backed |
177 | (8 | ) | 26 | 1,167 | (323 | ) | 225 | 1,344 | (331 | ) | 251 | ||||||||||||||||||||||||
|
Other asset-backed |
401 | (2 | ) | 37 | 512 | (94 | ) | 53 | 913 | (96 | ) | 90 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Subtotal, fixed maturity securities |
8,381 | (236 | ) | 1,100 | 6,454 | (1,433 | ) | 1,084 | 14,835 | (1,669 | ) | 2,184 | ||||||||||||||||||||||||
|
Equity securities |
77 | (3 | ) | 48 | 5 | (1 | ) | 4 | 82 | (4 | ) | 52 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 8,458 | $ | (239 | ) | 1,148 | $ | 6,459 | $ | (1,434 | ) | 1,088 | $ | 14,917 | $ | (1,673 | ) | 2,236 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
% Below cost—fixed maturity securities: |
||||||||||||||||||||||||||||||||||||
|
<20% Below cost |
$ | 8,359 | $ | (226 | ) | 1,076 | $ | 4,852 | $ | (418 | ) | 588 | $ | 13,211 | $ | (644 | ) | 1,664 | ||||||||||||||||||
|
20%-50% Below cost |
22 | (8 | ) | 18 | 1,428 | (652 | ) | 328 | 1,450 | (660 | ) | 346 | ||||||||||||||||||||||||
|
>50% Below cost |
— | (2 | ) | 6 | 174 | (363 | ) | 168 | 174 | (365 | ) | 174 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total fixed maturity securities |
8,381 | (236 | ) | 1,100 | 6,454 | (1,433 | ) | 1,084 | 14,835 | (1,669 | ) | 2,184 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
% Below cost—equity securities: |
||||||||||||||||||||||||||||||||||||
|
<20% Below cost |
72 | (2 | ) | 47 | 5 | (1 | ) | 4 | 77 | (3 | ) | 51 | ||||||||||||||||||||||||
|
20%-50% Below cost |
5 | (1 | ) | 1 | — | — | — | 5 | (1 | ) | 1 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total equity securities |
77 | (3 | ) | 48 | 5 | (1 | ) | 4 | 82 | (4 | ) | 52 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 8,458 | $ | (239 | ) | 1,148 | $ | 6,459 | $ | (1,434 | ) | 1,088 | $ | 14,917 | $ | (1,673 | ) | 2,236 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Investment grade |
$ | 8,249 | $ | (231 | ) | 1,060 | $ | 4,850 | $ | (764 | ) | 683 | $ | 13,099 | $ | (995 | ) | 1,743 | ||||||||||||||||||
|
Below investment grade (3) |
209 | (8 | ) | 88 | 1,609 | (670 | ) | 405 | 1,818 | (678 | ) | 493 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 8,458 | $ | (239 | ) | 1,148 | $ | 6,459 | $ | (1,434 | ) | 1,088 | $ | 14,917 | $ | (1,673 | ) | 2,236 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| (1) |
Amounts included $240 million of unrealized losses on other-than-temporarily impaired securities. |
| (2) |
Amounts included $243 million of unrealized losses on other-than-temporarily impaired securities. |
| (3) |
Amounts that have been in a continuous loss position for 12 months or more included $213 million of unrealized losses on other-than-temporarily impaired securities. |
The scheduled maturity distribution of fixed maturity securities as of September 30, 2011 is set forth below. Actual maturities may differ from contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.
|
(Amounts in millions) |
Amortized cost or cost |
Fair value |
||||||
|
Due one year or less |
$ | 2,696 | $ | 2,720 | ||||
|
Due after one year through five years |
10,842 | 11,172 | ||||||
|
Due after five years through ten years |
9,964 | 10,612 | ||||||
|
Due after ten years |
19,570 | 22,252 | ||||||
|
|
|
|
|
|||||
|
Subtotal |
43,072 | 46,756 | ||||||
|
Residential mortgage-backed |
5,392 | 5,380 | ||||||
|
Commercial mortgage-backed |
3,613 | 3,543 | ||||||
|
Other asset-backed |
2,202 | 2,137 | ||||||
|
|
|
|
|
|||||
|
Total |
$ | 54,279 | $ | 57,816 | ||||
|
|
|
|
|
|||||
As of September 30, 2011, $4,347 million of our investments (excluding mortgage-backed and asset-backed securities) were subject to certain call provisions.
As of September 30, 2011, securities issued by utilities and energy, finance and insurance, and consumer—non-cyclical industry groups represented approximately 23%, 22% and 12% of our domestic and foreign corporate fixed maturity securities portfolio, respectively. No other industry group comprised more than 10% of our investment portfolio. This portfolio is widely diversified among various geographic regions in the United States and internationally, and is not dependent on the economic stability of one particular region.
As of September 30, 2011, we did not hold any fixed maturity securities in any single issuer, other than securities issued or guaranteed by the U.S. government, which exceeded 10% of stockholders' equity.
(e) Commercial Mortgage Loans
Our mortgage loans are collateralized by commercial properties, including multi-family residential buildings. The carrying value of commercial mortgage loans is stated at original cost net of prepayments, amortization and allowance for loan losses.
We diversify our commercial mortgage loans by both property type and geographic region. The following tables set forth the distribution across property type and geographic region for commercial mortgage loans as of the dates indicated:
| September 30, 2011 | December 31, 2010 | |||||||||||||||
|
(Amounts in millions) |
Carrying value |
% of total |
Carrying value |
% of total |
||||||||||||
|
Property type: |
||||||||||||||||
|
Retail |
$ | 1,889 | 30 | % | $ | 1,974 | 29 | % | ||||||||
|
Industrial |
1,736 | 28 | 1,788 | 26 | ||||||||||||
|
Office |
1,647 | 26 | 1,850 | 27 | ||||||||||||
|
Apartments |
708 | 11 | 725 | 11 | ||||||||||||
|
Mixed use/other |
341 | 5 | 435 | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Subtotal |
6,321 | 100 | % | 6,772 | 100 | % | ||||||||||
|
|
|
|
|
|||||||||||||
|
Unamortized balance of loan origination fees and costs |
4 | 5 | ||||||||||||||
|
Allowance for losses |
(54 | ) | (59 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
|
Total |
$ | 6,271 | $ | 6,718 | ||||||||||||
|
|
|
|
|
|||||||||||||
| September 30, 2011 | December 31, 2010 | |||||||||||||||
|
(Amounts in millions) |
Carrying value |
% of total |
Carrying value |
% of total |
||||||||||||
|
Geographic region: |
||||||||||||||||
|
South Atlantic |
$ | 1,624 | 27 | % | $ | 1,583 | 23 | % | ||||||||
|
Pacific |
1,598 | 25 | 1,769 | 26 | ||||||||||||
|
Middle Atlantic |
810 | 13 | 937 | 14 | ||||||||||||
|
East North Central |
568 | 9 | 612 | 9 | ||||||||||||
|
Mountain |
500 | 8 | 540 | 8 | ||||||||||||
|
New England |
390 | 6 | 482 | 7 | ||||||||||||
|
West North Central |
344 | 5 | 369 | 6 | ||||||||||||
|
West South Central |
329 | 5 | 297 | 4 | ||||||||||||
|
East South Central |
158 | 2 | 183 | 3 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Subtotal |
6,321 | 100 | % | 6,772 | 100 | % | ||||||||||
|
|
|
|
|
|||||||||||||
|
Unamortized balance of loan origination fees and costs |
4 | 5 | ||||||||||||||
|
Allowance for losses |
(54 | ) | (59 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
|
Total |
$ | 6,271 | $ | 6,718 | ||||||||||||
|
|
|
|
|
|||||||||||||
The following tables set forth the aging of past due commercial mortgage loans by property type as of the dates indicated:
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
31 - 60 days past due |
61 - 90 days past due |
Greater than 90 days past due |
Total past due |
Current | Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | — | $ | — | $ | 3 | $ | 3 | $ | 1,886 | $ | 1,889 | ||||||||||||
|
Industrial |
— | 16 | 4 | 20 | 1,716 | 1,736 | ||||||||||||||||||
|
Office |
10 | 4 | 8 | 22 | 1,625 | 1,647 | ||||||||||||||||||
|
Apartments |
1 | — | — | 1 | 707 | 708 | ||||||||||||||||||
|
Mixed use/other |
1 | — | — | 1 | 340 | 341 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investment |
$ | 12 | $ | 20 | $ | 15 | $ | 47 | $ | 6,274 | $ | 6,321 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total commercial mortgage loans |
— | % | 1 | % | — | % | 1 | % | 99 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
31 - 60 days past due |
61 - 90 days past due |
Greater than 90 days past due |
Total past due |
Current | Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | — | $ | — | $ | — | $ | — | $ | 1,974 | $ | 1,974 | ||||||||||||
|
Industrial |
— | 6 | 27 | 33 | 1,755 | 1,788 | ||||||||||||||||||
|
Office |
— | — | 12 | 12 | 1,838 | 1,850 | ||||||||||||||||||
|
Apartments |
— | — | — | — | 725 | 725 | ||||||||||||||||||
|
Mixed use/other |
— | — | — | — | 435 | 435 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investment |
$ | — | $ | 6 | $ | 39 | $ | 45 | $ | 6,727 | $ | 6,772 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total commercial mortgage loans |
— | % | — | % | 1 | % | 1 | % | 99 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
As of September 30, 2011 and December 31, 2010, we had no commercial mortgage loans that were past due for more than 90 days and still accruing interest.
During the nine months ended September 30, 2011 and the year ended December 31, 2010, we modified or extended 23 and 13 commercial mortgage loans, respectively, with a total carrying value of $104 million and $98 million, respectively, as of September 30, 2011 and December 31, 2010. All of these modifications or extensions were based on current market interest rates, did not result in any forgiveness in the outstanding principal amount owed by the borrower and were not considered troubled debt restructurings.
The following table sets forth the commercial mortgage loans on nonaccrual status by property type as of the dates indicated:
|
(Amounts in millions) |
September 30, 2011 |
December 31, 2010 |
||||||
|
Property type: |
||||||||
|
Retail |
$ | 3 | $ | — | ||||
|
Industrial |
4 | 27 | ||||||
|
Office |
8 | 12 | ||||||
|
Apartments |
— | — | ||||||
|
Mixed use/other |
— | — | ||||||
|
|
|
|
|
|||||
|
Total recorded investment |
$ | 15 | $ | 39 | ||||
|
|
|
|
|
|||||
The following table sets forth the allowance for credit losses and recorded investment in commercial mortgage loans as of or for the periods indicated:
|
(Amounts in millions) |
Three months ended September 30, 2011 |
Nine months ended September 30, 2011 |
||||||
|
Allowance for credit losses: |
||||||||
|
Beginning balance |
$ | 57 | $ | 59 | ||||
|
Charge-offs |
— | (5 | ) | |||||
|
Recoveries |
— | — | ||||||
|
Provision |
(3 | ) | — | |||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 54 | $ | 54 | ||||
|
|
|
|
|
|||||
|
Ending allowance for individually impaired loans |
$ | — | $ | — | ||||
|
|
|
|
|
|||||
|
Ending allowance for loans not individually impaired that were evaluated collectively for impairment |
$ | 54 | $ | 54 | ||||
|
|
|
|
|
|||||
|
Recorded investment: |
||||||||
|
Ending balance |
$ | 6,321 | $ | 6,321 | ||||
|
|
|
|
|
|||||
|
Ending balance of individually impaired loans |
$ | 13 | $ | 13 | ||||
|
|
|
|
|
|||||
|
Ending balance of loans not individually impaired that were evaluated collectively for impairment |
$ | 6,308 | $ | 6,308 | ||||
|
|
|
|
|
|||||
The following table presents the activity in the allowance for losses as of or for the periods indicated:
|
(Amounts in millions) |
Three months ended September 30, 2010 |
Nine months ended September 30, 2010 |
||||||
|
Beginning balance |
$ | 70 | $ | 48 | ||||
|
Provision |
5 | 27 | ||||||
|
Release (1) |
(13 | ) | (13 | ) | ||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 62 | $ | 62 | ||||
|
|
|
|
|
|||||
| (1) |
Included $13 million related to held-for-sale commercial mortgage loans that were sold in the third quarter of 2010. |
The following tables set forth our individually impaired commercial mortgage loans by property type as of the dates indicated:
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Recorded investment |
Unpaid principal balance |
Charge- offs |
Related allowance |
Average recorded investment |
Interest income recognized |
||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 3 | $ | 4 | $ | 1 | $ | — | $ | 2 | $ | — | ||||||||||||
|
Industrial |
— | — | — | — | $ | — | — | |||||||||||||||||
|
Office |
10 | 13 | 3 | — | $ | 10 | — | |||||||||||||||||
|
Apartments |
— | — | — | — | $ | — | — | |||||||||||||||||
|
Mixed use/other |
— | — | — | — | $ | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total |
$ | 13 | $ | 17 | $ | 4 | $ | — | $ | 6 | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Recorded investment |
Unpaid principal balance |
Charge- offs |
Related allowance |
Average recorded investment |
Interest income recognized |
||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 5 | $ | 8 | $ | 3 | $ | — | $ | 2 | $ | — | ||||||||||||
|
Industrial |
19 | 24 | 5 | — | $ | 3 | — | |||||||||||||||||
|
Office |
6 | 8 | 2 | — | $ | 2 | — | |||||||||||||||||
|
Apartments |
— | — | — | — | $ | — | — | |||||||||||||||||
|
Mixed use/other |
— | — | — | — | $ | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total |
$ | 30 | $ | 40 | $ | 10 | $ | — | $ | 3 | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
In evaluating the credit quality of commercial mortgage loans, we assess the performance of the underlying loans using both quantitative and qualitative criteria. Certain risks associated with commercial mortgages loans can be evaluated by reviewing both the loan-to-value and debt service coverage ratio to understand both the probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the underlying property for an amount that would enable us to recover our unpaid principal balance in the event of default by the borrower. The average loan-to-value ratio is based on our most recent estimate of the fair value for the underlying property which is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A lower loan-to-value indicates that our loan value is more likely to be recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is based on "normalized" annual net operating income of the property compared to the payments required under the terms of the loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt service coverage ratio should not be used without considering other factors associated with the borrower, such as the borrower's liquidity or access to other resources that may result in our expectation that the borrower will continue to make the future scheduled payments.
The following tables set forth the loan-to-value of commercial mortgage loans by property type as of the dates indicated:
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
0% - 50 % | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% (1) |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 426 | $ | 275 | $ | 874 | $ | 282 | $ | 32 | $ | 1,889 | ||||||||||||
|
Industrial |
481 | 286 | 665 | 281 | 23 | 1,736 | ||||||||||||||||||
|
Office |
427 | 282 | 591 | 226 | 121 | 1,647 | ||||||||||||||||||
|
Apartments |
222 | 162 | 269 | 40 | 15 | 708 | ||||||||||||||||||
|
Mixed use/other |
80 | 58 | 60 | 137 | 6 | 341 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 1,636 | $ | 1,063 | $ | 2,459 | $ | 966 | $ | 197 | $ | 6,321 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
26 | % | 17 | % | 39 | % | 15 | % | 3 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average debt service coverage ratio |
2.54 | 1.89 | 2.13 | 1.78 | 0.89 | 2.11 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) |
Included $10 million of impaired loans and $187 million of loans in good standing, with a total weighted-average loan-to-value of 121%, where borrowers continued to make timely payments and have no history of delinquencies or distress. |
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% (1) |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 477 | $ | 287 | $ | 805 | $ | 363 | $ | 42 | $ | 1,974 | ||||||||||||
|
Industrial |
431 | 361 | 625 | 284 | 87 | 1,788 | ||||||||||||||||||
|
Office |
320 | 327 | 612 | 446 | 145 | 1,850 | ||||||||||||||||||
|
Apartments |
99 | 172 | 321 | 133 | — | 725 | ||||||||||||||||||
|
Mixed use/other |
123 | 10 | 63 | 221 | 18 | 435 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 1,450 | $ | 1,157 | $ | 2,426 | $ | 1,447 | $ | 292 | $ | 6,772 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
22 | % | 17 | % | 36 | % | 21 | % | 4 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average debt service coverage ratio |
2.24 | 1.99 | 1.79 | 2.42 | 0.75 | 2.01 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) |
Included $25 million of impaired loans and $267 million of loans in good standing, with a total weighted-average loan-to-value of 117%, where borrowers continued to make timely payments and have no history of delinquencies or distress. |
The following tables set forth the debt service coverage ratio for fixed rate commercial mortgage loans by property type as of the dates indicated:
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 96 | $ | 328 | $ | 447 | $ | 568 | $ | 345 | $ | 1,784 | ||||||||||||
|
Industrial |
227 | 232 | 284 | 636 | 341 | 1,720 | ||||||||||||||||||
|
Office |
192 | 132 | 282 | 441 | 516 | 1,563 | ||||||||||||||||||
|
Apartments |
15 | 83 | 75 | 301 | 167 | 641 | ||||||||||||||||||
|
Mixed use/other |
50 | 32 | 6 | 53 | 105 | 246 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 580 | $ | 807 | $ | 1,094 | $ | 1,999 | $ | 1,474 | $ | 5,954 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
10 | % | 13 | % | 18 | % | 34 | % | 25 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
87 | % | 71 | % | 67 | % | 60 | % | 50 | % | 63 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 125 | $ | 317 | $ | 490 | $ | 512 | $ | 415 | $ | 1,859 | ||||||||||||
|
Industrial |
260 | 166 | 292 | 698 | 346 | 1,762 | ||||||||||||||||||
|
Office |
176 | 186 | 238 | 524 | 547 | 1,671 | ||||||||||||||||||
|
Apartments |
7 | 62 | 160 | 290 | 135 | 654 | ||||||||||||||||||
|
Mixed use/other |
49 | 12 | 17 | 78 | 94 | 250 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 617 | $ | 743 | $ | 1,197 | $ | 2,102 | $ | 1,537 | $ | 6,196 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
10 | % | 12 | % | 19 | % | 34 | % | 25 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
90 | % | 71 | % | 68 | % | 62 | % | 50 | % | 64 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The following tables set forth the debt service coverage ratio for floating rate commercial mortgage loans by property type as of the dates indicated:
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | — | $ | — | $ | 1 | $ | — | $ | 104 | $ | 105 | ||||||||||||
|
Industrial |
— | — | — | 5 | 11 | 16 | ||||||||||||||||||
|
Office |
— | — | 8 | — | 76 | 84 | ||||||||||||||||||
|
Apartments |
— | — | — | — | 67 | 67 | ||||||||||||||||||
|
Mixed use/other |
— | 4 | — | — | 91 | 95 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | — | $ | 4 | $ | 9 | $ | 5 | $ | 349 | $ | 367 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
— | % | 1 | % | 3 | % | 1 | % | 95 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
— | % | 80 | % | 53 | % | 45 | % | 62 | % | 62 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | — | $ | — | $ | — | $ | 2 | $ | 113 | $ | 115 | ||||||||||||
|
Industrial |
1 | 5 | — | 1 | 19 | 26 | ||||||||||||||||||
|
Office |
— | — | — | 57 | 122 | 179 | ||||||||||||||||||
|
Apartments |
— | 4 | — | 21 | 46 | 71 | ||||||||||||||||||
|
Mixed use/other |
— | — | — | — | 185 | 185 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 1 | $ | 9 | $ | — | $ | 81 | $ | 485 | $ | 576 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
— | % | 2 | % | — | % | 14 | % | 84 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
30 | % | 62 | % | — | % | 83 | % | 77 | % | 78 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(f) Restricted Commercial Mortgage Loans Related To Securitization Entities
The following tables set forth additional information regarding our restricted commercial mortgage loans related to securitization entities as of the dates indicated:
| September 30, 2011 | December 31, 2010 | |||||||||||||||
|
(Amounts in millions) |
Carrying value |
% of total |
Carrying value |
% of total |
||||||||||||
|
Property type: |
||||||||||||||||
|
Retail |
$ | 168 | 39 | % | $ | 182 | 36 | % | ||||||||
|
Industrial |
104 | 24 | 124 | 24 | ||||||||||||
|
Office |
92 | 21 | 117 | 23 | ||||||||||||
|
Apartments |
61 | 14 | 64 | 13 | ||||||||||||
|
Mixed use/other |
7 | 2 | 22 | 4 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Subtotal |
432 | 100 | % | 509 | 100 | % | ||||||||||
|
|
|
|
|
|||||||||||||
|
Allowance for losses |
(2 | ) | (2 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
|
Total |
$ | 430 | $ | 507 | ||||||||||||
|
|
|
|
|
|||||||||||||
| September 30, 2011 | December 31, 2010 | |||||||||||||||
|
(Amounts in millions) |
Carrying value |
% of total |
Carrying value |
% of total |
||||||||||||
|
Geographic region: |
||||||||||||||||
|
South Atlantic |
$ | 151 | 35 | % | $ | 189 | 37 | % | ||||||||
|
Pacific |
75 | 17 | 90 | 18 | ||||||||||||
|
Middle Atlantic |
67 | 16 | 70 | 14 | ||||||||||||
|
East North Central |
47 | 11 | 51 | 10 | ||||||||||||
|
Mountain |
30 | 7 | 32 | 6 | ||||||||||||
|
West North Central |
28 | 6 | 31 | 6 | ||||||||||||
|
East South Central |
21 | 5 | 32 | 6 | ||||||||||||
|
West South Central |
12 | 3 | 13 | 3 | ||||||||||||
|
New England |
1 | — | 1 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Subtotal |
432 | 100 | % | 509 | 100 | % | ||||||||||
|
|
|
|
|
|||||||||||||
|
Allowance for losses |
(2 | ) | (2 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
|
Total |
$ | 430 | $ | 507 | ||||||||||||
|
|
|
|
|
|||||||||||||
Of our restricted commercial mortgage loans as of September 30, 2011, $429 million were current and $3 million were past due for more than 90 days and still accruing interest. As of December 31, 2010, all restricted commercial mortgage loans were current and there were no restricted commercial mortgage loans on nonaccrual status.
As of September 30, 2011 and December 31, 2010, loans not individually impaired that were evaluated collectively for impairment were $431 million and $509 million, respectively, of the total recorded investment of restricted commercial mortgage loans of $432 million and $509 million, respectively. There was no provision for credit losses recorded during the three months ended September 30, 2011 or 2010 related to restricted commercial mortgage loans. There was no provision for credit losses recorded during the nine months ended September 30, 2011 related to restricted commercial mortgage loans. A provision for credit losses of $2 million was recorded during the nine months ended September 30, 2010 related to restricted commercial mortgage loans, which reflected our ending allowance for credit losses balance and was required upon consolidation of securitization entities as of January 1, 2010.
In evaluating the credit quality of restricted commercial mortgage loans, we assess the performance of the underlying loans using both quantitative and qualitative criteria. The risks associated with restricted commercial mortgage loans can typically be evaluated by reviewing both the loan-to-value and debt service coverage ratio to understand both the probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the underlying property for an amount that would enable us to recover our unpaid principal balance in the event of default by the borrower. The average loan-to-value ratio is based on our most recent estimate of the fair value for the underlying property which is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A lower loan-to-value indicates that our loan value is more likely to be recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is based on "normalized" annual net operating income of the property compared to the payments required under the terms of the loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt service coverage ratio should not be used without considering other factors associated with the borrower, such as the borrower's liquidity or access to other resources that may result in our expectation that the borrower will continue to make the future scheduled payments.
The following tables set forth the loan-to-value of restricted commercial mortgage loans by property type as of the dates indicated:
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 152 | $ | 11 | $ | 2 | $ | — | $ | 3 | $ | 168 | ||||||||||||
|
Industrial |
92 | 5 | — | 5 | 2 | 104 | ||||||||||||||||||
|
Office |
67 | 12 | 5 | 6 | 2 | 92 | ||||||||||||||||||
|
Apartments |
35 | 3 | — | 23 | — | 61 | ||||||||||||||||||
|
Mixed use/other |
7 | — | — | — | — | 7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investments |
$ | 353 | $ | 31 | $ | 7 | $ | 34 | $ | 7 | $ | 432 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
82 | % | 7 | % | 1 | % | 8 | % | 2 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average debt service coverage ratio |
1.80 | 1.17 | 2.16 | 0.88 | 0.48 | 1.67 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 141 | $ | 34 | $ | 1 | $ | 3 | $ | 3 | $ | 182 | ||||||||||||
|
Industrial |
108 | 8 | 4 | 2 | 2 | 124 | ||||||||||||||||||
|
Office |
90 | 19 | 5 | 3 | — | 117 | ||||||||||||||||||
|
Apartments |
35 | 9 | — | 20 | — | 64 | ||||||||||||||||||
|
Mixed use/other |
17 | 5 | — | — | — | 22 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investments |
$ | 391 | $ | 75 | $ | 10 | $ | 28 | $ | 5 | $ | 509 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
77 | % | 15 | % | 2 | % | 5 | % | 1 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average debt service coverage ratio |
1.82 | 1.35 | 1.05 | 1.18 | 0.52 | 1.69 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The following tables set forth the debt service coverage ratio for fixed rate restricted commercial mortgage loans by property type as of the dates indicated:
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.50 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 5 | $ | 17 | $ | 50 | $ | 64 | $ | 32 | $ | 168 | ||||||||||||
|
Industrial |
15 | 11 | 24 | 24 | 30 | 104 | ||||||||||||||||||
|
Office |
12 | 24 | 4 | 39 | 13 | 92 | ||||||||||||||||||
|
Apartments |
12 | 15 | 9 | 20 | 5 | 61 | ||||||||||||||||||
|
Mixed use/other |
— | — | — | 2 | 5 | 7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investments |
$ | 44 | $ | 67 | $ | 87 | $ | 149 | $ | 85 | $ | 432 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
10 | % | 15 | % | 20 | % | 35 | % | 20 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
74 | % | 48 | % | 40 | % | 36 | % | 29 | % | 41 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.50 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 14 | $ | 6 | $ | 52 | $ | 77 | $ | 33 | $ | 182 | ||||||||||||
|
Industrial |
11 | 9 | 25 | 50 | 29 | 124 | ||||||||||||||||||
|
Office |
14 | 14 | 23 | 45 | 21 | 117 | ||||||||||||||||||
|
Apartments |
— | 21 | 10 | 26 | 7 | 64 | ||||||||||||||||||
|
Mixed use/other |
— | — | 7 | 11 | 4 | 22 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investments |
$ | 39 | $ | 50 | $ | 117 | $ | 209 | $ | 94 | $ | 509 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
8 | % | 10 | % | 23 | % | 41 | % | 18 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
65 | % | 55 | % | 42 | % | 41 | % | 31 | % | 43 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
There were no floating rate restricted commercial mortgage loans as of September 30, 2011 or December 31, 2010.
(g) Restricted Other Invested Assets Related To Securitization Entities
We have consolidated securitization entities that hold certain investments that are recorded as restricted other invested assets related to securitization entities. The consolidated securitization entities hold certain investments as trading securities whereby the changes in fair value are recorded in current period income. The trading securities are comprised of asset-backed securities, including residual interest in certain policy loan securitization entities and highly rated bonds that are primarily backed by credit card receivables.
|
|||
(5) Derivative Instruments
Our business activities routinely deal with fluctuations in interest rates, equity prices, currency exchange rates and other asset and liability prices. We use derivative instruments to mitigate or reduce certain of these risks. We have established policies for managing each of these risks, including prohibitions on derivatives market-making and other speculative derivatives activities. These policies require the use of derivative instruments in concert with other techniques to reduce or mitigate these risks. While we use derivatives to mitigate or reduce risks, certain derivatives do not meet the accounting requirements to be designated as hedging instruments and are denoted as "derivatives not designated as hedges" in the following disclosures. For derivatives that meet the accounting requirements to be designated as hedges, the following disclosures for these derivatives are denoted as "derivatives designated as hedges," which include both cash flow and fair value hedges.
The following table sets forth our positions in derivative instruments as of the dates indicated:
| Derivative assets | Derivative liabilities | |||||||||||||||||||
| Fair value | Fair value | |||||||||||||||||||
|
(Amounts in millions) |
Balance sheet classification |
September 30, 2011 |
December 31, 2010 |
Balance sheet classification |
September 30, 2011 |
December 31, 2010 |
||||||||||||||
|
Derivatives designated as hedges |
||||||||||||||||||||
|
Cash flow hedges: |
||||||||||||||||||||
|
Interest rate swaps |
Other invested assets | $ | 1,478 | $ | 222 | Other liabilities | $ | — | $ | 56 | ||||||||||
|
Forward bond purchase commitments |
Other invested assets | 37 | — | Other liabilities | — | — | ||||||||||||||
|
Inflation indexed swaps |
Other invested assets | — | — | Other liabilities | 41 | 33 | ||||||||||||||
|
Foreign currency swaps |
Other invested assets | — | 205 | Other liabilities | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total cash flow hedges |
1,515 | 427 | 41 | 89 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Fair value hedges: |
||||||||||||||||||||
|
Interest rate swaps |
Other invested assets | 56 | 95 | Other liabilities | 3 | 8 | ||||||||||||||
|
Foreign currency swaps |
Other invested assets | 37 | 35 | Other liabilities | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total fair value hedges |
93 | 130 | 3 | 8 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total derivatives designated as hedges |
1,608 | 557 | 44 | 97 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Derivatives not designated as hedges |
||||||||||||||||||||
|
Interest rate swaps |
Other invested assets | 718 | 446 | Other liabilities | 351 | 74 | ||||||||||||||
|
Equity return swaps |
Other invested assets | 24 | — | Other liabilities | 1 | 3 | ||||||||||||||
|
Interest rate swaps related to securitization entities |
Restricted other invested assets |
— | — | Other liabilities | 29 | 19 | ||||||||||||||
|
Interest rate swaptions |
Other invested assets | — | — | Other liabilities | — | — | ||||||||||||||
|
Credit default swaps |
Other invested assets | 1 | 11 | Other liabilities | 77 | 7 | ||||||||||||||
|
Credit default swaps related to securitization entities |
Restricted other invested assets |
— | — | Other liabilities | 180 | 129 | ||||||||||||||
|
Equity index options |
Other invested assets | 62 | 33 | Other liabilities | — | 3 | ||||||||||||||
|
Financial futures |
Other invested assets | — | — | Other liabilities | — | — | ||||||||||||||
|
Other foreign currency contracts |
Other invested assets | 2 | — | Other liabilities | 1 | — | ||||||||||||||
|
Reinsurance embedded derivatives (1) |
Other assets | 26 | 1 | Other liabilities | — | — | ||||||||||||||
|
GMWB embedded derivatives |
Reinsurance recoverable (2) |
21 | (5 | ) | Policyholder account balances (3) |
602 | 121 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total derivatives not designated as hedges |
854 | 486 | 1,241 | 356 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total derivatives |
$ | 2,462 | $ | 1,043 | $ | 1,285 | $ | 453 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) |
Represents embedded derivatives associated with certain reinsurance agreements. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits ("GMWB") liabilities. |
| (3) |
Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
The fair value of derivative positions presented above was not offset by the respective collateral amounts retained or provided under these agreements. The amounts recognized for derivative counterparty collateral retained by us was recorded in other invested assets with a corresponding amount recorded in other liabilities to represent our obligation to return the collateral retained by us.
The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for GMWB embedded derivatives, the change between periods is best illustrated by the number of policies. The following tables represent activity associated with derivative instruments as of the dates indicated:
|
(Notional in millions) |
Measurement | December 31, 2010 |
Additions | Maturities/ terminations |
September 30, 2011 |
|||||||||||||
|
Derivatives designated as hedges |
||||||||||||||||||
|
Cash flow hedges: |
||||||||||||||||||
|
Interest rate swaps |
Notional | $ | 12,355 | $ | 3,896 | $ | (4,021 | ) | $ | 12,230 | ||||||||
|
Forward bond purchase commitments |
Notional | — | 504 | — | 504 | |||||||||||||
|
Inflation indexed swaps |
Notional | 525 | 19 | — | 544 | |||||||||||||
|
Foreign currency swaps |
Notional | 491 | — | (491) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total cash flow hedges |
13,371 | 4,419 | (4,512 | ) | 13,278 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Fair value hedges: |
||||||||||||||||||
|
Interest rate swaps |
Notional | 1,764 | — | (698 | ) | 1,066 | ||||||||||||
|
Foreign currency swaps |
Notional | 85 | — | — | 85 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total fair value hedges |
1,849 | — | (698 | ) | 1,151 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total derivatives designated as hedges |
15,220 | 4,419 | (5,210 | ) | 14,429 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Derivatives not designated as hedges |
||||||||||||||||||
|
Interest rate swaps |
Notional | 7,681 | 1,310 | (1,769 | ) | 7,222 | ||||||||||||
|
Equity return swaps |
Notional | 208 | 362 | (229 | ) | 341 | ||||||||||||
|
Interest rate swaps related to securitization entities |
Notional | 129 | — | (9 | ) | 120 | ||||||||||||
|
Interest rate swaptions |
Notional | 200 | — | (200 | ) | — | ||||||||||||
|
Credit default swaps |
Notional | 1,195 | 115 | (200 | ) | 1,110 | ||||||||||||
|
Credit default swaps related to securitization entities |
Notional | 317 | — | — | 317 | |||||||||||||
|
Equity index options |
Notional | 744 | 521 | (795 | ) | 470 | ||||||||||||
|
Financial futures |
Notional | 3,937 | 4,737 | (5,078 | ) | 3,596 | ||||||||||||
|
Other foreign currency contracts |
Notional | 521 | 185 | (549 | ) | 157 | ||||||||||||
|
Reinsurance embedded derivatives |
Notional | 72 | 297 | (161 | ) | 208 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total derivatives not designated as hedges |
15,004 | 7,527 | (8,990 | ) | 13,541 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total derivatives |
$ | 30,224 | $ | 11,946 | $ | (14,200 | ) | $ | 27,970 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
(Number of policies) |
||||||||||||||||||
|
Derivatives designated as hedges |
||||||||||||||||||
|
GMWB embedded derivatives |
Policies | 49,566 | 696 | (1,960 | ) | 48,302 | ||||||||||||
We did not have any derivatives with counterparties that can be terminated at the option of the derivative counterparty as of September 30, 2011.
Certain derivative instruments are designated as cash flow hedges. The changes in fair value of these instruments are recorded as a component of OCI. We designate and account for the following as cash flow hedges when they have met the effectiveness requirements: (i) various types of interest rate swaps to convert floating rate investments to fixed rate investments; (ii) various types of interest rate swaps to convert floating rate liabilities into fixed rate liabilities; (iii) receive U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments; (iv) pay U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure on liabilities denominated in foreign currencies; (v) forward starting interest rate swaps to hedge against changes in interest rates associated with future fixed-rate bond purchases and/or interest income; and (vi) forward bond purchase commitments to hedge against the variability in the anticipated cash flows required to purchase future fixed rate bonds; and (vii)other instruments to hedge the cash flows of various forecasted transactions.
The following table provides information about the pre-tax income effects of cash flow hedges for the three months ended September 30, 2011:
|
(Amounts in millions) |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into net income from OCI |
Classification of gain |
Gain (loss) recognized in net income (1) |
Classification of gain | |||||||||||
|
Interest rate swaps hedging assets |
$ | 1,528 | $ | 7 |
Net investment Income |
$ | 51 |
Net investment gains (losses) | ||||||||
|
Forward bond purchase commitments |
37 | 0 | Net investment income | — | Net investment gains (losses) | |||||||||||
|
Inflation indexed swaps |
20 | (2) | Net investment income | — | Net investment gains (losses) | |||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Total |
$ | 1,585 | $ | 5 | $ | 51 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) |
Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness. |
The following table provides information about the pre-tax income effects of cash flow hedges for the three months ended September 30, 2010:
|
(Amounts in millions) |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into net income from OCI |
Classification of gain (loss) reclassified into net income |
Gain (loss) recognized in net income (1) |
Classification of gain (loss) recognized in net income | |||||||||||
|
Interest rate swaps hedging assets |
$ | 277 | $ | 3 | Net investment income |
$ | 8 | Net investment gains (losses) | ||||||||
|
Interest rate swaps hedging assets |
— | 1 | Net investment gains (losses) |
— | Net investment gains (losses) | |||||||||||
|
Interest rate swaps hedging liabilities |
— | 1 | Interest expense | — | Net investment gains (losses) | |||||||||||
|
Inflation indexed swaps |
22 | — | Net investment income |
— | Net investment gains (losses) | |||||||||||
|
Foreign currency swaps |
2 | (1 | ) | Interest expense | — | Net investment gains (losses) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Total |
$ | 301 | $ | 4 | $ | 8 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) |
Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness.
|
The following table provides information about the pre-tax income effects of cash flow hedges for the nine months ended September 30, 2011:
|
(Amounts in millions) |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into net income from OCI |
Classification of gain |
Gain (loss) recognized in net income (1) |
Classification of gain | |||||||||||
|
Interest rate swaps hedging assets |
$ | 1,568 | $ | 18 | Net investment income | $ | 51 | Net investment gains (losses) | ||||||||
|
Interest rate swaps hedging liabilities |
— | 1 | Interest expense | — | Net investment gains (losses) | |||||||||||
|
Forward bond purchase commitments |
37 | — | Net investment income | — | Net investment gains (losses) | |||||||||||
|
Inflation indexed swaps |
(8 | ) | (24 | ) | Net investment income | — | Net investment gains (losses) | |||||||||
|
Foreign currency swaps |
4 | (5 | ) | Interest expense | — | Net investment gains (losses) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Total |
$ | 1,601 | $ | (10 | ) | $ | 51 | |||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) |
Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness. |
The following table provides information about the pre-tax income effects of cash flow hedges for the nine months ended September 30, 2010:
|
(Amounts in millions) |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into net income from OCI |
Classification of gain |
Gain (loss) recognized in net income (1) |
Classification of gain | |||||||||||
|
Interest rate swaps hedging assets |
$ | 839 | $ | 12 | Net investment income | $ | 21 | Net investment gains (losses) | ||||||||
|
Interest rate swaps hedging assets |
— | 2 | Net investment gains (losses) | — | Net investment gains (losses) | |||||||||||
|
Interest rate swaps hedging liabilities |
(3 | ) | 1 | Interest expense | — | Net investment gains (losses) | ||||||||||
|
Inflation indexed swaps |
23 | — | Net investment income | (1 | ) | Net investment gains (losses) | ||||||||||
|
Foreign currency swaps |
9 | (5 | ) | Interest expense | — | Net investment gains (losses) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Total |
$ | 868 | $ | 10 | $ | 20 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) |
Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness. |
The total of derivatives designated as cash flow hedges of $1,960 million, net of taxes, recorded in stockholders' equity as of September 30, 2011 is expected to be reclassified to future net income, concurrently with and primarily offsetting changes in interest expense and interest income on floating-rate instruments and interest income on future fixed-rate bond purchases. Of this amount, $25 million, net of taxes, is expected to be reclassified to net income in the next 12 months. Actual amounts may vary from this amount as a result of market conditions. All forecasted transactions associated with qualifying cash flow hedges are expected to occur by 2045. No amounts were reclassified to net income during the nine months ended September 30, 2011 in connection with forecasted transactions that were no longer considered probable of occurring.
Fair Value Hedges
Certain derivative instruments are designated as fair value hedges. The changes in fair value of these instruments are recorded in net income. In addition, changes in the fair value attributable to the hedged portion of the underlying instrument are reported in net income. We designate and account for the following as fair value hedges when they have met the effectiveness requirements: (i) interest rate swaps to convert fixed rate investments to floating rate investments; (ii) interest rate swaps to convert fixed rate liabilities into floating rate liabilities; (iii) cross currency swaps to convert non-U.S. dollar fixed rate liabilities to floating rate U.S. dollar liabilities; and (iv) other instruments to hedge various fair value exposures of investments.
The following table provides information about the pre-tax income effects of fair value hedges and related hedged items for the three months ended September 30, 2011:
| Derivative instrument | Hedged item | |||||||||||||||||
|
(Amounts in millions) |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income |
Other impacts to net income |
Classification of other impacts to net income |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income | ||||||||||||
|
Interest rate swaps hedging assets |
$ | 1 | Net investment gains (losses) |
$ | (2 | ) | Net investment income |
$ | (1 | ) | Net investment gains (losses) | |||||||
|
Interest rate swaps hedging liabilities |
(10 | ) | Net investment gains (losses) |
16 | Interest credited | 10 | Net investment gains (losses) | |||||||||||
|
Foreign currency swaps |
(9 | ) | Net investment gains (losses) |
1 | Interest credited | 10 | Net investment gains (losses) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | (18 | ) | $ | 15 | $ | 19 | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
The following table provides information about the pre-tax income effects of fair value hedges and related hedged items for the three months ended September 30, 2010:
| Derivative instrument | Hedged item | |||||||||||||||||
|
(Amounts in millions) |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income |
Other impacts to net income |
Classification of other impacts to net income |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income | ||||||||||||
|
Interest rate swaps hedging assets |
$ | — | Net investment gains (losses) |
$ | (4 | ) | Net investment income |
$ | (1 | ) | Net investment gains (losses) | |||||||
|
Interest rate swaps hedging liabilities |
(4 | ) | Net investment gains (losses) |
25 | Interest credited | 4 | Net investment gains (losses) | |||||||||||
|
Foreign currency swaps |
11 | Net investment gains (losses) |
— | Interest credited | (10 | ) | Net investment gains (losses) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 7 | $ | 21 | $ | (7 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
The following table provides information about the pre-tax income effects of fair value hedges and related hedged items for the nine months ended September 30, 2011:
| Derivative instrument | Hedged item | |||||||||||||||||
|
(Amounts in millions) |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income |
Other impacts to net income |
Classification of other impacts to net income |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income | ||||||||||||
|
Interest rate swaps hedging assets |
$ | 3 | Net investment gains (losses) |
$ | (7 | ) | Net investment income |
$ | (3 | ) | Net investment gains (losses) | |||||||
|
Interest rate swaps hedging liabilities |
(39 | ) | Net investment gains (losses) |
53 | Interest credited | 39 | Net investment gains (losses) | |||||||||||
|
Foreign currency swaps |
2 | Net investment gains (losses) |
2 | Interest credited | (2 | ) | Net investment gains (losses) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | (34 | ) | $ | 48 | $ | 34 | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
The following table provides information about the pre-tax income effects of fair value hedges and related hedged items for the nine months ended September 30, 2010:
| Derivative instrument | Hedged item | |||||||||||||||||
|
(Amounts in millions) |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income |
Other impacts to net income |
Classification of other impacts to net income |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income | ||||||||||||
|
Interest rate swaps hedging assets |
$ | 2 | Net investment gains (losses) |
$ | (10 | ) | Net investment income |
$ | (3 | ) | Net investment gains (losses) | |||||||
|
Interest rate swaps hedging liabilities |
(11 | ) | Net investment gains (losses) |
75 | Interest credited | 11 | Net investment gains (losses) | |||||||||||
|
Foreign currency swaps |
7 | Net investment gains (losses) |
2 | Interest credited | (6 | ) | Net investment gains (losses) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | (2 | ) | $ | 67 | $ | 2 | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
The difference between the gain (loss) recognized for the derivative instrument and the hedged item presented above represents the net ineffectiveness of the fair value hedging relationships. The other impacts presented above represent the net income effects of the derivative instruments that are presented in the same location as the income (loss) activity from the hedged item. There were no amounts excluded from the measurement of effectiveness.
Derivatives Not Designated As Hedges
We also enter into certain non-qualifying derivative instruments such as: (i) interest rate swaps, swaptions and financial futures to mitigate interest rate risk as part of managing regulatory capital positions; (ii) credit default swaps to enhance yield and reproduce characteristics of investments with similar terms and credit risk; (iii) equity index options, equity return swaps, interest rate swaps and financial futures to mitigate the risks associated with liabilities that have guaranteed minimum benefits; (iv) interest rate swaps where the hedging relationship does not qualify for hedge accounting; (v) credit default swaps to mitigate loss exposure to certain credit risk; (vi) foreign currency forward contracts to mitigate currency risk associated with future dividends from certain foreign subsidiaries to our holding company; and (vii) equity index options and credit default swaps to mitigate certain macroeconomic risks associated with certain foreign subsidiaries. Additionally, we provide GMWBs on certain products that are required to be bifurcated as embedded derivatives and have reinsurance agreements with certain features that are required to be bifurcated as embedded derivatives.
We also have derivatives related to securitization entities where we were required to consolidate the related securitization entity as a result of our involvement in the structure. The counterparties for these derivatives typically only have recourse to the securitization entity. The interest rate swaps used for these entities are typically used to effectively convert the interest payments on the assets of the securitization entity to the same basis as the interest rate on the borrowings issued by the securitization entity. Credit default swaps are utilized in certain securitization entities to enhance the yield payable on the borrowings issued by the securitization entity and also include a settlement feature that allows the securitization entity to provide the par value of assets in the securitization entity for the amount of any losses incurred under the credit default swap.
The following table provides the pre-tax gain (loss) recognized in net income for the effects of derivatives not designated as hedges for the periods indicated:
| Three months ended September 30, | Classification of gain (loss) recognized | |||||||||
|
(Amounts in millions) |
2011 | 2010 |
in net income | |||||||
|
Interest rate swaps |
$ | 9 | $ | 36 | Net investment gains (losses) | |||||
|
Equity return swaps |
22 | (6 | ) | Net investment gains (losses) | ||||||
|
Interest rate swaps related to securitization entities |
(12 | ) | (12 | ) | Net investment gains (losses) | |||||
|
Interest rate swaptions |
— | 4 | Net investment gains (losses) | |||||||
|
Credit default swaps |
(70 | ) | 22 | Net investment gains (losses) | ||||||
|
Credit default swaps related to securitization entities |
(53 | ) | 30 | Net investment gains (losses) | ||||||
|
Equity index options |
60 | (55 | ) | Net investment gains (losses) | ||||||
|
Financial futures |
267 | (43 | ) | Net investment gains (losses) | ||||||
|
Other foreign currency contracts |
13 | (8 | ) | Net investment gains (losses) | ||||||
|
Reinsurance embedded derivatives |
27 | 2 | Net investment gains (losses) | |||||||
|
GMWB embedded derivatives |
(456 | ) | 133 | Net investment gains (losses) | ||||||
|
|
|
|
|
|||||||
|
Total derivatives not designated as hedges |
$ | (193 | ) | $ | 103 | |||||
|
|
|
|
|
|||||||
The following table provides the pre-tax gain (loss) recognized in net income for the effects of derivatives not designated as hedges for the periods indicated:
| Nine months ended September 30, | Classification of gain (loss) recognized | |||||||||
|
(Amounts in millions) |
2011 | 2010 |
in net income | |||||||
|
Interest rate swaps |
$ | 13 | $ | 93 | Net investment gains (losses) | |||||
|
Equity return swaps |
12 | (6 | ) | Net investment gains (losses) | ||||||
|
Interest rate swaps related to securitization entities |
(15 | ) | (24 | ) | Net investment gains (losses) | |||||
|
Interest rate swaptions |
— | 61 | Net investment gains (losses) | |||||||
|
Credit default swaps |
(67 | ) | (5 | ) | Net investment gains (losses) | |||||
|
Credit default swaps related to securitization entities |
(48 | ) | (11 | ) | Net investment gains (losses) | |||||
|
Equity index options |
32 | (32 | ) | Net investment gains (losses) | ||||||
|
Financial futures |
262 | 29 | Net investment gains (losses) | |||||||
|
Other foreign currency contracts |
— | (9 | ) | Net investment gains (losses) | ||||||
|
Reinsurance embedded derivatives |
26 | 4 | Net investment gains (losses) | |||||||
|
GMWB embedded derivatives |
(430 | ) | (109 | ) | Net investment gains (losses) | |||||
|
|
|
|
|
|||||||
|
Total derivatives not designated as hedges |
$ | (215 | ) | $ | (9 | ) | ||||
|
|
|
|
|
|||||||
Derivative Counterparty Credit Risk
As of September 30, 2011 and December 31, 2010, net fair value assets by counterparty totaled $1,962 million and $888 million, respectively. As of September 30, 2011 and December 31, 2010, net fair value liabilities by counterparty totaled $230 million and $172 million, respectively. As of September 30, 2011 and December 31, 2010, we retained collateral of $1,733 million and $794 million, respectively, related to these agreements, including over collateralization of $9 million and $29 million, respectively, from certain counterparties. As of September 30, 2011, we did not post any collateral to derivative counterparties. As of December 31, 2010, we posted $30 million of collateral to derivative counterparties, including over collateralization of $11 million. For derivatives related to securitization entities, there are no arrangements that require either party to provide collateral and the recourse of the derivative counterparty is typically limited to the assets held by the securitization entity and there is no recourse to any entity other than the securitization entity.
Except for derivatives related to securitization entities, all of our master swap agreements contain credit downgrade provisions that allow either party to assign or terminate derivative transactions if the other party's long-term unsecured debt rating or financial strength rating is below the limit defined in the applicable agreement. If the downgrade provisions had been triggered as of September 30, 2011 and December 31, 2010, we could have been allowed to claim up to $238 million and $123 million, respectively, from counterparties and required to disburse up to $21 million and $5 million, respectively. This represented the net fair value of gains and losses by counterparty, less available collateral held, and did not include any fair value gains or losses for derivatives related to securitization entities.
Credit Derivatives
We sell protection under single name credit default swaps and credit default swap index tranches in combination with purchasing securities to replicate characteristics of similar investments based on the credit quality and term of the credit default swap. Credit default triggers for both indexed reference entities and single name reference entities follow the Credit Derivatives Physical Settlement Matrix published by the International Swaps and Derivatives Association. Under these terms, credit default triggers are defined as bankruptcy, failure to pay or restructuring, if applicable. Our maximum exposure to credit loss equals the notional value for credit default swaps. In the event of default for credit default swaps, we are typically required to pay the protection holder the full notional value less a recovery rate determined at auction.
In addition to the credit derivatives discussed above, we also have credit derivative instruments related to securitization entities that we consolidated in 2010. These derivatives represent a customized index of reference entities with specified attachment points for certain derivatives. The credit default triggers are similar to those described above. In the event of default, the securitization entity will provide the counterparty with the par value of assets held in the securitization entity for the amount of incurred loss on the credit default swap. The maximum exposure to loss for the securitization entity is the notional value of the derivatives. Certain losses on these credit default swaps would be absorbed by the third-party noteholders of the securitization entity and the remaining losses on the credit default swaps would be absorbed by our portion of the notes issued by the securitization entity.
The following table sets forth our credit default swaps where we sell protection on single name reference entities and the fair values as of the dates indicated:
| September 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
|
(Amounts in millions) |
Notional value |
Assets | Liabilities | Notional value |
Assets | Liabilities | ||||||||||||||||||
|
Reference entity credit rating and maturity: |
||||||||||||||||||||||||
|
AAA |
||||||||||||||||||||||||
|
Matures after one year through five years |
$ | 5 | $ | — | $ | — | $ | 5 | $ | — | $ | — | ||||||||||||
|
AA |
||||||||||||||||||||||||
|
Matures after one year through five years |
6 | — | — | 6 | — | — | ||||||||||||||||||
|
Matures after five years through ten years |
5 | — | — | 5 | — | — | ||||||||||||||||||
|
A |
||||||||||||||||||||||||
|
Matures after one year through five years |
37 | 1 | — | 37 | 1 | — | ||||||||||||||||||
|
Matures after five years through ten years |
10 | — | 1 | 5 | — | — | ||||||||||||||||||
|
BBB |
||||||||||||||||||||||||
|
Matures after one year through five years |
68 | — | — | 68 | 2 | — | ||||||||||||||||||
|
Matures after five years through ten years |
24 | — | 1 | 29 | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total credit default swaps on single name reference entities |
$ | 155 | $ | 1 | $ | 2 | $ | 155 | $ | 3 | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The following table sets forth our credit default swaps where we sell protection on credit default swap index tranches and the fair values as of the dates indicated:
| September 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
|
(Amounts in millions) |
Notional value |
Assets | Liabilities | Notional value |
Assets | Liabilities | ||||||||||||||||||
|
Original index tranche attachment/detachment point and maturity: |
||||||||||||||||||||||||
|
9% - 12% matures after one year through five years (1) |
$ | 300 | $ | — | $ | 35 | $ | 300 | $ | — | $ | 3 | ||||||||||||
|
10% - 15% matures after one year through five years (2) |
250 | — | 4 | 250 | 4 | — | ||||||||||||||||||
|
12% - 22% matures after five years through ten years (3) |
248 | — | 32 | 248 | — | 4 | ||||||||||||||||||
|
15% - 30% matures after five years through ten years (4) |
127 | — | 4 | 127 | 2 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total credit default swap index tranches |
925 | — | 75 | 925 | 6 | 7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Customized credit default swap index tranches related to securitization entities: |
||||||||||||||||||||||||
|
Portion backing third-party borrowings maturing 2017 (5) |
17 | — | 9 | 17 | — | 8 | ||||||||||||||||||
|
Portion backing our interest maturing 2017 (6) |
300 | — | 171 | 300 | — | 121 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total customized credit default swap index tranches related to securitization entities |
317 | — | 180 | 317 | — | 129 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total credit default swaps on index tranches |
$ | 1,242 | $ | — | $ | 255 | $ | 1,242 | $ | 6 | $ | 136 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) |
The current attachment/detachment as of September 30, 2011 and December 31, 2010 was 9% – 12%. |
| (2) |
The current attachment/detachment as of September 30, 2011 and December 31, 2010 was 10% – 15%. |
| (3) |
The current attachment/detachment as of September 30, 2011 and December 31, 2010 was 12% – 22%. |
| (4) |
The current attachment/detachment as of September 30, 2011 and December 31, 2010 was 14.8% – 30.3%. |
| (5) |
Original notional value was $39 million. |
| (6) |
Original notional value was $300 million. |
|
|||
(6) Fair Value of Financial Instruments
Assets and liabilities that are reflected in the accompanying consolidated financial statements at fair value are not included in the following disclosure of fair value. Such items include cash and cash equivalents, investment securities, separate accounts, securities held as collateral and derivative instruments. Other financial assets and liabilities—those not carried at fair value—are discussed below. Apart from certain of our borrowings and certain marketable securities, few of the instruments discussed below are actively traded and their fair values must often be determined using models. The fair value estimates are made at a specific point in time, based upon available market information and judgments about the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets.
The basis on which we estimate fair value is as follows:
Commercial mortgage loans. Based on recent transactions and/or discounted future cash flows, using current market rates.
Restricted commercial mortgage loans. Based on recent transactions and/or discounted future cash flows, using current market rates.
Other invested assets. Based on comparable market transactions, discounted future cash flows, quoted market prices and/or estimates using the most recent data available for the related instrument. Primarily represents short-term investments, limited partnerships accounted for under the cost method.
Long-term borrowings. Based on market quotes or comparable market transactions.
Non-recourse funding obligations. Based on the then current coupon, revalued based on the London Interbank Offered Rate ("LIBOR") and current spread assumption based on commercially available data. The model is a floating rate coupon model using the spread assumption to derive the valuation.
Borrowings related to securitization entities. Based on market quotes or comparable market transactions.
Investment contracts. Based on expected future cash flows, discounted at current market rates for annuity contracts or institutional products.
The following represents the fair value of financial assets and liabilities that are not required to be carried at fair value as of the dates indicated:
| September 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
|
(Amounts in millions) |
Notional amount |
Carrying amount |
Fair value |
Notional amount |
Carrying amount |
Fair value |
||||||||||||||||||
|
Assets: |
||||||||||||||||||||||||
|
Commercial mortgage loans |
$ | (1) | $ | 6,271 | $ | 6,669 | $ | (1) | $ | 6,718 | $ | 6,896 | ||||||||||||
|
Restricted commercial mortgage loans |
(1) | 430 | 483 | (1) | 507 | 554 | ||||||||||||||||||
|
Other invested assets |
(1) | 302 | 313 | (1) | 267 | 272 | ||||||||||||||||||
|
Liabilities: |
||||||||||||||||||||||||
|
Long-term borrowings (2) |
(1) | 4,708 | 4,181 | (1) | 4,952 | 4,928 | ||||||||||||||||||
|
Non-recourse funding obligations (2) |
(1) | 3,280 | 2,198 | (1) | 3,437 | 2,170 | ||||||||||||||||||
|
Borrowings related to securitization entities |
(1) | 366 | 394 | (1) | 443 | 467 | ||||||||||||||||||
|
Investment contracts |
(1) | 19,095 | 19,869 | (1) | 19,772 | 20,471 | ||||||||||||||||||
|
Other firm commitments: |
||||||||||||||||||||||||
|
Commitments to fund limited partnerships |
65 | — | — | 110 | — | — | ||||||||||||||||||
|
Ordinary course of business lending commitments |
51 | — | — | 28 | — | — | ||||||||||||||||||
| (1) |
These financial instruments do not have notional amounts. |
| (2) |
See note 8 for additional information related to borrowings. |
Recurring Fair Value Measurements
We have fixed maturity, equity and trading securities, derivatives, embedded derivatives, securities held as collateral, separate account assets and certain other financial instruments, which are carried at fair value. Below is a description of the valuation techniques and inputs used to determine fair value by class of instrument.
Fixed maturity, equity and trading securities
The valuations of fixed maturity, equity and trading securities are determined using a market approach, income approach or a combination of the market and income approach depending on the type of instrument and availability of information.
We utilize certain third-party data providers when determining fair value. We consider information obtained from third-party pricing services as well as third-party broker provided prices, or broker quotes, in our determination of fair value. Additionally, we utilize internal models to determine the valuation of securities using an income approach where the inputs are based on third-party provided market inputs. While we consider the valuations provided by third-party pricing services and broker quotes, management determines the fair value of our investment securities after considering all relevant and available information. We also obtain an understanding of the valuation methodologies and procedures used by third-party data providers to ensure sufficient understanding to evaluate the valuation data received and determine the appropriate fair value.
In general, we first obtain valuations from pricing services. If a price is not supplied by a pricing service, we will typically seek a broker quote. For certain private fixed maturity securities where we do not obtain valuations from pricing services, we utilize an internal model to determine fair value since transactions for identical securities are not readily observable and these securities are not typically valued by pricing services. For all securities, excluding certain private fixed maturity securities, if neither a pricing service nor broker quote valuation is available, we determine fair value using internal models.
For pricing services, we obtain an understanding of the pricing methodologies and procedures for each type of instrument. In general, a pricing service does not provide a price for a security if sufficient information is not readily available to determine fair value or if such security is not in the specific sector or class covered by a particular pricing service. Given our understanding of the pricing methodologies and procedures of pricing services, the securities valued by pricing services are typically classified as Level 2 unless we determine the valuation process for a security or group of securities utilizes significant unobservable inputs.
For private fixed maturity securities, we utilize an internal model to determine fair value and utilize public bond spreads by sector, rating and maturity to develop the market rate that would be utilized for a similar public bond. We then add an additional premium to the public bond spread to adjust for the liquidity and other features of our private placements. We utilize the estimated market yield to discount the expected cash flows of the security to determine fair value. We assign each security an internal rating to determine the appropriate public bond spread that should be utilized in the valuation. While we generally consider the public bond spreads by sector and maturity to be observable inputs, we evaluate the similarities of our private placement with the public bonds to determine whether the spreads utilized would be considered observable inputs for the private placement being valued. To determine the significance of unobservable inputs, we calculate the impact on the valuation from the unobservable input and will classify a security as Level 3 when the impact on the valuation exceeds 10%.
For broker quotes, we consider the valuation methodology utilized by the third party but cannot typically obtain sufficient evidence to determine the valuation does not include significant unobservable inputs. Accordingly, we typically classify the securities where fair value is based on our consideration of broker quotes as Level 3 measurements.
For remaining securities priced using internal models, we maximize the use of observable inputs but typically utilize significant unobservable inputs to determine fair value. Accordingly, the valuations are typically classified as Level 3.
The following tables summarize the primary sources considered when determining fair value of each class of fixed maturity securities as of the dates indicated:
| September 30, 2011 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
U.S. government, agencies and government-sponsored enterprises: |
||||||||||||||||
|
Pricing services |
$ | 4,812 | $ | — | $ | 4,812 | $ | — | ||||||||
|
Internal models |
13 | — | 12 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total U.S. government, agencies and government-sponsored enterprises |
4,825 | — | 4,824 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Tax-exempt: |
||||||||||||||||
|
Pricing services |
693 | — | 693 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total tax-exempt |
693 | — | 693 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Government—non-U.S.: |
||||||||||||||||
|
Pricing services |
2,155 | — | 2,155 | — | ||||||||||||
|
Internal models |
10 | — | 9 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total government—non-U.S. |
2,165 | — | 2,164 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
U.S. corporate: |
||||||||||||||||
|
Pricing services |
22,102 | — | 22,102 | — | ||||||||||||
|
Broker quotes |
269 | — | — | 269 | ||||||||||||
|
Internal models |
2,997 | — | 1,916 | 1,081 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total U.S. corporate |
25,368 | — | 24,018 | 1,350 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Corporate—non-U.S.: |
||||||||||||||||
|
Pricing services |
11,790 | — | 11,790 | — | ||||||||||||
|
Broker quotes |
84 | — | — | 84 | ||||||||||||
|
Internal models |
1,831 | — | 1,545 | 286 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total corporate—non-U.S. |
13,705 | — | 13,335 | 370 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Residential mortgage-backed: |
||||||||||||||||
|
Pricing services |
5,273 | — | 5,273 | — | ||||||||||||
|
Broker quotes |
53 | — | — | 53 | ||||||||||||
|
Internal models |
54 | — | — | 54 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total residential mortgage-backed |
5,380 | — | 5,273 | 107 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Commercial mortgage-backed: |
||||||||||||||||
|
Pricing services |
3,502 | — | 3,502 | — | ||||||||||||
|
Broker quotes |
16 | — | — | 16 | ||||||||||||
|
Internal models |
25 | — | — | 25 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total commercial mortgage-backed |
3,543 | — | 3,502 | 41 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Other asset-backed: |
||||||||||||||||
|
Pricing services |
1,872 | — | 1,872 | — | ||||||||||||
|
Broker quotes |
255 | — | — | 255 | ||||||||||||
|
Internal models |
10 | — | 10 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other asset-backed |
2,137 | — | 1,882 | 255 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total fixed maturity securities |
$ | 57,816 | $ | — | $ | 55,691 | $ | 2,125 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2010 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
U.S. government, agencies and government-sponsored enterprises: |
||||||||||||||||
|
Pricing services |
$ | 3,688 | $ | — | $ | 3,688 | $ | — | ||||||||
|
Internal models |
17 | — | 6 | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total U.S. government, agencies and government-sponsored enterprises |
3,705 | — | 3,694 | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Tax-exempt: |
||||||||||||||||
|
Pricing services |
1,030 | — | 1,030 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total tax-exempt |
1,030 | — | 1,030 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Government—non-U.S.: |
||||||||||||||||
|
Pricing services |
2,357 | — | 2,357 | — | ||||||||||||
|
Internal models |
12 | — | 11 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total government—non-U.S. |
2,369 | — | 2,368 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
U.S. corporate: |
||||||||||||||||
|
Pricing services |
20,563 | — | 20,563 | — | ||||||||||||
|
Broker quotes |
235 | — | — | 235 | ||||||||||||
|
Internal models |
3,169 | — | 2,304 | 865 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total U.S. corporate |
23,967 | — | 22,867 | 1,100 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Corporate—non-U.S.: |
||||||||||||||||
|
Pricing services |
11,584 | — | 11,584 | — | ||||||||||||
|
Broker quotes |
113 | — | — | 113 | ||||||||||||
|
Internal models |
1,801 | — | 1,546 | 255 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total corporate—non-U.S. |
13,498 | — | 13,130 | 368 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Residential mortgage-backed: |
||||||||||||||||
|
Pricing services |
4,312 | — | 4,312 | — | ||||||||||||
|
Broker quotes |
72 | — | — | 72 | ||||||||||||
|
Internal models |
71 | — | — | 71 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total residential mortgage-backed |
4,455 | — | 4,312 | 143 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Commercial mortgage-backed: |
||||||||||||||||
|
Pricing services |
3,693 | — | 3,693 | — | ||||||||||||
|
Broker quotes |
16 | — | — | 16 | ||||||||||||
|
Internal models |
34 | — | — | 34 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total commercial mortgage-backed |
3,743 | — | 3,693 | 50 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Other asset-backed: |
||||||||||||||||
|
Pricing services |
2,241 | — | 2,143 | 98 | ||||||||||||
|
Broker quotes |
169 | — | — | 169 | ||||||||||||
|
Internal models |
6 | — | 5 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other asset-backed |
2,416 | — | 2,148 | 268 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total fixed maturity securities |
$ | 55,183 | $ | — | $ | 53,242 | $ | 1,941 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following tables summarize the primary sources considered when determining fair value of equity securities as of the dates indicated:
| September 30, 2011 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Pricing services |
$ | 254 | $ | 248 | $ | 6 | $ | — | ||||||||
|
Broker quotes |
6 | — | — | 6 | ||||||||||||
|
Internal models |
94 | — | — | 94 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total equity securities |
$ | 354 | $ | 248 | $ | 6 | $ | 100 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2010 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Pricing services |
$ | 245 | $ | 240 | $ | 5 | $ | — | ||||||||
|
Broker quotes |
6 | — | — | 6 | ||||||||||||
|
Internal models |
81 | — | — | 81 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total equity securities |
$ | 332 | $ | 240 | $ | 5 | $ | 87 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The following tables summarize the primary sources considered when determining fair value of trading securities as of the dates indicated:
| September 30, 2011 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Pricing services |
$ | 365 | $ | — | $ | 365 | $ | — | ||||||||
|
Broker quotes |
274 | — | — | 274 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total trading securities |
$ | 639 | $ | — | $ | 365 | $ | 274 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2010 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Pricing services |
$ | 348 | $ | — | $ | 348 | $ | — | ||||||||
|
Broker quotes |
230 | — | — | 230 | ||||||||||||
|
Internal models |
99 | — | — | 99 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total trading securities |
$ | 677 | $ | — | $ | 348 | $ | 329 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Restricted other invested assets related to securitization entities
We have trading securities related to securitization entities that are classified as restricted other invested assets and are carried at fair value. The trading securities represent asset-backed securities. The valuation for trading securities is determined using a market approach and/or an income approach depending on the availability of information. For certain highly rated asset-backed securities, there is observable market information for transactions of the same or similar instruments and is provided to us by a third-party pricing service and is classified as Level 2. For certain securities that are not actively traded, we determine fair value after considering third-party broker provided prices or discounted expected cash flows using current yields for similar securities and classify these valuations as Level 3.
Securities lending and derivative counterparty collateral
The fair value of securities held as collateral is primarily based on Level 2 inputs from market information for the collateral that is held on our behalf by the custodian. We determine fair value after considering prices obtained by third-party pricing services.
Separate account assets
The fair value of separate account assets is based on the quoted prices of the underlying fund investments and, therefore, represents Level 1 pricing.
Derivatives
In determining the fair value of derivatives, we consider the counterparty collateral arrangements and rights of set-off when determining whether any incremental adjustment should be made for both the counterparty's and our non-performance risk. As a result of these counterparty arrangements, we determined no adjustment for our non-performance risk was required to our derivative liabilities.
Interest rate swaps. The valuation of interest rate swaps is determined using an income approach. The primary input into the valuation represents the forward interest rate swap curve, which is generally considered an observable input, and results in the derivative being classified as Level 2. For certain interest rate swaps, the inputs into the valuation also include the total returns of certain bonds that would primarily be considered an observable input and result in the derivative being classified as Level 2. For certain other swaps, there are features that provide an option to the counterparty to terminate the swap at specified dates and would be considered a significant unobservable input and results in the fair value measurement of the derivative being classified as Level 3.
Interest rate swaps related to securitization entities. The valuation of interest rate swaps related to securitization entities is determined using an income approach. The primary input into the valuation represents the forward interest rate swap curve, which is generally considered an observable input, and results in the derivative being classified as Level 2.
Inflation indexed swaps. The valuation of inflation indexed swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and consumer price index, which are generally considered observable inputs, and results in the derivative being classified as Level 2.
Interest rate swaptions. The valuation of interest rate swaptions is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, which is generally considered an observable input, forward interest rate volatility and time value component associated with the optionality in the derivative. As a result of the significant unobservable inputs associated with the forward interest rate volatility input, the derivative is classified as Level 3.
Foreign currency swaps. The valuation of foreign currency swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and foreign currency exchange rates, both of which are considered an observable input, and results in the derivative being classified as Level 2.
Credit default swaps. We have both single name credit default swaps and index tranche credit default swaps. For single name credit default swaps, we utilize an income approach to determine fair value based on using current market information for the credit spreads of the reference entity, which is considered observable inputs based on the reference entities of our derivatives and results in these derivatives being classified as Level 2. For index tranche credit default swaps, we utilize an income approach that utilizes current market information related to credit spreads and expected defaults and losses associated with the reference entities that comprise the respective index associated with each derivative. There are significant unobservable inputs associated with the timing and amount of losses from the reference entities as well as the timing or amount of losses, if any, that will be absorbed by our tranche. Accordingly, the index tranche credit default swaps are classified as Level 3.
Credit default swaps related to securitization entities. Credit default swaps related to securitization entities represent customized index tranche credit default swaps and are valued using a similar methodology as described above for index tranche credit default swaps. We determine fair value of these credit default swaps after considering both the valuation methodology described above as well as the valuation provided by the derivative counterparty. In addition to the valuation methodology and inputs described for index tranche credit default swaps, these customized credit default swaps contain a feature that permits the securitization entity to provide the par value of underlying assets in the securitization entity to settle any losses under the credit default swap. The valuation of this settlement feature is dependent upon the valuation of the underlying assets and the timing and amount of any expected loss on the credit default swap, which is considered a significant unobservable input. Accordingly, these customized index tranche credit default swaps related to securitization entities are classified as Level 3.
Equity index options. We have equity index options associated with various equity indices. The valuation of equity index options is determined using an income approach. The primary inputs into the valuation represent forward interest rate volatility and time value component associated with the optionality in the derivative, which are considered significant unobservable inputs in most instances. The equity index volatility surface is determined based on market information that is not readily observable and is developed based upon inputs received from several third-party sources. Accordingly, these options are classified as Level 3
Financial futures. The fair value of financial futures is based on the closing exchange prices. Accordingly, these financial futures are classified as Level 1. The period end valuation is zero as a result of settling the margins on these contracts on a daily basis.
Equity return swaps. The valuation of equity return swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and underlying equity index values, which are generally considered observable inputs, and results in the derivative being classified as Level 2.
Forward bond purchase commitments. The valuation of forward bond purchase commitments is determined using an income approach. The primary input into the valuation represents the current bond prices and interest rates, which are generally considered an observable input, and results in the derivative being classified as Level 2.
Other foreign currency contracts. We have certain foreign currency options classified as other foreign currency contracts. The valuation of foreign currency options is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, foreign currency exchange rates, forward interest rate, foreign currency exchange rate volatility, foreign equity index volatility and time value component associated with the optionality in the derivative. As a result of the significant unobservable inputs associated with the forward interest rate, foreign currency exchange rate volatility and foreign equity index volatility inputs, the derivative is classified as Level 3. We also have foreign currency forward contracts where the valuation is determined using an income approach. The primary inputs into the valuation represent the forward foreign currency exchange rates, which are generally considered observable inputs and results in the derivative being classified as Level 2.
Reinsurance embedded derivatives
We have certain reinsurance agreements that result in a reinsurance counterparty holding assets for our benefit where this feature is considered an embedded derivative requiring bifurcation. As a result, we measure the embedded derivatives at fair value with changes in fair value being recorded in income. Fair value is determined by comparing the fair value and cost basis of the underlying assets. The underlying assets are primarily comprised of highly rated investments and result in the fair value of the embedded derivatives being classified as Level 2.
GMWB embedded derivatives
We are required to bifurcate an embedded derivative for certain features associated with annuity products and related reinsurance agreements where we provide a GMWB to the policyholder and are required to record the GMWB embedded derivative at fair value. The valuation of our GMWB embedded derivative is based on an income approach that incorporates inputs such as forward interest rates, equity index volatility, equity index and fund correlation, and policyholder assumptions such as utilization, lapse and mortality. In addition to these inputs, we also consider risk and expense margins when determining the projected cash flows that would be determined by another market participant. While the risk and expense margins are considered in determining fair value, these inputs do not have a significant impact on the valuation.
For GMWB liabilities, non-performance risk is integrated into the discount rate. Prior to the third quarter of 2010, the discount rate was based on the swap curve, which incorporated the non-performance risk of our GMWB liabilities. Beginning in 2009, the swap curve dropped below the U.S. Treasury curve at certain points on the longer end of the curve, and in 2010, the points below the U.S. Treasury curve expanded to several points beyond 10 years. For these points on the curve, we utilized the U.S. Treasury curve as our discount rate through the second quarter of 2010. Beginning in the third quarter of 2010, we revised our discount rate to reflect market credit spreads that represent an adjustment for the non-performance risk of the GMWB liabilities. The credit spreads included in our discount rate range from 60 to 85 basis points over the most relevant points on the U.S. Treasury curve. As of September 30, 2011 and December 31, 2010, the impact of non-performance risk resulted in a lower fair value of our GMWB liabilities of $118 million and $44 million, respectively.
To determine the appropriate discount rate to reflect the non-performance risk of the GMWB liabilities, we evaluate the non-performance risk in our liabilities based on a hypothetical exit market transaction as there is no exit market for these types of liabilities. A hypothetical exit market can be viewed as a hypothetical transfer of the liability to another similarly rated insurance company which would closely resemble a reinsurance transaction. Another hypothetical exit market transaction can be viewed as a hypothetical transaction from the perspective of the GMWB policyholder. We believe that a hypothetical exit market participant would use a similar discount rate as described above to value the liabilities.
For equity index volatility, we determine the projected equity market volatility using both historical volatility and projected near-term equity market volatility with more significance being placed on projected and recent historical data.
Equity index and fund correlations are determined based on historical price observations for the fund and equity index.
For policyholder assumptions, we use our expected lapse, mortality and utilization assumptions and update these assumptions for our actual experience, as necessary. For our lapse assumption, we adjust our base lapse assumption by policy based on a combination of the policyholder's current account value and GMWB benefit.
We classify the GMWB valuation as Level 3 based on having significant unobservable inputs. We evaluate the inputs and methodologies used to determine fair value based on how we expect a market participant would determine exit value. As stated above, there is no exit market or market participants for the GMWB embedded derivatives. Accordingly, we evaluate our inputs and resulting fair value based on a hypothetical exit market and hypothetical market participants. A hypothetical exit market could be viewed as a transaction that would closely resemble reinsurance. While reinsurance transactions for this type of product are not an observable input, we consider this type of hypothetical exit market, as appropriate, when evaluating our inputs and determining that our inputs are consistent with that of a hypothetical market participant.
Contingent purchase price
We have certain contingent purchase price payments related to acquisitions made after 2009 that are required to be recorded at fair value each period. Fair value is determined using an income approach whereby we project the expected earnings of the business and compare our projections of the relevant earnings metric to the thresholds established in the purchase agreement to determine our expected payments. We then discount these expected payments to calculate the fair value as of the valuation date. The inputs used to determine the discount rate and expected payments are primarily based on significant unobservable inputs and result in the fair value of the contingent purchase price being classified as Level 3.
Borrowings related to securitization entities
We record certain borrowings related to securitization entities at fair value. The fair value of these borrowings is determined using either a market approach or income approach, depending on the instrument and availability of market information. Given the unique characteristics of the securitization entities that issued these borrowings as well as the lack of comparable instruments, we determine fair value considering the valuation of the underlying assets held by the securitization entities and any derivatives, as well as any unique characteristics of the borrowings that may impact the valuation. After considering all relevant inputs, we determine fair value of the borrowings using the net valuation of the underlying assets and derivatives that are backing the borrowings. Accordingly, these instruments are classified as Level 3.
The following tables set forth our assets and liabilities by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:
| September 30, 2011 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Assets |
||||||||||||||||
|
Investments: |
||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 4,825 | $ | — | $ | 4,824 | $ | 1 | ||||||||
|
Tax-exempt |
693 | — | 693 | — | ||||||||||||
|
Government—non-U.S. |
2,165 | — | 2,164 | 1 | ||||||||||||
|
U.S. corporate |
25,368 | — | 24,018 | 1,350 | ||||||||||||
|
Corporate—non-U.S. |
13,705 | — | 13,335 | 370 | ||||||||||||
|
Residential mortgage-backed |
5,380 | — | 5,273 | 107 | ||||||||||||
|
Commercial mortgage-backed |
3,543 | — | 3,502 | 41 | ||||||||||||
|
Other asset-backed |
2,137 | — | 1,882 | 255 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total fixed maturity securities |
57,816 | — | 55,691 | 2,125 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Equity securities |
354 | 248 | 6 | 100 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Other invested assets: |
||||||||||||||||
|
Trading securities |
639 | — | 365 | 274 | ||||||||||||
|
Derivative assets: |
||||||||||||||||
|
Interest rate swaps |
2,252 | — | 2,246 | 6 | ||||||||||||
|
Foreign currency swaps |
37 | — | 37 | — | ||||||||||||
|
Credit default swaps |
1 | — | 1 | — | ||||||||||||
|
Equity index options |
62 | — | — | 62 | ||||||||||||
|
Equity return swaps |
24 | — | 24 | — | ||||||||||||
|
Forward bond purchase commitments |
37 | — | 37 | — | ||||||||||||
|
Other foreign currency commitments |
2 | — | 2 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total derivative assets |
2,415 | — | 2,347 | 68 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Securities lending collateral |
204 | — | 204 | — | ||||||||||||
|
Derivatives counterparty collateral |
563 | — | 563 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other invested assets |
3,821 | — | 3,479 | 342 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Restricted other invested assets related to securitization entities |
376 | — | 202 | 174 | ||||||||||||
|
Other assets (1) |
26 | — | 26 | — | ||||||||||||
|
Reinsurance recoverable (2) |
21 | — | — | 21 | ||||||||||||
|
Separate account assets |
9,794 | 9,794 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total assets |
$ | 72,208 | $ | 10,042 | $ | 59,404 | $ | 2,762 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Liabilities |
||||||||||||||||
|
Policyholder account balances (3) |
$ | 602 | $ | — | $ | — | $ | 602 | ||||||||
|
Other liabilities: |
||||||||||||||||
|
Contingent purchase price |
44 | — | — | 44 | ||||||||||||
|
Derivative liabilities: |
||||||||||||||||
|
Interest rate swaps |
354 | — | 354 | — | ||||||||||||
|
Interest rate swaps related to securitization entities |
29 | — | 29 | — | ||||||||||||
|
Inflation indexed swaps |
41 | — | 41 | — | ||||||||||||
|
Credit default swaps |
77 | — | 2 | 75 | ||||||||||||
|
Credit default swaps related to securitization entities |
180 | — | — | 180 | ||||||||||||
|
Equity return swaps |
1 | — | 1 | — | ||||||||||||
|
Other foreign currency contracts |
1 | — | 1 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total derivative liabilities |
683 | — | 428 | 255 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other liabilities |
727 | — | 428 | 299 | ||||||||||||
|
Borrowings related to securitization entities |
48 | — | — | 48 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total liabilities |
$ | 1,377 | $ | — | $ | 428 | $ | 949 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) |
Represents embedded derivatives associated with certain reinsurance agreements. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
| (3) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
| December 31, 2010 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Assets |
||||||||||||||||
|
Investments: |
||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||
|
U.S. government, agencies and government sponsored enterprises |
$ | 3,705 | $ | — | $ | 3,694 | $ | 11 | ||||||||
|
Tax-exempt |
1,030 | — | 1,030 | — | ||||||||||||
|
Government—non-U.S. |
2,369 | — | 2,368 | 1 | ||||||||||||
|
U.S. corporate |
23,967 | — | 22,867 | 1,100 | ||||||||||||
|
Corporate—non-U.S. |
13,498 | — | 13,130 | 368 | ||||||||||||
|
Residential mortgage-backed |
4,455 | — | 4,312 | 143 | ||||||||||||
|
Commercial mortgage-backed |
3,743 | — | 3,693 | 50 | ||||||||||||
|
Other asset-backed |
2,416 | — | 2,148 | 268 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total fixed maturity securities |
55,183 | — | 53,242 | 1,941 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Equity securities |
332 | 240 | 5 | 87 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Other invested assets: |
||||||||||||||||
|
Trading securities |
677 | — | 348 | 329 | ||||||||||||
|
Derivative assets: |
||||||||||||||||
|
Interest rate swaps |
763 | — | 758 | 5 | ||||||||||||
|
Foreign currency swaps |
240 | — | 240 | — | ||||||||||||
|
Credit default swaps |
11 | — | 5 | 6 | ||||||||||||
|
Equity index options |
33 | — | — | 33 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total derivative assets |
1,047 | — | 1,003 | 44 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Securities lending collateral |
772 | — | 772 | — | ||||||||||||
|
Derivatives counterparty collateral |
630 | — | 630 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other invested assets |
3,126 | — | 2,753 | 373 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Restricted other invested assets related to securitization entities |
370 | — | 199 | 171 | ||||||||||||
|
Other assets (1) |
1 | — | 1 | — | ||||||||||||
|
Reinsurance recoverable (2) |
(5 | ) | — | — | (5 | ) | ||||||||||
|
Separate account assets |
11,666 | 11,666 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total assets |
$ | 70,673 | $ | 11,906 | $ | 56,200 | $ | 2,567 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Liabilities |
||||||||||||||||
|
Policyholder account balances (3) |
$ | 121 | $ | — | $ | — | $ | 121 | ||||||||
|
Derivative liabilities: |
||||||||||||||||
|
Interest rate swaps |
138 | — | 138 | — | ||||||||||||
|
Interest rate swaps related to securitization entities |
19 | — | 19 | — | ||||||||||||
|
Inflation indexed swaps |
33 | — | 33 | — | ||||||||||||
|
Credit default swaps |
7 | — | — | 7 | ||||||||||||
|
Credit default swaps related to securitization entities |
129 | — | — | 129 | ||||||||||||
|
Equity index options |
3 | — | — | 3 | ||||||||||||
|
Equity return swaps |
3 | — | 3 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total derivative liabilities |
332 | — | 193 | 139 | ||||||||||||
|
Borrowings related to securitization entities |
51 | — | — | 51 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total liabilities |
$ | 504 | $ | — | $ | 193 | $ | 311 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) |
Represents embedded derivatives associated with certain reinsurance agreements. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
| (3) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers into and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur. Our assessment of whether or not there were significant unobservable inputs related to fixed maturity securities was based on our observations obtained through the course of managing our investment portfolio, including interaction with other market participants, observations related to the availability and consistency of pricing, and understanding of general market activity such as new issuance and the level of secondary market trading for a class of securities. Additionally, we considered data obtained from third-party pricing sources to determine whether our estimated values incorporate significant unobservable inputs that would result in the valuation being classified as Level 3.
The following tables present additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
|
(Amounts in millions) |
Beginning balance as of July 1, 2011 |
Total realized and |
Purchases | Sales | Issuances | Settlements | Transfer into Level 3 |
Transfer out of Level 3 |
Ending balance as of September 30, 2011 |
Total gains (losses) included in net income attributable to assets still held |
||||||||||||||||||||||||||||||||||
| Included in net income |
Included in OCI |
|||||||||||||||||||||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 13 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (12 | ) | $ | 1 | $ | — | |||||||||||||||||||||
|
Government—non-U.S. |
1 | — | — | — | — | — | — | — | — | 1 | — | |||||||||||||||||||||||||||||||||
|
U.S. corporate (1) |
949 | (21 | ) | 39 | 41 | — | — | (7 | ) | 382 | (33 | ) | 1,350 | (21 | ) | |||||||||||||||||||||||||||||
|
Corporate—non-U.S. (1) |
371 | (15 | ) | 30 | — | — | — | (1 | ) | 20 | (35 | ) | 370 | (16 | ) | |||||||||||||||||||||||||||||
|
Residential mortgage-backed |
124 | 1 | (7 | ) | — | — | — | (12 | ) | 3 | (2 | ) | 107 | 1 | ||||||||||||||||||||||||||||||
|
Commercial mortgage-backed |
43 | — | (1 | ) | — | — | — | (2 | ) | 1 | — | 41 | — | |||||||||||||||||||||||||||||||
|
Other asset-backed |
265 | — | (4 | ) | — | — | — | (6 | ) | — | — | 255 | — | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total fixed maturity securities |
1,766 | (35 | ) | 57 | 41 | — | — | (28 | ) | 406 | (82 | ) | 2,125 | (36 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Equity securities |
106 | — | (1 | ) | — | (5 | ) | — | — | — | — | 100 | — | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Other invested assets: |
||||||||||||||||||||||||||||||||||||||||||||
|
Trading securities |
291 | (12 | ) | — | — | — | — | (5 | ) | — | — | 274 | (12 | ) | ||||||||||||||||||||||||||||||
|
Derivative assets: |
||||||||||||||||||||||||||||||||||||||||||||
|
Interest rate swaps |
4 | 3 | — | — | — | — | (1 | ) | — | — | 6 | 3 | ||||||||||||||||||||||||||||||||
|
Credit default swaps |
4 | (4 | ) | — | — | — | — | — | — | — | — | (4 | ) | |||||||||||||||||||||||||||||||
|
Equity index options |
40 | 58 | — | — | — | — | (36 | ) | — | — | 62 | 37 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total derivative assets |
48 | 57 | — | — | — | — | (37 | ) | — | — | 68 | 36 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total other invested assets |
339 | 45 | — | — | — | — | (42 | ) | — | — | 342 | 24 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Restricted other invested assets related to securitization entities |
175 | (1 | ) | — | — | — | — | — | — | — | 174 | (1 | ) | |||||||||||||||||||||||||||||||
|
Reinsurance recoverable (2) |
(5 | ) | 26 | — | — | — | — | — | — | — | 21 | 26 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total Level 3 assets |
$ | 2,381 | $ | 35 | $ | 56 | $ | 41 | $ | (5 | ) | $ | — | $ | (70 | ) | $ | 406 | $ | (82 | ) | $ | 2,762 | $ | 13 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (1) |
The transfers into and out of Level 3 were primarily related to private fixed rate U.S. corporate and corporate—non-U.S. securities and resulted from a change in the observability of the additional premium to the public bond spread to adjust for the liquidity and other features of our private placements and resulted in unobservable inputs having a significant impact on certain valuations for transfers in or no longer having significant impact on certain valuations for transfers out. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
| Beginning balance |
Total realized and unrealized gains (losses) |
Purchases, |
Transfer into Level 3 (1) |
Transfer out of Level 3 |
Ending |
Total gains (losses) |
||||||||||||||||||||||||||
|
(Amounts in millions) |
as of July 1, 2010 |
Included in net income |
Included in OCI |
and settlements, net |
as of September 30, 2010 |
attributable to assets still held |
||||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 9 | $ | — | $ | — | $ | — | $ | 5 | $ | — | $ | 14 | $ | — | ||||||||||||||||
|
Government—non-U.S. |
18 | — | 1 | — | — | — | 19 | — | ||||||||||||||||||||||||
|
U.S. corporate |
1,520 | 4 | 23 | 2 | 83 | (303 | ) | 1,329 | 4 | |||||||||||||||||||||||
|
Corporate—non-U.S. |
720 | (8 | ) | — | (8 | ) | 119 | (220 | ) | 603 | (8 | ) | ||||||||||||||||||||
|
Residential mortgage-backed |
62 | — | 1 | 9 | 65 | (5 | ) | 132 | — | |||||||||||||||||||||||
|
Commercial mortgage-backed |
59 | (6 | ) | 8 | (15 | ) | 1 | — | 47 | — | ||||||||||||||||||||||
|
Other asset-backed |
361 | — | 5 | 15 | — | (215 | ) | 166 | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total fixed maturity securities |
2,749 | (10 | ) | 38 | 3 | 273 | (743 | ) | 2,310 | (4 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Equity securities |
9 | 11 | — | (11 | ) | 8 | — | 17 | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Other invested assets: |
||||||||||||||||||||||||||||||||
|
Trading securities |
136 | 7 | — | 9 | 213 | — | 365 | 7 | ||||||||||||||||||||||||
|
Derivative assets: |
||||||||||||||||||||||||||||||||
|
Interest rate swaps |
9 | — | — | — | — | — | 9 | — | ||||||||||||||||||||||||
|
Interest rate swaptions |
4 | 4 | — | — | — | — | 8 | 4 | ||||||||||||||||||||||||
|
Credit default swaps |
— | 1 | — | — | — | — | 1 | 1 | ||||||||||||||||||||||||
|
Equity index options |
97 | (54 | ) | — | 18 | — | — | 61 | (54 | ) | ||||||||||||||||||||||
|
Other foreign currency contracts |
1 | — | — | (1 | ) | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total derivative assets |
111 | (49 | ) | — | 17 | — | — | 79 | (49 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total other invested assets |
247 | (42 | ) | — | 26 | 213 | — | 444 | (42 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Restricted other invested assets related to securitization entities |
174 | 4 | — | — | — | — | 178 | 3 | ||||||||||||||||||||||||
|
Reinsurance recoverable (2) |
9 | (7 | ) | — | 2 | — | — | 4 | (7 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total Level 3 assets |
$ | 3,188 | $ | (44 | ) | $ | 38 | $ | 20 | $ | 494 | $ | (743 | ) | $ | 2,953 | $ | (50 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) |
The transfer into Level 3 was primarily related to private fixed U.S. corporate and corporate—non-U.S. securities and resulted from a change in the observability of the additional premium to the public bond spread to adjust for the liquidity and other features of our private placements and resulted in unobservable inputs having a significant impact on certain valuations. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
The following tables present additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
|
(Amounts in millions) |
Beginning balance as of January 1, 2011 |
Total realized and |
Purchases | Sales | Issuances | Settlements | Transfer into Level 3 |
Transfer out of Level 3 |
Ending balance as of September 30, 2011 |
Total gains (losses) included in net income attributable to assets still held |
||||||||||||||||||||||||||||||||||
| Included in net income |
Included in OCI |
|||||||||||||||||||||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 11 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 12 | $ | (22 | ) | $ | 1 | $ | — | |||||||||||||||||||||
|
Government—non-U.S. |
1 | — | — | — | — | — | — | — | — | 1 | — | |||||||||||||||||||||||||||||||||
|
U.S. corporate (1) |
1,100 | (13 | ) | 45 | 71 | (5 | ) | — | (70 | ) | 634 | (412 | ) | 1,350 | (13 | ) | ||||||||||||||||||||||||||||
|
Corporate—non-U.S. (1) |
368 | (26 | ) | 27 | 40 | (35 | ) | — | (8 | ) | 225 | (221 | ) | 370 | (26 | ) | ||||||||||||||||||||||||||||
|
Residential mortgage-backed |
143 | — | (15 | ) | 3 | — | — | (24 | ) | 3 | (3 | ) | 107 | — | ||||||||||||||||||||||||||||||
|
Commercial mortgage-backed |
50 | — | 1 | — | — | — | (11 | ) | 1 | — | 41 | — | ||||||||||||||||||||||||||||||||
|
Other asset-backed |
268 | (1 | ) | 5 | 8 | (8 | ) | — | (32 | ) | 15 | — | 255 | (1 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total fixed maturity securities |
1,941 | (40 | ) | 63 | 122 | (48 | ) | — | (145 | ) | 890 | (658 | ) | 2,125 | (40 | ) | ||||||||||||||||||||||||||||
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Equity securities |
87 | 1 | — | 24 | (10 | ) | — | (2 | ) | — | — | 100 | — | |||||||||||||||||||||||||||||||
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Other invested assets: |
||||||||||||||||||||||||||||||||||||||||||||
|
Trading securities |
329 | 4 | — | 5 | (41 | ) | — | (23 | ) | — | — | 274 | 4 | |||||||||||||||||||||||||||||||
|
Derivative assets: |
||||||||||||||||||||||||||||||||||||||||||||
|
Interest rate swaps |
5 | 2 | — | — | — | — | (1 | ) | — | — | 6 | 2 | ||||||||||||||||||||||||||||||||
|
Credit default swaps |
6 | (6 | ) | — | — | — | — | — | — | — | — | (6 | ) | |||||||||||||||||||||||||||||||
|
Equity index options |
33 | 31 | — | 39 | — | — | (41 | ) | — | — | 62 | 10 | ||||||||||||||||||||||||||||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total derivative assets |
44 | 27 | — | 39 | — | — | (42 | ) | — | — | 68 | 6 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total other invested assets |
373 | 31 | — | 44 | (41 | ) | — | (65 | ) | — | — | 342 | 10 | |||||||||||||||||||||||||||||||
|
|
|
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|
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|
|
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|
|
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|
|
|
|
|||||||||||||||||||||||
|
Restricted other invested assets related to securitization entities |
171 | 3 | — | — | — | — | — | — | — | 174 | 3 | |||||||||||||||||||||||||||||||||
|
Reinsurance recoverable (2) |
(5 | ) | 24 | — | — | — | 2 | — | — | — | 21 | 24 | ||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||
|
Total Level 3 assets |
$ | 2,567 | $ | 19 | $ | 63 | $ | 190 | $ | (99 | ) | $ | 2 | $ | (212 | ) | $ | 890 | $ | (658 | ) | $ | 2,762 | $ | (3 | ) | ||||||||||||||||||
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|
|||||||||||||||||||||||
| (1) |
The transfers into and out of Level 3 were primarily related to private fixed rate U.S. corporate and corporate—non-U.S. securities and resulted from a change in the observability of the additional premium to the public bond spread to adjust for the liquidity and other features of our private placements and resulted in unobservable inputs having a significant impact on certain valuations for transfers in or no longer having significant impact on certain valuations for transfers out. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
| Beginning balance as of January 1, 2010 |
Total realized and unrealized gains (losses) |
Purchases, sales, issuances and settlements, net |
Transfer into Level 3 |
Transfer out of Level 3 (1) |
Ending balance as of September 30, 2010 |
Total gains (losses) included in net income attributable to assets still held |
||||||||||||||||||||||||||
|
(Amounts in millions) |
Included in net income |
Included in OCI |
||||||||||||||||||||||||||||||
|
Fixed maturity securities |
||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 16 | $ | — | $ | — | $ | (2 | ) | $ | 14 | $ | (14 | ) | $ | 14 | $ | — | ||||||||||||||
|
Tax-exempt |
2 | — | — | — | — | (2 | ) | — | — | |||||||||||||||||||||||
|
Government—non-U.S. |
7 | — | 2 | — | 16 | (6 | ) | 19 | — | |||||||||||||||||||||||
|
U.S. corporate |
1,073 | 15 | 57 | 33 | 761 | (610 | ) | 1,329 | 12 | |||||||||||||||||||||||
|
Corporate—non-U.S. |
504 | (7 | ) | 8 | 3 | 472 | (377 | ) | 603 | (7 | ) | |||||||||||||||||||||
|
Residential mortgage-backed |
1,481 | — | 4 | 89 | 66 | (1,508 | ) | 132 | — | |||||||||||||||||||||||
|
Commercial mortgage-backed |
3,558 | (5 | ) | 22 | (78 | ) | 12 | (3,462 | ) | 47 | — | |||||||||||||||||||||
|
Other asset-backed |
1,419 | (24 | ) | 28 | (3 | ) | 10 | (1,264 | ) | 166 | (24 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
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|
|
|
|
|
|||||||||||||||||
|
Total fixed maturity securities |
8,060 | (21 | ) | 121 | 42 | 1,351 | (7,243 | ) | 2,310 | (19 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Equity securities |
9 | 11 | — | (3 | ) | 60 | (60 | ) | 17 | — | ||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Other invested assets: |
||||||||||||||||||||||||||||||||
|
Trading securities |
145 | 8 | — | (1 | ) | 213 | — | 365 | 8 | |||||||||||||||||||||||
|
D Derivative assets: |
||||||||||||||||||||||||||||||||
|
Interest rate swaps |
3 | 6 | — | — | — | — | 9 | 6 | ||||||||||||||||||||||||
|
Interest rate swaptions |
54 | 19 | — | (65 | ) | — | — | 8 | 19 | |||||||||||||||||||||||
|
Credit default swaps |
6 | (5 | ) | — | — | — | — | 1 | (5 | ) | ||||||||||||||||||||||
|
Equity index options |
39 | (32 | ) | — | 54 | — | — | 61 | (32 | ) | ||||||||||||||||||||||
|
Other foreign currency options |
8 | (7 | ) | — | (1 | ) | — | — | — | (7 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total derivative assets |
110 | (19 | ) | — | (12 | ) | — | — | 79 | (19 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total other invested assets |
255 | (11 | ) | — | (13 | ) | 213 | — | 444 | (11 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Restricted other invested assets related to securitization entities |
— | 4 | — | — | 174 | — | 178 | 1 | ||||||||||||||||||||||||
|
Reinsurance recoverable (2) |
(5 | ) | 7 | — | 2 | — | — | 4 | 7 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total Level 3 assets |
$ | 8,319 | $ | (10 | ) | $ | 121 | $ | 28 | $ | 1,798 | $ | (7,303 | ) | $ | 2,953 | $ | (22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) |
During 2010, primary market issuance and secondary market activity for commercial and non-agency residential mortgage-backed and other asset-backed securities increased the market observable inputs used to establish fair values for similar securities. These factors, along with more consistent pricing from third-party sources, resulted in our conclusion that there is sufficient trading activity in similar instruments to support classifying certain mortgage-backed and asset-backed securities as Level 2. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
The following tables present additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
|
(Amounts in millions) |
Beginning balance as of July 1, 2011 |
Total realized and |
Purchases | Sales | Issuances | Settlements | Transfer into Level 3 |
Transfer out of Level 3 |
Ending balance as of September 30, 2011 |
Total (gains) losses included in net (income) attributable to liabilities still held |
||||||||||||||||||||||||||||||||||
| Included in net (income) |
Included in OCI |
|||||||||||||||||||||||||||||||||||||||||||
|
Policyholder account balances (1) |
$ | 113 | $ | 480 | $ | — | $ | — | $ | — | $ | 9 | $ | — | $ | — | $ | — | $ | 602 | $ | 480 | ||||||||||||||||||||||
|
Other liabilities: |
||||||||||||||||||||||||||||||||||||||||||||
|
Contingent purchase price |
— | 22 | — | — | — | 22 | — | — | — | 44 | 22 | |||||||||||||||||||||||||||||||||
|
Derivative liabilities: |
||||||||||||||||||||||||||||||||||||||||||||
|
Credit default swaps |
9 | 66 | — | — | — | — | — | — | — | 75 | 66 | |||||||||||||||||||||||||||||||||
|
Credit default swaps related to securitization entities |
126 | 54 | — | — | — | — | — | — | — | 180 | 54 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total derivative liabilities |
135 | 120 | — | — | — | — | — | — | — | 255 | 120 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total other liabilities |
135 | 142 | — | — | — | 22 | — | — | — | 299 | 142 | |||||||||||||||||||||||||||||||||
|
Borrowings related to securitization entities |
58 | (10 | ) | — | — | — | — | — | — | — | 48 | (10 | ) | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total Level 3 liabilities |
$ | 306 | $ | 612 | $ | — | $ | — | $ | — | $ | 31 | $ | — | $ | — | $ | — | $ | 949 | $ | 612 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (1) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
| Beginning balance |
Total realized and unrealized (gains) losses |
Purchases, sales, issuances |
Ending balance |
Total (gains) |
||||||||||||||||||||||||||||
|
(Amounts in millions) |
as of July 1, 2010 |
Included in net (income) |
Included in OCI |
and settlements, net |
Transfer into Level 3 |
Transfer out of Level 3 |
as of September 30, 2010 |
attributable to liabilities still held |
||||||||||||||||||||||||
|
Policyholder account balance (1) |
$ | 447 | $ | (140 | ) | $ | — | $ | 9 | $ | — | $ | — | $ | 316 | $ | (138 | ) | ||||||||||||||
|
Derivative liabilities: |
||||||||||||||||||||||||||||||||
|
Credit default swaps |
26 | (17 | ) | — | — | — | — | 9 | (17 | ) | ||||||||||||||||||||||
|
Credit default swaps related to securitization entities |
159 | (30 | ) | — | 1 | — | — | 130 | (30 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total derivative liabilities |
185 | (47 | ) | — | 1 | — | — | 139 | (47 | ) | ||||||||||||||||||||||
|
Borrowings related to securitization entities |
51 | (8 | ) | — | — | 1 | — | 44 | (8 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total Level 3 liabilities |
$ | 683 | $ | (195 | ) | $ | — | $ | 10 | $ | 1 | $ | — | $ | 499 | $ | (193 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
The following tables present additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
|
(Amounts in millions) |
Beginning balance as of January 1, 2011 |
Total realized and |
Purchases | Sales | Issuances | Settlements | Transfer into Level 3 |
Transfer out of Level 3 |
Ending balance as of September 30, 2011 |
Total (gains) losses included in net (income) attributable to liabilities still held |
||||||||||||||||||||||||||||||||||
| Included in net (income) |
Included in OCI |
|||||||||||||||||||||||||||||||||||||||||||
|
Policyholder account balances (1) |
$ | 121 | $ | 452 | $ | — | $ | — | $ | — | $ | 29 | $ | — | $ | — | $ | — | $ | 602 | $ | 452 | ||||||||||||||||||||||
|
Other liabilities: |
||||||||||||||||||||||||||||||||||||||||||||
|
Contingent purchase price |
— | 23 | — | — | — | 21 | — | — | — | 44 | 23 | |||||||||||||||||||||||||||||||||
|
Derivative liabilities: |
||||||||||||||||||||||||||||||||||||||||||||
|
Credit default swaps |
7 | 66 | — | 3 | — | — | (1 | ) | — | — | 75 | 66 | ||||||||||||||||||||||||||||||||
|
Credit default swaps related to securitization entities |
129 | 51 | — | — | — | — | — | — | — | 180 | 51 | |||||||||||||||||||||||||||||||||
|
Equity index options |
3 | — | — | — | — | — | (3 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total derivative liabilities |
139 | 117 | — | 3 | — | — | (4 | ) | — | — | 255 | 117 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total other liabilities |
139 | 140 | — | 3 | — | 21 | (4 | ) | — | — | 299 | 140 | ||||||||||||||||||||||||||||||||
|
Borrowings related to securitization entities |
51 | (3 | ) | — | — | — | — | — | — | — | 48 | (3 | ) | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total Level 3 liabilities |
$ | 311 | $ | 589 | $ | — | $ | 3 | $ | — | $ | 50 | $ | (4 | ) | $ | — | $ | — | $ | 949 | $ | 589 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (1) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
| Beginning balance |
Total realized and unrealized (gains) losses |
Purchases, sales, issuances |
Ending balance |
Total (gains) losses included in net (income) |
||||||||||||||||||||||||||||
|
(Amounts in millions) |
as of January 1, 2010 |
Included in net (income) |
Included in OCI |
and settlements, net |
Transfer into Level 3 |
Transfer out of Level 3 |
as of September 30, 2010 |
attributable to liabilities still held |
||||||||||||||||||||||||
|
Policyholder account balance (1) |
$ | 175 | $ | 115 | $ | — | $ | 26 | $ | — | $ | — | $ | 316 | $ | 117 | ||||||||||||||||
|
Derivative liabilities: |
||||||||||||||||||||||||||||||||
|
Interest rate swaps |
2 | (2 | ) | — | — | — | — | — | (2 | ) | ||||||||||||||||||||||
|
Interest rate swaptions |
67 | (42 | ) | — | (25 | ) | — | — | — | (42 | ) | |||||||||||||||||||||
|
Credit default swaps |
— | 9 | — | — | — | — | 9 | 9 | ||||||||||||||||||||||||
|
Credit default swaps related to securitization entities |
— | 11 | — | (2 | ) | 121 | — | 130 | 11 | |||||||||||||||||||||||
|
Equity index options |
2 | (1 | ) | — | (1 | ) | — | — | — | (1 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total derivative liabilities |
71 | (25 | ) | — | (28 | ) | 121 | — | 139 | (25 | ) | |||||||||||||||||||||
|
Borrowings related to securitization entities |
— | (16 | ) | — | — | 60 | — | 44 | (16 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total Level 3 liabilities |
$ | 246 | $ | 74 | $ | — | $ | (2 | ) | $ | 181 | $ | — | $ | 499 | $ | 76 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
Realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either net investment gains (losses) within the consolidated statements of income or OCI within stockholders' equity based on the appropriate accounting treatment for the instrument.
Purchases, sales, issuances and settlements represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases, sales and settlements of fixed maturity, equity and trading securities and purchases, issuances and settlements of derivative instruments.
Issuances and settlements presented for policyholder account balances represent the issuances and settlements of embedded derivatives associated with our GMWB liabilities where: issuances are characterized as the change in fair value associated with the product fees recognized that are attributed to the embedded derivative to equal the expected future benefit costs upon issuance and settlements are characterized as the change in fair value upon exercising the embedded derivative instrument, effectively representing a settlement of the embedded derivative instrument. We have shown these changes in fair value separately based on the classification of this activity as effectively issuing and settling the embedded derivative instrument with all remaining changes in the fair value of these embedded derivative instruments being shown separately in the category labeled "included in net (income)" in the tables presented above.
The amount presented for unrealized gains (losses) for assets and liabilities still held as of the reporting date primarily represents impairments for available-for-sale securities, changes in fair value of trading securities and certain derivatives and changes in fair value of embedded derivatives associated with our GMWB liabilities that existed as of the reporting date, which were recorded in net investment gains (losses), and accretion on certain fixed maturity securities which was recorded in net investment income.
|
|||
(7) Commitments and Contingencies
(a) Litigation
We face the risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In our insurance operations, we are, have been, or may become subject to class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, increases to in-force long-term care insurance premiums, payment of contingent or other sales commissions, bidding practices in connection with our management and administration of a third-party's municipal guaranteed investment contract business, claims payments and procedures, product design, product disclosure, administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on products, recommending unsuitable products to customers, our pricing structures and business practices in our mortgage insurance businesses, such as captive reinsurance arrangements with lenders and contract underwriting services, violations of the Real Estate Settlement and Procedures Act of 1974 or related state anti-inducement laws, and breaching fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts which may remain unknown for substantial periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes with counterparties. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships. In addition, we are also subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations from state, federal and international regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business, financial condition or results of operations. At this time, it is not feasible to predict, nor determine the ultimate outcomes of any pending investigations and legal proceedings, nor to provide reasonable ranges of possible losses.
On June 22, 2011, we received a subpoena from the office of the New York Attorney General, relating to an industry-wide investigation of unclaimed property and escheatment practices and procedures. In addition to the subpoena, other state regulators are conducting reviews and examinations on the same subject. We are cooperating with these requests and inquiries.
As previously disclosed, in December 2009, one of our non-insurance subsidiaries, one of the subsidiary's officers and Genworth Financial, Inc. were named in a putative class action lawsuit captioned Michael J. Goodman and Linda Brown v. Genworth Financial Wealth Management, Inc., et al, in the United States District Court for the Eastern District of New York. In response to our motion to dismiss the complaint in its entirety, the Court granted on March 30, 2011 the motion to dismiss the state law fiduciary duty claim and denied the motion to dismiss the remaining federal claims. We continue to vigorously defend this action.
(b) Commitments
As of September 30, 2011, we were committed to fund $65 million in limited partnership investments and $51 million in U.S. commercial mortgage loan investments.
|
|||
(8) Borrowings and Other Financings
Revolving Credit Facilities
We have two five-year revolving credit facilities that mature in May 2012 and August 2012. These facilities bear variable interest rates based on one-month LIBOR plus a margin and we have access to $1.9 billion under these facilities. As of September 30, 2011, we had no borrowings under these facilities; however, we utilized $259 million under these facilities primarily for the issuance of letters of credit for the benefit of one of our life insurance subsidiaries. As of December 31, 2010, we had no borrowings under these facilities; however, we utilized $56 million under these facilities primarily for the issuance of letters of credit for the benefit of one of our lifestyle protection insurance subsidiaries.
Long-Term Notes
In June 2011, our indirect wholly-owned subsidiary, Genworth Financial Mortgage Insurance Pty Limited, issued AUD$140 million of subordinated floating rate notes due 2021 with an interest rate of three-month Bank Bill Swap reference rate plus a margin of 4.75%. Genworth Financial Mortgage Insurance Pty Limited used the proceeds it received from this transaction for general corporate purposes.
During the second quarter of 2011, we repaid ¥57.0 billion of senior notes that matured in June 2011, plus accrued interest. In addition, the arrangements to swap our obligations under these notes to a U.S. dollar obligation matured. These swaps had a notional principal amount of $491 million with interest at a rate of 4.84% per year. Upon maturity of these swaps, we received $212 million from the derivative counterparty resulting in a net repayment of $491 million of principal related to these notes.
In March 2011, we issued senior notes having an aggregate principal amount of $400 million, with an interest rate equal to 7.625% per year payable semi-annually, and maturing in September 2021 ("2021 Notes"). The 2021 Notes are our direct, unsecured obligations and will rank equally with all of our existing and future unsecured and unsubordinated obligations. We have the option to redeem all or a portion of the 2021 Notes at any time with proper notice to the note holders at a price equal to the greater of 100% of principal or the sum of the present value of the remaining scheduled payments of principal and interest discounted at the then-current treasury rate plus an applicable spread. The net proceeds of $397 million from the issuance of the 2021 Notes were used for general corporate purposes.
Mandatorily Redeemable Preferred Stock
On June 1, 2011, we redeemed all the remaining outstanding shares of our Series A Preferred Stock at a price of $50 per share, plus unpaid dividends accrued to the date of redemption, for $57 million.
Non-Recourse Funding Obligations
As of September 30, 2011, we had $3.3 billion of fixed and floating rate non-recourse funding obligations outstanding backing additional statutory reserves. In the third quarter of 2011, we repurchased principal of $94 million of notes secured by our non-recourse funding obligations, plus accrued interest, for a pre-tax gain of $25 million. In the second quarter of 2011, we repurchased principal of $57 million of notes secured by our non-recourse funding obligations, plus accrued interest, for a pre-tax gain of $17 million. As of September 30, 2011 and December 31, 2010, the weighted-average interest rates on our non-recourse funding obligations were 1.36% and 1.44%, respectively.
|
|||
(9) Income Taxes
The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows for the periods indicated:
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Statutory U.S. federal income tax rate |
35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||
|
Increase (reduction) in rate resulting from: |
||||||||||||||||
|
State income tax, net of federal income tax effect |
(7.3 | ) | 2.5 | — | (0.2 | ) | ||||||||||
|
Benefit on tax favored investments |
(33.0 | ) | (6.6 | ) | (14.9 | ) | (6.9 | ) | ||||||||
|
Effect of foreign operations |
(26.7 | ) | (21.1 | ) | (13.5 | ) | (21.2 | ) | ||||||||
|
Non-deductible expenses |
0.9 | 1.3 | 0.5 | 0.9 | ||||||||||||
|
Interest on uncertain tax positions |
(1.4 | ) | (0.4 | ) | (0.3 | ) | (1.5 | ) | ||||||||
|
Tax benefits related to separation from our former parent |
— | — | — | (32.2 | ) | |||||||||||
|
Other, net |
(8.8 | ) | 2.2 | (2.8 | ) | 1.9 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Effective rate |
(41.3 | )% | 12.9 | % | 4.0 | % | (24.2 | )% | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
For the three months ended September 30, 2011, the effective tax rate decreased from the prior year primarily due to tax favored investments and taxes on foreign operations in relation to smaller pre-tax results, partially offset by changes in uncertain tax positions in the current year.
For the nine months ended September 30, 2011, the effective tax rate increased from the prior year primarily due to changes in uncertain tax benefits related to our 2004 separation from our former parent, General Electric ("GE"). At the time of the separation, we made certain joint tax elections and realized certain tax benefits. During the first quarter of 2010, the Internal Revenue Service ("IRS") completed an examination of GE's 2004 tax return, including these tax impacts. Therefore, $106 million of previously uncertain tax benefits related to separation became certain and we recognized those in the first quarter of 2010. Additionally, we recorded $20 million as additional paid-in capital related to our 2004 separation.
Subsequent to September 30, 2011, we completed an assessment of several strategic alternatives. In connection with the completion of this assessment, we announced on November 3, 2011 our plan to pursue a sale of a minority position of our Australian mortgage insurance business through an initial public offering in Australia during 2012, subject to market conditions and regulatory approval. We anticipate selling up to 40% of our share position, while maintaining control and, as a result of our decision, will accrue in the fourth quarter of 2011 up to $80 million of additional deferred tax liabilities related to unremitted earnings no longer considered permanently reinvested. This transaction is part of a broader strategy to rebalance the business portfolio, support future growth opportunities for the Australian business and redeploy capital.
|
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(10) Segment Information
We conduct our operations in three operating business segments: (1) Retirement and Protection, which includes our life insurance, long-term care insurance, wealth management products and services and retirement income products; (2) International, which includes international mortgage and lifestyle protection insurance; and (3) U.S. Mortgage Insurance.
We also have Corporate and Other activities which include interest and other debt financing expenses, other corporate income and expenses not allocated to the segments, the results of non-strategic products that are managed outside of our operating segments, and eliminations of inter-segment transactions.
We use the same accounting policies and procedures to measure segment income (loss) and assets as our consolidated net income (loss) and assets. Our chief operating decision maker evaluates segment performance and allocates resources on the basis of "net operating income (loss) available to Genworth Financial, Inc.'s common stockholders." We define net operating income (loss) available to Genworth Financial, Inc.'s common stockholders as income (loss) from continuing operations excluding net income attributable to noncontrolling interests, after-tax net investment gains (losses) and other adjustments and infrequent or unusual non-operating items. We exclude net investment gains (losses) and infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result of impairments, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Infrequent or unusual non-operating items are also excluded from net operating income (loss) available to Genworth Financial, Inc.'s common stockholders if, in our opinion, they are not indicative of overall operating trends. While some of these items may be significant components of net income (loss) available to Genworth Financial, Inc.'s common stockholders in accordance with U.S. GAAP, we believe that net operating income (loss) available to Genworth Financial, Inc.'s common stockholders, and measures that are derived from or incorporate net operating income (loss) available to Genworth Financial, Inc.'s common stockholders, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. However, net operating income (loss) available to Genworth Financial, Inc.'s common stockholders is not a substitute for net income available to Genworth Financial, Inc.'s common stockholders determined in accordance with U.S. GAAP. In addition, our definition of net operating income (loss) available to Genworth Financial, Inc.'s common stockholders may differ from the definitions used by other companies.
There were no infrequent or unusual non-operating items excluded from net operating income (loss) available to Genworth Financial, Inc.'s common stockholders during the periods presented other than a $106 million tax benefit related to separation from our former parent recorded in the first quarter of 2010.
The following is a summary of revenues for our segments and Corporate and Other activities for the periods indicated:
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
|
(Amounts in millions) |
2011 | 2010 | 2011 | 2010 | ||||||||||||
|
Revenues: |
||||||||||||||||
|
Retirement and Protection |
$ | 1,747 | $ | 1,810 | $ | 5,269 | $ | 5,046 | ||||||||
|
International |
653 | 594 | 1,943 | 1,867 | ||||||||||||
|
U.S. Mortgage Insurance |
171 | 195 | 518 | 557 | ||||||||||||
|
Corporate and Other |
(50 | ) | 68 | 14 | 28 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total revenues |
$ | 2,521 | $ | 2,667 | $ | 7,744 | $ | 7,498 | ||||||||
|
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|
|
|
|
|
|
|||||||||
The following is a summary of net operating income (loss) available to Genworth Financial, Inc.'s common stockholders for our segments and Corporate and Other activities and a reconciliation of net operating income (loss) available to Genworth Financial, Inc.'s common stockholders for our segments and Corporate and Other activities to net income for the periods indicated:
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
|
(Amounts in millions) |
2011 | 2010 | 2011 | 2010 | ||||||||||||
|
Retirement and Protection's net operating income |
$ | 120 | $ | 111 | $ | 396 | $ | 347 | ||||||||
|
International's net operating income |
98 | 121 | 329 | 317 | ||||||||||||
|
U.S. Mortgage Insurance's net operating loss |
(79 | ) | (152 | ) | (413 | ) | (228 | ) | ||||||||
|
Corporate and Other's net operating loss |
(35 | ) | (51 | ) | (184 | ) | (175 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net operating income available to Genworth Financial, Inc.'s common stockholders |
104 | 29 | 128 | 261 | ||||||||||||
|
Net investment gains (losses), net of taxes and other adjustments |
(75 | ) | 54 | (113 | ) | (64 | ) | |||||||||
|
Net tax benefit related to separation from our former parent |
— | — | — | 106 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net income available to Genworth Financial, Inc.'s common stockholders |
29 | 83 | 15 | 303 | ||||||||||||
|
Add: net income attributable to noncontrolling assets |
36 | 39 | 106 | 108 | ||||||||||||
|
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|
|
|
|
|
|
|||||||||
|
Net income |
$ | 65 | $ | 122 | $ | 121 | $ | 411 | ||||||||
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|
|
|
|
|
|||||||||
The following is a summary of total assets for our segments and Corporate and Other activities as of the dates indicated:
| September 30, | December 31, | |||||||||
|
(Amounts in millions) |
2011 | 2010 | ||||||||
|
Assets: |
||||||||||
|
Retirement and Protection |
$ | 90,196 | $ | 86,352 | ||||||
|
International |
12,093 | 12,422 | ||||||||
|
U.S. Mortgage Insurance |
3,160 | 3,875 | ||||||||
|
Corporate and Other |
8,437 | 9,746 | ||||||||
|
|
|
|
|
|||||||
|
Total assets |
$ | 113,886 | $ | 112,395 | ||||||
|
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|
|
|
|||||||
|
|||
(11) Liability for Policy and Contract Claims
The following table sets forth changes in the liability for policy and contract claims for the dates indicated:
| As of or for the nine | ||||||||
| months ended | ||||||||
| September 30, | ||||||||
|
(Amounts in millions) |
2011 (1) | 2010 (2) | ||||||
|
Beginning balance |
$ | 6,933 | $ | 6,567 | ||||
|
Less reinsurance recoverables |
(1,654 | ) | (1,769 | ) | ||||
|
|
|
|
|
|||||
|
Net beginning balance |
5,279 | 4,798 | ||||||
|
|
|
|
|
|||||
|
Incurred related to insured events of: |
||||||||
|
Current year |
2,610 | 2,443 | ||||||
|
Prior years |
622 | 359 | ||||||
|
|
|
|
|
|||||
|
Total incurred |
3,232 | 2,802 | ||||||
|
|
|
|
|
|||||
|
Paid related to insured events of: |
||||||||
|
Current year |
(871 | ) | (801 | ) | ||||
|
Prior years |
(1,921 | ) | (2,090 | ) | ||||
|
|
|
|
|
|||||
|
Total paid |
(2,792 | ) | (2,891 | ) | ||||
|
|
|
|
|
|||||
|
Interest on liability for policy and contract claims |
102 | 90 | ||||||
|
Foreign currency translation |
(24 | ) | (3 | ) | ||||
|
|
|
|
|
|||||
|
Net ending balance |
5,797 | 4,796 | ||||||
|
Add reinsurance recoverables |
1,582 | 1,652 | ||||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 7,379 | $ | 6,448 | ||||
|
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|
|||||
| (1) |
Current year reserves related to our U.S. Mortgage Insurance segment for the nine months ended September 30, 2011 were reduced by loss mitigation activities of $51 million, including $49 million related to workouts, loan modifications, claims administration and pre-sales, and $2 million related to rescissions, net of reinstatements. Loss mitigation actions related to prior year delinquencies resulted in a reduction of expected losses of $369 million to date, including $335 million related to workouts, loan modifications, claims administration and pre-sales, and $34 million related to rescissions, net of reinstatements of $69 million. |
| (2 ) |
Current year reserves related to our U.S. Mortgage Insurance segment for the nine months ended September 30, 2010 were reduced by loss mitigation activities of $150 million, including $146 million related to workouts, loan modifications, claims administration and pre-sales, and $4 million related to rescissions, net of reinstatements. Loss mitigation actions related to prior year delinquencies resulted in a reduction of expected losses of $458 million to date, including $310 million related to workouts, loan modifications, claims administration and pre-sales, and $148 million related to rescissions, net of reinstatements of $152 million. |
We establish reserves for the ultimate cost of settling claims on reported and unreported insured events that have occurred on or before the respective reporting period. These liabilities are associated primarily with our mortgage, long-term care and lifestyle protection insurance products and represent our best estimates of the liabilities at the time based on known facts, historical trends of claim payments and other external factors, such as various trends in economic conditions, housing prices, employment rates, mortality, morbidity and medical costs.
While the liability for policy and contract claims represents our current best estimates, there may be additional adjustments to these amounts based on information and trends not presently known. Such adjustments, reflecting any variety of new and adverse or favorable trends, could possibly be significant, exceeding the currently recorded reserves by an amount that could be material to our results of operations, financial condition and liquidity. For example, in our U.S. mortgage insurance business, the amount and rate at which home prices, employment levels and cure rates for delinquent loans change could result in additional changes to reserves in future periods.
As of September 30, 2011, the increase in the ending liability for policy and contract claims was largely related to our long-term care insurance business due to growth of the in-force block and claims experience including the severity and duration of existing claims, particularly in older issued policies. In addition, our U.S. Mortgage Insurance segment increased the ending liability due primarily to a reserve strengthening in the second quarter of 2011.
During the nine months ended September 30, 2011, we strengthened prior year reserves by $622 million, as a result of changes in estimates related to prior year insured events and the development of information and trends not previously known when establishing the reserves in prior periods.
During the nine months ended September 30, 2011, we increased prior year reserves in our U.S. Mortgage Insurance segment by $371 million from $2,282 million as of December 31, 2010. During the second quarter of 2011, we strengthened reserves by $299 million as a result of worsening trends in recent experience in the quarter as well as market trends in an environment of continuing weakness in the U.S. residential real estate market. These trends reflected a decline in cure rates in the second quarter of 2011 for delinquent loans and continued aging trends in the delinquent loan inventory. These trends were associated with a range of factors, including slow-moving pipelines of mortgages in some stage of foreclosure and delinquent loans under consideration for loan modifications. Specifically, reduced cure rates were driven by lower borrower self-cures and lower levels of lender loan modifications outside of government-sponsored modification programs. The decline in cure rates was also concentrated in earlier term delinquencies at a level higher than expected or historically experienced. In our U.S. Mortgage Insurance segment, loss mitigation actions that occurred during the nine months ended September 30, 2011 resulted in a reduction of expected losses of $420 million.
During the nine months ended September 30, 2011, we increased prior year claim reserves related to our long-term care insurance business by $262 million from $3,678 million as of December 31, 2010. We have experienced an increase in severity and duration of claims associated with observed loss development which contributed to the reserve increase, particularly in older issued policies.
For our other businesses, the remaining favorable development during the nine months ended September 30, 2011 related to refinements to our estimates as part of our reserving process on both reported and unreported insured events occurring in the prior year that were not significant.
As of September 30, 2010, the decrease in the ending liability for policy and contract claims was largely related to our U.S. Mortgage Insurance segment due principally to a substantial decrease in flow delinquencies, coupled with a settlement that was reached with a GSE counterparty regarding certain bulk Alt-A business in the first quarter of 2010. In our U.S. Mortgage Insurance segment, loss mitigation actions that occurred during the nine months ended September 30, 2010 resulted in a reduction of expected losses of $608 million. Our international mortgage insurance business also decreased from favorable global economic and housing market conditions. These decreases were partially offset by an increase related to our long-term care insurance business as a result of growth of the in-force block and claims experience, including the severity and duration of existing claims.
During the nine months ended September 30, 2010, we strengthened prior year reserves by $359 million primarily related to our U.S. Mortgage Insurance segment and our long-term care insurance business.
During the nine months ended September 30, 2010, we increased prior year reserves in our U.S. Mortgage Insurance segment by $175 million from $2,289 million as of December 31, 2009. As part of our reserving methodology, we estimate the number of loans in our delinquent loan inventory that we expect to be rescinded or modified over time as part of our loss mitigation activities, as well as the number of loans for which coverage may be reinstated under certain conditions following a rescission or modification action. The strengthening of reserves in 2010 related primarily to a more significant decline in expected benefits from our loss mitigation activities than we had estimated at the end of 2009. A weakend U.S. housing market, driven by high levels of unemployment and underemployment and declining housing prices, coupled with broader adverse economic conditions drove fewer self cures within our delinquent loan inventory. In addition, underperforming loan servicers and newly instituted government programs also led to fewer loan modifications than we had expected. Accordingly, these combined factors contributed to higher foreclosure levels than expected that resulted in the continued aging of the delinquent loan inventory and thus reduced our anticipated benefits related to loan modifications.
During the nine months ended September 30, 2010, we increased prior year reserves in our long-term care insurance business by $174 million from $3,188 million as of December 31, 2009. We experienced an increase in severity and duration of claims associated with observed loss development.
For our other businesses, the remaining unfavorable development during the nine months ended September 30, 2010 related to refinements to our estimates as part of our reserving process on both reported and unreported insured events occurring in the prior year that were not significant.
|
|||
(12) Sale of Medicare Supplement Insurance Business
Effective October 1, 2011, we completed the sale of our Medicare supplement insurance business for $276 million. We will recognize a realized gain on the sale of $21 million in the fourth quarter of 2011. Our Medicare supplement insurance business is included in our long-term care insurance business in our Retirement and Protection segment. The transaction included the sale of Continental Life Insurance Company of Brentwood, Tennessee and its subsidiary, American Continental Insurance Company, and the reinsurance of the Medicare supplement insurance in-force business written by other Genworth life insurance subsidiaries.
|
|||
(13) Noncontrolling Interests
In June 2011, Genworth MI Canada Inc. ("Genworth Canada"), our indirect subsidiary, repurchased approximately 6.2 million common shares for CAD$160 million through a substantial issuer bid. Brookfield Life Assurance Company Limited ("Brookfield"), our indirect wholly-owned subsidiary, participated in the issuer bid by making a proportionate tender and received CAD$90 million and Brookfield continued to hold approximately 57.5% of the outstanding common shares of Genworth Canada in June 2011.
In August 2011, we executed a non-cash intercompany transaction to increase the statutory capital in our U.S. mortgage insurance companies by contributing to those companies a portion of common shares of Genworth Canada that were held by Brookfield outside of our U.S. mortgage insurance business, with an estimated market value of $375 million. We continue to hold approximately 57.5% of the outstanding common shares of Genworth Canada on a consolidated basis. In addition, Brookfield has the right, exercisable at its discretion, to purchase for cash these common shares of Genworth Canada from our U.S. mortgage insurance companies at the then current market price. Brookfield also has a right of first refusal with respect to the transfer of these common shares of Genworth Canada by the U.S. mortgage insurance companies.
|
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
|
(Amounts in millions) |
2011 | 2010 | 2011 | 2010 | ||||||||||||
|
Fixed maturity securities—taxable |
$ | 669 | $ | 658 | $ | 2,032 | $ | 1,930 | ||||||||
|
Fixed maturity securities—non-taxable |
8 | 14 | 29 | 46 | ||||||||||||
|
Commercial mortgage loans |
89 | 95 | 273 | 298 | ||||||||||||
|
Restricted commercial mortgage loans related to securitization entities |
11 | 10 | 30 | 30 | ||||||||||||
|
Equity securities |
3 | 4 | 16 | 11 | ||||||||||||
|
Other invested assets |
42 | 24 | 131 | 61 | ||||||||||||
|
Restricted other invested assets related to securitization entities |
— | 1 | — | 2 | ||||||||||||
|
Policy loans |
30 | 28 | 89 | 83 | ||||||||||||
|
Cash, cash equivalents and short-term investments |
12 | 6 | 24 | 15 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Gross investment income before expenses and fees |
864 | 840 | 2,624 | 2,476 | ||||||||||||
|
Expenses and fees |
(22 | ) | (25 | ) | (71 | ) | (73 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net investment income |
$ | 842 | $ | 815 | $ | 2,553 | $ | 2,403 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
|
(Amounts in millions) |
2011 | 2010 | 2011 | 2010 | ||||||||||||
|
Available-for-sale securities: |
||||||||||||||||
|
Realized gains |
$ | 59 | $ | 38 | $ | 113 | $ | 114 | ||||||||
|
Realized losses |
(23 | ) | (35 | ) | (88 | ) | (109 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net realized gains (losses) on available-for-sale securities |
36 | 3 | 25 | 5 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Impairments: |
||||||||||||||||
|
Total other-than-temporary impairments |
(39 | ) | (7 | ) | (98 | ) | (108 | ) | ||||||||
|
Portion of other-than-temporary impairments included in other comprehensive income (loss) |
(13 | ) | (30 | ) | (16 | ) | (60 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net other-than-temporary impairments |
(52 | ) | (37 | ) | (114 | ) | (168 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Trading securities |
11 | 23 | 36 | 25 | ||||||||||||
|
Commercial mortgage loans |
3 | (9 | ) | 4 | (31 | ) | ||||||||||
|
Net gains (losses) related to securitization entities |
(57 | ) | 30 | (52 | ) | (6 | ) | |||||||||
|
Derivative instruments (1) |
(76 | ) | 94 | (101 | ) | 48 | ||||||||||
|
Contingent purchase price valuation change |
(22 | ) | — | (23 | ) | — | ||||||||||
|
Other |
— | 1 | — | 23 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net investment gains (losses) |
$ | (157 | ) | $ | 105 | $ | (225 | ) | $ | (104 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) |
See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses). |
| As of or for the three months ended September 30, |
As of or for the nine months ended September 30, |
|||||||||||||||
|
(Amounts in millions) |
2011 | 2010 | 2011 | 2010 | ||||||||||||
|
Beginning balance |
$ | 726 | $ | 978 | $ | 784 | $ | 1,059 | ||||||||
|
Additions: |
||||||||||||||||
|
Other-than-temporary impairments not previously recognized |
27 | 13 | 31 | 44 | ||||||||||||
|
Increases related to other-than-temporary impairments previously recognized |
24 | 22 | 72 | 100 | ||||||||||||
|
Reductions: |
||||||||||||||||
|
Securities sold, paid down or disposed |
(58 | ) | (126 | ) | (168 | ) | (316 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Ending balance |
$ | 719 | $ | 887 | $ | 719 | $ | 887 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
(Amounts in millions) |
September 30, 2011 | December 31, 2010 | ||||||
|
Net unrealized gains (losses) on investment securities: |
||||||||
|
Fixed maturity securities |
$ | 3,553 | $ | 511 | ||||
|
Equity securities |
(4 | ) | 9 | |||||
|
Other invested assets |
(30 | ) | (22 | ) | ||||
|
|
|
|
|
|||||
|
Subtotal |
3,519 | 498 | ||||||
|
Adjustments to deferred acquisition costs, present value of future profits, sales inducements and benefit reserves |
(1,162 | ) | (583 | ) | ||||
|
Income taxes, net |
(820 | ) | 35 | |||||
|
|
|
|
|
|||||
|
Net unrealized investment gains (losses) |
1,537 | (50 | ) | |||||
|
Less: net unrealized investment gains (losses) attributable to noncontrolling interests |
84 | 50 | ||||||
|
|
|
|
|
|||||
|
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc. |
$ | 1,453 | $ | (100 | ) | |||
|
|
|
|
|
|||||
| As of or for the three months ended September 30, |
||||||||
|
(Amounts in millions) |
2011 | 2010 | ||||||
|
Beginning balance |
$ | 236 | $ | 29 | ||||
|
Cumulative effect of changes in accounting |
— | 169 | ||||||
|
Unrealized gains (losses) arising during the period: |
||||||||
|
Unrealized gains (losses) on investment securities |
2,365 | 1,486 | ||||||
|
Adjustment to deferred acquisition costs |
(44 | ) | (187 | ) | ||||
|
Adjustment to present value of future profits |
(61 | ) | (101 | ) | ||||
|
Adjustment to sales inducements |
6 | (21 | ) | |||||
|
Adjustment to benefit reserves |
(369 | ) | (581 | ) | ||||
|
Provision for income taxes |
(662 | ) | (210 | ) | ||||
|
|
|
|
|
|||||
|
Change in unrealized gains (losses) on investment securities |
1,235 | 386 | ||||||
|
Reclassification adjustments to net investment (gains) losses, net of taxes of $(5) and $(12) |
11 | 22 | ||||||
|
|
|
|
|
|||||
|
Change in net unrealized investment gains (losses) |
1,246 | 577 | ||||||
|
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests |
29 | 19 | ||||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 1,453 | $ | 587 | ||||
|
|
|
|
|
|||||
| As of or for the nine months ended September 30, |
||||||||
|
(Amounts in millions) |
2011 | 2010 | ||||||
|
Beginning balance |
$ | (100 | ) | $ | (1,398 | ) | ||
|
Cumulative effect of changes in accounting |
— | 260 | ||||||
|
Unrealized gains (losses) arising during the period: |
||||||||
|
Unrealized gains (losses) on investment securities |
2,932 | 3,747 | ||||||
|
Adjustment to deferred acquisition costs |
(101 | ) | (381 | ) | ||||
|
Adjustment to present value of future profits |
(77 | ) | (182 | ) | ||||
|
Adjustment to sales inducements |
(1 | ) | (46 | ) | ||||
|
Adjustment to benefit reserves |
(400 | ) | (581 | ) | ||||
|
Provision for income taxes |
(824 | ) | (910 | ) | ||||
|
|
|
|
|
|||||
|
Change in unrealized gains (losses) on investment securities |
1,529 | 1,647 | ||||||
|
Reclassification adjustments to net investment (gains) losses, net of taxes of $(31) and $(57) |
58 | 106 | ||||||
|
|
|
|
|
|||||
|
Change in net unrealized investment gains (losses) |
1,587 | 2,013 | ||||||
|
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests |
34 | 28 | ||||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 1,453 | $ | 587 | ||||
|
|
|
|
|
|||||
| Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
|
(Amounts in millions) |
Amortized cost or cost |
Not other-than- temporarily impaired |
Other-than- temporarily impaired |
Not other-than- temporarily impaired |
Other-than- temporarily impaired |
Fair value |
||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 3,973 | $ | 853 | $ | — | $ | (1 | ) | $ | — | $ | 4,825 | |||||||||||
|
Tax-exempt |
753 | 24 | — | (84 | ) | — | 693 | |||||||||||||||||
|
Government—non-U.S. |
1,990 | 178 | — | (3 | ) | — | 2,165 | |||||||||||||||||
|
U.S. corporate |
23,218 | 2,461 | 15 | (324 | ) | (2 | ) | 25,368 | ||||||||||||||||
|
Corporate—non-U.S. |
13,138 | 768 | — | (201 | ) | — | 13,705 | |||||||||||||||||
|
Residential mortgage-backed |
5,392 | 446 | 10 | (267 | ) | (201 | ) | 5,380 | ||||||||||||||||
|
Commercial mortgage-backed |
3,613 | 161 | 6 | (199 | ) | (38 | ) | 3,543 | ||||||||||||||||
|
Other asset-backed |
2,202 | 23 | — | (87 | ) | (1 | ) | 2,137 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total fixed maturity securities |
54,279 | 4,914 | 31 | (1,166 | ) | (242 | ) | 57,816 | ||||||||||||||||
|
Equity securities |
357 | 15 | — | (18 | ) | — | 354 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total available-for- sale securities |
$ | 54,636 | $ | 4,929 | $ | 31 | $ | (1,184 | ) | $ | (242 | ) | $ | 58,170 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
|
(Amounts in millions) |
Amortized cost or cost |
Not other-than- temporarily impaired |
Other-than- temporarily impaired |
Not other-than- temporarily impaired |
Other-than- temporarily impaired |
Fair value |
||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 3,568 | $ | 145 | $ | — | $ | (8 | ) | $ | — | $ | 3,705 | |||||||||||
|
Tax-exempt |
1,124 | 19 | — | (113 | ) | — | 1,030 | |||||||||||||||||
|
Government—non-U.S. |
2,257 | 118 | — | (6 | ) | — | 2,369 | |||||||||||||||||
|
U.S. corporate |
23,282 | 1,123 | 10 | (448 | ) | — | 23,967 | |||||||||||||||||
|
Corporate—non-U.S. |
13,180 | 485 | — | (167 | ) | — | 13,498 | |||||||||||||||||
|
Residential mortgage-backed |
4,821 | 116 | 18 | (304 | ) | (196 | ) | 4,455 | ||||||||||||||||
|
Commercial mortgage-backed |
3,936 | 132 | 6 | (286 | ) | (45 | ) | 3,743 | ||||||||||||||||
|
Other asset-backed |
2,494 | 18 | — | (94 | ) | (2 | ) | 2,416 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total fixed maturity securities |
54,662 | 2,156 | 34 | (1,426 | ) | (243 | ) | 55,183 | ||||||||||||||||
|
Equity securities |
323 | 13 | — | (4 | ) | — | 332 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total available-for-sale securities |
$ | 54,985 | $ | 2,169 | $ | 34 | $ | (1,430 | ) | $ | (243 | ) | $ | 55,515 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses (1) |
Number of securities |
Fair value |
Gross unrealized losses (2) |
Number of securities |
|||||||||||||||||||||||||||
|
Description of Securities |
||||||||||||||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 263 | $ | (1 | ) | 3 | $ | — | $ | — | — | $ | 263 | $ | (1 | ) | 3 | |||||||||||||||||||
|
Tax-exempt |
— | — | — | 254 | (84 | ) | 79 | 254 | (84 | ) | 79 | |||||||||||||||||||||||||
|
Government—non-U.S. |
149 | (3 | ) | 31 | — | — | — | 149 | (3 | ) | 31 | |||||||||||||||||||||||||
|
U.S. corporate |
1,700 | (65 | ) | 204 | 1,526 | (261 | ) | 137 | 3,226 | (326 | ) | 341 | ||||||||||||||||||||||||
|
Corporate—non-U.S. |
1,774 | (78 | ) | 271 | 736 | (123 | ) | 73 | 2,510 | (201 | ) | 344 | ||||||||||||||||||||||||
|
Residential mortgage-backed |
155 | (4 | ) | 71 | 815 | (464 | ) | 365 | 970 | (468 | ) | 436 | ||||||||||||||||||||||||
|
Commercial mortgage-backed |
321 | (29 | ) | 52 | 940 | (208 | ) | 167 | 1,261 | (237 | ) | 219 | ||||||||||||||||||||||||
|
Other asset-backed |
182 | (1 | ) | 35 | 319 | (87 | ) | 36 | 501 | (88 | ) | 71 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Subtotal, fixed maturity securities |
4,544 | (181 | ) | 667 | 4,590 | (1,227 | ) | 857 | 9,134 | (1,408 | ) | 1,524 | ||||||||||||||||||||||||
|
Equity securities |
115 | (15 | ) | 50 | 20 | (3 | ) | 13 | 135 | (18 | ) | 63 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 4,659 | $ | (196 | ) | 717 | $ | 4,610 | $ | (1,230 | ) | 870 | $ | 9,269 | $ | (1,426 | ) | 1,587 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
% Below cost—fixed maturity securities: |
||||||||||||||||||||||||||||||||||||
|
<20% Below cost |
$ | 4,477 | $ | (152 | ) | 622 | $ | 3,230 | $ | (322 | ) | 456 | $ | 7,707 | $ | (474 | ) | 1,078 | ||||||||||||||||||
|
20%-50% Below cost |
62 | (24 | ) | 34 | 1,207 | (585 | ) | 272 | 1,269 | (609 | ) | 306 | ||||||||||||||||||||||||
|
>50% Below cost |
5 | (5 | ) | 11 | 153 | (320 | ) | 129 | 158 | (325 | ) | 140 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total fixed maturity securities |
4,544 | (181 | ) | 667 | 4,590 | (1,227 | ) | 857 | 9,134 | (1,408 | ) | 1,524 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
% Below cost—equity securities: |
||||||||||||||||||||||||||||||||||||
|
<20% Below cost |
99 | (8 | ) | 41 | 16 | (1 | ) | 9 | 115 | (9 | ) | 50 | ||||||||||||||||||||||||
|
20%-50% Below cost |
16 | (7 | ) | 9 | 4 | (2 | ) | 4 | 20 | (9 | ) | 13 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total equity securities |
115 | (15 | ) | 50 | 20 | (3 | ) | 13 | 135 | (18 | ) | 63 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 4,659 | $ | (196 | ) | 717 | $ | 4,610 | $ | (1,230 | ) | 870 | $ | 9,269 | $ | (1,426 | ) | 1,587 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Investment grade |
$ | 4,047 | $ | (151 | ) | 536 | $ | 3,237 | $ | (567 | ) | 486 | $ | 7,284 | $ | (718 | ) | 1,022 | ||||||||||||||||||
|
Below investment grade (3) |
612 | (45 | ) | 181 | 1,373 | (663 | ) | 384 | 1,985 | (708 | ) | 565 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 4,659 | $ | (196 | ) | 717 | $ | 4,610 | $ | (1,230 | ) | 870 | $ | 9,269 | $ | (1,426 | ) | 1,587 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| (1) |
Amounts included $236 million of unrealized losses on other-than-temporarily impaired securities. |
| (2) |
Amounts included $242 million of unrealized losses on other-than-temporarily impaired securities. |
| (3) |
Amounts that have been in a continuous loss position for 12 months or more included $220 million of unrealized losses on other-than-temporarily impaired securities. |
| Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses (1) |
Number of securities |
Fair value |
Gross unrealized losses (2) |
Number of securities |
|||||||||||||||||||||||||||
|
Description of Securities |
||||||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 545 | $ | (8 | ) | 36 | $ | — | $ | — | — | $ | 545 | $ | (8 | ) | 36 | |||||||||||||||||||
|
Tax-exempt |
285 | (12 | ) | 101 | 244 | (101 | ) | 90 | 529 | (113 | ) | 191 | ||||||||||||||||||||||||
|
Government—non-U.S. |
431 | (5 | ) | 69 | 21 | (1 | ) | 7 | 452 | (6 | ) | 76 | ||||||||||||||||||||||||
|
U.S. corporate |
3,615 | (125 | ) | 443 | 2,338 | (323 | ) | 191 | 5,953 | (448 | ) | 634 | ||||||||||||||||||||||||
|
Corporate—non-U.S. |
2,466 | (53 | ) | 296 | 1,141 | (114 | ) | 102 | 3,607 | (167 | ) | 398 | ||||||||||||||||||||||||
|
Residential mortgage-backed |
461 | (23 | ) | 92 | 1,031 | (477 | ) | 416 | 1,492 | (500 | ) | 508 | ||||||||||||||||||||||||
|
Commercial mortgage-backed |
177 | (8 | ) | 26 | 1,167 | (323 | ) | 225 | 1,344 | (331 | ) | 251 | ||||||||||||||||||||||||
|
Other asset-backed |
401 | (2 | ) | 37 | 512 | (94 | ) | 53 | 913 | (96 | ) | 90 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Subtotal, fixed maturity securities |
8,381 | (236 | ) | 1,100 | 6,454 | (1,433 | ) | 1,084 | 14,835 | (1,669 | ) | 2,184 | ||||||||||||||||||||||||
|
Equity securities |
77 | (3 | ) | 48 | 5 | (1 | ) | 4 | 82 | (4 | ) | 52 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 8,458 | $ | (239 | ) | 1,148 | $ | 6,459 | $ | (1,434 | ) | 1,088 | $ | 14,917 | $ | (1,673 | ) | 2,236 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
% Below cost—fixed maturity securities: |
||||||||||||||||||||||||||||||||||||
|
<20% Below cost |
$ | 8,359 | $ | (226 | ) | 1,076 | $ | 4,852 | $ | (418 | ) | 588 | $ | 13,211 | $ | (644 | ) | 1,664 | ||||||||||||||||||
|
20%-50% Below cost |
22 | (8 | ) | 18 | 1,428 | (652 | ) | 328 | 1,450 | (660 | ) | 346 | ||||||||||||||||||||||||
|
>50% Below cost |
— | (2 | ) | 6 | 174 | (363 | ) | 168 | 174 | (365 | ) | 174 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total fixed maturity securities |
8,381 | (236 | ) | 1,100 | 6,454 | (1,433 | ) | 1,084 | 14,835 | (1,669 | ) | 2,184 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
% Below cost—equity securities: |
||||||||||||||||||||||||||||||||||||
|
<20% Below cost |
72 | (2 | ) | 47 | 5 | (1 | ) | 4 | 77 | (3 | ) | 51 | ||||||||||||||||||||||||
|
20%-50% Below cost |
5 | (1 | ) | 1 | — | — | — | 5 | (1 | ) | 1 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total equity securities |
77 | (3 | ) | 48 | 5 | (1 | ) | 4 | 82 | (4 | ) | 52 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 8,458 | $ | (239 | ) | 1,148 | $ | 6,459 | $ | (1,434 | ) | 1,088 | $ | 14,917 | $ | (1,673 | ) | 2,236 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Investment grade |
$ | 8,249 | $ | (231 | ) | 1,060 | $ | 4,850 | $ | (764 | ) | 683 | $ | 13,099 | $ | (995 | ) | 1,743 | ||||||||||||||||||
|
Below investment grade (3) |
209 | (8 | ) | 88 | 1,609 | (670 | ) | 405 | 1,818 | (678 | ) | 493 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Total for securities in an unrealized loss position |
$ | 8,458 | $ | (239 | ) | 1,148 | $ | 6,459 | $ | (1,434 | ) | 1,088 | $ | 14,917 | $ | (1,673 | ) | 2,236 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| (1) |
Amounts included $240 million of unrealized losses on other-than-temporarily impaired securities. |
| (2) |
Amounts included $243 million of unrealized losses on other-than-temporarily impaired securities. |
| (3) |
Amounts that have been in a continuous loss position for 12 months or more included $213 million of unrealized losses on other-than-temporarily impaired securities. |
| Investment Grade | ||||||||||||||||||||||||||||||||
| 20% to 50% | Greater than 50% | |||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||
|
Tax-exempt |
$ | 160 | $ | (73 | ) | 5 | % | 39 | $ | — | $ | — | — | % | — | |||||||||||||||||
|
U.S. corporate |
179 | (74 | ) | 5 | 12 | — | — | — | — | |||||||||||||||||||||||
|
Corporate—non-U.S. |
158 | (76 | ) | 5 | 14 | — | — | — | — | |||||||||||||||||||||||
|
Structured securities: |
||||||||||||||||||||||||||||||||
|
Residential mortgage-backed |
73 | (30 | ) | 2 | 28 | 11 | (27 | ) | 2 | 14 | ||||||||||||||||||||||
|
Commercial mortgage-backed |
68 | (29 | ) | 2 | 15 | 5 | (6 | ) | — | 7 | ||||||||||||||||||||||
|
Other asset-backed |
27 | (9 | ) | 1 | 3 | 1 | (1 | ) | — | 1 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total structured securities |
168 | (68 | ) | 5 | 46 | 17 | (34 | ) | 2 | 22 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
$ | 665 | $ | (291 | ) | 20 | % | 111 | $ | 17 | $ | (34 | ) | 2 | % | 22 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Below Investment Grade | ||||||||||||||||||||||||||||||||
| 20% to 50% | Greater than 50% | |||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||
|
Tax-exempt |
$ | — | $ | — | — | % | — | $ | — | $ | — | — | % | — | ||||||||||||||||||
|
U.S. corporate |
59 | (37 | ) | 3 | 9 | 9 | (11 | ) | 1 | 3 | ||||||||||||||||||||||
|
Structured securities: |
||||||||||||||||||||||||||||||||
|
Residential mortgage-backed |
310 | (170 | ) | 12 | 118 | 86 | (204 | ) | 14 | 86 | ||||||||||||||||||||||
|
Commercial mortgage-backed |
87 | (38 | ) | 3 | 30 | 29 | (59 | ) | 4 | 16 | ||||||||||||||||||||||
|
Other asset-backed |
86 | (49 | ) | 3 | 4 | 12 | (12 | ) | 1 | 2 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total structured securities |
483 | (257 | ) | 18 | 152 | 127 | (275 | ) | 19 | 104 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
$ | 542 | $ | (294 | ) | 21 | % | 161 | $ | 136 | $ | (286 | ) | 20 | % | 107 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Investment Grade | ||||||||||||||||||||||||||||||||
| 20% to 50% | Greater than 50% | |||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
||||||||||||||||||||||||
|
Industry: |
||||||||||||||||||||||||||||||||
|
Finance and insurance |
$ | 290 | $ | (133 | ) | 9 | % | 24 | $ | — | $ | — | — | % | — | |||||||||||||||||
|
Utilities and energy |
17 | (6 | ) | — | 1 | — | — | — | — | |||||||||||||||||||||||
|
Consumer-non-cyclical |
30 | (11 | ) | 1 | 1 | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
$ | 337 | $ | (150 | ) | 10 | % | 26 | $ | — | $ | — | — | % | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Below Investment Grade | ||||||||||||||||||||||||||||||||
| 20% to 50% | Greater than 50% | |||||||||||||||||||||||||||||||
|
(Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
% of total gross unrealized losses |
Number of securities |
||||||||||||||||||||||||
|
Industry: |
||||||||||||||||||||||||||||||||
|
Finance and insurance |
$ | 57 | $ | (36 | ) | 3 | % | 7 | $ | 9 | $ | (11 | ) | 1 | % | 3 | ||||||||||||||||
|
Technology and communications |
2 | (1 | ) | — | 2 | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
$ | 59 | $ | (37 | ) | 3 | % | 9 | $ | 9 | $ | (11 | ) | 1 | % | 3 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
(Amounts in millions) |
Amortized cost or cost |
Fair value |
||||||
|
Due one year or less |
$ | 2,696 | $ | 2,720 | ||||
|
Due after one year through five years |
10,842 | 11,172 | ||||||
|
Due after five years through ten years |
9,964 | 10,612 | ||||||
|
Due after ten years |
19,570 | 22,252 | ||||||
|
|
|
|
|
|||||
|
Subtotal |
43,072 | 46,756 | ||||||
|
Residential mortgage-backed |
5,392 | 5,380 | ||||||
|
Commercial mortgage-backed |
3,613 | 3,543 | ||||||
|
Other asset-backed |
2,202 | 2,137 | ||||||
|
|
|
|
|
|||||
|
Total |
$ | 54,279 | $ | 57,816 | ||||
|
|
|
|
|
|||||
| September 30, 2011 | December 31, 2010 | |||||||||||||||
|
(Amounts in millions) |
Carrying value |
% of total |
Carrying value |
% of total |
||||||||||||
|
Property type: |
||||||||||||||||
|
Retail |
$ | 1,889 | 30 | % | $ | 1,974 | 29 | % | ||||||||
|
Industrial |
1,736 | 28 | 1,788 | 26 | ||||||||||||
|
Office |
1,647 | 26 | 1,850 | 27 | ||||||||||||
|
Apartments |
708 | 11 | 725 | 11 | ||||||||||||
|
Mixed use/other |
341 | 5 | 435 | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Subtotal |
6,321 | 100 | % | 6,772 | 100 | % | ||||||||||
|
|
|
|
|
|||||||||||||
|
Unamortized balance of loan origination fees and costs |
4 | 5 | ||||||||||||||
|
Allowance for losses |
(54 | ) | (59 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
|
Total |
$ | 6,271 | $ | 6,718 | ||||||||||||
|
|
|
|
|
|||||||||||||
| September 30, 2011 | December 31, 2010 | |||||||||||||||
|
(Amounts in millions) |
Carrying value |
% of total |
Carrying value |
% of total |
||||||||||||
|
Geographic region: |
||||||||||||||||
|
South Atlantic |
$ | 1,624 | 27 | % | $ | 1,583 | 23 | % | ||||||||
|
Pacific |
1,598 | 25 | 1,769 | 26 | ||||||||||||
|
Middle Atlantic |
810 | 13 | 937 | 14 | ||||||||||||
|
East North Central |
568 | 9 | 612 | 9 | ||||||||||||
|
Mountain |
500 | 8 | 540 | 8 | ||||||||||||
|
New England |
390 | 6 | 482 | 7 | ||||||||||||
|
West North Central |
344 | 5 | 369 | 6 | ||||||||||||
|
West South Central |
329 | 5 | 297 | 4 | ||||||||||||
|
East South Central |
158 | 2 | 183 | 3 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Subtotal |
6,321 | 100 | % | 6,772 | 100 | % | ||||||||||
|
|
|
|
|
|||||||||||||
|
Unamortized balance of loan origination fees and costs |
4 | 5 | ||||||||||||||
|
Allowance for losses |
(54 | ) | (59 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
|
Total |
$ | 6,271 | $ | 6,718 | ||||||||||||
|
|
|
|
|
|||||||||||||
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
31 - 60 days past due |
61 - 90 days past due |
Greater than 90 days past due |
Total past due |
Current | Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | — | $ | — | $ | 3 | $ | 3 | $ | 1,886 | $ | 1,889 | ||||||||||||
|
Industrial |
— | 16 | 4 | 20 | 1,716 | 1,736 | ||||||||||||||||||
|
Office |
10 | 4 | 8 | 22 | 1,625 | 1,647 | ||||||||||||||||||
|
Apartments |
1 | — | — | 1 | 707 | 708 | ||||||||||||||||||
|
Mixed use/other |
1 | — | — | 1 | 340 | 341 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investment |
$ | 12 | $ | 20 | $ | 15 | $ | 47 | $ | 6,274 | $ | 6,321 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total commercial mortgage loans |
— | % | 1 | % | — | % | 1 | % | 99 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
31 - 60 days past due |
61 - 90 days past due |
Greater than 90 days past due |
Total past due |
Current | Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | — | $ | — | $ | — | $ | — | $ | 1,974 | $ | 1,974 | ||||||||||||
|
Industrial |
— | 6 | 27 | 33 | 1,755 | 1,788 | ||||||||||||||||||
|
Office |
— | — | 12 | 12 | 1,838 | 1,850 | ||||||||||||||||||
|
Apartments |
— | — | — | — | 725 | 725 | ||||||||||||||||||
|
Mixed use/other |
— | — | — | — | 435 | 435 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investment |
$ | — | $ | 6 | $ | 39 | $ | 45 | $ | 6,727 | $ | 6,772 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total commercial mortgage loans |
— | % | — | % | 1 | % | 1 | % | 99 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
(Amounts in millions) |
September 30, 2011 |
December 31, 2010 |
||||||
|
Property type: |
||||||||
|
Retail |
$ | 3 | $ | — | ||||
|
Industrial |
4 | 27 | ||||||
|
Office |
8 | 12 | ||||||
|
Apartments |
— | — | ||||||
|
Mixed use/other |
— | — | ||||||
|
|
|
|
|
|||||
|
Total recorded investment |
$ | 15 | $ | 39 | ||||
|
|
|
|
|
|||||
|
(Amounts in millions) |
Three months ended September 30, 2011 |
Nine months ended September 30, 2011 |
||||||
|
Allowance for credit losses: |
||||||||
|
Beginning balance |
$ | 57 | $ | 59 | ||||
|
Charge-offs |
— | (5 | ) | |||||
|
Recoveries |
— | — | ||||||
|
Provision |
(3 | ) | — | |||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 54 | $ | 54 | ||||
|
|
|
|
|
|||||
|
Ending allowance for individually impaired loans |
$ | — | $ | — | ||||
|
|
|
|
|
|||||
|
Ending allowance for loans not individually impaired that were evaluated collectively for impairment |
$ | 54 | $ | 54 | ||||
|
|
|
|
|
|||||
|
Recorded investment: |
||||||||
|
Ending balance |
$ | 6,321 | $ | 6,321 | ||||
|
|
|
|
|
|||||
|
Ending balance of individually impaired loans |
$ | 13 | $ | 13 | ||||
|
|
|
|
|
|||||
|
Ending balance of loans not individually impaired that were evaluated collectively for impairment |
$ | 6,308 | $ | 6,308 | ||||
|
|
|
|
|
|||||
|
(Amounts in millions) |
Three months ended September 30, 2010 |
Nine months ended September 30, 2010 |
||||||
|
Beginning balance |
$ | 70 | $ | 48 | ||||
|
Provision |
5 | 27 | ||||||
|
Release (1) |
(13 | ) | (13 | ) | ||||
|
|
|
|
|
|||||
|
Ending balance |
$ | 62 | $ | 62 | ||||
|
|
|
|
|
|||||
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Recorded investment |
Unpaid principal balance |
Charge- offs |
Related allowance |
Average recorded investment |
Interest income recognized |
||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 3 | $ | 4 | $ | 1 | $ | — | $ | 2 | $ | — | ||||||||||||
|
Industrial |
— | — | — | — | $ | — | — | |||||||||||||||||
|
Office |
10 | 13 | 3 | — | $ | 10 | — | |||||||||||||||||
|
Apartments |
— | — | — | — | $ | — | — | |||||||||||||||||
|
Mixed use/other |
— | — | — | — | $ | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total |
$ | 13 | $ | 17 | $ | 4 | $ | — | $ | 6 | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Recorded investment |
Unpaid principal balance |
Charge- offs |
Related allowance |
Average recorded investment |
Interest income recognized |
||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 5 | $ | 8 | $ | 3 | $ | — | $ | 2 | $ | — | ||||||||||||
|
Industrial |
19 | 24 | 5 | — | $ | 3 | — | |||||||||||||||||
|
Office |
6 | 8 | 2 | — | $ | 2 | — | |||||||||||||||||
|
Apartments |
— | — | — | — | $ | — | — | |||||||||||||||||
|
Mixed use/other |
— | — | — | — | $ | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total |
$ | 30 | $ | 40 | $ | 10 | $ | — | $ | 3 | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
0% - 50 % | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% (1) |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 426 | $ | 275 | $ | 874 | $ | 282 | $ | 32 | $ | 1,889 | ||||||||||||
|
Industrial |
481 | 286 | 665 | 281 | 23 | 1,736 | ||||||||||||||||||
|
Office |
427 | 282 | 591 | 226 | 121 | 1,647 | ||||||||||||||||||
|
Apartments |
222 | 162 | 269 | 40 | 15 | 708 | ||||||||||||||||||
|
Mixed use/other |
80 | 58 | 60 | 137 | 6 | 341 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 1,636 | $ | 1,063 | $ | 2,459 | $ | 966 | $ | 197 | $ | 6,321 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
26 | % | 17 | % | 39 | % | 15 | % | 3 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average debt service coverage ratio |
2.54 | 1.89 | 2.13 | 1.78 | 0.89 | 2.11 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) |
Included $10 million of impaired loans and $187 million of loans in good standing, with a total weighted-average loan-to-value of 121%, where borrowers continued to make timely payments and have no history of delinquencies or distress. |
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% (1) |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 477 | $ | 287 | $ | 805 | $ | 363 | $ | 42 | $ | 1,974 | ||||||||||||
|
Industrial |
431 | 361 | 625 | 284 | 87 | 1,788 | ||||||||||||||||||
|
Office |
320 | 327 | 612 | 446 | 145 | 1,850 | ||||||||||||||||||
|
Apartments |
99 | 172 | 321 | 133 | — | 725 | ||||||||||||||||||
|
Mixed use/other |
123 | 10 | 63 | 221 | 18 | 435 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 1,450 | $ | 1,157 | $ | 2,426 | $ | 1,447 | $ | 292 | $ | 6,772 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
22 | % | 17 | % | 36 | % | 21 | % | 4 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average debt service coverage ratio |
2.24 | 1.99 | 1.79 | 2.42 | 0.75 | 2.01 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) |
Included $25 million of impaired loans and $267 million of loans in good standing, with a total weighted-average loan-to-value of 117%, where borrowers continued to make timely payments and have no history of delinquencies or distress. |
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 96 | $ | 328 | $ | 447 | $ | 568 | $ | 345 | $ | 1,784 | ||||||||||||
|
Industrial |
227 | 232 | 284 | 636 | 341 | 1,720 | ||||||||||||||||||
|
Office |
192 | 132 | 282 | 441 | 516 | 1,563 | ||||||||||||||||||
|
Apartments |
15 | 83 | 75 | 301 | 167 | 641 | ||||||||||||||||||
|
Mixed use/other |
50 | 32 | 6 | 53 | 105 | 246 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 580 | $ | 807 | $ | 1,094 | $ | 1,999 | $ | 1,474 | $ | 5,954 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
10 | % | 13 | % | 18 | % | 34 | % | 25 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
87 | % | 71 | % | 67 | % | 60 | % | 50 | % | 63 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 125 | $ | 317 | $ | 490 | $ | 512 | $ | 415 | $ | 1,859 | ||||||||||||
|
Industrial |
260 | 166 | 292 | 698 | 346 | 1,762 | ||||||||||||||||||
|
Office |
176 | 186 | 238 | 524 | 547 | 1,671 | ||||||||||||||||||
|
Apartments |
7 | 62 | 160 | 290 | 135 | 654 | ||||||||||||||||||
|
Mixed use/other |
49 | 12 | 17 | 78 | 94 | 250 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 617 | $ | 743 | $ | 1,197 | $ | 2,102 | $ | 1,537 | $ | 6,196 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
10 | % | 12 | % | 19 | % | 34 | % | 25 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
90 | % | 71 | % | 68 | % | 62 | % | 50 | % | 64 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | — | $ | — | $ | 1 | $ | — | $ | 104 | $ | 105 | ||||||||||||
|
Industrial |
— | — | — | 5 | 11 | 16 | ||||||||||||||||||
|
Office |
— | — | 8 | — | 76 | 84 | ||||||||||||||||||
|
Apartments |
— | — | — | — | 67 | 67 | ||||||||||||||||||
|
Mixed use/other |
— | 4 | — | — | 91 | 95 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | — | $ | 4 | $ | 9 | $ | 5 | $ | 349 | $ | 367 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
— | % | 1 | % | 3 | % | 1 | % | 95 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
— | % | 80 | % | 53 | % | 45 | % | 62 | % | 62 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | — | $ | — | $ | — | $ | 2 | $ | 113 | $ | 115 | ||||||||||||
|
Industrial |
1 | 5 | — | 1 | 19 | 26 | ||||||||||||||||||
|
Office |
— | — | — | 57 | 122 | 179 | ||||||||||||||||||
|
Apartments |
— | 4 | — | 21 | 46 | 71 | ||||||||||||||||||
|
Mixed use/other |
— | — | — | — | 185 | 185 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 1 | $ | 9 | $ | — | $ | 81 | $ | 485 | $ | 576 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
— | % | 2 | % | — | % | 14 | % | 84 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
30 | % | 62 | % | — | % | 83 | % | 77 | % | 78 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| September 30, 2011 | December 31, 2010 | |||||||||||||||
|
(Amounts in millions) |
Carrying value |
% of total |
Carrying value |
% of total |
||||||||||||
|
Property type: |
||||||||||||||||
|
Retail |
$ | 168 | 39 | % | $ | 182 | 36 | % | ||||||||
|
Industrial |
104 | 24 | 124 | 24 | ||||||||||||
|
Office |
92 | 21 | 117 | 23 | ||||||||||||
|
Apartments |
61 | 14 | 64 | 13 | ||||||||||||
|
Mixed use/other |
7 | 2 | 22 | 4 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Subtotal |
432 | 100 | % | 509 | 100 | % | ||||||||||
|
|
|
|
|
|||||||||||||
|
Allowance for losses |
(2 | ) | (2 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
|
Total |
$ | 430 | $ | 507 | ||||||||||||
|
|
|
|
|
|||||||||||||
| September 30, 2011 | December 31, 2010 | |||||||||||||||
|
(Amounts in millions) |
Carrying value |
% of total |
Carrying value |
% of total |
||||||||||||
|
Geographic region: |
||||||||||||||||
|
South Atlantic |
$ | 151 | 35 | % | $ | 189 | 37 | % | ||||||||
|
Pacific |
75 | 17 | 90 | 18 | ||||||||||||
|
Middle Atlantic |
67 | 16 | 70 | 14 | ||||||||||||
|
East North Central |
47 | 11 | 51 | 10 | ||||||||||||
|
Mountain |
30 | 7 | 32 | 6 | ||||||||||||
|
West North Central |
28 | 6 | 31 | 6 | ||||||||||||
|
East South Central |
21 | 5 | 32 | 6 | ||||||||||||
|
West South Central |
12 | 3 | 13 | 3 | ||||||||||||
|
New England |
1 | — | 1 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Subtotal |
432 | 100 | % | 509 | 100 | % | ||||||||||
|
|
|
|
|
|||||||||||||
|
Allowance for losses |
(2 | ) | (2 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
|
Total |
$ | 430 | $ | 507 | ||||||||||||
|
|
|
|
|
|||||||||||||
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 152 | $ | 11 | $ | 2 | $ | — | $ | 3 | $ | 168 | ||||||||||||
|
Industrial |
92 | 5 | — | 5 | 2 | 104 | ||||||||||||||||||
|
Office |
67 | 12 | 5 | 6 | 2 | 92 | ||||||||||||||||||
|
Apartments |
35 | 3 | — | 23 | — | 61 | ||||||||||||||||||
|
Mixed use/other |
7 | — | — | — | — | 7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investments |
$ | 353 | $ | 31 | $ | 7 | $ | 34 | $ | 7 | $ | 432 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
82 | % | 7 | % | 1 | % | 8 | % | 2 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average debt service coverage ratio |
1.80 | 1.17 | 2.16 | 0.88 | 0.48 | 1.67 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 141 | $ | 34 | $ | 1 | $ | 3 | $ | 3 | $ | 182 | ||||||||||||
|
Industrial |
108 | 8 | 4 | 2 | 2 | 124 | ||||||||||||||||||
|
Office |
90 | 19 | 5 | 3 | — | 117 | ||||||||||||||||||
|
Apartments |
35 | 9 | — | 20 | — | 64 | ||||||||||||||||||
|
Mixed use/other |
17 | 5 | — | — | — | 22 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investments |
$ | 391 | $ | 75 | $ | 10 | $ | 28 | $ | 5 | $ | 509 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
77 | % | 15 | % | 2 | % | 5 | % | 1 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average debt service coverage ratio |
1.82 | 1.35 | 1.05 | 1.18 | 0.52 | 1.69 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| September 30, 2011 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.50 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 5 | $ | 17 | $ | 50 | $ | 64 | $ | 32 | $ | 168 | ||||||||||||
|
Industrial |
15 | 11 | 24 | 24 | 30 | 104 | ||||||||||||||||||
|
Office |
12 | 24 | 4 | 39 | 13 | 92 | ||||||||||||||||||
|
Apartments |
12 | 15 | 9 | 20 | 5 | 61 | ||||||||||||||||||
|
Mixed use/other |
— | — | — | 2 | 5 | 7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investments |
$ | 44 | $ | 67 | $ | 87 | $ | 149 | $ | 85 | $ | 432 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
10 | % | 15 | % | 20 | % | 35 | % | 20 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
74 | % | 48 | % | 40 | % | 36 | % | 29 | % | 41 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||
|
(Amounts in millions) |
Less than 1.00 | 1.00 - 1.50 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 |
Total | ||||||||||||||||||
|
Property type: |
||||||||||||||||||||||||
|
Retail |
$ | 14 | $ | 6 | $ | 52 | $ | 77 | $ | 33 | $ | 182 | ||||||||||||
|
Industrial |
11 | 9 | 25 | 50 | 29 | 124 | ||||||||||||||||||
|
Office |
14 | 14 | 23 | 45 | 21 | 117 | ||||||||||||||||||
|
Apartments |
— | 21 | 10 | 26 | 7 | 64 | ||||||||||||||||||
|
Mixed use/other |
— | — | 7 | 11 | 4 | 22 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total recorded investments |
$ | 39 | $ | 50 | $ | 117 | $ | 209 | $ | 94 | $ | 509 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
% of total |
8 | % | 10 | % | 23 | % | 41 | % | 18 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Weighted-average loan-to-value |
65 | % | 55 | % | 42 | % | 41 | % | 31 | % | 43 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative assets | Derivative liabilities | |||||||||||||||||||
| Fair value | Fair value | |||||||||||||||||||
|
(Amounts in millions) |
Balance sheet classification |
September 30, 2011 |
December 31, 2010 |
Balance sheet classification |
September 30, 2011 |
December 31, 2010 |
||||||||||||||
|
Derivatives designated as hedges |
||||||||||||||||||||
|
Cash flow hedges: |
||||||||||||||||||||
|
Interest rate swaps |
Other invested assets | $ | 1,478 | $ | 222 | Other liabilities | $ | — | $ | 56 | ||||||||||
|
Forward bond purchase commitments |
Other invested assets | 37 | — | Other liabilities | — | — | ||||||||||||||
|
Inflation indexed swaps |
Other invested assets | — | — | Other liabilities | 41 | 33 | ||||||||||||||
|
Foreign currency swaps |
Other invested assets | — | 205 | Other liabilities | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total cash flow hedges |
1,515 | 427 | 41 | 89 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Fair value hedges: |
||||||||||||||||||||
|
Interest rate swaps |
Other invested assets | 56 | 95 | Other liabilities | 3 | 8 | ||||||||||||||
|
Foreign currency swaps |
Other invested assets | 37 | 35 | Other liabilities | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total fair value hedges |
93 | 130 | 3 | 8 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total derivatives designated as hedges |
1,608 | 557 | 44 | 97 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Derivatives not designated as hedges |
||||||||||||||||||||
|
Interest rate swaps |
Other invested assets | 718 | 446 | Other liabilities | 351 | 74 | ||||||||||||||
|
Equity return swaps |
Other invested assets | 24 | — | Other liabilities | 1 | 3 | ||||||||||||||
|
Interest rate swaps related to securitization entities |
Restricted other invested assets |
— | — | Other liabilities | 29 | 19 | ||||||||||||||
|
Interest rate swaptions |
Other invested assets | — | — | Other liabilities | — | — | ||||||||||||||
|
Credit default swaps |
Other invested assets | 1 | 11 | Other liabilities | 77 | 7 | ||||||||||||||
|
Credit default swaps related to securitization entities |
Restricted other invested assets |
— | — | Other liabilities | 180 | 129 | ||||||||||||||
|
Equity index options |
Other invested assets | 62 | 33 | Other liabilities | — | 3 | ||||||||||||||
|
Financial futures |
Other invested assets | — | — | Other liabilities | — | — | ||||||||||||||
|
Other foreign currency contracts |
Other invested assets | 2 | — | Other liabilities | 1 | — | ||||||||||||||
|
Reinsurance embedded derivatives (1) |
Other assets | 26 | 1 | Other liabilities | — | — | ||||||||||||||
|
GMWB embedded derivatives |
Reinsurance recoverable (2) |
21 | (5 | ) | Policyholder account balances (3) |
602 | 121 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total derivatives not designated as hedges |
854 | 486 | 1,241 | 356 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total derivatives |
$ | 2,462 | $ | 1,043 | $ | 1,285 | $ | 453 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) |
Represents embedded derivatives associated with certain reinsurance agreements. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits ("GMWB") liabilities. |
| (3) |
Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
|
(Notional in millions) |
Measurement | December 31, 2010 |
Additions | Maturities/ terminations |
September 30, 2011 |
|||||||||||||
|
Derivatives designated as hedges |
||||||||||||||||||
|
Cash flow hedges: |
||||||||||||||||||
|
Interest rate swaps |
Notional | $ | 12,355 | $ | 3,896 | $ | (4,021 | ) | $ | 12,230 | ||||||||
|
Forward bond purchase commitments |
Notional | — | 504 | — | 504 | |||||||||||||
|
Inflation indexed swaps |
Notional | 525 | 19 | — | 544 | |||||||||||||
|
Foreign currency swaps |
Notional | 491 | — | (491) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total cash flow hedges |
13,371 | 4,419 | (4,512 | ) | 13,278 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Fair value hedges: |
||||||||||||||||||
|
Interest rate swaps |
Notional | 1,764 | — | (698 | ) | 1,066 | ||||||||||||
|
Foreign currency swaps |
Notional | 85 | — | — | 85 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total fair value hedges |
1,849 | — | (698 | ) | 1,151 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total derivatives designated as hedges |
15,220 | 4,419 | (5,210 | ) | 14,429 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Derivatives not designated as hedges |
||||||||||||||||||
|
Interest rate swaps |
Notional | 7,681 | 1,310 | (1,769 | ) | 7,222 | ||||||||||||
|
Equity return swaps |
Notional | 208 | 362 | (229 | ) | 341 | ||||||||||||
|
Interest rate swaps related to securitization entities |
Notional | 129 | — | (9 | ) | 120 | ||||||||||||
|
Interest rate swaptions |
Notional | 200 | — | (200 | ) | — | ||||||||||||
|
Credit default swaps |
Notional | 1,195 | 115 | (200 | ) | 1,110 | ||||||||||||
|
Credit default swaps related to securitization entities |
Notional | 317 | — | — | 317 | |||||||||||||
|
Equity index options |
Notional | 744 | 521 | (795 | ) | 470 | ||||||||||||
|
Financial futures |
Notional | 3,937 | 4,737 | (5,078 | ) | 3,596 | ||||||||||||
|
Other foreign currency contracts |
Notional | 521 | 185 | (549 | ) | 157 | ||||||||||||
|
Reinsurance embedded derivatives |
Notional | 72 | 297 | (161 | ) | 208 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total derivatives not designated as hedges |
15,004 | 7,527 | (8,990 | ) | 13,541 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total derivatives |
$ | 30,224 | $ | 11,946 | $ | (14,200 | ) | $ | 27,970 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
|
(Number of policies) |
||||||||||||||||||
|
Derivatives designated as hedges |
||||||||||||||||||
|
GMWB embedded derivatives |
Policies | 49,566 | 696 | (1,960 | ) | 48,302 | ||||||||||||
The following table provides information about the pre-tax income effects of cash flow hedges for the three months ended September 30, 2011:
|
(Amounts in millions) |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into net income from OCI |
Classification of gain (loss) reclassified into net income |
Gain (loss) recognized in net income (1) |
Classification of gain (loss) recognized in net income | |||||||||||
|
Interest rate swaps hedging assets |
$ | 1,528 | $ | 7 | Net investment Income |
$ | 51 | Net investment gains (losses) | ||||||||
|
Forward bond purchase commitments |
37 | — | Net investment income |
— | Net investment gains (losses) | |||||||||||
|
Inflation indexed swaps |
20 | (2 | ) | Net investment income |
— | Net investment gains (losses) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Total |
$ | 1,585 | $ | 5 | $ | 51 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) |
Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness. |
The following table provides information about the pre-tax income effects of cash flow hedges for the three months ended September 30, 2010:
|
(Amounts in millions) |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into net income from OCI |
Classification of gain (loss) reclassified into net income |
Gain (loss) recognized in net income (1) |
Classification of gain (loss) recognized in net income | |||||||||||
|
Interest rate swaps hedging assets |
$ | 277 | $ | 3 | Net investment income |
$ | 8 | Net investment gains (losses) | ||||||||
|
Interest rate swaps hedging assets |
— | 1 | Net investment gains (losses) |
— | Net investment gains (losses) | |||||||||||
|
Interest rate swaps hedging liabilities |
— | 1 | Interest expense | — | Net investment gains (losses) | |||||||||||
|
Inflation indexed swaps |
22 | — | Net investment income |
— | Net investment gains (losses) | |||||||||||
|
Foreign currency swaps |
2 | (1 | ) | Interest expense | — | Net investment gains (losses) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Total |
$ | 301 | $ | 4 | $ | 8 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) |
Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness. |
The following table provides information about the pre-tax income effects of cash flow hedges for the nine months ended September 30, 2011:
|
(Amounts in millions) |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into net income from OCI |
Classification of gain |
Gain (loss) recognized in net income (1) |
Classification of gain | |||||||||||
|
Interest rate swaps hedging assets |
$ | 1,568 | $ | 18 | Net investment income | $ | 51 | Net investment gains (losses) | ||||||||
|
Interest rate swaps hedging liabilities |
— | 1 | Interest expense | — | Net investment gains (losses) | |||||||||||
|
Forward bond purchase commitments |
37 | — | Net investment income | — | Net investment gains (losses) | |||||||||||
|
Inflation indexed swaps |
(8 | ) | (24 | ) | Net investment income | — | Net investment gains (losses) | |||||||||
|
Foreign currency swaps |
4 | (5 | ) | Interest expense | — | Net investment gains (losses) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Total |
$ | 1,601 | $ | (10 | ) | $ | 51 | |||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) |
Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness. |
The following table provides information about the pre-tax income effects of cash flow hedges for the nine months ended September 30, 2010:
|
(Amounts in millions) |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into net income from OCI |
Classification of gain |
Gain (loss) recognized in net income (1) |
Classification of gain | |||||||||||
|
Interest rate swaps hedging assets |
$ | 839 | $ | 12 | Net investment income | $ | 21 | Net investment gains (losses) | ||||||||
|
Interest rate swaps hedging assets |
— | 2 | Net investment gains (losses) | — | Net investment gains (losses) | |||||||||||
|
Interest rate swaps hedging liabilities |
(3 | ) | 1 | Interest expense | — | Net investment gains (losses) | ||||||||||
|
Inflation indexed swaps |
23 | — | Net investment income | (1 | ) | Net investment gains (losses) | ||||||||||
|
Foreign currency swaps |
9 | (5 | ) | Interest expense | — | Net investment gains (losses) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Total |
$ | 868 | $ | 10 | $ | 20 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) |
Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness. |
| Derivative instrument | Hedged item | |||||||||||||||||
|
(Amounts in millions) |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income |
Other impacts to net income |
Classification of other impacts to net income |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income | ||||||||||||
|
Interest rate swaps hedging assets |
$ | 1 | Net investment gains (losses) |
$ | (2 | ) | Net investment income |
$ | (1 | ) | Net investment gains (losses) | |||||||
|
Interest rate swaps hedging liabilities |
(10 | ) | Net investment gains (losses) |
16 | Interest credited | 10 | Net investment gains (losses) | |||||||||||
|
Foreign currency swaps |
(9 | ) | Net investment gains (losses) |
1 | Interest credited | 10 | Net investment gains (losses) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | (18 | ) | $ | 15 | $ | 19 | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
| Derivative instrument | Hedged item | |||||||||||||||||
|
(Amounts in millions) |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income |
Other impacts to net income |
Classification of other impacts to net income |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income | ||||||||||||
|
Interest rate swaps hedging assets |
$ | — | Net investment gains (losses) |
$ | (4 | ) | Net investment income |
$ | (1 | ) | Net investment gains (losses) | |||||||
|
Interest rate swaps hedging liabilities |
(4 | ) | Net investment gains (losses) |
25 | Interest credited | 4 | Net investment gains (losses) | |||||||||||
|
Foreign currency swaps |
11 | Net investment gains (losses) |
— | Interest credited | (10 | ) | Net investment gains (losses) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 7 | $ | 21 | $ | (7 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
| Derivative instrument | Hedged item | |||||||||||||||||
|
(Amounts in millions) |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income |
Other impacts to net income |
Classification of other impacts to net income |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income | ||||||||||||
|
Interest rate swaps hedging assets |
$ | 3 | Net investment gains (losses) |
$ | (7 | ) | Net investment income |
$ | (3 | ) | Net investment gains (losses) | |||||||
|
Interest rate swaps hedging liabilities |
(39 | ) | Net investment gains (losses) |
53 | Interest credited | 39 | Net investment gains (losses) | |||||||||||
|
Foreign currency swaps |
2 | Net investment gains (losses) |
2 | Interest credited | (2 | ) | Net investment gains (losses) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | (34 | ) | $ | 48 | $ | 34 | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
| Derivative instrument | Hedged item | |||||||||||||||||
|
(Amounts in millions) |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income |
Other impacts to net income |
Classification of other impacts to net income |
Gain (loss) recognized in net income |
Classification of gain (losses) recognized in net income | ||||||||||||
|
Interest rate swaps hedging assets |
$ | 2 | Net investment gains (losses) |
$ | (10 | ) | Net investment income |
$ | (3 | ) | Net investment gains (losses) | |||||||
|
Interest rate swaps hedging liabilities |
(11 | ) | Net investment gains (losses) |
75 | Interest credited | 11 | Net investment gains (losses) | |||||||||||
|
Foreign currency swaps |
7 | Net investment gains (losses) |
2 | Interest credited | (6 | ) | Net investment gains (losses) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | (2 | ) | $ | 67 | $ | 2 | |||||||||||
|
|
|
|
|
|
|
|||||||||||||
| Three months ended September 30, | Classification of gain (loss) recognized | |||||||||
|
(Amounts in millions) |
2011 | 2010 |
in net income | |||||||
|
Interest rate swaps |
$ | 9 | $ | 36 | Net investment gains (losses) | |||||
|
Equity return swaps |
22 | (6 | ) | Net investment gains (losses) | ||||||
|
Interest rate swaps related to securitization entities |
(12 | ) | (12 | ) | Net investment gains (losses) | |||||
|
Interest rate swaptions |
— | 4 | Net investment gains (losses) | |||||||
|
Credit default swaps |
(70 | ) | 22 | Net investment gains (losses) | ||||||
|
Credit default swaps related to securitization entities |
(53 | ) | 30 | Net investment gains (losses) | ||||||
|
Equity index options |
60 | (55 | ) | Net investment gains (losses) | ||||||
|
Financial futures |
267 | (43 | ) | Net investment gains (losses) | ||||||
|
Other foreign currency contracts |
13 | (8 | ) | Net investment gains (losses) | ||||||
|
Reinsurance embedded derivatives |
27 | 2 | Net investment gains (losses) | |||||||
|
GMWB embedded derivatives |
(456 | ) | 133 | Net investment gains (losses) | ||||||
|
|
|
|
|
|||||||
|
Total derivatives not designated as hedges |
$ | (193 | ) | $ | 103 | |||||
|
|
|
|
|
|||||||
| Nine months ended September 30, | Classification of gain (loss) recognized | |||||||||
|
(Amounts in millions) |
2011 | 2010 |
in net income | |||||||
|
Interest rate swaps |
$ | 13 | $ | 93 | Net investment gains (losses) | |||||
|
Equity return swaps |
12 | (6 | ) | Net investment gains (losses) | ||||||
|
Interest rate swaps related to securitization entities |
(15 | ) | (24 | ) | Net investment gains (losses) | |||||
|
Interest rate swaptions |
— | 61 | Net investment gains (losses) | |||||||
|
Credit default swaps |
(67 | ) | (5 | ) | Net investment gains (losses) | |||||
|
Credit default swaps related to securitization entities |
(48 | ) | (11 | ) | Net investment gains (losses) | |||||
|
Equity index options |
32 | (32 | ) | Net investment gains (losses) | ||||||
|
Financial futures |
262 | 29 | Net investment gains (losses) | |||||||
|
Other foreign currency contracts |
— | (9 | ) | Net investment gains (losses) | ||||||
|
Reinsurance embedded derivatives |
26 | 4 | Net investment gains (losses) | |||||||
|
GMWB embedded derivatives |
(430 | ) | (109 | ) | Net investment gains (losses) | |||||
|
|
|
|
|
|||||||
|
Total derivatives not designated as hedges |
$ | (215 | ) | $ | (9 | ) | ||||
|
|
|
|
|
|||||||
| September 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
|
(Amounts in millions) |
Notional value |
Assets | Liabilities | Notional value |
Assets | Liabilities | ||||||||||||||||||
|
Reference entity credit rating and maturity: |
||||||||||||||||||||||||
|
AAA |
||||||||||||||||||||||||
|
Matures after one year through five years |
$ | 5 | $ | — | $ | — | $ | 5 | $ | — | $ | — | ||||||||||||
|
AA |
||||||||||||||||||||||||
|
Matures after one year through five years |
6 | — | — | 6 | — | — | ||||||||||||||||||
|
Matures after five years through ten years |
5 | — | — | 5 | — | — | ||||||||||||||||||
|
A |
||||||||||||||||||||||||
|
Matures after one year through five years |
37 | 1 | — | 37 | 1 | — | ||||||||||||||||||
|
Matures after five years through ten years |
10 | — | 1 | 5 | — | — | ||||||||||||||||||
|
BBB |
||||||||||||||||||||||||
|
Matures after one year through five years |
68 | — | — | 68 | 2 | — | ||||||||||||||||||
|
Matures after five years through ten years |
24 | — | 1 | 29 | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total credit default swaps on single name reference entities |
$ | 155 | $ | 1 | $ | 2 | $ | 155 | $ | 3 | $ | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| September 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
|
(Amounts in millions) |
Notional value |
Assets | Liabilities | Notional value |
Assets | Liabilities | ||||||||||||||||||
|
Original index tranche attachment/detachment point and maturity: |
||||||||||||||||||||||||
|
9% - 12% matures after one year through five years (1) |
$ | 0 | $ | 0 | $ | 0 | $ | 300 | $ | — | $ | 3 | ||||||||||||
|
10% - 15% matures after one year through five years (2) |
0 | 0 | — | 250 | 4 | — | ||||||||||||||||||
|
12% - 22% matures after five years through ten years (3) |
0 | — | 0 | 248 | — | 4 | ||||||||||||||||||
|
15% - 30% matures after five years through ten years (4) |
0 | — | — | 127 | 2 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total credit default swap index tranches |
0 | 0 | 0 | 925 | 6 | 7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Customized credit default swap index tranches related to securitization entities: |
||||||||||||||||||||||||
|
Portion backing third-party borrowings maturing 2017 (5) |
0 | — | 0 | 17 | — | 8 | ||||||||||||||||||
|
Portion backing our interest maturing 2017 (6) |
0 | — | 0 | 300 | — | 121 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total customized credit default swap index tranches related to securitization entities |
0 | — | 0 | 317 | — | 129 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total credit default swaps on index tranches |
$ | 0 | $ | 0 | $ | 0 | $ | 1,242 | $ | 6 | $ | 136 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) |
The current attachment/detachment as of September 30, 2011 and December 31, 2010 was 9% – 12%. |
| (2) |
The current attachment/detachment as of September 30, 2011 and December 31, 2010 was 10% – 15%. |
| (3) |
The current attachment/detachment as of September 30, 2011 and December 31, 2010 was 12% – 22%. |
| (4) |
The current attachment/detachment as of September 30, 2011 and December 31, 2010 was 14.8% – 30.3%. |
| (5) |
Original notional value was $39 million. |
| (6) |
Original notional value was $300 million. |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
|
(Amounts in millions) |
Notional amount |
Carrying amount |
Fair value |
Notional amount |
Carrying amount |
Fair value |
||||||||||||||||||
|
Assets: |
||||||||||||||||||||||||
|
Commercial mortgage loans |
$ | (1) | $ | 6,271 | $ | 6,669 | $ | (1) | $ | 6,718 | $ | 6,896 | ||||||||||||
|
Restricted commercial mortgage loans |
(1) | 430 | 483 | (1) | 507 | 554 | ||||||||||||||||||
|
Other invested assets |
(1) | 302 | 313 | (1) | 267 | 272 | ||||||||||||||||||
|
Liabilities: |
||||||||||||||||||||||||
|
Long-term borrowings (2) |
(1) | 4,708 | 4,181 | (1) | 4,952 | 4,928 | ||||||||||||||||||
|
Non-recourse funding obligations (2) |
(1) | 3,280 | 2,198 | (1) | 3,437 | 2,170 | ||||||||||||||||||
|
Borrowings related to securitization entities |
(1) | 366 | 394 | (1) | 443 | 467 | ||||||||||||||||||
|
Investment contracts |
(1) | 19,095 | 19,869 | (1) | 19,772 | 20,471 | ||||||||||||||||||
|
Other firm commitments: |
||||||||||||||||||||||||
|
Commitments to fund limited partnerships |
65 | — | — | 110 | — | — | ||||||||||||||||||
|
Ordinary course of business lending commitments |
51 | — | — | 28 | — | — | ||||||||||||||||||
| (1) |
These financial instruments do not have notional amounts. |
| (2) |
See note 8 for additional information related to borrowings. |
| September 30, 2011 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
U.S. government, agencies and government-sponsored enterprises: |
||||||||||||||||
|
Pricing services |
$ | 4,812 | $ | — | $ | 4,812 | $ | — | ||||||||
|
Internal models |
13 | — | 12 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total U.S. government, agencies and government-sponsored enterprises |
4,825 | — | 4,824 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Tax-exempt: |
||||||||||||||||
|
Pricing services |
693 | — | 693 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total tax-exempt |
693 | — | 693 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Government—non-U.S.: |
||||||||||||||||
|
Pricing services |
2,155 | — | 2,155 | — | ||||||||||||
|
Internal models |
10 | — | 9 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total government—non-U.S. |
2,165 | — | 2,164 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
U.S. corporate: |
||||||||||||||||
|
Pricing services |
22,102 | — | 22,102 | — | ||||||||||||
|
Broker quotes |
269 | — | — | 269 | ||||||||||||
|
Internal models |
2,997 | — | 1,916 | 1,081 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total U.S. corporate |
25,368 | — | 24,018 | 1,350 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Corporate—non-U.S.: |
||||||||||||||||
|
Pricing services |
11,790 | — | 11,790 | — | ||||||||||||
|
Broker quotes |
84 | — | — | 84 | ||||||||||||
|
Internal models |
1,831 | — | 1,545 | 286 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total corporate—non-U.S. |
13,705 | — | 13,335 | 370 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Residential mortgage-backed: |
||||||||||||||||
|
Pricing services |
5,273 | — | 5,273 | — | ||||||||||||
|
Broker quotes |
53 | — | — | 53 | ||||||||||||
|
Internal models |
54 | — | — | 54 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total residential mortgage-backed |
5,380 | — | 5,273 | 107 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Commercial mortgage-backed: |
||||||||||||||||
|
Pricing services |
3,502 | — | 3,502 | — | ||||||||||||
|
Broker quotes |
16 | — | — | 16 | ||||||||||||
|
Internal models |
25 | — | — | 25 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total commercial mortgage-backed |
3,543 | — | 3,502 | 41 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Other asset-backed: |
||||||||||||||||
|
Pricing services |
1,872 | — | 1,872 | — | ||||||||||||
|
Broker quotes |
255 | — | — | 255 | ||||||||||||
|
Internal models |
10 | — | 10 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other asset-backed |
2,137 | — | 1,882 | 255 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total fixed maturity securities |
$ | 57,816 | $ | — | $ | 55,691 | $ | 2,125 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2010 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
U.S. government, agencies and government-sponsored enterprises: |
||||||||||||||||
|
Pricing services |
$ | 3,688 | $ | — | $ | 3,688 | $ | — | ||||||||
|
Internal models |
17 | — | 6 | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total U.S. government, agencies and government-sponsored enterprises |
3,705 | — | 3,694 | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Tax-exempt: |
||||||||||||||||
|
Pricing services |
1,030 | — | 1,030 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total tax-exempt |
1,030 | — | 1,030 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Government—non-U.S.: |
||||||||||||||||
|
Pricing services |
2,357 | — | 2,357 | — | ||||||||||||
|
Internal models |
12 | — | 11 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total government—non-U.S. |
2,369 | — | 2,368 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
U.S. corporate: |
||||||||||||||||
|
Pricing services |
20,563 | — | 20,563 | — | ||||||||||||
|
Broker quotes |
235 | — | — | 235 | ||||||||||||
|
Internal models |
3,169 | — | 2,304 | 865 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total U.S. corporate |
23,967 | — | 22,867 | 1,100 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Corporate—non-U.S.: |
||||||||||||||||
|
Pricing services |
11,584 | — | 11,584 | — | ||||||||||||
|
Broker quotes |
113 | — | — | 113 | ||||||||||||
|
Internal models |
1,801 | — | 1,546 | 255 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total corporate—non-U.S. |
13,498 | — | 13,130 | 368 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Residential mortgage-backed: |
||||||||||||||||
|
Pricing services |
4,312 | — | 4,312 | — | ||||||||||||
|
Broker quotes |
72 | — | — | 72 | ||||||||||||
|
Internal models |
71 | — | — | 71 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total residential mortgage-backed |
4,455 | — | 4,312 | 143 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Commercial mortgage-backed: |
||||||||||||||||
|
Pricing services |
3,693 | — | 3,693 | — | ||||||||||||
|
Broker quotes |
16 | — | — | 16 | ||||||||||||
|
Internal models |
34 | — | — | 34 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total commercial mortgage-backed |
3,743 | — | 3,693 | 50 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Other asset-backed: |
||||||||||||||||
|
Pricing services |
2,241 | — | 2,143 | 98 | ||||||||||||
|
Broker quotes |
169 | — | — | 169 | ||||||||||||
|
Internal models |
6 | — | 5 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other asset-backed |
2,416 | — | 2,148 | 268 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total fixed maturity securities |
$ | 55,183 | $ | — | $ | 53,242 | $ | 1,941 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| September 30, 2011 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Pricing services |
$ | 254 | $ | 248 | $ | 6 | $ | — | ||||||||
|
Broker quotes |
6 | — | — | 6 | ||||||||||||
|
Internal models |
94 | — | — | 94 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total equity securities |
$ | 354 | $ | 248 | $ | 6 | $ | 100 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2010 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Pricing services |
$ | 245 | $ | 240 | $ | 5 | $ | — | ||||||||
|
Broker quotes |
6 | — | — | 6 | ||||||||||||
|
Internal models |
81 | — | — | 81 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total equity securities |
$ | 332 | $ | 240 | $ | 5 | $ | 87 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| September 30, 2011 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Pricing services |
$ | 365 | $ | — | $ | 365 | $ | — | ||||||||
|
Broker quotes |
274 | — | — | 274 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total trading securities |
$ | 639 | $ | — | $ | 365 | $ | 274 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2010 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Pricing services |
$ | 348 | $ | — | $ | 348 | $ | — | ||||||||
|
Broker quotes |
230 | — | — | 230 | ||||||||||||
|
Internal models |
99 | — | — | 99 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total trading securities |
$ | 677 | $ | — | $ | 348 | $ | 329 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| September 30, 2011 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Assets |
||||||||||||||||
|
Investments: |
||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 4,825 | $ | — | $ | 4,824 | $ | 1 | ||||||||
|
Tax-exempt |
693 | — | 693 | — | ||||||||||||
|
Government—non-U.S. |
2,165 | — | 2,164 | 1 | ||||||||||||
|
U.S. corporate |
25,368 | — | 24,018 | 1,350 | ||||||||||||
|
Corporate—non-U.S. |
13,705 | — | 13,335 | 370 | ||||||||||||
|
Residential mortgage-backed |
5,380 | — | 5,273 | 107 | ||||||||||||
|
Commercial mortgage-backed |
3,543 | — | 3,502 | 41 | ||||||||||||
|
Other asset-backed |
2,137 | — | 1,882 | 255 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total fixed maturity securities |
57,816 | — | 55,691 | 2,125 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Equity securities |
354 | 248 | 6 | 100 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Other invested assets: |
||||||||||||||||
|
Trading securities |
639 | — | 365 | 274 | ||||||||||||
|
Derivative assets: |
||||||||||||||||
|
Interest rate swaps |
2,252 | — | 2,246 | 6 | ||||||||||||
|
Foreign currency swaps |
37 | — | 37 | — | ||||||||||||
|
Credit default swaps |
1 | — | 1 | — | ||||||||||||
|
Equity index options |
62 | — | — | 62 | ||||||||||||
|
Equity return swaps |
24 | — | 24 | — | ||||||||||||
|
Forward bond purchase commitments |
37 | — | 37 | — | ||||||||||||
|
Other foreign currency commitments |
2 | — | 2 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total derivative assets |
2,415 | — | 2,347 | 68 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Securities lending collateral |
204 | — | 204 | — | ||||||||||||
|
Derivatives counterparty collateral |
563 | — | 563 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other invested assets |
3,821 | — | 3,479 | 342 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Restricted other invested assets related to securitization entities |
376 | — | 202 | 174 | ||||||||||||
|
Other assets (1) |
26 | — | 26 | — | ||||||||||||
|
Reinsurance recoverable (2) |
21 | — | — | 21 | ||||||||||||
|
Separate account assets |
9,794 | 9,794 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total assets |
$ | 72,208 | $ | 10,042 | $ | 59,404 | $ | 2,762 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Liabilities |
||||||||||||||||
|
Policyholder account balances (3) |
$ | 602 | $ | — | $ | — | $ | 602 | ||||||||
|
Other liabilities: |
||||||||||||||||
|
Contingent purchase price |
44 | — | — | 44 | ||||||||||||
|
Derivative liabilities: |
||||||||||||||||
|
Interest rate swaps |
354 | — | 354 | — | ||||||||||||
|
Interest rate swaps related to securitization entities |
29 | — | 29 | — | ||||||||||||
|
Inflation indexed swaps |
41 | — | 41 | — | ||||||||||||
|
Credit default swaps |
77 | — | 2 | 75 | ||||||||||||
|
Credit default swaps related to securitization entities |
180 | — | — | 180 | ||||||||||||
|
Equity return swaps |
1 | — | 1 | — | ||||||||||||
|
Other foreign currency contracts |
1 | — | 1 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total derivative liabilities |
683 | — | 428 | 255 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other liabilities |
727 | — | 428 | 299 | ||||||||||||
|
Borrowings related to securitization entities |
48 | — | — | 48 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total liabilities |
$ | 1,377 | $ | — | $ | 428 | $ | 949 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) |
Represents embedded derivatives associated with certain reinsurance agreements. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
| (3) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
| December 31, 2010 | ||||||||||||||||
|
(Amounts in millions) |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
|
Assets |
||||||||||||||||
|
Investments: |
||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||
|
U.S. government, agencies and government sponsored enterprises |
$ | 3,705 | $ | — | $ | 3,694 | $ | 11 | ||||||||
|
Tax-exempt |
1,030 | — | 1,030 | — | ||||||||||||
|
Government—non-U.S. |
2,369 | — | 2,368 | 1 | ||||||||||||
|
U.S. corporate |
23,967 | — | 22,867 | 1,100 | ||||||||||||
|
Corporate—non-U.S. |
13,498 | — | 13,130 | 368 | ||||||||||||
|
Residential mortgage-backed |
4,455 | — | 4,312 | 143 | ||||||||||||
|
Commercial mortgage-backed |
3,743 | — | 3,693 | 50 | ||||||||||||
|
Other asset-backed |
2,416 | — | 2,148 | 268 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total fixed maturity securities |
55,183 | — | 53,242 | 1,941 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Equity securities |
332 | 240 | 5 | 87 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Other invested assets: |
||||||||||||||||
|
Trading securities |
677 | — | 348 | 329 | ||||||||||||
|
Derivative assets: |
||||||||||||||||
|
Interest rate swaps |
763 | — | 758 | 5 | ||||||||||||
|
Foreign currency swaps |
240 | — | 240 | — | ||||||||||||
|
Credit default swaps |
11 | — | 5 | 6 | ||||||||||||
|
Equity index options |
33 | — | — | 33 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total derivative assets |
1,047 | — | 1,003 | 44 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Securities lending collateral |
772 | — | 772 | — | ||||||||||||
|
Derivatives counterparty collateral |
630 | — | 630 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total other invested assets |
3,126 | — | 2,753 | 373 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Restricted other invested assets related to securitization entities |
370 | — | 199 | 171 | ||||||||||||
|
Other assets (1) |
1 | — | 1 | — | ||||||||||||
|
Reinsurance recoverable (2) |
(5 | ) | — | — | (5 | ) | ||||||||||
|
Separate account assets |
11,666 | 11,666 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total assets |
$ | 70,673 | $ | 11,906 | $ | 56,200 | $ | 2,567 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Liabilities |
||||||||||||||||
|
Policyholder account balances (3) |
$ | 121 | $ | — | $ | — | $ | 121 | ||||||||
|
Derivative liabilities: |
||||||||||||||||
|
Interest rate swaps |
138 | — | 138 | — | ||||||||||||
|
Interest rate swaps related to securitization entities |
19 | — | 19 | — | ||||||||||||
|
Inflation indexed swaps |
33 | — | 33 | — | ||||||||||||
|
Credit default swaps |
7 | — | — | 7 | ||||||||||||
|
Credit default swaps related to securitization entities |
129 | — | — | 129 | ||||||||||||
|
Equity index options |
3 | — | — | 3 | ||||||||||||
|
Equity return swaps |
3 | — | 3 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total derivative liabilities |
332 | — | 193 | 139 | ||||||||||||
|
Borrowings related to securitization entities |
51 | — | — | 51 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total liabilities |
$ | 504 | $ | — | $ | 193 | $ | 311 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) |
Represents embedded derivatives associated with certain reinsurance agreements. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
| (3) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
|
(Amounts in millions) |
Beginning balance as of July 1, 2011 |
Total realized and |
Purchases | Sales | Issuances | Settlements | Transfer in Level 3 |
Transfer out of Level 3 |
Ending balance as of September 30, 2011 |
Total gains (losses) included in net income attributable to assets still held |
||||||||||||||||||||||||||||||||||
| Included in net income |
Included in OCI |
|||||||||||||||||||||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 13 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (12 | ) | $ | 1 | $ | — | |||||||||||||||||||||
|
Government—non-U.S. |
1 | — | — | — | — | — | — | — | — | 1 | — | |||||||||||||||||||||||||||||||||
|
U.S. corporate (1) |
949 | (21 | ) | 39 | 41 | — | — | (7 | ) | 382 | (33 | ) | 1,350 | (21 | ) | |||||||||||||||||||||||||||||
|
Corporate—non-U.S. (1) |
371 | (15 | ) | 30 | — | — | — | (1 | ) | 20 | (35 | ) | 370 | (16 | ) | |||||||||||||||||||||||||||||
|
Residential mortgage-backed |
124 | 1 | (7 | ) | — | — | — | (12 | ) | 3 | (2 | ) | 107 | 1 | ||||||||||||||||||||||||||||||
|
Commercial mortgage-backed |
43 | — | (1 | ) | — | — | — | (2 | ) | 1 | — | 41 | — | |||||||||||||||||||||||||||||||
|
Other asset-backed |
265 | — | (4 | ) | — | — | — | (6 | ) | — | — | 255 | — | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total fixed maturity securities |
1,766 | (35 | ) | 57 | 41 | — | — | (28 | ) | 406 | (82 | ) | 2,125 | (36 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Equity securities |
106 | — | (1 | ) | — | (5 | ) | — | — | — | — | 100 | — | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Other invested assets: |
||||||||||||||||||||||||||||||||||||||||||||
|
Trading securities |
291 | (12 | ) | — | — | — | — | (5 | ) | — | — | 274 | (12 | ) | ||||||||||||||||||||||||||||||
|
Derivative assets: |
||||||||||||||||||||||||||||||||||||||||||||
|
Interest rate swaps |
4 | 3 | — | — | — | — | (1 | ) | — | — | 6 | 3 | ||||||||||||||||||||||||||||||||
|
Credit default swaps |
4 | (4 | ) | — | — | — | — | — | — | — | — | (4 | ) | |||||||||||||||||||||||||||||||
|
Equity index options |
40 | 58 | — | — | — | — | (36 | ) | — | — | 62 | 37 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total derivative assets |
48 | 57 | — | — | — | — | (37 | ) | — | — | 68 | 36 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total other invested assets |
339 | 45 | — | — | — | — | (42 | ) | — | — | 342 | 24 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Restricted other invested assets related to securitization entities |
175 | (1 | ) | — | — | — | — | — | — | — | 174 | (1 | ) | |||||||||||||||||||||||||||||||
|
Reinsurance recoverable (2) |
(5 | ) | 26 | — | — | — | — | — | — | — | 21 | 26 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total Level 3 assets |
$ | 2,381 | $ | 35 | $ | 56 | $ | 41 | $ | (5 | ) | $ | — | $ | (70 | ) | $ | 406 | $ | (82 | ) | $ | 2,762 | $ | 13 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (1) |
The transfers into and out of Level 3 were primarily related to private fixed rate U.S. corporate and corporate—non-U.S. securities and resulted from a change in the observability of the additional premium to the public bond spread to adjust for the liquidity and other features of our private placements and resulted in unobservable inputs having a significant impact on certain valuations for transfers in or no longer having significant impact on certain valuations for transfers out. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
|
(Amounts in millions) |
Beginning balance as of July 1, 2010 |
Total realized and |
Purchases, sales, issuances and settlements, net |
Transfer in Level 3 (1) |
Transfer out of Level 3 |
Ending balance as of September 30, 2010 |
Total gains (losses) included in net income attributable to assets still held |
|||||||||||||||||||||||||
| Included in net income |
Included in OCI |
|||||||||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 9 | $ | — | $ | — | $ | — | $ | 5 | $ | — | $ | 14 | $ | — | ||||||||||||||||
|
Government—non-U.S. |
18 | — | 1 | — | — | — | 19 | — | ||||||||||||||||||||||||
|
U.S. corporate |
1,520 | 4 | 23 | 2 | 83 | (303 | ) | 1,329 | 4 | |||||||||||||||||||||||
|
Corporate—non-U.S. |
720 | (8 | ) | — | (8 | ) | 119 | (220 | ) | 603 | (8 | ) | ||||||||||||||||||||
|
Residential mortgage-backed |
62 | — | 1 | 9 | 65 | (5 | ) | 132 | — | |||||||||||||||||||||||
|
Commercial mortgage-backed |
59 | (6 | ) | 8 | (15 | ) | 1 | — | 47 | — | ||||||||||||||||||||||
|
Other asset-backed |
361 | — | 5 | 15 | — | (215 | ) | 166 | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total fixed maturity securities |
2,749 | (10 | ) | 38 | 3 | 273 | (743 | ) | 2,310 | (4 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Equity securities |
9 | 11 | — | (11 | ) | 8 | — | 17 | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Other invested assets: |
||||||||||||||||||||||||||||||||
|
Trading securities |
136 | 7 | — | 9 | 213 | — | 365 | 7 | ||||||||||||||||||||||||
|
Derivative assets: |
||||||||||||||||||||||||||||||||
|
Interest rate swaps |
9 | — | — | — | — | — | 9 | — | ||||||||||||||||||||||||
|
Interest rate swaptions |
4 | 4 | — | — | — | — | 8 | 4 | ||||||||||||||||||||||||
|
Credit default swaps |
— | 1 | — | — | — | — | 1 | 1 | ||||||||||||||||||||||||
|
Equity index options |
97 | (54 | ) | — | 18 | — | — | 61 | (54 | ) | ||||||||||||||||||||||
|
Other foreign currency contracts |
1 | — | — | (1 | ) | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total derivative assets |
111 | (49 | ) | — | 17 | — | — | 79 | (49 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total other invested assets |
247 | (42 | ) | — | 26 | 213 | — | 444 | (42 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Restricted other invested assets related to securitization entities |
174 | 4 | — | — | — | — | 178 | 3 | ||||||||||||||||||||||||
|
Reinsurance recoverable (2) |
9 | (7 | ) | — | 2 | — | — | 4 | (7 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total Level 3 assets |
$ | 3,188 | $ | (44 | ) | $ | 38 | $ | 20 | $ | 494 | $ | (743 | ) | $ | 2,953 | $ | (50 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) |
The transfer into Level 3 was primarily related to private fixed U.S. corporate and corporate—non-U.S. securities and resulted from a change in the observability of the additional premium to the public bond spread to adjust for the liquidity and other features of our private placements and resulted in unobservable inputs having a significant impact on certain valuations. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
|
(Amounts in millions) |
Beginning balance as of January 1, 2011 |
Total realized and |
Purchases | Sales | Issuances | Settlements | Transfer into Level 3 |
Transfer out of Level 3 |
Ending balance as of September 30, 2011 |
Total gains (losses) included in net income attributable to assets still held |
||||||||||||||||||||||||||||||||||
| Included in net income |
Included in OCI |
|||||||||||||||||||||||||||||||||||||||||||
|
Fixed maturity securities: |
||||||||||||||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 11 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 12 | $ | (22 | ) | $ | 1 | $ | — | |||||||||||||||||||||
|
Government—non-U.S. |
1 | — | — | — | — | — | — | — | — | 1 | — | |||||||||||||||||||||||||||||||||
|
U.S. corporate (1) |
1,100 | (13 | ) | 45 | 71 | (5 | ) | — | (70 | ) | 634 | (412 | ) | 1,350 | (13 | ) | ||||||||||||||||||||||||||||
|
Corporate—non-U.S. (1) |
368 | (26 | ) | 27 | 40 | (35 | ) | — | (8 | ) | 225 | (221 | ) | 370 | (26 | ) | ||||||||||||||||||||||||||||
|
Residential mortgage-backed |
143 | — | (15 | ) | 3 | — | — | (24 | ) | 3 | (3 | ) | 107 | — | ||||||||||||||||||||||||||||||
|
Commercial mortgage-backed |
50 | — | 1 | — | — | — | (11 | ) | 1 | — | 41 | — | ||||||||||||||||||||||||||||||||
|
Other asset-backed |
268 | (1 | ) | 5 | 8 | (8 | ) | — | (32 | ) | 15 | — | 255 | (1 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total fixed maturity securities |
1,941 | (40 | ) | 63 | 122 | (48 | ) | — | (145 | ) | 890 | (658 | ) | 2,125 | (40 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Equity securities |
87 | 1 | — | 24 | (10 | ) | — | (2 | ) | — | — | 100 | — | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Other invested assets: |
||||||||||||||||||||||||||||||||||||||||||||
|
Trading securities |
329 | 4 | — | 5 | (41 | ) | — | (23 | ) | — | — | 274 | 4 | |||||||||||||||||||||||||||||||
|
Derivative assets: |
||||||||||||||||||||||||||||||||||||||||||||
|
Interest rate swaps |
5 | 2 | — | — | — | — | (1 | ) | — | — | 6 | 2 | ||||||||||||||||||||||||||||||||
|
Credit default swaps |
6 | (6 | ) | — | — | — | — | — | — | — | — | (6 | ) | |||||||||||||||||||||||||||||||
|
Equity index options |
33 | 31 | — | 39 | — | — | (41 | ) | — | — | 62 | 10 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total derivative assets |
44 | 27 | — | 39 | — | — | (42 | ) | — | — | 68 | 6 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total other invested assets |
373 | 31 | — | 44 | (41 | ) | — | (65 | ) | — | — | 342 | 10 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Restricted other invested assets related to securitization entities |
171 | 3 | — | — | — | — | — | — | — | 174 | 3 | |||||||||||||||||||||||||||||||||
|
Reinsurance recoverable (2) |
(5 | ) | 24 | — | — | — | 2 | — | — | — | 21 | 24 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total Level 3 assets |
$ | 2,567 | $ | 19 | $ | 63 | $ | 190 | $ | (99 | ) | $ | 2 | $ | (212 | ) | $ | 890 | $ | (658 | ) | $ | 2,762 | $ | (3 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (1) |
The transfers into and out of Level 3 were primarily related to private fixed rate U.S. corporate and corporate—non-U.S. securities and resulted from a change in the observability of the additional premium to the public bond spread to adjust for the liquidity and other features of our private placements and resulted in unobservable inputs having a significant impact on certain valuations for transfers in or no longer having significant impact on certain valuations for transfers out. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
|
(Amounts in millions) |
Beginning balance as of January 1, 2010 |
Total realized and unrealized gains (losses) |
Purchases, sales, issuances and settlements, net |
Transfer into Level 3 |
Transfer out of Level 3 (1) |
Ending balance as of September 30, 2010 |
Total gains (losses) included in net income attributable to assets still held |
|||||||||||||||||||||||||
| Included in net income |
Included in OCI |
|||||||||||||||||||||||||||||||
|
Fixed maturity securities |
||||||||||||||||||||||||||||||||
|
U.S. government, agencies and government-sponsored enterprises |
$ | 16 | $ | — | $ | — | $ | (2 | ) | $ | 14 | $ | (14 | ) | $ | 14 | $ | — | ||||||||||||||
|
Tax-exempt |
2 | — | — | — | — | (2 | ) | — | — | |||||||||||||||||||||||
|
Government—non-U.S. |
7 | — | 2 | — | 16 | (6 | ) | 19 | — | |||||||||||||||||||||||
|
U.S. corporate |
1,073 | 15 | 57 | 33 | 761 | (610 | ) | 1,329 | 12 | |||||||||||||||||||||||
|
Corporate—non-U.S. |
504 | (7 | ) | 8 | 3 | 472 | (377 | ) | 603 | (7 | ) | |||||||||||||||||||||
|
Residential mortgage-backed |
1,481 | — | 4 | 89 | 66 | (1,508 | ) | 132 | — | |||||||||||||||||||||||
|
Commercial mortgage-backed |
3,558 | (5 | ) | 22 | (78 | ) | 12 | (3,462 | ) | 47 | — | |||||||||||||||||||||
|
Other asset-backed |
1,419 | (24 | ) | 28 | (3 | ) | 10 | (1,264 | ) | 166 | (24 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total fixed maturity securities |
8,060 | (21 | ) | 121 | 42 | 1,351 | (7,243 | ) | 2,310 | (19 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Equity securities |
9 | 11 | — | (3 | ) | 60 | (60 | ) | 17 | — | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Other invested assets: |
||||||||||||||||||||||||||||||||
|
Trading securities |
145 | 8 | — | (1 | ) | 213 | — | 365 | 8 | |||||||||||||||||||||||
|
Derivative assets: |
||||||||||||||||||||||||||||||||
|
Interest rate swaps |
3 | 6 | — | — | — | — | 9 | 6 | ||||||||||||||||||||||||
|
Interest rate swaptions |
54 | 19 | — | (65 | ) | — | — | 8 | 19 | |||||||||||||||||||||||
|
Credit default swaps |
6 | (5 | ) | — | — | — | — | 1 | (5 | ) | ||||||||||||||||||||||
|
Equity index options |
39 | (32 | ) | — | 54 | — | — | 61 | (32 | ) | ||||||||||||||||||||||
|
Other foreign currency options |
8 | (7 | ) | — | (1 | ) | — | — | — | (7 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total derivative assets |
110 | (19 | ) | — | (12 | ) | — | — | 79 | (19 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total other invested assets |
255 | (11 | ) | — | (13 | ) | 213 | — | 444 | (11 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Restricted other invested assets related to securitization entities |
— | 4 | — | — | 174 | — | 178 | 1 | ||||||||||||||||||||||||
|
Reinsurance recoverable (2) |
(5 | ) | 7 | — | 2 | — | — | 4 | 7 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total Level 3 assets |
$ | 8,319 | $ | (10 | ) | $ | 121 | $ | 28 | $ | 1,798 | $ | (7,303 | ) | $ | 2,953 | $ | (22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) |
During 2010, primary market issuance and secondary market activity for commercial and non-agency residential mortgage-backed and other asset-backed securities increased the market observable inputs used to establish fair values for similar securities. These factors, along with more consistent pricing from third-party sources, resulted in our conclusion that there is sufficient trading activity in similar instruments to support classifying certain mortgage-backed and asset-backed securities as Level 2. |
| (2) |
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
|
(Amounts in millions) |
Beginning balance as of July 1, 2011 |
Total realized and |
Purchases | Sales | Issuances | Settlements | Transfer into Level 3 |
Transfer out of Level 3 |
Ending balance as of September 30, 2011 |
Total (gains) losses included in net (income) attributable to liabilities still held |
||||||||||||||||||||||||||||||||||
| Included in net (income) |
Included in OCI |
|||||||||||||||||||||||||||||||||||||||||||
|
Policyholder account balances (1) |
$ | 113 | $ | 480 | $ | — | $ | — | $ | — | $ | 9 | $ | — | $ | — | $ | — | $ | 602 | $ | 480 | ||||||||||||||||||||||
|
Other liabilities: |
||||||||||||||||||||||||||||||||||||||||||||
|
Contingent purchase price |
— | 22 | — | — | — | 22 | — | — | — | 44 | 22 | |||||||||||||||||||||||||||||||||
|
Derivative liabilities: |
||||||||||||||||||||||||||||||||||||||||||||
|
Credit default swaps |
9 | 66 | — | — | — | — | — | — | — | 75 | 66 | |||||||||||||||||||||||||||||||||
|
Credit default swaps related to securitization entities |
126 | 54 | — | — | — | — | — | — | — | 180 | 54 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total derivative liabilities |
135 | 120 | — | — | — | — | — | — | — | 255 | 120 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total other liabilities |
135 | 142 | — | — | — | 22 | — | — | — | 299 | 142 | |||||||||||||||||||||||||||||||||
|
Borrowings related to securitization entities |
58 | (10 | ) | — | — | — | — | — | — | — | 48 | (10 | ) | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total Level 3 liabilities |
$ | 306 | $ | 612 | $ | — | $ | — | $ | — | $ | 31 | $ | — | $ | — | $ | — | $ | 949 | $ | 612 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (1) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
|
(Amounts in millions) |
Beginning balance as of July 1, 2010 |
Total realized and |
Purchases, sales, issuances and settlements, net |
Transfer into Level 3 |
Transfer out of Level 3 |
Ending balance as of September 30, 2010 |
Total (gains) losses included in net (income) attributable to liabilities still held |
|||||||||||||||||||||||||
| Included in net (income) |
Included in OCI |
|||||||||||||||||||||||||||||||
|
Policyholder account balances (1) |
$ | 447 | $ | (140 | ) | $ | — | $ | 9 | $ | — | $ | — | $ | 316 | $ | (138 | ) | ||||||||||||||
|
Derivative liabilities: |
||||||||||||||||||||||||||||||||
|
Credit default swaps |
26 | (17 | ) | — | — | — | — | 9 | (17 | ) | ||||||||||||||||||||||
|
Credit default swaps related to securitization entities |
159 | (30 | ) | — | 1 | — | — | 130 | (30 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total derivative liabilities |
185 | (47 | ) | — | 1 | — | — | 139 | (47 | ) | ||||||||||||||||||||||
|
Borrowings related to securitization entities |
51 | (8 | ) | — | — | 1 | — | 44 | (8 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total Level 3 liabilities |
$ | 683 | $ | (195 | ) | $ | — | $ | 10 | $ | 1 | $ | — | $ | 499 | $ | (193 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
|
(Amounts in millions) |
Beginning balance as of January 1, 2011 |
Total realized and |
Purchases | Sales | Issuances | Settlements | Transfer into Level 3 |
Transfer out of Level 3 |
Ending balance as of September 30, 2011 |
Total (gains) losses included in net (income) attributable to liabilities still held |
||||||||||||||||||||||||||||||||||
| Included in net (income) |
Included in OCI |
|||||||||||||||||||||||||||||||||||||||||||
|
Policyholder account balances (1) |
$ | 121 | $ | 452 | $ | — | $ | — | $ | — | $ | 29 | $ | — | $ | — | $ | — | $ | 602 | $ | 452 | ||||||||||||||||||||||
|
Other liabilities: |
||||||||||||||||||||||||||||||||||||||||||||
|
Contingent purchase price |
— | 23 | — | — | — | 21 | — | — | — | 44 | 23 | |||||||||||||||||||||||||||||||||
|
Derivative liabilities: |
||||||||||||||||||||||||||||||||||||||||||||
|
Credit default swaps |
7 | 66 | — | 3 | — | — | (1 | ) | — | — | 75 | 66 | ||||||||||||||||||||||||||||||||
|
Credit default swaps related to securitization entities |
129 | 51 | — | — | — | — | — | — | — | 180 | 51 | |||||||||||||||||||||||||||||||||
|
Equity index options |
3 | — | — | — | — | — | (3 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total derivative liabilities |
139 | 117 | — | 3 | — | — | (4 | ) | — | — | 255 | 117 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total other liabilities |
139 | 140 | — | 3 | — | 21 | (4 | ) | — | — | 299 | 140 | ||||||||||||||||||||||||||||||||
|
Borrowings related to securitization entities |
51 | (3 | ) | — | — | — | — | — | — | — | 48 | (3 | ) | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total Level 3 liabilities |
$ | 311 | $ | 589 | $ | — | $ | 3 | $ | — | $ | 50 | $ | (4 | ) | $ | — | $ | — | $ | 949 | $ | 589 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (1) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
|
(Amounts in millions) |
Beginning balance as of January 1, 2010 |
Total realized and |
Purchases, sales, issuances and settlements, net |
Transfer in Level 3 |
Transfer out of Level 3 |
Ending balance as of September 30, 2010 |
Total (gains) losses included in net (income) attributable to liabilities still held |
|||||||||||||||||||||||||
| Included in net (income) |
Included in OCI |
|||||||||||||||||||||||||||||||
|
Policyholder account balances (1) |
$ | 175 | $ | 115 | $ | — | $ | 26 | $ | — | $ | — | $ | 316 | $ | 117 | ||||||||||||||||
|
Derivative liabilities: |
||||||||||||||||||||||||||||||||
|
Interest rate swaps |
2 | (2 | ) | — | — | — | — | — | (2 | ) | ||||||||||||||||||||||
|
Interest rate swaptions |
67 | (42 | ) | — | (25 | ) | — | — | — | (42 | ) | |||||||||||||||||||||
|
Credit default swaps |
— | 9 | — | — | — | — | 9 | 9 | ||||||||||||||||||||||||
|
Credit default swaps related to securitization entities |
— | 11 | — | (2 | ) | 121 | — | 130 | 11 | |||||||||||||||||||||||
|
Equity index options |
2 | (1 | ) | — | (1 | ) | — | — | — | (1 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total derivative liabilities |
71 | (25 | ) | — | (28 | ) | 121 | — | 139 | (25 | ) | |||||||||||||||||||||
|
Borrowings related to securitization entities |
— | (16 | ) | — | — | 60 | — | 44 | (16 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total Level 3 liabilities |
$ | 246 | $ | 74 | $ | — | $ | (2 | ) | $ | 181 | $ | — | $ | 499 | $ | 76 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (1) |
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
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| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
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Statutory U.S. federal income tax rate |
35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||
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Increase (reduction) in rate resulting from: |
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State income tax, net of federal income tax effect |
(7.3 | ) | 2.5 | — | (0.2 | ) | ||||||||||
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Benefit on tax favored investments |
(33.0 | ) | (6.6 | ) | (14.9 | ) | (6.9 | ) | ||||||||
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Effect of foreign operations |
(26.7 | ) | (21.1 | ) | (13.5 | ) | (21.2 | ) | ||||||||
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Non-deductible expenses |
0.9 | 1.3 | 0.5 | 0.9 | ||||||||||||
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Interest on uncertain tax positions |
(1.4 | ) | (0.4 | ) | (0.3 | ) | (1.5 | ) | ||||||||
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Tax benefits related to separation from our former parent |
— | — | — | (32.2 | ) | |||||||||||
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Other, net |
(8.8 | ) | 2.2 | (2.8 | ) | 1.9 | ||||||||||
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Effective rate |
(41.3 | )% | 12.9 | % | 4.0 | % | (24.2 | )% | ||||||||
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| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
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(Amounts in millions) |
2011 | 2010 | 2011 | 2010 | ||||||||||||
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Revenues: |
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Retirement and Protection |
$ | 1,747 | $ | 1,810 | $ | 5,269 | $ | 5,046 | ||||||||
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International |
653 | 594 | 1,943 | 1,867 | ||||||||||||
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U.S. Mortgage Insurance |
171 | 195 | 518 | 557 | ||||||||||||
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Corporate and Other |
(50 | ) | 68 | 14 | 28 | |||||||||||
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Total revenues |
$ | 2,521 | $ | 2,667 | $ | 7,744 | $ | 7,498 | ||||||||
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| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
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(Amounts in millions) |
2011 | 2010 | 2011 | 2010 | ||||||||||||
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Retirement and Protection's net operating income |
$ | 120 | $ | 111 | $ | 396 | $ | 347 | ||||||||
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International's net operating income |
98 | 121 | 329 | 317 | ||||||||||||
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U.S. Mortgage Insurance's net operating loss |
(79 | ) | (152 | ) | (413 | ) | (228 | ) | ||||||||
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Corporate and Other's net operating loss |
(35 | ) | (51 | ) | (184 | ) | (175 | ) | ||||||||
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Net operating income available to Genworth Financial, Inc.'s common stockholders |
104 | 29 | 128 | 261 | ||||||||||||
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Net investment gains (losses), net of taxes and other adjustments |
(75 | ) | 54 | (113 | ) | (64 | ) | |||||||||
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Net tax benefit related to separation from our former parent |
— | — | — | 106 | ||||||||||||
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Net income available to Genworth Financial, Inc.'s common stockholders |
29 | 83 | 15 | 303 | ||||||||||||
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Add: net income attributable to noncontrolling assets |
36 | 39 | 106 | 108 | ||||||||||||
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Net income |
$ | 65 | $ | 122 | $ | 121 | $ | 411 | ||||||||
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| September 30, | December 31, | |||||||||
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(Amounts in millions) |
2011 | 2010 | ||||||||
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Assets: |
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Retirement and Protection |
$ | 90,196 | $ | 86,352 | ||||||
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International |
12,093 | 12,422 | ||||||||
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U.S. Mortgage Insurance |
3,160 | 3,875 | ||||||||
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Corporate and Other |
8,437 | 9,746 | ||||||||
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Total assets |
$ | 113,886 | $ | 112,395 | ||||||
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| As of or for the nine months ended September 30, |
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(Amounts in millions) |
2011 (1) | 2010 (2) | ||||||
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Beginning balance |
$ | 6,933 | $ | 6,567 | ||||
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Less reinsurance recoverables |
(1,654 | ) | (1,769 | ) | ||||
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Net beginning balance |
5,279 | 4,798 | ||||||
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Incurred related to insured events of: |
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Current year |
0 | 2,443 | ||||||
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Prior years |
0 | 359 | ||||||
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Total incurred |
0 | 2,802 | ||||||
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Paid related to insured events of: |
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Current year |
0 | (801 | ) | |||||
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Prior years |
0 | (2,090 | ) | |||||
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Total paid |
0 | (2,891 | ) | |||||
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Interest on liability for policy and contract claims |
0 | 90 | ||||||
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Foreign currency translation |
0 | (3 | ) | |||||
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Net ending balance |
0 | 4,796 | ||||||
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Add reinsurance recoverables |
0 | 1,652 | ||||||
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Ending balance |
$ | 0 | $ | 6,448 | ||||
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| (1) |
Current year reserves related to our U.S. Mortgage Insurance segment for the nine months ended September 30, 2011 were reduced by loss mitigation activities of $0 million related to workouts, loan modifications and pre-sales. Loss mitigation actions related to prior year delinquencies resulted in a reduction of expected losses of $0 million to date, including $0 million related to workouts, loan modifications and pre-sales, and $0 million related to rescissions, net of reinstatements of $0 million. |
| (2) |
Current year reserves related to our U.S. Mortgage Insurance segment for the nine months ended September 30, 2010 were reduced by loss mitigation activities of $0 million, including $0 million related to workouts, loan modifications and pre-sales, and $0 million related to rescissions, net of reinstatements. Loss mitigation actions related to prior year delinquencies resulted in a reduction of expected losses of $0 million to date, including $0 million related to workouts, loan modifications and pre-sales, and $0 million related to rescissions, net of reinstatements of $0 million. |
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