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| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
Delaware
(State or other jurisdiction of incorporation or organization) |
13-3317783
(I.R.S. Employer Identification No.) |
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
| (Do not check if a smaller reporting company) |
| Item | Description | Page | ||||||
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| Exhibit 15.01 | ||||||||
| Exhibit 31.01 | ||||||||
| Exhibit 31.02 | ||||||||
| Exhibit 32.01 | ||||||||
| Exhibit 32.02 | ||||||||
| EX-101 INSTANCE DOCUMENT | ||||||||
| EX-101 SCHEMA DOCUMENT | ||||||||
| EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
| EX-101 LABELS LINKBASE DOCUMENT | ||||||||
| EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
| EX-101 DEFINITION LINKBASE DOCUMENT | ||||||||
2
| • |
risks and uncertainties related to the Company’s current operating environment, which
reflects continued volatility in financial markets, constrained capital and credit markets and
uncertainty about the strength of an economic recovery and the impact of U.S. and other
governmental stimulus, budgetary and legislative initiatives, and whether management’s efforts
to identify and address these risks will be timely and effective;
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risks associated with our continued execution of steps to realign our business and
reposition our investment portfolio, including the potential need to take other actions, such
as divestitures;
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market risks associated with our business, including changes in interest rates, credit
spreads, equity prices and foreign exchange rates, as well as challenging or deteriorating
conditions in key sectors such as the commercial real estate market, that have pressured our
results and have continued to do so in 2010;
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volatility in our earnings resulting from our adjustment of our risk management program to
emphasize protection of statutory surplus;
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the impact on our statutory capital of various factors, including many that are outside the
Company’s control, which can in turn affect our credit and financial strength ratings, cost of
capital, regulatory compliance and other aspects of our business and results;
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risks to our business, financial position, prospects and results associated with negative
rating actions or downgrades in the Company’s financial strength and credit ratings or
negative rating actions or downgrades relating to our investments;
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the potential for differing interpretations of the methodologies, estimations and
assumptions that underlie the valuation of the Company’s financial instruments that could
result in changes to investment valuations;
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the subjective determinations that underlie the Company’s evaluation of
other-than-temporary impairments on available-for-sale securities;
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losses due to nonperformance or defaults by others;
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the potential for further acceleration of deferred policy acquisition cost amortization;
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the potential for further impairments of our goodwill or the potential for additional
valuation allowances against deferred tax assets;
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the possible occurrence of terrorist attacks and the Company’s ability to contain its
exposure, including the effect of the absence or insufficiency of applicable terrorism
legislation on coverage;
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the difficulty in predicting the Company’s potential exposure for asbestos and
environmental claims;
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the possibility of a pandemic or other man-made disaster that may adversely affect our
businesses and cost and availability of reinsurance;
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weather and other natural physical events, including the severity and frequency of storms,
hail, snowfall and other winter conditions, natural disasters such as hurricanes and
earthquakes, as well as climate change, including effects on weather patterns, greenhouse
gases, sea, land and air temperatures, sea levels, rain and snow;
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the response of reinsurance companies under reinsurance contracts and the availability,
pricing and adequacy of reinsurance to protect the Company against losses;
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the possibility of unfavorable loss development;
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actions by our competitors, many of which are larger or have greater financial resources
than we do;
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3
| • |
the restrictions, oversight, costs and other consequences of being a savings and loan holding
company, including from the supervision, regulation and examination by the Office of Thrift
Supervision (the “OTS”), and in the future, as a result of the enactment of the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), The Federal Reserve
and the Office of the Controller of the Currency as regulator of Federal Trust Bank;
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the potential effect of domestic and foreign regulatory developments, including those that
could adversely impact the demand for the Company’s products, operating costs and required
capital levels, including changes to statutory reserves and/or risk-based capital requirements
related to secondary guarantees under universal life and variable annuity products;
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the cost and other effects of increased regulation as a result of the enactment of the
Dodd-Frank Act, which will, among other effects, vest a newly created Financial Services
Oversight Council with the power to designate “systemically important” institutions, require
central clearing of, and/or impose new margin and capital requirements on, derivatives
transactions, and may affect our ability as a savings and loan holding company to manage our
general account by limiting or eliminating investments in certain private equity and hedge
funds;
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the Company’s ability to distribute its products through distribution channels, both
current and future;
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the uncertain effects of emerging claim and coverage issues;
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the ability of the Company to declare and pay dividends is subject to limitations;
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the Company’s ability to effectively price its property and casualty policies, including
its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal
of certain product lines;
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the Company’s ability to maintain the availability of its systems and safeguard the
security of its data in the event of a disaster or other unanticipated events;
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the risk that our framework for managing business risks may not be effective in mitigating
risk and loss to us that could adversely affect our business;
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the potential for difficulties arising from outsourcing relationships;
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the impact of potential changes in federal or state tax laws, including changes affecting
the availability of the separate account dividend received deduction;
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the impact of potential changes in accounting principles and related financial reporting
requirements;
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the Company’s ability to protect its intellectual property and defend against claims of
infringement;
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unfavorable judicial or legislative developments; and
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other factors described in such forward-looking statements.
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4
| Item 1. |
Financial Statements
|
5
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (In millions, except for per share data) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
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Revenues
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Earned premiums
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$ | 3,513 | $ | 3,499 | $ | 10,546 | $ | 10,920 | ||||||||
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Fee income
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1,173 | 1,140 | 3,557 | 3,369 | ||||||||||||
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Net investment income (loss):
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Securities available-for-sale and other
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1,083 | 1,049 | 3,296 | 2,990 | ||||||||||||
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Equity securities, trading
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1,043 | 638 | (905 | ) | 2,437 | |||||||||||
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Total net investment income
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2,126 | 1,687 | 2,391 | 5,427 | ||||||||||||
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Net realized capital gains (losses):
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||||||||||||||||
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Total other-than-temporary impairment (“OTTI”) losses
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(146 | ) | (760 | ) | (778 | ) | (1,546 | ) | ||||||||
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OTTI losses recognized in other comprehensive income
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31 | 224 | 403 | 472 | ||||||||||||
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Net OTTI losses recognized in earnings
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(115 | ) | (536 | ) | (375 | ) | (1,074 | ) | ||||||||
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Net realized capital losses, excluding net OTTI losses recognized in earnings
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(146 | ) | (683 | ) | (151 | ) | (742 | ) | ||||||||
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Total net realized capital losses
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(261 | ) | (1,219 | ) | (526 | ) | (1,816 | ) | ||||||||
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Other revenues
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122 | 123 | 360 | 361 | ||||||||||||
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Total revenues
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6,673 | 5,230 | 16,328 | 18,261 | ||||||||||||
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Benefits, losses and expenses
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Benefits, losses and loss adjustment expenses
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3,037 | 3,070 | 9,762 | 10,799 | ||||||||||||
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Benefits, losses and loss adjustment expenses — returns
credited on international variable annuities
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1,043 | 638 | (905 | ) | 2,437 | |||||||||||
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Amortization of deferred policy acquisition costs and
present value of future profits
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438 | 687 | 2,027 | 3,620 | ||||||||||||
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Insurance operating costs and other expenses
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1,105 | 1,174 | 3,461 | 3,472 | ||||||||||||
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Interest expense
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128 | 118 | 380 | 357 | ||||||||||||
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Goodwill impairment
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— | — | 153 | 32 | ||||||||||||
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Total benefits, losses and expenses
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5,751 | 5,687 | 14,878 | 20,717 | ||||||||||||
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Income (loss) before income taxes
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922 | (457 | ) | 1,450 | (2,456 | ) | ||||||||||
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Income tax expense (benefit)
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256 | (237 | ) | 389 | (1,012 | ) | ||||||||||
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Net income (loss)
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$ | 666 | $ | (220 | ) | $ | 1,061 | $ | (1,444 | ) | ||||||
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Preferred stock dividends and accretion of discount
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10 | 62 | 504 | 65 | ||||||||||||
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Net income (loss) available to common shareholders
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$ | 656 | $ | (282 | ) | $ | 557 | $ | (1,509 | ) | ||||||
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Earnings (Loss) per common share
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||||||||||||||||
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Basic
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$ | 1.48 | $ | (0.79 | ) | $ | 1.30 | $ | (4.52 | ) | ||||||
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Diluted
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$ | 1.34 | $ | (0.79 | ) | $ | 1.21 | $ | (4.52 | ) | ||||||
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Cash dividends declared per common share
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$ | 0.05 | $ | 0.05 | $ | 0.15 | $ | 0.15 | ||||||||
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||||||||||||||||
6
| September 30, | December 31, | |||||||
| (In millions, except for share and per share data) | 2010 | 2009 | ||||||
| (Unaudited) | ||||||||
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Assets
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Investments
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Fixed maturities, available-for-sale, at fair value (amortized cost of $78,484 and
$76,015) (includes variable interest entity assets, at fair value, of $440 as of
September 30, 2010)
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$ | 79,736 | $ | 71,153 | ||||
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Fixed maturities, at fair value using the fair value option (includes variable interest
entity assets of $328 as of September 30, 2010)
|
564 | — | ||||||
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Equity securities, trading, at fair value (cost of $33,674 and $33,070)
|
32,495 | 32,321 | ||||||
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Equity securities, available-for-sale, at fair value (cost of $1,232 and $1,333)
|
1,168 | 1,221 | ||||||
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Mortgage loans (net of allowances for loan losses of $164 and $366)
|
4,684 | 5,938 | ||||||
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Policy loans, at outstanding balance
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2,180 | 2,174 | ||||||
|
Limited partnerships and other alternative investments (includes variable interest
entity assets of $14 as of September 30, 2010)
|
1,819 | 1,790 | ||||||
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Other investments
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1,427 | 602 | ||||||
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Short-term investments
|
9,517 | 10,357 | ||||||
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||||||||
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Total investments
|
133,590 | 125,556 | ||||||
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Cash
|
1,707 | 2,142 | ||||||
|
Premiums receivable and agents’ balances, net
|
3,370 | 3,404 | ||||||
|
Reinsurance recoverables, net
|
5,242 | 5,384 | ||||||
|
Deferred policy acquisition costs and present value of future profits
|
9,386 | 10,686 | ||||||
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Deferred income taxes, net
|
1,721 | 3,940 | ||||||
|
Goodwill
|
1,051 | 1,204 | ||||||
|
Property and equipment, net
|
1,143 | 1,026 | ||||||
|
Other assets
|
2,497 | 3,981 | ||||||
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Separate account assets
|
154,219 | 150,394 | ||||||
|
|
||||||||
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Total assets
|
$ | 313,926 | $ | 307,717 | ||||
|
|
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Liabilities
|
||||||||
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Reserve for future policy benefits and unpaid losses and loss adjustment expenses
|
$ | 39,890 | $ | 39,631 | ||||
|
Other policyholder funds and benefits payable
|
45,889 | 45,852 | ||||||
|
Other policyholder funds and benefits payable — international variable annuities
|
32,470 | 32,296 | ||||||
|
Unearned premiums
|
5,296 | 5,221 | ||||||
|
Short-term debt
|
— | 343 | ||||||
|
Long-term debt
|
6,603 | 5,496 | ||||||
|
Consumer notes
|
384 | 1,136 | ||||||
|
Other liabilities (includes variable interest entity liabilities of $405 as of
September 30, 2010)
|
8,266 | 9,454 | ||||||
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Separate account liabilities
|
154,219 | 150,394 | ||||||
|
|
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Total liabilities
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293,017 | 289,823 | ||||||
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Commitments and Contingencies (Note 9)
|
||||||||
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Equity
|
||||||||
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Preferred stock, $0.01 par value — 50,000,000 shares authorized, 575,000 and 3,400,000
shares issued, liquidation preference $1,000 per share
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556 | 2,960 | ||||||
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Common stock, $0.01 par value — 1,500,000,000 shares authorized,
469,758,371 and 410,184,182 shares issued
|
5 | 4 | ||||||
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Additional paid-in capital
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10,455 | 8,985 | ||||||
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Retained earnings
|
11,488 | 11,164 | ||||||
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Treasury stock, at cost — 25,391,969 and 27,177,019 shares
|
(1,789 | ) | (1,936 | ) | ||||
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Accumulated other comprehensive income (loss), net of tax
|
194 | (3,312 | ) | |||||
|
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Total stockholders’ equity
|
20,909 | 17,865 | ||||||
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Noncontrolling interest
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— | 29 | ||||||
|
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Total equity
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20,909 | 17,894 | ||||||
|
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Total liabilities and equity
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$ | 313,926 | $ | 307,717 | ||||
|
|
||||||||
7
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| (In millions, except for share data) | 2010 | 2009 | ||||||
| (Unaudited) | ||||||||
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Preferred Stock, at beginning of period
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$ | 2,960 | $ | — | ||||
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Issuance of mandatory convertible preferred stock
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556 | — | ||||||
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Accretion of preferred stock discount on issuance to U.S. Treasury
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— | 20 | ||||||
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Accelerated accretion of discount from redemption of preferred stock issued to U.S. Treasury
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440 | — | ||||||
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Issuance (redemption) of preferred stock to the U.S. Treasury
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(3,400 | ) | 2,920 | |||||
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Preferred Stock, at end of period
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556 | 2,940 | ||||||
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Common Stock
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5 | 4 | ||||||
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Additional Paid-in Capital, at beginning of period
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8,985 | 7,569 | ||||||
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Issuance of warrants to U.S. Treasury
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— | 480 | ||||||
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Issuance of shares under discretionary equity issuance plan
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— | 887 | ||||||
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Issuance of shares under public offering
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1,599 | — | ||||||
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Issuance of shares under incentive and stock compensation plans
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(123 | ) | (135 | ) | ||||
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Reclassification of warrants from other liabilities to equity and extension of warrants’ term
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— | 186 | ||||||
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Tax expense on employee stock options and awards
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(6 | ) | (11 | ) | ||||
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Additional Paid-in Capital, at end of period
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10,455 | 8,976 | ||||||
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Retained Earnings, at beginning of period, before cumulative effect of accounting change, net
of tax
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11,164 | 11,336 | ||||||
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Cumulative effect of accounting change, net of tax
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26 | — | ||||||
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Retained Earnings, at beginning of period, as adjusted
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11,190 | 11,336 | ||||||
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Net income (loss)
|
1,061 | (1,444 | ) | |||||
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Cumulative effect of accounting changes, net of tax
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(194 | ) | 912 | |||||
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Accretion of preferred stock discount on issuance to U.S. Treasury
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— | (20 | ) | |||||
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Accelerated accretion of discount from redemption of preferred stock issued to U.S. Treasury
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(440 | ) | — | |||||
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Dividends on preferred stock
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(64 | ) | (45 | ) | ||||
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Dividends declared on common stock
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(65 | ) | (50 | ) | ||||
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Retained Earnings, at end of period
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11,488 | 10,689 | ||||||
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Treasury Stock, at Cost, at beginning of period
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(1,936 | ) | (2,120 | ) | ||||
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Issuance of shares under incentive and stock compensation plans from treasury stock
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150 | 187 | ||||||
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Return of shares under incentive and stock compensation plans to treasury stock
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(3 | ) | (3 | ) | ||||
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Treasury Stock, at Cost, at end of period
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(1,789 | ) | (1,936 | ) | ||||
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Accumulated Other Comprehensive Loss, Net of Tax, at beginning of period
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(3,312 | ) | (7,520 | ) | ||||
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Cumulative effect of accounting changes, net of tax
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194 | (912 | ) | |||||
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Total other comprehensive income
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3,312 | 5,215 | ||||||
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||||||||
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Accumulated Other Comprehensive Income (Loss), Net of Tax, at end of period
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194 | (3,217 | ) | |||||
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Total Stockholders’ Equity
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20,909 | 17,456 | ||||||
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||||||||
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Noncontrolling Interest, at beginning of period (Note 13)
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29 | 92 | ||||||
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Change in noncontrolling interest ownership
|
— | (61 | ) | |||||
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Noncontrolling loss
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— | (6 | ) | |||||
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Recognition of noncontrolling interest in other liabilities
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(29 | ) | — | |||||
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Noncontrolling Interest, at end of period
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— | 25 | ||||||
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Total Equity
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$ | 20,909 | $ | 17,481 | ||||
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||||||||
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Preferred Shares Outstanding, at beginning of period (in thousands)
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3,400 | 6,048 | ||||||
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Conversion of preferred to common shares
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— | (6,048 | ) | |||||
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Issuance (redemption) of shares issued to the U.S. Treasury
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(3,400 | ) | 3,400 | |||||
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Issuance of mandatory convertible preferred shares
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575 | — | ||||||
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Preferred Shares Outstanding, at end of period
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575 | 3,400 | ||||||
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Common Shares Outstanding, at beginning of period (in thousands)
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383,007 | 300,579 | ||||||
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Treasury stock acquired
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— | (15 | ) | |||||
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Conversion of preferred to common shares
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— | 24,194 | ||||||
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Issuance of shares under discretionary equity issuance plan
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— | 56,109 | ||||||
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Issuance of shares under public offering
|
59,590 | — | ||||||
|
Issuance of shares under incentive and stock compensation plans
|
1,901 | 2,353 | ||||||
|
Return of shares under incentive and stock compensation plans to treasury stock
|
(132 | ) | (190 | ) | ||||
|
|
||||||||
|
Common Shares Outstanding, at end of period
|
444,366 | 383,030 | ||||||
|
|
||||||||
8
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (In millions) | (Unaudited) | (Unaudited) | ||||||||||||||
|
Comprehensive Income
|
||||||||||||||||
|
Net income (loss)
|
$ | 666 | $ | (220 | ) | $ | 1,061 | $ | (1,444 | ) | ||||||
|
|
||||||||||||||||
|
Other comprehensive income (loss)
|
||||||||||||||||
|
Change in net unrealized gain / loss on securities
|
1,064 | 3,232 | 2,642 | 5,572 | ||||||||||||
|
Change in OTTI losses recognized in other comprehensive income
|
44 | (51 | ) | 97 | (176 | ) | ||||||||||
|
Change in net gain (loss) on cash-flow hedging instruments
|
79 | 99 | 308 | (269 | ) | |||||||||||
|
Change in foreign currency translation adjustments
|
164 | 102 | 205 | 57 | ||||||||||||
|
Amortization of prior service cost and actuarial net losses
included in net periodic benefit costs
|
28 | 11 | 60 | 31 | ||||||||||||
|
|
||||||||||||||||
|
Total other comprehensive income
|
1,379 | 3,393 | 3,312 | 5,215 | ||||||||||||
|
|
||||||||||||||||
|
Total comprehensive income
|
$ | 2,045 | $ | 3,173 | $ | 4,373 | $ | 3,771 | ||||||||
|
|
||||||||||||||||
9
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| (In millions) | 2010 | 2009 | ||||||
| (Unaudited) | ||||||||
|
Operating Activities
|
||||||||
|
Net income (loss)
|
$ | 1,061 | $ | (1,444 | ) | |||
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities
|
||||||||
|
Amortization of deferred policy acquisition costs and present value of future profits
|
2,027 | 3,620 | ||||||
|
Additions to deferred policy acquisition costs and present value of future profits
|
(1,999 | ) | (2,155 | ) | ||||
|
Change in reserve for future policy benefits and unpaid losses and loss adjustment expenses and unearned premiums
|
(17 | ) | 903 | |||||
|
Change in reinsurance recoverables
|
247 | 152 | ||||||
|
Change in receivables and other assets
|
(29 | ) | 212 | |||||
|
Change in payables and accruals
|
(92 | ) | (600 | ) | ||||
|
Change in accrued and deferred income taxes
|
(5 | ) | (252 | ) | ||||
|
Net realized capital losses
|
526 | 1,816 | ||||||
|
Net receipts from investment contracts related to policyholder funds — international variable annuities
|
174 | 2,691 | ||||||
|
Net increase in equity securities, trading
|
(174 | ) | (2,694 | ) | ||||
|
Depreciation and amortization
|
449 | 360 | ||||||
|
Goodwill impairment
|
153 | 32 | ||||||
|
Other operating activities, net
|
(76 | ) | 104 | |||||
|
|
||||||||
|
Net cash provided by operating activities
|
2,245 | 2,745 | ||||||
|
Investing Activities
|
||||||||
|
Proceeds from the sale/maturity/prepayment of:
|
||||||||
|
Fixed maturities, available-for-sale
|
37,320 | 41,749 | ||||||
|
Equity securities, available-for-sale
|
207 | 598 | ||||||
|
Mortgage loans
|
1,517 | 480 | ||||||
|
Partnerships
|
312 | 405 | ||||||
|
Payments for the purchase of:
|
||||||||
|
Fixed maturities, available-for-sale
|
(39,485 | ) | (42,990 | ) | ||||
|
Equity securities, available-for-sale
|
(135 | ) | (284 | ) | ||||
|
Mortgage loans
|
(273 | ) | (249 | ) | ||||
|
Partnerships
|
(226 | ) | (228 | ) | ||||
|
Proceeds from business sold
|
130 | 7 | ||||||
|
Derivatives, net
|
504 | (298 | ) | |||||
|
Change in policy loans, net
|
(6 | ) | (1 | ) | ||||
|
Change in payables for collateral under securities lending, net
|
(46 | ) | (2,771 | ) | ||||
|
Other investing activities, net
|
(105 | ) | (239 | ) | ||||
|
|
||||||||
|
Net cash used for investing activities
|
(286 | ) | (3,821 | ) | ||||
|
Financing Activities
|
||||||||
|
Deposits and other additions to investment and universal life-type contracts
|
9,458 | 11,158 | ||||||
|
Withdrawals and other deductions from investment and universal life-type contracts
|
(16,426 | ) | (18,528 | ) | ||||
|
Net transfers from separate accounts related to investment and universal life-type contracts
|
5,998 | 5,418 | ||||||
|
Proceeds from issuance of long-term debt
|
1,090 | — | ||||||
|
Repayments at maturity for long-term debt and payments on capital lease obligations
|
(343 | ) | (24 | ) | ||||
|
Change in commercial paper
|
— | (375 | ) | |||||
|
Repayments at maturity or settlement of consumer notes
|
(752 | ) | (17 | ) | ||||
|
Net proceeds from issuance of mandatory convertible preferred stock
|
556 | — | ||||||
|
Net proceeds from issuance of common shares under public offering
|
1,600 | — | ||||||
|
Redemption of preferred stock issued to the U.S. Treasury
|
(3,400 | ) | — | |||||
|
Proceeds from issuance of preferred stock and warrants to U.S. Treasury
|
— | 3,400 | ||||||
|
Net proceeds from issuance of common shares under discretionary equity issuance plan
|
— | 887 | ||||||
|
Proceeds from net issuance of shares under incentive and stock compensation plans and excess tax benefit
|
17 | 18 | ||||||
|
Dividends paid on preferred stock
|
(75 | ) | (31 | ) | ||||
|
Dividends paid on common stock
|
(62 | ) | (129 | ) | ||||
|
Changes in bank deposits and payments on bank advances
|
(56 | ) | (85 | ) | ||||
|
|
||||||||
|
Net cash provided by (used for) financing activities
|
(2,395 | ) | 1,692 | |||||
|
Foreign exchange rate effect on cash
|
1 | (10 | ) | |||||
|
Net increase (decrease) in cash
|
(435 | ) | 606 | |||||
|
Cash — beginning of period
|
2,142 | 1,811 | ||||||
|
|
||||||||
|
Cash — end of period
|
$ | 1,707 | $ | 2,417 | ||||
|
|
||||||||
|
Supplemental Disclosure of Cash Flow Information
|
||||||||
|
Income taxes paid (received)
|
$ | 249 | $ | (392 | ) | |||
|
Interest paid
|
$ | 324 | $ | 303 | ||||
10
11
12
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Tax expense (benefit) at U.S. Federal statutory rate
|
$ | 323 | $ | (160 | ) | $ | 508 | $ | (860 | ) | ||||||
|
Tax-exempt interest
|
(38 | ) | (36 | ) | (116 | ) | (111 | ) | ||||||||
|
Dividends received deduction
|
(34 | ) | (41 | ) | (115 | ) | (120 | ) | ||||||||
|
Investment valuation allowance
|
— | — | 86 | — | ||||||||||||
|
Nondeductible costs associated with warrants
|
— | — | — | 78 | ||||||||||||
|
Other
|
5 | — | 26 | 1 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Income tax expense (benefit)
|
$ | 256 | $ | (237 | ) | $ | 389 | $ | (1,012 | ) | ||||||
|
|
||||||||||||||||
13
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (In millions, except for per share data) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
|
||||||||||||||||
|
Income (loss)
|
||||||||||||||||
|
Net income (loss)
|
$ | 666 | $ | (220 | ) | $ | 1,061 | $ | (1,444 | ) | ||||||
|
Less: Preferred stock dividends and accretion of discount
|
10 | 62 | 504 | 65 | ||||||||||||
|
|
||||||||||||||||
|
Net income (loss) available to common shareholders
|
$ | 656 | $ | (282 | ) | $ | 557 | $ | (1,509 | ) | ||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Common shares
|
||||||||||||||||
|
Basic
|
||||||||||||||||
|
Weighted average common shares outstanding
|
444.1 | 356.1 | 427.2 | 334.1 | ||||||||||||
|
|
||||||||||||||||
|
Diluted
|
||||||||||||||||
|
Warrants
|
29.0 | — | 32.6 | — | ||||||||||||
|
Stock compensation plans
|
1.4 | — | 1.3 | — | ||||||||||||
|
Mandatory convertible preferred shares
|
20.8 | — | — | — | ||||||||||||
|
|
||||||||||||||||
|
Weighted average shares outstanding and dilutive potential
common shares
|
495.3 | 356.1 | 461.1 | 334.1 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Earnings (loss) per common share
|
||||||||||||||||
|
Basic
|
$ | 1.48 | $ | (0.79 | ) | $ | 1.30 | $ | (4.52 | ) | ||||||
|
Diluted
|
$ | 1.34 | $ | (0.79 | ) | $ | 1.21 | $ | (4.52 | ) | ||||||
14
15
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Property & Casualty Commercial
|
$ | 306 | $ | 217 | $ | 782 | $ | 484 | ||||||||
|
Group Benefits
|
46 | 65 | 145 | 148 | ||||||||||||
|
Consumer Markets
|
70 | 15 | 113 | 55 | ||||||||||||
|
Global Annuity
|
175 | (320 | ) | 141 | (1,304 | ) | ||||||||||
|
Life Insurance
|
97 | 8 | 224 | 18 | ||||||||||||
|
Retirement Plans
|
30 | (34 | ) | 38 | (162 | ) | ||||||||||
|
Mutual Funds
|
18 | 11 | 67 | 17 | ||||||||||||
|
Corporate and Other
|
(76 | ) | (182 | ) | (449 | ) | (700 | ) | ||||||||
|
|
||||||||||||||||
|
Net income (loss)
|
$ | 666 | $ | (220 | ) | $ | 1,061 | $ | (1,444 | ) | ||||||
|
|
||||||||||||||||
16
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Earned premiums, fees, and other considerations
|
||||||||||||||||
|
Property & Casualty Commercial
|
||||||||||||||||
|
Workers’ compensation
|
$ | 605 | $ | 556 | $ | 1,754 | $ | 1,706 | ||||||||
|
Property
|
137 | 144 | 412 | 451 | ||||||||||||
|
Automobile
|
149 | 159 | 453 | 497 | ||||||||||||
|
Package business
|
281 | 277 | 842 | 842 | ||||||||||||
|
Liability
|
129 | 149 | 405 | 477 | ||||||||||||
|
Fidelity and surety
|
56 | 61 | 169 | 192 | ||||||||||||
|
Professional liability
|
82 | 96 | 243 | 298 | ||||||||||||
|
|
||||||||||||||||
|
Total Property & Casualty Commercial
|
1,439 | 1,442 | 4,278 | 4,463 | ||||||||||||
|
Group Benefits
|
||||||||||||||||
|
Group disability
|
487 | 479 | 1,520 | 1,493 | ||||||||||||
|
Group life and accident
|
513 | 528 | 1,539 | 1,600 | ||||||||||||
|
Other
|
58 | 62 | 175 | 188 | ||||||||||||
|
|
||||||||||||||||
|
Total Group Benefits
|
1,058 | 1,069 | 3,234 | 3,281 | ||||||||||||
|
Consumer Markets
|
||||||||||||||||
|
Automobile
|
698 | 717 | 2,122 | 2,136 | ||||||||||||
|
Homeowners
|
287 | 272 | 854 | 821 | ||||||||||||
|
|
||||||||||||||||
|
Total Consumer Markets [1]
|
985 | 989 | 2,976 | 2,957 | ||||||||||||
|
Global Annuity
|
||||||||||||||||
|
Variable annuity
|
629 | 555 | 1,855 | 1,634 | ||||||||||||
|
Fixed / MVA annuity
|
21 | 10 | 43 | 24 | ||||||||||||
|
IIP
|
4 | 38 | 21 | 333 | ||||||||||||
|
Other
|
5 | 8 | 13 | 23 | ||||||||||||
|
|
||||||||||||||||
|
Total Global Annuity
|
659 | 611 | 1,932 | 2,014 | ||||||||||||
|
Life Insurance
|
||||||||||||||||
|
Variable life
|
113 | 123 | 315 | 396 | ||||||||||||
|
Universal life
|
72 | 92 | 282 | 286 | ||||||||||||
|
Term / Other life
|
12 | 11 | 36 | 35 | ||||||||||||
|
PPLI
|
46 | 21 | 129 | 86 | ||||||||||||
|
|
||||||||||||||||
|
Total Life Insurance
|
243 | 247 | 762 | 803 | ||||||||||||
|
Retirement Plans
|
||||||||||||||||
|
401(k)
|
77 | 74 | 233 | 208 | ||||||||||||
|
Government plans
|
12 | 10 | 32 | 29 | ||||||||||||
|
|
||||||||||||||||
|
Total Retirement Plans
|
89 | 84 | 265 | 237 | ||||||||||||
|
Mutual Funds
|
||||||||||||||||
|
Non-Proprietary
|
151 | 137 | 467 | 370 | ||||||||||||
|
Proprietary
|
15 | — | 46 | — | ||||||||||||
|
|
||||||||||||||||
|
Total Mutual Funds
|
166 | 137 | 513 | 370 | ||||||||||||
|
Corporate and Other
|
47 | 60 | 143 | 164 | ||||||||||||
|
|
||||||||||||||||
|
Total earned premiums, fees, and other considerations
|
4,686 | 4,639 | 14,103 | 14,289 | ||||||||||||
|
Net investment income (loss):
|
||||||||||||||||
|
Securities available-for-sale and other
|
1,083 | 1,049 | 3,296 | 2,990 | ||||||||||||
|
Equity securities, trading
|
1,043 | 638 | (905 | ) | 2,437 | |||||||||||
|
|
||||||||||||||||
|
Total net investment income
|
2,126 | 1,687 | 2,391 | 5,427 | ||||||||||||
|
Net realized capital losses
|
(261 | ) | (1,219 | ) | (526 | ) | (1,816 | ) | ||||||||
|
Other revenues
|
122 | 123 | 360 | 361 | ||||||||||||
|
|
||||||||||||||||
|
Total revenues
|
$ | 6,673 | $ | 5,230 | $ | 16,328 | $ | 18,261 | ||||||||
|
|
||||||||||||||||
| [1] |
For both the three months ended September 30, 2010 and 2009, AARP members accounted for
earned premiums of $712. For both the nine months ended September 30, 2010 and 2009, AARP
members accounted for earned premiums of $2.1 billion.
|
17
| Level 1 |
Observable inputs that reflect quoted prices for identical assets
or liabilities in active markets that the Company has the ability
to access at the measurement date. Level 1 securities include
highly liquid U.S. Treasuries, money market funds and exchange
traded equity securities, open-ended mutual funds reported in
separate account assets and derivative securities, including
futures and certain option contracts.
|
|
| Level 2 |
Observable inputs, other than quoted prices included in Level 1,
for the asset or liability or prices for similar assets and
liabilities. Most fixed maturities and preferred stocks,
including those reported in separate account assets, are model
priced by vendors using observable inputs and are classified
within Level 2. Also included in the Level 2 category are
investment grade private placement securities and derivative
instruments that are priced using models with significant
observable market inputs, including interest rate, foreign
currency and certain credit default swap contracts and have no
significant unobservable market inputs.
|
|
| Level 3 |
Valuations that are derived from techniques in which one or more
of the significant inputs are unobservable (including assumptions
about risk). Level 3 securities include less liquid securities
such as lower quality asset-backed securities (“ABS”), commercial
mortgage-backed securities (“CMBS”), commercial real estate
(“CRE”) CDOs, residential mortgage-backed securities (“RMBS”)
primarily backed by below-prime loans and below investment grade
private placement securities. Also included in Level 3 are
guaranteed product embedded and reinsurance derivatives and other
complex derivative securities, including customized guaranteed
minimum withdrawal benefit (“GMWB”) hedging derivatives (see Note
4a for further information on GMWB product related financial
instruments), equity derivatives, long dated derivatives, swaps
with optionality, certain complex credit derivatives and certain
other liabilities. Because Level 3 fair values, by their nature,
contain one or more significant unobservable market inputs as
there is little or no observable market for these assets and
liabilities, considerable judgment is used to determine the Level
3 fair values. Level 3 fair values represent the Company’s best
estimate of an amount that could be realized in a current market
exchange absent actual market exchanges.
|
18
| September 30, 2010 | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | Significant | ||||||||||||||
| Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Assets accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Fixed maturities, AFS
|
||||||||||||||||
|
ABS
|
$ | 3,009 | $ | — | $ | 2,500 | $ | 509 | ||||||||
|
CDOs
|
2,563 | — | 7 | 2,556 | ||||||||||||
|
CMBS
|
8,160 | — | 7,547 | 613 | ||||||||||||
|
Corporate
|
40,851 | — | 38,741 | 2,110 | ||||||||||||
|
Foreign government/government agencies
|
1,924 | — | 1,873 | 51 | ||||||||||||
|
States, municipalities and political subdivisions (“Municipal”)
|
12,723 | — | 12,434 | 289 | ||||||||||||
|
RMBS
|
5,551 | — | 4,279 | 1,272 | ||||||||||||
|
U.S. Treasuries
|
4,955 | 774 | 4,181 | — | ||||||||||||
|
|
||||||||||||||||
|
Total fixed maturities, AFS
|
79,736 | 774 | 71,562 | 7,400 | ||||||||||||
|
Fixed maturities, FVO
|
564 | — | 64 | 500 | ||||||||||||
|
Equity securities, trading
|
32,495 | 2,286 | 30,209 | — | ||||||||||||
|
Equity securities, AFS
|
1,168 | 327 | 741 | 100 | ||||||||||||
|
Derivative assets
|
||||||||||||||||
|
Credit derivatives
|
(9 | ) | — | (9 | ) | — | ||||||||||
|
Equity derivatives
|
3 | — | — | 3 | ||||||||||||
|
Foreign exchange derivatives
|
482 | — | 482 | — | ||||||||||||
|
Interest rate derivatives
|
74 | — | 98 | (24 | ) | |||||||||||
|
Other derivative contracts
|
34 | — | — | 34 | ||||||||||||
|
|
||||||||||||||||
|
Total derivative assets [1]
|
584 | — | 571 | 13 | ||||||||||||
|
Short-term investments
|
9,517 | 715 | 8,802 | — | ||||||||||||
|
Separate account assets [2]
|
148,771 | 112,182 | 35,512 | 1,077 | ||||||||||||
|
|
||||||||||||||||
|
Total assets accounted for at fair value on a recurring basis
|
$ | 272,835 | $ | 116,284 | $ | 147,461 | $ | 9,090 | ||||||||
|
|
||||||||||||||||
|
Liabilities accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Other policyholder funds and benefits payable
|
||||||||||||||||
|
Institutional notes
|
$ | 3 | $ | — | $ | — | $ | 3 | ||||||||
|
Equity linked notes
|
(8 | ) | — | — | (8 | ) | ||||||||||
|
|
||||||||||||||||
|
Total other policyholder funds and benefits payable
|
(5 | ) | — | — | (5 | ) | ||||||||||
|
Derivative liabilities
|
||||||||||||||||
|
Credit derivatives
|
(509 | ) | — | (53 | ) | (456 | ) | |||||||||
|
Equity derivatives
|
1 | — | — | 1 | ||||||||||||
|
Foreign exchange derivatives
|
172 | — | 172 | — | ||||||||||||
|
Interest rate derivatives
|
(77 | ) | — | (52 | ) | (25 | ) | |||||||||
|
|
||||||||||||||||
|
Total derivative liabilities [3]
|
(413 | ) | — | 67 | (480 | ) | ||||||||||
|
Other liabilities
|
(30 | ) | — | — | (30 | ) | ||||||||||
|
Consumer notes [4]
|
(4 | ) | — | — | (4 | ) | ||||||||||
|
|
||||||||||||||||
|
Total liabilities accounted for at fair value on a recurring
basis
|
$ | (452 | ) | $ | — | $ | 67 | $ | (519 | ) | ||||||
|
|
||||||||||||||||
| [1] |
Includes over-the-counter derivative instruments in a net asset value position which may require the counterparty to pledge collateral
to the Company. As of September 30, 2010, $828 of a cash collateral liability was netted against the derivative asset value in the
Condensed Consolidated Balance Sheet and is excluded from the table above. See footnote 3 below for derivative liabilities.
|
|
| [2] |
As of September 30, 2010, excludes approximately $5 billion of investment sales receivable that are not subject to fair value accounting.
|
|
| [3] |
Includes over-the-counter derivative instruments in a net negative market value position (derivative liability). In the Level 3
roll-forward table included below in this Note 4, the derivative asset and liability are referred to as “freestanding derivatives” and
are presented on a net basis.
|
|
| [4] |
Represents embedded derivatives associated with non-funding agreement-backed consumer equity linked notes.
|
19
| December 31, 2009 | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | Significant | ||||||||||||||
| Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Assets accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Fixed maturities, AFS
|
||||||||||||||||
|
ABS
|
$ | 2,523 | $ | — | $ | 1,943 | $ | 580 | ||||||||
|
CDOs
|
2,892 | — | 57 | 2,835 | ||||||||||||
|
CMBS
|
8,544 | — | 8,237 | 307 | ||||||||||||
|
Corporate
|
35,243 | — | 27,216 | 8,027 | ||||||||||||
|
Foreign government/government agencies
|
1,408 | — | 1,315 | 93 | ||||||||||||
|
Municipal
|
12,065 | — | 11,803 | 262 | ||||||||||||
|
RMBS
|
4,847 | — | 3,694 | 1,153 | ||||||||||||
|
U.S. Treasuries
|
3,631 | 526 | 3,105 | — | ||||||||||||
|
|
||||||||||||||||
|
Total fixed maturities, AFS
|
71,153 | 526 | 57,370 | 13,257 | ||||||||||||
|
Equity securities, trading
|
32,321 | 2,443 | 29,878 | — | ||||||||||||
|
Equity securities, AFS
|
1,221 | 259 | 904 | 58 | ||||||||||||
|
Derivative assets [1]
|
178 | — | 97 | 81 | ||||||||||||
|
Short-term investments
|
10,357 | 6,846 | 3,511 | — | ||||||||||||
|
Separate account assets [2]
|
147,432 | 112,877 | 33,593 | 962 | ||||||||||||
|
|
||||||||||||||||
|
Total assets accounted for at fair value on a recurring basis
|
$ | 262,662 | $ | 122,951 | $ | 125,353 | $ | 14,358 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Liabilities accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Other policyholder funds and benefits payable
|
||||||||||||||||
|
Institutional notes
|
$ | (2 | ) | $ | — | $ | — | $ | (2 | ) | ||||||
|
Equity linked notes
|
(10 | ) | — | — | (10 | ) | ||||||||||
|
|
||||||||||||||||
|
Total other policyholder funds and benefits payable
|
(12 | ) | — | — | (12 | ) | ||||||||||
|
Derivative liabilities [3]
|
(214 | ) | — | 56 | (270 | ) | ||||||||||
|
Consumer notes [4]
|
(5 | ) | — | — | (5 | ) | ||||||||||
|
|
||||||||||||||||
|
Total liabilities accounted for at fair value on a recurring
basis
|
$ | (231 | ) | $ | — | $ | 56 | $ | (287 | ) | ||||||
|
|
||||||||||||||||
| [1] |
Includes over-the-counter derivative instruments in a net asset value position which may require the counterparty to pledge collateral
to the Company. As of December 31, 2009, $149 of a cash collateral liability was netted against the derivative asset value in the
Condensed Consolidated Balance Sheet and is excluded from the table above. See footnote 3 below for derivative liabilities.
|
|
| [2] |
As of December 31, 2009, excludes approximately $3 billion of investment sales receivable that are not subject to fair value accounting.
|
|
| [3] |
Includes over-the-counter derivative instruments in a net negative market value position (derivative liability). In the Level 3
roll-forward table included below in this Note 4, the derivative asset and liability are referred to as “freestanding derivatives” and
are presented on a net basis.
|
|
| [4] |
Represents embedded derivatives associated with non-funding agreement-backed consumer equity linked notes.
|
20
21
| Level 2 |
The fair values of most of the Company’s Level 2 investments are
determined by management after considering prices received from third
party pricing services. These investments include most fixed maturities
and preferred stocks, including those reported in separate account
assets.
|
| • |
ABS, CDOs, CMBS and RMBS
— Primary inputs also include monthly payment information,
collateral performance, which varies by vintage year and includes delinquency rates,
collateral valuation loss severity rates, collateral refinancing assumptions, credit
default swap indices and, for ABS and RMBS, estimated prepayment rates.
|
||
| • |
Corporates
— Primary inputs also include observations of credit default swap curves
related to the issuer.
|
||
| • |
Foreign government/government agencies
— Primary inputs also include observations
of credit default swap curves related to the issuer and political events in emerging
markets.
|
||
| • |
Municipals
— Primary inputs also include Municipal Securities Rulemaking Board
reported trades and material event notices, and issuer financial statements.
|
||
| • |
Short-term investments
— Primary inputs also include material event notices and new
issue money market rates.
|
||
| • |
Equity securities, trading
— Consist of investments in mutual funds. Primary inputs
include net asset values obtained from third party pricing services.
|
||
| • |
Credit derivatives
— Significant inputs primarily include the swap yield curve and
credit curves.
|
||
| • |
Foreign exchange derivatives —
Significant inputs primarily include the swap yield
curve, currency spot and forward rates, and cross currency basis curves.
|
||
| • |
Interest rate derivatives —
Significant input is primarily the swap yield curve.
|
22
| Level 3 |
Most of the Company’s securities classified as Level 3 are valued based on brokers’
prices. Certain long-dated securities are priced based on third party pricing services,
including municipal securities and foreign government/government agencies, as well as bank
loans and below investment grade private placement securities. Primary inputs for these
long-dated securities are consistent with the typical inputs used in Level 1 and Level 2
measurements noted above, but include benchmark interest rate or credit spread assumptions
that are not observable in the marketplace. Also included in Level 3 are certain derivative
instruments that either have significant unobservable inputs or are valued based on broker
quotations. Significant inputs for these derivative contracts primarily include the typical
inputs used in the Level 1 and Level 2 measurements noted above, but also may include the
following:
|
| • |
Credit derivatives —
Significant unobservable inputs may include credit correlation
and swap yield curve and credit curve extrapolation beyond observable limits.
|
| • |
Equity derivatives —
Significant unobservable inputs may include equity volatility.
|
| • |
Interest rate contracts —
Significant unobservable inputs may include swap yield
curve extrapolation beyond observable limits and interest rate volatility.
|
23
| Changes in unrealized | ||||||||||||||||||||||||||||||||
| gains (losses) | ||||||||||||||||||||||||||||||||
| included in net income | ||||||||||||||||||||||||||||||||
| related to | ||||||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | financial instruments | ||||||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers | Transfers | as of | still held at | ||||||||||||||||||||||||||
| June 30, | Net | and | in to | out of | September 30, | September 30, | ||||||||||||||||||||||||||
| Asset (Liability) | 2010 | income [1] | OCI [2] | settlements | Level 3 [3] | Level 3 [3] | 2010 | 2010 [1] | ||||||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||||||
|
Fixed maturities, AFS
|
||||||||||||||||||||||||||||||||
|
ABS
|
$ | 548 | $ | (6 | ) | $ | 28 | $ | (26 | ) | $ | — | $ | (35 | ) | $ | 509 | $ | — | |||||||||||||
|
CDOs
|
2,778 | (45 | ) | 110 | (110 | ) | 15 | (192 | ) | 2,556 | (47 | ) | ||||||||||||||||||||
|
CMBS
|
652 | (23 | ) | 58 | (32 | ) | 36 | (78 | ) | 613 | (34 | ) | ||||||||||||||||||||
|
Corporate
|
8,816 | (10 | ) | 74 | (140 | ) | 5 | (6,635 | ) | 2,110 | (11 | ) | ||||||||||||||||||||
|
Foreign govt./govt. agencies
|
51 | — | 1 | (1 | ) | — | — | 51 | — | |||||||||||||||||||||||
|
Municipal
|
317 | 1 | 14 | (30 | ) | 11 | (24 | ) | 289 | — | ||||||||||||||||||||||
|
RMBS
|
1,466 | (4 | ) | 56 | (243 | ) | — | (3 | ) | 1,272 | (4 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total fixed maturities, AFS
|
14,628 | (87 | ) | 341 | (582 | ) | 67 | (6,967 | ) | 7,400 | (96 | ) | ||||||||||||||||||||
|
Fixed maturities, FVO
|
— | 48 | — | (1 | ) | 453 | — | 500 | 48 | |||||||||||||||||||||||
|
Equity securities, AFS
|
80 | — | (1 | ) | 7 | 14 | — | 100 | — | |||||||||||||||||||||||
|
Freestanding derivatives
|
||||||||||||||||||||||||||||||||
|
Credit derivatives
|
(533 | ) | 80 | — | (3 | ) | — | — | (456 | ) | 79 | |||||||||||||||||||||
|
Equity derivatives
|
— | 4 | — | — | — | — | 4 | 4 | ||||||||||||||||||||||||
|
Interest rate derivatives
|
(49 | ) | — | — | — | — | — | (49 | ) | 1 | ||||||||||||||||||||||
|
Other derivative contracts
|
35 | (1 | ) | — | — | — | — | 34 | (1 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total freestanding
derivatives [4]
|
(547 | ) | 83 | — | (3 | ) | — | — | (467 | ) | 83 | |||||||||||||||||||||
|
Separate accounts [5]
|
937 | 13 | — | 72 | 61 | (6 | ) | 1,077 | 9 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||||||||||
|
Other policyholder funds and
benefits payable
|
||||||||||||||||||||||||||||||||
|
Institutional notes
|
$ | 2 | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | 3 | $ | 1 | ||||||||||||||||
|
Equity linked notes
|
(7 | ) | (1 | ) | — | — | — | — | (8 | ) | (1 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total other policyholder
funds and benefits payable
|
(5 | ) | — | — | — | — | — | (5 | ) | — | ||||||||||||||||||||||
|
Other liabilities
|
(16 | ) | (14 | ) | — | — | — | — | (30 | ) | — | |||||||||||||||||||||
|
Consumer notes
|
(4 | ) | — | — | — | — | — | (4 | ) | — | ||||||||||||||||||||||
| [1] |
All amounts in these columns are reported in net realized capital
gains (losses) except for less than $1, which is reported in benefits,
losses and loss adjustment expenses. All amounts are before income
taxes and amortization of deferred policy acquisition costs and
present value of future profits (“DAC”).
|
|
| [2] |
OCI refers to “Other comprehensive income” in the Condensed
Consolidated Statement of Comprehensive Income. All amounts are
before income taxes and amortization of DAC.
|
|
| [3] |
Transfers in and/or (out) of Level 3 are primarily attributable to the
reclassification of investment grade private placement securities,
changes in the availability of market observable information, the
re-evaluation of the observability of pricing inputs and the election
of fair value option for investments containing an embedded credit
derivative.
|
|
| [4] |
Derivative instruments are reported in this table on a net basis for
asset/(liability) positions and reported in the Condensed Consolidated
Balance Sheet in other investments and other liabilities.
|
|
| [5] |
The realized/unrealized gains (losses) included in net income for
separate account assets are offset by an equal amount for separate
account liabilities, which results in a net zero impact on net income
for the Company.
|
24
| Changes in unrealized | ||||||||||||||||||||||||||||||||
| gains (losses) | ||||||||||||||||||||||||||||||||
| included in net income | ||||||||||||||||||||||||||||||||
| related to | ||||||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | financial instruments | ||||||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers | Transfers | as of | still held at | ||||||||||||||||||||||||||
| January 1, | Net | and | in to | out of | September 30, | September 30, | ||||||||||||||||||||||||||
| Asset (Liability) | 2010 | income [1] | OCI [2] | settlements | Level 3 [3] | Level 3 [3] | 2010 | 2010 [1] | ||||||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||||||
|
Fixed maturities, AFS
|
||||||||||||||||||||||||||||||||
|
ABS
|
$ | 580 | $ | (9 | ) | $ | 71 | $ | (49 | ) | $ | 28 | $ | (112 | ) | $ | 509 | $ | (2 | ) | ||||||||||||
|
CDOs
|
2,835 | (130 | ) | 430 | (177 | ) | 42 | (444 | ) | 2,556 | (137 | ) | ||||||||||||||||||||
|
CMBS
|
307 | (137 | ) | 333 | (55 | ) | 302 | (137 | ) | 613 | (108 | ) | ||||||||||||||||||||
|
Corporate
|
8,027 | (2 | ) | 306 | 137 | 515 | (6,873 | ) | 2,110 | (4 | ) | |||||||||||||||||||||
|
Foreign govt./govt. agencies
|
93 | — | 3 | (9 | ) | 6 | (42 | ) | 51 | — | ||||||||||||||||||||||
|
Municipal
|
262 | 1 | 48 | (5 | ) | 11 | (28 | ) | 289 | — | ||||||||||||||||||||||
|
RMBS
|
1,153 | (38 | ) | 220 | (37 | ) | — | (26 | ) | 1,272 | (33 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total fixed maturities, AFS
|
13,257 | (315 | ) | 1,411 | (195 | ) | 904 | (7,662 | ) | 7,400 | (284 | ) | ||||||||||||||||||||
|
Fixed maturities, FVO
|
— | 48 | — | (1 | ) | 453 | — | 500 | 48 | |||||||||||||||||||||||
|
Equity securities, AFS
|
58 | (2 | ) | 8 | 16 | 20 | — | 100 | (5 | ) | ||||||||||||||||||||||
|
Freestanding derivatives
|
||||||||||||||||||||||||||||||||
|
Credit derivatives
|
(228 | ) | 60 | — | 2 | (290 | ) | — | (456 | ) | 59 | |||||||||||||||||||||
|
Equity derivatives
|
(2 | ) | 6 | — | — | — | — | 4 | 6 | |||||||||||||||||||||||
|
Interest rate derivatives
|
5 | 1 | — | (44 | ) | — | (11 | ) | (49 | ) | (19 | ) | ||||||||||||||||||||
|
Other derivative contracts
|
36 | (2 | ) | — | — | — | — | 34 | (2 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total freestanding
derivatives [4]
|
(189 | ) | 65 | — | (42 | ) | (290 | ) | (11 | ) | (467 | ) | 44 | |||||||||||||||||||
|
Separate accounts [5]
|
962 | 29 | — | 154 | 65 | (133 | ) | 1,077 | 21 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||||||||||
|
Other policyholder funds and
benefits payable
|
||||||||||||||||||||||||||||||||
|
Institutional notes
|
$ | (2 | ) | $ | 5 | $ | — | $ | — | $ | — | $ | — | $ | 3 | $ | 5 | |||||||||||||||
|
Equity linked notes
|
(10 | ) | 2 | — | — | — | — | (8 | ) | 2 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total other policyholder
funds and benefits payable
|
(12 | ) | 7 | — | — | — | — | (5 | ) | 7 | ||||||||||||||||||||||
|
Other liabilities
|
— | (19 | ) | — | — | (11 | ) | — | (30 | ) | — | |||||||||||||||||||||
|
Consumer notes
|
(5 | ) | 1 | — | — | — | — | (4 | ) | 1 | ||||||||||||||||||||||
| [1] |
All amounts in these columns are reported in net realized capital
gains (losses) except for less than $1, which is reported in benefits,
losses and loss adjustment expenses. All amounts are before income
taxes and amortization of DAC.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
Transfers in and/or (out) of Level 3 are primarily attributable to the
reclassification of investment grade private placement securities,
changes in the availability of market observable information, the
re-evaluation of the observability of pricing inputs and the election
of fair value option for investments containing an embedded credit
derivative. Transfers in also include the consolidation of additional
VIEs due to the adoption of new accounting guidance on January 1,
2010.
|
|
| [4] |
Derivative instruments are reported in this table on a net basis for
asset/(liability) positions and reported in the Condensed Consolidated
Balance Sheet in other investments and other liabilities.
|
|
| [5] |
The realized/unrealized gains (losses) included in net income for
separate account assets are offset by an equal amount for separate
account liabilities, which results in a net zero impact on net income
for the Company.
|
25
| Changes in unrealized | ||||||||||||||||||||||||||||
| gains (losses) | ||||||||||||||||||||||||||||
| included in net income | ||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | related to financial | ||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers in | as of | instruments still held at | |||||||||||||||||||||||
| June 30, | Net | and | and/or (out) | September 30, | September 30, | |||||||||||||||||||||||
| Asset (Liability) | 2009 | income [1] | OCI [2] | settlements | of Level 3 [3] | 2009 | 2009 [1] | |||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||
|
Fixed maturities, AFS
|
||||||||||||||||||||||||||||
|
ABS
|
$ | 502 | $ | (32 | ) | $ | 122 | $ | (36 | ) | $ | 18 | $ | 574 | $ | (32 | ) | |||||||||||
|
CDOs
|
2,562 | (218 | ) | 436 | 35 | (31 | ) | 2,784 | (218 | ) | ||||||||||||||||||
|
CMBS
|
198 | (117 | ) | 171 | (5 | ) | 211 | 458 | (117 | ) | ||||||||||||||||||
|
Corporate
|
6,530 | (6 | ) | 587 | 80 | (54 | ) | 7,137 | (11 | ) | ||||||||||||||||||
|
Foreign govt./govt. agencies
|
68 | 1 | 4 | (3 | ) | (2 | ) | 68 | 1 | |||||||||||||||||||
|
Municipal
|
214 | — | 13 | 29 | 7 | 263 | — | |||||||||||||||||||||
|
RMBS
|
1,353 | (66 | ) | 158 | (231 | ) | (64 | ) | 1,150 | (66 | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total fixed maturities, AFS
|
11,427 | (438 | ) | 1,491 | (131 | ) | 85 | 12,434 | (443 | ) | ||||||||||||||||||
|
Equity securities, AFS
|
228 | (4 | ) | (5 | ) | 1 | 16 | 236 | — | |||||||||||||||||||
|
Freestanding derivatives [4]
|
(282 | ) | 49 | 5 | 11 | — | (217 | ) | 54 | |||||||||||||||||||
|
Separate accounts [5]
|
673 | 40 | — | 29 | (24 | ) | 718 | 34 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||||||
|
Other policyholder funds and
benefits payable
|
||||||||||||||||||||||||||||
|
Institutional notes
|
$ | 2 | $ | (9 | ) | $ | — | $ | — | $ | — | $ | (7 | ) | $ | (9 | ) | |||||||||||
|
Equity linked notes
|
(6 | ) | (2 | ) | — | — | — | (8 | ) | (2 | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total other policyholder
funds and benefits payable
|
(4 | ) | (11 | ) | — | — | — | (15 | ) | (11 | ) | |||||||||||||||||
|
Consumer notes
|
(4 | ) | (1 | ) | — | — | — | (5 | ) | (1 | ) | |||||||||||||||||
| [1] |
All amounts in these columns are reported in net realized capital
gains/losses except for less than $1 for the three months ended
September 30, 2009, which is reported in benefits, losses and loss
adjustment expenses. All amounts are before income taxes and
amortization DAC.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
Transfers in and/or (out) of Level 3 are attributable to a change in
the availability of market observable information and re-evaluation of
the observability of pricing inputs.
|
|
| [4] |
Derivative instruments are reported in this table on a net basis for
asset/(liability) positions and reported in the Condensed Consolidated
Balance Sheet in other investments and other liabilities.
|
|
| [5] |
The realized/unrealized gains (losses) included in net income for
separate account assets are offset by an equal amount for separate
account liabilities, which results in a net zero impact on net income
for the Company.
|
26
| Changes in unrealized | ||||||||||||||||||||||||||||
| gains (losses) | ||||||||||||||||||||||||||||
| included in net income | ||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | related to financial | ||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers in | as of | instruments still held at | |||||||||||||||||||||||
| January 1, | Net | and | and/or (out) | September 30, | September 30, | |||||||||||||||||||||||
| Asset (Liability) | 2009 | income [1] | OCI [2] | settlements | of Level 3 [3] | 2009 | 2009 [1] | |||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||
|
Fixed maturities, AFS
|
||||||||||||||||||||||||||||
|
ABS
|
$ | 536 | $ | (41 | ) | $ | 158 | $ | (35 | ) | $ | (44 | ) | $ | 574 | $ | (37 | ) | ||||||||||
|
CDOs
|
2,612 | (313 | ) | 534 | (18 | ) | (31 | ) | 2,784 | (312 | ) | |||||||||||||||||
|
CMBS
|
341 | (165 | ) | 199 | (13 | ) | 96 | 458 | (143 | ) | ||||||||||||||||||
|
Corporate
|
6,396 | (66 | ) | 994 | 278 | (465 | ) | 7,137 | (38 | ) | ||||||||||||||||||
|
Foreign govt./govt. agencies
|
100 | 1 | 2 | (13 | ) | (22 | ) | 68 | 1 | |||||||||||||||||||
|
Municipal
|
163 | — | 6 | 16 | 78 | 263 | — | |||||||||||||||||||||
|
RMBS
|
1,662 | (235 | ) | (86 | ) | (130 | ) | (61 | ) | 1,150 | (150 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total fixed maturities, AFS
|
11,810 | (819 | ) | 1,807 | 85 | (449 | ) | 12,434 | (679 | ) | ||||||||||||||||||
|
Equity securities, AFS
|
541 | (5 | ) | (6 | ) | (1 | ) | (293 | ) | 236 | — | |||||||||||||||||
|
Freestanding derivatives [4]
|
(281 | ) | 44 | (5 | ) | 31 | (6 | ) | (217 | ) | 63 | |||||||||||||||||
|
Separate accounts [5]
|
786 | (82 | ) | — | 139 | (125 | ) | 718 | (39 | ) | ||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||||||
|
Other policyholder funds and
benefits payable
|
||||||||||||||||||||||||||||
|
Institutional notes
|
$ | (41 | ) | $ | 34 | $ | — | $ | — | $ | — | $ | (7 | ) | $ | 34 | ||||||||||||
|
Equity linked notes
|
(8 | ) | — | — | — | — | (8 | ) | — | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total other policyholder funds
and benefits payable
|
(49 | ) | 34 | — | — | — | (15 | ) | 34 | |||||||||||||||||||
|
Other derivative liabilities [6]
|
(163 | ) | 70 | — | 93 | — | — | — | ||||||||||||||||||||
|
Consumer notes
|
(5 | ) | — | — | — | — | (5 | ) | — | |||||||||||||||||||
| [1] |
All amounts in these columns are reported in net realized capital
gains (losses) except for $2 for the nine months ended September 30,
2009, which is reported in benefits, losses and loss adjustment
expenses. All amounts are before income taxes and amortization of
DAC.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
Transfers in and/or (out) of Level 3 are attributable to a change in
the availability of market observable information and re-evaluation of
the observability of pricing inputs.
|
|
| [4] |
Derivative instruments are reported in this table on a net basis for
asset/(liability) positions and reported in the Condensed Consolidated
Balance Sheet in other investments and other liabilities.
|
|
| [5] |
The realized/unrealized gains (losses) included in net income for
separate account assets are offset by an equal amount for separate
account liabilities, which results in a net zero impact on net income
for the Company.
|
|
| [6] |
On March 26, 2009, certain of the Allianz warrants were reclassified
to equity, at their current fair value, as shareholder approval of the
conversion of these warrants to common shares was received. See Note
21 of the Notes to Consolidated Financial Statements included in The
Hartford’s 2009 Form 10-K Annual Report for further discussion.
|
27
| Three Months Ended | Nine Months Ended | |||||||
| September 30, 2010 | September 30, 2010 | |||||||
|
Assets
|
||||||||
|
Fixed maturities, FVO
|
||||||||
|
ABS
|
$ | 1 | $ | 3 | ||||
|
CRE CDOs
|
44 | 44 | ||||||
|
Corporate
|
4 | — | ||||||
|
Other liabilities
|
||||||||
|
Credit-linked notes
|
(14 | ) | (19 | ) | ||||
|
|
||||||||
|
Total realized capital gains
|
$ | 35 | $ | 28 | ||||
|
|
||||||||
| September 30, 2010 | ||||
|
Assets
|
||||
|
Fixed maturities, FVO
|
||||
|
ABS
|
$ | 64 | ||
|
CRE CDOs
|
236 | |||
|
Corporate
|
260 | |||
|
RMBS
|
4 | |||
|
|
||||
|
Total fixed maturities, FVO
|
$ | 564 | ||
|
|
||||
|
|
||||
|
Other liabilities
|
||||
|
Credit-linked notes [1]
|
$ | 30 | ||
| [1] |
As of September 30, 2010, the outstanding principal balance of the notes was $243. Not
included in the table above was $270 of derivative instruments held in one of the Company’s
consolidated VIEs which is included in the Company’s Condensed Consolidated Balance Sheets.
|
28
| September 30, 2010 | December 31, 2009 | |||||||||||||||
| Carrying | Fair | Carrying | Fair | |||||||||||||
| Amount | Value | Amount | Value | |||||||||||||
|
Assets
|
||||||||||||||||
|
Policy loans
|
$ | 2,180 | $ | 2,328 | $ | 2,174 | $ | 2,321 | ||||||||
|
Mortgage loans
|
4,684 | 4,728 | 5,938 | 5,091 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Liabilities
|
||||||||||||||||
|
Other policyholder funds and benefits payable [1]
|
$ | 11,486 | $ | 11,845 | $ | 12,330 | $ | 12,513 | ||||||||
|
Senior notes [2]
|
4,880 | 5,110 | 4,054 | 4,037 | ||||||||||||
|
Junior subordinated debentures [2]
|
1,723 | 2,466 | 1,717 | 2,338 | ||||||||||||
|
Consumer notes [3]
|
380 | 394 | 1,131 | 1,194 | ||||||||||||
| [1] |
Excludes guarantees on variable annuities, group accident and health and universal life insurance contracts, including
corporate owned life insurance.
|
|
| [2] |
Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are
included in short-term debt.
|
|
| [3] |
Excludes amounts carried at fair value and included in disclosures above.
|
| • |
Fair value for policy loans and consumer notes were estimated using discounted cash flow
calculations using current interest rates.
|
| • |
Fair values for mortgage loans were estimated using discounted cash flow calculations based
on current lending rates for similar type loans. Current lending rates reflect changes in
credit spreads and the remaining terms of the loans.
|
| • |
Fair values for other policyholder funds and benefits payable, not carried at fair value,
are determined by estimating future cash flows, discounted at the current market rate.
|
| • |
Fair values for senior notes and junior subordinated debentures are based primarily on
market quotations from independent third-party pricing services.
|
29
| September 30, 2010 | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | Significant | ||||||||||||||
| Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Assets accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Variable annuity hedging derivatives
|
$ | 162 | $ | — | $ | (16 | ) | $ | 178 | |||||||
|
Macro hedge program
|
587 | 1 | 185 | 401 | ||||||||||||
|
Reinsurance recoverable for U.S. GMWB
|
458 | — | — | 458 | ||||||||||||
|
|
||||||||||||||||
|
Total assets accounted for at fair value on a recurring basis
|
$ | 1,207 | $ | 1 | $ | 169 | $ | 1,037 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Liabilities accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Other policyholder funds and benefits payable
|
||||||||||||||||
|
U.S. guaranteed withdrawal benefits
|
$ | (2,541 | ) | $ | — | $ | — | $ | (2,541 | ) | ||||||
|
International guaranteed withdrawal benefits
|
(64 | ) | — | — | (64 | ) | ||||||||||
|
International other guaranteed living benefits
|
1 | — | — | 1 | ||||||||||||
|
Variable annuity hedging derivatives
|
352 | — | (30 | ) | 382 | |||||||||||
|
Macro hedge program
|
11 | — | — | 11 | ||||||||||||
|
|
||||||||||||||||
|
Total liabilities accounted for at fair value on a recurring
basis
|
$ | (2,241 | ) | $ | — | $ | (30 | ) | $ | (2,211 | ) | |||||
|
|
||||||||||||||||
| December 31, 2009 | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | Significant | ||||||||||||||
| Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Assets accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Variable annuity hedging derivatives
|
$ | 9 | $ | — | $ | — | $ | 9 | ||||||||
|
Macro hedge program
|
203 | 8 | 16 | 179 | ||||||||||||
|
Reinsurance recoverable for U.S. GMWB
|
347 | — | — | 347 | ||||||||||||
|
|
||||||||||||||||
|
Total assets accounted for at fair value on a recurring basis
|
$ | 559 | $ | 8 | $ | 16 | $ | 535 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Liabilities accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Other policyholder funds and benefits payable
|
||||||||||||||||
|
U.S. guaranteed withdrawal benefits
|
$ | (1,957 | ) | $ | — | $ | — | $ | (1,957 | ) | ||||||
|
International guaranteed withdrawal benefits
|
(45 | ) | — | — | (45 | ) | ||||||||||
|
International other guaranteed living benefits
|
2 | — | — | 2 | ||||||||||||
|
Variable annuity hedging derivatives
|
43 | — | (184 | ) | 227 | |||||||||||
|
Macro hedge program
|
115 | (2 | ) | 6 | 111 | |||||||||||
|
|
||||||||||||||||
|
Total liabilities accounted for at fair value on a recurring
basis
|
$ | (1,842 | ) | $ | (2 | ) | $ | (178 | ) | $ | (1,662 | ) | ||||
|
|
||||||||||||||||
30
| • |
risk-free rates as represented by the eurodollar futures, LIBOR deposits and swap rates to
derive forward curve rates;
|
| • |
market implied volatility assumptions for each underlying index based primarily on a blend
of observed market “implied volatility” data;
|
| • |
correlations of historical returns across underlying well known market indices based on
actual observed returns over the ten years preceding the valuation date; and
|
| • |
three years of history for fund indexes compared to separate account fund regression.
|
31
32
| Changes in unrealized | ||||||||||||||||||||||||||||||||
| gains (losses) | ||||||||||||||||||||||||||||||||
| included in net income | ||||||||||||||||||||||||||||||||
| related to | ||||||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | financial instruments | ||||||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers | Transfers | as of | still held at | ||||||||||||||||||||||||||
| June 30, | Net income | and | in to | out of | September 30, | September 30, | ||||||||||||||||||||||||||
| Asset (Liability) | 2010 | [1] [2] [6] | OCI [2] | settlements [3] | Level 3 | Level 3 | 2010 | 2010 [1] [2] | ||||||||||||||||||||||||
|
Variable annuity
hedging derivatives [5]
|
||||||||||||||||||||||||||||||||
|
Levels 1 and 2
|
$ | (91 | ) | $ | (89 | ) | $ | — | $ | 134 | $ | — | $ | — | $ | (46 | ) | [4] | ||||||||||||||
|
Level 3
|
928 | (295 | ) | — | (73 | ) | — | — | 560 | $ | (241 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total variable annuity
hedging derivatives
|
837 | (384 | ) | — | 61 | — | — | 514 | [4] | |||||||||||||||||||||||
|
Reinsurance recoverable
for GMWB
|
550 | (101 | ) | — | 9 | — | — | 458 | (101 | ) | ||||||||||||||||||||||
|
U.S. guaranteed
withdrawal benefits —
Level 3
|
(3,148 | ) | 639 | — | (32 | ) | — | — | (2,541 | ) | 639 | |||||||||||||||||||||
|
International guaranteed
withdrawal benefits —
Level 3
|
(72 | ) | 16 | (4 | ) | (4 | ) | — | — | (64 | ) | 16 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total Guaranteed
withdrawal benefits net
of reinsurance and
hedging derivatives
|
(1,833 | ) | 170 | (4 | ) | 34 | — | — | (1,633 | ) | [4] | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Macro hedge program [5]
|
||||||||||||||||||||||||||||||||
|
Levels 1 and 2
|
190 | (165 | ) | — | 161 | — | — | 186 | [4] | |||||||||||||||||||||||
|
Level 3
|
663 | (278 | ) | — | 27 | — | — | 412 | (278 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total macro hedge program
|
853 | (443 | ) | — | 188 | — | — | 598 | [4] | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
International other
guaranteed living
benefits — Level 3
|
(1 | ) | 3 | — | (1 | ) | — | — | 1 | 3 | ||||||||||||||||||||||
| [1] |
The Company classifies gains and losses on GMWB reinsurance derivatives and Guaranteed Living Benefit embedded derivatives as
unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract
basis the realized gains (losses) for these derivatives and embedded derivatives.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
The ‘Purchases, issuances, and settlements’ primarily relates to the receipt of cash on futures and option contracts classified
as Level 1 and interest rate, currency and credit default swaps classified as Level 2. For GMWB reinsurance and guaranteed
withdrawal benefits, purchases, issuances and settlements represent the reinsurance premium paid and the attributed fees
collected, respectively.
|
|
| [4] |
Disclosure of changes in unrealized gains (losses) is not required for Levels 1 and 2. Information presented is for Level 3 only.
|
|
| [5] |
The variable annuity hedging derivatives and the macro hedge program derivatives are reported in this table on a net basis for
asset/(liability) positions and reported in the Condensed Consolidated Balance Sheet in other investments and other liabilities.
|
|
| [6] |
Includes both market and non-market impacts in deriving realized and unrealized gains (losses).
|
33
| Changes in unrealized | ||||||||||||||||||||||||||||||||
| gains (losses) | ||||||||||||||||||||||||||||||||
| included in net income | ||||||||||||||||||||||||||||||||
| related to | ||||||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | financial instruments | ||||||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers | Transfers | as of | still held at | ||||||||||||||||||||||||||
| January 1, | Net income | And | in to | out of | September 30, | September 30, | ||||||||||||||||||||||||||
| Asset (Liability) | 2010 | [1] [2] [6] | OCI [2] | settlements [3] | Level 3 | Level 3 | 2010 | 2010 [1] [2] | ||||||||||||||||||||||||
|
Variable annuity
hedging derivatives [5]
|
||||||||||||||||||||||||||||||||
|
Levels 1 and 2
|
$ | (184 | ) | $ | 34 | $ | — | $ | 104 | $ | — | $ | — | $ | (46 | ) | [4] | |||||||||||||||
|
Level 3
|
236 | 244 | — | 80 | — | — | 560 | $ | 261 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total variable annuity
hedging derivatives
|
52 | 278 | — | 184 | — | — | 514 | [4] | ||||||||||||||||||||||||
|
Reinsurance recoverable
for GMWB
|
347 | 84 | — | 27 | — | — | 458 | 84 | ||||||||||||||||||||||||
|
U.S. guaranteed
withdrawal benefits —
Level 3
|
(1,957 | ) | (481 | ) | — | (103 | ) | — | — | (2,541 | ) | (481 | ) | |||||||||||||||||||
|
International guaranteed
withdrawal benefits —
Level 3
|
(45 | ) | (8 | ) | (4 | ) | (7 | ) | — | — | (64 | ) | (8 | ) | ||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total Guaranteed
withdrawal benefits net
of reinsurance and
hedging derivatives
|
(1,603 | ) | (127 | ) | (4 | ) | 101 | — | — | (1,633 | ) | [4] | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Macro hedge program [5]
|
||||||||||||||||||||||||||||||||
|
Levels 1 and 2
|
28 | (73 | ) | — | 231 | — | — | 186 | [4] | |||||||||||||||||||||||
|
Level 3
|
290 | (137 | ) | — | 259 | — | — | 412 | (117 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total macro hedge program
|
318 | (210 | ) | — | 490 | — | — | 598 | [4] | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
International other
guaranteed living
benefits — Level 3
|
2 | 1 | — | (2 | ) | — | — | 1 | 1 | |||||||||||||||||||||||
| [1] |
The Company classifies gains and losses on GMWB reinsurance derivatives and Guaranteed Living Benefit embedded derivatives as
unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract
basis the realized gains (losses) for these derivatives and embedded derivatives.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
The ‘Purchases, issuances, and settlements’ primarily relates to the receipt of cash on futures and option contracts classified
as Level 1 and interest rate, currency and credit default swaps classified as Level 2. For GMWB reinsurance and guaranteed
withdrawal benefits, purchases, issuances and settlements represent the reinsurance premium paid and the attributed fees
collected, respectively.
|
|
| [4] |
Disclosure of changes in unrealized gains (losses) is not required for Levels 1 and 2. Information presented is for Level 3 only.
|
|
| [5] |
The variable annuity hedging derivatives and the macro hedge program derivatives are reported in this table on a net basis for
asset/(liability) positions and reported in the Condensed Consolidated Balance Sheet in other investments and other liabilities.
|
|
| [6] |
Includes both market and non-market impacts in deriving realized and unrealized gains (losses).
|
34
| Changes in unrealized | ||||||||||||||||||||||||||||
| gains (losses) | ||||||||||||||||||||||||||||
| included in net income | ||||||||||||||||||||||||||||
| related to | ||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | financial instruments | ||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers in | as of | still held at | |||||||||||||||||||||||
| June 30, | Net income | and | and/or (out) | September 30, | September 30, | |||||||||||||||||||||||
| Asset (Liability) | 2009 | [1] [2] [6] | OCI [2] | settlements [3] | of Level 3 | 2009 | 2009 [1] [2] | |||||||||||||||||||||
|
Variable annuity hedging derivatives [5]
|
||||||||||||||||||||||||||||
|
Levels 1 and 2
|
$ | (167 | ) | $ | (268 | ) | $ | — | $ | 309 | $ | — | $ | (126 | ) | [4] | ||||||||||||
|
Level 3
|
1,022 | (210 | ) | — | (302 | ) | — | 510 | $ | (3 | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total variable annuity hedging derivatives
|
855 | (478 | ) | — | 7 | — | 384 | [4] | ||||||||||||||||||||
|
Reinsurance recoverable for GMWB
|
632 | (103 | ) | — | 9 | — | 538 | (103 | ) | |||||||||||||||||||
|
U.S. guaranteed withdrawal benefits — Level 3
|
(3,289 | ) | 383 | — | (38 | ) | — | (2,944 | ) | 383 | ||||||||||||||||||
|
International guaranteed withdrawal benefits —
Level 3
|
(57 | ) | 8 | — | (2 | ) | — | (51 | ) | 8 | ||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Guaranteed withdrawal benefits net of
reinsurance and hedging derivatives
|
(1,859 | ) | (190 | ) | — | (24 | ) | — | (2,073 | ) | [4] | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Macro hedge program [5]
|
||||||||||||||||||||||||||||
|
Levels 1 and 2
|
28 | (97 | ) | — | 130 | — | 61 | [4] | ||||||||||||||||||||
|
Level 3
|
113 | (231 | ) | — | 379 | — | 261 | (231 | ) | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total macro hedge program
|
141 | (328 | ) | — | 509 | — | 322 | [4] | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
International other guaranteed living benefits —
Level 3
|
2 | 1 | — | — | — | 3 | 1 | |||||||||||||||||||||
| [1] |
The Company classifies gains and losses on GMWB reinsurance derivatives and Guaranteed Living Benefit embedded derivatives as
unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract
basis the realized gains (losses) for these derivatives and embedded derivatives.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
The ‘Purchases, issuances, and settlements’ primarily relates to the receipt of cash on futures and option contracts classified
as Level 1 and interest rate, currency and credit default swaps classified as Level 2. For GMWB reinsurance and guaranteed
withdrawal benefits, purchases, issuances and settlements represent the reinsurance premium paid and the attributed fees
collected, respectively.
|
|
| [4] |
Disclosure of changes in unrealized gains (losses) is not required for Levels 1 and 2. Information presented is for Level 3 only.
|
|
| [5] |
The variable annuity hedging derivatives and the macro hedge program derivatives are reported in this table on a net basis for
asset/(liability) positions and reported in the Condensed Consolidated Balance Sheet in other investments and other liabilities.
|
|
| [6] |
Includes both market and non-market impacts in deriving realized and unrealized gains (losses).
|
35
| Changes in unrealized | ||||||||||||||||||||||||||||
| gains (losses) | ||||||||||||||||||||||||||||
| included in net income | ||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value |
related to
financial instruments |
||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers in | as of | still held at | |||||||||||||||||||||||
| January 1, | Net income | and | and/or (out) | September 30, | September 30, | |||||||||||||||||||||||
| Asset (Liability) | 2009 | [1] [2] [6] | OCI [2] | settlements [3] | of Level 3 | 2009 | 2009 [1] [2] | |||||||||||||||||||||
|
Variable annuity hedging derivatives [5]
|
||||||||||||||||||||||||||||
|
Levels 1 and 2
|
$ | 27 | $ | (782 | ) | $ | — | $ | 629 | $ | — | $ | (126 | ) | [4] | |||||||||||||
|
Level 3
|
2,637 | (1,096 | ) | — | (1,031 | ) | — | 510 | $ | (838 | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total variable annuity hedging derivatives
|
2,664 | (1,878 | ) | — | (402 | ) | — | 384 | [4] | |||||||||||||||||||
|
Reinsurance recoverable for GMWB
|
1,302 | (788 | ) | — | 24 | — | 538 | (788 | ) | |||||||||||||||||||
|
U.S. guaranteed withdrawal benefits — Level
3
|
(6,526 | ) | 3,683 | — | (101 | ) | — | (2,944 | ) | 3,683 | ||||||||||||||||||
|
International guaranteed withdrawal
benefits — Level 3
|
(94 | ) | 53 | (3 | ) | (7 | ) | — | (51 | ) | 53 | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Guaranteed withdrawal benefits net of
reinsurance and hedging derivatives
|
(2,654 | ) | 1,070 | (3 | ) | (486 | ) | — | (2,073 | ) | [4] | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Macro hedge program [5]
|
||||||||||||||||||||||||||||
|
Levels 1 and 2
|
— | (254 | ) | — | 315 | — | 61 | [4] | ||||||||||||||||||||
|
Level 3
|
137 | (438 | ) | — | 562 | — | 261 | (438 | ) | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total macro hedge program
|
137 | (692 | ) | — | 877 | — | 322 | [4] | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
International other guaranteed living
benefits — Level 3
|
— | 5 | — | (2 | ) | — | 3 | 5 | ||||||||||||||||||||
| [1] |
The Company classifies gains and losses on GMWB reinsurance derivatives and Guaranteed Living Benefit embedded derivatives as
unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract
basis the realized gains (losses) for these derivatives and embedded derivatives.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
The ‘Purchases, issuances, and settlements’ primarily relates to the receipt of cash on futures and option contracts classified
as Level 1 and interest rate, currency and credit default swaps classified as Level 2. For GMWB reinsurance and guaranteed
withdrawal benefits, purchases, issuances and settlements represent the reinsurance premium paid and the attributed fees
collected, respectively.
|
|
| [4] |
Disclosure of changes in unrealized gains (losses) is not required for Levels 1 and 2. Information presented is for Level 3 only.
|
|
| [5] |
The variable annuity hedging derivatives and the macro hedge program derivatives are reported in this table on a net basis for
asset/(liability) positions and reported in the Condensed Consolidated Balance Sheet in other investments and other liabilities.
|
|
| [6] |
Includes both market and non-market impacts in deriving realized and unrealized gains (losses).
|
36
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 [1] | 2010 | 2009 [1] | |||||||||||||
|
OTTI losses recognized in OCI
|
$ | (31 | ) | $ | (224 | ) | $ | (403 | ) | $ | (472 | ) | ||||
|
Changes in fair value and/or sales
|
114 | 137 | 591 | 236 | ||||||||||||
|
Tax and deferred acquisition costs
|
(39 | ) | 36 | (91 | ) | 60 | ||||||||||
|
|
||||||||||||||||
|
Change in non-credit impairments recognized in OCI
|
$ | 44 | $ | (51 | ) | $ | 97 | $ | (176 | ) | ||||||
|
|
||||||||||||||||
| [1] |
The Company adopted the other-than-temporary impairment guidance as of April 1, 2009.
|
37
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Before-tax) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Gross gains on sales
|
$ | 179 | $ | 205 | $ | 654 | $ | 570 | ||||||||
|
Gross losses on sales
|
(88 | ) | (104 | ) | (293 | ) | (1,013 | ) | ||||||||
|
Net OTTI losses recognized in earnings
|
(115 | ) | (536 | ) | (375 | ) | (1,074 | ) | ||||||||
|
Valuation allowances on mortgage loans
|
(7 | ) | (40 | ) | (159 | ) | (193 | ) | ||||||||
|
Japanese fixed annuity contract hedges, net [1]
|
11 | (7 | ) | 22 | 28 | |||||||||||
|
Periodic net coupon settlements on credit derivatives/Japan
|
(4 | ) | (7 | ) | (15 | ) | (39 | ) | ||||||||
|
Results of variable annuity hedge program
|
||||||||||||||||
|
GMWB derivatives, net
|
170 | (190 | ) | (127 | ) | 1,070 | ||||||||||
|
Macro hedge program
|
(443 | ) | (328 | ) | (210 | ) | (692 | ) | ||||||||
|
|
||||||||||||||||
|
Total results of variable annuity hedge program
|
(273 | ) | (518 | ) | (337 | ) | 378 | |||||||||
|
Other, net [2]
|
36 | (212 | ) | (23 | ) | (473 | ) | |||||||||
|
|
||||||||||||||||
|
Net realized capital losses
|
$ | (261 | ) | $ | (1,219 | ) | $ | (526 | ) | $ | (1,816 | ) | ||||
|
|
||||||||||||||||
| [1] |
Relates to derivative hedging instruments, excluding periodic net
coupon settlements, and is net of the Japanese fixed annuity
product liability adjustment for changes in the dollar/yen
exchange spot rate.
|
|
| [2] |
Primarily consists of losses on Japan 3Win related foreign
currency swaps, changes in fair value on non-qualifying
derivatives and fixed maturities, FVO, and other investment gains
and losses.
|
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Before-tax) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Balance as of beginning of period
|
$ | (2,281 | ) | $ | (1,578 | ) | $ | (2,200 | ) | $ | (1,320 | ) | ||||
|
Additions for credit impairments recognized on [1]:
|
||||||||||||||||
|
Securities not previously impaired
|
(19 | ) | (315 | ) | (183 | ) | (527 | ) | ||||||||
|
Securities previously impaired
|
(52 | ) | (180 | ) | (143 | ) | (229 | ) | ||||||||
|
Reductions for credit impairments previously recognized on:
|
||||||||||||||||
|
Securities that matured or were sold during the period
|
224 | 28 | 378 | 28 | ||||||||||||
|
Securities that the Company intends to sell or more
likely than not will be required to sell before
recovery
|
— | — | — | 3 | ||||||||||||
|
Securities due to an increase in expected cash flows
|
10 | 2 | 30 | 2 | ||||||||||||
|
|
||||||||||||||||
|
Balance as of end of period
|
$ | (2,118 | ) | $ | (2,043 | ) | $ | (2,118 | ) | $ | (2,043 | ) | ||||
|
|
||||||||||||||||
| [1] |
These additions are included in the net OTTI losses recognized in earnings in the Condensed
Consolidated Statements of Operations.
|
38
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||||||||||
| Cost or | Gross | Gross | Non- | Cost or | Gross | Gross | Non- | |||||||||||||||||||||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | Credit | Amortized | Unrealized | Unrealized | Fair | Credit | |||||||||||||||||||||||||||||||
| Cost | Gains | Losses | Value | OTTI [1] | Cost | Gains | Losses | Value | OTTI [1] | |||||||||||||||||||||||||||||||
|
ABS
|
$ | 3,341 | $ | 75 | $ | (407 | ) | $ | 3,009 | $ | (22 | ) | $ | 3,040 | $ | 36 | $ | (553 | ) | $ | 2,523 | $ | (48 | ) | ||||||||||||||||
|
CDOs
|
3,114 | 16 | (567 | ) | 2,563 | (90 | ) | 4,054 | 27 | (1,189 | ) | 2,892 | (174 | ) | ||||||||||||||||||||||||||
|
CMBS
|
8,776 | 301 | (917 | ) | 8,160 | (3 | ) | 10,736 | 114 | (2,306 | ) | 8,544 | (6 | ) | ||||||||||||||||||||||||||
|
Corporate [2]
|
38,368 | 3,244 | (702 | ) | 40,851 | (4 | ) | 35,318 | 1,368 | (1,443 | ) | 35,243 | (23 | ) | ||||||||||||||||||||||||||
|
Foreign govt./govt. agencies
|
1,773 | 162 | (11 | ) | 1,924 | — | 1,376 | 52 | (20 | ) | 1,408 | — | ||||||||||||||||||||||||||||
|
Municipal
|
12,235 | 596 | (108 | ) | 12,723 | — | 12,125 | 318 | (378 | ) | 12,065 | (3 | ) | |||||||||||||||||||||||||||
|
RMBS
|
5,919 | 156 | (524 | ) | 5,551 | (132 | ) | 5,512 | 104 | (769 | ) | 4,847 | (185 | ) | ||||||||||||||||||||||||||
|
U.S. Treasuries
|
4,958 | 75 | (78 | ) | 4,955 | — | 3,854 | 14 | (237 | ) | 3,631 | — | ||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total fixed maturities, AFS
|
78,484 | 4,625 | (3,314 | ) | 79,736 | (251 | ) | 76,015 | 2,033 | (6,895 | ) | 71,153 | (439 | ) | ||||||||||||||||||||||||||
|
Equity securities, AFS
|
1,232 | 76 | (140 | ) | 1,168 | — | 1,333 | 80 | (192 | ) | 1,221 | — | ||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total AFS securities
|
$ | 79,716 | $ | 4,701 | $ | (3,454 | ) | $ | 80,904 | $ | (251 | ) | $ | 77,348 | $ | 2,113 | $ | (7,087 | ) | $ | 72,374 | $ | (439 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
| [1] |
Represents the amount of cumulative non-credit OTTI losses recognized
in OCI on securities that also had credit impairments. These losses
are included in gross unrealized losses as of September 30, 2010 and
December 31, 2009.
|
|
| [2] |
Gross unrealized gains (losses) exclude the fair value of bifurcated
embedded derivative features of certain securities. Subsequent
changes in value will be recorded in net realized capital gains
(losses).
|
| September 30, 2010 | ||||||||
| Contractual Maturity | Amortized Cost | Fair Value | ||||||
|
One year or less
|
$ | 1,894 | $ | 1,912 | ||||
|
Over one year through five years
|
16,649 | 17,564 | ||||||
|
Over five years through ten years
|
14,668 | 15,836 | ||||||
|
Over ten years
|
24,123 | 25,141 | ||||||
|
|
||||||||
|
Subtotal
|
57,334 | 60,453 | ||||||
|
Mortgage-backed and asset-backed securities
|
21,150 | 19,283 | ||||||
|
|
||||||||
|
Total fixed maturities, AFS
|
$ | 78,484 | $ | 79,736 | ||||
|
|
||||||||
39
| September 30, 2010 | ||||||||||||||||||||||||||||||||||||
| Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||||||||||||||
| Cost or | Cost or | Cost or | ||||||||||||||||||||||||||||||||||
| Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | ||||||||||||||||||||||||||||
| Cost | Value | Losses | Cost | Value | Losses | Cost | Value | Losses | ||||||||||||||||||||||||||||
|
ABS
|
$ | 204 | $ | 186 | $ | (18 | ) | $ | 1,479 | $ | 1,090 | $ | (389 | ) | $ | 1,683 | $ | 1,276 | $ | (407 | ) | |||||||||||||||
|
CDOs
|
317 | 279 | (38 | ) | 2,763 | 2,234 | (529 | ) | 3,080 | 2,513 | (567 | ) | ||||||||||||||||||||||||
|
CMBS
|
251 | 238 | (13 | ) | 4,531 | 3,627 | (904 | ) | 4,782 | 3,865 | (917 | ) | ||||||||||||||||||||||||
|
Corporate [1]
|
1,531 | 1,418 | (107 | ) | 4,710 | 4,062 | (595 | ) | 6,241 | 5,480 | (702 | ) | ||||||||||||||||||||||||
|
Foreign govt./govt. agencies
|
35 | 34 | (1 | ) | 75 | 65 | (10 | ) | 110 | 99 | (11 | ) | ||||||||||||||||||||||||
|
Municipal
|
319 | 315 | (4 | ) | 1,139 | 1,035 | (104 | ) | 1,458 | 1,350 | (108 | ) | ||||||||||||||||||||||||
|
RMBS
|
1,064 | 1,041 | (23 | ) | 1,693 | 1,192 | (501 | ) | 2,757 | 2,233 | (524 | ) | ||||||||||||||||||||||||
|
U.S. Treasuries
|
764 | 762 | (2 | ) | 575 | 499 | (76 | ) | 1,339 | 1,261 | (78 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total fixed maturities, AFS
|
4,485 | 4,273 | (206 | ) | 16,965 | 13,804 | (3,108 | ) | 21,450 | 18,077 | (3,314 | ) | ||||||||||||||||||||||||
|
Equity securities, AFS
|
66 | 61 | (5 | ) | 789 | 654 | (135 | ) | 855 | 715 | (140 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total AFS securities in an
unrealized loss
|
$ | 4,551 | $ | 4,334 | $ | (211 | ) | $ | 17,754 | $ | 14,458 | $ | (3,243 | ) | $ | 22,305 | $ | 18,792 | $ | (3,454 | ) | |||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| [1] |
Unrealized losses exclude the fair value of bifurcated embedded derivative features of
certain securities. Subsequent changes in value will be recorded in net realized capital
gains (losses).
|
| December 31, 2009 | ||||||||||||||||||||||||||||||||||||
| Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||||||||||||||
| Cost or | Cost or | Cost or | ||||||||||||||||||||||||||||||||||
| Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | ||||||||||||||||||||||||||||
| Cost | Value | Losses | Cost | Value | Losses | Cost | Value | Losses | ||||||||||||||||||||||||||||
|
ABS
|
$ | 445 | $ | 376 | $ | (69 | ) | $ | 1,574 | $ | 1,090 | $ | (484 | ) | $ | 2,019 | $ | 1,466 | $ | (553 | ) | |||||||||||||||
|
CDOs
|
1,649 | 1,418 | (231 | ) | 2,388 | 1,430 | (958 | ) | 4,037 | 2,848 | (1,189 | ) | ||||||||||||||||||||||||
|
CMBS
|
1,951 | 1,628 | (323 | ) | 6,330 | 4,347 | (1,983 | ) | 8,281 | 5,975 | (2,306 | ) | ||||||||||||||||||||||||
|
Corporate
|
5,715 | 5,314 | (401 | ) | 6,675 | 5,633 | (1,042 | ) | 12,390 | 10,947 | (1,443 | ) | ||||||||||||||||||||||||
|
Foreign govt./govt. agencies
|
543 | 530 | (13 | ) | 43 | 36 | (7 | ) | 586 | 566 | (20 | ) | ||||||||||||||||||||||||
|
Municipal
|
2,339 | 2,283 | (56 | ) | 2,184 | 1,862 | (322 | ) | 4,523 | 4,145 | (378 | ) | ||||||||||||||||||||||||
|
RMBS
|
855 | 787 | (68 | ) | 1,927 | 1,226 | (701 | ) | 2,782 | 2,013 | (769 | ) | ||||||||||||||||||||||||
|
U.S. Treasuries
|
2,592 | 2,538 | (54 | ) | 648 | 465 | (183 | ) | 3,240 | 3,003 | (237 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total fixed maturities, AFS
|
16,089 | 14,874 | (1,215 | ) | 21,769 | 16,089 | (5,680 | ) | 37,858 | 30,963 | (6,895 | ) | ||||||||||||||||||||||||
|
Equity securities, AFS
|
419 | 356 | (63 | ) | 676 | 547 | (129 | ) | 1,095 | 903 | (192 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total AFS securities in an
unrealized loss
|
$ | 16,508 | $ | 15,230 | $ | (1,278 | ) | $ | 22,445 | $ | 16,636 | $ | (5,809 | ) | $ | 38,953 | $ | 31,866 | $ | (7,087 | ) | |||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
40
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Amortized | Valuation | Carrying | Amortized | Valuation | Carrying | |||||||||||||||||||
| Cost [1] | Allowance | Value | Cost [1] | Allowance | Value | |||||||||||||||||||
|
Agricultural
|
$ | 350 | $ | (22 | ) | $ | 328 | $ | 604 | $ | (8 | ) | $ | 596 | ||||||||||
|
Commercial
|
4,321 | (139 | ) | 4,182 | 5,492 | (358 | ) | 5,134 | ||||||||||||||||
|
Residential
|
177 | (3 | ) | 174 | 208 | — | 208 | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total mortgage loans
|
$ | 4,848 | $ | (164 | ) | $ | 4,684 | $ | 6,304 | $ | (366 | ) | $ | 5,938 | ||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Amortized cost represents carrying value prior to valuation allowances, if any.
|
| 2010 | 2009 | |||||||
|
Balance as of January 1
|
$ | (366 | ) | $ | (26 | ) | ||
|
Additions
|
(159 | ) | (198 | ) | ||||
|
Deductions
|
361 | 48 | ||||||
|
|
||||||||
|
Balance as of September 30
|
$ | (164 | ) | $ | (176 | ) | ||
|
|
||||||||
| Mortgage Loans by Region | ||||||||||||||||
|
|
||||||||||||||||
| September 30, 2010 | December 31, 2009 | |||||||||||||||
| Carrying | Percent of | Carrying | Percent of | |||||||||||||
| Value | Total | Value | Total | |||||||||||||
|
East North Central
|
$ | 77 | 1.6 | % | $ | 125 | 2.1 | % | ||||||||
|
Middle Atlantic
|
432 | 9.2 | % | 689 | 11.6 | % | ||||||||||
|
Mountain
|
112 | 2.4 | % | 138 | 2.3 | % | ||||||||||
|
New England
|
390 | 8.3 | % | 449 | 7.6 | % | ||||||||||
|
Pacific
|
1,182 | 25.2 | % | 1,377 | 23.2 | % | ||||||||||
|
South Atlantic
|
1,188 | 25.4 | % | 1,213 | 20.4 | % | ||||||||||
|
West North Central
|
37 | 0.8 | % | 51 | 0.9 | % | ||||||||||
|
West South Central
|
242 | 5.2 | % | 297 | 5.0 | % | ||||||||||
|
Other [1]
|
1,024 | 21.9 | % | 1,599 | 26.9 | % | ||||||||||
|
|
||||||||||||||||
|
Total mortgage loans
|
$ | 4,684 | 100.0 | % | $ | 5,938 | 100.0 | % | ||||||||
|
|
||||||||||||||||
| [1] |
Primarily represents loans collateralized by multiple properties in various regions.
|
| Mortgage Loans by Property Type | ||||||||||||||||
|
|
||||||||||||||||
| September 30, 2010 | December 31, 2009 | |||||||||||||||
| Carrying | Percent of | Carrying | Percent of | |||||||||||||
| Value | Total | Value | Total | |||||||||||||
|
Agricultural
|
$ | 328 | 7.0 | % | $ | 596 | 10.0 | % | ||||||||
|
Industrial
|
1,144 | 24.4 | % | 1,068 | 18.0 | % | ||||||||||
|
Lodging
|
167 | 3.6 | % | 421 | 7.1 | % | ||||||||||
|
Multifamily
|
820 | 17.5 | % | 835 | 14.1 | % | ||||||||||
|
Office
|
1,011 | 21.6 | % | 1,727 | 29.1 | % | ||||||||||
|
Residential
|
174 | 3.7 | % | 208 | 3.5 | % | ||||||||||
|
Retail
|
655 | 14.0 | % | 712 | 12.0 | % | ||||||||||
|
Other
|
385 | 8.2 | % | 371 | 6.2 | % | ||||||||||
|
|
||||||||||||||||
|
Total mortgage loans
|
$ | 4,684 | 100.0 | % | $ | 5,938 | 100.0 | % | ||||||||
|
|
||||||||||||||||
41
| September 30, 2010 | December 31, 2009 | ||||||||||||||||||||||||||
| Maximum | Maximum | ||||||||||||||||||||||||||
| Total | Total | Exposure | Total | Total | Exposure | ||||||||||||||||||||||
| Assets | Liabilities [1] | to Loss [2] | Assets | Liabilities [1] | to Loss [2] | ||||||||||||||||||||||
|
CDOs [3]
|
$ | 768 | $ | 404 | $ | 334 | $ | 226 | $ | 32 | $ | 196 | |||||||||||||||
|
Limited partnerships
|
14 | 1 | 13 | 31 | 1 | 30 | |||||||||||||||||||||
|
Other investments [3]
|
— | — | — | 111 | 20 | 87 | |||||||||||||||||||||
|
|
|||||||||||||||||||||||||||
|
Total
|
$ | 782 | $ | 405 | $ | 347 | $ | 368 | $ | 53 | $ | 313 | |||||||||||||||
|
|
|||||||||||||||||||||||||||
| [1] |
Included in other liabilities in the Company’s Condensed Consolidated Balance Sheets.
|
|
| [2] |
The maximum exposure to loss represents the maximum loss amount that the Company could recognize as a reduction in net investment
income or as a realized capital loss and is the cost basis of the Company’s investment.
|
|
| [3] |
Total assets included in fixed maturities, AFS, and fixed maturities, FVO, in the Company’s Condensed Consolidated Balance Sheets.
|
42
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Maximum | Maximum | |||||||||||||||||||||||
| Exposure | Exposure | |||||||||||||||||||||||
| Assets | Liabilities | to Loss | Assets | Liabilities | to Loss | |||||||||||||||||||
|
CDOs [1]
|
$ | — | $ | — | $ | — | $ | 262 | $ | — | $ | 273 | ||||||||||||
|
Other [2]
|
34 | 32 | 4 | 36 | 36 | 5 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 34 | $ | 32 | $ | 4 | $ | 298 | $ | 36 | $ | 278 | ||||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Maximum exposure to loss represents the Company’s investment in securities issued by CDOs at cost.
|
|
| [2] |
Maximum exposure to loss represents issuance costs that were incurred to establish a contingent capital facility.
|
43
44
45
| Notional Amount | Fair Value | |||||||||||||||
| September 30, | December 31, | September 30, | December 31, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Customized swaps
|
$ | 9,886 | $ | 10,838 | $ | 393 | $ | 234 | ||||||||
|
Equity swaps, options, and futures
|
3,479 | 2,994 | 163 | 9 | ||||||||||||
|
Interest rate swaps and futures
|
2,619 | 1,735 | (42 | ) | (191 | ) | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 15,984 | $ | 15,567 | $ | 514 | $ | 52 | ||||||||
|
|
||||||||||||||||
| Notional Amount | Fair Value | |||||||||||||||
| September 30, | December 31, | September 30, | December 31, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Equity options and futures
|
$ | 14,747 | $ | 25,373 | $ | 393 | $ | 296 | ||||||||
|
Cross-currency equity options
|
1,000 | — | 20 | — | ||||||||||||
|
Long currency options
|
6,808 | 1,000 | 198 | 22 | ||||||||||||
|
Short currency options
|
5,355 | 1,075 | (13 | ) | — | |||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 27,910 | $ | 27,448 | $ | 598 | $ | 318 | ||||||||
|
|
||||||||||||||||
46
| Net Derivatives | Asset Derivatives | Liability Derivatives | ||||||||||||||||||||||||||||||
| Notional Amount | Fair Value | Fair Value | Fair Value | |||||||||||||||||||||||||||||
| Sept. 30, | Dec. 31, | Sept. 30, | Dec. 31, | Sept. 30, | Dec. 31, | Sept. 30, | Dec. 31, | |||||||||||||||||||||||||
| Hedge Designation/ Derivative Type | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||
|
Cash flow hedges
|
||||||||||||||||||||||||||||||||
|
Interest rate swaps
|
$ | 10,193 | $ | 11,170 | $ | 433 | $ | 123 | $ | 433 | $ | 294 | $ | — | $ | (171 | ) | |||||||||||||||
|
Forward rate agreements
|
— | 6,355 | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Foreign currency swaps
|
346 | 381 | (3 | ) | (3 | ) | 33 | 30 | (36 | ) | (33 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total cash flow hedges
|
10,539 | 17,906 | 430 | 120 | 466 | 324 | (36 | ) | (204 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Fair value hedges
|
||||||||||||||||||||||||||||||||
|
Interest rate swaps
|
979 | 1,745 | (89 | ) | (21 | ) | — | 16 | (89 | ) | (37 | ) | ||||||||||||||||||||
|
Foreign currency swaps
|
696 | 696 | (10 | ) | (9 | ) | 66 | 53 | (76 | ) | (62 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total fair value hedges
|
1,675 | 2,441 | (99 | ) | (30 | ) | 66 | 69 | (165 | ) | (99 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Non-qualifying strategies
|
||||||||||||||||||||||||||||||||
|
Interest rate contracts
|
||||||||||||||||||||||||||||||||
|
Interest rate swaps, caps, floors, and futures
|
7,939 | 8,355 | (347 | ) | (84 | ) | 505 | 250 | (852 | ) | (334 | ) | ||||||||||||||||||||
|
Foreign exchange contracts
|
||||||||||||||||||||||||||||||||
|
Foreign currency swaps and forwards
|
386 | 1,039 | (10 | ) | (13 | ) | 2 | 14 | (12 | ) | (27 | ) | ||||||||||||||||||||
|
Japan 3Win related foreign currency swaps
|
2,515 | 2,514 | 74 | (19 | ) | 74 | 35 | — | (54 | ) | ||||||||||||||||||||||
|
Japanese fixed annuity hedging instruments
|
2,206 | 2,271 | 564 | 316 | 564 | 319 | — | (3 | ) | |||||||||||||||||||||||
|
Japanese variable annuity hedging instruments
|
1,395 | 257 | 39 | (8 | ) | 42 | — | (3 | ) | (8 | ) | |||||||||||||||||||||
|
Credit contracts
|
||||||||||||||||||||||||||||||||
|
Credit derivatives that purchase credit
protection
|
2,897 | 2,606 | 22 | (50 | ) | 60 | 45 | (38 | ) | (95 | ) | |||||||||||||||||||||
|
Credit derivatives that assume credit risk [1]
|
2,695 | 1,158 | (522 | ) | (240 | ) | 3 | 2 | (525 | ) | (242 | ) | ||||||||||||||||||||
|
Credit derivatives in offsetting positions
|
6,618 | 6,176 | (77 | ) | (71 | ) | 122 | 185 | (199 | ) | (256 | ) | ||||||||||||||||||||
|
Equity contracts
|
||||||||||||||||||||||||||||||||
|
Equity index swaps, options, and futures
|
195 | 220 | (8 | ) | (16 | ) | 5 | 3 | (13 | ) | (19 | ) | ||||||||||||||||||||
|
Variable annuity hedge program
|
||||||||||||||||||||||||||||||||
|
GMWB product derivatives [2]
|
44,179 | 47,329 | (2,605 | ) | (2,002 | ) | — | — | (2,605 | ) | (2,002 | ) | ||||||||||||||||||||
|
GMWB reinsurance contracts
|
9,141 | 10,301 | 458 | 347 | 458 | 347 | — | — | ||||||||||||||||||||||||
|
GMWB hedging instruments
|
15,984 | 15,567 | 514 | 52 | 660 | 264 | (146 | ) | (212 | ) | ||||||||||||||||||||||
|
Macro hedge program
|
27,910 | 27,448 | 598 | 318 | 626 | 558 | (28 | ) | (240 | ) | ||||||||||||||||||||||
|
Other
|
||||||||||||||||||||||||||||||||
|
GMAB product derivatives [2]
|
242 | 226 | 1 | 2 | 1 | 2 | — | — | ||||||||||||||||||||||||
|
Contingent capital facility put option
|
500 | 500 | 34 | 36 | 34 | 36 | — | — | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total non-qualifying strategies
|
124,802 | 125,967 | (1,265 | ) | (1,432 | ) | 3,156 | 2,060 | (4,421 | ) | (3,492 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total cash flow hedges, fair value hedges, and
non-qualifying strategies
|
$ | 137,016 | $ | 146,314 | $ | (934 | ) | $ | (1,342 | ) | $ | 3,688 | $ | 2,453 | $ | (4,622 | ) | $ | (3,795 | ) | ||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Balance Sheet Location
|
||||||||||||||||||||||||||||||||
|
Fixed maturities, available-for-sale
|
$ | 763 | $ | 269 | $ | (59 | ) | $ | (8 | ) | $ | — | $ | — | $ | (59 | ) | $ | (8 | ) | ||||||||||||
|
Other investments
|
44,543 | 24,006 | 1,333 | 390 | 1,824 | 492 | (491 | ) | (102 | ) | ||||||||||||||||||||||
|
Other liabilities
|
38,050 | 64,061 | (50 | ) | (56 | ) | 1,405 | 1,612 | (1,455 | ) | (1,668 | ) | ||||||||||||||||||||
|
Consumer notes
|
39 | 64 | (4 | ) | (5 | ) | — | — | (4 | ) | (5 | ) | ||||||||||||||||||||
|
Reinsurance recoverables
|
9,141 | 10,301 | 458 | 347 | 458 | 347 | — | — | ||||||||||||||||||||||||
|
Other policyholder funds and benefits payable
|
44,480 | 47,613 | (2,612 | ) | (2,010 | ) | 1 | 2 | (2,613 | ) | (2,012 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total derivatives
|
$ | 137,016 | $ | 146,314 | $ | (934 | ) | $ | (1,342 | ) | $ | 3,688 | $ | 2,453 | $ | (4,622 | ) | $ | (3,795 | ) | ||||||||||||
|
|
||||||||||||||||||||||||||||||||
| [1] |
The derivative instruments related to these strategies are held for other investment purposes.
|
|
| [2] |
These derivatives are embedded within liabilities and are not held for risk management purposes.
|
47
| • |
The Company terminated $6.4 billion notional of forward rate agreements as a result of the
sale of the hedged variable rate securities. The $6.4 billion notional was comprised of a
series of one month forward contracts that were hedging the variability of cash flows related
to coupon payments on $555 of variable rate securities for consecutive monthly periods during
2010.
|
| • |
The GMWB product derivative notional declined $3.2 billion primarily as a result of
policyholder lapses and withdrawals.
|
| • |
The notional amount related to credit derivatives that assume credit risk increased by $1.5
billion as a result of the Company adding $676 notional of exposure to a standard market
basket of corporate issuers to manage credit spread duration, $525 notional related to the
bifurcation of certain embedded credit derivatives as a result of new accounting guidance, and
$353 related to the consolidation of a VIE as a result of new accounting guidance. See
Adoption of New Accounting Standards in Note 1 for further discussion of the new accounting
guidance on embedded credit derivatives and VIEs adopted during 2010.
|
| • |
The increase in fair value of the macro hedge program is primarily due to appreciation of
the Japanese yen and purchases of equity and currency options made during the first half of
the year.
|
| • |
The increase in fair value related to the Japanese fixed annuity hedging instruments is
primarily due to the U.S. dollar weakening in comparison to the Japanese yen.
|
| • |
The fair value related to credit derivatives that assume credit risk primarily decreased as
a result of the Company adopting new accounting guidance related to the consolidation of VIEs;
see Adoption of New Accounting Standards in Note 1. As a result of this new guidance, the
Company has consolidated a Company sponsored CDO that included credit default swaps with a
notional amount of $353 and a fair value of $(270) as of September 30, 2010. These swaps
reference a basket of corporate issuers.
|
| Derivatives in Cash Flow Hedging Relationships | ||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||
| Gain (Loss) Recognized in | ||||||||||||||||||||||||||||||||||
| Gain (Loss) Recognized in OCI | Income on Derivative | |||||||||||||||||||||||||||||||||
| on Derivative (Effective Portion) | (Ineffective Portion) | |||||||||||||||||||||||||||||||||
| Three Months | Nine Months | Three Months | Nine Months | |||||||||||||||||||||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||
|
Interest rate swaps
|
Net realized capital gains (losses) | $ | 182 | $ | 156 | $ | 542 | $ | (310 | ) | $ | — | $ | — | $ | 3 | $ | (2 | ) | |||||||||||||||
|
Foreign currency swaps
|
Net realized capital gains (losses) | (15 | ) | (23 | ) | — | (160 | ) | — | 17 | — | 56 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||
|
Total
|
$ | 167 | $ | 133 | $ | 542 | $ | (470 | ) | $ | — | $ | 17 | $ | 3 | $ | 54 | |||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||
| Derivatives in Cash Flow Hedging Relationships | ||||||||||||||||||
|
|
||||||||||||||||||
| Gain (Loss) Reclassified from AOCI into Income | ||||||||||||||||||
| (Effective Portion) | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||||
|
Interest rate swaps
|
Net realized capital gains (losses) | $ | 7 | $ | — | $ | 11 | $ | 11 | |||||||||
|
Interest rate swaps
|
Net investment income (loss) | 27 | 13 | 61 | 33 | |||||||||||||
|
Foreign currency swaps
|
Net realized capital gains (losses) | 11 | (31 | ) | (5 | ) | (102 | ) | ||||||||||
|
Foreign currency swaps
|
Net investment income (loss) | — | 1 | — | 2 | |||||||||||||
|
|
||||||||||||||||||
|
Total
|
$ | 45 | $ | (17 | ) | $ | 67 | $ | (56 | ) | ||||||||
|
|
||||||||||||||||||
48
| Derivatives in Fair Value Hedging Relationships | ||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Gain (Loss) Recognized in Income [1] | ||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||
| Hedge | Hedge | Hedge | Hedge | |||||||||||||||||||||||||||||
| Derivative | Item | Derivative | Item | Derivative | Item | Derivative | Item | |||||||||||||||||||||||||
|
Interest rate swaps
|
||||||||||||||||||||||||||||||||
|
Net realized capital gains (losses)
|
$ | (25 | ) | $ | 25 | $ | (15 | ) | $ | 15 | $ | (77 | ) | $ | 72 | $ | 51 | $ | (47 | ) | ||||||||||||
|
Benefits, losses and loss adjustment expenses
|
(1 | ) | 2 | 9 | (9 | ) | (3 | ) | 5 | (33 | ) | 35 | ||||||||||||||||||||
|
Foreign currency swaps
|
||||||||||||||||||||||||||||||||
|
Net realized capital gains (losses)
|
44 | (44 | ) | (1 | ) | 1 | 4 | (4 | ) | 46 | (46 | ) | ||||||||||||||||||||
|
Benefits, losses and loss adjustment expenses
|
(5 | ) | 5 | 2 | (2 | ) | (6 | ) | 6 | 2 | (2 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
$ | 13 | $ | (12 | ) | $ | (5 | ) | $ | 5 | $ | (82 | ) | $ | 79 | $ | 66 | $ | (60 | ) | ||||||||||||
|
|
||||||||||||||||||||||||||||||||
| [1] |
The amounts presented do not include the periodic net coupon settlements of the derivative
or the coupon income (expense) related to the hedged item. The net of the amounts presented
represents the ineffective portion of the hedge.
|
49
| Non-qualifying Strategies | ||||||||||||||||
| Gain (Loss) Recognized within Net Realized Capital Gains (Losses) | ||||||||||||||||
|
|
||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Interest rate contracts
|
||||||||||||||||
|
Interest rate swaps, caps, floors, and forwards
|
$ | 50 | $ | 3 | $ | 45 | $ | 23 | ||||||||
|
Foreign exchange contracts
|
||||||||||||||||
|
Foreign currency swaps, forwards, and swaptions
|
(21 | ) | (30 | ) | 8 | (52 | ) | |||||||||
|
Japan 3Win hedging derivatives [1]
|
84 | 128 | 93 | 18 | ||||||||||||
|
Japanese fixed annuity hedging instruments [2]
|
160 | 178 | 301 | 60 | ||||||||||||
|
Japanese variable annuity hedging instruments
|
15 | 7 | 60 | (12 | ) | |||||||||||
|
Credit contracts
|
||||||||||||||||
|
Credit derivatives that purchase credit protection
|
(34 | ) | (103 | ) | 4 | (493 | ) | |||||||||
|
Credit derivatives that assume credit risk
|
113 | 51 | 100 | 128 | ||||||||||||
|
Equity contracts
|
||||||||||||||||
|
Equity index swaps, options, and futures
|
2 | 3 | 7 | (2 | ) | |||||||||||
|
Warrants
|
— | — | — | 70 | ||||||||||||
|
Variable annuity hedge program
|
||||||||||||||||
|
GMWB product derivatives
|
655 | 391 | (489 | ) | 3,736 | |||||||||||
|
GMWB reinsurance contracts
|
(101 | ) | (103 | ) | 84 | (788 | ) | |||||||||
|
GMWB hedging instruments
|
(384 | ) | (478 | ) | 278 | (1,878 | ) | |||||||||
|
Macro hedge program
|
(443 | ) | (328 | ) | (210 | ) | (692 | ) | ||||||||
|
Other
|
||||||||||||||||
|
GMAB product derivatives
|
3 | 1 | 1 | 5 | ||||||||||||
|
Contingent capital facility put option
|
(1 | ) | (1 | ) | (3 | ) | (6 | ) | ||||||||
|
|
||||||||||||||||
|
Total
|
$ | 98 | $ | (281 | ) | $ | 279 | $ | 117 | |||||||
|
|
||||||||||||||||
| [1] |
The associated liability is adjusted for changes in spot rates
through realized capital gains and losses and was $(114) and
$(150) for the three months ended September 30, 2010 and 2009,
respectively and $(210) and $(10) for the nine months ended
September 30, 2010 and 2009, respectively.
|
|
| [2] |
The associated liability is adjusted for changes in spot rates
through realized capital gains and losses and was $(140) and
$(176) for the three months ended September 30, 2010 and 2009,
respectively, and $(258) and $(25) for the nine months ended
September 30, 2010 and 2009, respectively.
|
| • |
The net loss associated with the macro hedge program is primarily due to a higher equity
market valuation, time decay, and lower implied market volatility.
|
| • |
The net gain on the Japanese fixed annuity hedging instruments is primarily due to the U.S.
dollar weakening in comparison to the Japanese yen and a decrease in Japanese interest rates.
|
| • |
The gain for the three months ended September 30, 2010 related to the net GMWB product,
reinsurance, and hedging derivatives is primarily driven by liability model assumption updates
and lower implied market volatility, partially offset by losses due to a general decrease in
long-term rates. The loss for the nine months ended September 30, 2010 related to the net
GMWB product, reinsurance, and hedging derivatives is primarily driven by a general decrease
in long-term interest rates, partially offset by gains on liability model assumption updates.
|
| • |
The net gain associated with credit derivatives that assume credit risk is primarily due to
credit spreads tightening.
|
| • |
The net gain related to the Japan 3 Win hedging derivatives is primarily due to the
strengthening of the Japanese yen in comparison to the U.S. dollar, partially offset by the
decrease in U.S. long-term interest rates.
|
50
| • |
The loss on the net GMWB product, reinsurance, and hedging derivatives for the three months
ended September 30, 2009, was primarily due to a general decrease in long-term interest rates,
higher implied market volatility, and rising equity markets. Additional losses on the GMWB
related derivatives beyond market impacts include liability model assumption updates and
changes in credit standing, partially offset by gains due to the relative outperformance of
the underlying actively managed funds as compared to their respective indices. The net gain
on the net GMWB product, reinsurance, and hedging derivatives for the nine months ended
September 30, 2009, was primarily due to lower implied market volatility and a general
increase in long-term interest rates, partially offset by rising equity markets. Additional
gains on GMWB related derivatives beyond market impacts include the relative outperformance of
the underlying actively managed funds as compared to their respective indices, liability model
assumption updates, and changes in credit standing. For further discussion on liability model
assumption updates, refer to Note 4a.
|
| • |
The net loss associated with the macro hedge program was primarily due to higher equity
market valuation and the impact of trading activity and to a lesser extent, time decay on
foreign exchange rates.
|
| • |
The net gain on the Japanese fixed annuity and Japan 3Win hedging instruments for the three
months ended September 30, 2009 was primarily due to weakening of the U.S. dollar against the
Japanese yen.
|
| • |
The loss on credit derivatives that purchase credit protection and the net gain on credit
derivatives that assume credit risk as a part of replication transactions resulted from credit
spreads tightening.
|
| As of September 30, 2010 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||
| Underlying Referenced | ||||||||||||||||||||||
| Weighted | Credit Obligation(s) [1] | |||||||||||||||||||||
| Average | Average | Offsetting | ||||||||||||||||||||
| Credit Derivative type by derivative | Notional | Fair | Years to | Credit | Notional | Offsetting | ||||||||||||||||
| risk exposure | Amount [2] | Value | Maturity | Type | Rating | Amount [3] | Fair Value [3] | |||||||||||||||
|
Single name credit default swaps
|
||||||||||||||||||||||
|
Investment grade risk exposure
|
$ | 1,531 | $ | (17 | ) | 4 years |
Corporate Credit/
Foreign Gov. |
A+ | $ | 1,415 | $ | (43 | ) | |||||||||
|
Below investment grade risk
exposure
|
161 | (7 | ) | 3 years | Corporate Credit | BB- | 120 | (10 | ) | |||||||||||||
|
Basket credit default swaps [4]
|
||||||||||||||||||||||
|
Investment grade risk exposure
|
1,975 | 9 | 4 years | Corporate Credit | BBB+ | 1,224 | (11 | ) | ||||||||||||||
|
Investment grade risk exposure
|
525 | (75 | ) | 6 years | CMBS Credit | A- | 525 | 75 | ||||||||||||||
|
Below
investment grade risk exposure
|
1,227 | (462 | ) | 4 years | Corporate Credit | BBB | 25 | 1 | ||||||||||||||
|
Embedded credit derivatives
|
||||||||||||||||||||||
|
Investment grade risk exposure
|
60 | 59 | 2 years | Corporate Credit | BBB | — | — | |||||||||||||||
|
Below investment grade risk
exposure
|
525 | 444 | 6 years | Corporate Credit | BB | — | — | |||||||||||||||
|
|
||||||||||||||||||||||
|
Total
|
$ | 6,004 | $ | (49 | ) | $ | 3,309 | $ | 12 | |||||||||||||
|
|
||||||||||||||||||||||
51
| As of December 31, 2009 | ||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| Underlying Referenced | ||||||||||||||||||||||||||||
| Weighted | Credit Obligation(s) [1] | |||||||||||||||||||||||||||
| Average | Average | Offsetting | ||||||||||||||||||||||||||
| Credit Derivative type by derivative | Notional | Fair | Years to | Credit | Notional | Offsetting | ||||||||||||||||||||||
| risk exposure | Amount [2] | Value | Maturity | Type | Rating | Amount [3] | Fair Value [3] | |||||||||||||||||||||
|
Single name credit default swaps
|
||||||||||||||||||||||||||||
|
Investment grade risk exposure
|
$ | 1,226 | $ | 4 | 4 years |
Corporate Credit/
Foreign Gov. |
AA- | $ | 1,201 | $ | (59 | ) | ||||||||||||||||
|
Below investment grade risk
exposure
|
156 | (4 | ) | 3 years | Corporate Credit | B+ | 85 | (12 | ) | |||||||||||||||||||
|
Basket credit default swaps [4]
|
||||||||||||||||||||||||||||
|
Investment grade risk exposure
|
2,052 | (54 | ) | 4 years | Corporate Credit | BBB+ | 1,277 | (21 | ) | |||||||||||||||||||
|
Investment grade risk exposure
|
525 | (141 | ) | 7 years | CMBS Credit | A | 525 | 141 | ||||||||||||||||||||
|
Below investment grade risk
exposure
|
200 | (157 | ) | 5 years | Corporate Credit | BBB+ | — | — | ||||||||||||||||||||
|
Credit linked notes
|
||||||||||||||||||||||||||||
|
Investment grade risk exposure
|
87 | 83 | 2 years | Corporate Credit | BBB+ | — | — | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total
|
$ | 4,246 | $ | (269 | ) | $ | 3,088 | $ | 49 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| [1] |
The average credit ratings are based on availability and the
midpoint of the applicable ratings among Moody’s, S&P, and Fitch.
If no rating is available from a rating agency, then an internally
developed rating is used.
|
|
| [2] |
Notional amount is equal to the maximum potential future loss
amount. There is no specific collateral related to these
contracts or recourse provisions included in the contracts to
offset losses.
|
|
| [3] |
The Company has entered into offsetting credit default swaps to
terminate certain existing credit default swaps, thereby
offsetting the future changes in value of, or losses paid related
to, the original swap.
|
|
| [4] |
Includes $3.1 billion and $2.5 billion as of September 30, 2010
and December 31, 2009, respectively, of standard market indices of
diversified portfolios of corporate issuers referenced through
credit default swaps. These swaps are subsequently valued based
upon the observable standard market index. Also includes $628 and
$325 as of September 30, 2010 and December 31, 2009, respectively,
of customized diversified portfolios of corporate issuers
referenced through credit default swaps.
|
| 2010 | 2009 | |||||||
|
Balance, January 1
|
$ | 10,686 | $ | 13,248 | ||||
|
Deferred Costs
|
1,999 | 2,155 | ||||||
|
Amortization — DAC
|
(2,057 | ) | (2,531 | ) | ||||
|
Amortization — Unlock (charge) benefit, pre-tax [1]
|
30 | (1,089 | ) | |||||
|
Adjustments to unrealized gains and losses on securities available-for-sale and other [2] [3]
|
(1,462 | ) | (692 | ) | ||||
|
Effect of currency translation
|
179 | 27 | ||||||
|
Effect of new accounting guidance [3]
|
11 | (78 | ) | |||||
|
|
||||||||
|
Balance, September 30
|
$ | 9,386 | $ | 11,040 | ||||
|
|
||||||||
| [1] |
The most significant contributors to the Unlock benefit recorded during the nine months
ended September 30, 2010 were actual separate account returns from January 1, 2010 to
September 30, 2010 being above the Company’s aggregated estimated return, as well as
assumption updates primarily related to decreasing lapse and withdrawal rates and lower
hedge costs.
|
|
|
The most significant contributor to the Unlock charge recorded during the nine months ended
September 30, 2009 was the result of actual separate account returns from October 1, 2008 to
March 31, 2009 being significantly below our aggregated estimated return while the opposite was
true from April 1, 2009 to September 30, 2009.
|
||
| [2] |
The 2010 adjustment reflects the effect of declining interest rates, resulting in unrealized gains on securities classified in AOCI.
|
|
| [3] |
For the nine months ended September 30, 2009 the effect of adopting new accounting guidance for investments other-than-temporarily
impaired resulted in an increase to retained earnings and as a result a DAC charge. In addition, an offsetting amount was recorded
in unrealized losses as unrealized losses increased upon adoption of the new accounting guidance.
|
|
|
For the nine months ended September 30, 2010 the effect of adopting new accounting guidance for
embedded credit derivatives resulted in a decrease to retained earnings and as a result a DAC
benefit. In addition, an offsetting amount was recorded in unrealized losses as unrealized
losses decreased upon adoption of the new accounting guidance.
|
52
| International | UL Secondary | |||||||||||
| U.S. GMDB | GMDB/GMIB | Guarantees | ||||||||||
|
Liability — gross as of January 1, 2010
|
$ | 1,233 | $ | 599 | $ | 76 | ||||||
|
Incurred
|
183 | 87 | 29 | |||||||||
|
Paid
|
(233 | ) | (95 | ) | — | |||||||
|
Unlock
|
(24 | ) | (20 | ) | (2 | ) | ||||||
|
Currency translation adjustment
|
— | 70 | — | |||||||||
|
|
||||||||||||
|
Liability — gross, as of September 30, 2010
|
$ | 1,159 | $ | 641 | $ | 103 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Reinsurance recoverable asset, as of January 1, 2010
|
$ | 787 | $ | 52 | $ | 22 | ||||||
|
Unlock
|
(4 | ) | (5 | ) | — | |||||||
|
Other
|
(31 | ) | (4 | ) | 6 | |||||||
|
|
||||||||||||
|
Reinsurance recoverable asset, as of September 30,
2010
|
$ | 752 | $ | 43 | $ | 28 | ||||||
|
|
||||||||||||
| International | UL Secondary | |||||||||||
| U.S. GMDB | GMDB/GMIB | Guarantees | ||||||||||
|
Liability — gross as of January 1, 2009
|
$ | 870 | $ | 232 | $ | 40 | ||||||
|
Incurred
|
243 | 67 | 21 | |||||||||
|
Paid
|
(387 | ) | (93 | ) | — | |||||||
|
Unlock
|
519 | 339 | 5 | |||||||||
|
Currency translation adjustment
|
— | 62 | — | |||||||||
|
|
||||||||||||
|
Liability — gross, as of September 30, 2009
|
$ | 1,245 | $ | 607 | $ | 66 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Reinsurance recoverable asset, as of January 1, 2009
|
$ | 593 | $ | 32 | $ | 16 | ||||||
|
Unlock
|
281 | 31 | (1 | ) | ||||||||
|
Other
|
(72 | ) | (8 | ) | 5 | |||||||
|
|
||||||||||||
|
Reinsurance recoverable asset, as of September 30,
2009
|
$ | 802 | $ | 55 | $ | 20 | ||||||
|
|
||||||||||||
53
| Retained Net | |||||||||||||||||||
| Net Amount | Amount | Weighted Average | |||||||||||||||||
| Account | at Risk | at Risk | Attained Age of | ||||||||||||||||
| Maximum anniversary value (“MAV”) [1] | Value | (“NAR”) [10] | (“RNAR”) [10] | Annuitant | |||||||||||||||
|
MAV only
|
$ | 24,880 | $ | 7,196 | $ | 1,963 | 68 | ||||||||||||
|
With 5% rollup [2]
|
1,710 | 589 | 219 | 67 | |||||||||||||||
|
With Earnings Protection Benefit Rider (“EPB”) [3]
|
6,311 | 1,173 | 121 | 64 | |||||||||||||||
|
With 5% rollup & EPB
|
707 | 195 | 40 | 67 | |||||||||||||||
|
|
|||||||||||||||||||
|
Total MAV
|
33,608 | 9,153 | 2,343 | ||||||||||||||||
|
Asset Protection Benefit (“APB”) [4]
|
27,097 | 4,319 | 2,775 | 65 | |||||||||||||||
|
Lifetime Income Benefit (“LIB”) — Death Benefit [5]
|
1,276 | 161 | 161 | 63 | |||||||||||||||
|
Reset [6] (5-7 years)
|
3,555 | 398 | 394 | 68 | |||||||||||||||
|
Return of Premium (“ROP”) [7]/Other
|
22,206 | 1,117 | 1,083 | 64 | |||||||||||||||
|
|
|||||||||||||||||||
|
Subtotal U.S. GMDB [8]
|
87,742 | $ | 15,148 | 6,756 | 66 | ||||||||||||||
|
Less: General account value subject to U.S. GMDB
|
6,861 | ||||||||||||||||||
|
|
|||||||||||||||||||
|
Subtotal Separate Account Liabilities with U.S. GMDB
|
80,881 | ||||||||||||||||||
|
Separate Account Liabilities without U.S. GMDB
|
73,338 | ||||||||||||||||||
|
|
|||||||||||||||||||
|
Total Separate Account Liabilities
|
$ | 154,219 | |||||||||||||||||
|
|
|||||||||||||||||||
|
Japan GMDB and GMIB [9]
|
$ | 30,912 | $ | 8,569 | $ | 7,233 | 69 | ||||||||||||
|
|
|||||||||||||||||||
| [1] |
MAV GMDB is the greatest of current AV, net premiums paid and the highest AV on any anniversary before age 80 (adjusted
for withdrawals).
|
|
| [2] |
Rollup GMDB is the greatest of the MAV, current AV, net premium paid and premiums (adjusted for withdrawals)
accumulated at generally 5% simple interest up to the earlier of age 80 or 100% of adjusted premiums.
|
|
| [3] |
EPB GMDB is the greatest of the MAV, current AV, or contract value plus a percentage of the contract’s growth. The
contract’s growth is AV less premiums net of withdrawals, subject to a cap of 200% of premiums net of withdrawals.
|
|
| [4] |
APB GMDB is the greater of current AV or MAV, not to exceed current AV plus 25% times the greater of net premiums and
MAV (each adjusted for premiums in the past 12 months).
|
|
| [5] |
LIB GMDB is the greatest of current AV, net premiums paid, or for certain contracts a benefit amount that ratchets over
time, generally based on market performance.
|
|
| [6] |
Reset GMDB is the greatest of current AV, net premiums paid and the most recent five to seven year anniversary AV
before age 80 (adjusted for withdrawals).
|
|
| [7] |
ROP GMDB is the greater of current AV and net premiums paid.
|
|
| [8] |
AV includes the contract holder’s investment in the separate account and the general account.
|
|
| [9] |
GMDB includes a ROP and MAV (before age 80) paid in a single lump sum. GMIB is a guarantee to return initial
investment, adjusted for earnings liquidity, which allows for free withdrawal of earnings, paid through a fixed payout
annuity, after a minimum deferral period of 10, 15 or 20 years. The GRB related to the Japan GMIB was $30.8 billion and
$28.6 billion as of September 30, 2010 and December 31, 2009, respectively. The GRB related to the Japan GMAB and GMWB
was $695 and $648 as of September 30, 2010 and December 31, 2009, respectively. These liabilities are not included in
the Separate Account as they are not legally insulated from the general account liabilities of the insurance
enterprise. As of September 30, 2010, 60% of the AV and 54% of RNAR is reinsured to a Hartford affiliate. NAR
increased due to lower equity markets during the second quarter, as well as the strengthening of the yen.
|
|
| [10] |
NAR is defined as the guaranteed benefit in excess of the current AV. RNAR represents NAR reduced for reinsurance.
NAR and RNAR are highly sensitive to equity markets movements and increase when equity markets decline.
|
| Asset type | As of September 30, 2010 | As of December 31, 2009 | ||||||
|
Equity securities (including mutual funds)
|
$ | 72,291 | $ | 75,720 | ||||
|
Cash and cash equivalents
|
8,590 | 9,298 | ||||||
|
|
||||||||
|
Total
|
$ | 80,881 | $ | 85,018 | ||||
|
|
||||||||
54
| 2010 | 2009 | |||||||
|
Balance, January 1
|
$ | 438 | $ | 553 | ||||
|
Sales inducements deferred
|
20 | 48 | ||||||
|
Amortization
|
(10 | ) | (94 | ) | ||||
|
Amortization — Unlock
|
(6 | ) | (73 | ) | ||||
|
|
||||||||
|
Balance, September 30
|
$ | 442 | $ | 434 | ||||
|
|
||||||||
55
56
| Pension Benefits | Other Postretirement Benefits | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Service cost
|
$ | 25 | $ | 27 | $ | 2 | $ | 2 | ||||||||
|
Interest cost
|
64 | 61 | 6 | 6 | ||||||||||||
|
Expected return on plan assets
|
(71 | ) | (69 | ) | (4 | ) | (4 | ) | ||||||||
|
Amortization of prior service credit
|
(2 | ) | (2 | ) | (1 | ) | — | |||||||||
|
Amortization of actuarial loss
|
26 | 19 | — | — | ||||||||||||
|
|
||||||||||||||||
|
Net periodic benefit cost
|
$ | 42 | $ | 36 | $ | 3 | $ | 4 | ||||||||
|
|
||||||||||||||||
| Pension Benefits | Other Postretirement Benefits | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Service cost
|
$ | 76 | $ | 79 | $ | 5 | $ | 5 | ||||||||
|
Interest cost
|
189 | 182 | 17 | 18 | ||||||||||||
|
Expected return on plan assets
|
(214 | ) | (206 | ) | (10 | ) | (9 | ) | ||||||||
|
Settlement expense
|
20 | — | — | — | ||||||||||||
|
Amortization of prior service credit
|
(7 | ) | (7 | ) | (1 | ) | (1 | ) | ||||||||
|
Amortization of actuarial loss
|
80 | 56 | — | — | ||||||||||||
|
|
||||||||||||||||
|
Net periodic benefit cost
|
$ | 144 | $ | 104 | $ | 11 | $ | 13 | ||||||||
|
|
||||||||||||||||
57
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Stock-based compensation plans expense
|
$ | 16 | $ | 32 | $ | 57 | $ | 54 | ||||||||
|
Income tax benefit
|
(6 | ) | (8 | ) | (20 | ) | (14 | ) | ||||||||
|
|
||||||||||||||||
|
Total stock-based compensation plans expense, after-tax
|
$ | 10 | $ | 24 | $ | 37 | $ | 40 | ||||||||
|
|
||||||||||||||||
58
59
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Accumulated | Carrying | Accumulated | Carrying | |||||||||||||||||||||
| Gross | Impairments | Value | Gross | Impairments | Value | |||||||||||||||||||
|
Commercial Markets
|
||||||||||||||||||||||||
|
Property & Casualty Commercial
|
$ | 30 | $ | — | $ | 30 | $ | 30 | $ | — | $ | 30 | ||||||||||||
|
|
||||||||||||||||||||||||
|
Total Commercial Markets
|
30 | — | 30 | 30 | — | 30 | ||||||||||||||||||
|
Consumer Markets
|
119 | — | 119 | 119 | — | 119 | ||||||||||||||||||
|
Wealth Management
|
||||||||||||||||||||||||
|
Global Annuity
|
422 | (422 | ) | — | 422 | (422 | ) | — | ||||||||||||||||
|
Life Insurance
|
224 | — | 224 | 224 | — | 224 | ||||||||||||||||||
|
Retirement Plans
|
87 | — | 87 | 87 | — | 87 | ||||||||||||||||||
|
Mutual Funds
|
159 | — | 159 | 159 | — | 159 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Wealth Management
|
892 | (422 | ) | 470 | 892 | (422 | ) | 470 | ||||||||||||||||
|
Corporate and Other
|
940 | (508 | ) | 432 | 940 | (355 | ) | 585 | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Goodwill
|
$ | 1,981 | $ | (930 | ) | $ | 1,051 | $ | 1,981 | $ | (777 | ) | $ | 1,204 | ||||||||||
|
|
||||||||||||||||||||||||
60
| Description | Page | |||
|
|
||||
| 62 | ||||
|
|
||||
| 64 | ||||
|
|
||||
| 67 | ||||
|
|
||||
| 78 | ||||
|
|
||||
| 86 | ||||
|
|
||||
| 88 | ||||
|
|
||||
| 89 | ||||
|
|
||||
| 93 | ||||
|
|
||||
| 96 | ||||
|
|
||||
| 98 | ||||
|
|
||||
| 100 | ||||
|
|
||||
| 101 | ||||
|
|
||||
| 102 | ||||
|
|
||||
| 102 | ||||
|
|
||||
| 111 | ||||
|
|
||||
| 118 | ||||
|
|
||||
| 126 | ||||
61
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Operating Summary | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Earned premiums
|
$ | 3,513 | $ | 3,499 | — | $ | 10,546 | $ | 10,920 | (3 | %) | |||||||||||||
|
Fee income
|
1,173 | 1,140 | 3 | % | 3,557 | 3,369 | 6 | % | ||||||||||||||||
|
Net investment income (loss):
|
||||||||||||||||||||||||
|
Securities available-for-sale and other
|
1,083 | 1,049 | 3 | % | 3,296 | 2,990 | 10 | % | ||||||||||||||||
|
Equity securities, trading [1]
|
1,043 | 638 | 63 | % | (905 | ) | 2,437 | NM | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total net investment income
|
2,126 | 1,687 | 26 | % | 2,391 | 5,427 | (56 | %) | ||||||||||||||||
|
Net realized capital gains (losses):
|
||||||||||||||||||||||||
|
Total other-than-temporary impairment (“OTTI”) losses
|
(146 | ) | (760 | ) | 81 | % | (778 | ) | (1,546 | ) | 50 | % | ||||||||||||
|
OTTI losses recognized in other comprehensive income
|
31 | 224 | (86 | %) | 403 | 472 | (15 | %) | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net OTTI losses recognized in earnings
|
(115 | ) | (536 | ) | 79 | % | (375 | ) | (1,074 | ) | 65 | % | ||||||||||||
|
Net realized capital gains (losses), excluding net OTTI
losses recognized in earnings
|
(146 | ) | (683 | ) | 79 | % | (151 | ) | (742 | ) | 80 | % | ||||||||||||
|
|
||||||||||||||||||||||||
|
Total net realized capital losses
|
(261 | ) | (1,219 | ) | 79 | % | (526 | ) | (1,816 | ) | 71 | % | ||||||||||||
|
|
||||||||||||||||||||||||
|
Other revenues
|
122 | 123 | (1 | %) | 360 | 361 | — | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total revenues
|
6,673 | 5,230 | 28 | % | 16,328 | 18,261 | (11 | %) | ||||||||||||||||
|
Benefits, losses and loss adjustment expenses
|
3,037 | 3,070 | (1 | %) | 9,762 | 10,799 | (10 | %) | ||||||||||||||||
|
Benefits, losses and loss adjustment expenses — returns
credited on international variable annuities [1]
|
1,043 | 638 | 63 | % | (905 | ) | 2,437 | NM | ||||||||||||||||
|
Amortization of deferred policy acquisition costs and
present value of future profits (“DAC”)
|
438 | 687 | (36 | %) | 2,027 | 3,620 | (44 | %) | ||||||||||||||||
|
Insurance operating costs and other expenses
|
1,105 | 1,174 | (6 | %) | 3,461 | 3,472 | — | |||||||||||||||||
|
Interest expense
|
128 | 118 | 8 | % | 380 | 357 | 6 | % | ||||||||||||||||
|
Goodwill impairment
|
— | — | — | 153 | 32 | NM | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total benefits, losses and expenses
|
5,751 | 5,687 | 1 | % | 14,878 | 20,717 | (28 | %) | ||||||||||||||||
|
Income (loss) before income taxes
|
922 | (457 | ) | NM | 1,450 | (2,456 | ) | NM | ||||||||||||||||
|
Income tax expense (benefit)
|
256 | (237 | ) | NM | 389 | (1,012 | ) | NM | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income (loss)
|
$ | 666 | $ | (220 | ) | NM | $ | 1,061 | $ | (1,444 | ) | NM | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Supplemental Operating Data
|
||||||||||||||||||||||||
|
Diluted earnings (loss) per common share
|
$ | 1.34 | $ | (0.79 | ) | NM | $ | 1.21 | $ | (4.52 | ) | NM | ||||||||||||
|
Total revenues, excluding net investment
income (loss) on equity securities, trading
|
5,630 | 4,592 | 23 | % | 17,233 | 15,824 | 9 | % | ||||||||||||||||
|
DAC Unlock benefit (charge), after-tax
|
193 | 63 | NM | 48 | (1,071 | ) | NM | |||||||||||||||||
| September 30, | December 31, | |||||||
| Summary of Financial Condition | 2010 | 2009 | ||||||
|
Total assets
|
$ | 313,926 | $ | 307,717 | ||||
|
Total investments, excluding equity securities, trading
|
101,095 | 93,235 | ||||||
|
Total stockholders’ equity
|
20,909 | 17,865 | ||||||
| [1] |
Includes investment income and mark-to-market effects of equity securities, trading,
supporting the international variable annuity business, which are classified in net
investment income with corresponding amounts credited to policyholders within benefits,
losses and loss adjustment expenses.
|
62
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Increase | Increase | |||||||||||||||||||||||
| (Decrease) From | (Decrease) From | |||||||||||||||||||||||
| Segment Results | 2010 | 2009 | 2009 to 2010 | 2010 | 2009 | 2009 to 2010 | ||||||||||||||||||
|
Property & Casualty Commercial
|
$ | 306 | $ | 217 | $ | 89 | $ | 782 | $ | 484 | $ | 298 | ||||||||||||
|
Group Benefits
|
46 | 65 | (19 | ) | 145 | 148 | (3 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Commercial Markets
|
352 | 282 | 70 | 927 | 632 | 295 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Consumer Markets
|
70 | 15 | 55 | 113 | 55 | 58 | ||||||||||||||||||
|
Global Annuity
|
175 | (320 | ) | 495 | 141 | (1,304 | ) | 1,445 | ||||||||||||||||
|
Life Insurance
|
97 | 8 | 89 | 224 | 18 | 206 | ||||||||||||||||||
|
Retirement Plans
|
30 | (34 | ) | 64 | 38 | (162 | ) | 200 | ||||||||||||||||
|
Mutual Funds
|
18 | 11 | 7 | 67 | 17 | 50 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Wealth Management
|
320 | (335 | ) | 655 | 470 | (1,431 | ) | 1,901 | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Corporate and Other
|
(76 | ) | (182 | ) | 106 | (449 | ) | (700 | ) | 251 | ||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income (loss)
|
$ | 666 | $ | (220 | ) | $ | 886 | $ | 1,061 | $ | (1,444 | ) | $ | 2,505 | ||||||||||
|
|
||||||||||||||||||||||||
63
64
65
66
67
| Nine Months Ended September 30, 2010 | ||||||||||||||||
|
|
||||||||||||||||
| Total | ||||||||||||||||
| Property & | Property and | |||||||||||||||
| Casualty | Consumer | Corporate and | Casualty | |||||||||||||
| Commercial | Markets | Other | Insurance | |||||||||||||
|
Beginning liabilities for unpaid losses and loss adjustment expenses,
gross
|
$ | 15,051 | $ | 2,109 | $ | 4,491 | $ | 21,651 | ||||||||
|
Reinsurance and other recoverables
|
2,570 | 11 | 860 | 3,441 | ||||||||||||
|
|
||||||||||||||||
|
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
12,481 | 2,098 | 3,631 | 18,210 | ||||||||||||
|
|
||||||||||||||||
|
Provision for unpaid losses and loss adjustment expenses
|
||||||||||||||||
|
Current accident year before catastrophes
|
2,634 | 2,034 | — | 4,668 | ||||||||||||
|
Current accident year catastrophes
|
134 | 229 | — | 363 | ||||||||||||
|
Prior accident years
|
(339 | ) | (51 | ) | 236 | (154 | ) | |||||||||
|
|
||||||||||||||||
|
Total provision for unpaid losses and loss adjustment expenses
|
2,429 | 2,212 | 236 | 4,877 | ||||||||||||
|
Payments
|
(2,568 | ) | (2,146 | ) | (306 | ) | (5,020 | ) | ||||||||
|
|
||||||||||||||||
|
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
12,342 | 2,164 | 3,561 | 18,067 | ||||||||||||
|
Reinsurance and other recoverables
|
2,438 | 11 | 701 | 3,150 | ||||||||||||
|
|
||||||||||||||||
|
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$ | 14,780 | $ | 2,175 | $ | 4,262 | $ | 21,217 | ||||||||
|
|
||||||||||||||||
|
Earned premiums
|
$ | 4,278 | $ | 2,976 | ||||||||||||
|
Loss and loss expense paid ratio [1]
|
60.0 | 72.1 | ||||||||||||||
|
Loss and loss expense incurred ratio
|
56.8 | 74.3 | ||||||||||||||
|
Prior accident years development (pts) [2]
|
(7.9 | ) | (1.9 | ) | ||||||||||||
| [1] |
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
|
| [2] |
“Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums.
|
| Three Months Ended September 30, 2010 | ||||||||||||||||
|
|
||||||||||||||||
| Total | ||||||||||||||||
| Property & | Property and | |||||||||||||||
| Casualty | Consumer | Corporate and | Casualty | |||||||||||||
| Commercial | Markets | Other | Insurance | |||||||||||||
|
Auto liability
|
$ | (26 | ) | $ | (41 | ) | $ | — | $ | (67 | ) | |||||
|
Package business
|
(17 | ) | — | — | (17 | ) | ||||||||||
|
Workers’ compensation
|
(36 | ) | — | — | (36 | ) | ||||||||||
|
General liability, umbrella and high hazard liability
|
(19 | ) | — | — | (19 | ) | ||||||||||
|
General liability, excluding umbrella and high hazard liability
|
(28 | ) | — | — | (28 | ) | ||||||||||
|
Professional liability
|
(8 | ) | — | — | (8 | ) | ||||||||||
|
Property
|
— | 3 | — | 3 | ||||||||||||
|
Net environmental reserves
|
— | — | 62 | 62 | ||||||||||||
|
Other reserve re-estimates, net [1]
|
16 | 4 | 2 | 22 | ||||||||||||
|
|
||||||||||||||||
|
Total prior accident years development
|
$ | (118 | ) | $ | (34 | ) | $ | 64 | $ | (88 | ) | |||||
|
|
||||||||||||||||
| [1] |
Includes reserve discount accretion of $7 in Property & Casualty Commercial.
|
| Nine Months Ended September 30, 2010 | ||||||||||||||||
|
|
||||||||||||||||
| Total | ||||||||||||||||
| Property & | Property and | |||||||||||||||
| Casualty | Consumer | Corporate and | Casualty | |||||||||||||
| Commercial | Markets | Other | Insurance | |||||||||||||
|
Auto liability
|
$ | (50 | ) | $ | (82 | ) | $ | — | $ | (132 | ) | |||||
|
Package business
|
(23 | ) | — | — | (23 | ) | ||||||||||
|
Workers’ compensation
|
(56 | ) | — | — | (56 | ) | ||||||||||
|
General liability, umbrella and high hazard liability
|
(61 | ) | — | — | (61 | ) | ||||||||||
|
General liability, excluding umbrella and high hazard liability
|
(33 | ) | — | — | (33 | ) | ||||||||||
|
Professional liability
|
(87 | ) | — | — | (87 | ) | ||||||||||
|
Property
|
— | 21 | — | 21 | ||||||||||||
|
Net environmental reserves
|
— | — | 64 | 64 | ||||||||||||
|
Net asbestos reserves
|
— | — | 172 | 172 | ||||||||||||
|
Uncollectible reinsurance
|
(30 | ) | — | — | (30 | ) | ||||||||||
|
Other reserve re-estimates, net [1]
|
1 | 10 | — | 11 | ||||||||||||
|
|
||||||||||||||||
|
Total prior accident years development
|
$ | (339 | ) | $ | (51 | ) | $ | 236 | $ | (154 | ) | |||||
|
|
||||||||||||||||
| [1] |
Includes reserve discount accretion of $20 in Property & Casualty Commercial.
|
68
| • |
Released reserves for commercial auto claims in the three and nine months ended September
30, 2010 as the Company lowered its reserve estimate to recognize a lower severity trend
during 2009 and 2010 on larger claims in accident years 2002 to 2009.
|
| • |
Released reserves for personal auto liability claims in the three and nine months ended
September 30, 2010. During 2009, the Company recognized that favorable development in
reported severity, due in part to changes made to claim handling procedures in 2007, was a
sustained trend for accident years 2005 through 2008 and, accordingly, management reduced its
reserve estimate. The reserve releases are in response to a continuation of these same
favorable trends, primarily affecting accident years 2005 through 2009.
|
| • |
Released reserves for package business claims for the three and nine months ended September
30, 2010, primarily related to accident years 2005 through 2009. Claim emergence within the
liability portion of the package coverage for these accident years continues to be lower than
anticipated. Management now believes this lower level of claim activity will continue into
the future and has reduced its reserve estimate in response to these favorable trends.
|
| • |
Released reserves for workers’ compensation business in the three and nine months ended
September 30, 2010, primarily related to accident years 2006 and 2007. Management updated
reviews of state reforms affecting these accident years and determined impacts to be more
favorable than previously estimated. Accordingly, management reduced reserve estimates for
these years.
|
| • |
Released reserves for general liability claims for the three and nine months ending
September 30, 2010, primarily related to accident years 2005 through 2008. Claim emergence
for these accident years continues to be lower than anticipated. Management now believes this
lower level of claim activity will continue into the future and has reduced its reserve
estimate in response to these favorable trends. Partially offsetting this reserve release is
strengthening on loss adjustment expense reserves during the second quarter of 2010 due to
higher than expected allocated loss expenses for claims in accident years 2000 and prior.
|
| • |
Released reserves for professional liability claims for the three and nine months ended
September 30, 2010 primarily related to directors’ and officers’ (“D&O”) claims in accident
years 2008 and prior. For these accident years, reported losses for claims under D&O policies
have been emerging favorably to initial expectations due to lower than expected claim
severity.
|
| • |
Strengthened reserves for property in personal homeowners’ claims for the three and nine
months ended September 30, 2010. During 2010, the Company observed a lengthening of the claim
reporting period for homeowners’ claims for prior accident years which resulted in increasing
management’s estimate of the ultimate cost to settle these claims.
|
| • |
The Company reviewed its allowance for uncollectible reinsurance in the second quarter of
2010 and reduced its allowance, in part, by a reduction in gross ceded loss recoverables.
|
| • |
Refer to the Other Operations Claims section for further discussion on strengthening of net
environmental and net asbestos reserves.
|
69
| Nine Months Ended September 30, 2009 | ||||||||||||||||
|
|
||||||||||||||||
| Total | ||||||||||||||||
| Property & | Property and | |||||||||||||||
| Casualty | Consumer | Corporate and | Casualty | |||||||||||||
| Commercial | Markets | Other | Insurance | |||||||||||||
|
Beginning liabilities for unpaid losses and loss adjustment expenses,
gross
|
$ | 15,273 | $ | 2,083 | $ | 4,577 | $ | 21,933 | ||||||||
|
Reinsurance and other recoverables
|
2,742 | 46 | 798 | 3,586 | ||||||||||||
|
|
||||||||||||||||
|
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
12,531 | 2,037 | 3,779 | 18,347 | ||||||||||||
|
|
||||||||||||||||
|
Provision for unpaid losses and loss adjustment expenses
|
||||||||||||||||
|
Current accident year before catastrophes
|
2,726 | 1,974 | 1 | 4,701 | ||||||||||||
|
Current accident year catastrophes
|
80 | 242 | — | 322 | ||||||||||||
|
Prior accident years
|
(246 | ) | (15 | ) | 203 | (58 | ) | |||||||||
|
|
||||||||||||||||
|
Total provision for unpaid losses and loss adjustment expenses
|
2,560 | 2,201 | 204 | 4,965 | ||||||||||||
|
Payments
|
(2,470 | ) | (2,156 | ) | (275 | ) | (4,901 | ) | ||||||||
|
|
||||||||||||||||
|
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
12,621 | 2,082 | 3,708 | 18,411 | ||||||||||||
|
Reinsurance and other recoverables
|
2,594 | 43 | 853 | 3,490 | ||||||||||||
|
|
||||||||||||||||
|
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$ | 15,215 | $ | 2,125 | $ | 4,561 | $ | 21,901 | ||||||||
|
|
||||||||||||||||
|
Earned premiums
|
$ | 4,463 | $ | 2,957 | ||||||||||||
|
Loss and loss expense paid ratio [1]
|
55.3 | 72.9 | ||||||||||||||
|
Loss and loss expense incurred ratio
|
57.3 | 74.5 | ||||||||||||||
|
Prior accident years development (pts) [2]
|
(5.5 | ) | (0.5 | ) | ||||||||||||
| [1] |
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
|
| [2] |
“Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums.
|
| Three Months Ended September 30, 2009 | ||||||||||||||||
|
|
||||||||||||||||
| Total | ||||||||||||||||
| Property & | Property and | |||||||||||||||
| Casualty | Consumer | Corporate and | Casualty | |||||||||||||
| Commercial | Markets | Other | Insurance | |||||||||||||
|
Auto liability
|
$ | — | $ | (20 | ) | $ | — | $ | (20 | ) | ||||||
|
Workers’ compensation
|
(45 | ) | — | — | (45 | ) | ||||||||||
|
General liability
|
(14 | ) | — | — | (14 | ) | ||||||||||
|
Professional liability
|
(24 | ) | — | — | (24 | ) | ||||||||||
|
Net environmental reserves
|
— | — | 75 | 75 | ||||||||||||
|
Other reserve re-estimates, net [1]
|
(25 | ) | (5 | ) | 6 | (24 | ) | |||||||||
|
|
||||||||||||||||
|
Total prior accident years development
|
$ | (108 | ) | $ | (25 | ) | $ | 81 | $ | (52 | ) | |||||
|
|
||||||||||||||||
| [1] |
Includes reserve discount accretion of $6 in Property & Casualty Commercial.
|
| Nine Months Ended September 30, 2009 | ||||||||||||||||
|
|
||||||||||||||||
| Total | ||||||||||||||||
| Property & | Property and | |||||||||||||||
| Casualty | Consumer | Corporate and | Casualty | |||||||||||||
| Commercial | Markets | Other | Insurance | |||||||||||||
|
Auto liability
|
$ | — | $ | (53 | ) | $ | — | $ | (53 | ) | ||||||
|
Package business
|
36 | — | — | 36 | ||||||||||||
|
Workers’ compensation
|
(68 | ) | — | — | (68 | ) | ||||||||||
|
General liability
|
(85 | ) | — | — | (85 | ) | ||||||||||
|
Professional liability
|
(74 | ) | — | — | (74 | ) | ||||||||||
|
Property
|
— | 18 | — | 18 | ||||||||||||
|
Surety business
|
25 | — | — | 25 | ||||||||||||
|
Net environmental reserves
|
— | — | 75 | 75 | ||||||||||||
|
Net asbestos reserves
|
— | — | 138 | 138 | ||||||||||||
|
Uncollectible reinsurance
|
(20 | ) | — | (20 | ) | (40 | ) | |||||||||
|
Other reserve re-estimates, net [1]
|
(60 | ) | 20 | 10 | (30 | ) | ||||||||||
|
|
||||||||||||||||
|
Total prior accident years development
|
$ | (246 | ) | $ | (15 | ) | $ | 203 | $ | (58 | ) | |||||
|
|
||||||||||||||||
| [1] |
Includes reserve discount accretion of $18 in Property & Casualty Commercial.
|
70
| • |
Released reserves for personal auto liability claims in the three and nine months ended
September 30, 2009. Beginning in the first quarter of 2008, management observed an
improvement in emerged claim severity for the 2005 through 2007 accident years attributed, in
part, to changes made in claim handling procedures in 2007. In the first six months of 2009,
the Company recognized that favorable development in reported severity was a sustained trend
and, accordingly, management reduced its reserve estimate, primarily related to accident years
2005 to 2007. The release of reserves in the three months ended September 30, 2009 was
principally related to AARP business for the 2006 through 2008 accident years. The reduction
in reserves related to accident years 2006 and 2007 reflects a continuation of the favorable
severity development trends that were first observed in early 2008. For accident year 2008,
management first lowered its estimate in the fourth quarter of 2008, reflecting favorable
frequency due to higher gas prices and reduced driving mileage. With the third quarter 2009
release, management now recognizes sustained improvement in reported severity development as
accident year 2008 has matured.
|
| • |
Strengthened reserves for liability claims under package policies by $16 in the first
quarter of 2009, primarily related to allocated loss adjustment expenses for accident years
2000 to 2005 and by $20 in the second quarter of 2009, principally related to allocated loss
adjustment expenses for accident years 2007 and 2008. During the first quarter of 2009, the
Company identified higher than expected expense payments on older accident years related to
the liability coverage. Additional analysis in the second quarter of 2009 showed that this
higher level of loss adjustment expense is likely to continue into more recent accident years.
As a result, in the second quarter of 2009, the Company increased its estimates for future
expense payments for the 2007 and 2008 accident years. In addition, during the third quarter
of 2009, the Company recognized the cost of late emerging exposures were likely to be higher
than previously expected. Also in the third quarter, the Company recognized a lower than
expected frequency of high severity claims. These third quarter events were largely
offsetting.
|
| • |
Released workers’ compensation reserves in the three and nine months ended September 30,
2009. The Company released reserves in the three months ended September 30, 2009, primarily
related to additional ceded losses on accident years 1999 and prior. During the first quarter
of 2009, the Company observed lower than expected expense payments on older accident years.
As a result, the Company reduced its estimate for future expense payments on more recent
accident years.
|
| • |
Released reserves for general liability claims for the three and nine months ended
September 30, 2009 primarily related to accident years 2003 to 2007. Beginning in the third
quarter of 2007, the Company observed that reported losses for high hazard and umbrella
general liability claims, primarily related to the 2001 to 2006 accident years, were emerging
favorably and this caused management to reduce its estimate of the cost of future reported
claims for these accident years, resulting in a reserve release in each quarter since the
third quarter of 2007. During the nine months ended September 30, 2009, management determined
that the lower level of loss emergence was also evident in accident year 2007 and had
continued for accident years 2003 to 2006 and, as a result, the Company reduced the reserves.
In addition, during the third quarter of 2009, the Company recognized that the cost of late
emerging exposures were likely to be higher than previously expected. Also in the third
quarter, the Company recognized additional ceded losses on accident years 1999 and prior.
These third quarter events were largely offsetting.
|
| • |
Released reserves for professional liability claims in the three and nine months ended
September 30, 2009 primarily related to accident years 2003 to 2007. Beginning in 2008, the
Company observed that claim severity for both D&O and E&O claims for the 2003 to 2006 accident
years was developing favorably to previous expectations and the Company released reserves for
these accident years in 2008. During the first nine months of 2009, the Company’s updated
analysis showed that claim severity for D&O losses in the 2003 to 2007 accident years
continued to develop favorably to previous expectations, resulting in a reduction of reserves
in each of the first three quarters of 2009.
|
| • |
Strengthened reserves for property personal homeowners’ claims for the nine months ended
September 30, 2009 primarily driven by increased claim settlement costs in recent accident
years and increased losses from underground storage tanks in older accident years. In 2008,
the Company began to observe increasing claim settlement costs for the 2005 to 2008 accident
years and, in the first quarter of 2009, determined that this higher cost level would
continue, resulting in a reserve strengthening of $9 for these accident years. In addition,
beginning in 2008, the Company observed unfavorable emergence of homeowners’ casualty claims
for accident years 2003 and prior, primarily related to underground storage tanks. Following a
detailed review of these claims in the first quarter of 2009, management increased its
estimate of the magnitude of this exposure and strengthened homeowners’ casualty claim
reserves by $9.
|
| • |
Strengthened reserves for surety business for the nine months ended September 30, 2009
primarily related to accident years 2004 to 2007. The strengthening in 2009 consisted of net
actions of $45 strengthening of reserves for customs bonds, partially offset by a $20 release
of reserves for contract surety claims. During 2008, the Company became aware that there were
a large number of late reported surety claims related to customs bonds. Continued high volume
of late reported claims during the first and second quarters of 2009 caused the Company to
strengthen the reserves in each period.
|
| • |
The Company reviewed its allowance for uncollectible reinsurance for Property & Casualty
Commercial in the second quarter of 2009 and reduced its allowance for Property & Casualty
Commercial driven, in part, by a reduction in gross ceded loss recoverables
|
| • |
Refer to the Other Operations Claims section for further discussion on strengthening of net
environmental and net asbestos reserves.
|
71
| For the Three Months Ended September 30, 2010 | Asbestos | Environmental | All Other [1] | Total | |||||||||||||||
|
Beginning liability — net [2][3]
|
$ | 1,944 | $ | 291 | $ | 1,351 | $ | 3,586 | |||||||||||
|
Losses and loss adjustment expenses incurred
|
— | 62 | 1 | 63 | |||||||||||||||
|
Losses and loss adjustment expenses paid
|
(56 | ) | (11 | ) | (21 | ) | (88 | ) | |||||||||||
|
|
|||||||||||||||||||
|
Ending liability — net [2][3]
|
$ | 1,888 | [4] | $ | 342 | $ | 1,331 | $ | 3,561 | ||||||||||
|
|
|||||||||||||||||||
| For the Nine Months Ended September 30, 2010 | Asbestos | Environmental | All Other [1] | Total | ||||||||||||
|
Beginning liability — net [2][3]
|
$ | 1,892 | $ | 307 | $ | 1,432 | $ | 3,631 | ||||||||
|
Losses and loss adjustment expenses incurred
|
172 | 64 | — | 236 | ||||||||||||
|
Losses and loss adjustment expenses paid
|
(176 | ) | (29 | ) | (101 | ) | (306 | ) | ||||||||
|
|
||||||||||||||||
|
Ending liability — net [2][3]
|
$ | 1,888 | [4] | $ | 342 | $ | 1,331 | $ | 3,561 | |||||||
|
|
||||||||||||||||
| [1] |
“All Other” includes unallocated loss adjustment expense reserves.
“All Other” also includes The Company’s allowance for uncollectible
reinsurance. When the Company commutes a ceded reinsurance contract
or settles a ceded reinsurance dispute, the portion of the allowance
for uncollectible reinsurance attributable to that commutation or
settlement, if any, is reclassified to the appropriate cause of loss.
|
|
| [2] |
Excludes asbestos and environmental net liabilities reported in
Property & Casualty Commercial of $9 and $5, respectively, as of
September 30, 2010, $10 and $4, respectively, as of June 30, 2010 and
$10 and $5, respectively, as of December 31, 2009. Total net losses
and loss adjustment expenses incurred in Property & Casualty
Commercial for the three and nine months ended September 30, 2010
includes $4 and $10, respectively, related to asbestos and
environmental claims. Total net losses and loss adjustment expenses
paid in Property & Casualty Commercial for the three and nine months
ended September 30, 2010 includes $4 and $11 respectively, related to
asbestos and environmental claims.
|
|
| [3] |
Gross of reinsurance, asbestos and environmental reserves, including
liabilities in Property & Casualty Commercial, were $2,393 and $395,
respectively, as of September 30, 2010, $2,545 and $344, respectively,
as of June 30, 2010 and $2,484 and $367, respectively, as of December
31, 2009.
|
|
| [4] |
The one year and average three year net paid amounts for asbestos
claims, including Property & Casualty Commercial, are $232 and $225,
respectively, resulting in a one year net survival ratio of 8.2 and a
three year net survival ratio of 8.4. Net survival ratio is the
quotient of the net carried reserves divided by the average annual
payment amount and is an indication of the number of years that the
net carried reserve would last (i.e. survive) if the future annual
claim payments were consistent with the calculated historical average.
|
72
| Asbestos [1] | Environmental [1] | |||||||||||||||
| Paid | Incurred | Paid | Incurred | |||||||||||||
| Three Months Ended September 30, 2010 | Losses & LAE | Losses & LAE | Losses & LAE | Losses & LAE | ||||||||||||
|
Gross
|
||||||||||||||||
|
Direct
|
$ | 95 | $ | — | $ | 9 | $ | 47 | ||||||||
|
Assumed Reinsurance
|
48 | — | 1 | 5 | ||||||||||||
|
London Market
|
8 | — | 2 | 10 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
151 | — | 12 | 62 | ||||||||||||
|
Ceded
|
(95 | ) | — | (1 | ) | — | ||||||||||
|
|
||||||||||||||||
|
Net
|
$ | 56 | $ | — | $ | 11 | $ | 62 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Nine months Ended September 30, 2010
|
||||||||||||||||
|
Gross
|
||||||||||||||||
|
Direct
|
$ | 163 | $ | 209 | $ | 26 | $ | 47 | ||||||||
|
Assumed Reinsurance
|
98 | — | 4 | 5 | ||||||||||||
|
London Market
|
23 | (15 | ) | 4 | 10 | |||||||||||
|
|
||||||||||||||||
|
Total
|
284 | 194 | 34 | 62 | ||||||||||||
|
Ceded
|
(108 | ) | (22 | ) | (5 | ) | 2 | |||||||||
|
|
||||||||||||||||
|
Net
|
$ | 176 | $ | 172 | $ | 29 | $ | 64 | ||||||||
|
|
||||||||||||||||
| [1] |
Excludes asbestos and environmental paid and incurred loss and LAE reported in Property &
Casualty Commercial. Total gross losses and LAE incurred in Property & Casualty Commercial
for the three and nine months ended September 30, 2010 includes $4 and $10, respectively,
related to asbestos and environmental claims. Total gross losses and LAE paid in Property &
Casualty Commercial for the three and nine months ended September 30, 2010 includes $4 and
$11, respectively, related to asbestos and environmental claims.
|
| Total | ||||
| Reserves | ||||
|
Gross
|
||||
|
Direct
|
$ | 281 | ||
|
Assumed Reinsurance
|
55 | |||
|
London Market
|
61 | |||
|
|
||||
|
Total [1] [2]
|
397 | |||
|
Ceded
|
(50 | ) | ||
|
|
||||
|
Net
|
$ | 347 | ||
|
|
||||
| [1] |
The one-year gross paid amount for total environmental claims is $56, resulting in a one-year gross survival ratio of 7.0.
|
|
| [2] |
The three-year average annual gross paid amount for total environmental claims is $53, resulting in a three-year gross survival ratio of 7.6.
|
73
74
| U.S. Annuity | International Annuity | Retirement Plans | Life Insurance | |||||||||||||||||||||||||||||
| September | December | September | December | September | December | September | December | |||||||||||||||||||||||||
| 30, 2010 | 30, 2009 | 30, 2010 | 30, 2009 | 30, 2010 | 30, 2009 | 30, 2010 | 30, 2009 | |||||||||||||||||||||||||
|
DAC
|
$ | 3,119 | $ | 3,378 | $ | 1,620 | $ | 1,693 | $ | 797 | $ | 701 | $ | 2,632 | $ | 2,490 | ||||||||||||||||
|
SIA
|
$ | 318 | $ | 324 | $ | 38 | $ | 28 | $ | 24 | $ | 23 | $ | 44 | $ | 42 | ||||||||||||||||
|
URR
|
$ | 94 | $ | 96 | $ | 48 | $ | 584 | $ | — | $ | — | $ | 1,331 | $ | 1,182 | ||||||||||||||||
|
Death and Other
Insurance Benefit
Reserves
|
$ | 1,158 | $ | 1,232 | $ | 641 | $ | 70 | $ | 1 | $ | 1 | $ | 103 | $ | 76 | ||||||||||||||||
| Death and | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Insurance | ||||||||||||||||||||
| Segment | Benefit | |||||||||||||||||||
| After-tax (Charge) Benefit | DAC | URR | Reserves | SIA | Total [1] | |||||||||||||||
|
Global Annuity
|
$ | 58 | $ | 5 | $ | 77 | $ | 5 | $ | 145 | ||||||||||
|
Life Insurance
|
31 | (2 | ) | 1 | (1 | ) | 29 | |||||||||||||
|
Retirement Plans
|
19 | — | — | — | 19 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 108 | $ | 3 | $ | 78 | $ | 4 | $ | 193 | ||||||||||
|
|
||||||||||||||||||||
| [1] |
The most significant contributors to the Unlock benefit recorded during the third quarter
of 2010 were actual separate account returns from July 1, 2010 to September 30, 2010 being
above our aggregated estimated return and the impact of assumption updates primarily
related to decreasing lapse and withdrawal rates and lower hedge costs.
|
| Death and | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Insurance | ||||||||||||||||||||
| Segment | Benefit | |||||||||||||||||||
| After-tax (Charge) Benefit | DAC | URR | Reserves | SIA | Total [1] | |||||||||||||||
|
Global Annuity
|
$ | (22 | ) | $ | 8 | $ | 23 | $ | (5 | ) | $ | 4 | ||||||||
|
Life Insurance
|
26 | 3 | 1 | (1 | ) | 29 | ||||||||||||||
|
Retirement Plans
|
15 | — | — | — | 15 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 19 | $ | 11 | $ | 24 | $ | (6 | ) | $ | 48 | |||||||||
|
|
||||||||||||||||||||
| [1] |
The most significant contributors to the Unlock benefit recorded during the nine months
ended September 30, 2010 was actual separate account returns from January 1, 2010 to
September 30, 2010 being above our aggregated estimated return and the impacts of
increased hedging costs and assumption updates.
|
75
| Death and | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Insurance | ||||||||||||||||||||
| Segment | Benefit | |||||||||||||||||||
| After-tax (Charge) Benefit | DAC | URR | Reserves | SIA | Total [2] | |||||||||||||||
|
Global Annuity [1]
|
$ | 18 | $ | (14 | ) | $ | 92 | $ | (10 | ) | $ | 86 | ||||||||
|
Life Insurance
|
(27 | ) | 7 | (4 | ) | — | (24 | ) | ||||||||||||
|
Corporate and Other
|
1 | — | — | — | 1 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | (8 | ) | $ | (7 | ) | $ | 88 | $ | (10 | ) | $ | 63 | |||||||
|
|
||||||||||||||||||||
| [1] |
Includes $(49) related to DAC recoverability impairment associated with the decision to suspend sales in the U.K. variable annuity business.
|
|
| [2] |
The most significant contributor to the Unlock benefit recorded during the third quarter of 2009 was actual separate account returns from
July 1, 2009 to September 30, 2009 being above our aggregated estimated return.
|
| Death and | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Insurance | ||||||||||||||||||||
| Segment | Benefit | |||||||||||||||||||
| After-tax (Charge) Benefit | DAC | URR | Reserves | SIA | Total [1] | |||||||||||||||
|
Global Annuity
|
$ | (583 | ) | $ | 24 | $ | (355 | ) | $ | (50 | ) | $ | (964 | ) | ||||||
|
Life Insurance
|
(91 | ) | 47 | (4 | ) | — | (48 | ) | ||||||||||||
|
Retirement Plans
|
(54 | ) | — | (1 | ) | (1 | ) | (56 | ) | |||||||||||
|
Corporate and Other
|
(3 | ) | — | — | — | (3 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | (731 | ) | $ | 71 | $ | (360 | ) | $ | (51 | ) | $ | (1,071 | ) | ||||||
|
|
||||||||||||||||||||
| [1] |
The most significant contributor to the Unlock charge recorded during the nine months ended
September 30, 2009 was the result of actual separate account returns from October 1, 2008 to
March 31, 2009 being significantly below our aggregated estimated return while the opposite
was true from April 1, 2009 to September 30, 2009.
|
76
| Segment | Goodwill in | |||||||||||
| Goodwill | Corporate and Other | Total | ||||||||||
|
Hartford Financial Products within Property &
Casualty Commercial
|
$ | 30 | $ | — | $ | 30 | ||||||
|
Group Benefits
|
— | 138 | 138 | |||||||||
|
Consumer Markets
|
119 | — | 119 | |||||||||
|
Individual Life within Life Insurance
|
224 | 118 | 342 | |||||||||
|
Retirement Plans
|
87 | 69 | 156 | |||||||||
|
Mutual Funds
|
159 | 92 | 251 | |||||||||
|
Federal Trust Corporation within Corporate and Other
|
— | 15 | 15 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 619 | $ | 432 | $ | 1,051 | ||||||
|
|
||||||||||||
77
78
79
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Property & Casualty Commercial
|
||||||||||||||||
|
Combined ratio
|
84.9 | 87.3 | 88.0 | 88.0 | ||||||||||||
|
Catastrophe ratio
|
0.9 | 1.9 | 3.1 | 1.4 | ||||||||||||
|
Non-catastrophe prior year development
|
(8.2 | ) | (7.7 | ) | (7.9 | ) | (5.1 | ) | ||||||||
|
|
||||||||||||||||
|
Combined ratio before catastrophes and prior year development
|
92.2 | 93.1 | 92.8 | 91.7 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Consumer Markets
|
||||||||||||||||
|
Combined ratio
|
94.1 | 101.2 | 98.5 | 98.5 | ||||||||||||
|
Catastrophe ratio
|
5.1 | 8.1 | 8.0 | 8.5 | ||||||||||||
|
Non-catastrophe prior year development
|
(4.3 | ) | (1.5 | ) | (2.1 | ) | (0.8 | ) | ||||||||
|
|
||||||||||||||||
|
Combined ratio before catastrophes and prior year development
|
93.3 | 94.6 | 92.6 | 90.8 | ||||||||||||
|
|
||||||||||||||||
| • |
Property & Casualty Commercial’s combined ratio before catastrophes and prior year
development for the three-month period decreased due to a decrease in the expense ratio as a
result of lower compensation-related costs and lower amortization of DAC. For the nine-month
period, the combined ratio before catastrophes and prior year development increased primarily
due to a decrease in earned premiums.
|
| • |
Consumer Markets combined ratio before catastrophes and prior year development for the
three-month period decreased due to a decrease in the current accident year losses and loss
adjustment expenses before catastrophes driven by the effect of current accident year reserve
strengthening in 2009 compared to releases in 2010. For the nine-month period, the combined
ratio before catastrophes and prior year development increased primarily due to an increase in
the current accident year loss and loss adjustment expense ratio before catastrophes for auto.
|
80
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Global Annuity
|
||||||||||||||||
|
ROA [1]
|
47.4 | bps | (81.0 | ) bps | 12.0 | bps | (111.0 | ) bps | ||||||||
|
Effect of net realized losses, net of tax and DAC on ROA [3]
|
(30.5 | ) bps | (136.1 | ) bps | (24.1 | ) bps | (48.3 | ) bps | ||||||||
|
Effect of DAC Unlock on ROA [2]
|
39.3 | bps | 21.8 | bps | 0.3 | bps | (82.0 | ) bps | ||||||||
|
|
||||||||||||||||
|
ROA, excluding realized losses and DAC Unlock
|
38.6 | bps | 33.3 | bps | 35.8 | bps | 19.3 | bps | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Retirement Plans [1]
|
||||||||||||||||
|
ROA
|
25.8 | bps | (33.3 | ) bps | 10.9 | bps | (54.1 | ) bps | ||||||||
|
Effect of net realized losses, net of tax and DAC on ROA
|
(0.4 | ) bps | (41.6 | ) bps | (2.8 | ) bps | (40.9 | ) bps | ||||||||
|
Effect of DAC Unlock on ROA [2]
|
16.3 | bps | — | bps | 4.3 | bps | (18.7 | ) bps | ||||||||
|
|
||||||||||||||||
|
ROA, excluding realized losses and DAC Unlock
|
9.9 | bps | 8.3 | bps | 9.4 | bps | 5.5 | bps | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Mutual Funds [1]
|
||||||||||||||||
|
ROA [4]
|
7.9 | bps | 11.4 | bps | 9.5 | bps | 6.1 | bps | ||||||||
|
Effect of net realized losses, net of tax and DAC on ROA
|
(0.4 | ) bps | — | bps | — | bps | — | bps | ||||||||
|
|
||||||||||||||||
|
ROA, excluding realized losses
|
8.3 | bps | 11.4 | bps | 9.5 | bps | 6.1 | bps | ||||||||
|
|
||||||||||||||||
| [1] |
Proprietary mutual fund assets are included in Mutual Funds and those same assets are also included in Global Annuity and
Retirement Plans as those same assets generate earnings for each of these segments.
|
|
| [2] |
See Unlocks within the Critical Accounting Estimates section of the MD&A.
|
|
| [3] |
Included in the net realized capital gain (losses) are amounts that represent the net periodic accruals on currency rate
swaps used in the risk management of Japan fixed annuity products.
|
|
| [4] |
Includes assets attributed to the transfer of Proprietary mutual funds, Investment-Only mutual funds, Canadian mutual
funds, and 529 college savings plans effective January 1, 2010.
|
| • |
Global Annuity’s ROA, excluding realized losses and DAC Unlock, increased primarily due to
improved net investment income on limited partnerships and other alternative investments, a
lower DAC amortization rate and improved operating expenses associated with the restructuring
of Japan’s operations. In addition, Global Annuity’s ROA, excluding realized losses and DAC
Unlock, for the nine months ended September 30, 2010 improved due to 3 Win charges recognized
in the first quarter of 2009 of $40, after-tax. Excluding the effects of the 3 Win charge,
ROA, excluding realized losses and DAC Unlock, DAC amortization would have been 22.7 bps for
the nine months ended September 30, 2009.
|
| • |
The increase in Retirement Plans’ ROA, excluding realized losses and DAC Unlock, was
primarily driven by improved performance on limited partnerships and other alternative
investments in 2010, and an unfavorable tax adjustment recorded in the third quarter of 2009
related to a true-up for the 2008 tax year.
|
| • |
The decrease in the Mutual Funds’ ROA, excluding realized losses, for the three months
ended September 30, 2010 is driven by the addition of Proprietary and Canadian mutual fund
assets to this line of business which have a lower ROA, as well as
the capital infusion to the money market fund. The increase in Mutual Funds’ ROA,
excluding realized losses, for the nine months ended September 30, 2010 was driven by
improvement in the equity markets, which enabled this business to partially return to scale,
and the impact of lower operating expenses, partially offset by the addition of Proprietary
and Canadian mutual fund assets to this line of business which have a lower ROA.
|
81
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
|
||||||||||||||||
|
Life Insurance
|
||||||||||||||||
|
After-tax margin
|
25.0 | % | 2.7 | % | 18.7 | % | 1.9 | % | ||||||||
|
Effect of net realized gains (losses), net of tax and DAC on
after-tax margin
|
2.9 | % | (6.1 | %) | 1.5 | % | (6.4 | %) | ||||||||
|
Effect of DAC Unlock on after-tax margin [1]
|
7.1 | % | (8.3 | %) | 2.4 | % | (5.5 | %) | ||||||||
|
|
||||||||||||||||
|
After-tax margin, excluding realized gains (losses) and DAC Unlock
|
15.0 | % | 17.1 | % | 14.8 | % | 13.8 | % | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Group Benefits
|
||||||||||||||||
|
After-tax margin (excluding buyouts)
|
4.0 | % | 5.7 | % | 4.1 | % | 4.2 | % | ||||||||
|
Effect of net realized gains (losses), net of tax on after-tax margin
|
0.2 | % | (1.6 | %) | 0.5 | % | (1.2 | %) | ||||||||
|
|
||||||||||||||||
|
After-tax margin (excluding buyouts), exlcuding realized gains
(losses)
|
3.8 | % | 7.3 | % | 3.6 | % | 5.4 | % | ||||||||
|
|
||||||||||||||||
| [1] |
See Unlocks within the Critical Accounting Estimates section of the MD&A.
|
| • |
For the three months ended September 30, 2010, Life Insurance’s after-tax margin, excluding
realized gains (losses) and DAC Unlock, decreased primarily due to higher mortality, partially
offset by lower DAC amortization and favorable operating expenses. For the nine months ended
September 30, 2010, Life Insurance’s after-tax margin, excluding realized gains (losses) and
DAC Unlock, increased primarily due to lower DAC amortization and favorable operating
expenses, partially offset by higher mortality.
|
| • |
The decrease in Group Benefits’ after-tax margin (excluding buyouts), excluding realized
gains (losses), was primarily due to a higher loss ratio from unfavorable morbidity.
|
82
| September 30, 2010 | December 31, 2009 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
|
Fixed maturities, AFS, at fair value
|
$ | 79,736 | 78.8 | % | $ | 71,153 | 76.3 | % | ||||||||
|
Fixed maturities, at fair value using the fair value option
|
564 | 0.6 | % | — | — | |||||||||||
|
Equity securities, AFS, at fair value
|
1,168 | 1.2 | % | 1,221 | 1.3 | % | ||||||||||
|
Mortgage loans
|
4,684 | 4.6 | % | 5,938 | 6.4 | % | ||||||||||
|
Policy loans, at outstanding balance
|
2,180 | 2.2 | % | 2,174 | 2.3 | % | ||||||||||
|
Limited partnerships and other alternative investments
|
1,819 | 1.8 | % | 1,790 | 1.9 | % | ||||||||||
|
Other investments [1]
|
1,427 | 1.4 | % | 602 | 0.7 | % | ||||||||||
|
Short-term investments
|
9,517 | 9.4 | % | 10,357 | 11.1 | % | ||||||||||
|
|
||||||||||||||||
|
Total investments excluding equity securities, trading
|
101,095 | 100.0 | % | 93,235 | 100.0 | % | ||||||||||
|
Equity securities, trading, at fair value [2]
|
32,495 | 32,321 | ||||||||||||||
|
|
||||||||||||||||
|
Total investments
|
$ | 133,590 | $ | 125,556 | ||||||||||||
|
|
||||||||||||||||
| [1] |
Primarily relates to derivative instruments.
|
|
| [2] |
These assets primarily support the Global Annuity-International
variable annuity business. Changes in these balances are also
reflected in the respective liabilities.
|
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||
| (Before-tax) | Amount | Yield [1] | Amount | Yield [1] | Amount | Yield [1] | Amount | Yield [1] | ||||||||||||||||||||||||
|
Fixed maturities [2]
|
$ | 868 | 4.3 | % | $ | 883 | 4.4 | % | $ | 2,629 | 4.4 | % | $ | 2,765 | 4.6 | % | ||||||||||||||||
|
Equity securities, AFS
|
12 | 3.9 | % | 24 | 6.5 | % | 39 | 4.2 | % | 76 | 7.0 | % | ||||||||||||||||||||
|
Mortgage loans
|
72 | 6.2 | % | 82 | 5.1 | % | 210 | 5.5 | % | 240 | 5.0 | % | ||||||||||||||||||||
|
Policy loans
|
33 | 6.1 | % | 36 | 6.5 | % | 101 | 6.2 | % | 108 | 6.5 | % | ||||||||||||||||||||
|
Limited partnerships and
other alternative
investments
|
49 | 11.5 | % | (32 | ) | (6.2 | %) | 141 | 10.9 | % | (334 | ) | (20.2 | %) | ||||||||||||||||||
|
Other [3]
|
78 | 89 | 254 | 217 | ||||||||||||||||||||||||||||
|
Investment expense
|
(29 | ) | (33 | ) | (78 | ) | (82 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total net investment
income excl. equity
securities, trading
|
1,083 | 4.4 | % | 1,049 | 4.2 | % | 3,296 | 4.5 | % | 2,990 | 4.0 | % | ||||||||||||||||||||
|
Equity securities, trading
|
1,043 | 638 | (905 | ) | 2,437 | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total net investment
income (loss)
|
$ | 2,126 | $ | 1,687 | $ | 2,391 | $ | 5,427 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| [1] |
Yields calculated using annualized investment income before investment expenses divided by the monthly average invested
assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding securities lending collateral and
consolidated variable interest entity noncontrolling interests. Included in the fixed maturity yield is Other, which
primarily relates to derivatives (see footnote [3] below). Included in the total net investment income yield is investment
expense.
|
|
| [2] |
Includes net investment income on short-term investments.
|
|
| [3] |
Includes income from derivatives that qualify for hedge accounting and hedge fixed maturities.
|
83
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Before-tax) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Gross gains on sales
|
$ | 179 | $ | 205 | $ | 654 | $ | 570 | ||||||||
|
Gross losses on sales
|
(88 | ) | (104 | ) | (293 | ) | (1,013 | ) | ||||||||
|
Net OTTI losses recognized in earnings
|
(115 | ) | (536 | ) | (375 | ) | (1,074 | ) | ||||||||
|
Valuation allowances on mortgage loans
|
(7 | ) | (40 | ) | (159 | ) | (193 | ) | ||||||||
|
Japanese fixed annuity contract hedges, net [1]
|
11 | (7 | ) | 22 | 28 | |||||||||||
|
Periodic net coupon settlements on credit derivatives/Japan
|
(4 | ) | (7 | ) | (15 | ) | (39 | ) | ||||||||
|
Results of variable annuity hedge program
|
||||||||||||||||
|
GMWB derivatives, net
|
170 | (190 | ) | (127 | ) | 1,070 | ||||||||||
|
Macro hedge program
|
(443 | ) | (328 | ) | (210 | ) | (692 | ) | ||||||||
|
|
||||||||||||||||
|
Total results of variable annuity hedge program
|
(273 | ) | (518 | ) | (337 | ) | 378 | |||||||||
|
Other, net [2]
|
36 | (212 | ) | (23 | ) | (473 | ) | |||||||||
|
|
||||||||||||||||
|
Net realized capital losses
|
$ | (261 | ) | $ | (1,219 | ) | $ | (526 | ) | $ | (1,816 | ) | ||||
|
|
||||||||||||||||
| [1] |
Relates to derivative hedging instruments, excluding periodic net
coupon settlements, and is net of the Japanese fixed annuity product
liability adjustment for changes in the dollar/yen exchange spot rate.
|
|
| [2] |
Primarily consists of losses on Japan 3Win related foreign currency
swaps, changes in fair value on non-qualifying derivatives and fixed
maturities, FVO, and other investment gains and losses.
|
|
Gross gains and losses on sales
|
•
Gross gains and losses on
sales for the three and nine months
ended September 30, 2010 were
predominantly from sales of
investment grade corporate
securities, U.S. Treasuries and
previously reserved mortgage loans
in order to take advantage of
attractive market opportunities.
|
|
|
|
||
|
|
•
Gross gains and losses on
sales for the three and nine months
September 30, 2009 were
predominantly within financial
services, structured and government
securities due to efforts to reduce
portfolio risk while simultaneously
reallocating the portfolio to
securities with more favorable
risk/return profiles.
|
|
|
|
||
|
Net OTTI losses
|
•
For further information, see
Other-Than-Temporary Impairments
within the Investment Credit Risk
section of the MD&A.
|
|
|
|
||
|
Valuation allowances on mortgage
loans |
•
For further information, see
Valuation Allowances on Mortgage
Loans within the Investment Credit
Risk section of the MD&A.
|
|
|
|
||
|
Variable annuity hedge program
|
•
The gain on GMWB
derivatives, net, for the three
months ended September 30, 2010 was
primarily due to liability model
assumption updates of $164 and lower
implied market volatility of $117,
partially offset by losses due to a
general decrease in long-term rates
of $(94). The loss on GMWB
derivatives, net, for the nine
months ended September 30, 2010 was
primarily due to a general decrease
in long-term interest rates of
$(309), partially offset by gains on
liability model assumption updates
of $164. The net loss on the macro
hedge program was primarily the
result of higher equity market
valuation.
|
|
|
|
||
|
|
•
The loss on GMWB
derivatives, net, for the three
months ended September 30, 2009 was
primarily due to liability model
assumption updates of $(126) and a
general decrease in long-term
interest rates of $(97). The gain
on GMWB derivatives, net, for the
nine months ended September 30, 2009
was primarily due to outperformance
of the underlying actively managed
funds as compared to their
respective indices of $510,
liability model assumption updates
of $306, and lower implied market
volatility of $201, partially offset
by losses on higher equity market
valuation of $(194). For more
information, see Note 4a of the
Notes to Condensed Consolidated
Financial Statements. The net
losses on the macro hedge program
for the three and nine months ended
September 30, 2009 were primarily
the result of a higher equity market
valuation.
|
84
|
Other, net
|
•
Other, net gain for the three months ended September
30, 2010 was primarily due to gains of $109 on credit
derivatives that assume credit risk driven by credit spreads
tightening, and gains of $58 on interest rate derivatives used
to manage portfolio duration driven by a decline in long-term
interest rates, partially offset by losses of $(123) on
transactional foreign currency re-valuation due to an increase
in value of the Japanese yen versus the U.S. dollar associated
with the internal reinsurance of the Japan variable annuity
business, which is offset in AOCI.
|
|
|
|
||
|
|
•
Other, net loss for the nine months ended September 30,
2010 was primarily due to losses of $(240) on transactional
foreign currency re-valuation due to an increase in value of
the Japanese yen versus the U.S. dollar associated with the
internal reinsurance of the Japan variable annuity business,
which is offset in AOCI, and losses of $(117) related to the
Japan 3Win foreign currency swaps driven by a decrease in U.S.
interest rates. These losses are partially offset by gains of
$140 on credit derivatives, gains of $60 related to Japan
variable annuity hedges due to the appreciation of the Japanese
yen, gains of $55 on interest rate derivatives used to manage
portfolio duration driven by a decline in long-term interest
rates and $35 of other foreign currency related gains.
|
|
|
|
||
|
|
•
Other, net loss for the three months ended September
30, 2009 primarily resulted from losses of $(99) on
transactional foreign currency re-valuation due to an increase
in value of the Japanese yen versus the U.S. dollar associated
with the internal reinsurance of the Japan variable annuity
business, which is offset in AOCI and losses of $(84) on credit
derivatives that purchase credit protection due to credit
spreads tightening. Other, net loss for the nine months ended
September 30 2009 primarily resulted from losses of $(438) on
credit derivatives that purchase credit protection due to
credit spreads tightening, and losses of $(223) related to
contingent obligations associated with the Allianz transaction.
These losses were partially offset by gains of $118 on credit
derivatives that assume credit risk driven by credit spreads
tightening, and gains of $80 on transactional foreign currency
re-valuation gains predominantly on the internal reinsurance of
the Japan variable annuity business, which is offset in AOCI.
|
85
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Operating Summary | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Written premiums
|
$ | 1,447 | $ | 1,387 | 4 | % | $ | 4,347 | $ | 4,316 | 1 | % | ||||||||||||
|
Change in unearned premium reserve
|
8 | (55 | ) | NM | 69 | (147 | ) | NM | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Earned premiums
|
1,439 | 1,442 | — | 4,278 | 4,463 | (4 | %) | |||||||||||||||||
|
Losses and loss adjustment expenses
|
||||||||||||||||||||||||
|
Current accident year before catastrophes
|
888 | 888 | — | 2,634 | 2,726 | (3 | %) | |||||||||||||||||
|
Current accident year catastrophes
|
13 | 25 | (48 | %) | 134 | 80 | 68 | % | ||||||||||||||||
|
Prior accident years
|
(118 | ) | (108 | ) | (9 | %) | (339 | ) | (246 | ) | (38 | %) | ||||||||||||
|
|
||||||||||||||||||||||||
|
Total losses and loss adjustment expenses
|
783 | 805 | (3 | %) | 2,429 | 2,560 | (5 | %) | ||||||||||||||||
|
Amortization of deferred policy acquisition costs
|
338 | 345 | (2 | %) | 1,018 | 1,051 | (3 | %) | ||||||||||||||||
|
Insurance operating costs and expenses
|
100 | 109 | (8 | %) | 318 | 315 | 1 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Underwriting results
|
218 | 183 | 19 | % | 513 | 537 | (4 | %) | ||||||||||||||||
|
Net servicing income
|
6 | 4 | 50 | % | 7 | 6 | 17 | % | ||||||||||||||||
|
Net investment income
|
227 | 206 | 10 | % | 696 | 546 | 27 | % | ||||||||||||||||
|
Net realized capital gains (losses)
|
6 | (66 | ) | NM | (10 | ) | (359 | ) | 97 | % | ||||||||||||||
|
Other expenses
|
(24 | ) | (28 | ) | 14 | % | (87 | ) | (87 | ) | — | |||||||||||||
|
|
||||||||||||||||||||||||
|
Income before income taxes
|
433 | 299 | 45 | % | 1,119 | 643 | 74 | % | ||||||||||||||||
|
Income tax expense
|
127 | 82 | 55 | % | 337 | 159 | 112 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income
|
$ | 306 | $ | 217 | 41 | % | $ | 782 | $ | 484 | 62 | % | ||||||||||||
|
|
||||||||||||||||||||||||
| Premium Measures | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||
|
New business premium
|
$ | 279 | $ | 269 | $ | 852 | $ | 823 | ||||||||||||||||
|
Standard commercial lines policy count retention
|
83 | % | 80 | % | 84 | % | 80 | % | ||||||||||||||||
|
Standard
commercial lines renewal written pricing increase (decrease)
|
1 | % | (1 | %) | 1 | % | (1 | %) | ||||||||||||||||
|
Standard
commercial lines renewal earned pricing decrease
|
— | (1 | %) | — | (2 | %) | ||||||||||||||||||
|
Standard commercial lines policies in-force
|
1,201,862 | 1,151,999 | ||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Underwriting Ratios | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Loss and loss adjustment expense ratio
|
||||||||||||||||||||||||
|
Current accident year before catastrophes
|
61.8 | 61.6 | (0.2 | ) | 61.6 | 61.1 | (0.5 | ) | ||||||||||||||||
|
Current accident year catastrophes
|
0.9 | 1.8 | 0.9 | 3.1 | 1.8 | (1.3 | ) | |||||||||||||||||
|
Prior accident years
|
(8.2 | ) | (7.5 | ) | 0.7 | (7.9 | ) | (5.5 | ) | 2.4 | ||||||||||||||
|
|
||||||||||||||||||||||||
|
Total loss and loss adjustment expense ratio
|
54.5 | 55.9 | 1.4 | 56.8 | 57.3 | 0.5 | ||||||||||||||||||
|
Expense ratio
|
30.1 | 31.1 | 1.0 | 31.2 | 30.3 | (0.9 | ) | |||||||||||||||||
|
Policyholder dividend ratio
|
0.3 | 0.3 | — | — | 0.3 | 0.3 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Combined ratio
|
84.9 | 87.3 | 2.4 | 88.0 | 88.0 | — | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Catastrophe ratio
|
||||||||||||||||||||||||
|
Current year
|
0.9 | 1.8 | 0.9 | 3.1 | 1.8 | (1.3 | ) | |||||||||||||||||
|
Prior years
|
— | 0.1 | 0.1 | — | (0.4 | ) | (0.4 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total catastrophe ratio
|
0.9 | 1.9 | 1.0 | 3.1 | 1.4 | (1.7 | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Combined ratio before catastrophes
|
84.0 | 85.5 | 1.5 | 84.9 | 86.5 | 1.6 | ||||||||||||||||||
|
Combined ratio before catastrophes and prior
accident years development
|
92.2 | 93.1 | 0.9 | 92.8 | 91.7 | (1.1 | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Other revenues [1]
|
$ | 82 | $ | 85 | (4 | %) | $ | 237 | $ | 246 | (4 | %) | ||||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Represents servicing revenues.
|
86
|
New business premium
|
•
New business written premium
increased for both the three and
nine months ended September 30,
2010. The increase in both periods
was driven by an increase in
specialty casualty, and to a lesser
extent for the nine months, an
increase in package business.
|
|
|
|
||
|
Standard commercial lines policy
count retention |
•
Policy count retention
increased in both the three- and
nine-month periods in nearly all
lines of business, as a result of an
improvement in mid-term
cancellations in 2010.
|
|
|
|
||
|
Standard
commercial lines renewal earned pricing decrease
|
•
For both the three- and
nine-month periods, renewal earned
pricing was flat, as an increase in
package business was offset by a
decrease for general liability. The
earned pricing changes were
primarily a reflection of written
pricing changes over the last year.
|
|
|
|
||
|
Standard commercial lines policies
in-force |
•
The number of
policies-in-force increased by 4%
from September 30, 2009 to September
30, 2010, while earned premiums
declined over the same period. The
increase is primarily related to the
increase in policy count retention.
|
87
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Operating Summary | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Premiums and other considerations
|
$ | 1,058 | $ | 1,069 | (1 | %) | $ | 3,234 | $ | 3,281 | (1 | %) | ||||||||||||
|
Net investment income
|
107 | 105 | 2 | % | 324 | 298 | 9 | % | ||||||||||||||||
|
Net realized capital gains (losses)
|
(1 | ) | (32 | ) | 97 | % | 31 | (70 | ) | NM | ||||||||||||||
|
|
||||||||||||||||||||||||
|
Total revenues
|
1,164 | 1,142 | 2 | % | 3,589 | 3,509 | 2 | % | ||||||||||||||||
|
Benefits, losses and loss adjustment expenses
|
816 | 742 | 10 | % | 2,505 | 2,424 | 3 | % | ||||||||||||||||
|
Amortization of deferred policy acquisition costs
|
15 | 16 | (6 | %) | 46 | 45 | 2 | % | ||||||||||||||||
|
Insurance operating costs and other expenses
|
275 | 295 | (7 | %) | 839 | 846 | (1 | %) | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total benefits, losses and expenses
|
1,106 | 1,053 | 5 | % | 3,390 | 3,315 | 2 | % | ||||||||||||||||
|
Income before income taxes
|
58 | 89 | (35 | %) | 199 | 194 | 3 | % | ||||||||||||||||
|
Income tax expense
|
12 | 24 | (50 | %) | 54 | 46 | 17 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income
|
$ | 46 | $ | 65 | (29 | %) | $ | 145 | $ | 148 | (2 | %) | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Earned Premiums and Other
|
||||||||||||||||||||||||
|
Fully insured — ongoing premiums
|
$ | 1,043 | $ | 1,059 | (2 | %) | $ | 3,136 | $ | 3,251 | (4 | %) | ||||||||||||
|
Buyout premiums
|
— | — | — | 58 | — | — | ||||||||||||||||||
|
Other
|
15 | 10 | 50 | % | 40 | 30 | 33 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total earned premiums and other
|
$ | 1,058 | $ | 1,069 | (1 | %) | $ | 3,234 | $ | 3,281 | (1 | %) | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Fully insured ongoing sales, excluding buyouts
|
$ | 100 | $ | 122 | (18 | %) | $ | 497 | $ | 611 | (19 | %) | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Ratios, excluding buyouts
|
||||||||||||||||||||||||
|
Loss ratio
|
77.1 | % | 69.4 | % | 77.0 | % | 73.9 | % | ||||||||||||||||
|
Loss ratio, excluding financial institutions
|
82.4 | % | 74.0 | % | 82.5 | % | 78.2 | % | ||||||||||||||||
|
Expense ratio
|
27.4 | % | 29.1 | % | 27.9 | % | 27.2 | % | ||||||||||||||||
|
Expense ratio, excluding financial institutions
|
22.8 | % | 22.9 | % | 23.1 | % | 22.5 | % | ||||||||||||||||
|
Premiums and other considerations
|
•
Premiums and other
considerations decreased for the
nine months ended September 30, 2010
due to lower sales and reductions in
covered lives within our customer
base.
|
|
|
|
||
|
Net investment income
|
•
Net investment income
increased for the nine months ended
September 30, 2010 as a result of
higher weighted average portfolio
yields primarily due to improved
performance on limited partnerships
and other alternative investments.
|
|
|
|
||
|
Benefits, losses and loss adjustment
expenses/Loss ratio
|
•
The segment’s loss ratio
(defined as benefits, losses and
loss adjustment expenses as a
percentage of premiums and other
considerations excluding buyouts)
was higher compared to the prior
year periods due primarily to
unfavorable morbidity experience
from higher incidence and lower
claim terminations.
|
|
|
|
||
|
Expense ratio and insurance
operating costs and other expenses
|
•
The segment’s expense ratio,
excluding buyouts, declined for the
three months ended September 30,
2010 compared to the prior year
period primarily due to a commission
accrual adjustment recorded in the
third quarter of 2009 on the
financial institution business. For
the nine months ended September 30,
2010 the expense ratio was higher
primarily due to an overall
reduction in the underlying premium.
|
|
|
|
||
|
Income tax expense
|
•
The effective tax rate, in
all periods, differs from the
statutory rate of 35% primarily due
to permanent differences related to
investments in tax exempt
securities. For further discussion,
see Income Taxes within Note 1 of
the Notes to Condensed Consolidated
Financial Statements.
|
88
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Operating Summary | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Written premiums
|
$ | 1,014 | $ | 1,049 | (3 | %) | $ | 2,990 | $ | 3,042 | (2 | %) | ||||||||||||
|
Change in unearned premium reserve
|
29 | 60 | (52 | %) | 14 | 85 | (84 | %) | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Earned premiums
|
985 | 989 | — | 2,976 | 2,957 | 1 | % | |||||||||||||||||
|
Losses and loss adjustment expenses
|
||||||||||||||||||||||||
|
Current accident year before catastrophes
|
681 | 694 | (2 | %) | 2,034 | 1,974 | 3 | % | ||||||||||||||||
|
Current accident year catastrophes
|
42 | 90 | (53 | %) | 229 | 242 | (5 | %) | ||||||||||||||||
|
Prior accident years
|
(34 | ) | (25 | ) | (36 | %) | (51 | ) | (15 | ) | NM | |||||||||||||
|
|
||||||||||||||||||||||||
|
Total losses and loss adjustment expenses
|
689 | 759 | (9 | %) | 2,212 | 2,201 | — | |||||||||||||||||
|
Amortization of deferred policy acquisition costs
|
167 | 171 | (2 | %) | 503 | 505 | — | |||||||||||||||||
|
Insurance operating costs and expenses
|
71 | 69 | 3 | % | 217 | 205 | 6 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Underwriting results
|
58 | (10 | ) | NM | 44 | 46 | (4 | %) | ||||||||||||||||
|
Net servicing income
|
7 | 6 | 17 | % | 22 | 20 | 10 | % | ||||||||||||||||
|
Net investment income
|
46 | 48 | (4 | %) | 139 | 128 | 9 | % | ||||||||||||||||
|
Net realized capital gains (losses)
|
1 | (15 | ) | NM | (2 | ) | (87 | ) | 98 | % | ||||||||||||||
|
Other expenses
|
(14 | ) | (15 | ) | 7 | % | (47 | ) | (47 | ) | — | |||||||||||||
|
|
||||||||||||||||||||||||
|
Income before income taxes
|
98 | 14 | NM | 156 | 60 | 160 | % | |||||||||||||||||
|
Income tax expense (benefit)
|
28 | (1 | ) | NM | 43 | 5 | NM | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income
|
$ | 70 | $ | 15 | NM | $ | 113 | $ | 55 | 105 | % | |||||||||||||
|
|
||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Written Premiums | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Business Unit
|
||||||||||||||||||||||||
|
AARP
|
$ | 743 | $ | 755 | (2 | %) | $ | 2,166 | $ | 2,199 | (2 | %) | ||||||||||||
|
Agency
|
258 | 280 | (8 | %) | 783 | 797 | (2 | %) | ||||||||||||||||
|
Other
|
13 | 14 | (7 | %) | 41 | 46 | (11 | %) | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 1,014 | $ | 1,049 | (3 | %) | $ | 2,990 | $ | 3,042 | (2 | %) | ||||||||||||
|
|
||||||||||||||||||||||||
|
Product Line
|
||||||||||||||||||||||||
|
Automobile
|
$ | 700 | $ | 742 | (6 | %) | $ | 2,115 | $ | 2,195 | (4 | %) | ||||||||||||
|
Homeowners
|
314 | 307 | 2 | % | 875 | 847 | 3 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 1,014 | $ | 1,049 | (3 | %) | $ | 2,990 | $ | 3,042 | (2 | %) | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Earned Premiums
|
||||||||||||||||||||||||
|
Business Unit
|
||||||||||||||||||||||||
|
AARP
|
$ | 712 | $ | 712 | — | $ | 2,143 | $ | 2,124 | 1 | % | |||||||||||||
|
Agency
|
259 | 261 | (1 | %) | 789 | 783 | 1 | % | ||||||||||||||||
|
Other
|
14 | 16 | (13 | %) | 44 | 50 | (12 | %) | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 985 | $ | 989 | — | $ | 2,976 | $ | 2,957 | 1 | % | |||||||||||||
|
|
||||||||||||||||||||||||
|
Product Line
|
||||||||||||||||||||||||
|
Automobile
|
$ | 698 | $ | 717 | (3 | %) | $ | 2,122 | $ | 2,136 | (1 | %) | ||||||||||||
|
Homeowners
|
287 | 272 | 6 | % | 854 | 821 | 4 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 985 | $ | 989 | — | $ | 2,976 | $ | 2,957 | 1 | % | |||||||||||||
|
|
||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| Premium Measures | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Policies in-force end of period
|
||||||||||||||||
|
Automobile
|
2,287,845 | 2,394,043 | ||||||||||||||
|
Homeowners
|
1,455,921 | 1,483,795 | ||||||||||||||
|
|
||||||||||||||||
|
Total policies in-force end of period
|
3,743,766 | 3,877,838 | ||||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
New business written premium
|
||||||||||||||||
|
Automobile
|
$ | 74 | $ | 118 | $ | 249 | $ | 356 | ||||||||
|
Homeowners
|
$ | 26 | $ | 41 | $ | 86 | $ | 113 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Policy count retention
|
||||||||||||||||
|
Automobile
|
82 | % | 86 | % | 83 | % | 86 | % | ||||||||
|
Homeowners
|
84 | % | 86 | % | 85 | % | 86 | % | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Renewal written pricing increase
|
||||||||||||||||
|
Automobile
|
8 | % | 3 | % | 6 | % | 3 | % | ||||||||
|
Homeowners
|
11 | % | 5 | % | 9 | % | 5 | % | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Renewal earned pricing increase
|
||||||||||||||||
|
Automobile
|
5 | % | 3 | % | 4 | % | 4 | % | ||||||||
|
Homeowners
|
8 | % | 6 | % | 7 | % | 6 | % | ||||||||
89
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Ratios and Supplemental Data | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Loss and loss adjustment expense ratio
|
||||||||||||||||||||||||
|
Current accident year before catastrophes
|
69.2 | 70.4 | 1.2 | 68.4 | 66.8 | (1.6 | ) | |||||||||||||||||
|
Current accident year catastrophes
|
4.3 | 9.1 | 4.8 | 7.7 | 8.2 | 0.5 | ||||||||||||||||||
|
Prior accident years
|
(3.5 | ) | (2.5 | ) | 1.0 | (1.7 | ) | (0.5 | ) | 1.2 | ||||||||||||||
|
|
||||||||||||||||||||||||
|
Total loss and loss adjustment expense ratio
|
70.0 | 76.9 | 6.9 | 74.4 | 74.5 | 0.1 | ||||||||||||||||||
|
Expense ratio
|
24.1 | 24.2 | 0.1 | 24.2 | 24.0 | (0.2 | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Combined ratio
|
94.1 | 101.2 | 7.1 | 98.5 | 98.5 | — | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Catastrophe ratio
|
||||||||||||||||||||||||
|
Current year
|
4.3 | 9.1 | 4.8 | 7.7 | 8.2 | 0.5 | ||||||||||||||||||
|
Prior years
|
0.7 | (1.0 | ) | (1.7 | ) | 0.4 | 0.3 | (0.1 | ) | |||||||||||||||
|
|
||||||||||||||||||||||||
|
Total catastrophe ratio
|
5.1 | 8.1 | 3.0 | 8.0 | 8.5 | 0.5 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Combined ratio before catastrophes
|
89.1 | 93.1 | 4.0 | 90.5 | 90.0 | (0.5 | ) | |||||||||||||||||
|
Combined ratio before catastrophes and prior
accident years development
|
93.3 | 94.6 | 1.3 | 92.6 | 90.8 | (1.8 | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Other revenues [1]
|
$ | 40 | $ | 38 | 5 | % | $ | 123 | $ | 110 | 12 | % | ||||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Represents servicing revenues.
|
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Product Line Combined Ratios | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Automobile
|
93.3 | 98.1 | 4.8 | 95.2 | 94.7 | (0.5 | ) | |||||||||||||||||
|
Homeowners
|
96.3 | 109.3 | 13.0 | 107.4 | 108.5 | 1.1 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
94.1 | 101.2 | 7.1 | 98.5 | 98.5 | — | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| • |
AARP earned premiums were flat for the three-month period and were up 1% for the nine-month
period. Earned premium growth for the nine-month period was driven by new business written
premium growth through the third quarter of 2009. Since the third quarter of 2009, new
business written premium and policy count retention have decreased driven by a lower auto
policy conversion rate, lower responses from direct response marketing and lower average
renewal earned premium per policy for auto business, partially offset by an increase in
cross-selling homeowners’ insurance to insureds who have auto policies. For the three-month
period, the decrease in AARP written premium in 2010 offset the positive effect on earned
premium from growth in written premium in 2009.
|
| • |
Agency earned premiums decreased 1% for the three-month period and increased 1% for the
nine-month period. Earned premium growth for the nine-month period was primarily due to new
business written premium growth in 2009 and the first quarter of 2010, partially offset by a
decrease in new business written premium and policy retention since the first quarter of 2010
as well as a decrease in average renewal earned premium per policy for auto business. The new
business written premium growth through the first quarter of 2010 was driven by an increase in
the number of agency appointments and the number of policy quotes. Since the first quarter of
2010, the number of quotes and the policy issue rate have declined as the Company has taken
pricing and underwriting actions to improve profitability.
|
90
|
New business written premium
|
•
Auto new business written
premium decreased by 37% and 30% for
the three- and nine-month periods,
respectively, due primarily to the
effect of written pricing increases
and underwriting actions that
lowered the policy issue rate on
direct marketing responses and
agency business quotes. Also
contributing to the decrease in auto
new business was lower responses
from direct marketing. Homeowners’
new business written premium
decreased 37% and 24% for the three-
and nine-month periods,
respectively, as the effect of
pricing and underwriting actions
lowered the policy issue rate on
direct marketing responses and
agency business quotes. This was
partially offset by an increase in
the cross-sale of homeowners’
insurance to insureds that have auto
policies.
|
|
|
|
||
|
Policy count retention
|
•
Policy count retention for
auto decreased by 4 points for the
three-month period and by 3 points
for the nine-month period primarily
driven by the effect of renewal
written pricing increases and
underwriting actions to improve
profitability. Policy count
retention for homeowners decreased 2
points for the three-month period
and 1 point for the nine-month
period, primarily driven by the
effect of renewal written pricing
increases and underwriting actions.
For the nine-month period, the
decrease in policy count retention
was partially offset by the effect
of the Company’s non-renewal of
Florida homeowners’ Agency business
in 2009.
|
|
|
|
||
|
Renewal earned pricing increase
|
•
Auto renewal earned pricing
increased in both the three- and
nine-month periods due to rate
increases and the effect of
policyholders purchasing newer
vehicle models in place of older
models. Homeowners’ renewal earned
pricing increased in both the three-
and nine-month periods due to rate
increases and increased coverage
amounts reflecting higher rebuilding
costs. For both auto and home, the
Company has increased rates in
certain states for certain classes
of business to maintain
profitability in the face of rising
loss costs.
|
|
|
|
||
|
Policies in-force
|
•
Compared to September 30,
2009, the number of policies
in-force as of September 30, 2010
decreased by 4% for auto, driven by
a decrease in AARP and Agency policy
retention, and by 2% for home,
driven by a decrease in Agency
policy retention.
|
91
92
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Operating Summary | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Fee income and other
|
$ | 590 | $ | 580 | 2 | % | $ | 1,769 | $ | 1,706 | 4 | % | ||||||||||||
|
Earned premiums
|
69 | 31 | 123 | % | 163 | 308 | (47 | %) | ||||||||||||||||
|
Net investment income (loss):
|
||||||||||||||||||||||||
|
Securities available-for sale and other
|
426 | 440 | (3 | %) | 1,277 | 1,282 | — | |||||||||||||||||
|
Equity securities, trading [1]
|
1,043 | 638 | 63 | % | (905 | ) | 2,437 | NM | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total net investment income
|
1,469 | 1,078 | 36 | % | 372 | 3,719 | (90 | %) | ||||||||||||||||
|
Net realized capital losses
|
(320 | ) | (917 | ) | 65 | % | (625 | ) | (568 | ) | (10 | %) | ||||||||||||
|
|
||||||||||||||||||||||||
|
Total revenues
|
1,808 | 772 | 134 | % | 1,679 | 5,165 | (67 | %) | ||||||||||||||||
|
Benefits, losses and loss adjustment expenses
|
388 | 403 | (4 | %) | 1,531 | 2,556 | (40 | %) | ||||||||||||||||
|
Benefits, losses and loss adjustment expenses — returns credited on
international variable annuities [1]
|
1,043 | 638 | 63 | % | (905 | ) | 2,437 | NM | ||||||||||||||||
|
Amortization of DAC
|
(66 | ) | 78 | NM | 328 | 1,655 | (80 | %) | ||||||||||||||||
|
Insurance operating costs and other expenses
|
199 | 200 | (1 | %) | 573 | 646 | (11 | %) | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total benefits, losses and expenses
|
1,564 | 1,319 | 19 | % | 1,527 | 7,294 | (79 | %) | ||||||||||||||||
|
Income (loss) before income taxes
|
244 | (547 | ) | NM | 152 | (2,129 | ) | NM | ||||||||||||||||
|
Income tax expense (benefit)
|
69 | (227 | ) | NM | 11 | (825 | ) | NM | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income (loss)
|
$ | 175 | $ | (320 | ) | NM | $ | 141 | $ | (1,304 | ) | NM | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Assets Under Management
|
||||||||||||||||||||||||
|
Variable annuity account values
|
$ | 113,912 | $ | 119,079 | (4 | %) | ||||||||||||||||||
|
Fixed MVA annuity and other account values
|
17,100 | 16,816 | 2 | % | ||||||||||||||||||||
|
Institutional investment products account values
|
20,086 | 23,128 | (13 | %) | ||||||||||||||||||||
|
Investment-Only mutual funds assets [2]
|
— | 4,453 | (100 | %) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total assets under management [3]
|
$ | 151,098 | $ | 163,476 | (8 | %) | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Account Value Roll Forward
|
||||||||||||||||||||||||
|
Variable Annuities
|
||||||||||||||||||||||||
|
Account value, beginning of period
|
$ | 107,295 | $ | 108,548 | $ | 119,387 | $ | 105,921 | ||||||||||||||||
|
Net flows
|
(2,848 | ) | (1,940 | ) | (8,597 | ) | (5,322 | ) | ||||||||||||||||
|
Change in market value and other
|
7,631 | 10,165 | 1,349 | 16,299 | ||||||||||||||||||||
|
Transfers [4]
|
— | — | (1,355 | ) | 1,188 | |||||||||||||||||||
|
Effect of currency translation
|
1,834 | 2,306 | 3,128 | 993 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Account value, end of period
|
$ | 113,912 | $ | 119,079 | $ | 113,912 | $ | 119,079 | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net Investment Spread
|
(4 | ) bps | (2 | ) bps | 13 | bps | (26 | ) bps | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Expense Ratios
|
||||||||||||||||||||||||
|
General insurance expense ratio
|
22.7 | bps | 26.1 | bps | 21.3 | bps | 30.1 | bps | ||||||||||||||||
|
DAC amortization ratio [5]
|
(37.1 | %) | (16.6 | %) | 68.3 | % | (349.2 | %) | ||||||||||||||||
|
DAC amortization ratio, excluding realized losses and DAC Unlocks [5] [6]
|
46.9 | % | 54.0 | % | 51.2 | % | 71.2 | % | ||||||||||||||||
| [1] |
Includes investment income and mark-to-market effects of equity securities, trading, supporting the international
variable annuity business, which are classified in net investment income with corresponding amounts credited to
policyholders within benefits, losses and loss adjustment expenses.
|
|
| [2] |
Investment-Only mutual fund assets were transferred to Mutual Funds effective January 1, 2010.
|
|
| [3] |
Includes policyholders’ balances for investment contracts and reserves for future policy benefits for insurance contracts.
|
|
| [4] |
Canadian and Offshore businesses were transferred from Mutual Funds to Global Annuity, effective January 1, 2009.
Canadian mutual funds were transferred from Global Annuity to Mutual Funds effective January 1, 2010.
|
|
| [5] |
Excludes the effects of realized gains and losses except for net periodic settlements. Included in the net realized
capital gain (losses) are amounts that represent the net periodic accruals on currency rate swaps used in the risk
management of Japan fixed annuity products.
|
|
| [6] |
See Critical Accounting Estimates in the MD&A.
|
93
|
Fee income and other
|
•
Fee income and other
increased as a result of slightly
higher average variable annuity
account values for the three and
nine-month periods ended September
30, 2010 compared with 2009. The
increase in average account values
has been driven by improvements in
equity markets, which has been
principally offset by net outflows
of Global Annuity.
|
|
|
|
||
|
Earned premiums
|
•
Earned premiums, for the
three months ended September 30,
2010, increased compared to the
prior year due to the implementation
of the new variable annuity product
in the fourth quarter of 2009. The
nature of this product results in
the recognition of earned premiums
with an offsetting increase in
benefits, losses and loss adjustment
expenses.
|
|
|
|
||
|
|
•
Earned premiums, for the
nine months ended September 30,
2010, decreased due to management’s
decision to suspend sales of
structured settlements and terminal
funding products. This decrease in
earned premiums was correspondingly
offset by a decrease in benefits,
losses and loss adjustment expenses.
|
|
|
|
||
|
Net investment income (excluding
Equity securities, trading) |
•
For the three month period
ended September 30, 2010, net
investment income decreased
primarily as a result of a decline
in general account values driven by
net outflows since 2009.
|
|
|
|
||
|
|
•
For the nine month period
ended September 30, 2010, net
investment income decreased
primarily as a result of significant
net outflow activity since 2009 and
declines on returns from fixed
maturity securities driven by the
low interest rate environment,
partially offset by improving
investments results on limited
partnership and other alternative
investments.
|
|
|
|
||
|
Net investment spread
|
•
For the three months ended
September 30, 2010 compared to 2009,
net investment spreads for Global
Annuity products are consistent.
|
|
|
|
||
|
|
•
For the nine months ended
September 30, 2010 compared to 2009,
net investment spreads improved
primarily due to improved
performance on limited partnership
and other alternative investments of
54 bps, partially offset by a
decline in yields on fixed maturity
assets of 13 bps, respectively.
|
|
|
|
||
|
Net realized capital losses
|
•
For the three month period
ended September 30, 2010, the $597
improvement in net realized capital
losses is primarily related to a
reduction in variable annuity
hedging program losses as compared
to losses in the comparable prior
year period and lower impairment
losses.
|
|
|
|
||
|
|
•
For the nine month period
ended September 30, 2010, the change
in net realized capital losses of
$(57) is primarily related to
variable annuity hedging program
losses in 2010 as compared to gains
in the comparable prior year period,
partially offset by lower impairment
losses and net realized gains on
sales of securities in 2010 compared
with net losses in 2009.
|
|
|
|
||
|
Benefits, losses and loss adjustment
expenses
|
•
For the nine month period
ended September 30, 2010, benefits,
losses and loss adjustment expenses
declined significantly as a result
of the impact of the 2010 and 2009
Unlocks (for further discussion of
the 2010 and 2009 Unlocks, see
Unlocks within the Critical
Accounting Estimates section of the
MD&A). Additionally, 2009 includes a
3 Win related charge of $60
(pre-tax). Benefits, losses and
loss adjustment expenses were lower
for institutional investment
products driven by the Company’s
execution on its call and buyback
strategy associated with stable
value products, which reduced the
related liabilities, and a decrease
in earned premiums associated with
management’s decision to suspend
sales.
|
94
|
Insurance operating costs and other
expenses
|
•
For the nine months ended
September 30, 2010, insurance
operating costs and other expenses
have decreased as compared to 2009
as a result of lower operating and
wholesaling expenses driven by
management’s active efforts to
reduce operating expenses and
management’s efforts to match
distribution costs with the
Company’s current lower sales
levels.
|
|
|
|
||
|
General insurance expense ratio
|
•
The general insurance
expense ratio declined as a result
of management’s efforts to reduce
expenses associated with the U.S.
annuity product, and the
restructuring and active expense
management of Japan’s operations
while the improving equity markets
compared to 2009 have driven an
increase in the average asset base.
|
|
|
|
||
|
Amortization of DAC
|
•
For the three and nine
months ended September 30, 2010,
amortization of DAC changed on a
comparative period basis primarily
as a result of the Unlocks.
|
|
|
|
||
|
DAC amortization ratio, excluding
realized gains (losses) and DAC
Unlocks
|
•
For the three and nine
months ended September 30, 2010, the
DAC amortization ratio decreased due
to rising gross profits driven by
equity market appreciation, and
improved returns from limited
partnerships and other alternative
investments, as previously
discussed.
|
|
|
|
||
|
Income tax expense (benefit)
|
•
For the three and nine
months ended September 30, 2010, the
effective tax rate differs from the
statutory rate of 35% primarily due
to permanent differences for the
separate account DRD on U.S. annuity
products as well as varying tax
rates by country, and the valuation
allowance on deferred tax benefits
related to certain realized losses
on securities that back certain
institutional investment products.
The three and nine month periods
ended September 30, 2010 and 2009
include separate account DRD
benefits of $19 and $23, and $79 and
$83 respectively. For further
discussion, see Income Taxes within
Note 1 of the Notes to Condensed
Consolidated Financial Statements.
|
95
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Operating Summary | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Fee income and other
|
$ | 268 | $ | 269 | — | $ | 832 | $ | 864 | (4 | %) | |||||||||||||
|
Earned premiums
|
(25 | ) | (22 | ) | (14 | %) | (70 | ) | (61 | ) | (15 | %) | ||||||||||||
|
Net investment income
|
132 | 91 | 45 | % | 391 | 260 | 50 | % | ||||||||||||||||
|
Net realized capital gains (losses)
|
13 | (37 | ) | NM | 45 | (120 | ) | NM | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total revenues
|
388 | 301 | 29 | % | 1,198 | 943 | 27 | % | ||||||||||||||||
|
Benefits, losses and loss adjustment expenses
|
227 | 176 | 29 | % | 646 | 535 | 21 | % | ||||||||||||||||
|
Amortization of DAC
|
(20 | ) | 82 | NM | 71 | 263 | (73 | %) | ||||||||||||||||
|
Insurance operating costs and other expenses
|
44 | 49 | (10 | %) | 154 | 153 | 1 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total benefits, losses and expenses
|
251 | 307 | (18 | %) | 871 | 951 | (8 | %) | ||||||||||||||||
|
Income (loss) before income taxes
|
137 | (6 | ) | NM | 327 | (8 | ) | NM | ||||||||||||||||
|
Income tax expense (benefit)
|
40 | (14 | ) | NM | 103 | (26 | ) | NM | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income (loss)
|
$ | 97 | $ | 8 | NM | $ | 224 | $ | 18 | NM | ||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Account Values
|
||||||||||||||||||||||||
|
Individual variable universal life insurance
|
$ | 5,757 | $ | 5,552 | 4 | % | ||||||||||||||||||
|
Individual universal life insurance [1]
|
5,995 | 5,591 | 7 | % | ||||||||||||||||||||
|
PPLI [2]
|
35,558 | 33,197 | 7 | % | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total account values
|
$ | 47,310 | $ | 44,340 | (7 | %) | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Individual Life Insurance In-Force
|
||||||||||||||||||||||||
|
Variable universal life insurance
|
$ | 75,399 | $ | 75,667 | — | |||||||||||||||||||
|
Universal life insurance [1]
|
57,734 | 54,775 | 5 | % | ||||||||||||||||||||
|
Term life
|
73,959 | 68,447 | 8 | % | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total individual life insurance in-force
|
$ | 207,092 | $ | 198,889 | 4 | % | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net Investment Spread
|
||||||||||||||||||||||||
|
Individual variable universal and individual
universal life insurance [1]
|
142 | bps | 111 | bps | 148 | bps | 88 | bps | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Death Benefits
|
$ | 134 | $ | 92 | $ | 348 | $ | 304 | ||||||||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Includes universal life, interest sensitive whole life, modified guaranteed life insurance and other.
|
|
| [2] |
Includes PPLI operations transferred from Corporate and Other to Life Insurance effective January 1, 2010.
|
96
|
Fee income and other
|
•
Fee income and other decreased for the nine months ended
September 30, 2010 primarily due to the impact of the DAC Unlock in
the first nine months of 2009.
|
|
|
|
||
|
Earned premiums
|
•
Earned premiums, which include premiums for ceded
reinsurance, decreased primarily due to higher ceded reinsurance
premiums related to lower retention levels and the aging of the life
insurance in-force.
|
|
|
|
||
|
Net investment income
|
•
Net investment income increased primarily due to improved
performance of limited partnerships and other alternative
investments.
|
|
|
|
||
|
Net investment spread
|
•
Net investment spread increased for the three and nine months
ended September 30, 2010 primarily related to improved performance of
limited partnerships and other alternative investments of 28 bps and
50 bps, respectively, and lower average credited rates of 16 bps and
18 bps, respectively.
|
|
|
|
||
|
Amortization of DAC
|
•
Amortization of DAC decreased for the three and nine months
ended September 30, 2010 primarily as a result of the Unlock benefit
in 2010 compared to the Unlock charge in 2009. DAC amortization had
a partial offset in amortization of deferred revenues, which drove
the decrease in fee income noted above.
|
|
|
|
||
|
Income tax expense
(benefit) |
•
The effective tax rate for 2010 differs from the statutory
rate of 35% primarily due to the recognition of separate account DRD
partially offset by a valuation allowance on deferred tax benefits
related to certain realized losses recorded in the nine months ended
September 30, 2010. For further discussion, see Income Taxes within
Note 1 of the Notes to Condensed Consolidated Financial Statements.
|
|
|
|
||
|
Death Benefits
|
•
Death benefits increased primarily due to mortality
volatility.
|
97
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Operating Summary | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Fee income and other
|
$ | 88 | $ | 83 | 6 | % | $ | 260 | $ | 234 | 11 | % | ||||||||||||
|
Earned premiums
|
1 | 1 | — | 5 | 3 | 67 | % | |||||||||||||||||
|
Net investment income
|
93 | 80 | 16 | % | 267 | 237 | 13 | % | ||||||||||||||||
|
Net realized capital losses
|
— | (89 | ) | 100 | % | (10 | ) | (228 | ) | 96 | % | |||||||||||||
|
|
||||||||||||||||||||||||
|
Total revenues
|
182 | 75 | 143 | % | 522 | 246 | 112 | % | ||||||||||||||||
|
Benefits, losses and loss adjustment expenses
|
71 | 62 | 15 | % | 204 | 204 | — | |||||||||||||||||
|
Amortization of DAC
|
(12 | ) | (15 | ) | 20 | % | 14 | 63 | (78 | %) | ||||||||||||||
|
Insurance operating costs and other expenses
|
84 | 81 | 4 | % | 250 | 241 | 4 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total benefits, losses and expenses
|
143 | 128 | 12 | % | 468 | 508 | (8 | %) | ||||||||||||||||
|
Income (loss) before income taxes
|
39 | (53 | ) | NM | 54 | (262 | ) | NM | ||||||||||||||||
|
Income tax expense (benefit)
|
9 | (19 | ) | NM | 16 | (100 | ) | NM | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income (loss)
|
$ | 30 | $ | (34 | ) | NM | $ | 38 | $ | (162 | ) | NM | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Assets Under Management
|
||||||||||||||||||||||||
|
403(b)/457 account values
|
$ | 11,874 | $ | 10,760 | 10 | % | ||||||||||||||||||
|
401(k) account values
|
18,764 | 15,339 | 22 | % | ||||||||||||||||||||
|
401(k)/403(b) mutual funds
|
18,602 | 16,648 | 12 | % | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total assets under management
|
$ | 49,240 | $ | 42,747 | 15 | % | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total assets under administration — 401(k)
|
$ | 4,266 | $ | 5,867 | (27 | %) | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Account Value and Assets Under Management Roll
Forward
|
||||||||||||||||||||||||
|
401(k) / 403(b) Mutual Funds
|
||||||||||||||||||||||||
|
Assets under management, beginning of period
|
$ | 15,848 | $ | 15,342 | $ | 16,704 | $ | 14,838 | ||||||||||||||||
|
Net flows
|
(71 | ) | (748 | ) | (606 | ) | (1,388 | ) | ||||||||||||||||
|
Transfer in
|
1,294 | — | 1,294 | — | ||||||||||||||||||||
|
Change in market value
|
1,552 | 2,054 | 1,232 | 3,198 | ||||||||||||||||||||
|
Other
|
(21 | ) | — | (22 | ) | — | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Assets under management, end of period
|
$ | 18,602 | $ | 16,648 | $ | 18,602 | $ | 16,648 | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
401(k) / 403(b) / 457 Group Annuities
|
||||||||||||||||||||||||
|
Account value, beginning of period
|
$ | 27,943 | $ | 23,490 | $ | 27,258 | $ | 22,198 | ||||||||||||||||
|
Net flows
|
579 | 259 | 2,048 | 305 | ||||||||||||||||||||
|
Transfers in of Lifetime Income & Maturity Funding
|
— | — | 194 | — | ||||||||||||||||||||
|
Change in market value
|
2,095 | 2,350 | 1,116 | 3,596 | ||||||||||||||||||||
|
Other
|
21 | — | 22 | — | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Account value, end of period [1]
|
$ | 30,638 | $ | 26,099 | $ | 30,638 | $ | 26,099 | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net Investment Spread
|
100 | bps | 94 | bps | 111 | bps | 65 | bps | ||||||||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Includes policyholder balances for investment contracts and reserves for future policy
benefits for insurance contracts.
|
98
|
Fee income and other
|
•
For the three and nine month
period ended September 30, 2010, fee
income and other increased primarily
due to increases in average assets
under management resulting from
improvements in equity markets and
increased deposit activity as equity
market improvements created an
environment where investors were
willing to re-enter the capital
markets. Over the past 12 months,
average account values have
increased driven by $2.3 billion of
net flows and $2.0 billion of market
activity.
|
|
|
|
||
|
Net investment income
|
•
For the three and nine month
periods ended September 30, 2010,
net investment income increased
primarily due to improved
performance on limited partnerships
and other alternative investments.
|
|
|
|
||
|
Net investment spread
|
•
Net investment spread
increased primarily as a result of
higher earned rates driven primarily
by improved performance on limited
partnerships and other alternative
investments in 2010 which added 26
bps of return for the three months
ended September 30, 2010, and 48 bps
of return for the nine months ended
September 30, 2010 as compared to
the prior year, partially offset by
lower yields on fixed maturities of
19 bps for the three months ended
September 30, 2010, and 13 bps for
the nine months ended September 30,
2010 as compared to the prior year.
|
|
|
|
||
|
Net realized capital gains (losses)
|
•
The change in net realized
capital gains (losses) for the three
months ended September 30, 2010 is
driven by higher losses on
impairments in the third quarter of
2009.
|
|
|
|
||
|
|
•
For the nine months ended
September 30, 2010, net realized
capital losses were lower due to
higher losses on impairments,
derivatives, and trading losses in
the first three quarters of 2009.
|
|
|
|
||
|
Insurance operating costs and other
expenses
|
•
For the three and nine
months ended September 30, 2010,
insurance operating costs and other
expenses increased primarily due to
greater assets under management
resulting in higher trail
commissions.
|
|
|
|
||
|
Amortization of DAC
|
•
For the three and nine
months ended September 30, 2010, the
change in amortization of DAC is
attributed to the DAC Unlock.
|
|
|
|
||
|
Income tax expense (benefit)
|
•
The effective tax rate for
2010 differs from the statutory rate
of 35% primarily due to permanent
tax differences for DRD that are
partially offset by a valuation
allowance on deferred tax benefits
related to certain realized losses
recorded in the nine months ended
September 30, 2010. The three and
nine month periods ended September
30, 2010 and 2009 include separate
account DRD benefits of $5 and $0,
and $14 and $7, respectively. For
further discussion, see Income Taxes
within Note 1 of the Notes to
Condensed Consolidated Financial
Statements.
|
99
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Operating Summary | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Fee income and other
|
$ | 166 | $ | 137 | 21 | % | $ | 513 | $ | 370 | 39 | % | ||||||||||||
|
Net investment income
|
(2 | ) | (5 | ) | 60 | % | (6 | ) | (15 | ) | 60 | % | ||||||||||||
|
Net realized capital gains (losses)
|
(1 | ) | — | — | — | — | — | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total revenues
|
163 | 132 | 23 | % | 507 | 355 | 43 | % | ||||||||||||||||
|
Benefits, losses and loss adjustment expenses
|
(1 | ) | — | — | (1 | ) | — | — | ||||||||||||||||
|
Amortization of DAC
|
16 | 11 | 45 | % | 47 | 38 | 24 | % | ||||||||||||||||
|
Insurance operating costs and other expenses
|
121 | 103 | 17 | % | 358 | 290 | 23 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total benefits, losses and expenses
|
136 | 114 | 19 | % | 404 | 328 | 23 | % | ||||||||||||||||
|
Income (loss) before income taxes
|
27 | 18 | 50 | % | 103 | 27 | NM | |||||||||||||||||
|
Income tax expense (benefit)
|
9 | 7 | 29 | % | 36 | 10 | NM | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income (loss)
|
$ | 18 | $ | 11 | 64 | % | $ | 67 | $ | 17 | NM | |||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Non Proprietary Mutual Funds [3]
|
||||||||||||||||||||||||
|
Assets under management, beginning of period
|
$ | 48,759 | $ | 35,693 | $ | 44,031 | $ | 32,710 | ||||||||||||||||
|
Transfer in of Investment-Only and Canadian mutual funds
|
— | — | 5,617 | — | ||||||||||||||||||||
|
Net flows
|
(163 | ) | 796 | 2,199 | 1,486 | |||||||||||||||||||
|
Change in market value and other [1]
|
4,788 | 4,761 | 1,537 | 7,054 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Assets under management, end of period [1]
|
$ | 53,384 | $ | 41,250 | $ | 53,384 | $ | 41,250 | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Proprietary Mutual Funds [4]
|
||||||||||||||||||||||||
|
Assets under management, beginning of period
|
$ | 39,402 | $ | — | $ | — | $ | — | ||||||||||||||||
|
Transfers in of insurance product mutual funds
|
— | — | 43,890 | — | ||||||||||||||||||||
|
Net flows
|
(1,299 | ) | — | (3,763 | ) | — | ||||||||||||||||||
|
Change in market value and other
|
3,676 | — | 1,652 | — | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Assets under management, end of period
|
$ | 41,779 | $ | — | $ | 41,779 | $ | — | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Mutual fund assets under management [1] [2]
|
$ | 95,163 | $ | 41,250 | $ | 95,163 | $ | 41,250 | ||||||||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Includes amount attributed to the transfer of Investment-Only mutual funds and Canadian mutual funds effective January 1, 2010.
|
|
| [2] |
Includes Proprietary mutual funds effective January 1, 2010.
|
|
| [3] |
Includes Retail mutual funds, Investment-Only mutual funds, Canadian mutual funds and 529 college savings plan assets.
|
|
| [4] |
Includes mutual funds sponsored by the Company which are owned by the separate accounts of the Company to support insurance
and investment products sold by the Company.
|
100
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Operating Summary | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
|
Earned premiums
|
$ | 1 | $ | (1 | ) | NM | $ | — | $ | (1 | ) | 100 | % | |||||||||||
|
Fee income [1]
|
46 | 61 | (25 | %) | 143 | 165 | (13 | %) | ||||||||||||||||
|
Net investment income
|
54 | 84 | (36 | %) | 208 | 254 | (18 | %) | ||||||||||||||||
|
Net realized capital gains (losses)
|
41 | (63 | ) | NM | 45 | (384 | ) | NM | ||||||||||||||||
|
Other revenues
|
— | — | — | — | 5 | (100 | %) | |||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total revenues
|
142 | 81 | 75 | % | 396 | 39 | NM | |||||||||||||||||
|
Benefits, losses and loss adjustment expenses
|
64 | 123 | (48 | %) | 236 | 319 | (26 | %) | ||||||||||||||||
|
Insurance operating costs and other expenses [1]
|
64 | 111 | (42 | %) | 287 | 312 | (8 | %) | ||||||||||||||||
|
Interest expense
|
128 | 118 | 8 | % | 380 | 357 | 6 | % | ||||||||||||||||
|
Goodwill impairment
|
— | — | — | 153 | 32 | NM | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total benefits, losses and expenses
|
256 | 352 | (27 | %) | 1,056 | 1,020 | 4 | % | ||||||||||||||||
|
Loss before income taxes
|
(114 | ) | (271 | ) | 58 | % | (660 | ) | (981 | ) | 33 | % | ||||||||||||
|
Income tax benefit
|
(38 | ) | (89 | ) | 57 | % | (211 | ) | (281 | ) | 25 | % | ||||||||||||
|
|
||||||||||||||||||||||||
|
Net loss
|
$ | (76 | ) | $ | (182 | ) | 58 | % | $ | (449 | ) | $ | (700 | ) | 36 | % | ||||||||
|
|
||||||||||||||||||||||||
| [1] |
Fee income includes the income associated with the sales of non-proprietary insurance
products in the Company’s broker-dealer subsidiaries that has an offsetting commission expense
in insurance operating costs and other expenses.
|
101
| % of layer(s) | ||||||||||||||||
| Coverage | Treaty term | reinsured | Per occurrence limit | Retention | ||||||||||||
|
Principal property
catastrophe program
covering property catastrophe losses from a single event
|
1/1/2010 to 1/1/2011 |
Varies by layer, but
averages 81% across all layers |
Aggregates to
$690 across all layers |
$ | 250 | |||||||||||
|
|
||||||||||||||||
|
Reinsurance with
the Florida
Hurricane
Catastrophe Fund
(“FHCF”) covering
Florida Personal
Lines property
catastrophe losses
from a single event
|
6/1/2010 to 6/1/2011 | 90 | % | $ | 170 | [1] | 64 | |||||||||
|
|
||||||||||||||||
|
Workers’
compensation losses
arising from a
single catastrophe
event
|
7/1/2010 to 7/1/2011 | 95 | % | 300 | [2] | 50 | ||||||||||
| [1] |
The estimated per occurrence limit on the FHCF treaty is $170 for
the 6/1/2010 to 6/1/2011 treaty year based on the Company’s
election to purchase the required coverage from the FHCF. For
the 6/1/2010 to 6/1/2011 treaty year, the Company elected not to
purchase additional limits under the Temporary Increase in
Coverage Limit (“TICL”) statutory provision.
|
|
| [2] |
In addition to the limit shown above, the workers’ compensation
reinsurance treaty includes a non-catastrophe, industrial accident
layer of $30 excess of a $20 retention.
|
102
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Percent of | Percent of | |||||||||||||||||||||||
| Amortized | Total Fair | Amortized | Total Fair | |||||||||||||||||||||
| Cost | Fair Value | Value | Cost | Fair Value | Value | |||||||||||||||||||
|
United States Government/Government agencies
|
$ | 9,393 | $ | 9,556 | 12.0 | % | $ | 7,299 | $ | 7,172 | 10.1 | % | ||||||||||||
|
AAA
|
10,911 | 11,158 | 14.0 | % | 11,974 | 11,188 | 15.7 | % | ||||||||||||||||
|
AA
|
15,400 | 15,591 | 19.6 | % | 14,845 | 13,932 | 19.6 | % | ||||||||||||||||
|
A
|
19,163 | 19,922 | 25.0 | % | 19,822 | 18,664 | 26.2 | % | ||||||||||||||||
|
BBB
|
19,453 | 20,022 | 25.0 | % | 17,886 | 17,071 | 24.0 | % | ||||||||||||||||
|
BB & below
|
4,164 | 3,487 | 4.4 | % | 4,189 | 3,126 | 4.4 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total fixed maturities, AFS
|
$ | 78,484 | $ | 79,736 | 100.0 | % | $ | 76,015 | $ | 71,153 | 100.0 | % | ||||||||||||
|
|
||||||||||||||||||||||||
103
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||||||||||
| Percent | Percent | |||||||||||||||||||||||||||||||||||||||
| Cost or | Gross | Gross | of Total | Cost or | Gross | Gross | of Total | |||||||||||||||||||||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | Fair | Amortized | Unrealized | Unrealized | Fair | Fair | |||||||||||||||||||||||||||||||
| Cost | Gains | Losses | Value | Value | Cost | Gains | Losses | Value | Value | |||||||||||||||||||||||||||||||
|
Asset-backed
securities (“ABS”)
|
||||||||||||||||||||||||||||||||||||||||
|
Consumer loans
|
$ | 2,494 | $ | 35 | $ | (218 | ) | $ | 2,311 | 2.9 | % | $ | 2,087 | $ | 15 | $ | (277 | ) | $ | 1,825 | 2.6 | % | ||||||||||||||||||
|
Small business
|
476 | 1 | (165 | ) | 312 | 0.4 | % | 548 | 1 | (232 | ) | 317 | 0.4 | % | ||||||||||||||||||||||||||
|
Other
|
371 | 39 | (24 | ) | 386 | 0.5 | % | 405 | 20 | (44 | ) | 381 | 0.5 | % | ||||||||||||||||||||||||||
|
CDOs
|
||||||||||||||||||||||||||||||||||||||||
|
Collateralized loan
obligations (“CLOs”)
|
2,427 | 1 | (240 | ) | 2,188 | 2.7 | % | 2,727 | — | (288 | ) | 2,439 | 3.5 | % | ||||||||||||||||||||||||||
|
CREs
|
681 | 15 | (327 | ) | 369 | 0.5 | % | 1,319 | 21 | (901 | ) | 439 | 0.6 | % | ||||||||||||||||||||||||||
|
Other
|
6 | — | — | 6 | — | 8 | 6 | — | 14 | — | ||||||||||||||||||||||||||||||
|
CMBS
|
||||||||||||||||||||||||||||||||||||||||
|
Agency backed [1]
|
439 | 30 | — | 469 | 0.6 | % | 62 | 3 | — | 65 | 0.1 | % | ||||||||||||||||||||||||||||
|
Bonds
|
7,486 | 183 | (892 | ) | 6,777 | 8.5 | % | 9,600 | 52 | (2,241 | ) | 7,411 | 10.4 | % | ||||||||||||||||||||||||||
|
Interest only (“IOs”)
|
851 | 88 | (25 | ) | 914 | 1.1 | % | 1,074 | 59 | (65 | ) | 1,068 | 1.5 | % | ||||||||||||||||||||||||||
|
Corporate
|
||||||||||||||||||||||||||||||||||||||||
|
Basic industry [2]
|
3,120 | 260 | (51 | ) | 3,328 | 4.2 | % | 2,642 | 112 | (56 | ) | 2,698 | 3.8 | % | ||||||||||||||||||||||||||
|
Capital goods
|
3,205 | 343 | (29 | ) | 3,519 | 4.4 | % | 3,085 | 140 | (51 | ) | 3,174 | 4.5 | % | ||||||||||||||||||||||||||
|
Consumer cyclical
|
1,934 | 168 | (10 | ) | 2,092 | 2.6 | % | 1,946 | 75 | (45 | ) | 1,976 | 2.8 | % | ||||||||||||||||||||||||||
|
Consumer non-cyclical
|
6,054 | 642 | (13 | ) | 6,683 | 8.4 | % | 4,737 | 281 | (22 | ) | 4,996 | 7.0 | % | ||||||||||||||||||||||||||
|
Energy
|
3,276 | 319 | (14 | ) | 3,581 | 4.5 | % | 3,070 | 163 | (18 | ) | 3,215 | 4.5 | % | ||||||||||||||||||||||||||
|
Financial services
|
8,007 | 378 | (486 | ) | 7,899 | 9.9 | % | 8,059 | 118 | (917 | ) | 7,260 | 10.1 | % | ||||||||||||||||||||||||||
|
Tech./comm.
|
4,186 | 399 | (41 | ) | 4,544 | 5.7 | % | 3,984 | 205 | (75 | ) | 4,114 | 5.8 | % | ||||||||||||||||||||||||||
|
Transportation
|
855 | 84 | (4 | ) | 935 | 1.2 | % | 698 | 22 | (23 | ) | 697 | 1.0 | % | ||||||||||||||||||||||||||
|
Utilities
|
6,861 | 633 | (25 | ) | 7,469 | 9.4 | % | 5,755 | 230 | (85 | ) | 5,900 | 8.3 | % | ||||||||||||||||||||||||||
|
Other [2]
|
870 | 18 | (29 | ) | 801 | 1.0 | % | 1,342 | 22 | (151 | ) | 1,213 | 1.7 | % | ||||||||||||||||||||||||||
|
Foreign govt./govt.
agencies
|
1,773 | 162 | (11 | ) | 1,924 | 2.4 | % | 1,376 | 52 | (20 | ) | 1,408 | 2.0 | % | ||||||||||||||||||||||||||
|
Municipal
|
||||||||||||||||||||||||||||||||||||||||
|
Taxable
|
1,162 | 35 | (72 | ) | 1,125 | 1.4 | % | 1,176 | 4 | (205 | ) | 975 | 1.4 | % | ||||||||||||||||||||||||||
|
Tax-exempt
|
11,073 | 561 | (36 | ) | 11,598 | 14.5 | % | 10,949 | 314 | (173 | ) | 11,090 | 15.6 | % | ||||||||||||||||||||||||||
|
Residential
mortgage-backed
securities (“RMBS”)
|
||||||||||||||||||||||||||||||||||||||||
|
Agency
|
3,996 | 140 | (4 | ) | 4,132 | 5.3 | % | 3,383 | 99 | (6 | ) | 3,476 | 4.9 | % | ||||||||||||||||||||||||||
|
Non-agency
|
123 | — | (5 | ) | 118 | 0.1 | % | 143 | — | (16 | ) | 127 | 0.2 | % | ||||||||||||||||||||||||||
|
Alt-A
|
179 | 3 | (25 | ) | 157 | 0.2 | % | 218 | — | (58 | ) | 160 | 0.2 | % | ||||||||||||||||||||||||||
|
Sub-prime
|
1,621 | 13 | (490 | ) | 1,144 | 1.4 | % | 1,768 | 5 | (689 | ) | 1,084 | 1.5 | % | ||||||||||||||||||||||||||
|
U.S. Treasuries
|
4,958 | 75 | (78 | ) | 4,955 | 6.2 | % | 3,854 | 14 | (237 | ) | 3,631 | 5.1 | % | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Fixed maturities, AFS
|
78,484 | 4,625 | (3,314 | ) | 79,736 | 100.0 | % | 76,015 | 2,033 | (6,895 | ) | 71,153 | 100.0 | % | ||||||||||||||||||||||||||
|
Equity securities
|
||||||||||||||||||||||||||||||||||||||||
|
Financial services
|
632 | 3 | (134 | ) | 501 | 836 | 7 | (164 | ) | 679 | ||||||||||||||||||||||||||||||
|
Other
|
600 | 73 | (6 | ) | 667 | 497 | 73 | (28 | ) | 542 | ||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Equity securities, AFS
|
1,232 | 76 | (140 | ) | 1,168 | 1,333 | 80 | (192 | ) | 1,221 | ||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total AFS securities
|
$ | 79,716 | $ | 4,701 | $ | (3,454 | ) | $ | 80,904 | $ | 77,348 | $ | 2,113 | $ | (7,087 | ) | $ | 72,374 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Fixed maturities, FVO
|
$ | 564 | $ | — | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
| [1] |
Represents securities with pools of loans by the Small Business
Administration whose issued loans are backed by the full faith and
credit of the U.S. government.
|
|
| [2] |
Gross unrealized gains (losses) exclude the fair value of bifurcated
embedded derivative features of certain securities. Subsequent
changes in value will be recorded in net realized capital gains
(losses).
|
104
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Amortized | Net | Amortized | Net | |||||||||||||||||||||
| Cost | Fair Value | Unrealized | Cost | Fair Value | Unrealized | |||||||||||||||||||
|
AAA
|
$ | 325 | $ | 324 | $ | (1 | ) | $ | 299 | $ | 290 | $ | (9 | ) | ||||||||||
|
AA
|
2,117 | 2,169 | 52 | 1,913 | 1,867 | (46 | ) | |||||||||||||||||
|
A
|
3,993 | 3,872 | (121 | ) | 4,510 | 3,987 | (523 | ) | ||||||||||||||||
|
BBB
|
1,955 | 1,800 | (155 | ) | 1,664 | 1,379 | (285 | ) | ||||||||||||||||
|
BB & below
|
249 | 235 | (14 | ) | 509 | 416 | (93 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 8,639 | $ | 8,400 | $ | (239 | ) | $ | 8,895 | $ | 7,939 | $ | (956 | ) | ||||||||||
|
|
||||||||||||||||||||||||
| AAA | AA | A | BBB | BB and Below | Total | |||||||||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 821 | $ | 845 | $ | 146 | $ | 141 | $ | 120 | $ | 107 | $ | 46 | $ | 45 | $ | 41 | $ | 37 | $ | 1,174 | $ | 1,175 | ||||||||||||||||||||||||
|
2004
|
523 | 553 | 27 | 23 | 59 | 50 | 50 | 39 | 12 | 9 | 671 | 674 | ||||||||||||||||||||||||||||||||||||
|
2005
|
639 | 665 | 182 | 145 | 200 | 148 | 211 | 164 | 89 | 66 | 1,321 | 1,188 | ||||||||||||||||||||||||||||||||||||
|
2006
|
1,091 | 1,084 | 420 | 349 | 452 | 413 | 627 | 521 | 432 | 307 | 3,022 | 2,674 | ||||||||||||||||||||||||||||||||||||
|
2007
|
275 | 270 | 171 | 160 | 159 | 142 | 290 | 182 | 348 | 254 | 1,243 | 1,008 | ||||||||||||||||||||||||||||||||||||
|
2008
|
— | — | — | — | 55 | 58 | — | — | — | — | 55 | 58 | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 3,349 | $ | 3,417 | $ | 946 | $ | 818 | $ | 1,045 | $ | 918 | $ | 1,224 | $ | 951 | $ | 922 | $ | 673 | $ | 7,486 | $ | 6,777 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Credit protection
|
27.0 | % | 21.9 | % | 12.5 | % | 13.1 | % | 10.2 | % | 21.0 | % | ||||||||||||||||||||||||||||||||||||
| AAA | AA | A | BBB | BB and Below | Total | |||||||||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 1,732 | $ | 1,716 | $ | 297 | $ | 230 | $ | 150 | $ | 113 | $ | 20 | $ | 17 | $ | 11 | $ | 7 | $ | 2,210 | $ | 2,083 | ||||||||||||||||||||||||
|
2004
|
639 | 626 | 82 | 52 | 52 | 34 | 15 | 7 | — | — | 788 | 719 | ||||||||||||||||||||||||||||||||||||
|
2005
|
1,011 | 930 | 356 | 230 | 228 | 123 | 100 | 64 | 89 | 54 | 1,784 | 1,401 | ||||||||||||||||||||||||||||||||||||
|
2006
|
1,945 | 1,636 | 430 | 275 | 536 | 247 | 323 | 132 | 231 | 83 | 3,465 | 2,373 | ||||||||||||||||||||||||||||||||||||
|
2007
|
498 | 408 | 139 | 101 | 169 | 68 | 346 | 160 | 201 | 98 | 1,353 | 835 | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 5,825 | $ | 5,316 | $ | 1,304 | $ | 888 | $ | 1,135 | $ | 585 | $ | 804 | $ | 380 | $ | 532 | $ | 242 | $ | 9,600 | $ | 7,411 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Credit protection
|
26.5 | % | 21.2 | % | 13.1 | % | 11.6 | % | 8.7 | % | 22.0 | % | ||||||||||||||||||||||||||||||||||||
| [1] |
The vintage year represents the year the pool of loans was originated.
|
105
| AAA | AA | A | BBB | BB and Below | Total | |||||||||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 32 | $ | 27 | $ | 12 | $ | 8 | $ | 63 | $ | 35 | $ | 126 | $ | 53 | $ | 88 | $ | 32 | $ | 321 | $ | 155 | ||||||||||||||||||||||||
|
2004
|
— | — | 6 | 4 | 35 | 18 | 38 | 19 | 24 | 7 | 103 | 48 | ||||||||||||||||||||||||||||||||||||
|
2005
|
1 | 1 | — | — | 11 | 7 | 9 | 6 | 17 | 9 | 38 | 23 | ||||||||||||||||||||||||||||||||||||
|
2006
|
— | — | — | — | 16 | 9 | 17 | 13 | 22 | 18 | 55 | 40 | ||||||||||||||||||||||||||||||||||||
|
2007
|
— | — | — | — | 29 | 18 | 24 | 19 | 32 | 19 | 85 | 56 | ||||||||||||||||||||||||||||||||||||
|
2008
|
— | — | — | — | 8 | 5 | 11 | 9 | 24 | 13 | 43 | 27 | ||||||||||||||||||||||||||||||||||||
|
2009
|
— | — | — | — | 9 | 6 | 7 | 6 | 14 | 5 | 30 | 17 | ||||||||||||||||||||||||||||||||||||
|
2010
|
— | — | — | — | 2 | 1 | 2 | 1 | 2 | 1 | 6 | 3 | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Total AFS
|
$ | 33 | $ | 28 | $ | 18 | $ | 12 | $ | 173 | $ | 99 | $ | 234 | $ | 126 | $ | 223 | $ | 104 | $ | 681 | $ | 369 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Total FVO
[3]
|
$ | — | $ | 24 | $ | 60 | $ | 91 | $ | 61 | $ | 236 | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Credit protection
|
53.0 | % | 16.1 | % | 32.1 | % | 23.2 | % | 28.5 | % | 27.5 | % | ||||||||||||||||||||||||||||||||||||
| AAA | AA | A | BBB | BB and Below | Total | |||||||||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 60 | $ | 41 | $ | 30 | $ | 15 | $ | 69 | $ | 26 | $ | 165 | $ | 44 | $ | 95 | $ | 14 | $ | 419 | $ | 140 | ||||||||||||||||||||||||
|
2004
|
19 | 11 | 70 | 22 | 37 | 11 | 27 | 4 | 23 | 4 | 176 | 52 | ||||||||||||||||||||||||||||||||||||
|
2005
|
17 | 8 | 72 | 12 | 35 | 14 | 49 | 8 | 26 | 6 | 199 | 48 | ||||||||||||||||||||||||||||||||||||
|
2006
|
23 | 13 | 108 | 33 | 82 | 28 | 69 | 22 | 23 | 12 | 305 | 108 | ||||||||||||||||||||||||||||||||||||
|
2007
|
62 | 33 | 12 | 3 | 20 | 5 | 26 | 9 | 15 | 10 | 135 | 60 | ||||||||||||||||||||||||||||||||||||
|
2008
|
22 | 12 | — | — | 5 | 1 | 15 | 4 | 13 | 3 | 55 | 20 | ||||||||||||||||||||||||||||||||||||
|
2009
|
15 | 8 | — | — | 2 | — | 4 | 1 | 9 | 2 | 30 | 11 | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 218 | $ | 126 | $ | 292 | $ | 85 | $ | 250 | $ | 85 | $ | 355 | $ | 92 | $ | 204 | $ | 51 | $ | 1,319 | $ | 439 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Credit protection
|
40.0 | % | 10.5 | % | 25.5 | % | 34.9 | % | 31.6 | % | 28.1 | % | ||||||||||||||||||||||||||||||||||||
| [1] |
The vintage year represents the year that the underlying collateral in the pool was originated. Individual CRE CDO amortized cost
and fair value are allocated by the proportion of collateral within each vintage year.
|
|
| [2] |
For certain CRE CDOs, the collateral manager has the ability to reinvest proceeds that become available, primarily from collateral
maturities. The increase in recent vintage years reflects reinvestment for these CRE CDOs.
|
|
| [3] |
For further discussion on the election of fair value option, see Note 4 of the Notes to Condensed Consolidated Financial Statements.
|
| AAA | A | BBB | BB and Below | Total | ||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 229 | $ | 254 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 229 | $ | 254 | ||||||||||||||||||||
|
2004
|
166 | 190 | — | — | — | — | — | — | 166 | 190 | ||||||||||||||||||||||||||||||
|
2005
|
237 | 255 | — | — | 1 | 1 | — | — | 238 | 256 | ||||||||||||||||||||||||||||||
|
2006
|
122 | 116 | — | — | — | — | — | — | 122 | 116 | ||||||||||||||||||||||||||||||
|
2007
|
96 | 98 | — | — | — | — | — | — | 96 | 98 | ||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 850 | $ | 913 | $ | — | $ | — | $ | 1 | $ | 1 | $ | — | $ | — | $ | 851 | $ | 914 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
| AAA | A | BBB | BB and Below | Total | ||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 331 | $ | 352 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 331 | $ | 352 | ||||||||||||||||||||
|
2004
|
207 | 217 | — | — | — | — | — | — | 207 | 217 | ||||||||||||||||||||||||||||||
|
2005
|
284 | 275 | — | — | 1 | 2 | — | — | 285 | 277 | ||||||||||||||||||||||||||||||
|
2006
|
137 | 120 | 3 | 1 | — | — | 1 | 2 | 141 | 123 | ||||||||||||||||||||||||||||||
|
2007
|
110 | 99 | — | — | — | — | — | — | 110 | 99 | ||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 1,069 | $ | 1,063 | $ | 3 | $ | 1 | $ | 1 | $ | 2 | $ | 1 | $ | 2 | $ | 1,074 | $ | 1,068 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
| [1] |
The vintage year represents the year the pool of loans was originated.
|
106
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Amortized | Valuation | Carrying | Amortized | Valuation | Carrying | |||||||||||||||||||
| Cost [1] | Allowance | Value | Cost [1] | Allowance | Value | |||||||||||||||||||
|
Whole loans
|
$ | 3,443 | $ | (29 | ) | $ | 3,414 | $ | 3,319 | $ | (40 | ) | $ | 3,279 | ||||||||||
|
A-Note participations
|
354 | — | 354 | 391 | — | 391 | ||||||||||||||||||
|
B-Note participations
|
328 | (71 | ) | 257 | 701 | (176 | ) | 525 | ||||||||||||||||
|
Mezzanine loans
|
196 | (39 | ) | 157 | 1,081 | (142 | ) | 939 | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total [2]
|
$ | 4,321 | $ | (139 | ) | $ | 4,182 | $ | 5,492 | $ | (358 | ) | $ | 5,134 | ||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Amortized cost represents carrying value prior to valuation allowances, if any.
|
|
| [2] |
Excludes agricultural and residential mortgage loans. For further information on the total mortgage loan portfolio,
see Note 5 of the Notes to Condensed Consolidated Financial Statements.
|
| September 30, 2010 | December 31, 2009 | |||||||||||||||
| Carrying Value | Percent | Carrying Value | Percent | |||||||||||||
|
Hedge funds
|
$ | 432 | 23.7 | % | $ | 596 | 33.3 | % | ||||||||
|
Mortgage and real estate funds
|
327 | 18.0 | % | 302 | 16.9 | % | ||||||||||
|
Mezzanine debt funds
|
141 | 7.8 | % | 133 | 7.4 | % | ||||||||||
|
Private equity and other funds
|
919 | 50.5 | % | 759 | 42.4 | % | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 1,819 | 100.0 | % | $ | 1,790 | 100.0 | % | ||||||||
|
|
||||||||||||||||
107
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||
| Cost or | Cost or | |||||||||||||||||||||||||||||||
| Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||||||||||
| Items | Cost | Value | Loss [1] | Items | Cost | Value | Loss | |||||||||||||||||||||||||
|
Three months or less
|
377 | $ | 2,758 | $ | 2,691 | $ | (67 | ) | 1,237 | $ | 11,197 | $ | 10,838 | $ | (359 | ) | ||||||||||||||||
|
Greater than three to six months
|
283 | 724 | 676 | (47 | ) | 105 | 317 | 289 | (28 | ) | ||||||||||||||||||||||
|
Greater than six to nine months
|
83 | 309 | 290 | (20 | ) | 311 | 2,940 | 2,429 | (511 | ) | ||||||||||||||||||||||
|
Greater than nine to twelve months
|
97 | 760 | 677 | (77 | ) | 134 | 2,054 | 1,674 | (380 | ) | ||||||||||||||||||||||
|
Greater than twelve months
|
1,357 | 17,754 | 14,458 | (3,243 | ) | 2,020 | 22,445 | 16,636 | (5,809 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
2,197 | $ | 22,305 | $ | 18,792 | $ | (3,454 | ) | 3,807 | $ | 38,953 | $ | 31,866 | $ | (7,087 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| [1] |
Unrealized losses exclude the fair value of bifurcated embedded derivative features of
certain securities. Subsequent changes in value will be recorded in net realized capital
gains (losses).
|
108
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||
| Cost or | Cost or | |||||||||||||||||||||||||||||||
| Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||||||||||
| Consecutive Months | Items | Cost | Value | Loss [1] | Items | Cost | Value | Loss | ||||||||||||||||||||||||
|
Three months or less
|
57 | $ | 184 | $ | 138 | $ | (46 | ) | 161 | $ | 951 | $ | 672 | $ | (279 | ) | ||||||||||||||||
|
Greater than three to six months
|
64 | 359 | 264 | (94 | ) | 51 | 55 | 38 | (17 | ) | ||||||||||||||||||||||
|
Greater than six to nine months
|
18 | 81 | 60 | (20 | ) | 159 | 2,046 | 1,397 | (649 | ) | ||||||||||||||||||||||
|
Greater than nine to twelve months
|
35 | 205 | 146 | (59 | ) | 86 | 1,398 | 913 | (485 | ) | ||||||||||||||||||||||
|
Greater than twelve months
|
479 | 5,394 | 3,340 | (2,051 | ) | 715 | 8,146 | 4,228 | (3,918 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
653 | $ | 6,223 | $ | 3,948 | $ | (2,270 | ) | 1,172 | $ | 12,596 | $ | 7,248 | $ | (5,348 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| [1] |
Unrealized losses exclude the fair value of bifurcated embedded derivative features of
certain securities. Subsequent changes in value will be recorded in net realized capital
gains (losses).
|
| September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||
| Cost or | Cost or | |||||||||||||||||||||||||||||||
| Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||||||||||
| Consecutive Months | Items | Cost | Value | Loss | Items | Cost | Value | Loss | ||||||||||||||||||||||||
|
Three months or less
|
12 | $ | 44 | $ | 19 | $ | (25 | ) | 62 | $ | 169 | $ | 61 | $ | (108 | ) | ||||||||||||||||
|
Greater than three to six months
|
17 | 74 | 32 | (42 | ) | 28 | 5 | 2 | (3 | ) | ||||||||||||||||||||||
|
Greater than six to nine months
|
— | — | — | — | 54 | 190 | 74 | (116 | ) | |||||||||||||||||||||||
|
Greater than nine to twelve months
|
10 | 13 | 5 | (8 | ) | 58 | 592 | 210 | (382 | ) | ||||||||||||||||||||||
|
Greater than twelve months
|
122 | 1,029 | 347 | (682 | ) | 220 | 2,553 | 735 | (1,818 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
161 | $ | 1,160 | $ | 403 | $ | (757 | ) | 422 | $ | 3,509 | $ | 1,082 | $ | (2,427 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
ABS
|
$ | — | $ | 42 | $ | 5 | $ | 51 | ||||||||
|
CDOs
|
||||||||||||||||
|
CREs
|
49 | 199 | 142 | 304 | ||||||||||||
|
Other
|
— | 26 | — | 28 | ||||||||||||
|
CMBS
|
||||||||||||||||
|
Bonds
|
44 | 132 | 155 | 202 | ||||||||||||
|
IOs
|
1 | — | 2 | 25 | ||||||||||||
|
Corporate
|
15 | 43 | 21 | 163 | ||||||||||||
|
Equity
|
— | 28 | 5 | 121 | ||||||||||||
|
Municipal
|
1 | 1 | 1 | 18 | ||||||||||||
|
RMBS
|
||||||||||||||||
|
Non-agency
|
1 | 2 | 2 | 3 | ||||||||||||
|
Alt-A
|
1 | 28 | 10 | 29 | ||||||||||||
|
Sub-prime
|
3 | 35 | 32 | 128 | ||||||||||||
|
U.S. Treasuries
|
— | — | — | 2 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 115 | $ | 536 | $ | 375 | $ | 1,074 | ||||||||
|
|
||||||||||||||||
109
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Credit-related concerns
|
$ | 4 | $ | 45 | $ | 72 | $ | 198 | ||||||||
|
Held for sale
|
||||||||||||||||
|
B-note participations
|
— | — | 22 | — | ||||||||||||
|
Mezzanine loans
|
— | — | 52 | — | ||||||||||||
|
Agricultural loans
|
— | — | 10 | — | ||||||||||||
|
Residential
|
3 | — | 3 | — | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 7 | $ | 45 | $ | 159 | $ | 198 | ||||||||
|
|
||||||||||||||||
110
111
| • |
reduce the value of assets under management and the amount of fee income generated from
those assets;
|
| • |
reduce the value of equity securities, trading, supporting the international variable
annuities, the related policyholder funds and benefits payable, and the amount of fee income
generated from those variable annuities;
|
| • |
increase the liability for GMWB benefits resulting in realized capital losses;
|
| • |
increase the value of derivative assets used to hedge product guarantees resulting in
realized capital gains;
|
| • |
increases the costs of the hedging instruments we use in our hedging program;
|
| • |
increase the Company’s net amount at risk for GMDB and GMIB benefits;
|
| • |
decrease the Company’s actual gross profits, resulting in increased DAC amortization;
|
|
| • |
increase the amount of required assets to be held backing variable annuity guarantees to
maintain required regulatory reserve levels and targeted risk based capital ratios;
|
|
| • |
adversely affect customer sentiment toward equity-linked products, causing a decline in
sales; and
|
|
| • |
decrease the Company’s estimated future gross profits. See Estimated Gross Profits Used in
the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity and
Other Universal Life-Type Contracts within the Critical Accounting Estimates section of the
MD&A for further information.
|
112
| Variable Annuity Guarantee [1] | U.S. GAAP Treatment [1] | Primary Market Risk Exposures [1] | ||
|
U.S. GMDB
|
Accumulation of fees received less accumulation of claims paid | Equity Market Levels | ||
|
Japan GMDB
|
Accumulation of fees received less accumulation of claims paid | Equity Market Levels / Interest Rates / Foreign Currency | ||
|
GMWB
|
Fair Value | Equity Market Levels / Implied Volatility / Interest Rates | ||
|
For Life Component of GMWB
|
Accumulation of fees received less accumulation of claims paid | Equity Market Levels | ||
|
Japan GMIB
|
Accumulation of fees received less accumulation of claims paid | Equity Market Levels / Interest Rates / Foreign Currency | ||
|
GMAB
|
Fair Value | Equity Market Levels / Implied Volatility / Interest Rates |
| [1] |
Each of these guarantees and the related U.S. GAAP accounting volatility will also be
influenced by actual and estimated policyholder behavior.
|
113
| Variable Annuity Guarantee | Reinsurance | Customized Derivative | Dynamic Hedging [1] | Macro Hedging [2] | ||||
|
|
||||||||
|
GMDB
|
ü | ü | ||||||
|
|
||||||||
|
GMWB
|
ü | ü | ü | ü | ||||
|
|
||||||||
|
For Life Component of GMWB
|
ü | |||||||
|
|
||||||||
|
GMIB
|
ü | |||||||
|
|
||||||||
|
GMAB
|
ü |
| [1] |
Through the third quarter of 2010, the Company continued to maintain a
reduced level of dynamic hedge protection on GMWB while placing a
greater relative emphasis on the protection of statutory surplus
through the inclusion of a macro hedging program. This portion of the
GMWB hedge strategy may include derivatives with maturities of up to
10 years. U.S. GAAP fair value volatility will be driven by a reduced
level of dynamic hedge protection and macro program positions.
|
|
| [2] |
As described below, the Company’s macro hedging program is not
designed to provide protection against any one variable annuity
guarantee program, but rather is a broad based hedge designed to
provide protection against multiple guarantees and market risks,
primarily focused on statutory liability and surplus volatility.
|
114
| Net Impact on Net GMWB Liability | ||||||||
| and Hedging Program | ||||||||
| Pre-Tax/DAC Gain (Loss) | ||||||||
| Expected for third quarter | Expected for fourth quarter | |||||||
| Capital Market Factor | based on June 30, 2010 | based on September 30, 2010 | ||||||
|
Equity markets increase / decrease 1% [1] [2]
|
$ | (17) / 17 | $ | (34) / 34 | ||||
|
Volatility increases / decreases 1% [3]
|
(22) / 22 | (25) / 25 | ||||||
|
Interest rates increase / decrease 1 basis point [4]
|
3 / (3) | 1 / (1) | ||||||
|
Yen strengthens / weakens 1% versus all other currencies [5]
|
17 / (17) | 44 / (44) | ||||||
| [1] |
Represents the aggregate net impact of a 1% increase or decrease in broadly traded global equity indices.
|
|
| [2] |
Due to the structure of the macro hedge program, the increase in equity sensitivity was primarily due to additional
purchases of equity macro hedges during the third quarter of 2010.
|
|
| [3] |
Represents the aggregate net impact of a 1% increase or decrease in blended implied volatility that is generally skewed
towards longer durations for broadly traded global equity indices.
|
|
| [4] |
Represents the aggregate net impact of a 1 basis point parallel shift on the global LIBOR yield curve. The decrease in
interest rate sensitivity was primarily due to lower liability interest rate sensitivity from favorable policyholder
behavior assumption updates.
|
|
| [5] |
Represents the aggregate net impact of a 1% strengthening or weakening in the yen compared to all other currencies. Due to
the structure of the macro hedge program, the increase in currency sensitivity was primarily due to additional purchases of
currency protection and a strengthened yen during the quarter. A significant portion of our currency protection expires
early in the first quarter of 2011.
|
| Predicted Earnings Impact | ||||
| Three Months Ended | ||||
| GMWB Net Liability and Dynamic and Global Macro Programs | September 30, 2010 | |||
|
Equity markets increased approximately 11%
|
$ | (187 | ) | |
|
Volatility decreased approximately 4%
|
88 | |||
|
Interest rates decreased approximately 43 basis points
|
(129 | ) | ||
|
Yen
strengthened approximately 5% against USD and
weakened 5% against euro
|
— | |||
|
|
||||
|
Total implied pre-tax net realized loss [1]
|
$ | (228 | ) | |
|
|
||||
|
|
||||
|
Actual reported pre-tax net realized loss [1]
|
$ | (273 | ) | |
|
|
||||
| [1] |
The difference between actual reported result and the implied pre-tax net realized
gain/(loss) represents the aggregate net impact of the following factors: (i) non-parallel
shifts in capital market factors, (ii) shifts that are not equal in size to those assumed in
the calculation of the sensitivities or available information is not
sufficiently detailed enough to determine the impacts, and (iii) other factors, including policyholder
behavior, variation in underlying fund performance relative to the hedged indices, changes in
the Hartford’s own credit, policyholder behavior assumption updates, additional purchases of
equity and currency macro hedges during the 3
rd
Quarter 2010, the impact of elapsed
time on macro hedge assets, and changes in Non-U.S. GMWB fair value liabilities. This
difference may vary materially from quarter-to-quarter.
|
115
| • |
In general, as equity market levels and interest rates decline, the amount and volatility
of both our actual potential obligation, as well as the related statutory surplus and capital
margin for death and living benefit guarantees associated with U.S. variable annuity contracts
can be materially negatively effected, sometimes at a greater than linear rate. Other market
factors that can impact statutory surplus, reserve levels and capital margin include
differences in performance of variable subaccounts relative to indices and/or realized equity
and interest rate volatilities. In addition, as equity market levels increase, generally
surplus levels will increase. RBC ratios will also tend to increase when equity markets
increase. However, as a result of a number of factors and market conditions, including the
level of hedging costs and other risk transfer activities, reserve requirements for death and
living benefit guarantees and RBC requirements could increase with rising equity markets,
resulting in lower RBC ratios. Non-market factors, which can also impact the amount and
volatility of both our actual potential obligation, as well as the related statutory surplus
and capital margin, include actual and estimated policyholder behavior experience as it
pertains to lapsation, partial withdrawals, and mortality.
|
| • |
Similarly, for guaranteed benefits (GMDB and GMIB) reinsured from our Japanese operations
to our U.S. insurance subsidiaries, the amount and volatility of both our actual potential
obligation, as well as the related statutory surplus and capital margin can be materially
affected by a variety of factors, both market and non-market. Market factors include declines
in various equity market indices and interest rates, changes in value of the yen versus other
global currencies, difference in the performance of variable subaccounts relative to indices,
and increases in realized equity, interest rate, and currency volatilities. Non-market factors
include actual and estimated policyholder behavior experience as it pertains to lapsation,
withdrawals, mortality, and annuitization. Risk mitigation activities, such as hedging, may
also result in material and sometimes counterintuitive impacts on statutory surplus and
capital margin. Notably, as changes in these market and non-market factors occur, both our
potential obligation and the related statutory reserves and/or required capital can increase
or decrease at a greater than linear rate.
|
| • |
As the value of certain fixed-income and equity securities in our investment portfolio
decreases, due in part to credit spread widening, statutory surplus and RBC ratios may
decrease.
|
| • |
As the value of certain derivative instruments that do not get hedge accounting decreases,
statutory surplus and RBC ratios may decrease.
|
| • |
The life insurance subsidiaries’ exposure to foreign currency exchange risk exists with
respect to non-U.S. dollar denominated assets and liabilities. Assets and liabilities
denominated in foreign currencies are accounted for at their U.S. dollar equivalent values
using exchange rates at the balance sheet date. As foreign currency exchange rates vary in
comparison to the U.S. dollar, the remeasured value of those non-dollar denominated assets or
liabilities will also vary, causing an increase or decrease to statutory surplus.
|
116
| • |
Our statutory surplus is also impacted by widening credit spreads as a result of the accounting
for the assets and liabilities in our fixed market value adjusted (“MVA”) annuities. Statutory
separate account assets supporting the fixed MVA annuities are recorded at fair value. In
determining the statutory reserve for the fixed MVA annuities, we are required to use current
crediting rates in the U.S. and Japanese LIBOR in Japan. In many capital market scenarios,
current crediting rates in the U.S. are highly correlated with market rates implicit in the fair
value of statutory separate account assets. As a result, the change in statutory reserve from
period to period will likely substantially offset the change in the fair value of the statutory
separate account assets. However, in periods of volatile credit
markets, such as we have experienced, actual credit spreads on investment assets may increase sharply for certain
sub-sectors of the overall credit market, resulting in statutory separate account asset market
value losses. As actual credit spreads are not fully reflected in the current crediting rates
in the U.S. or Japanese LIBOR in Japan, the calculation of statutory reserves will not
substantially offset the change in fair value of the statutory separate account assets resulting
in reductions in statutory surplus. This has resulted and may continue to result in the need to
devote significant additional capital to support the product.
|
| • |
With respect to our fixed annuity business, sustained low interest rates may result in a
reduction in statutory surplus and an increase in National Association of Insurance
Commissioners (“NAIC”) required capital.
|
117
118
119
| Maximum Available As of | Outstanding As of | |||||||||||||||||||||||
| Effective | Expiration | September 30, | December 31, | September 30, | December 31, | |||||||||||||||||||
| Description | Date | Date | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
|
Commercial Paper
|
||||||||||||||||||||||||
|
The Hartford
|
11/10/86 | N/A | $ | 2,000 | $ | 2,000 | $ | — | $ | — | ||||||||||||||
|
Revolving Credit Facility
|
||||||||||||||||||||||||
|
5-year revolving credit facility
|
8/9/07 | 8/9/12 | 1,900 | 1,900 | — | — | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Commercial Paper and
Revolving Credit Facility
|
$ | 3,900 | $ | 3,900 | $ | — | $ | — | ||||||||||||||||
|
|
||||||||||||||||||||||||
| As of September 30, 2010 | ||||||||
| Ratings levels | Notional Amount | Fair Value | ||||||
|
Either BBB+ or Baa1 [1]
|
$ | 14,999 | $ | 508 | ||||
| [1] |
The notional and fair value amounts include a customized GMWB derivative with a notional
amount of $4.9 billion and a fair value of $214, for which the Company has a contractual right
to make a collateral payment in the amount of approximately $55 to prevent its termination.
|
120
| As of | ||||
| September 30, | ||||
| 2010 | ||||
|
Fixed maturities [1]
|
$ | 80,029 | ||
|
Short-term investments
|
7,627 | |||
|
Cash
|
1,704 | |||
|
Less: Derivative collateral
|
(2,230 | ) | ||
|
Cash associated with Japan variable annuities
|
(680 | ) | ||
|
|
||||
|
Total
|
$ | 86,450 | ||
|
|
||||
| [1] |
Includes $4.7 billion of U.S. Treasuries.
|
121
| As of | ||||
| September 30, | ||||
| Contractholder Obligations | 2010 | |||
|
Total contractholder obligations
|
$ | 251,635 | ||
|
Less: Separate account assets [1]
|
(154,219 | ) | ||
|
International statutory separate accounts [1]
|
(32,470 | ) | ||
|
|
||||
|
General account contractholder obligations
|
$ | 64,946 | ||
|
|
||||
|
|
||||
|
Composition of General Account Contractholder Obligations
|
||||
|
Contracts without a surrender provision and/or fixed payout dates [2]
|
$ | 30,737 | ||
|
U.S. fixed MVA annuities [3]
|
10,655 | |||
|
International fixed MVA annuities
|
2,703 | |||
|
Guaranteed investment contracts (“GIC”) [4]
|
1,000 | |||
|
Other [5]
|
19,851 | |||
|
|
||||
|
General account contractholder obligations
|
$ | 64,946 | ||
|
|
||||
| [1] |
In the event customers elect to surrender separate account assets or
international statutory separate accounts, the proceeds from the sale
of the assets will be used to fund the surrender, and the liquidity
position will not be impacted. In many instances, a percentage of the
surrender amount will be received as compensation for early surrender
(surrender charge), increasing the liquidity position. In addition, a
surrender of variable annuity separate account or general account
assets (see below) will decrease the obligation for payments on
guaranteed living and death benefits.
|
|
| [2] |
Relates to contracts such as payout annuities or institutional notes,
other than guaranteed investment products with an MVA feature
(discussed below) or surrenders of term life, group benefit contracts
or death and living benefit reserves for which surrenders will have no
current effect on liquidity requirements.
|
|
| [3] |
Relates to annuities that are held in a statutory separate account,
but under U.S. GAAP are recorded in the general account as Fixed MVA
annuity contract holders are subject to the Company’s credit risk. In
the statutory separate account, invested assets with a fair value
equal to the MVA surrender value of the Fixed MVA contract must be
maintained. In the event assets decline in value at a greater rate
than the MVA surrender value of the Fixed MVA contract, additional
capital is required to be contributed to the statutory separate
account. These required contributions will be funded with operating
cash flows or short-term investments. In the event that operating
cash flows or short-term investments are not sufficient to fund
required contributions, the Company may have to sell other invested
assets at a loss, potentially resulting in a decrease in statutory
surplus. As the fair value of invested assets in the statutory
separate account are generally equal to the MVA surrender value of the
Fixed MVA contract, surrender of Fixed MVA annuities will have an
insignificant impact on liquidity requirements.
|
|
| [4] |
GICs are subject to discontinuance provisions which allow the
policyholders to terminate their contracts prior to scheduled maturity
at the lesser of the book value or market value. Generally, the
market value adjustment reflects changes in interest rates and credit
spreads. As a result, the market value adjustment feature in the GIC
serves to protect the Company from interest rate risks and limit
liquidity requirements in the event of a surrender.
|
|
| [5] |
Surrenders of, or policy loans taken from, as applicable, these
general account liabilities, which include the general account option
for Global Annuity’s U.S. variable annuities, Life Insurance’s
variable and universal life contracts, and Retirement Plans’ annuities
may be funded through operating cash flows, available short-term
investments, or the Company may be required to sell fixed maturity
investments to fund the surrender payment. Sales of fixed maturity
investments could result in the recognition of significant realized
losses and insufficient proceeds to fully fund the surrender amount.
In this circumstance, the Company may need to take other actions,
including enforcing certain contract provisions which could restrict
surrenders and/or slow or defer payouts.
|
| As of | ||||
| September 30, | ||||
| 2010 | ||||
|
Short-term investments
|
$ | 9,517 | ||
|
U.S. Treasuries
|
4,955 | |||
|
Cash
|
1,707 | |||
|
Less: Derivative collateral
|
(2,230 | ) | ||
|
Cash associated with Japan variable annuities
|
(680 | ) | ||
|
|
||||
|
Total available liquidity [1]
|
$ | 13,269 | ||
|
|
||||
| [1] |
Includes Corporate and Other.
|
122
| September 30, | December 31, | |||||||||||
| 2010 | 2009 | Change | ||||||||||
|
Short-term debt (includes current
maturities of long-term debt and
capital lease obligations)
|
$ | — | $ | 343 | (100 | )% | ||||||
|
Long-term debt
|
6,603 | 5,496 | 20 | % | ||||||||
|
|
||||||||||||
|
Total debt [1]
|
6,603 | 5,839 | 13 | % | ||||||||
|
Stockholders’ equity excluding
accumulated other comprehensive loss,
net of tax (“AOCI”)
|
20,715 | 21,177 | (2 | )% | ||||||||
|
AOCI, net of tax
|
194 | (3,312 | ) | NM | ||||||||
|
|
||||||||||||
|
Total stockholders’ equity
|
$ | 20,909 | $ | 17,865 | 17 | % | ||||||
|
Total capitalization including AOCI
|
$ | 27,512 | $ | 23,704 | 16 | % | ||||||
|
|
||||||||||||
|
Debt to stockholders’ equity
|
32 | % | 33 | % | ||||||||
|
Debt to capitalization
|
24 | % | 25 | % | ||||||||
| [1] |
Total debt of the Company excludes $384 and $1.1 billion of consumer notes as of September
30, 2010 and December 31, 2009, respectively, and $60 and $78 of Federal Home Loan Bank
advances recorded in other liabilities as of September 30, 2010 and December 31, 2009,
respectively.
|
|
Total debt
|
•
Total debt increased primarily due to the
issuance of $1.1 billion in senior notes in March 2010
partially offset by the repayment of $275 in senior notes
in June 2010 and payment of capital lease obligations in
January 2010.
|
|
|
|
||
|
AOCI, net of tax
|
•
AOCI, net of tax, improved primarily due to
increases in net unrealized available-for-sale securities
of $2.9 billion primarily as a result of improved
security valuations due to declining interest rates and
an increase of $308 in cash flow hedging instruments.
|
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2010 | 2009 | |||||||
|
Net cash provided by operating activities
|
$ | 2,245 | $ | 2,745 | ||||
|
Net cash used for investing activities
|
$ | (286 | ) | $ | (3,821 | ) | ||
|
Net cash provided by (used for) financing activities
|
$ | (2,395 | ) | $ | 1,692 | |||
|
Cash — end of period
|
$ | 1,707 | $ | 2,417 | ||||
123
| Insurance Financial Strength Ratings: | A.M. Best | Fitch | Standard & Poor’s | Moody’s | ||||
|
Hartford Fire Insurance Company
|
A | A+ | A | A2 | ||||
|
Hartford Life Insurance Company
|
A | A- | A | A3 | ||||
|
Hartford Life and Accident Insurance Company
|
A | A- | A | A3 | ||||
|
Hartford Life and Annuity Insurance Company
|
A | A- | A | A3 | ||||
|
|
||||||||
|
Other Ratings:
|
||||||||
|
The Hartford Financial Services Group, Inc.:
|
||||||||
|
Senior debt
|
bbb+ | BBB- | BBB | Baa3 | ||||
|
Commercial paper
|
AMB-2 | F2 | A-2 | P-3 |
| September 30, | June 30, | December 31, | ||||||||||
| 2010 | 2010 | 2009 | ||||||||||
|
U.S. life insurance subsidiaries, includes
domestic captive insurance subsidiaries
|
$ | 7,557 | $ | 7,141 | $ | 7,324 | ||||||
|
Property and casualty insurance subsidiaries
|
7,690 | 7,388 | 7,364 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 15,247 | $ | 14,529 | $ | 14,688 | ||||||
|
|
||||||||||||
124
125
126
127
128
| • |
We are subject to regulation, supervision and examination by the OTS, including with
respect to required capital, cash flow, organizational structure, risk management and earnings
at the parent company level, and to the OTS reporting requirements. All of our activities must
be financially-related activities as defined by federal law (which includes insurance
activities), and the OTS has enforcement authority over us, including the right to pursue
administrative orders or penalties and the right to restrict or prohibit activities determined
by the OTS to be a serious risk to FTB. We must also be a source of strength to FTB, which
could require further capital contributions. We will be subject to similar, potentially
stricter, requirements when regulatory authority over us transfers to The Federal Reserve (for
our holding company) and the OCC (for FTB).
|
| • |
Recipients of federal assistance continue to be subject to intense scrutiny, and future
regulatory initiatives could be adopted at the federal or state level that have the effect of
constraining the business or management of those enterprises. The Obama administration has
proposed a financial crisis responsibility tax that would be levied on the largest financial
institutions in terms of assets. We cannot predict the scope or impact of future regulatory
initiatives or the effect that they may have on our ability to attract and retain key
personnel, the cost and complexity of our compliance programs or on required levels of
regulatory capital.
|
129
| Total Number of | Approximate Dollar | |||||||||||||||
| Shares Purchased as | Value of Shares that | |||||||||||||||
| Total Number | Average Price | Part of Publicly | May Yet Be | |||||||||||||
| of Shares | Paid Per | Announced Plans or | Purchased Under | |||||||||||||
| Period | Purchased [1] | Share | Programs | the Plans or Programs | ||||||||||||
| (in millions) | ||||||||||||||||
|
|
||||||||||||||||
|
July 1,
2010 – July 31, 2010
|
— | $ | — | — | $ | 807 | ||||||||||
|
August 1, 2010 – August 31, 2010
|
5,969 | $ | 23.41 | — | $ | 807 | ||||||||||
|
September 1, 2010 – September 30, 2010
|
— | $ | — | — | $ | 807 | ||||||||||
|
|
||||||||||||||||
|
Total
|
5,969 | $ | 23.41 | — | N/A | |||||||||||
|
|
||||||||||||||||
| [1] |
Represents shares acquired from employees of the Company for tax withholding purposes in
connection with the Company’s stock compensation plans.
|
130
|
The Hartford Financial Services Group, Inc.
(Registrant) |
||||
| Date: November 2, 2010 | /s/ Beth A. Bombara | |||
| Beth A. Bombara | ||||
|
Senior Vice President and Controller
(Chief accounting officer and duly authorized signatory) |
||||
131
| Exhibit No. | Description | |||
| 3.01 |
Amended and Restated By-Laws of The Hartford Financial Services Group, Inc., amended
effective October 21, 2010 (incorporated herein by reference to Exhibit 3.1 to The
Hartford’s Current Report on Form 8-K, filed
October 27, 2010).
|
|||
|
|
||||
| 15.01 |
Deloitte & Touche LLP Letter of Awareness.
|
|||
|
|
||||
| 31.01 |
Certification of Liam E. McGee pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|||
|
|
||||
| 31.02 |
Certification of Christopher J. Swift pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|||
|
|
||||
| 32.01 |
Certification of Liam E. McGee pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|||
|
|
||||
| 32.02 |
Certification of Christopher J. Swift pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|||
|
|
||||
| 101.INS |
XBRL Instance Document. [1]
|
|||
|
|
||||
| 101.SCH |
XBRL Taxonomy Extension Schema.
|
|||
|
|
||||
| 101.CAL |
XBRL Taxonomy Extension Calculation Linkbase.
|
|||
|
|
||||
| 101.DEF |
XBRL Taxonomy Extension Definition Linkbase.
|
|||
|
|
||||
| 101.LAB |
XBRL Taxonomy Extension Label Linkbase.
|
|||
|
|
||||
| 101.PRE |
XBRL Taxonomy Extension Presentation Linkbase.
|
|||
| [1] |
Includes the following materials contained in this Quarterly Report on Form
10-Q for the quarter ended September 30, 2010 formatted in XBRL (eXtensible
Business Reporting Language) (i) the Condensed Consolidated Statements of
Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the
Condensed Consolidated Statements of Changes in Equity, (iv) the Condensed
Consolidated Statements of Comprehensive Income, (v) the Condensed
Consolidated Statements of Cash Flows, and (vi) Notes to Condensed
Consolidated Financial Statements, which is tagged as blocks of text.
|
132
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
Customers
| Customer name | Ticker |
|---|---|
| The Travelers Companies, Inc. | TRV |
| Kemper Corporation | KMPR |
| Unum Group | UNM |
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|