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ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
13-3317783
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
Indicate by check mark:
|
Yes
|
|
No
|
|
|
|
|
• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
|
ý
|
|
¨
|
|
|
|
|
• whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
|
ý
|
|
¨
|
|
|
|
|
• whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
|
|
|
Large accelerated filer
x
|
|
Accelerated filer
¨
|
|
Non-accelerated filer
¨
|
|
Smaller reporting company
¨
|
• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
|
¨
|
|
ý
|
Item
|
Description
|
Page
|
|
|
|
1.
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
2.
|
||
3.
|
||
4.
|
||
|
|
|
1.
|
||
1A.
|
||
2.
|
||
|
|
|
6.
|
||
|
|
|
|
||
|
•
|
challenges related to the Company’s current operating environment, including global political, economic and market conditions, and the effect of financial market disruptions, economic downturns or other potentially adverse macroeconomic developments on the attractiveness of our products, the returns in our investment portfolios and the hedging costs associated with our variable annuities business;
|
•
|
financial risk related to the continued reinvestment of our investment portfolios and performance of our hedge program for our runoff annuity block;
|
•
|
market risks associated with our business, including changes in interest rates, credit spreads, equity prices, market volatility and foreign exchange rates, commodities prices and implied volatility levels, as well as continuing uncertainty in key sectors such as the global real estate market;
|
•
|
the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;
|
•
|
risk associated with the use of analytical models in making decisions in key areas such as underwriting, capital, hedging, reserving, and catastrophe risk management;
|
•
|
the potential for further acceleration of deferred policy acquisition cost amortization;
|
•
|
the potential for further impairments of our goodwill or the potential for changes in valuation allowances against deferred tax assets;
|
•
|
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;
|
•
|
the difficulty in predicting the Company’s potential exposure for asbestos and environmental claims;
|
•
|
the subjective determinations that underlie the Company’s evaluation of other-than-temporary impairments on available-for-sale securities;
|
•
|
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;
|
•
|
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;
|
•
|
losses due to nonperformance or defaults by others, including reinsurers, sourcing partners, derivative counterparties and other third parties;
|
•
|
the potential for losses due to our reinsurers’ unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect us against losses;
|
•
|
the possibility of unfavorable loss development including with respect to long-tailed exposures;
|
•
|
the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses;
|
•
|
weather and other natural physical events, including the severity and frequency of storms, hail, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns;
|
•
|
the uncertain effects of emerging claim and coverage issues;
|
•
|
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;
|
•
|
technology innovations, such as telematics and other usage-based methods of determining premiums, auto technology advancements that improve driver safety and technologies that facilitate ride or home sharing, may alter demand for the Company’s products, impact the frequency or severity of losses and/or impact the way the Company markets, distributes and underwrites its products;
|
•
|
the possible occurrence of terrorist attacks and the Company’s ability to contain its exposure, including limitations on coverage from the federal government under applicable reinsurance terrorism laws;
|
•
|
volatility in our statutory and United States ("U.S.") GAAP earnings and potential material changes to our results resulting from our adjustment of our risk management program to emphasize protection of economic value;
|
•
|
the cost and other effects of increased regulation as a result of the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the potential effect of other domestic and foreign regulatory developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels;
|
•
|
unfavorable judicial or legislative developments;
|
•
|
regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends;
|
•
|
the impact of changes in federal or state tax laws;
|
•
|
the impact of potential changes in accounting principles and related financial reporting requirements;
|
•
|
regulatory requirements that could delay, deter or prevent a takeover attempt that shareholders might consider in their best interests;
|
•
|
the risks, challenges and uncertainties associated with
our
capital management plan, expense reduction initiatives and other actions, which may include acquisitions, divestitures or restructurings;
|
•
|
actions by our competitors, many of which are larger or have greater financial resources than we do;
|
•
|
the Company’s ability to market, distribute and provide investment advisory services in relation to our products through current and future distribution channels and advisory firms;
|
•
|
the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event;
|
•
|
the risk that our framework for managing operational risks may not be effective in mitigating material risk and loss to the Company;
|
•
|
the potential for difficulties arising from outsourcing and similar third-party relationships;
|
•
|
the Company’s ability to protect its intellectual property and defend against claims of infringement; and
|
•
|
other factors described in such forward-looking statements.
|
Item 1.
|
Financial Statements
|
|
Three Months Ended March 31,
|
|||||
(In millions, except for per share data)
|
2015
|
2014
|
||||
|
(Unaudited)
|
|||||
Revenues
|
|
|
||||
Earned premiums
|
$
|
3,322
|
|
$
|
3,302
|
|
Fee income
|
459
|
|
496
|
|
||
Net investment income
|
809
|
|
824
|
|
||
Net realized capital gains (losses):
|
|
|
||||
Total other-than-temporary impairment (“OTTI”) losses
|
(12
|
)
|
(23
|
)
|
||
OTTI losses recognized in other comprehensive income (“OCI”)
|
—
|
|
1
|
|
||
Net OTTI losses recognized in earnings
|
(12
|
)
|
(22
|
)
|
||
Other net realized capital gains (losses)
|
17
|
|
(13
|
)
|
||
Total net realized capital gains (losses)
|
5
|
|
(35
|
)
|
||
Other revenues
|
22
|
|
25
|
|
||
Total revenues
|
4,617
|
|
4,612
|
|
||
Benefits, losses and expenses
|
|
|
||||
Benefits, losses and loss adjustment expenses
|
2,563
|
|
2,576
|
|
||
Amortization of deferred policy acquisition costs and present value of future profits
|
387
|
|
396
|
|
||
Insurance operating costs and other expenses
|
948
|
|
936
|
|
||
Interest expense
|
94
|
|
95
|
|
||
Total benefits, losses and expenses
|
3,992
|
|
4,003
|
|
||
Income from continuing operations before income taxes
|
625
|
|
609
|
|
||
Income tax expense
|
158
|
|
143
|
|
||
Income from continuing operations, net of tax
|
467
|
|
466
|
|
||
Income from discontinued operations, net of tax
|
—
|
|
29
|
|
||
Net income
|
$
|
467
|
|
$
|
495
|
|
Income from continuing operations, net of tax, per common share
|
|
|
||||
Basic
|
$
|
1.11
|
|
$
|
1.04
|
|
Diluted
|
$
|
1.08
|
|
$
|
0.97
|
|
Net income per common share
|
|
|
||||
Basic
|
$
|
1.11
|
|
$
|
1.10
|
|
Diluted
|
$
|
1.08
|
|
$
|
1.03
|
|
Cash dividends declared per common share
|
$
|
0.18
|
|
$
|
0.15
|
|
|
Three Months Ended March 31,
|
|||||
(In millions)
|
2015
|
2014
|
||||
|
(Unaudited)
|
|||||
Comprehensive Income
|
|
|
||||
Net income
|
$
|
467
|
|
$
|
495
|
|
Other comprehensive income (loss):
|
|
|
||||
Change in net unrealized gain on securities
|
208
|
|
699
|
|
||
Change in OTTI losses recognized in other comprehensive income
|
(3
|
)
|
2
|
|
||
Change in net gain on cash flow hedging instruments
|
27
|
|
13
|
|
||
Change in foreign currency translation adjustments
|
(20
|
)
|
17
|
|
||
Change in pension and other postretirement plan adjustments
|
10
|
|
7
|
|
||
Total other comprehensive income
|
222
|
|
738
|
|
||
Total comprehensive income
|
$
|
689
|
|
$
|
1,233
|
|
(In millions, except for share and per share data)
|
March 31,
2015 |
December 31, 2014
|
||||
|
(Unaudited)
|
|||||
Assets
|
|
|||||
Investments:
|
|
|
||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $56,104 and $55,362)
|
$
|
60,555
|
|
$
|
59,384
|
|
Fixed maturities, at fair value using the fair value option (includes variable interest entity assets of $217 and $218)
|
520
|
|
488
|
|
||
Equity securities, available-for-sale, at fair value (cost of $1,129 and $1,027) (includes equity securities, at fair value using the fair value option, of $402 and $348)
|
1,148
|
|
1,047
|
|
||
Mortgage loans (net of allowances for loan losses of $21 and $18)
|
5,697
|
|
5,556
|
|
||
Policy loans, at outstanding balance
|
1,452
|
|
1,431
|
|
||
Limited partnerships and other alternative investments (includes variable interest entity assets of $2 and $3)
|
2,923
|
|
2,942
|
|
||
Other investments
|
630
|
|
547
|
|
||
Short-term investments (includes variable interest entity assets, at fair value, of $8 and $16)
|
3,651
|
|
4,883
|
|
||
Total investments
|
76,576
|
|
76,278
|
|
||
Cash (includes variable interest entity assets, at fair value, of $12 and $9)
|
500
|
|
399
|
|
||
Premiums receivable and agents’ balances, net
|
3,497
|
|
3,429
|
|
||
Reinsurance recoverables, net
|
22,737
|
|
22,920
|
|
||
Deferred policy acquisition costs
|
1,764
|
|
1,823
|
|
||
Deferred income taxes, net
|
2,636
|
|
2,897
|
|
||
Goodwill
|
498
|
|
498
|
|
||
Property and equipment, net
|
848
|
|
831
|
|
||
Other assets
|
2,101
|
|
1,236
|
|
||
Separate account assets
|
135,803
|
|
134,702
|
|
||
Total assets
|
$
|
246,960
|
|
$
|
245,013
|
|
Liabilities
|
|
|
||||
Reserve for future policy benefits and unpaid losses and loss adjustment expenses
|
$
|
41,523
|
|
$
|
41,444
|
|
Other policyholder funds and benefits payable
|
32,101
|
|
32,532
|
|
||
Unearned premiums
|
5,383
|
|
5,255
|
|
||
Short-term debt
|
167
|
|
456
|
|
||
Long-term debt
|
5,653
|
|
5,653
|
|
||
Other liabilities (includes variable interest entity liabilities of $5 and $6)
|
7,253
|
|
6,251
|
|
||
Separate account liabilities
|
135,803
|
|
134,702
|
|
||
Total liabilities
|
227,883
|
|
226,293
|
|
||
Commitments and Contingencies (Note 8)
|
|
|
||||
Stockholders’ Equity
|
|
|
||||
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 490,923,222 and 490,923,222 shares issued
|
5
|
|
5
|
|
||
Additional paid-in capital
|
8,996
|
|
9,123
|
|
||
Retained earnings
|
11,583
|
|
11,191
|
|
||
Treasury stock, at cost — 69,533,810 and 66,507,690 shares
|
(2,657
|
)
|
(2,527
|
)
|
||
Accumulated other comprehensive income, net of tax
|
1,150
|
|
928
|
|
||
Total stockholders’ equity
|
19,077
|
|
18,720
|
|
||
Total liabilities and stockholders’ equity
|
$
|
246,960
|
|
$
|
245,013
|
|
|
Three Months Ended March 31,
|
|||||
(In millions, except for share data)
|
2015
|
2014
|
||||
|
(Unaudited)
|
|||||
Common Stock
|
$
|
5
|
|
$
|
5
|
|
Additional Paid-in Capital, beginning of period
|
9,123
|
|
9,894
|
|
||
Issuance of shares under incentive and stock compensation plans
|
(150
|
)
|
(49
|
)
|
||
Stock-based compensation plans expense
|
16
|
|
19
|
|
||
Tax benefit on employee stock options and share-based awards
|
26
|
|
3
|
|
||
Issuance of shares for warrant exercise
|
(19
|
)
|
(318
|
)
|
||
Additional Paid-in Capital, end of period
|
8,996
|
|
9,549
|
|
||
Retained Earnings, beginning of period
|
11,191
|
|
10,683
|
|
||
Net income
|
467
|
|
495
|
|
||
Dividends declared on common stock
|
(75
|
)
|
(67
|
)
|
||
Retained Earnings, end of period
|
11,583
|
|
11,111
|
|
||
Treasury Stock, at Cost, beginning of period
|
(2,527
|
)
|
(1,598
|
)
|
||
Treasury stock acquired
|
(250
|
)
|
(300
|
)
|
||
Issuance of shares under incentive and stock compensation plans
|
154
|
|
43
|
|
||
Net shares acquired related to employee incentive and stock compensation plans
|
(53
|
)
|
(13
|
)
|
||
Issuance of shares for warrant exercise
|
19
|
|
318
|
|
||
Treasury Stock, at Cost, end of period
|
(2,657
|
)
|
(1,550
|
)
|
||
Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period
|
928
|
|
(79
|
)
|
||
Total other comprehensive income
|
222
|
|
738
|
|
||
Accumulated Other Comprehensive Income, net of tax, end of period
|
1,150
|
|
659
|
|
||
Total Stockholders’ Equity
|
$
|
19,077
|
|
$
|
19,774
|
|
Common Shares Outstanding beginning of period (in thousands)
|
424,416
|
|
453,290
|
|
||
Treasury stock acquired
|
(6,128
|
)
|
(8,821
|
)
|
||
Issuance of shares under incentive and stock compensation plans
|
3,923
|
|
996
|
|
||
Return of shares under incentive and stock compensation plans and other to treasury stock
|
(1,299
|
)
|
(357
|
)
|
||
Issuance of shares for warrant exercise
|
477
|
|
7,378
|
|
||
Common Shares Outstanding, at end of period
|
421,389
|
|
452,486
|
|
|
Three Months Ended March 31,
|
|||||
(In millions)
|
2015
|
2014
|
||||
Operating Activities
|
(Unaudited)
|
|||||
Net income (loss)
|
$
|
467
|
|
$
|
495
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
||||
Amortization of deferred policy acquisition costs and present value of future profits
|
387
|
|
396
|
|
||
Additions to deferred policy acquisition costs and present value of future profits
|
(354
|
)
|
(350
|
)
|
||
Net realized capital (gains) losses
|
(5
|
)
|
86
|
|
||
Depreciation and amortization
|
101
|
|
60
|
|
||
Other operating activities, net
|
22
|
|
(97
|
)
|
||
Change in assets and liabilities:
|
|
|
||||
Increase in reserve for future policy benefits and unpaid losses and loss adjustment expenses and unearned premiums
|
120
|
|
107
|
|
||
Decrease in reinsurance recoverables
|
37
|
|
3
|
|
||
Increase in receivables and other assets
|
(449
|
)
|
(69
|
)
|
||
Decrease in payables and accruals
|
(47
|
)
|
(399
|
)
|
||
Decrease in accrued and deferred income taxes
|
168
|
|
117
|
|
||
Net disbursements from investment contracts related to policyholder funds—international variable annuities
|
—
|
|
(2,458
|
)
|
||
Net decrease in equity securities, trading
|
—
|
|
2,458
|
|
||
Net cash provided by operating activities
|
447
|
|
349
|
|
||
Investing Activities
|
|
|
||||
Proceeds from the sale/maturity/prepayment of:
|
|
|
||||
Fixed maturities, available-for-sale
|
6,584
|
|
8,015
|
|
||
Fixed maturities, fair value option
|
36
|
|
55
|
|
||
Equity securities, available-for-sale
|
363
|
|
118
|
|
||
Mortgage loans
|
104
|
|
96
|
|
||
Partnerships
|
179
|
|
123
|
|
||
Payments for the purchase of:
|
|
|
||||
Fixed maturities, available-for-sale
|
(7,375
|
)
|
(7,654
|
)
|
||
Fixed maturities, fair value option
|
(59
|
)
|
(168
|
)
|
||
Equity securities, available-for-sale
|
(566
|
)
|
(28
|
)
|
||
Mortgage loans
|
(154
|
)
|
(204
|
)
|
||
Partnerships
|
(106
|
)
|
(70
|
)
|
||
Net proceeds from (payments for) derivatives
|
45
|
|
(17
|
)
|
||
Net increase (decrease) in policy loans
|
(24
|
)
|
9
|
|
||
Net additions to property and equipment
|
(58
|
)
|
(33
|
)
|
||
Net proceeds from (payments for) short-term investments
|
1,325
|
|
(44
|
)
|
||
Other investing activities, net
|
1
|
|
(2
|
)
|
||
Net cash provided by investing activities
|
295
|
|
196
|
|
||
Financing Activities
|
|
|
||||
Deposits and other additions to investment and universal life-type contracts
|
1,209
|
|
817
|
|
||
Withdrawals and other deductions from investment and universal life-type contracts
|
(4,682
|
)
|
(4,687
|
)
|
||
Net transfers from separate accounts related to investment and universal life-type contracts
|
3,175
|
|
3,581
|
|
||
Repayments at maturity or settlement of consumer notes
|
(2
|
)
|
(6
|
)
|
||
Net proceeds from securities loaned or sold under agreements to repurchase
|
323
|
|
147
|
|
||
Repayment of debt
|
(289
|
)
|
(200
|
)
|
||
Net issuance (return) of shares under incentive and stock compensation plans, excess tax benefit, and other
|
(25
|
)
|
30
|
|
||
Treasury stock acquired
|
(250
|
)
|
(300
|
)
|
||
Dividends paid on common stock
|
(78
|
)
|
(67
|
)
|
||
Net cash used for financing activities
|
(619
|
)
|
(685
|
)
|
||
Foreign exchange rate effect on cash
|
(22
|
)
|
(3
|
)
|
||
Net decrease in cash
|
101
|
|
(143
|
)
|
||
Cash – beginning of period
|
399
|
|
1,428
|
|
||
Cash – end of period
|
$
|
500
|
|
$
|
1,285
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
||||
Income taxes received
|
$
|
47
|
|
$
|
126
|
|
Interest paid
|
$
|
77
|
|
$
|
82
|
|
|
Three Months Ended March 31,
|
|||||
(In millions, except for per share data)
|
2015
|
2014
|
||||
Earnings
|
|
|
||||
Income from continuing operations, net of tax
|
$
|
467
|
|
$
|
466
|
|
Income from discontinued operations, net of tax
|
$
|
—
|
|
$
|
29
|
|
Net income
|
$
|
467
|
|
$
|
495
|
|
Shares
|
|
|
||||
Weighted average common shares outstanding, basic
|
422.6
|
|
449.8
|
|
||
Dilutive effect of stock compensation plans
|
5.5
|
|
6.2
|
|
||
Dilutive effect of warrants
|
5.6
|
|
22.6
|
|
||
Weighted average common shares outstanding and dilutive potential common shares
|
433.7
|
|
478.6
|
|
||
Earnings per common share
|
|
|
||||
Basic
|
|
|
||||
Income from continuing operations, net of tax
|
$
|
1.11
|
|
$
|
1.04
|
|
Income from discontinued operations, net of tax
|
—
|
|
0.06
|
|
||
Net income per common share
|
$
|
1.11
|
|
$
|
1.10
|
|
Diluted
|
|
|
||||
Income from continuing operations, net of tax
|
$
|
1.08
|
|
$
|
0.97
|
|
Income from discontinued operations, net of tax
|
—
|
|
0.06
|
|
||
Net income per common share
|
$
|
1.08
|
|
$
|
1.03
|
|
|
Three Months Ended March 31,
|
|||||
Net income (loss)
|
2015
|
2014
|
||||
Commercial Lines
|
$
|
240
|
|
$
|
242
|
|
Personal Lines
|
76
|
|
99
|
|
||
Property & Casualty Other Operations
|
23
|
|
22
|
|
||
Group Benefits
|
52
|
|
51
|
|
||
Mutual Funds
|
22
|
|
21
|
|
||
Talcott Resolution
|
111
|
|
145
|
|
||
Corporate
|
(57
|
)
|
(85
|
)
|
||
Net income
|
$
|
467
|
|
$
|
495
|
|
|
Three Months Ended March 31,
|
|||||
Revenues
|
2015
|
2014
|
||||
Earned premiums and fee income
|
|
|
||||
Commercial Lines
|
|
|
||||
Workers’ compensation
|
$
|
744
|
|
$
|
732
|
|
Property
|
156
|
|
136
|
|
||
Automobile
|
148
|
|
144
|
|
||
Package business
|
292
|
|
283
|
|
||
Liability
|
135
|
|
145
|
|
||
Bond
|
53
|
|
51
|
|
||
Professional liability
|
55
|
|
50
|
|
||
Total Commercial Lines
|
1,583
|
|
1,541
|
|
||
Personal Lines
|
|
|
||||
Automobile
|
655
|
|
636
|
|
||
Homeowners
|
297
|
|
292
|
|
||
Total Personal Lines [1]
|
952
|
|
928
|
|
||
Group Benefits
|
|
|
||||
Group disability
|
371
|
|
369
|
|
||
Group life
|
365
|
|
388
|
|
||
Other
|
44
|
|
42
|
|
||
Total Group Benefits
|
780
|
|
799
|
|
||
Mutual Funds
|
|
|
||||
Mutual Fund
|
149
|
|
138
|
|
||
Talcott
|
30
|
|
36
|
|
||
Total Mutual Funds
|
179
|
|
174
|
|
||
Talcott Resolution
|
285
|
|
353
|
|
||
Corporate
|
2
|
|
3
|
|
||
Total earned premiums and fee income
|
3,781
|
|
3,798
|
|
||
Net investment income
|
809
|
|
824
|
|
||
Net realized capital gains
|
5
|
|
(35
|
)
|
||
Other revenues
|
22
|
|
25
|
|
||
Total revenues
|
$
|
4,617
|
|
$
|
4,612
|
|
[1]
|
For the
three months ended
March 31, 2015
and
2014
, AARP members accounted for earned premiums of
$766
and
$736
, respectively.
|
Level 1
|
Observable inputs that reflect quoted prices for identical assets, or liabilities, in active markets that the Company has the ability to access at the measurement date. Level 1 securities include highly liquid U.S. Treasuries, money market funds and exchange traded equity securities, open-ended mutual funds, and exchange-traded derivative instruments.
|
Level 2
|
Observable inputs, other than quoted prices included in Level 1, for the asset or liability, or prices for similar assets and liabilities. Most fixed maturities and preferred stocks, including those reported in separate account assets, are model priced by vendors using observable inputs and are classified within Level 2. Also included are hedge funds where investment company accounting guidance has been applied to a wholly-owned fund of funds measured at fair value w
here an investment can be redeemed, or substantially redeemed, at the net asset value per share or equivalent ("NAV") on the measurement date or in the near-term, not to exceed 90 days.
Derivative instruments classified within Level 2 are priced using observable market inputs such as swap yield curves and credit default swap curves.
|
Level 3
|
Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Level 3 securities include less liquid securities, guaranteed product embedded and reinsurance derivatives and other complex derivative instruments, as well as hedge fund investments carried at fair value, consistent with investment company accounting guidance, that cannot be redeemed in the near-term at the NAV. Because Level 3 fair values, by their nature, contain one or more significant unobservable inputs, as there is little or no observable market for these assets and liabilities, considerable judgment is used to determine the Level 3 fair values. Level 3 fair values represent the Company’s best estimate of an amount that could be realized in a current market exchange absent actual market exchanges.
|
|
March 31, 2015
|
|||||||||||
|
Total
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
Significant
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Fixed maturities, AFS
|
|
|
|
|
||||||||
Asset-backed-securities ("ABS")
|
$
|
3,004
|
|
$
|
—
|
|
$
|
2,843
|
|
$
|
161
|
|
Collateralized debt obligations ("CDOs")
|
2,982
|
|
—
|
|
2,398
|
|
584
|
|
||||
Commercial mortgage-backed securities ("CMBS")
|
4,652
|
|
—
|
|
4,384
|
|
268
|
|
||||
Corporate
|
27,119
|
|
—
|
|
26,007
|
|
1,112
|
|
||||
Foreign government/government agencies
|
1,365
|
|
—
|
|
1,317
|
|
48
|
|
||||
Municipal
|
12,842
|
|
—
|
|
12,778
|
|
64
|
|
||||
Residential mortgage-backed securities ("RMBS")
|
4,078
|
|
—
|
|
2,615
|
|
1,463
|
|
||||
U.S. Treasuries
|
4,513
|
|
444
|
|
4,069
|
|
—
|
|
||||
Total fixed maturities
|
60,555
|
|
444
|
|
56,411
|
|
3,700
|
|
||||
Fixed maturities, FVO
|
520
|
|
—
|
|
435
|
|
85
|
|
||||
Equity securities, trading [1]
|
11
|
|
11
|
|
—
|
|
—
|
|
||||
Equity securities, AFS
|
1,148
|
|
910
|
|
136
|
|
102
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Credit derivatives
|
9
|
|
—
|
|
13
|
|
(4
|
)
|
||||
Commodity derivatives
|
7
|
|
—
|
|
7
|
|
—
|
|
||||
Equity derivatives
|
2
|
|
—
|
|
—
|
|
2
|
|
||||
Foreign exchange derivatives
|
9
|
|
—
|
|
9
|
|
—
|
|
||||
Interest rate derivatives
|
130
|
|
—
|
|
119
|
|
11
|
|
||||
Guaranteed minimum withdrawal benefit ("GMWB") hedging instruments
|
142
|
|
—
|
|
47
|
|
95
|
|
||||
Macro hedge program
|
135
|
|
—
|
|
—
|
|
135
|
|
||||
Other derivative contracts
|
11
|
|
—
|
|
—
|
|
11
|
|
||||
Total derivative assets [2]
|
445
|
|
—
|
|
195
|
|
250
|
|
||||
Short-term investments
|
3,651
|
|
313
|
|
3,338
|
|
—
|
|
||||
Limited partnerships and other alternative investments [3]
|
742
|
|
—
|
|
552
|
|
190
|
|
||||
Reinsurance recoverable for GMWB
|
65
|
|
—
|
|
—
|
|
65
|
|
||||
Modified coinsurance reinsurance contracts
|
22
|
|
—
|
|
22
|
|
—
|
|
||||
Separate account assets [4]
|
131,087
|
|
89,871
|
|
40,614
|
|
602
|
|
||||
Total assets accounted for at fair value on a recurring basis
|
$
|
198,246
|
|
$
|
91,549
|
|
$
|
101,703
|
|
$
|
4,994
|
|
Liabilities accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Other policyholder funds and benefits payable
|
|
|
|
|
||||||||
GMWB
|
$
|
(176
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(176
|
)
|
Equity linked notes
|
(26
|
)
|
—
|
|
—
|
|
(26
|
)
|
||||
Total other policyholder funds and benefits payable
|
(202
|
)
|
—
|
|
—
|
|
(202
|
)
|
||||
Derivative liabilities
|
|
|
|
|
||||||||
Credit derivatives
|
(6
|
)
|
—
|
|
1
|
|
(7
|
)
|
||||
Commodity derivatives
|
3
|
|
—
|
|
3
|
|
—
|
|
||||
Equity derivatives
|
32
|
|
—
|
|
26
|
|
6
|
|
||||
Foreign exchange derivatives
|
(469
|
)
|
—
|
|
(469
|
)
|
—
|
|
||||
Interest rate derivatives
|
(531
|
)
|
—
|
|
(502
|
)
|
(29
|
)
|
||||
GMWB hedging instruments
|
39
|
|
—
|
|
(25
|
)
|
64
|
|
||||
Macro hedge program
|
52
|
|
—
|
|
—
|
|
52
|
|
||||
Total derivative liabilities [5]
|
(880
|
)
|
—
|
|
(966
|
)
|
86
|
|
||||
Consumer notes [6]
|
(3
|
)
|
—
|
|
—
|
|
(3
|
)
|
||||
Total liabilities accounted for at fair value on a recurring basis
|
$
|
(1,085
|
)
|
$
|
—
|
|
$
|
(966
|
)
|
$
|
(119
|
)
|
|
December 31, 2014
|
|||||||||||
|
Total
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
Significant
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Fixed maturities, AFS
|
|
|
|
|
||||||||
ABS
|
$
|
2,472
|
|
$
|
—
|
|
$
|
2,350
|
|
$
|
122
|
|
CDOs
|
2,841
|
|
—
|
|
2,218
|
|
623
|
|
||||
CMBS
|
4,415
|
|
—
|
|
4,131
|
|
284
|
|
||||
Corporate
|
27,359
|
|
—
|
|
26,319
|
|
1,040
|
|
||||
Foreign government/government agencies
|
1,636
|
|
—
|
|
1,577
|
|
59
|
|
||||
Municipal
|
12,871
|
|
—
|
|
12,805
|
|
66
|
|
||||
RMBS
|
3,918
|
|
—
|
|
2,637
|
|
1,281
|
|
||||
U.S. Treasuries
|
3,872
|
|
106
|
|
3,766
|
|
—
|
|
||||
Total fixed maturities
|
59,384
|
|
106
|
|
55,803
|
|
3,475
|
|
||||
Fixed maturities, FVO
|
488
|
|
—
|
|
396
|
|
92
|
|
||||
Equity securities, trading [1]
|
11
|
|
11
|
|
—
|
|
—
|
|
||||
Equity securities, AFS
|
1,047
|
|
786
|
|
163
|
|
98
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Credit derivatives
|
8
|
|
—
|
|
10
|
|
(2
|
)
|
||||
Equity derivatives
|
3
|
|
—
|
|
—
|
|
3
|
|
||||
Interest rate derivatives
|
129
|
|
—
|
|
113
|
|
16
|
|
||||
GMWB hedging instruments
|
119
|
|
—
|
|
5
|
|
114
|
|
||||
Macro hedge program
|
93
|
|
—
|
|
—
|
|
93
|
|
||||
Other derivative contracts
|
12
|
|
—
|
|
—
|
|
12
|
|
||||
Total derivative assets [2]
|
364
|
|
—
|
|
128
|
|
236
|
|
||||
Short-term investments
|
4,883
|
|
349
|
|
4,534
|
|
—
|
|
||||
Limited partnerships and other alternative investments [3]
|
770
|
|
—
|
|
581
|
|
189
|
|
||||
Reinsurance recoverable for GMWB
|
56
|
|
—
|
|
—
|
|
56
|
|
||||
Modified coinsurance reinsurance contracts
|
34
|
|
—
|
|
34
|
|
—
|
|
||||
Separate account assets [4]
|
132,211
|
|
91,537
|
|
40,096
|
|
578
|
|
||||
Total assets accounted for at fair value on a recurring basis
|
$
|
199,248
|
|
$
|
92,789
|
|
$
|
101,735
|
|
$
|
4,724
|
|
Liabilities accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Other policyholder funds and benefits payable
|
|
|
|
|
||||||||
GMWB
|
$
|
(139
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(139
|
)
|
Equity linked notes
|
(26
|
)
|
—
|
|
—
|
|
(26
|
)
|
||||
Total other policyholder funds and benefits payable
|
(165
|
)
|
—
|
|
—
|
|
(165
|
)
|
||||
Derivative liabilities
|
|
|
|
|
||||||||
Credit derivatives
|
(16
|
)
|
—
|
|
(9
|
)
|
(7
|
)
|
||||
Equity derivatives
|
28
|
|
—
|
|
25
|
|
3
|
|
||||
Foreign exchange derivatives
|
(445
|
)
|
—
|
|
(445
|
)
|
—
|
|
||||
Interest rate derivatives
|
(597
|
)
|
—
|
|
(574
|
)
|
(23
|
)
|
||||
GMWB hedging instruments
|
55
|
|
—
|
|
(1
|
)
|
56
|
|
||||
Macro hedge program
|
48
|
|
—
|
|
—
|
|
48
|
|
||||
Total derivative liabilities [5]
|
(927
|
)
|
—
|
|
(1,004
|
)
|
77
|
|
||||
Consumer notes [6]
|
(3
|
)
|
—
|
|
—
|
|
(3
|
)
|
||||
Total liabilities accounted for at fair value on a recurring basis
|
$
|
(1,095
|
)
|
$
|
—
|
|
$
|
(1,004
|
)
|
$
|
(91
|
)
|
[1]
|
Included in other investments on the Condensed Consolidated Balance Sheets.
|
[2]
|
Includes over-the-counter ("OTC") and OTC-cleared derivative instruments in a net positive fair value position after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements, clearing house rules and applicable law. As of
March 31, 2015
and
December 31, 2014
,
$389
and
$413
, respectively, of cash collateral liability was netted against the derivative asset value in the Condensed Consolidated Balance Sheets and is excluded from the preceding table. See the following footnote 4 for derivative liabilities.
|
[3]
|
Represents hedge funds where investment company accounting has been applied to a wholly-owned fund of funds measured at fair value.
|
[4]
|
Approximately
$4.7 billion
and
$2.5 billion
of investment sales receivable, as of
March 31, 2015
and
December 31, 2014
, respectively, are excluded from this disclosure requirement because they are trade receivables in the ordinary course of business where the carrying amount approximates fair value.
|
[5]
|
Includes OTC and OTC-cleared derivative instruments in a net negative fair market value position (derivative liability) after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements, clearing house rules and applicable law. In the following Level 3 roll-forward table in this Note 4, the derivative assets and liabilities are referred to as “freestanding derivatives” and are presented on a net basis.
|
[6]
|
Represents embedded derivatives associated with non-funding agreement-backed consumer equity linked notes.
|
Level 2
|
The fair values of most of the Company’s Level 2 investments are determined by management after considering prices received from third party pricing services. These investments include most fixed maturities and preferred stocks, including those reported in separate account assets
, as well as, hedge funds where investment company accounting has been applied to a wholly-owned fund of funds measured at fair value, and derivative instruments.
|
•
|
ABS, CDOs, CMBS and RMBS
– Primary inputs also include monthly payment information, collateral performance, which varies by vintage year and includes delinquency rates, collateral valuation loss severity rates, collateral refinancing assumptions, credit default swap indices and, for ABS and RMBS, estimated prepayment rates.
|
•
|
Corporates, including investment grade private placements
– Primary inputs also include observations of credit default swap curves related to the issuer.
|
•
|
Foreign government/government agencies
— Primary inputs also include observations of credit default swap curves related to the issuer and political events in emerging market economies.
|
•
|
Municipals
– Primary inputs also include Municipal Securities Rulemaking Board reported trades and material event notices, and issuer financial statements.
|
•
|
Short-term investments
– Primary inputs also include material event notices and new issue money market rates.
|
•
|
Credit derivatives –
Primary inputs include the swap yield curve and credit default swap curves.
|
•
|
Commodity derivatives –
Primary input is the underlying commodity price curves.
|
•
|
Foreign exchange derivatives –
Primary inputs include the swap yield curve, currency spot and forward rates, and cross currency basis curves.
|
•
|
Interest rate derivatives –
Primary input is the swap yield curve.
|
•
|
Limited partnerships and other alternative investments —
Primary inputs include a NAV for investment companies with no redemption restrictions as reported on their U.S. GAAP financial statements, which are typically recorded on a one-month lag.
|
Level 3
|
Most of the Company’s securities classified as Level 3 include less liquid securities such as lower quality ABS, CMBS, commercial real estate (“CRE”) CDOs and RMBS primarily backed by sub-prime loans. Securities included in Level 3 are primarily valued based on broker prices or broker spreads, without adjustments. Primary inputs for non-broker priced investments, including structured securities, are consistent with the typical inputs used in the preceding noted Level 2 measurements, but are Level 3 due to their less liquid markets. Additionally, certain long-dated securities are priced based on third party pricing services, including certain municipal securities, foreign government/government agencies, and bank loans. Primary inputs for these long-dated securities are consistent with the typical inputs used in the preceding noted Level 1 and Level 2 measurements, but include benchmark interest rate or credit spread assumptions that are not observable in the marketplace. Level 3 investments also include below investment grade private placements, as well as hedge funds where investment company accounting has been applied to a wholly-owned fund of funds measured at fair value where the Company does not have the ability to redeem the investment in the near-term at the NAV. Also included in Level 3 are certain derivative instruments that either have significant unobservable inputs or are valued based on broker quotations. Significant inputs for these derivative contracts primarily include the typical inputs used in the preceding noted Level 1 and Level 2 measurements; but also include equity and interest rate volatility and swap yield curves beyond observable limits.
|
Securities
|
Unobservable Inputs
|
|||||||||||
|
As of March 31, 2015
|
|||||||||||
Assets accounted for at fair value on a recurring basis
|
Fair
Value
|
Predominant
Valuation
Method
|
Significant
Unobservable Input
|
Minimum
|
Maximum
|
Weighted Average [1]
|
Impact of
Increase in Input
on Fair Value [2]
|
|||||
CMBS
|
$
|
268
|
|
Discounted cash flows
|
Spread (encompasses prepayment, default risk and loss severity)
|
43
|
bps
|
2,474
|
bps
|
267
|
bps
|
Decrease
|
Corporate [3]
|
640
|
|
Discounted cash flows
|
Spread
|
120
|
bps
|
1,652
|
bps
|
327
|
bps
|
Decrease
|
|
Municipal [3]
|
33
|
|
Discounted cash flows
|
Spread
|
214
|
bps
|
214
|
bps
|
214
|
bps
|
Decrease
|
|
RMBS
|
1,463
|
|
Discounted cash flows
|
Spread
|
24
|
bps
|
1,693
|
bps
|
155
|
bps
|
Decrease
|
|
|
|
|
Constant prepayment rate
|
—
|
%
|
8.0
|
%
|
3.0
|
%
|
Decrease [4]
|
||
|
|
|
Constant default rate
|
1.0
|
%
|
14.0
|
%
|
7.0
|
%
|
Decrease
|
||
|
|
|
Loss severity
|
—
|
%
|
100.0
|
%
|
79.0
|
%
|
Decrease
|
||
|
As of December 31, 2014
|
|||||||||||
CMBS
|
$
|
284
|
|
Discounted cash flows
|
Spread (encompasses prepayment, default risk and loss severity)
|
46
|
bps
|
2,475
|
bps
|
284
|
bps
|
Decrease
|
Corporate [3]
|
568
|
|
Discounted cash flows
|
Spread
|
123
|
bps
|
765
|
bps
|
279
|
bps
|
Decrease
|
|
Municipal [3]
|
32
|
|
Discounted cash flows
|
Spread
|
212
|
bps
|
212
|
bps
|
212
|
bps
|
Decrease
|
|
RMBS
|
1,281
|
|
Discounted cash flows
|
Spread
|
23
|
bps
|
1,904
|
bps
|
142
|
bps
|
Decrease
|
|
|
|
|
Constant prepayment rate
|
—
|
%
|
7.0
|
%
|
2.0
|
%
|
Decrease [4]
|
||
|
|
|
Constant default rate
|
1.0
|
%
|
14.0
|
%
|
7.0
|
%
|
Decrease
|
||
|
|
|
Loss severity
|
—
|
%
|
100.0
|
%
|
78.0
|
%
|
Decrease
|
[1]
|
The weighted average is determined based on the fair value of the securities.
|
[2]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the preceding table.
|
[3]
|
Level 3 corporate and municipal securities excludes those for which the Company bases fair value on broker quotations as noted in the following discussion.
|
[4]
|
Decrease for above market rate coupons and increase for below market rate coupons.
|
Freestanding Derivatives
|
Unobservable Inputs
|
||||||||
|
As of March 31, 2015
|
||||||||
|
Fair
Value
|
Predominant
Valuation
Method
|
Significant Unobservable Input
|
Minimum
|
Maximum
|
Impact of
Increase in Input on
Fair Value [1]
|
|||
Interest rate derivative
|
|
|
|
|
|
|
|||
Interest rate swaps
|
(30
|
)
|
Discounted cash flows
|
Swap curve beyond 30 years
|
2
|
%
|
2
|
%
|
Decrease
|
Interest rate swaptions
|
12
|
|
Option model
|
Interest rate volatility
|
1
|
%
|
1
|
%
|
Increase
|
GMWB hedging instruments
|
|
|
|
|
|
|
|||
Equity options
|
15
|
|
Option model
|
Equity volatility
|
23
|
%
|
38
|
%
|
Increase
|
Customized swaps
|
144
|
|
Discounted cash flows
|
Equity volatility
|
10
|
%
|
40
|
%
|
Increase
|
Macro hedge program
|
|
|
|
|
|
|
|||
Equity options
|
187
|
|
Option model
|
Equity volatility
|
16
|
%
|
30
|
%
|
Increase
|
|
As of December 31, 2014
|
||||||||
Interest rate derivative
|
|
|
|
|
|
|
|||
Interest rate swaps
|
(29
|
)
|
Discounted cash flows
|
Swap curve beyond 30 years
|
3
|
%
|
3
|
%
|
Decrease
|
Interest rate swaptions
|
22
|
|
Option model
|
Interest rate volatility
|
1
|
%
|
1
|
%
|
Increase
|
GMWB hedging instruments
|
|
|
|
|
|
|
|||
Equity options
|
46
|
|
Option model
|
Equity volatility
|
22
|
%
|
34
|
%
|
Increase
|
Customized swaps
|
124
|
|
Discounted cash flows
|
Equity volatility
|
10
|
%
|
40
|
%
|
Increase
|
Macro hedge program
|
|
|
|
|
|
|
|||
Equity options
|
141
|
|
Option model
|
Equity volatility
|
27
|
%
|
28
|
%
|
Increase
|
[1]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. Changes are based on long positions, unless otherwise noted. Changes in fair value will be inversely impacted for short positions.
|
•
|
risk-free rates as represented by the Eurodollar futures, LIBOR deposits and swap rates to derive forward curve rates;
|
•
|
market implied volatility assumptions for each underlying index based primarily on a blend of observed market “implied volatility” data;
|
•
|
correlations of historical returns across underlying well known market indices based on actual observed returns over the ten years preceding the valuation date; and
|
•
|
three years of history for fund indexes compared to separate account fund regression.
|
Significant Unobservable Input
|
Unobservable Inputs (Minimum)
|
Unobservable Inputs (Maximum)
|
Impact of Increase in Input
on Fair Value Measurement [1]
|
Withdrawal Utilization [2]
|
20%
|
100%
|
Increase
|
Withdrawal Rates [3]
|
—%
|
8%
|
Increase
|
Lapse Rates [4]
|
—%
|
75%
|
Decrease
|
Reset Elections [5]
|
20%
|
75%
|
Increase
|
Equity Volatility [6]
|
10%
|
40%
|
Increase
|
[1]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.
|
[2]
|
Range represents assumed cumulative percentages of policyholders taking withdrawals.
|
[3]
|
Range represents assumed cumulative annual amount withdrawn by policyholders.
|
[4]
|
Range represents assumed annual percentages of full surrender of the underlying variable annuity contracts across all policy durations for in force business.
|
[5]
|
Range represents assumed cumulative percentages of policyholders that would elect to reset their guaranteed benefit base.
|
[6]
|
Range represents implied market volatilities for equity indices based on multiple pricing sources.
|
|
Fixed Maturities, AFS
|
|
|||||||||||||||||||||||||
Assets
|
ABS
|
CDOs
|
CMBS
|
Corporate
|
Foreign
govt./govt.
agencies
|
Municipal
|
RMBS
|
Total Fixed
Maturities,
AFS
|
Fixed
Maturities,
FVO
|
||||||||||||||||||
Fair value as of January 1, 2015
|
$
|
122
|
|
$
|
623
|
|
$
|
284
|
|
$
|
1,040
|
|
$
|
59
|
|
$
|
66
|
|
$
|
1,281
|
|
$
|
3,475
|
|
$
|
92
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1] [2] [6]
|
—
|
|
(2
|
)
|
(1
|
)
|
(4
|
)
|
—
|
|
—
|
|
(1
|
)
|
(8
|
)
|
(5
|
)
|
|||||||||
Included in OCI [3]
|
—
|
|
19
|
|
(3
|
)
|
(28
|
)
|
1
|
|
(2
|
)
|
(1
|
)
|
(14
|
)
|
—
|
|
|||||||||
Purchases
|
43
|
|
—
|
|
21
|
|
5
|
|
5
|
|
—
|
|
310
|
|
384
|
|
12
|
|
|||||||||
Settlements
|
(1
|
)
|
(9
|
)
|
(13
|
)
|
1
|
|
(1
|
)
|
—
|
|
(46
|
)
|
(69
|
)
|
—
|
|
|||||||||
Sales
|
—
|
|
—
|
|
—
|
|
(7
|
)
|
(16
|
)
|
—
|
|
(31
|
)
|
(54
|
)
|
(4
|
)
|
|||||||||
Transfers into Level 3 [4]
|
1
|
|
—
|
|
5
|
|
139
|
|
—
|
|
—
|
|
4
|
|
149
|
|
—
|
|
|||||||||
Transfers out of Level 3 [4]
|
(4
|
)
|
(47
|
)
|
(25
|
)
|
(34
|
)
|
—
|
|
—
|
|
(53
|
)
|
(163
|
)
|
(10
|
)
|
|||||||||
Fair value as of March 31, 2015
|
$
|
161
|
|
$
|
584
|
|
$
|
268
|
|
$
|
1,112
|
|
$
|
48
|
|
$
|
64
|
|
$
|
1,463
|
|
$
|
3,700
|
|
$
|
85
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at March 31, 2015 [2] [7]
|
$
|
—
|
|
$
|
(1
|
)
|
$
|
(1
|
)
|
$
|
(2
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(1
|
)
|
$
|
(5
|
)
|
$
|
(1
|
)
|
|
|
Freestanding Derivatives [5]
|
||||||||||||||||||||||
Assets (Liabilities)
|
Equity
Securities,
AFS
|
Credit
|
Equity
|
Interest
Rate
|
GMWB
Hedging
|
Macro
Hedge
Program
|
Other
Contracts
|
Total Free-
Standing
Derivatives [5]
|
||||||||||||||||
Fair value as of January 1, 2015
|
$
|
98
|
|
$
|
(9
|
)
|
$
|
6
|
|
$
|
(7
|
)
|
$
|
170
|
|
$
|
141
|
|
$
|
12
|
|
$
|
313
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
||||||||||||||||
Included in net income [1], [2], [6]
|
1
|
|
5
|
|
17
|
|
(11
|
)
|
9
|
|
(1
|
)
|
(1
|
)
|
18
|
|
||||||||
Included in OCI [3]
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
Purchases
|
8
|
|
(7
|
)
|
—
|
|
—
|
|
—
|
|
47
|
|
—
|
|
40
|
|
||||||||
Settlements
|
—
|
|
—
|
|
(15
|
)
|
—
|
|
(20
|
)
|
—
|
|
—
|
|
(35
|
)
|
||||||||
Sales
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
Transfers out of Level 3 [4]
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
Fair value as of March 31, 2015
|
$
|
102
|
|
$
|
(11
|
)
|
$
|
8
|
|
$
|
(18
|
)
|
$
|
159
|
|
$
|
187
|
|
$
|
11
|
|
$
|
336
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at March 31, 2015 [2] [7]
|
$
|
1
|
|
$
|
5
|
|
$
|
3
|
|
$
|
(19
|
)
|
$
|
16
|
|
$
|
3
|
|
$
|
(1
|
)
|
$
|
7
|
|
Assets
|
Limited Partnerships and Other Alternative Investments
|
Reinsurance Recoverable for GMWB
|
Separate Accounts
|
||||||
Fair value as of January 1, 2015
|
$
|
189
|
|
$
|
56
|
|
$
|
578
|
|
Total realized/unrealized gains (losses)
|
|
|
|
||||||
Included in net income [1] [2] [6]
|
1
|
|
4
|
|
—
|
|
|||
Purchases
|
—
|
|
—
|
|
38
|
|
|||
Settlements
|
—
|
|
5
|
|
(5
|
)
|
|||
Sales
|
—
|
|
—
|
|
(6
|
)
|
|||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
1
|
|
|||
Transfers out of Level 3 [4]
|
—
|
|
—
|
|
(4
|
)
|
|||
Fair value as of March 31, 2015
|
$
|
190
|
|
$
|
65
|
|
$
|
602
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at March 31, 2015 [2] [7]
|
$
|
1
|
|
$
|
4
|
|
$
|
—
|
|
|
Other Policyholder Funds and Benefits Payable
|
|
||||||||||
Liabilities
|
Guaranteed Withdrawal Benefits
|
Equity Linked Notes
|
Total Other Policyholder Funds and Benefits Payable
|
Consumer Notes
|
||||||||
Fair value as of January 1, 2015
|
$
|
(139
|
)
|
$
|
(26
|
)
|
$
|
(165
|
)
|
$
|
(3
|
)
|
Total realized/unrealized gains (losses)
|
|
|
|
|
||||||||
Included in net income [1] [2] [6]
|
(19
|
)
|
—
|
|
(19
|
)
|
—
|
|
||||
Settlements
|
(18
|
)
|
—
|
|
(18
|
)
|
—
|
|
||||
Fair value as of March 31, 2015
|
$
|
(176
|
)
|
$
|
(26
|
)
|
$
|
(202
|
)
|
$
|
(3
|
)
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at March 31, 2015 [2] [7]
|
$
|
(19
|
)
|
$
|
—
|
|
$
|
(19
|
)
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Maturities, AFS
|
|
|||||||||||||||||||||||||
Assets
|
ABS
|
CDOs
|
CMBS
|
Corporate
|
Foreign
govt./govt.
agencies
|
Municipal
|
RMBS
|
Total Fixed
Maturities,
AFS
|
Fixed
Maturities,
FVO
|
||||||||||||||||||
Fair value as of January 1, 2014
|
$
|
147
|
|
$
|
664
|
|
$
|
663
|
|
$
|
1,274
|
|
$
|
65
|
|
$
|
69
|
|
$
|
1,272
|
|
$
|
4,154
|
|
$
|
193
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1] [2] [6]
|
—
|
|
—
|
|
23
|
|
(14
|
)
|
(2
|
)
|
—
|
|
(1
|
)
|
6
|
|
10
|
|
|||||||||
Included in OCI [3]
|
2
|
|
—
|
|
(22
|
)
|
24
|
|
5
|
|
3
|
|
14
|
|
26
|
|
—
|
|
|||||||||
Purchases
|
—
|
|
—
|
|
65
|
|
37
|
|
—
|
|
12
|
|
147
|
|
261
|
|
5
|
|
|||||||||
Settlements
|
(1
|
)
|
(14
|
)
|
(33
|
)
|
1
|
|
(1
|
)
|
—
|
|
(46
|
)
|
(94
|
)
|
—
|
|
|||||||||
Sales
|
—
|
|
—
|
|
(87
|
)
|
(78
|
)
|
(13
|
)
|
—
|
|
(42
|
)
|
(220
|
)
|
(2
|
)
|
|||||||||
Transfers into Level 3 [4]
|
—
|
|
72
|
|
—
|
|
67
|
|
—
|
|
—
|
|
—
|
|
139
|
|
1
|
|
|||||||||
Transfers out of Level 3 [4]
|
(92
|
)
|
(10
|
)
|
(17
|
)
|
(68
|
)
|
—
|
|
(6
|
)
|
(16
|
)
|
(209
|
)
|
(1
|
)
|
|||||||||
Fair value as of March 31, 2014
|
$
|
56
|
|
$
|
712
|
|
$
|
592
|
|
$
|
1,243
|
|
$
|
54
|
|
$
|
78
|
|
$
|
1,328
|
|
$
|
4,063
|
|
$
|
206
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at March 31, 2014 [2] [7]
|
$
|
—
|
|
$
|
—
|
|
$
|
8
|
|
$
|
(17
|
)
|
$
|
(2
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(11
|
)
|
$
|
10
|
|
|
|
Freestanding Derivatives [5]
|
|||||||||||||||||||||||||
Assets (Liabilities)
|
Equity
Securities,
AFS
|
Credit
|
Equity
|
Interest
Rate
|
GMWB
Hedging
|
Macro
Hedge
Program
|
Intl.
Program
Hedging
|
Other
Contracts
|
Total Free-
Standing
Derivatives [5]
|
||||||||||||||||||
Fair value as of January 1, 2014
|
$
|
77
|
|
$
|
2
|
|
$
|
3
|
|
$
|
18
|
|
$
|
146
|
|
$
|
139
|
|
$
|
(29
|
)
|
$
|
17
|
|
$
|
296
|
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Included in net income [1], [2], [6]
|
(2
|
)
|
(2
|
)
|
(1
|
)
|
(14
|
)
|
(34
|
)
|
(10
|
)
|
15
|
|
(1
|
)
|
(47
|
)
|
|||||||||
Included in OCI [3]
|
4
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Purchases
|
—
|
|
—
|
|
—
|
|
—
|
|
4
|
|
4
|
|
9
|
|
—
|
|
17
|
|
|||||||||
Settlements
|
—
|
|
—
|
|
—
|
|
—
|
|
7
|
|
—
|
|
—
|
|
—
|
|
7
|
|
|||||||||
Transfers out of Level 3 [4]
|
—
|
|
—
|
|
—
|
|
24
|
|
—
|
|
—
|
|
—
|
|
—
|
|
24
|
|
|||||||||
Fair value as of March 31, 2014
|
$
|
79
|
|
$
|
—
|
|
$
|
2
|
|
$
|
28
|
|
$
|
123
|
|
$
|
133
|
|
$
|
(5
|
)
|
$
|
16
|
|
$
|
297
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at March 31, 2014 [2] [7]
|
$
|
(2
|
)
|
$
|
(1
|
)
|
$
|
—
|
|
$
|
(16
|
)
|
$
|
(50
|
)
|
$
|
(10
|
)
|
$
|
17
|
|
$
|
—
|
|
$
|
(60
|
)
|
Assets
|
Limited Partnerships and Other Alternative Investments
|
Reinsurance Recoverable for GMWB
|
Separate Accounts
|
||||||
Fair value as of January 1, 2014
|
$
|
108
|
|
$
|
29
|
|
$
|
737
|
|
Total realized/unrealized gains (losses)
|
|
|
|
||||||
Included in net income [1] [2] [6]
|
3
|
|
(4
|
)
|
5
|
|
|||
Purchases
|
30
|
|
—
|
|
130
|
|
|||
Settlements
|
—
|
|
5
|
|
(1
|
)
|
|||
Sales
|
(24
|
)
|
—
|
|
(86
|
)
|
|||
Transfers into Level 3 [4]
|
—
|
|
—
|
|
3
|
|
|||
Transfers out of Level 3 [4]
|
(10
|
)
|
—
|
|
(26
|
)
|
|||
Fair value as of March 31, 2014
|
$
|
107
|
|
$
|
30
|
|
$
|
762
|
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at March 31, 2014 [2] [7]
|
$
|
3
|
|
$
|
(4
|
)
|
$
|
5
|
|
|
Other Policyholder Funds and Benefits Payable
|
|
||||||||||||||||
Liabilities
|
Guaranteed
Withdrawal
Benefits
|
International Guaranteed
Living
Benefits
|
International Other Living
Benefits
|
Equity
Linked
Notes
|
Total Other
Policyholder
Funds and
Benefits
Payable
|
Consumer
Notes
|
||||||||||||
Fair value as of January 1, 2014
|
$
|
(36
|
)
|
$
|
3
|
|
$
|
3
|
|
$
|
(18
|
)
|
$
|
(48
|
)
|
$
|
(2
|
)
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
||||||||||||
Included in net income [1] [2] [6]
|
36
|
|
—
|
|
(1
|
)
|
(1
|
)
|
34
|
|
—
|
|
||||||
Settlements
|
(24
|
)
|
(1
|
)
|
—
|
|
—
|
|
(25
|
)
|
—
|
|
||||||
Fair value as of March 31, 2014
|
$
|
(24
|
)
|
$
|
2
|
|
$
|
2
|
|
$
|
(19
|
)
|
$
|
(39
|
)
|
$
|
(2
|
)
|
Changes in unrealized gains (losses) included in net income related to financial instruments still held at March 31, 2014 [2] [7]
|
$
|
36
|
|
$
|
—
|
|
$
|
(1
|
)
|
$
|
(1
|
)
|
$
|
34
|
|
$
|
—
|
|
[1]
|
The Company classifies gains and losses on GMWB reinsurance derivatives and GMWB embedded derivatives as unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract basis the realized gains (losses) for these derivatives and embedded derivatives.
|
[2]
|
All amounts in these rows are reported in net realized capital gains (losses). The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. All amounts are before income taxes and amortization of DAC.
|
[3]
|
All amounts are before income taxes and amortization of DAC.
|
[4]
|
Transfers in and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.
|
[5]
|
Derivative instruments are reported in this table on a net basis for asset (liability) positions and reported in the Condensed Consolidated Balance Sheets in other investments and other liabilities.
|
[6]
|
Includes both market and non-market impacts in deriving realized and unrealized gains (losses).
|
[7]
|
Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|||||
|
2015
|
2014
|
||||
Assets
|
|
|
||||
Fixed maturities, FVO
|
|
|
||||
Corporate
|
$
|
—
|
|
$
|
2
|
|
CRE CDOs
|
1
|
|
8
|
|
||
Foreign government
|
—
|
|
1
|
|
||
RMBS
|
1
|
|
1
|
|
||
Total fixed maturities, FVO
|
$
|
2
|
|
$
|
12
|
|
Equity, FVO
|
2
|
|
—
|
|
||
Total realized capital gains (losses)
|
$
|
4
|
|
$
|
12
|
|
|
As of
|
|||||
|
March 31, 2015
|
December 31, 2014
|
||||
Assets
|
|
|
||||
Fixed maturities, FVO
|
|
|
||||
ABS
|
$
|
15
|
|
$
|
15
|
|
CRE CDOs
|
72
|
|
69
|
|
||
CMBS
|
21
|
|
22
|
|
||
Corporate
|
135
|
|
133
|
|
||
Foreign government
|
29
|
|
30
|
|
||
U.S government
|
5
|
|
2
|
|
||
Municipals
|
1
|
|
2
|
|
||
RMBS
|
242
|
|
215
|
|
||
Total fixed maturities, FVO
|
$
|
520
|
|
$
|
488
|
|
Equity, FVO [1]
|
$
|
402
|
|
$
|
348
|
|
[1]
|
Included in equity securities, AFS on the Condensed Consolidated Balance Sheets.
|
|
|
March 31, 2015
|
December 31, 2014
|
||||||||||
|
Fair Value Hierarchy Level
|
Carrying Amount
|
Fair Value
|
Carrying Amount
|
Fair Value
|
||||||||
Assets
|
|
|
|
|
|
||||||||
Policy loans
|
Level 3
|
$
|
1,452
|
|
$
|
1,452
|
|
$
|
1,431
|
|
$
|
1,431
|
|
Mortgage loans
|
Level 3
|
5,697
|
|
5,963
|
|
5,556
|
|
5,840
|
|
||||
Liabilities
|
|
|
|
|
|
||||||||
Other policyholder funds and benefits payable [1]
|
Level 3
|
$
|
7,009
|
|
$
|
7,238
|
|
$
|
7,304
|
|
$
|
7,522
|
|
Senior notes [2]
|
Level 2
|
4,721
|
|
5,606
|
|
5,009
|
|
5,837
|
|
||||
Junior subordinated debentures [2]
|
Level 2
|
1,100
|
|
1,308
|
|
1,100
|
|
1,291
|
|
||||
Consumer notes [3] [4]
|
Level 3
|
66
|
|
66
|
|
68
|
|
68
|
|
||||
Assumed investment contracts [4]
|
Level 3
|
770
|
|
848
|
|
763
|
|
851
|
|
[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 preceding disclosures.
|
[4]
|
Included in other liabilities in the Condensed Consolidated Balance Sheets.
|
|
Three Months Ended March 31,
|
|||||
(Before tax)
|
2015
|
2014
|
||||
Gross gains on sales
|
$
|
197
|
|
$
|
183
|
|
Gross losses on sales
|
(148
|
)
|
(129
|
)
|
||
Net OTTI losses recognized in earnings
|
(12
|
)
|
(22
|
)
|
||
Valuation allowances on mortgage loans
|
(3
|
)
|
—
|
|
||
Periodic net coupon settlements on credit derivatives
|
1
|
|
(1
|
)
|
||
Results of variable annuity hedge program
|
|
|
||||
GMWB derivatives, net
|
1
|
|
15
|
|
||
Macro hedge program
|
(4
|
)
|
(10
|
)
|
||
Total results of variable annuity hedge program
|
(3
|
)
|
5
|
|
||
Other, net [1]
|
(27
|
)
|
(71
|
)
|
||
Net realized capital gains
|
$
|
5
|
|
$
|
(35
|
)
|
[1]
|
Primarily consists of changes in the value of non-qualifying derivatives, transactional foreign currency revaluation gains (losses) on the Japan fixed payout annuity liabilities assumed from HLIKK and gains (losses) on non-qualifying derivatives used to hedge the foreign currency exposure of the liabilities. For the
three months ended
March 31, 2015
and
2014
, gains (losses) from transactional foreign currency revaluation of the Japan fixed payout annuity liabilities were
$0
and
$(28)
, respectively. For the
three months ended
March 31, 2015
and
2014
, gains (losses) on instruments used to hedge the foreign currency exposure on the fixed payout annuities were
$(14)
and
$15
, respectively.
|
|
Three Months Ended March 31,
|
|||||
(Before-tax)
|
2015
|
2014
|
||||
Balance as of beginning of period
|
$
|
(424
|
)
|
$
|
(552
|
)
|
Additions for credit impairments recognized on [1]:
|
|
|
||||
Securities not previously impaired
|
(3
|
)
|
(7
|
)
|
||
Securities previously impaired
|
—
|
|
(11
|
)
|
||
Reductions for credit impairments previously recognized on:
|
|
|
||||
Securities that matured or were sold during the period
|
4
|
|
33
|
|
||
Securities the Company made the decision to sell or more likely than not will be required to sell
|
2
|
|
—
|
|
||
Securities due to an increase in expected cash flows
|
9
|
|
6
|
|
||
Balance as of end of period
|
$
|
(412
|
)
|
$
|
(531
|
)
|
[1]
|
These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||||||||
|
Cost or
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Non-Credit
OTTI [1]
|
|
Cost or
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Non-Credit
OTTI [1]
|
||||||||||||||||||||
ABS
|
$
|
2,997
|
|
$
|
41
|
|
$
|
(34
|
)
|
$
|
3,004
|
|
$
|
—
|
|
|
$
|
2,470
|
|
$
|
39
|
|
$
|
(37
|
)
|
$
|
2,472
|
|
$
|
(1
|
)
|
CDOs [2]
|
2,891
|
|
115
|
|
(22
|
)
|
2,982
|
|
—
|
|
|
2,776
|
|
98
|
|
(36
|
)
|
2,841
|
|
—
|
|
||||||||||
CMBS
|
4,445
|
|
223
|
|
(16
|
)
|
4,652
|
|
(7
|
)
|
|
4,235
|
|
196
|
|
(16
|
)
|
4,415
|
|
(6
|
)
|
||||||||||
Corporate
|
24,698
|
|
2,558
|
|
(137
|
)
|
27,119
|
|
(6
|
)
|
|
25,188
|
|
2,382
|
|
(211
|
)
|
27,359
|
|
(3
|
)
|
||||||||||
Foreign govt./govt. agencies
|
1,310
|
|
69
|
|
(14
|
)
|
1,365
|
|
—
|
|
|
1,592
|
|
73
|
|
(29
|
)
|
1,636
|
|
—
|
|
||||||||||
Municipal
|
11,656
|
|
1,189
|
|
(3
|
)
|
12,842
|
|
—
|
|
|
11,735
|
|
1,141
|
|
(5
|
)
|
12,871
|
|
—
|
|
||||||||||
RMBS
|
3,963
|
|
132
|
|
(17
|
)
|
4,078
|
|
(1
|
)
|
|
3,815
|
|
122
|
|
(19
|
)
|
3,918
|
|
(1
|
)
|
||||||||||
U.S. Treasuries
|
4,144
|
|
371
|
|
(2
|
)
|
4,513
|
|
—
|
|
|
3,551
|
|
326
|
|
(5
|
)
|
3,872
|
|
—
|
|
||||||||||
Total fixed maturities, AFS
|
56,104
|
|
4,698
|
|
(245
|
)
|
60,555
|
|
(14
|
)
|
|
55,362
|
|
4,377
|
|
(358
|
)
|
59,384
|
|
(11
|
)
|
||||||||||
Equity securities, AFS [3]
|
726
|
|
48
|
|
(28
|
)
|
746
|
|
—
|
|
|
676
|
|
50
|
|
(27
|
)
|
699
|
|
—
|
|
||||||||||
Total AFS securities
|
$
|
56,830
|
|
$
|
4,746
|
|
$
|
(273
|
)
|
$
|
61,301
|
|
$
|
(14
|
)
|
|
$
|
56,038
|
|
$
|
4,427
|
|
$
|
(385
|
)
|
$
|
60,083
|
|
$
|
(11
|
)
|
[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
March 31, 2015
and
December 31, 2014
.
|
[2]
|
Gross unrealized gains (losses) exclude the fair value of bifurcated, embedded derivative features of certain securities. Subsequent changes in value are recorded in net realized capital gains (losses).
|
[3]
|
Excludes equity securities, FVO, with a cost and fair value of
$403
and
$402
, respectively, as of
March 31, 2015
, and
$351
and
$348
, respectively, as of
December 31, 2014
.
|
|
March 31, 2015
|
December 31, 2014
|
||||||||||
Contractual Maturity
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||
One year or less
|
$
|
1,832
|
|
$
|
1,856
|
|
$
|
2,141
|
|
$
|
2,168
|
|
Over one year through five years
|
11,883
|
|
12,446
|
|
11,264
|
|
11,827
|
|
||||
Over five years through ten years
|
8,778
|
|
9,294
|
|
8,802
|
|
9,226
|
|
||||
Over ten years
|
19,315
|
|
22,243
|
|
19,859
|
|
22,517
|
|
||||
Subtotal
|
41,808
|
|
45,839
|
|
42,066
|
|
45,738
|
|
||||
Mortgage-backed and asset-backed securities
|
14,296
|
|
14,716
|
|
13,296
|
|
13,646
|
|
||||
Total fixed maturities, AFS
|
$
|
56,104
|
|
$
|
60,555
|
|
$
|
55,362
|
|
$
|
59,384
|
|
|
March 31, 2015
|
||||||||||||||||||||||||||||
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
||||||||||||||||||
ABS
|
$
|
736
|
|
$
|
735
|
|
$
|
(1
|
)
|
|
$
|
416
|
|
$
|
383
|
|
$
|
(33
|
)
|
|
$
|
1,152
|
|
$
|
1,118
|
|
$
|
(34
|
)
|
CDOs [1]
|
593
|
|
591
|
|
(2
|
)
|
|
1,341
|
|
1,319
|
|
(20
|
)
|
|
1,934
|
|
1,910
|
|
(22
|
)
|
|||||||||
CMBS
|
233
|
|
230
|
|
(3
|
)
|
|
192
|
|
179
|
|
(13
|
)
|
|
425
|
|
409
|
|
(16
|
)
|
|||||||||
Corporate
|
2,086
|
|
2,022
|
|
(64
|
)
|
|
710
|
|
637
|
|
(73
|
)
|
|
2,796
|
|
2,659
|
|
(137
|
)
|
|||||||||
Foreign govt./govt. agencies
|
251
|
|
244
|
|
(7
|
)
|
|
118
|
|
111
|
|
(7
|
)
|
|
369
|
|
355
|
|
(14
|
)
|
|||||||||
Municipal
|
169
|
|
167
|
|
(2
|
)
|
|
33
|
|
32
|
|
(1
|
)
|
|
202
|
|
199
|
|
(3
|
)
|
|||||||||
RMBS
|
717
|
|
714
|
|
(3
|
)
|
|
277
|
|
263
|
|
(14
|
)
|
|
994
|
|
977
|
|
(17
|
)
|
|||||||||
U.S. Treasuries
|
245
|
|
244
|
|
(1
|
)
|
|
62
|
|
61
|
|
(1
|
)
|
|
307
|
|
305
|
|
(2
|
)
|
|||||||||
Total fixed maturities, AFS
|
5,030
|
|
4,947
|
|
(83
|
)
|
|
3,149
|
|
2,985
|
|
(162
|
)
|
|
8,179
|
|
7,932
|
|
(245
|
)
|
|||||||||
Equity securities, AFS [2]
|
198
|
|
185
|
|
(13
|
)
|
|
108
|
|
93
|
|
(15
|
)
|
|
306
|
|
278
|
|
(28
|
)
|
|||||||||
Total securities in an unrealized loss position
|
$
|
5,228
|
|
$
|
5,132
|
|
$
|
(96
|
)
|
|
$
|
3,257
|
|
$
|
3,078
|
|
$
|
(177
|
)
|
|
$
|
8,485
|
|
$
|
8,210
|
|
$
|
(273
|
)
|
|
December 31, 2014
|
||||||||||||||||||||||||||||
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
|
Amortized Cost
|
Fair Value
|
Unrealized Losses
|
||||||||||||||||||
ABS
|
$
|
897
|
|
$
|
893
|
|
$
|
(4
|
)
|
|
$
|
473
|
|
$
|
440
|
|
$
|
(33
|
)
|
|
$
|
1,370
|
|
$
|
1,333
|
|
$
|
(37
|
)
|
CDOs [1]
|
748
|
|
743
|
|
(5
|
)
|
|
1,489
|
|
1,461
|
|
(31
|
)
|
|
2,237
|
|
2,204
|
|
(36
|
)
|
|||||||||
CMBS
|
230
|
|
227
|
|
(3
|
)
|
|
319
|
|
306
|
|
(13
|
)
|
|
549
|
|
533
|
|
(16
|
)
|
|||||||||
Corporate
|
3,082
|
|
2,980
|
|
(102
|
)
|
|
1,177
|
|
1,068
|
|
(109
|
)
|
|
4,259
|
|
4,048
|
|
(211
|
)
|
|||||||||
Foreign govt./govt. agencies
|
363
|
|
349
|
|
(14
|
)
|
|
227
|
|
212
|
|
(15
|
)
|
|
590
|
|
561
|
|
(29
|
)
|
|||||||||
Municipal
|
74
|
|
73
|
|
(1
|
)
|
|
86
|
|
82
|
|
(4
|
)
|
|
160
|
|
155
|
|
(5
|
)
|
|||||||||
RMBS
|
320
|
|
318
|
|
(2
|
)
|
|
433
|
|
416
|
|
(17
|
)
|
|
753
|
|
734
|
|
(19
|
)
|
|||||||||
U.S. Treasuries
|
432
|
|
431
|
|
(1
|
)
|
|
361
|
|
357
|
|
(4
|
)
|
|
793
|
|
788
|
|
(5
|
)
|
|||||||||
Total fixed maturities, AFS
|
6,146
|
|
6,014
|
|
(132
|
)
|
|
4,565
|
|
4,342
|
|
(226
|
)
|
|
10,711
|
|
10,356
|
|
(358
|
)
|
|||||||||
Equity securities, AFS [2]
|
172
|
|
160
|
|
(12
|
)
|
|
102
|
|
87
|
|
(15
|
)
|
|
274
|
|
247
|
|
(27
|
)
|
|||||||||
Total securities in an unrealized loss position
|
$
|
6,318
|
|
$
|
6,174
|
|
$
|
(144
|
)
|
|
$
|
4,667
|
|
$
|
4,429
|
|
$
|
(241
|
)
|
|
$
|
10,985
|
|
$
|
10,603
|
|
$
|
(385
|
)
|
[1]
|
Unrealized losses exclude the change in fair value of bifurcated embedded derivative features of certain securities, for which changes in fair value are recorded in net realized capital gains (losses).
|
[2]
|
As of
March 31, 2015
and
December 31, 2014
, excludes equity securities, FVO which are included in equity securities, AFS on the Condensed Consolidated Balance Sheets.
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||||||
|
Amortized Cost [1]
|
Valuation Allowance
|
Carrying Value
|
|
Amortized Cost [1]
|
Valuation Allowance
|
Carrying Value
|
||||||||||||
Total commercial mortgage loans
|
$
|
5,718
|
|
$
|
(21
|
)
|
$
|
5,697
|
|
|
$
|
5,574
|
|
$
|
(18
|
)
|
$
|
5,556
|
|
[1]
|
Amortized cost represents carrying value prior to valuation allowances, if any.
|
|
2015
|
2014
|
||||
Balance, as of January 1
|
$
|
(18
|
)
|
$
|
(67
|
)
|
(Additions)/Reversals
|
(3
|
)
|
—
|
|
||
Deductions
|
—
|
|
50
|
|
||
Balance, as of March 31
|
$
|
(21
|
)
|
$
|
(17
|
)
|
Commercial Mortgage Loans Credit Quality
|
|||||||||
|
March 31, 2015
|
|
December 31, 2014
|
||||||
Loan-to-value
|
Carrying Value
|
Avg. Debt-Service Coverage Ratio
|
|
Carrying Value
|
Avg. Debt-Service Coverage Ratio
|
||||
Greater than 80%
|
$
|
49
|
|
1.12x
|
|
$
|
53
|
|
1.07x
|
65% - 80%
|
928
|
|
1.73x
|
|
789
|
|
1.75x
|
||
Less than 65%
|
4,720
|
|
2.69x
|
|
4,714
|
|
2.66x
|
||
Total commercial mortgage loans
|
$
|
5,697
|
|
2.51x
|
|
$
|
5,556
|
|
2.51x
|
Mortgage Loans by Region
|
|||||||||||
|
March 31, 2015
|
|
December 31, 2014
|
||||||||
|
Carrying Value
|
Percent of Total
|
|
Carrying Value
|
Percent of Total
|
||||||
East North Central
|
$
|
231
|
|
4.1
|
%
|
|
$
|
211
|
|
3.8
|
%
|
Middle Atlantic
|
452
|
|
7.9
|
%
|
|
468
|
|
8.4
|
%
|
||
Mountain
|
88
|
|
1.5
|
%
|
|
88
|
|
1.6
|
%
|
||
New England
|
381
|
|
6.7
|
%
|
|
381
|
|
6.9
|
%
|
||
Pacific
|
1,646
|
|
28.9
|
%
|
|
1,607
|
|
29.0
|
%
|
||
South Atlantic
|
1,104
|
|
19.4
|
%
|
|
1,019
|
|
18.3
|
%
|
||
West North Central
|
44
|
|
0.8
|
%
|
|
44
|
|
0.8
|
%
|
||
West South Central
|
319
|
|
5.6
|
%
|
|
302
|
|
5.4
|
%
|
||
Other [1]
|
1,432
|
|
25.1
|
%
|
|
1,436
|
|
25.8
|
%
|
||
Total mortgage loans
|
$
|
5,697
|
|
100.0
|
%
|
|
$
|
5,556
|
|
100.0
|
%
|
[1]
|
Primarily represents loans collateralized by multiple properties in various regions.
|
Mortgage Loans by Property Type
|
|||||||||||
|
March 31, 2015
|
|
December 31, 2014
|
||||||||
|
Carrying Value
|
Percent of Total
|
|
Carrying
Value |
Percent of Total
|
||||||
Commercial
|
|
|
|
|
|
||||||
Agricultural
|
$
|
46
|
|
0.8
|
%
|
|
$
|
46
|
|
0.8
|
%
|
Industrial
|
1,465
|
|
25.7
|
%
|
|
1,476
|
|
26.6
|
%
|
||
Lodging
|
26
|
|
0.5
|
%
|
|
26
|
|
0.5
|
%
|
||
Multifamily
|
1,267
|
|
22.2
|
%
|
|
1,190
|
|
21.4
|
%
|
||
Office
|
1,538
|
|
27.0
|
%
|
|
1,517
|
|
27.3
|
%
|
||
Retail
|
1,204
|
|
21.1
|
%
|
|
1,147
|
|
20.6
|
%
|
||
Other
|
151
|
|
2.7
|
%
|
|
154
|
|
2.8
|
%
|
||
Total mortgage loans
|
$
|
5,697
|
|
100.0
|
%
|
|
$
|
5,556
|
|
100.0
|
%
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||||||
|
Total Assets
|
Total Liabilities [1]
|
Maximum Exposure to Loss [2]
|
|
Total Assets
|
Total Liabilities [1]
|
Maximum Exposure to Loss [2]
|
||||||||||||
CDOs [3]
|
$
|
5
|
|
$
|
5
|
|
$
|
—
|
|
|
$
|
5
|
|
$
|
5
|
|
$
|
—
|
|
Investment funds [4]
|
232
|
|
—
|
|
235
|
|
|
238
|
|
—
|
|
243
|
|
||||||
Limited partnerships and other alternative investments
|
2
|
|
—
|
|
2
|
|
|
3
|
|
1
|
|
2
|
|
||||||
Total
|
$
|
239
|
|
$
|
5
|
|
$
|
237
|
|
|
$
|
246
|
|
$
|
6
|
|
$
|
245
|
|
[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 cash in the Company’s Condensed Consolidated Balance Sheets.
|
[4]
|
Total assets included in fixed maturities, FVO, short-term investments, equity, AFS, and cash in the Company’s Condensed Consolidated Balance Sheets.
|
|
Notional Amount
|
|
Fair Value
|
||||||||||
|
March 31,
2015 |
December 31, 2014
|
|
March 31,
2015 |
December 31, 2014
|
||||||||
Customized swaps
|
$
|
6,806
|
|
$
|
7,041
|
|
|
$
|
144
|
|
$
|
124
|
|
Equity swaps, options, and futures
|
1,803
|
|
3,761
|
|
|
11
|
|
39
|
|
||||
Interest rate swaps and futures
|
3,570
|
|
3,640
|
|
|
26
|
|
11
|
|
||||
Total
|
$
|
12,179
|
|
$
|
14,442
|
|
|
$
|
181
|
|
$
|
174
|
|
|
Notional Amount
|
|
Fair Value
|
||||||||||
|
March 31,
2015 |
December 31, 2014
|
|
March 31,
2015 |
December 31, 2014
|
||||||||
Equity swaps, options, and futures
|
7,342
|
|
5,983
|
|
|
187
|
|
141
|
|
||||
Foreign currency options
|
400
|
|
400
|
|
|
—
|
|
—
|
|
||||
Total
|
$
|
7,742
|
|
$
|
6,383
|
|
|
$
|
187
|
|
$
|
141
|
|
|
Net Derivatives
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||||||||||||
|
Notional Amount
|
|
Fair Value
|
|
Fair Value
|
|
Fair Value
|
||||||||||||||||||||
Hedge Designation/ Derivative Type
|
Mar. 31, 2015
|
Dec. 31, 2014
|
|
Mar. 31, 2015
|
Dec. 31, 2014
|
|
Mar. 31, 2015
|
Dec. 31, 2014
|
|
Mar. 31, 2015
|
Dec. 31, 2014
|
||||||||||||||||
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps
|
$
|
4,001
|
|
$
|
3,999
|
|
|
$
|
100
|
|
$
|
44
|
|
|
$
|
101
|
|
$
|
52
|
|
|
$
|
(1
|
)
|
$
|
(8
|
)
|
Foreign currency swaps
|
143
|
|
143
|
|
|
(27
|
)
|
(19
|
)
|
|
6
|
|
3
|
|
|
(33
|
)
|
(22
|
)
|
||||||||
Total cash flow hedges
|
4,144
|
|
4,142
|
|
|
73
|
|
25
|
|
|
107
|
|
55
|
|
|
(34
|
)
|
(30
|
)
|
||||||||
Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps
|
66
|
|
32
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||||||||
Total fair value hedges
|
66
|
|
32
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||||||||
Non-qualifying strategies
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps and futures
|
15,295
|
|
15,254
|
|
|
(501
|
)
|
(512
|
)
|
|
718
|
|
536
|
|
|
(1,219
|
)
|
(1,048
|
)
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Foreign currency swaps and forwards
|
179
|
|
177
|
|
|
8
|
|
1
|
|
|
9
|
|
3
|
|
|
(1
|
)
|
(2
|
)
|
||||||||
Japan fixed payout annuity hedge
|
1,319
|
|
1,319
|
|
|
(441
|
)
|
(427
|
)
|
|
—
|
|
—
|
|
|
(441
|
)
|
(427
|
)
|
||||||||
Credit contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Credit derivatives that purchase credit protection
|
197
|
|
595
|
|
|
(3
|
)
|
(6
|
)
|
|
—
|
|
4
|
|
|
(3
|
)
|
(10
|
)
|
||||||||
Credit derivatives that assume credit risk [1]
|
1,863
|
|
1,487
|
|
|
8
|
|
3
|
|
|
21
|
|
14
|
|
|
(13
|
)
|
(11
|
)
|
||||||||
Credit derivatives in offsetting positions
|
5,150
|
|
5,343
|
|
|
(3
|
)
|
(3
|
)
|
|
49
|
|
53
|
|
|
(52
|
)
|
(56
|
)
|
||||||||
Equity contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Equity index swaps and options
|
541
|
|
635
|
|
|
4
|
|
2
|
|
|
34
|
|
31
|
|
|
(30
|
)
|
(29
|
)
|
||||||||
Commodity contracts
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Commodity options
|
582
|
|
—
|
|
|
10
|
|
—
|
|
|
10
|
|
—
|
|
|
—
|
|
—
|
|
||||||||
Variable annuity hedge program
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
GMWB product derivatives [2]
|
17,079
|
|
17,908
|
|
|
(176
|
)
|
(139
|
)
|
|
—
|
|
—
|
|
|
(176
|
)
|
(139
|
)
|
||||||||
GMWB reinsurance contracts
|
3,514
|
|
3,659
|
|
|
65
|
|
56
|
|
|
65
|
|
56
|
|
|
—
|
|
—
|
|
||||||||
GMWB hedging instruments
|
12,179
|
|
14,442
|
|
|
181
|
|
174
|
|
|
309
|
|
289
|
|
|
(128
|
)
|
(115
|
)
|
||||||||
Macro hedge program
|
7,742
|
|
6,383
|
|
|
187
|
|
141
|
|
|
227
|
|
180
|
|
|
(40
|
)
|
(39
|
)
|
||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Contingent capital facility put option
|
500
|
|
500
|
|
|
11
|
|
12
|
|
|
11
|
|
12
|
|
|
—
|
|
—
|
|
||||||||
Modified coinsurance reinsurance contracts
|
963
|
|
974
|
|
|
22
|
|
34
|
|
|
22
|
|
34
|
|
|
—
|
|
—
|
|
||||||||
Total non-qualifying strategies
|
67,103
|
|
68,676
|
|
|
(628
|
)
|
(664
|
)
|
|
1,475
|
|
1,212
|
|
|
(2,103
|
)
|
(1,876
|
)
|
||||||||
Total cash flow hedges, fair value hedges, and non-qualifying strategies
|
$
|
71,313
|
|
$
|
72,850
|
|
|
$
|
(555
|
)
|
$
|
(639
|
)
|
|
$
|
1,582
|
|
$
|
1,267
|
|
|
$
|
(2,137
|
)
|
$
|
(1,906
|
)
|
Balance Sheet Location
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturities, available-for-sale
|
$
|
454
|
|
$
|
454
|
|
|
$
|
(2
|
)
|
$
|
2
|
|
|
$
|
—
|
|
$
|
2
|
|
|
$
|
(2
|
)
|
$
|
—
|
|
Other investments
|
22,729
|
|
23,014
|
|
|
445
|
|
364
|
|
|
659
|
|
624
|
|
|
(214
|
)
|
(260
|
)
|
||||||||
Other liabilities
|
26,524
|
|
26,791
|
|
|
(883
|
)
|
(930
|
)
|
|
836
|
|
551
|
|
|
(1,719
|
)
|
(1,481
|
)
|
||||||||
Reinsurance recoverables
|
4,477
|
|
4,633
|
|
|
87
|
|
90
|
|
|
87
|
|
90
|
|
|
—
|
|
—
|
|
||||||||
Other policyholder funds and benefits payable
|
17,129
|
|
17,958
|
|
|
(202
|
)
|
(165
|
)
|
|
—
|
|
—
|
|
|
(202
|
)
|
(165
|
)
|
||||||||
Total derivatives
|
$
|
71,313
|
|
$
|
72,850
|
|
|
$
|
(555
|
)
|
$
|
(639
|
)
|
|
$
|
1,582
|
|
$
|
1,267
|
|
|
$
|
(2,137
|
)
|
$
|
(1,906
|
)
|
[1]
|
The derivative instruments related to this strategy are held for other investment purposes.
|
[2]
|
These derivatives are embedded within liabilities and are not held for risk management purposes.
|
•
|
The decline in notional amount related to the GMWB hedging instruments, partially offset by an increase in notional amount related to the macro hedge program, was primarily driven by portfolio re-balancing.
|
•
|
The increase in the fair value of interest rate swaps was primarily due to a decrease in interest rates.
|
•
|
The increase in the fair value related to the macro hedge program was primarily driven by portfolio re-balancing.
|
•
|
These improvements in fair value were partially offset by a decrease in fair value related to the combined GMWB hedging program, which includes the GMWB product, reinsurance, and hedging derivatives, primarily driven by declining interest rates and volatility levels.
|
|
(i)
|
|
(ii)
|
|
(iii) = (i) - (ii)
|
(iv)
|
|
(v) = (iii) - (iv)
|
|||||||||||||||
|
|
|
|
|
Net Amounts Presented in the Statement of Financial Position
|
|
Collateral Disallowed for Offset in the Statement of Financial Position
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Derivative Assets [1]
|
|
Accrued Interest and Cash Collateral Received [2]
|
|
Financial Collateral Received [4]
|
|
Net Amount
|
||||||||||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other investments
|
$
|
1,495
|
|
|
$
|
1,268
|
|
|
$
|
445
|
|
|
$
|
(218
|
)
|
|
$
|
138
|
|
|
$
|
89
|
|
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Derivative Liabilities [3]
|
|
Accrued Interest and Cash Collateral Pledged [3]
|
|
Financial Collateral Pledged [4]
|
|
Net Amount
|
||||||||||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other liabilities
|
$
|
(1,933
|
)
|
|
$
|
(946
|
)
|
|
$
|
(880
|
)
|
|
$
|
(107
|
)
|
|
$
|
(1,131
|
)
|
|
$
|
144
|
|
|
(i)
|
|
(ii)
|
|
(iii) = (i) - (ii)
|
(iv)
|
|
(v) = (iii) - (iv)
|
|||||||||||||||
|
|
|
|
|
Net Amounts Presented in the Statement of Financial Position
|
|
Collateral Disallowed for Offset in the Statement of Financial Position
|
|
|
||||||||||||||
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Derivative Assets [1]
|
|
Accrued Interest and Cash Collateral Received [2]
|
|
Financial Collateral Received [4]
|
|
Net Amount
|
||||||||||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other investments
|
$
|
1,175
|
|
|
$
|
969
|
|
|
$
|
364
|
|
|
$
|
(158
|
)
|
|
$
|
109
|
|
|
$
|
97
|
|
|
Gross Amounts of Recognized Liabilities
|
|
Gross Amounts Offset in the Statement of Financial Position
|
|
Derivative Liabilities [3]
|
|
Accrued Interest and Cash Collateral Pledged [3]
|
|
Financial Collateral Pledged [4]
|
|
Net Amount
|
||||||||||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other liabilities
|
$
|
(1,741
|
)
|
|
$
|
(799
|
)
|
|
$
|
(927
|
)
|
|
$
|
(15
|
)
|
|
$
|
(1,079
|
)
|
|
$
|
137
|
|
[1]
|
Included in other invested assets in the Company's Condensed Consolidated Balance Sheets.
|
[2]
|
Included in other assets in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative receivable associated with each counterparty.
|
[3]
|
Included in other liabilities in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty. Not included in this amount are embedded derivatives associated with consumer notes of
$(3)
as of
March 31, 2015
and
December 31, 2014
, which were not eligible for offset in the Company's Condensed Consolidated Balance Sheets.
|
[4]
|
Excludes collateral associated with exchange-traded derivative instruments.
|
|
Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
|
Net Realized Capital Gains(Losses) Recognized in Income on Derivative (Ineffective Portion)
|
||||||||||
|
Three Months Ended March 31,
|
Three Months Ended March 31,
|
||||||||||
|
2015
|
2014
|
2015
|
2014
|
||||||||
Interest rate swaps
|
$
|
56
|
|
$
|
44
|
|
$
|
—
|
|
$
|
(1
|
)
|
Foreign currency swaps
|
(7
|
)
|
(1
|
)
|
—
|
|
—
|
|
||||
Total
|
$
|
49
|
|
$
|
43
|
|
$
|
—
|
|
$
|
(1
|
)
|
|
|
Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
|
|||||
|
|
Three Months Ended March 31,
|
|||||
|
Location
|
2015
|
2014
|
||||
Interest rate swaps
|
Net realized capital gain (loss)
|
$
|
1
|
|
$
|
1
|
|
Interest rate swaps
|
Net investment income
|
16
|
|
23
|
|
||
Foreign currency swaps
|
Net realized capital gain (loss)
|
(10
|
)
|
—
|
|
||
Total
|
|
$
|
7
|
|
$
|
24
|
|
|
|
Gain or (Loss) Recognized in Income [1]
|
||||||||||||
|
|
Three Months Ended March 31,
|
||||||||||||
|
|
2015
|
|
2014
|
||||||||||
|
Location
|
Derivative
|
Hedge Item
|
|
Derivative
|
Hedge Item
|
||||||||
Interest rate swaps
|
Net realized capital gain/(loss)
|
$
|
—
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
$
|
—
|
|
[1]
|
The amounts presented do not include the periodic net coupon settlements of the derivative or the coupon income (expense) related to the hedged item. The net of the amounts presented represents the ineffective portion of the hedge.
|
|
Three Months Ended March 31,
|
|||||
|
2015
|
2014
|
||||
Interest rate contracts
|
|
|
||||
Interest rate swaps and forwards
|
$
|
(12
|
)
|
$
|
(57
|
)
|
Foreign exchange contracts
|
|
|
||||
Foreign currency swaps and forwards
|
7
|
|
(2
|
)
|
||
Japan fixed payout annuity hedge [1]
|
(14
|
)
|
15
|
|
||
Credit contracts
|
|
|
||||
Credit derivatives that purchase credit protection
|
(2
|
)
|
(4
|
)
|
||
Credit derivatives that assume credit risk
|
9
|
|
(1
|
)
|
||
Equity contracts
|
|
|
||||
Equity index swaps and options
|
(3
|
)
|
—
|
|
||
Commodity contracts
|
|
|
||||
Commodity options
|
(5
|
)
|
—
|
|
||
Variable annuity hedge program
|
|
|
||||
GMWB product derivatives
|
(19
|
)
|
36
|
|
||
GMWB reinsurance contracts
|
7
|
|
(4
|
)
|
||
GMWB hedging instruments
|
13
|
|
(17
|
)
|
||
Macro hedge program
|
(4
|
)
|
(10
|
)
|
||
Other
|
|
|
||||
Contingent capital facility put option
|
(2
|
)
|
(1
|
)
|
||
Modified coinsurance reinsurance contracts
|
(11
|
)
|
(19
|
)
|
||
Total [2]
|
$
|
(36
|
)
|
$
|
(64
|
)
|
[1]
|
Not included in this amount is the associated liability adjustment for changes in foreign exchange spot rates through realized capital gains of
$0
and
$(28)
for the three months ended
March 31, 2015
and
2014
, respectively.
|
[2]
|
Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note
4
-
Fair Value Measurements
.
|
•
|
The loss on the GMWB product derivatives was largely driven by a decline in interest rates and changes in volatility levels, offset by an increase in equity markets. These losses were offset by gains on the GMWB reinsurance contracts and GMWB hedging instruments.
|
•
|
The net loss related to the Japan fixed annuity payout hedge was primarily driven by a decline in U.S. interest rates.
|
•
|
The net loss related to interest rate derivatives was primarily due to a decline in U.S. interest rates.
|
•
|
The loss associated with modified coinsurance reinsurance contracts, which are accounted for as embedded derivatives and transfer to the reinsurer the investment experience related to the assets supporting the reinsured policies, was primarily driven by a decline in long-term interest rates during the period. The assets remain on the Company's books and the Company recorded an offsetting gain in OCI as a result of the increase in market value of the bonds.
|
•
|
The net loss related to interest rate contracts was primarily driven by a decline in U.S. interest rates.
|
•
|
The net loss on the macro hedge program was primarily due to decreased volatility and an improvement in domestic equity markets.
|
•
|
The loss associated with modified coinsurance reinsurance contracts, which are accounted for as embedded derivatives and transfer to the reinsurer the investment experience related to the assets supporting the reinsured policies, was primarily driven by a decline in long-term interest rates during the period. The assets remain on the Company's books and the Company recorded an offsetting gain in OCI as a result of the increase in market value of the bonds.
|
•
|
The net gain related to the combined GMWB hedging program, which includes the GMWB product, reinsurance, and hedging derivatives, was primarily due to outperformance of underlying actively managed funds compared to their respective indices.
|
|
|
|
|
Underlying Referenced Credit
Obligation(s) [1]
|
|
|
|||||||||
Credit Derivative type by derivative risk exposure
|
Notional
Amount
[2]
|
Fair
Value
|
Weighted
Average
Years to
Maturity
|
Type
|
Average
Credit
Rating
|
Offsetting
Notional
Amount [3]
|
Offsetting
Fair
Value [3]
|
||||||||
Single name credit default swaps
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
$
|
252
|
|
$
|
4
|
|
2 years
|
Corporate Credit/
Foreign Gov. |
BBB+
|
$
|
227
|
|
$
|
(4
|
)
|
Below investment grade risk exposure
|
29
|
|
—
|
|
2 years
|
Corporate Credit
|
BB
|
29
|
|
(1
|
)
|
||||
Basket credit default swaps [4]
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
2,721
|
|
38
|
|
3 years
|
Corporate Credit
|
BBB+
|
1,898
|
|
(23
|
)
|
||||
Below investment grade risk exposure
|
59
|
|
4
|
|
5 years
|
Corporate Credit
|
B+
|
—
|
|
—
|
|
||||
Investment grade risk exposure
|
873
|
|
(12
|
)
|
6 years
|
CMBS Credit
|
AA+
|
267
|
|
2
|
|
||||
Below investment grade risk exposure
|
154
|
|
(22
|
)
|
2 years
|
CMBS Credit
|
CCC+
|
154
|
|
21
|
|
||||
Embedded credit derivatives
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
350
|
|
347
|
|
2 years
|
Corporate Credit
|
A+
|
—
|
|
—
|
|
||||
Total [5]
|
$
|
4,438
|
|
$
|
359
|
|
|
|
|
$
|
2,575
|
|
$
|
(5
|
)
|
|
|
|
|
Underlying Referenced
Credit Obligation(s) [1]
|
|
|
|||||||||
Credit Derivative type by derivative risk exposure
|
Notional
Amount [2]
|
Fair
Value
|
Weighted
Average
Years to
Maturity
|
Type
|
Average
Credit
Rating
|
Offsetting
Notional
Amount [3]
|
Offsetting
Fair
Value [3]
|
||||||||
Single name credit default swaps
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
$
|
320
|
|
$
|
5
|
|
2 years
|
Corporate Credit/
Foreign Gov. |
BBB+
|
$
|
247
|
|
$
|
(5
|
)
|
Below investment grade risk exposure
|
29
|
|
—
|
|
2 years
|
Corporate Credit
|
BB
|
29
|
|
(1
|
)
|
||||
Basket credit default swaps [4]
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
2,546
|
|
33
|
|
3 years
|
Corporate Credit
|
BBB
|
1,973
|
|
(25
|
)
|
||||
Below investment grade risk exposure
|
38
|
|
(1
|
)
|
12 years
|
Corporate Credit
|
D
|
—
|
|
—
|
|
||||
Investment grade risk exposure
|
722
|
|
(12
|
)
|
6 years
|
CMBS Credit
|
AA+
|
269
|
|
3
|
|
||||
Below investment grade risk exposure
|
154
|
|
(22
|
)
|
2 years
|
CMBS Credit
|
CCC+
|
154
|
|
23
|
|
||||
Embedded credit derivatives
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
350
|
|
342
|
|
2 years
|
Corporate Credit
|
A
|
—
|
|
—
|
|
||||
Total [5]
|
$
|
4,159
|
|
$
|
345
|
|
|
|
|
$
|
2,672
|
|
$
|
(5
|
)
|
[1]
|
The average credit ratings are based on availability and the midpoint of the applicable ratings among Moody’s, S&P, Fitch and Morningstar. If no rating is available from a rating agency, then an internally developed rating is used.
|
[2]
|
Notional amount is equal to the maximum potential future loss amount. These derivatives are governed by agreements, clearing house rules and applicable law which include collateral posting requirements. There is no additional specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.
|
[3]
|
The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap.
|
[4]
|
Includes
$3.8 billion
and
$3.5 billion
as of
March 31, 2015
and
December 31, 2014
, respectively, of standard market indices of diversified portfolios of corporate and CMBS issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index.
|
[5]
|
Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note
4
-
Fair Value Measurements
.
|
|
U.S. GMDB/GMWB [1]
|
Universal Life Secondary Guarantees
|
||||
Liability balance as of January 1, 2015
|
$
|
812
|
|
$
|
2,041
|
|
Incurred
|
41
|
|
66
|
|
||
Paid
|
(29
|
)
|
—
|
|
||
Unlock
|
(24
|
)
|
(3
|
)
|
||
Liability balance as of March 31, 2015
|
$
|
800
|
|
$
|
2,104
|
|
Reinsurance recoverable asset, as of January 1, 2015
|
$
|
481
|
|
$
|
2,041
|
|
Incurred
|
24
|
|
63
|
|
||
Paid
|
(22
|
)
|
—
|
|
||
Unlock
|
(6
|
)
|
—
|
|
||
Reinsurance recoverable asset, as of March 31, 2015
|
$
|
477
|
|
$
|
2,104
|
|
|
U.S. GMDB/GMWB [1]
|
International GMDB/GMIB
|
Universal Life Secondary Guarantees
|
||||||
Liability balance as of January 1, 2014
|
$
|
849
|
|
$
|
272
|
|
$
|
1,802
|
|
Incurred
|
46
|
|
15
|
|
56
|
|
|||
Paid
|
(30
|
)
|
(8
|
)
|
—
|
|
|||
Unlock
|
(11
|
)
|
3
|
|
—
|
|
|||
Currency translation adjustment
|
—
|
|
6
|
|
—
|
|
|||
Liability balance as of March 31, 2014
|
$
|
854
|
|
$
|
288
|
|
$
|
1,858
|
|
Reinsurance recoverable asset, as of January 1, 2014
|
$
|
533
|
|
$
|
23
|
|
$
|
1,802
|
|
Incurred
|
26
|
|
2
|
|
56
|
|
|||
Paid
|
(22
|
)
|
(2
|
)
|
—
|
|
|||
Unlock
|
(5
|
)
|
6
|
|
—
|
|
|||
Reinsurance recoverable asset, as of March 31, 2014
|
$
|
532
|
|
$
|
29
|
|
$
|
1,858
|
|
[1]
|
These liability balances include all GMDB benefits, plus the life-contingent portion of GMWB benefits in excess of the return of the GRB. GMWB benefits up to the return of the GRB are embedded derivatives held at fair value and are excluded from these balances.
|
Account Value by GMDB/GMWB Type
|
||||||||||
Maximum anniversary value (“MAV”) [1]
|
Account Value (“AV”) [8]
|
Net Amount at Risk (“NAR”) [9]
|
Retained Net Amount at Risk (“RNAR”) [9]
|
Weighted Average Attained Age of Annuitant
|
||||||
MAV only
|
$
|
16,577
|
|
$
|
2,519
|
|
$
|
379
|
|
70
|
With 5% rollup [2]
|
1,433
|
|
199
|
|
57
|
|
70
|
|||
With Earnings Protection Benefit Rider (“EPB”) [3]
|
4,275
|
|
581
|
|
77
|
|
69
|
|||
With 5% rollup & EPB
|
544
|
|
115
|
|
24
|
|
71
|
|||
Total MAV
|
22,829
|
|
3,414
|
|
537
|
|
|
|||
Asset Protection Benefit (“APB”) [4]
|
14,304
|
|
195
|
|
128
|
|
68
|
|||
Lifetime Income Benefit (“LIB”) — Death Benefit [5]
|
608
|
|
7
|
|
7
|
|
68
|
|||
Reset [6] (5-7 years)
|
2,895
|
|
14
|
|
14
|
|
69
|
|||
Return of Premium (“ROP”) [7]/Other
|
10,864
|
|
53
|
|
47
|
|
67
|
|||
Subtotal Variable Annuity with GMDB/GMWB [10]
|
51,500
|
|
3,683
|
|
733
|
|
69
|
|||
Less: General Account Value with GMDB/GMWB
|
3,951
|
|
|
|
|
|||||
Subtotal Separate Account Liabilities with GMDB
|
47,549
|
|
|
|
|
|||||
Separate Account Liabilities without GMDB
|
88,254
|
|
|
|
|
|||||
Total Separate Account Liabilities
|
$
|
135,803
|
|
|
|
|
[1]
|
MAV GMDB is the greatest of current AV, net premiums paid and the highest AV on any anniversary before age
80 years
(adjusted for withdrawals).
|
[2]
|
Rollup GMDB is the greatest of the MAV, current AV, net premium paid and premiums (adjusted for withdrawals) accumulated at generally
5%
simple interest up to the earlier of age
80 years
or
100%
of adjusted premiums.
|
[3]
|
EPB GMDB is the greatest of the MAV, current AV, or contract value plus a percentage of the contract’s growth. The contract’s growth is AV less premiums net of withdrawals, subject to a cap of
200%
of premiums net of withdrawals.
|
[4]
|
APB GMDB is the greater of current AV or MAV, not to exceed current AV plus
25%
times the greater of net premiums and MAV (each adjusted for premiums in the past
12 months
).
|
[5]
|
LIB GMDB is the greatest of current AV; net premiums paid; or, for certain contracts, a benefit amount generally based on market performance that ratchets over time.
|
[6]
|
Reset GMDB is the greatest of current AV, net premiums paid and the most recent
five
to
seven
year anniversary AV before age
80 years
(adjusted for withdrawals).
|
[7]
|
ROP GMDB is the greater of current AV or net premiums paid.
|
[8]
|
AV includes the contract holder’s investment in the separate account and the general account.
|
[9]
|
NAR is defined as the guaranteed benefit in excess of the current AV. RNAR represents NAR reduced for reinsurance. NAR and RNAR are highly sensitive to equity markets movements and increase when equity markets decline.
|
[10]
|
Some variable annuity contracts with GMDB also have a life-contingent GMWB that may provide for benefits in excess of the return of the GRB. Such contracts included in this amount have
$8.2 billion
of total account value and weighted average attained age of
70 years
. There is
no
NAR or retained NAR related to these contracts.
|
Asset type
|
As of March 31, 2015
|
As of December 31, 2014
|
||||
Equity securities (including mutual funds)
|
$
|
43,532
|
|
$
|
44,786
|
|
Cash and cash equivalents
|
4,017
|
|
4,066
|
|
||
Total
|
$
|
47,549
|
|
$
|
48,852
|
|
|
Three Months Ended March 31,
|
|||||
|
2015
|
2014
|
||||
Tax provision at U.S. federal statutory rate
|
$
|
219
|
|
$
|
213
|
|
Tax-exempt interest
|
(34
|
)
|
(35
|
)
|
||
Dividends-received deduction ("DRD")
|
(23
|
)
|
(27
|
)
|
||
Valuation allowance
|
(1
|
)
|
—
|
|
||
Other
|
(3
|
)
|
(8
|
)
|
||
Provision for income taxes
|
$
|
158
|
|
$
|
143
|
|
|
As of
|
|
||||||||||||||||
|
March 31, 2015
|
December 31, 2014
|
Expiration
|
|||||||||||||||
|
Carryover amount
|
Expected tax benefit, gross
|
Carryover amount
|
Expected tax benefit, gross
|
Dates
|
Amount
|
||||||||||||
Net operating loss carryover
|
$
|
5,485
|
|
$
|
1,915
|
|
$
|
5,547
|
|
$
|
1,936
|
|
2016
|
-
|
2017
|
$
|
3
|
|
|
|
|
|
|
2023
|
-
|
2033
|
$
|
5,482
|
|
||||||||
Foreign tax credit carryover
|
$
|
180
|
|
$
|
180
|
|
$
|
178
|
|
$
|
178
|
|
2018
|
-
|
2025
|
$
|
180
|
|
Capital loss carryover
|
$
|
494
|
|
$
|
173
|
|
$
|
491
|
|
$
|
172
|
|
2019
|
$
|
491
|
|
||
|
|
|
|
|
2020
|
$
|
3
|
|
||||||||||
Alternative minimum tax credit carryover
|
$
|
652
|
|
$
|
652
|
|
$
|
652
|
|
$
|
652
|
|
No expiration
|
$
|
—
|
|
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
Total AOCI
|
||||||||||||
Beginning balance
|
$
|
2,370
|
|
$
|
(5
|
)
|
$
|
150
|
|
$
|
(8
|
)
|
$
|
(1,579
|
)
|
$
|
928
|
|
OCI before reclassifications
|
232
|
|
(4
|
)
|
32
|
|
(20
|
)
|
19
|
|
259
|
|
||||||
Amounts reclassified from AOCI
|
(24
|
)
|
1
|
|
(5
|
)
|
—
|
|
(9
|
)
|
(37
|
)
|
||||||
Net OCI
|
208
|
|
(3
|
)
|
27
|
|
(20
|
)
|
10
|
|
222
|
|
||||||
Ending balance
|
$
|
2,578
|
|
$
|
(8
|
)
|
$
|
177
|
|
$
|
(28
|
)
|
$
|
(1,569
|
)
|
$
|
1,150
|
|
|
|
|
|
|
|
|
AOCI
|
Amount Reclassified from AOCI
|
Affected Line Item in the Condensed Consolidated Statement of Operations
|
||
|
Three months ended March 31, 2015
|
|
||
Net Unrealized Gain on Securities
|
|
|
||
Available-for-sale securities
|
$
|
37
|
|
Net realized capital gains (losses)
|
|
37
|
|
Total before tax
|
|
|
13
|
|
Income tax expense
|
|
|
$
|
24
|
|
Net income (loss)
|
OTTI Losses in OCI
|
|
|
||
Other than temporary impairments
|
$
|
(1
|
)
|
Net realized capital gains (losses)
|
|
(1
|
)
|
Total before tax
|
|
|
—
|
|
Income tax expense (benefit)
|
|
|
$
|
(1
|
)
|
Net income (loss)
|
Net Gains on Cash Flow Hedging Instruments
|
|
|
||
Interest rate swaps
|
$
|
1
|
|
Net realized capital gains (losses)
|
Interest rate swaps
|
16
|
|
Net investment income
|
|
Foreign currency swaps
|
(10
|
)
|
Net realized capital gains (losses)
|
|
|
7
|
|
Total before tax
|
|
|
2
|
|
Income tax expense
|
|
|
$
|
5
|
|
Net income (loss)
|
Pension and Other Postretirement Plan Adjustments
|
|
|
||
Amortization of prior service credit
|
$
|
(2
|
)
|
Insurance operating costs and other expenses
|
Amortization of actuarial loss
|
$
|
16
|
|
Insurance operating costs and other expenses
|
|
14
|
|
Total before tax
|
|
|
5
|
|
Income tax expense
|
|
|
9
|
|
Net income (loss)
|
|
Total amounts reclassified from AOCI
|
$
|
37
|
|
Net income (loss)
|
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
Total AOCI
|
||||||||||||
Beginning balance
|
$
|
987
|
|
$
|
(12
|
)
|
$
|
108
|
|
$
|
91
|
|
$
|
(1,253
|
)
|
$
|
(79
|
)
|
OCI before reclassifications
|
717
|
|
3
|
|
29
|
|
17
|
|
13
|
|
779
|
|
||||||
Amounts reclassified from AOCI
|
(18
|
)
|
(1
|
)
|
(16
|
)
|
—
|
|
(6
|
)
|
(41
|
)
|
||||||
Net OCI
|
699
|
|
2
|
|
13
|
|
17
|
|
7
|
|
738
|
|
||||||
Ending balance
|
$
|
1,686
|
|
$
|
(10
|
)
|
$
|
121
|
|
$
|
108
|
|
$
|
(1,246
|
)
|
$
|
659
|
|
|
|
|
|
|
|
|
AOCI
|
Amount Reclassified from AOCI
|
Affected Line Item in the Condensed Consolidated Statement of Operations
|
||
|
Three months ended March 31, 2014
|
|
||
Net Unrealized Gain on Securities
|
|
|
||
Available-for-sale securities
|
$
|
44
|
|
Net realized capital gains (losses)
|
|
44
|
|
Total before tax
|
|
|
15
|
|
Income tax expense
|
|
|
(11
|
)
|
Loss from discontinued operations, net of tax
|
|
|
$
|
18
|
|
Net income (loss)
|
OTTI Losses in OCI
|
|
|
||
Other than temporary impairments
|
$
|
2
|
|
Net realized capital gains (losses)
|
|
2
|
|
Total before tax
|
|
|
1
|
|
Income tax expense (benefit)
|
|
|
$
|
1
|
|
Net income (loss)
|
Net Gains on Cash Flow Hedging Instruments
|
|
|
||
Interest rate swaps
|
$
|
1
|
|
Net realized capital gains (losses)
|
Interest rate swaps
|
23
|
|
Net investment income
|
|
Foreign currency swaps
|
—
|
|
Net realized capital gains (losses)
|
|
|
24
|
|
Total before tax
|
|
|
8
|
|
Income tax expense
|
|
|
$
|
16
|
|
Net income (loss)
|
Pension and Other Postretirement Plan Adjustments
|
|
|
||
Amortization of prior service credit
|
$
|
(2
|
)
|
Insurance operating costs and other expenses
|
Amortization of actuarial loss
|
12
|
|
Insurance operating costs and other expenses
|
|
|
10
|
|
Total before tax
|
|
|
4
|
|
Income tax expense
|
|
|
6
|
|
Net income (loss)
|
|
Total amounts reclassified from AOCI
|
$
|
41
|
|
Net income (loss)
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||
|
Three Months Ended March 31,
|
|
Three Months Ended March 31,
|
||||||||||
|
2015
|
2014
|
|
2015
|
2014
|
||||||||
Interest cost
|
$
|
59
|
|
$
|
64
|
|
|
$
|
3
|
|
$
|
3
|
|
Expected return on plan assets
|
(78
|
)
|
(81
|
)
|
|
(3
|
)
|
(4
|
)
|
||||
Amortization of prior service credit
|
—
|
|
—
|
|
|
(2
|
)
|
(2
|
)
|
||||
Amortization of actuarial loss
|
15
|
|
11
|
|
|
1
|
|
1
|
|
||||
Net periodic benefit
|
$
|
(4
|
)
|
$
|
(6
|
)
|
|
$
|
(1
|
)
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
||
|
2014
|
||
Revenues
|
|
||
Earned premiums
|
$
|
(1
|
)
|
Fee income
|
125
|
|
|
Net investment income:
|
|
||
Securities available-for-sale and other
|
12
|
|
|
Equity securities, trading
|
(236
|
)
|
|
Total net investment income
|
(224
|
)
|
|
Net realized capital losses
|
(51
|
)
|
|
Total revenues
|
(151
|
)
|
|
Benefits, losses and expenses
|
|
||
Benefits losses and loss adjustment expenses
|
28
|
|
|
Benefits, losses and loss adjustment expenses - returns credited on international variable annuities
|
(236
|
)
|
|
Insurance operating costs and other expenses
|
11
|
|
|
Total benefits, losses and expenses
|
(197
|
)
|
|
Income before income taxes
|
46
|
|
|
Income tax expense
|
17
|
|
|
Income from discontinued operations, net of tax
|
$
|
29
|
|
Description
|
Page
|
Commercial
Lines
|
|
Personal Lines
|
|
•
|
Net income was
$467
, or
$1.08
per diluted share, compared with net income of
$495
, or
$1.03
per diluted share, in the comparable prior year period.
|
•
|
Common share repurchases totaled
$250
, or approximately
6.1 million
shares, in the current quarter.
|
•
|
Book value per diluted common share (excluding AOCI) increased to
$41.47
from
$40.71
in the prior quarter due to the effect of net income less dividends and the effect of share repurchases in the quarter.
|
•
|
Net investment income decreased
2%
to
$809
compared to the prior year period due to lower income from fixed maturities as a result of lower reinvestment rates and a decrease in asset levels due to runoff of Talcott Resolution.
|
•
|
The annualized investment yield after-tax of
3.1%
decreased slightly compared to the prior year period due to lower reinvestment rates reflecting the current interest rate environment. The new money yield decreased to
3.1%
from
3.9%
, compared to the prior year period, driven by lower interest rates.
|
•
|
Lower interest rates and tighter credit spreads increased the after-tax net unrealized gains in the investment portfolio by
$208
in the current quarter.
|
•
|
Property & Casualty written premiums increased
2%
over the comparable prior year period, comprised of
3%
growth in Commercial Lines and
1%
in Personal Lines.
|
•
|
Property & Casualty combined ratio, before catastrophes and prior year development, increased
2.1
points to
91.7
from
89.6
in the comparable prior year period. The first quarter of 2014 included a
2.0
point favorable impact related to a reduction in New York State Workers' Compensation Board assessments ("NY Assessments").
|
•
|
Catastrophe losses of
$83
, before tax, decreased from catastrophe losses of
$86
, before tax, in the comparable prior year period.
|
•
|
Favorable prior year development totaled
$2
, before tax, driven primarily by reserve releases related to favorable development in professional and general liability, and reserve releases related to 2014 catastrophes, partially offset by reserve strengthening in commercial auto liability.
|
•
|
Group Benefits after-tax core earnings margin, excluding buyouts, increased to
5.9%
in the quarter from
5.1%
in the comparable prior year period.
|
•
|
Talcott Resolution after-tax income from continuing operations was
$111
, compared with
$116
in the comparable prior year period.
|
Operating Summary
|
Three Months Ended March 31,
|
|||||||
|
2015
|
2014
|
Change
|
|||||
Earned premiums
|
$
|
3,322
|
|
$
|
3,302
|
|
1
|
%
|
Fee income
|
459
|
|
496
|
|
(7
|
%)
|
||
Net investment income
|
809
|
|
824
|
|
(2
|
%)
|
||
Net realized capital gains (losses)
|
5
|
|
(35
|
)
|
114
|
%
|
||
Other revenues
|
22
|
|
25
|
|
(12
|
%)
|
||
Total revenues
|
4,617
|
|
4,612
|
|
—
|
%
|
||
Benefits, losses and loss adjustment expenses
|
2,563
|
|
2,576
|
|
(1
|
%)
|
||
Amortization of deferred policy acquisition costs and present value of future profits (“DAC”)
|
387
|
|
396
|
|
(2
|
%)
|
||
Insurance operating costs and other expenses
|
948
|
|
936
|
|
1
|
%
|
||
Interest expense
|
94
|
|
95
|
|
(1
|
%)
|
||
Total benefits, losses and expenses
|
3,992
|
|
4,003
|
|
—
|
%
|
||
Income from continuing operations before income taxes
|
625
|
|
609
|
|
3
|
%
|
||
Income tax expense
|
158
|
|
143
|
|
10
|
%
|
||
Income from continuing operations, net of tax
|
467
|
|
466
|
|
—
|
%
|
||
Income from discontinued operations, net of tax
|
—
|
|
29
|
|
(100
|
%)
|
||
Net income
|
$
|
467
|
|
$
|
495
|
|
(6
|
%)
|
•
|
A $47 before tax decrease in current accident year underwriting results before catastrophes in Property & Casualty driven by a 2.1 point increase in the combined ratio before catastrophes and prior year development. Earned premiums increased 3% or $66, before tax, reflecting earned premium growth of 3% in both Commercial Lines and Personal Lines. Underwriting expenses in 2015 increased $77 due, in part, to a $49 benefit, before tax, in 2014 related to a reduction in NY Assessments, representing a 2.0 point favorable impact on the combined ratio in 2014.
For a discussion of the Company's operating results by segment, see the segment sections of MD&A.
|
•
|
Prior accident year reserve release of
$2
, before tax, for the
three months ended
March 31, 2015
, compared to a reserve release of
$40
, before tax, for the prior year period. Reserve releases in
2015
were primarily related to favorable development in professional and general liability, and reserve releases related to 2014 catastrophes, partially offset by reserve strengthening in commercial auto liability. Reserve releases in
2014
were primarily related to favorable development on accident year 2013 catastrophes and professional liability claims, and favorable development on accident year 2013 homeowners claims. For additional information, see MD&A - Critical Accounting Estimates, Reserve Roll Forwards and Development.
|
•
|
A decrease in income from discontinued operations of
$29
, net of tax, compared to the
three months ended
March 31, 2014
. Income from discontinued operations in 2014 represents income from operations related to the Japan variable annuity business.
|
•
|
Net investment income of
$809
, before tax, for the
three months ended
March 31, 2015
, decreased compared to
$824
, before tax, for the prior year period. The decrease in investment income was primarily due to lower income from fixed maturities as a result of lower reinvestment rates, as well as a decrease in asset levels, due to the runoff of Talcott Resolution. For further discussion of investment results, see MD&A - Investment Results, Net Investment Income (Loss).
|
•
|
Current accident year catastrophe losses of
$83
, before tax, for the
three months ended
March 31, 2015
, compared to
$86
, before tax, for the prior year period. Catastrophe losses in both periods were primarily due to winter storm events across various U.S. geographic regions. For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.
|
•
|
Differences between the Company's effective income tax rate and the U.S. statutory rate of 35% are due primarily to tax-exempt interest earned on invested assets and the dividends received deduction ("DRD"). Income tax expense for the
three months ended
March 31, 2015
increased by $15 from
$143
in the prior year period, primarily due to the $16, before tax, increase in income from continuing operations and the effect of permanent items. For further discussion of income taxes, see Note
7
-
Income Taxes
of Notes to Condensed Consolidated Financial Statements.
|
|
Three months ended March 31,
|
||||||||
Net income (loss) by segment
|
2015
|
2014
|
Increase
(Decrease) From 2014 to 2015 |
||||||
Commercial Lines
|
$
|
240
|
|
$
|
242
|
|
$
|
(2
|
)
|
Personal Lines
|
76
|
|
99
|
|
(23
|
)
|
|||
Property & Casualty Other Operations
|
23
|
|
22
|
|
1
|
|
|||
Group Benefits
|
52
|
|
51
|
|
1
|
|
|||
Mutual Funds
|
22
|
|
21
|
|
1
|
|
|||
Talcott Resolution
|
111
|
|
145
|
|
(34
|
)
|
|||
Corporate
|
(57
|
)
|
(85
|
)
|
28
|
|
|||
Net income
|
$
|
467
|
|
$
|
495
|
|
$
|
(28
|
)
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||
|
Amount
|
Percent
|
|
Amount
|
Percent
|
||||||
Fixed maturities, available-for-sale ("AFS"), at fair value
|
$
|
60,555
|
|
79.1
|
%
|
|
$
|
59,384
|
|
77.9
|
%
|
Fixed maturities, at fair value using the fair value option ("FVO")
|
520
|
|
0.7
|
%
|
|
488
|
|
0.6
|
%
|
||
Equity securities, AFS, at fair value [1]
|
1,148
|
|
1.5
|
%
|
|
1,047
|
|
1.4
|
%
|
||
Mortgage loans
|
5,697
|
|
7.4
|
%
|
|
5,556
|
|
7.3
|
%
|
||
Policy loans, at outstanding balance
|
1,452
|
|
1.9
|
%
|
|
1,431
|
|
1.9
|
%
|
||
Limited partnerships and other alternative investments
|
2,923
|
|
3.8
|
%
|
|
2,942
|
|
3.9
|
%
|
||
Other investments [2]
|
630
|
|
0.8
|
%
|
|
547
|
|
0.7
|
%
|
||
Short-term investments
|
3,651
|
|
4.8
|
%
|
|
4,883
|
|
6.4
|
%
|
||
Total investments
|
$
|
76,576
|
|
100.0
|
%
|
|
$
|
76,278
|
|
100.0
|
%
|
[1]
|
Includes equity securities at fair value using the FVO of $402 and $348 as of March 31, 2015 and December 31, 2014, respectively.
|
[2]
|
Primarily relates to derivative instruments.
|
|
Three Months Ended March 31,
|
|||||||||
|
2015
|
2014
|
||||||||
(Before-tax)
|
Amount
|
Yield [1]
|
Amount
|
Yield [1]
|
||||||
Fixed maturities [2]
|
$
|
600
|
|
4.2
|
%
|
$
|
616
|
|
4.2
|
%
|
Equity securities, AFS
|
6
|
|
2.0
|
%
|
7
|
|
3.3
|
%
|
||
Mortgage loans
|
69
|
|
4.9
|
%
|
66
|
|
4.7
|
%
|
||
Policy loans
|
20
|
|
5.6
|
%
|
20
|
|
5.7
|
%
|
||
Limited partnerships and other alternative investments
|
99
|
|
13.7
|
%
|
97
|
|
13.0
|
%
|
||
Other [3]
|
42
|
|
|
43
|
|
|
||||
Investment expense
|
(27
|
)
|
|
(25
|
)
|
|
||||
Total net investment income
|
809
|
|
4.5
|
%
|
824
|
|
4.5
|
%
|
||
Total net investment income excluding limited partnerships and other alternative investments
|
$
|
710
|
|
4.1
|
%
|
$
|
727
|
|
4.2
|
%
|
[1]
|
Yields calculated using annualized net investment income divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding repurchase agreement collateral, if any, and derivatives book value. Yield calculations for each period exclude assets associated with the dispositions of Japan variable and fixed annuity business, as applicable.
|
[2]
|
Includes net investment income on short-term investments.
|
[3]
|
Primarily includes income from derivatives that qualify for hedge accounting and hedge fixed maturities.
|
|
Three Months Ended March 31,
|
|||||
(Before-tax)
|
2015
|
2014
|
||||
Gross gains on sales
|
$
|
197
|
|
$
|
183
|
|
Gross losses on sales
|
(148
|
)
|
(129
|
)
|
||
Net other-than-temporary impairment ("OTTI") losses recognized in earnings
|
(12
|
)
|
(22
|
)
|
||
Valuation allowances on mortgage loans
|
(3
|
)
|
—
|
|
||
Periodic net coupon settlements on credit derivatives
|
1
|
|
(1
|
)
|
||
Results of variable annuity hedge program
|
|
|
||||
GMWB derivatives, net
|
1
|
|
15
|
|
||
Macro hedge program
|
(4
|
)
|
(10
|
)
|
||
Total results of variable annuity hedge program
|
(3
|
)
|
5
|
|
||
Other, net [1]
|
(27
|
)
|
(71
|
)
|
||
Net realized capital gains
|
$
|
5
|
|
$
|
(35
|
)
|
[1]
|
Primarily consists of changes in value of non-qualifying derivatives, including interest rate derivatives used to manage duration, and the Japan fixed payout annuity hedge.
|
•
|
Gross gains on sales for the three months ended
March 31, 2015
were primarily due to gains on the sale of industrial corporate and U.S. Treasury securities. Gross losses on sales for the three months ended
March 31, 2015
were primarily the result of losses on the sale of corporate and foreign government and government agency securities, which included sales resulting from a reduction in our exposure to certain emerging market and energy sector securities, as well as other portfolio management activities. The sales were primarily a result of duration, liquidity and credit management, as well as tactical changes to the portfolio as a result of changing market conditions.
|
•
|
Gross gains on sales for the
three months ended
March 31, 2014
were primarily due to gains on the sale of corporate, CMBS, and RMBS. Gross losses on sales for the
three months ended
March 31, 2014
were the result of losses on sales of emerging market securities, primarily within the foreign government and corporate sectors. The sales were primarily a result of duration and liquidity management, as well as tactical changes to the portfolio as a result of changing market conditions.
|
•
|
See Other-Than-Temporary Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A.
|
•
|
For the three months ended
March 31, 2014
the gain related to the combined GMWB derivatives, net, which include the GMWB product, reinsurance, and hedging derivatives, was primarily driven by gains of
$14
related to outperformance of underlying actively managed funds compared to their respective indices.
|
•
|
For the three months ended
March 31, 2014
the loss on the macro hedge program was primarily due to losses of
$9
related to decreased volatility and losses of
$4
driven by an improvement in domestic equity markets.
|
•
|
Other, net loss for the three months ended
March 31, 2015
was primarily due to losses of
$14
on Japan fixed payout annuity hedges primarily driven by a decline in U.S. interest rates, losses of
$10
on interest rate derivatives due to a decline in interest rates, and losses of
$11
associated with modified coinsurance reinsurance contracts. Modified coinsurance reinsurance contracts are accounted for as embedded derivatives and transfer to the reinsurer the investment experience related to the assets supporting the reinsured policies, primarily driven by a decline in long-term interest rates.
|
•
|
Other, net loss for the three months ended
March 31, 2014
was primarily due to losses of
$56
on interest derivatives due to a decline in U.S. interest rates, and losses of
$13
on Japan fixed payout annuity hedges primarily driven by a decline in U.S. interest rates.
|
•
|
property and casualty insurance product reserves, net of reinsurance;
|
•
|
estimated gross profits used in the valuation and amortization of assets and liabilities associated with variable annuity and other universal life-type contracts;
|
•
|
evaluation of other-than-temporary impairments on available-for-sale securities and valuation allowances on mortgage loans;
|
•
|
living benefits required to be fair valued (in other policyholder funds and benefits payable);
|
•
|
goodwill impairment;
|
•
|
valuation of investments and derivative instruments;
|
•
|
valuation allowance on deferred tax assets; and
|
•
|
contingencies relating to corporate litigation and regulatory matters.
|
Three Months Ended March 31, 2015
|
||||||||||||
|
Commercial
Lines [3]
|
Personal Lines
|
Property & Casualty Other Operations [3]
|
Total Property & Casualty Insurance
|
||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross [3]
|
$
|
16,465
|
|
$
|
1,874
|
|
$
|
3,467
|
|
$
|
21,806
|
|
Reinsurance and other recoverables [3]
|
2,459
|
|
18
|
|
564
|
|
3,041
|
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net [3]
|
14,006
|
|
1,856
|
|
2,903
|
|
18,765
|
|
||||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||||||||
Current accident year before catastrophes
|
928
|
|
618
|
|
—
|
|
1,546
|
|
||||
Current accident year catastrophes [4]
|
58
|
|
25
|
|
—
|
|
83
|
|
||||
Prior accident years strengthening (release)
|
(2
|
)
|
(4
|
)
|
4
|
|
(2
|
)
|
||||
Total provision for unpaid losses and loss adjustment expenses
|
984
|
|
639
|
|
4
|
|
1,627
|
|
||||
Less: Payments
|
897
|
|
647
|
|
93
|
|
1,637
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
14,093
|
|
1,848
|
|
2,814
|
|
18,755
|
|
||||
Reinsurance and other recoverables
|
2,418
|
|
19
|
|
558
|
|
2,995
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
16,511
|
|
$
|
1,867
|
|
$
|
3,372
|
|
$
|
21,750
|
|
Earned premiums
|
$
|
1,583
|
|
$
|
952
|
|
|
|
||||
Loss and loss expense paid ratio [1]
|
56.7
|
|
68.0
|
|
|
|
||||||
Loss and loss expense incurred ratio
|
62.2
|
|
67.1
|
|
|
|
||||||
Prior accident years development (pts) [2]
|
(0.1
|
)
|
(0.4
|
)
|
|
|
[1]
|
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
[2]
|
“Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums.
|
[3]
|
Hartford Financial Products International ("HFPI") gross reserves and reinsurance recoverables balances of $40 and $5, respectively, as of December 31, 2014 have been prospectively reclassified from Commercial Lines to Property & Casualty Other Operations as HFPI does not write new business.
|
[4]
|
Contributing to the current accident year catastrophes losses were the following events:
|
Three Months Ended March 31, 2015
|
|||||||||
Category
|
Commercial Lines
|
Personal Lines
|
Total Property & Casualty Insurance
|
||||||
Winter Storms [1]
|
$
|
49
|
|
$
|
17
|
|
$
|
66
|
|
Tornadoes
|
7
|
|
5
|
|
12
|
|
|||
Wind and Hail
|
2
|
|
3
|
|
5
|
|
|||
Total
|
$
|
58
|
|
$
|
25
|
|
$
|
83
|
|
Three Months Ended March 31, 2015
|
||||||||||||
|
Commercial Lines
|
Personal Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Auto liability
|
$
|
25
|
|
$
|
—
|
|
$
|
—
|
|
$
|
25
|
|
Homeowners
|
—
|
|
1
|
|
—
|
|
1
|
|
||||
Professional liability
|
(17
|
)
|
—
|
|
—
|
|
(17
|
)
|
||||
Package business
|
1
|
|
—
|
|
—
|
|
1
|
|
||||
General liability
|
(13
|
)
|
—
|
|
—
|
|
(13
|
)
|
||||
Commercial property
|
(7
|
)
|
—
|
|
—
|
|
(7
|
)
|
||||
Change in workers’ compensation discount, including accretion
|
8
|
|
—
|
|
—
|
|
8
|
|
||||
Catastrophes
|
(6
|
)
|
(12
|
)
|
—
|
|
(18
|
)
|
||||
Other reserve re-estimates, net
|
7
|
|
7
|
|
4
|
|
18
|
|
||||
Total prior accident years development
|
$
|
(2
|
)
|
$
|
(4
|
)
|
$
|
4
|
|
$
|
(2
|
)
|
|
|
|
|
|
•
|
Strengthened reserves in commercial auto liability primarily for accident years 2010 through 2013 due to increased frequency of large claims.
|
•
|
Released reserves in professional liability for accident years 2009 through 2011 primarily for large accounts. Claim costs for these accident years have emerged favorably as these years have matured and management has placed more weight on the emerged experience.
|
•
|
Released reserves in general liability primarily for accident years 2012 and 2013 due to lower frequency in late emerging claims.
|
•
|
Released catastrophe reserves primarily for accident year 2014 as fourth quarter 2014 catastrophes have developed favorably.
|
Three Months Ended March 31, 2014
|
||||||||||||
|
Commercial Lines
|
Personal Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
16,293
|
|
$
|
1,864
|
|
$
|
3,547
|
|
$
|
21,704
|
|
Reinsurance and other recoverables
|
2,442
|
|
13
|
|
573
|
|
3,028
|
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
13,851
|
|
1,851
|
|
2,974
|
|
18,676
|
|
||||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||||||||
Current accident year before catastrophes
|
934
|
|
590
|
|
—
|
|
1,524
|
|
||||
Current accident year catastrophes [3]
|
60
|
|
26
|
|
—
|
|
86
|
|
||||
Prior accident years strengthening (release)
|
(7
|
)
|
(34
|
)
|
1
|
|
(40
|
)
|
||||
Total provision for unpaid losses and loss adjustment expenses
|
987
|
|
582
|
|
1
|
|
1,570
|
|
||||
Less: Payments
|
912
|
|
613
|
|
120
|
|
1,645
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
13,926
|
|
1,820
|
|
2,855
|
|
18,601
|
|
||||
Reinsurance and other recoverables
|
2,469
|
|
15
|
|
567
|
|
3,051
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
16,395
|
|
$
|
1,835
|
|
$
|
3,422
|
|
$
|
21,652
|
|
Earned premiums
|
$
|
1,541
|
|
$
|
928
|
|
|
|
||||
Loss and loss expense paid ratio [1]
|
59.2
|
|
66.1
|
|
|
|
||||||
Loss and loss expense incurred ratio
|
64.0
|
|
62.7
|
|
|
|
||||||
Prior accident years development (pts) [2]
|
(0.5
|
)
|
(3.7
|
)
|
|
|
[1]
|
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
[2]
|
“Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums.
|
[3]
|
Contributing to the current accident year catastrophes losses were the following events:
|
Three Months Ended March 31, 2014
|
|||||||||
Category
|
Commercial Lines
|
Personal Lines
|
Total Property & Casualty Insurance
|
||||||
Winter Storms [1]
|
$
|
55
|
|
$
|
18
|
|
$
|
73
|
|
Wind and Hail [1]
|
5
|
|
8
|
|
13
|
|
|||
Total
|
$
|
60
|
|
$
|
26
|
|
$
|
86
|
|
Three Months Ended March 31, 2014
|
||||||||||||
|
Commercial Lines
|
Personal Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Auto liability
|
$
|
5
|
|
$
|
—
|
|
$
|
—
|
|
$
|
5
|
|
Homeowners
|
—
|
|
(13
|
)
|
—
|
|
(13
|
)
|
||||
Professional liability
|
(8
|
)
|
—
|
|
—
|
|
(8
|
)
|
||||
Package business
|
(3
|
)
|
—
|
|
—
|
|
(3
|
)
|
||||
Commercial property
|
(3
|
)
|
—
|
|
—
|
|
(3
|
)
|
||||
Change in workers’ compensation discount, including accretion
|
8
|
|
—
|
|
—
|
|
8
|
|
||||
Catastrophes
|
(12
|
)
|
(21
|
)
|
—
|
|
(33
|
)
|
||||
Other reserve re-estimates, net
|
6
|
|
—
|
|
1
|
|
7
|
|
||||
Total prior accident years development
|
$
|
(7
|
)
|
$
|
(34
|
)
|
$
|
1
|
|
$
|
(40
|
)
|
|
|
|
|
|
•
|
Homeowner results emerged favorably for accident year 2013, primarily related to favorable development on fire and water-related claims in homeowners
|
•
|
Released reserves in professional liability for accident year 2013 due to lower frequency of reported claims.
|
•
|
Released reserves for accident year 2013 catastrophes as fourth quarter catastrophes have developed favorably.
|
Three Months Ended March 31, 2015
|
Asbestos
|
|
Environmental
|
All Other [1] [2]
|
Total
|
||||||||
Beginning liability—net [3][4]
|
$
|
1,710
|
|
|
$
|
241
|
|
$
|
952
|
|
$
|
2,903
|
|
Losses and loss adjustment expenses incurred
|
—
|
|
|
3
|
|
1
|
|
4
|
|
||||
Less : losses and loss adjustment expenses paid
|
43
|
|
|
16
|
|
34
|
|
93
|
|
||||
Ending liability – net [3][4]
|
$
|
1,667
|
|
[5]
|
$
|
228
|
|
$
|
919
|
|
$
|
2,814
|
|
[1]
|
HFPI net reserves of $35 as of December 31, 2014 have been prospectively reclassified from Commercial Lines to "All Other" as HFPI does not write new business.
|
[2]
|
In addition to various insurance and assumed reinsurance exposures, “All Other” includes unallocated loss adjustment expense reserves. “All Other” also includes The Company's allowance for uncollectible reinsurance. When the Company commutes a ceded reinsurance contract or settles a ceded reinsurance dispute, the portion of the allowance for uncollectible reinsurance attributable to that commutation or settlement, if any, is reclassified to the appropriate cause of loss.
|
[3]
|
Excludes amounts reported in Commercial Lines and Personal Lines reporting segments (collectively “Ongoing Operations”) for asbestos and environmental net liabilities of
$16
and
$6
, respectively, as of
March 31, 2015
. Total net losses and loss adjustment expenses incurred for the
three months ended
March 31, 2015
includes
$2
related to asbestos and environmental claims. Total net losses and loss adjustment expenses paid for the
three months ended
March 31, 2015
includes
$3
related to asbestos and environmental claims.
|
[4]
|
Gross of reinsurance, asbestos and environmental reserves, including liabilities in Ongoing Operations, were
$2,147
and
$255
.
|
[5]
|
The one year and average three year net paid amounts for asbestos claims, including Ongoing Operations, are
$203
and
$198
, respectively, resulting in a one year net survival ratio of
8.3
and a three year net survival ratio of
8.5
. Net survival ratio is the quotient of the net carried reserves divided by the average annual payment amount and is an indication of the number of years that the net carried reserve would last (i.e. survive) if the future annual claim payments were consistent with the calculated historical average.
|
Three Months Ended March 31, 2014
|
Asbestos
|
|
Environmental
|
All Other
|
Total
|
||||||||
Beginning liability—net [1][2]
|
$
|
1,714
|
|
|
$
|
270
|
|
$
|
990
|
|
$
|
2,974
|
|
Losses and loss adjustment expenses incurred
|
—
|
|
|
—
|
|
1
|
|
1
|
|
||||
Less: losses and loss adjustment expenses paid
|
67
|
|
|
7
|
|
46
|
|
120
|
|
||||
Ending liability – net [1][2]
|
$
|
1,647
|
|
[3]
|
$
|
263
|
|
$
|
945
|
|
$
|
2,855
|
|
[1]
|
Excludes amounts reported in Ongoing Operations for asbestos and environmental net liabilities of
$16
and
$8
, respectively, as of March 31, 2014. Total net losses and loss adjustment expenses incurred for the three months ended March 31, 2014 includes
$4
related to asbestos and environmental claims. Total net losses and loss adjustment expenses paid for the three months ended March 31, 2014 includes $3 related to asbestos and environmental claims.
|
[2]
|
Gross of reinsurance, asbestos and environmental reserves, including liabilities in Ongoing Operations, were
$2,107 and $306
.
|
[3]
|
The one year and average three year net paid amounts for asbestos claims, including Ongoing Operations, are
$216 and $195
, respectively, resulting in a one year net survival ratio of
7.7
and a three year net survival ratio of 8.5. Net survival ratio is the quotient of the net carried reserves divided by the average annual payment amount and is an indication of the number of years that the net carried reserve would last (i.e. survive) if the future annual claim payments were consistent with the calculated historical average.
|
|
Asbestos [1]
|
Environmental [1]
|
||||||||||
Three Months Ended March 31, 2015
|
Paid
Losses & LAE
|
Incurred
Losses & LAE
|
Paid
Losses & LAE
|
Incurred
Losses & LAE
|
||||||||
Gross
|
|
|
|
|
||||||||
Direct
|
$
|
31
|
|
$
|
—
|
|
$
|
10
|
|
$
|
3
|
|
Assumed Reinsurance
|
9
|
|
—
|
|
1
|
|
—
|
|
||||
London Market
|
5
|
|
—
|
|
5
|
|
—
|
|
||||
Total
|
45
|
|
—
|
|
16
|
|
3
|
|
||||
Ceded
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
||||
Net
|
$
|
43
|
|
$
|
—
|
|
$
|
16
|
|
$
|
3
|
|
[1]
|
Excludes asbestos and environmental paid and incurred loss and LAE reported in Ongoing Operations. Total gross losses and LAE incurred in Ongoing Operations for the
three months ended March 31,
2015
includes
$2
related to asbestos and environmental claims. Total gross losses and LAE paid in Ongoing Operations for the
three months ended March 31,
2015
includes
$3
related to asbestos and environmental claims.
|
|
||||||
|
Talcott Resolution
|
|||||
|
As of March 31, 2015
|
As of December 31, 2014
|
||||
DAC
|
$
|
1,127
|
|
$
|
1,200
|
|
SIA
|
$
|
85
|
|
$
|
89
|
|
Death and Other Insurance Benefit Reserves, net of reinsurance [1]
|
$
|
323
|
|
$
|
331
|
|
[1]
|
For additional information on death and other insurance benefit reserves, see Note
6
-
Separate Accounts, Death Benefits and Other Insurance Benefit Features
of Notes to Condensed Consolidated Financial Statements.
|
|
Talcott Resolution
|
|||||
|
Three Months Ended March 31,
|
|||||
|
2015
|
2014
|
||||
DAC
|
$
|
10
|
|
$
|
12
|
|
SIA
|
1
|
|
1
|
|
||
Death and Other Insurance Benefit Reserves
|
18
|
|
6
|
|
||
Total (before tax)
|
$
|
29
|
|
$
|
19
|
|
Income tax effect
|
10
|
|
7
|
|
||
Total (after-tax)
|
$
|
19
|
|
$
|
12
|
|
|
Three Months Ended March 31,
|
|||||
|
2015
|
2014
|
||||
Net income
|
$
|
467
|
|
$
|
495
|
|
Less: Unlock charge, after-tax
|
19
|
|
12
|
|
||
Less: Net realized capital gains (losses), after-tax and DAC, excluded from core earnings
|
2
|
|
(34
|
)
|
||
Less: Restructuring and other costs, after-tax
|
(6
|
)
|
(13
|
)
|
||
Less: Loss from discontinued operations, after-tax
|
—
|
|
29
|
|
||
Core earnings
|
$
|
452
|
|
$
|
501
|
|
|
Three Months Ended March 31,
|
|||||||
Underwriting Summary
|
2015
|
2014
|
Change
|
|||||
Written premiums
|
$
|
1,722
|
|
$
|
1,669
|
|
3
|
%
|
Change in unearned premium reserve
|
139
|
|
128
|
|
9
|
%
|
||
Earned premiums
|
1,583
|
|
1,541
|
|
3
|
%
|
||
Losses and loss adjustment expenses
|
|
|
|
|||||
Current accident year before catastrophes
|
928
|
|
934
|
|
(1
|
%)
|
||
Current accident year catastrophes
|
58
|
|
60
|
|
(3
|
%)
|
||
Prior accident years
|
(2
|
)
|
(7
|
)
|
71
|
%
|
||
Total losses and loss adjustment expenses
|
984
|
|
987
|
|
—
|
%
|
||
Amortization of DAC
|
234
|
|
226
|
|
4
|
%
|
||
Underwriting expenses
|
295
|
|
217
|
|
36
|
%
|
||
Dividends to policyholders
|
5
|
|
4
|
|
25
|
%
|
||
Underwriting gain
|
65
|
|
107
|
|
(39
|
%)
|
||
Net servicing income [1]
|
4
|
|
3
|
|
33
|
%
|
||
Net investment income
|
257
|
|
256
|
|
—
|
%
|
||
Net realized capital gains (losses)
|
8
|
|
(32
|
)
|
125
|
%
|
||
Other income (expense)
|
1
|
|
(2
|
)
|
150
|
%
|
||
Income before income taxes
|
335
|
|
332
|
|
1
|
%
|
||
Income tax expense
|
95
|
|
90
|
|
6
|
%
|
||
Net income
|
$
|
240
|
|
$
|
242
|
|
(1
|
%)
|
[1]
|
Includes servicing revenues of
$22
and
$25
for the three months ended
March 31, 2015
and
2014
, respectively.
|
|
Three Months Ended March 31,
|
|||||
Premium Measures [1]
|
2015
|
2014
|
||||
New business premium
|
$
|
290
|
|
$
|
268
|
|
Standard commercial lines policy count retention
|
84
|
%
|
83
|
%
|
||
Standard commercial lines renewal written pricing increases
|
3
|
%
|
6
|
%
|
||
Standard commercial lines renewal earned pricing increases
|
5
|
%
|
8
|
%
|
||
Standard commercial lines policies in-force as of end of period (in thousands)
|
1,283
|
|
1,252
|
|
[1]
|
Standard commercial lines consists of small commercial and middle market. Standard commercial premium measures exclude middle market specialty programs and livestock lines of business.
|
|
Three Months Ended March 31,
|
|||||
Underwriting Ratios
|
2015
|
2014
|
Change
|
|||
Loss and loss adjustment expense ratio
|
|
|
|
|||
Current accident year before catastrophes
|
58.6
|
|
60.6
|
|
2.0
|
|
Current accident year catastrophes
|
3.7
|
|
3.9
|
|
0.2
|
|
Prior year development
|
(0.1
|
)
|
(0.5
|
)
|
(0.4
|
)
|
Total loss and loss adjustment expense ratio
|
62.2
|
|
64.0
|
|
1.8
|
|
Expense ratio
|
33.4
|
|
28.7
|
|
(4.7
|
)
|
Policyholder dividend ratio
|
0.3
|
|
0.3
|
|
—
|
|
Combined ratio
|
95.9
|
|
93.1
|
|
(2.8
|
)
|
Current accident year catastrophes and prior year development
|
3.6
|
|
3.4
|
|
(0.2
|
)
|
Combined ratio before catastrophes and prior year development
|
92.4
|
|
89.6
|
|
(2.8
|
)
|
•
|
The reduction in the current accident year loss and loss adjustment expense ratios before catastrophes for the
three months ended
March 31, 2015
, as compared to the prior year period, was primarily driven by a lower loss and loss adjustment expense ratio in workers' compensation due to earned pricing increases and favorable frequency and severity trends. Accordingly, the current accident year loss and loss adjustment expense ratio before catastrophes decreased by
2.0
points to
58.6
in the current quarter from
60.6
in the prior year quarter.
|
•
|
Current accident year catastrophe losses totaled
$58
, before tax, for the
three months ended
March 31, 2015
, compared to
$60
, before tax, for the
three months ended
March 31, 2014
. Catastrophe losses for both periods were primarily due to winter storms across various U.S. geographic regions. For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.
|
•
|
Prior accident years reserve release of
$2
, before tax, for the
three months ended
March 31, 2015
, compared to a reserve release of
$7
, before tax, for the
three months ended
March 31, 2014
. Net reserve releases for the
three months ended
March 31, 2015
were primarily due to a release of professional and general liability reserves, partially offset by reserve strengthening in commercial auto liability. Net reserve releases for the
three months ended
March 31, 2014
were primarily due to reserve releases related to 2013 catastrophes and professional liability, partially offset by workers' compensation discount accretion. For additional information, see MD&A - Critical Accounting Estimates, Reserve Roll-forwards and Development.
|
|
Three Months Ended March 31,
|
|||||||
Underwriting Summary
|
2015
|
2014
|
Change
|
|||||
Written premiums
|
$
|
939
|
|
$
|
927
|
|
1
|
%
|
Change in unearned premium reserve
|
(13
|
)
|
(1
|
)
|
NM
|
|
||
Earned premiums
|
952
|
|
928
|
|
3
|
%
|
||
Losses and loss adjustment expenses
|
|
|
|
|||||
Current accident year before catastrophes
|
618
|
|
590
|
|
5
|
%
|
||
Current accident year catastrophes
|
25
|
|
26
|
|
(4
|
%)
|
||
Prior accident years
|
(4
|
)
|
(34
|
)
|
88
|
%
|
||
Total losses and loss adjustment expenses
|
639
|
|
582
|
|
10
|
%
|
||
Amortization of DAC
|
90
|
|
85
|
|
6
|
%
|
||
Underwriting expenses
|
148
|
|
148
|
|
—
|
%
|
||
Underwriting gain
|
75
|
|
113
|
|
(34
|
%)
|
||
Net servicing income
|
1
|
|
—
|
|
NM
|
|
||
Net investment income
|
35
|
|
35
|
|
—
|
%
|
||
Net realized capital gains (losses)
|
1
|
|
(5
|
)
|
120
|
%
|
||
Other income (expenses)
|
(1
|
)
|
4
|
|
(125
|
%)
|
||
Income before income taxes
|
111
|
|
147
|
|
(24
|
)%
|
||
Income tax expense
|
35
|
|
48
|
|
(27
|
%)
|
||
Net income
|
$
|
76
|
|
$
|
99
|
|
(23
|
)%
|
|
Three Months Ended March 31,
|
|||||||
Written Premiums
|
2015
|
2014
|
Change
|
|||||
Product Line
|
|
|
|
|||||
Automobile
|
$
|
671
|
|
$
|
660
|
|
2
|
%
|
Homeowners
|
268
|
|
267
|
|
—
|
%
|
||
Total
|
$
|
939
|
|
$
|
927
|
|
1
|
%
|
Earned Premiums
|
|
|
|
|||||
Product Line
|
|
|
|
|||||
Automobile
|
$
|
655
|
|
$
|
636
|
|
3
|
%
|
Homeowners
|
297
|
|
292
|
|
2
|
%
|
||
Total
|
$
|
952
|
|
$
|
928
|
|
3
|
%
|
|
Three Months Ended March 31,
|
|||||
Premium Measures
|
2015
|
2014
|
||||
Policies in-force end of period (in thousands)
|
|
|
||||
Automobile
|
2,053
|
|
2,033
|
|
||
Homeowners
|
1,305
|
|
1,324
|
|
||
New business written premium
|
|
|
||||
Automobile
|
$
|
101
|
|
$
|
104
|
|
Homeowners
|
$
|
27
|
|
$
|
32
|
|
Policy count retention
|
|
|
||||
Automobile
|
84
|
%
|
87
|
%
|
||
Homeowners
|
85
|
%
|
87
|
%
|
||
Renewal written pricing increase
|
|
|
||||
Automobile
|
7
|
%
|
5
|
%
|
||
Homeowners
|
8
|
%
|
8
|
%
|
||
Renewal earned pricing increase
|
|
|
||||
Automobile
|
6
|
%
|
5
|
%
|
||
Homeowners
|
8
|
%
|
7
|
%
|
|
Three Months Ended March 31,
|
|||||
Underwriting Ratios
|
2015
|
2014
|
Change
|
|||
Loss and loss adjustment expense ratio
|
|
|
|
|||
Current accident year before catastrophes
|
64.9
|
|
63.6
|
|
(1.3
|
)
|
Current accident year catastrophes
|
2.6
|
|
2.8
|
|
0.2
|
|
Prior year development
|
(0.4
|
)
|
(3.7
|
)
|
(3.3
|
)
|
Total loss and loss adjustment expense ratio
|
67.1
|
|
62.7
|
|
(4.4
|
)
|
Expense ratio
|
25.0
|
|
25.1
|
|
0.1
|
|
Combined ratio
|
92.1
|
|
87.8
|
|
(4.3
|
)
|
Current accident year catastrophes and prior year development
|
2.2
|
|
(0.9
|
)
|
(3.1
|
)
|
Combined ratio before catastrophes and prior year development
|
89.9
|
|
88.7
|
|
(1.2
|
)
|
|
Three Months Ended March 31,
|
|||||
Product Combined Ratios
|
2015
|
2014
|
Change
|
|||
Automobile
|
95.4
|
|
92.6
|
|
(2.8
|
)
|
Homeowners
|
85.1
|
|
76.7
|
|
(8.4
|
)
|
•
|
Current accident year losses and loss adjustment expenses before catastrophes increased for the
three months ended
March 31, 2015
, compared to the prior year period, as a result of higher earned premiums, increased auto liability losses and increased auto physical damage severity. The current accident year loss and loss adjustment expense ratio before catastrophes of
64.9
in
2015
increased
1.3
points from
63.6
in
2014
. The increase primarily reflects higher loss costs, higher auto liability losses and increased physical damage severity, partially offset by strong earned pricing.
|
•
|
Current accident year catastrophe losses of
$25
, before tax, for the
three months ended
March 31, 2015
compared to
$26
for the prior year period. Catastrophe losses for both periods were primarily due to winter storms across various U.S. geographic regions.
|
•
|
Prior accident years reserve release of
$4
, before tax, for the
three months ended
March 31, 2015
compared to a release of
$34
, before tax, for the prior year period. Reserve releases for
2015
were primarily related to releases related to 2014 catastrophes offset by unfavorable development on accident year 2014 auto physical damage claims. Reserve releases for
2014
were primarily related to favorable development on accident year 2013 fire and water-related homeowners claims, and reserve releases related to fourth quarter 2013 catastrophes. For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.
|
|
Three Months Ended March 31,
|
|||||||
Underwriting Summary
|
2015
|
2014
|
Change
|
|||||
Losses and loss adjustment expenses [1]
|
$
|
4
|
|
$
|
1
|
|
NM
|
|
Underwriting expenses
|
6
|
|
7
|
|
(14
|
%)
|
||
Underwriting loss
|
(10
|
)
|
(8
|
)
|
(25
|
%)
|
||
Net investment income
|
35
|
|
35
|
|
—
|
%
|
||
Net realized capital gains
|
4
|
|
—
|
|
NM
|
|
||
Other income
|
1
|
|
—
|
|
NM
|
|
||
Income before income taxes
|
30
|
|
27
|
|
11
|
%
|
||
Income tax expense
|
7
|
|
5
|
|
40
|
%
|
||
Net income
|
$
|
23
|
|
$
|
22
|
|
5
|
%
|
[1]
|
Consists of prior year loss reserve development.
|
|
Three months ended March 31,
|
|||||||
Operating Summary
|
2015
|
2014
|
Change
|
|||||
Premiums and other considerations [1]
|
$
|
780
|
|
$
|
799
|
|
(2
|
)%
|
Net investment income
|
97
|
|
96
|
|
1
|
%
|
||
Net realized capital gains (losses)
|
(1
|
)
|
8
|
|
(113
|
)%
|
||
Total revenues
|
876
|
|
903
|
|
(3
|
)%
|
||
Benefits, losses and loss adjustment expenses
|
598
|
|
597
|
|
—
|
%
|
||
Amortization of deferred policy acquisition costs
|
8
|
|
9
|
|
(11
|
)%
|
||
Insurance operating costs and other expenses
|
200
|
|
228
|
|
(12
|
)%
|
||
Total benefits, losses and expenses
|
806
|
|
834
|
|
(3
|
)%
|
||
Income before income taxes
|
70
|
|
69
|
|
1
|
%
|
||
Income tax expense
|
18
|
|
18
|
|
—
|
%
|
||
Net income [1]
|
$
|
52
|
|
$
|
51
|
|
2
|
%
|
[1]
|
Group Benefits has a block of Association - Financial Institutions business that is subject to a profit sharing arrangement with third parties which was terminated on December 31, 2014. The Association - Financial Institutions business represented
$44
of premiums and other considerations and
$1
of net income for the three months ended March 31, 2014.
|
|
Three months ended March 31,
|
|||||||
Premiums and other considerations
|
2015
|
2014
|
Change
|
|||||
Fully insured – ongoing premiums
|
$
|
763
|
|
$
|
776
|
|
(2
|
)%
|
Buyout premiums
|
—
|
|
8
|
|
(100
|
)%
|
||
Other
|
17
|
|
15
|
|
13
|
%
|
||
Total premiums and other considerations
|
$
|
780
|
|
$
|
799
|
|
(2
|
)%
|
Fully insured ongoing sales, excluding buyouts
|
$
|
300
|
|
$
|
180
|
|
67
|
%
|
|
Three months ended March 31,
|
||||
Ratios, excluding buyouts
|
2015
|
2014
|
Change
|
||
Group disability loss ratio
|
81.8
|
%
|
82.4
|
%
|
0.6
|
Group life loss ratio
|
73.2
|
%
|
67.9
|
%
|
(5.3)
|
Total loss ratio
|
76.7
|
%
|
74.5
|
%
|
(2.2)
|
Expense ratio
|
26.7
|
%
|
30.0
|
%
|
3.3
|
Selected ratios excluding Association - Financial Institutions
|
|
|
|
||
Group life loss ratio, excluding Association - Financial Institutions
|
73.2
|
%
|
74.0
|
%
|
0.8
|
Loss ratio, excluding Association - Financial Institutions
|
76.7
|
%
|
77.6
|
%
|
0.9
|
Expense ratio, excluding Association - Financial Institutions
|
26.7
|
%
|
27.4
|
%
|
0.7
|
|
Three months ended March 31,
|
|||||
After-tax margin
|
2015
|
2014
|
Change
|
|||
After-tax margin (excluding buyouts)
|
5.9
|
%
|
5.7
|
%
|
0.2
|
|
Effect of net capital realized gains (losses), net of tax on after-tax margin
|
—
|
%
|
0.6
|
%
|
(0.6
|
)
|
After-tax core earnings margin (excluding buyouts)
|
5.9
|
%
|
5.1
|
%
|
0.8
|
|
|
Three Months Ended March 31,
|
|||||||
Operating Summary
|
2015
|
2014
|
Change
|
|||||
Fee income and other
|
$
|
179
|
|
$
|
174
|
|
3
|
%
|
Total revenues
|
179
|
|
174
|
|
3
|
%
|
||
Amortization of DAC
|
5
|
|
9
|
|
(44
|
)%
|
||
Insurance operating costs and other expenses
|
140
|
|
132
|
|
6
|
%
|
||
Total benefits, losses and expenses
|
145
|
|
141
|
|
3
|
%
|
||
Income before income taxes
|
34
|
|
33
|
|
3
|
%
|
||
Income tax expense
|
12
|
|
12
|
|
—
|
%
|
||
Net income
|
$
|
22
|
|
$
|
21
|
|
5
|
%
|
|
|
|
|
|||||
Average Total Mutual Funds segment AUM
|
94,778
|
|
97,519
|
|
(3
|
)%
|
||
ROA, core earnings
|
$
|
9.3
|
|
$
|
8.6
|
|
8
|
%
|
|
|
|
|
|||||
Mutual Funds segment AUM
|
|
|
|
|||||
Mutual Fund AUM - beginning of period
|
$
|
73,035
|
|
$
|
70,918
|
|
3
|
%
|
Sales
|
4,710
|
|
3,692
|
|
28
|
%
|
||
Redemptions
|
(4,181
|
)
|
(3,674
|
)
|
(14
|
)%
|
||
Net Flows
|
529
|
|
18
|
|
NM
|
|
||
Change in market value and other
|
2,132
|
|
2,410
|
|
(12
|
)%
|
||
Mutual Fund AUM - end of period
|
$
|
75,696
|
|
$
|
73,346
|
|
3
|
%
|
Talcott AUM [1]
|
$
|
20,240
|
|
$
|
24,957
|
|
(19
|
)%
|
Total Mutual Funds segment AUM
|
$
|
95,936
|
|
$
|
98,303
|
|
(2
|
)%
|
|
|
|
|
|||||
Mutual Fund AUM by Asset Class
|
|
|
|
|||||
Equity
|
$
|
47,131
|
|
$
|
44,489
|
|
6
|
%
|
Fixed Income
|
14,267
|
|
14,661
|
|
(3
|
)%
|
||
Multi-Strategy Investments [2]
|
14,298
|
|
14,196
|
|
1
|
%
|
||
Mutual Fund AUM
|
$
|
75,696
|
|
$
|
73,346
|
|
3
|
%
|
[1]
|
Talcott AUM consist of Company-sponsored mutual fund assets held in separate accounts supporting variable insurance and investment products.
|
[2]
|
Includes balanced, allocation, and alternative investment products.
|
|
||||||||
|
Three Months Ended March 31,
|
|||||||
Operating Summary
|
2015
|
2014
|
Change
|
|||||
Earned premiums, fees and other
|
$
|
285
|
|
$
|
353
|
|
(19
|
%)
|
Net investment income
|
382
|
|
400
|
|
(5
|
%)
|
||
Realized capital gains (losses):
|
|
|
|
|
||||
Total other-than-temporary impairment (“OTTI”) losses
|
(5
|
)
|
(4
|
)
|
(25
|
%)
|
||
Other net realized capital gains (losses)
|
(20
|
)
|
7
|
|
NM
|
|
||
Net realized capital gains (losses)
|
(25
|
)
|
3
|
|
NM
|
|
||
Total revenues
|
642
|
|
756
|
|
(15
|
%)
|
||
Benefits, losses and loss adjustment expenses
|
338
|
|
409
|
|
(17
|
%)
|
||
Amortization of DAC
|
50
|
|
67
|
|
(25
|
%)
|
||
Insurance operating costs and other expenses
|
121
|
|
148
|
|
(18
|
%)
|
||
Total benefits, losses and expenses
|
509
|
|
624
|
|
(18
|
%)
|
||
Income from continuing operations before income taxes
|
133
|
|
132
|
|
1
|
%
|
||
Income tax expense
|
22
|
|
16
|
|
38
|
%
|
||
Income from continuing operations, net of tax
|
111
|
|
116
|
|
(4
|
%)
|
||
Income from discontinued operations, net of tax [1]
|
—
|
|
29
|
|
(100
|
%)
|
||
Net income
|
$
|
111
|
|
$
|
145
|
|
(23
|
%)
|
Assets Under Management (end of period)
|
|
|
|
|||||
Variable annuity account value
|
$
|
51,500
|
|
$
|
77,347
|
|
(33
|
%)
|
Fixed Market Value Adjusted annuity and other account value
|
8,666
|
|
13,046
|
|
(34
|
%)
|
||
Institutional annuity account value
|
15,663
|
|
16,951
|
|
(8
|
%)
|
||
Other account value [2]
|
107,543
|
|
107,918
|
|
—
|
%
|
||
Total account value [3]
|
$
|
183,372
|
|
$
|
214,240
|
|
(14
|
%)
|
Variable Annuity Account Value [4]
|
|
|
|
|||||
Account value, beginning of period
|
$
|
52,861
|
|
$
|
61,812
|
|
(14
|
%)
|
Net outflows
|
(2,296
|
)
|
(2,950
|
)
|
22
|
%
|
||
Change in market value and other
|
935
|
|
685
|
|
36
|
%
|
||
Account value, end of period
|
$
|
51,500
|
|
$
|
59,547
|
|
(14
|
%)
|
[1]
|
Represents the income from operations of HLIKK. For additional information, see Note
12
-
Discontinued Operations
of Notes to Condensed Consolidated Financial Statements.
|
[2]
|
Other account value includes
$52.6 billion
,
$15.0 billion
, and
$40.0 billion
as of
March 31, 2015
for the Retirement Plans, Individual Life and Private Placement Life Insurance, respectively. Other account value includes
$54.3 billion
,
$14.7 billion
,
$39.0 billion
at
March 31, 2014
for the Retirement Plans, Individual Life, Private Placement Life Insurance businesses, respectively. Account
values
a
ssociated with the Retirement Plans and Individual Life businesses no longer generate asset-based fee income due to the sales of these businesses through reinsurance transactions.
|
[3]
|
Included in the total account value is approximately
$(1.0) billion
as of
March 31, 2014
related to a Talcott Resolution intra-segment funding agreement which is eliminated in consolidation. Also included in the variable and fixed annuity account values as of
March 31, 2014
is account value related to the Japan businesses sold on June 30, 2014.
|
[4]
|
Excludes account value related to the Japan business sold on June 30, 2014.
|
|
Three Months Ended March 31,
|
|||||||
Operating Summary
|
2015
|
2014
|
Change
|
|||||
Fee income [1]
|
$
|
2
|
|
$
|
3
|
|
(33
|
%)
|
Net investment income
|
3
|
|
2
|
|
50
|
%
|
||
Net realized capital gains (losses)
|
18
|
|
(9
|
)
|
NM
|
|
||
Total revenues
|
23
|
|
(4
|
)
|
NM
|
|
||
Insurance operating costs and other expenses [1]
|
17
|
|
32
|
|
(47
|
%)
|
||
Interest expense
|
94
|
|
95
|
|
(1
|
%)
|
||
Total benefits, losses and expenses
|
111
|
|
127
|
|
(13
|
%)
|
||
Loss from continuing operations before income taxes
|
(88
|
)
|
(131
|
)
|
33
|
%
|
||
Income tax benefit
|
(31
|
)
|
(46
|
)
|
33
|
%
|
||
Net loss
|
$
|
(57
|
)
|
$
|
(85
|
)
|
33
|
%
|
[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 included in insurance operating costs and other expenses.
|
•
|
Insurance Risk
|
•
|
Operational Risk
|
•
|
Financial Risk
|
Coverage
|
Treaty term
|
% of layer(s) reinsurance
|
Per occurrence limit
|
|
Retention
|
||||
Principal property catastrophe program covering property catastrophe losses from a single event [1]
|
1/1/2015 to 1/1/2016
|
90%
|
$
|
850
|
|
|
$
|
350
|
|
Reinsurance with the FHCF covering Florida Personal Lines property catastrophe losses from a single event
|
6/1/2014 to 6/1/2015
|
90%
|
$
|
109
|
|
[2]
|
$
|
41
|
|
Workers compensation losses arising from a single catastrophe event [3]
|
7/1/2014 to 7/1/2015
|
80%
|
$
|
350
|
|
|
$
|
100
|
|
[1]
|
Certain aspects of our catastrophe treaty have terms that extend beyond the traditional one year term.
|
[2]
|
The per occurrence limit on the FHCF treaty is $109 for the 6/1/2014 to 6/1/2015 treaty year based on the Company's election to purchase the required coverage from FHCF. Coverage is based on the best available information from FHCF, which was updated in January 2015.
|
[3]
|
In addition, to the preceding limit shown, the workers compensation reinsurance includes a non-catastrophe, industrial accident layer, 80% of a $30 per event limit in excess a $20 retention.
|
Reinsurance Recoverables
|
As of March 31, 2015
|
As of December 31, 2014
|
||||
Paid loss and loss adjustment expenses
|
$
|
131
|
|
$
|
133
|
|
Unpaid loss and loss adjustment expenses
|
2,824
|
|
2,868
|
|
||
Gross reinsurance recoverables
|
$
|
2,955
|
|
$
|
3,001
|
|
Less: Allowance for uncollectible reinsurance
|
(273
|
)
|
(271
|
)
|
||
Net reinsurance recoverables
|
$
|
2,682
|
|
$
|
2,730
|
|
Reinsurance Recoverables
|
As of March 31, 2015
|
As of December 31, 2014
|
||||
Future policy benefits and unpaid loss and loss adjustment expenses and other policyholder funds and benefits payable
|
20,055
|
|
20,190
|
|
||
Gross reinsurance recoverables
|
$
|
20,055
|
|
$
|
20,190
|
|
Less: Allowance for uncollectible reinsurance [1]
|
—
|
|
—
|
|
||
Net reinsurance recoverables
|
$
|
20,055
|
|
$
|
20,190
|
|
•
|
Liquidity Risk
|
•
|
Interest Rate Risk
|
•
|
Foreign Currency Exchange Risk
|
•
|
Equity Risk
|
•
|
Credit Risk
|
•
|
reduce the value of assets under management and the amount of fee income generated from those assets;
|
•
|
increase the liability for GMWB benefits resulting in realized capital losses;
|
•
|
increase the value of derivative assets used to hedge product guarantees resulting in realized capital gains;
|
•
|
increase the costs of the hedging instruments we use in our hedging program;
|
•
|
increase the Company’s net amount at risk ("NAR") for GMDB and GMWB benefits;
|
•
|
increase the amount of required assets to be held backing variable annuity guarantees to maintain required regulatory reserve levels and targeted risk based capital ratios; and
|
•
|
decrease the Company’s estimated future gross profits, resulting in a DAC unlock charge. See Estimated Gross Profits Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity Contracts within the Critical Accounting Estimates section of the MD&A for further information.
|
Total Variable Annuity Guarantees
|
||||||||||
As of March 31, 2015
|
||||||||||
($ in billions)
|
Account
Value
|
Gross Net
Amount at Risk
|
Retained Net
Amount at Risk
|
% of Contracts In
the Money [2]
|
% In the
Money [2] [3]
|
|||||
Variable Annuity [1]
|
|
|
|
|
|
|||||
GMDB
|
51.5
|
|
3.7
|
|
0.7
|
|
20
|
%
|
16
|
%
|
GMWB
|
24.0
|
|
0.2
|
|
0.1
|
|
6
|
%
|
12
|
%
|
Total Variable Annuity Guarantees
|
|||||||||||||
As of December 31, 2014
|
|||||||||||||
($ in billions)
|
Account
Value
|
Gross Net
Amount at Risk
|
Retained Net
Amount at Risk
|
% of Contracts In
the Money [2] |
% In the
Money [2] [3] |
||||||||
Variable Annuity [1]
|
|
|
|
|
|
||||||||
GMDB
|
$
|
52.9
|
|
$
|
3.8
|
|
$
|
0.8
|
|
23
|
%
|
14
|
%
|
GMWB
|
24.8
|
|
0.2
|
|
0.1
|
|
6
|
%
|
11
|
%
|
[1]
|
Policies with a guaranteed living benefit also have a guaranteed death benefit. The NAR for each benefit is shown; however these benefits are not additive. When a policy terminates due to death, any NAR related to GMWB is released. Similarly, when a policy goes into benefit status on a GMWB, the GMDB NAR is reduced to zero.
|
[2]
|
Excludes contracts that are fully reinsured.
|
[3]
|
For all contracts that are “in the money”, this represents the percentage by which the average contract was in the money.
|
Variable Annuity Guarantees [1]
|
U.S. GAAP Treatment [1]
|
Primary Market Risk Exposures [1]
|
GMDB and life-contingent component of the GMWB
|
Accumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paid
|
Equity Market Levels
|
GMWB (excluding life-contingent portions)
|
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.
|
GAAP Sensitivity Analysis
|
As of March 31, 2015
|
|||||||||||||||||
(before tax and DAC) [1]
|
GMWB
|
Macro
|
||||||||||||||||
Equity Market Return
|
-20
|
%
|
-10
|
%
|
10
|
%
|
-20
|
%
|
-10
|
%
|
10
|
%
|
||||||
Potential Net Fair Value Impact
|
$
|
(25
|
)
|
$
|
(10
|
)
|
$
|
6
|
|
$
|
163
|
|
$
|
65
|
|
$
|
(44
|
)
|
Interest Rates
|
-50 bps
|
|
-25 bps
|
|
25 bps
|
|
-50 bps
|
|
-25 bps
|
|
25 bps
|
|
||||||
Potential Net Fair Value Impact
|
$
|
(2
|
)
|
$
|
(1
|
)
|
$
|
—
|
|
$
|
14
|
|
$
|
7
|
|
$
|
(6
|
)
|
Implied Volatilities
|
10
|
%
|
2
|
%
|
-10
|
%
|
10
|
%
|
2
|
%
|
-10
|
%
|
||||||
Potential Net Fair Value Impact
|
$
|
(14
|
)
|
$
|
(2
|
)
|
$
|
7
|
|
$
|
110
|
|
$
|
22
|
|
$
|
(108
|
)
|
[1]
|
These sensitivities are based on the following key market levels as of
March 31, 2015
: 1) S&P of
2068
; 2) 10yr US swap rate of
2.07%
; and 3) S&P 10yr volatility of
27.59%
.
|
•
|
The sensitivity analysis is only valid as of the measurement date and assumes instantaneous changes in the capital market factors and no ability to rebalance hedge positions prior to the market changes;
|
•
|
Changes to the underlying hedging program, policyholder behavior, and variation in underlying fund performance relative to the hedged index, which could materially impact the liability; and
|
•
|
The impact of elapsed time on liabilities or hedge assets, any non-parallel shifts in capital market factors, or correlated moves across the sensitivities.
|
•
|
In general, as equity market levels and interest rates decline, the amount and volatility of both our actual potential obligation, as well as the related statutory surplus and capital margin for death and living benefit guarantees associated with variable annuity contracts can be materially negatively affected, sometimes at a greater than linear rate. Other market factors that can impact statutory surplus, reserve levels and capital margin include differences in performance of variable subaccounts relative to indices and/or realized equity and interest rate volatilities. In addition, as equity market levels increase, generally surplus levels will increase. RBC ratios will also tend to increase when equity markets increase. However, as a result of a number of factors and market conditions, including the level of hedging costs and other risk transfer activities, reserve requirements for death and living benefit guarantees and RBC requirements could increase with rising equity markets, resulting in lower RBC ratios. Non-market factors, which can also impact the amount and volatility of both our actual potential obligation, as well as the related statutory surplus and capital margin, include actual and estimated policyholder behavior experience as it pertains to lapsation, partial withdrawals, and mortality.
|
•
|
As the value of certain fixed-income and equity securities in our investment portfolio decreases, due in part to credit spread widening, statutory surplus and RBC ratios may decrease.
|
•
|
As the value of certain derivative instruments that do not get hedge accounting decreases, statutory surplus and RBC ratios may decrease.
|
•
|
Our statutory surplus is also impacted by widening credit spreads as a result of the accounting for the assets and liabilities in our fixed market value adjusted (“MVA”) annuities. Statutory separate account assets supporting the fixed MVA annuities are recorded at fair value. In determining the statutory reserve for the fixed MVA annuities, we are required to use current crediting rates in the U.S. In many capital market scenarios, current crediting rates in the U.S. are highly correlated with market rates implicit in the fair value of statutory separate account assets. As a result, the change in statutory reserve from period to period will likely substantially offset the change in the fair value of the statutory separate account assets. However, in periods of volatile credit markets, such as we have experienced in 2008 and 2009, actual credit spreads on investment assets may increase sharply for certain sub-sectors of the overall credit market, resulting in statutory separate account asset market value losses. As actual credit spreads are not fully reflected in the current crediting rates in the U.S. the calculation of statutory reserves will not substantially offset the change in fair value of the statutory separate account assets resulting in reductions in statutory surplus. This has resulted and may continue to result in the need to devote significant additional capital to support the product.
|
•
|
With respect to our fixed annuity business, sustained low interest rates may result in a reduction in statutory surplus and an increase in NAIC required capital.
|
Fixed Maturities by Credit Quality
|
||||||||||||||||
|
March 31, 2015
|
December 31, 2014
|
||||||||||||||
|
Amortized Cost
|
Fair Value
|
Percent of Total Fair Value
|
Amortized Cost
|
Fair Value
|
Percent of Total Fair Value
|
||||||||||
United States Government/Government agencies
|
$
|
7,682
|
|
$
|
8,214
|
|
13.6
|
%
|
$
|
7,135
|
|
$
|
7,596
|
|
12.8
|
%
|
AAA
|
7,776
|
|
8,100
|
|
13.4
|
%
|
6,963
|
|
7,251
|
|
12.2
|
%
|
||||
AA
|
9,206
|
|
10,020
|
|
16.5
|
%
|
9,258
|
|
10,056
|
|
16.9
|
%
|
||||
A
|
15,350
|
|
16,973
|
|
28.0
|
%
|
15,250
|
|
16,717
|
|
28.2
|
%
|
||||
BBB
|
12,877
|
|
13,946
|
|
23.0
|
%
|
13,464
|
|
14,397
|
|
24.2
|
%
|
||||
BB & below
|
3,213
|
|
3,302
|
|
5.5
|
%
|
3,292
|
|
3,367
|
|
5.7
|
%
|
||||
Total fixed maturities, AFS
|
$
|
56,104
|
|
$
|
60,555
|
|
100
|
%
|
$
|
55,362
|
|
$
|
59,384
|
|
100
|
%
|
Securities by Type
|
|||||||||||||||||||||||||||||||||||||
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||||||||||||||
|
Cost or Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Percent of Total Fair Value
|
|
Cost or Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Percent of Total Fair Value
|
||||||||||||||||||
ABS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Consumer loans
|
$
|
2,397
|
|
|
$
|
16
|
|
|
$
|
(27
|
)
|
|
$
|
2,386
|
|
|
3.9
|
%
|
|
$
|
2,052
|
|
|
$
|
14
|
|
|
$
|
(28
|
)
|
|
$
|
2,038
|
|
|
3.4
|
%
|
Small business
|
159
|
|
|
15
|
|
|
(7
|
)
|
|
167
|
|
|
0.3
|
%
|
|
166
|
|
|
14
|
|
|
(8
|
)
|
|
172
|
|
|
0.3
|
%
|
||||||||
Other
|
441
|
|
|
10
|
|
|
—
|
|
|
451
|
|
|
0.7
|
%
|
|
252
|
|
|
11
|
|
|
(1
|
)
|
|
262
|
|
|
0.4
|
%
|
||||||||
Collateralized debt obligations ("CDOs")
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
CLOs
|
2,404
|
|
|
7
|
|
|
(14
|
)
|
|
2,397
|
|
|
4.0
|
%
|
|
2,279
|
|
|
4
|
|
|
(17
|
)
|
|
2,266
|
|
|
3.8
|
%
|
||||||||
Commercial real estate ("CREs")
|
104
|
|
|
82
|
|
|
(7
|
)
|
|
179
|
|
|
0.3
|
%
|
|
114
|
|
|
88
|
|
|
(9
|
)
|
|
193
|
|
|
0.3
|
%
|
||||||||
Other [1]
|
383
|
|
|
26
|
|
|
(1
|
)
|
|
406
|
|
|
0.7
|
%
|
|
383
|
|
|
6
|
|
|
(10
|
)
|
|
382
|
|
|
0.6
|
%
|
||||||||
Commercial mortgage-backed securities ("CMBS")
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Agency backed [2]
|
1,174
|
|
|
56
|
|
|
—
|
|
|
1,230
|
|
|
2.0
|
%
|
|
1,136
|
|
|
45
|
|
|
(1
|
)
|
|
1,180
|
|
|
2.0
|
%
|
||||||||
Bonds
|
2,689
|
|
|
142
|
|
|
(3
|
)
|
|
2,828
|
|
|
4.7
|
%
|
|
2,594
|
|
|
126
|
|
|
(4
|
)
|
|
2,716
|
|
|
4.6
|
%
|
||||||||
Interest only (“IOs”)
|
582
|
|
|
25
|
|
|
(13
|
)
|
|
594
|
|
|
1.0
|
%
|
|
505
|
|
|
25
|
|
|
(11
|
)
|
|
519
|
|
|
0.9
|
%
|
||||||||
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Basic industry
|
1,447
|
|
|
110
|
|
|
(9
|
)
|
|
1,548
|
|
|
2.6
|
%
|
|
1,673
|
|
|
105
|
|
|
(22
|
)
|
|
1,756
|
|
|
3.0
|
%
|
||||||||
Capital goods
|
1,778
|
|
|
186
|
|
|
(4
|
)
|
|
1,960
|
|
|
3.2
|
%
|
|
1,880
|
|
|
192
|
|
|
(4
|
)
|
|
2,068
|
|
|
3.5
|
%
|
||||||||
Consumer cyclical
|
1,731
|
|
|
149
|
|
|
(5
|
)
|
|
1,875
|
|
|
3.1
|
%
|
|
1,647
|
|
|
128
|
|
|
(8
|
)
|
|
1,767
|
|
|
3.0
|
%
|
||||||||
Consumer non-cyclical
|
3,526
|
|
|
341
|
|
|
(3
|
)
|
|
3,864
|
|
|
6.4
|
%
|
|
3,473
|
|
|
335
|
|
|
(5
|
)
|
|
3,803
|
|
|
6.4
|
%
|
||||||||
Energy
|
2,643
|
|
|
267
|
|
|
(31
|
)
|
|
2,879
|
|
|
4.8
|
%
|
|
3,092
|
|
|
252
|
|
|
(49
|
)
|
|
3,295
|
|
|
5.5
|
%
|
||||||||
Financial services
|
5,297
|
|
|
427
|
|
|
(67
|
)
|
|
5,657
|
|
|
9.3
|
%
|
|
4,942
|
|
|
405
|
|
|
(94
|
)
|
|
5,253
|
|
|
8.8
|
%
|
||||||||
Tech./comm.
|
3,207
|
|
|
416
|
|
|
(4
|
)
|
|
3,619
|
|
|
6.0
|
%
|
|
3,150
|
|
|
370
|
|
|
(12
|
)
|
|
3,508
|
|
|
5.9
|
%
|
||||||||
Transportation
|
888
|
|
|
87
|
|
|
(2
|
)
|
|
973
|
|
|
1.6
|
%
|
|
891
|
|
|
82
|
|
|
(4
|
)
|
|
969
|
|
|
1.6
|
%
|
||||||||
Utilities
|
4,045
|
|
|
556
|
|
|
(12
|
)
|
|
4,589
|
|
|
7.6
|
%
|
|
4,278
|
|
|
496
|
|
|
(13
|
)
|
|
4,761
|
|
|
8.0
|
%
|
||||||||
Other
|
136
|
|
|
19
|
|
|
—
|
|
|
155
|
|
|
0.3
|
%
|
|
162
|
|
|
17
|
|
|
—
|
|
|
179
|
|
|
0.3
|
%
|
||||||||
Foreign govt./govt. agencies
|
1,310
|
|
|
69
|
|
|
(14
|
)
|
|
1,365
|
|
|
2.3
|
%
|
|
1,592
|
|
|
73
|
|
|
(29
|
)
|
|
1,636
|
|
|
2.8
|
%
|
||||||||
Municipal bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Taxable
|
1,180
|
|
|
153
|
|
|
(1
|
)
|
|
1,332
|
|
|
2.2
|
%
|
|
1,135
|
|
|
135
|
|
|
(2
|
)
|
|
1,268
|
|
|
2.1
|
%
|
||||||||
Tax-exempt
|
10,476
|
|
|
1,036
|
|
|
(2
|
)
|
|
11,510
|
|
|
19.0
|
%
|
|
10,600
|
|
|
1,006
|
|
|
(3
|
)
|
|
11,603
|
|
|
19.5
|
%
|
||||||||
RMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Agency
|
2,364
|
|
|
108
|
|
|
(1
|
)
|
|
2,471
|
|
|
4.1
|
%
|
|
2,448
|
|
|
98
|
|
|
(2
|
)
|
|
2,544
|
|
|
4.3
|
%
|
||||||||
Non-agency
|
78
|
|
|
3
|
|
|
—
|
|
|
81
|
|
|
0.1
|
%
|
|
81
|
|
|
3
|
|
|
—
|
|
|
84
|
|
|
0.1
|
%
|
||||||||
Alt-A
|
107
|
|
|
1
|
|
|
—
|
|
|
108
|
|
|
0.2
|
%
|
|
55
|
|
|
1
|
|
|
—
|
|
|
56
|
|
|
0.1
|
%
|
||||||||
Sub-prime
|
1,414
|
|
|
20
|
|
|
(16
|
)
|
|
1,418
|
|
|
2.3
|
%
|
|
1,231
|
|
|
20
|
|
|
(17
|
)
|
|
1,234
|
|
|
2.1
|
%
|
||||||||
U.S. Treasuries
|
4,144
|
|
|
371
|
|
|
(2
|
)
|
|
4,513
|
|
|
7.5
|
%
|
|
3,551
|
|
|
326
|
|
|
(5
|
)
|
|
3,872
|
|
|
6.5
|
%
|
||||||||
Fixed maturities, AFS
|
56,104
|
|
|
4,698
|
|
|
(245
|
)
|
|
60,555
|
|
|
100
|
%
|
|
55,362
|
|
|
4,377
|
|
|
(358
|
)
|
|
59,384
|
|
|
100
|
%
|
||||||||
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Financial services
|
129
|
|
|
13
|
|
|
—
|
|
|
142
|
|
|
19.0
|
%
|
|
149
|
|
|
13
|
|
|
—
|
|
|
162
|
|
|
23.2
|
%
|
||||||||
Other
|
597
|
|
|
35
|
|
|
(28
|
)
|
|
604
|
|
|
81.0
|
%
|
|
527
|
|
|
37
|
|
|
(27
|
)
|
|
537
|
|
|
76.8
|
%
|
||||||||
Equity securities, AFS
|
726
|
|
|
48
|
|
|
(28
|
)
|
|
746
|
|
|
100
|
%
|
|
676
|
|
|
50
|
|
|
(27
|
)
|
|
699
|
|
|
100
|
%
|
||||||||
Total AFS securities
|
$
|
56,830
|
|
|
$
|
4,746
|
|
|
$
|
(273
|
)
|
|
$
|
61,301
|
|
|
|
|
$
|
56,038
|
|
|
$
|
4,427
|
|
|
$
|
(385
|
)
|
|
$
|
60,083
|
|
|
|
||
Fixed maturities, FVO
|
|
|
|
|
|
|
$
|
520
|
|
|
|
|
|
|
|
|
|
|
$
|
488
|
|
|
|
||||||||||||||
Equity, FVO [3]
|
|
|
|
|
|
|
$
|
402
|
|
|
|
|
|
|
|
|
|
|
$
|
348
|
|
|
|
[1]
|
Gross unrealized gains (losses) exclude the fair value of bifurcated embedded derivative features of certain securities. Changes in value are recorded in net realized capital gains (losses).
|
[2]
|
Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
|
[3]
|
Included in equity securities, AFS on the Condensed Consolidated Balance Sheets.
|
|
March 31, 2015
|
|||||||||||||||||
|
Corporate & Equity Securities [1]
|
Foreign govt./govt. agencies [1][2]
|
Total
|
|||||||||||||||
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||||||
Investment grade
|
$
|
2,419
|
|
$
|
2,692
|
|
$
|
206
|
|
$
|
206
|
|
$
|
2,625
|
|
$
|
2,898
|
|
Below investment grade
|
287
|
|
262
|
|
19
|
|
18
|
|
306
|
|
280
|
|
||||||
Equity, AFS
|
19
|
|
18
|
|
—
|
|
—
|
|
19
|
|
18
|
|
||||||
Total energy exposure
|
$
|
2,725
|
|
$
|
2,972
|
|
$
|
225
|
|
$
|
224
|
|
$
|
2,950
|
|
$
|
3,196
|
|
|
December 31, 2014
|
|||||||||||||||||
|
Corporate & Equity Securities [1]
|
Foreign govt./govt. agencies [1][2]
|
Total
|
|||||||||||||||
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||||||
Investment grade
|
$
|
2,923
|
|
$
|
3,162
|
|
$
|
268
|
|
$
|
266
|
|
$
|
3,191
|
|
$
|
3,428
|
|
Below investment grade
|
288
|
|
266
|
|
36
|
|
32
|
|
324
|
|
298
|
|
||||||
Equity, AFS
|
23
|
|
21
|
|
—
|
|
—
|
|
23
|
|
21
|
|
||||||
Total energy exposure
|
$
|
3,234
|
|
$
|
3,449
|
|
$
|
304
|
|
$
|
298
|
|
$
|
3,538
|
|
$
|
3,747
|
|
[1]
|
Included in fixed maturities, AFS and FVO, equity, AFS and short-term investments on the Condensed Consolidated Balance Sheets. Excludes equity securities, FVO with cost and fair value of $45 and $45, respectively, as of December 31, 2014, that are hedged with total return swaps. The Company did not hold any equity securities, FVO as of March 31, 2015.
|
[2]
|
Includes sovereigns for which oil exports are greater than 4% of gross domestic product.
|
|
March 31, 2015
|
December 31, 2014
|
||||||||||
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||
Argentina
|
$
|
2
|
|
$
|
2
|
|
$
|
2
|
|
$
|
2
|
|
Brazil
|
33
|
|
30
|
|
123
|
|
120
|
|
||||
India
|
27
|
|
26
|
|
37
|
|
37
|
|
||||
Indonesia
|
66
|
|
67
|
|
82
|
|
80
|
|
||||
Kazakhstan
|
51
|
|
46
|
|
79
|
|
73
|
|
||||
Lebanon
|
21
|
|
21
|
|
29
|
|
29
|
|
||||
South Africa
|
53
|
|
53
|
|
54
|
|
53
|
|
||||
Turkey
|
48
|
|
48
|
|
65
|
|
67
|
|
||||
Ukraine
|
1
|
|
1
|
|
3
|
|
3
|
|
||||
Uruguay
|
17
|
|
18
|
|
16
|
|
17
|
|
||||
Venezuela
|
2
|
|
2
|
|
4
|
|
2
|
|
||||
Other
|
80
|
|
81
|
|
97
|
|
96
|
|
||||
Total [1]
|
$
|
401
|
|
$
|
395
|
|
$
|
591
|
|
$
|
579
|
|
[1]
|
Includes an amortized cost and fair value of $207 and $196, respectively, as of March 31, 2015 and an amortized cost and fair value of $137 and $131, respectively, as of December 31, 2014 included in the exposure to the preceding energy sector table.
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
|
Amortized Cost
|
|
Fair Value
|
|
Net Unrealized Gain/(Loss)
|
|
Amortized Cost
|
|
Fair Value
|
|
Net Unrealized Gain/(Loss)
|
||||||||||||
AAA
|
$
|
52
|
|
|
$
|
54
|
|
|
$
|
2
|
|
|
$
|
31
|
|
|
$
|
34
|
|
|
$
|
3
|
|
AA
|
494
|
|
|
528
|
|
|
34
|
|
|
401
|
|
|
436
|
|
|
35
|
|
||||||
A
|
3,019
|
|
|
3,234
|
|
|
215
|
|
|
2,610
|
|
|
2,804
|
|
|
194
|
|
||||||
BBB
|
1,550
|
|
|
1,641
|
|
|
91
|
|
|
1,681
|
|
|
1,734
|
|
|
53
|
|
||||||
BB & below
|
311
|
|
|
342
|
|
|
31
|
|
|
368
|
|
|
407
|
|
|
39
|
|
||||||
Total
|
$
|
5,426
|
|
|
$
|
5,799
|
|
|
$
|
373
|
|
|
$
|
5,091
|
|
|
$
|
5,415
|
|
|
$
|
324
|
|
March 31, 2015
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
BB and Below
|
|
Total
|
||||||||||||||||||||||||||||||||||||
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||||||||||||||||||
2004 & Prior
|
$
|
14
|
|
|
$
|
15
|
|
|
$
|
53
|
|
|
$
|
61
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
19
|
|
|
$
|
82
|
|
|
$
|
95
|
|
2005
|
120
|
|
|
133
|
|
|
64
|
|
|
66
|
|
|
116
|
|
|
117
|
|
|
63
|
|
|
64
|
|
|
25
|
|
|
25
|
|
|
388
|
|
|
405
|
|
||||||||||||
2006
|
285
|
|
|
295
|
|
|
108
|
|
|
114
|
|
|
120
|
|
|
126
|
|
|
63
|
|
|
65
|
|
|
22
|
|
|
23
|
|
|
598
|
|
|
623
|
|
||||||||||||
2007
|
225
|
|
|
235
|
|
|
156
|
|
|
168
|
|
|
78
|
|
|
83
|
|
|
16
|
|
|
16
|
|
|
71
|
|
|
72
|
|
|
546
|
|
|
574
|
|
||||||||||||
2008
|
40
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
43
|
|
||||||||||||
2009
|
11
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
||||||||||||
2010
|
18
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
20
|
|
||||||||||||
2011
|
56
|
|
|
62
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
68
|
|
||||||||||||
2012
|
40
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
19
|
|
|
30
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
88
|
|
|
91
|
|
||||||||||||
2013
|
16
|
|
|
17
|
|
|
95
|
|
|
102
|
|
|
74
|
|
|
81
|
|
|
10
|
|
|
11
|
|
|
1
|
|
|
1
|
|
|
196
|
|
|
212
|
|
||||||||||||
2014
|
350
|
|
|
369
|
|
|
66
|
|
|
69
|
|
|
59
|
|
|
61
|
|
|
6
|
|
|
6
|
|
|
2
|
|
|
2
|
|
|
483
|
|
|
507
|
|
||||||||||||
2015
|
87
|
|
|
88
|
|
|
58
|
|
|
58
|
|
|
32
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
177
|
|
|
179
|
|
||||||||||||
Total
|
$
|
1,262
|
|
|
$
|
1,330
|
|
|
$
|
600
|
|
|
$
|
638
|
|
|
$
|
497
|
|
|
$
|
520
|
|
|
$
|
194
|
|
|
$
|
198
|
|
|
$
|
136
|
|
|
$
|
142
|
|
|
$
|
2,689
|
|
|
$
|
2,828
|
|
Credit protection
|
32.5%
|
|
26.1%
|
|
22.5%
|
|
17.9%
|
|
23.0%
|
|
27.7%
|
December 31, 2014
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
BB and Below
|
|
Total
|
||||||||||||||||||||||||||||||||||||
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
|
Amortized Cost
|
|
Fair Value
|
||||||||||||||||||||||||
2004 & Prior
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
58
|
|
|
$
|
64
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
20
|
|
|
$
|
93
|
|
|
$
|
104
|
|
2005
|
175
|
|
|
188
|
|
|
78
|
|
|
80
|
|
|
99
|
|
|
101
|
|
|
83
|
|
|
84
|
|
|
46
|
|
|
46
|
|
|
481
|
|
|
499
|
|
||||||||||||
2006
|
287
|
|
|
300
|
|
|
108
|
|
|
115
|
|
|
121
|
|
|
127
|
|
|
63
|
|
|
66
|
|
|
22
|
|
|
23
|
|
|
601
|
|
|
631
|
|
||||||||||||
2007
|
211
|
|
|
221
|
|
|
169
|
|
|
182
|
|
|
78
|
|
|
82
|
|
|
31
|
|
|
31
|
|
|
72
|
|
|
73
|
|
|
561
|
|
|
589
|
|
||||||||||||
2008
|
40
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
43
|
|
||||||||||||
2009
|
11
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
||||||||||||
2010
|
18
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
20
|
|
||||||||||||
2011
|
56
|
|
|
62
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
68
|
|
||||||||||||
2012
|
40
|
|
|
41
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
14
|
|
|
12
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
66
|
|
|
67
|
|
||||||||||||
2013
|
16
|
|
|
16
|
|
|
95
|
|
|
99
|
|
|
71
|
|
|
76
|
|
|
12
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
194
|
|
|
204
|
|
||||||||||||
2014
|
350
|
|
|
360
|
|
|
64
|
|
|
66
|
|
|
53
|
|
|
54
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
467
|
|
|
480
|
|
||||||||||||
Total
|
$
|
1,217
|
|
|
$
|
1,275
|
|
|
$
|
572
|
|
|
$
|
606
|
|
|
$
|
443
|
|
|
$
|
461
|
|
|
$
|
207
|
|
|
$
|
212
|
|
|
$
|
155
|
|
|
$
|
162
|
|
|
$
|
2,594
|
|
|
$
|
2,716
|
|
Credit
protection |
33.0%
|
|
25.7%
|
|
20.2%
|
|
19.5%
|
|
18.0%
|
|
27.2%
|
[1]
|
The vintage year represents the year the pool of loans was originated.
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||
|
Amortized Cost [1]
|
|
Valuation Allowance
|
|
Carrying Value
|
|
Amortized Cost [1]
|
|
Valuation Allowance
|
|
Carrying Value
|
||||||||||||
Agricultural
|
$
|
51
|
|
|
$
|
(5
|
)
|
|
$
|
46
|
|
|
$
|
51
|
|
|
$
|
(5
|
)
|
|
$
|
46
|
|
Whole loans
|
5,477
|
|
|
(16
|
)
|
|
5,461
|
|
|
5,333
|
|
|
(13
|
)
|
|
5,320
|
|
||||||
A-Note participations
|
154
|
|
|
—
|
|
|
154
|
|
|
154
|
|
|
—
|
|
|
154
|
|
||||||
B-Note participations
|
17
|
|
|
—
|
|
|
17
|
|
|
17
|
|
|
—
|
|
|
17
|
|
||||||
Mezzanine loans
|
19
|
|
|
—
|
|
|
19
|
|
|
19
|
|
|
—
|
|
|
19
|
|
||||||
Total
|
$
|
5,718
|
|
|
$
|
(21
|
)
|
|
$
|
5,697
|
|
|
$
|
5,574
|
|
|
$
|
(18
|
)
|
|
$
|
5,556
|
|
[1]
|
Amortized cost represents carrying value prior to valuation allowances, if any.
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||||||
|
Amortized Cost
|
|
Fair Value
|
|
Weighted Average Credit Quality
|
|
Amortized Cost
|
|
Fair Value
|
|
Weighted Average Credit Quality
|
||||||||
General Obligation
|
$
|
2,254
|
|
|
$
|
2,476
|
|
|
AA
|
|
$
|
2,259
|
|
|
$
|
2,480
|
|
|
AA
|
Pre-Refunded [1]
|
752
|
|
|
791
|
|
|
AAA
|
|
716
|
|
|
748
|
|
|
AAA
|
||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transportation
|
1,503
|
|
|
1,696
|
|
|
A+
|
|
1,599
|
|
|
1,781
|
|
|
A+
|
||||
Health Care
|
1,475
|
|
|
1,628
|
|
|
AA-
|
|
1,412
|
|
|
1,560
|
|
|
AA-
|
||||
Water & Sewer
|
1,200
|
|
|
1,309
|
|
|
AA
|
|
1,204
|
|
|
1,308
|
|
|
AA
|
||||
Education
|
1,127
|
|
|
1,247
|
|
|
AA
|
|
1,115
|
|
|
1,232
|
|
|
AA
|
||||
Sales Tax
|
867
|
|
|
977
|
|
|
AA-
|
|
916
|
|
|
1,020
|
|
|
AA-
|
||||
Leasing [2]
|
778
|
|
|
867
|
|
|
A+
|
|
772
|
|
|
858
|
|
|
AA-
|
||||
Power
|
745
|
|
|
822
|
|
|
A+
|
|
739
|
|
|
814
|
|
|
A+
|
||||
Housing
|
125
|
|
|
130
|
|
|
AA
|
|
148
|
|
|
153
|
|
|
AA
|
||||
Other
|
830
|
|
|
899
|
|
|
AA-
|
|
855
|
|
|
917
|
|
|
AA-
|
||||
Total Revenue
|
8,650
|
|
|
9,575
|
|
|
AA-
|
|
8,760
|
|
|
9,643
|
|
|
AA-
|
||||
Total Municipal
|
$
|
11,656
|
|
|
$
|
12,842
|
|
|
AA-
|
|
$
|
11,735
|
|
|
$
|
12,871
|
|
|
AA-
|
[1]
|
Pre-Refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the remaining payments of principal and interest.
|
[2]
|
Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments.
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
||||||
Hedge funds
|
$
|
1,160
|
|
|
39.7
|
%
|
|
$
|
1,187
|
|
|
40.3
|
%
|
Mortgage and real estate funds
|
549
|
|
|
18.8
|
%
|
|
561
|
|
|
19.1
|
%
|
||
Mezzanine debt funds
|
58
|
|
|
2.0
|
%
|
|
61
|
|
|
2.1
|
%
|
||
Private equity and other funds
|
1,156
|
|
|
39.5
|
%
|
|
1,133
|
|
|
38.5
|
%
|
||
Total
|
$
|
2,923
|
|
|
100
|
%
|
|
$
|
2,942
|
|
|
100
|
%
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||||||
Consecutive Months
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss [1]
|
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss [1]
|
||||||||||||||
Three months or less
|
1,103
|
|
|
$
|
3,177
|
|
|
$
|
3,138
|
|
|
$
|
(39
|
)
|
|
1,412
|
|
|
$
|
4,014
|
|
|
$
|
3,963
|
|
|
$
|
(51
|
)
|
Greater than three to six months
|
497
|
|
|
978
|
|
|
957
|
|
|
(21
|
)
|
|
643
|
|
|
1,739
|
|
|
1,665
|
|
|
(74
|
)
|
||||||
Greater than six to nine months
|
406
|
|
|
851
|
|
|
820
|
|
|
(31
|
)
|
|
220
|
|
|
417
|
|
|
404
|
|
|
(13
|
)
|
||||||
Greater than nine to eleven months
|
149
|
|
|
222
|
|
|
217
|
|
|
(5
|
)
|
|
102
|
|
|
148
|
|
|
142
|
|
|
(6
|
)
|
||||||
Twelve months or more
|
585
|
|
|
3,257
|
|
|
3,078
|
|
|
(177
|
)
|
|
688
|
|
|
4,667
|
|
|
4,429
|
|
|
(241
|
)
|
||||||
Total
|
2,740
|
|
|
$
|
8,485
|
|
|
$
|
8,210
|
|
|
$
|
(273
|
)
|
|
3,065
|
|
|
$
|
10,985
|
|
|
$
|
10,603
|
|
|
$
|
(385
|
)
|
[1]
|
Unrealized losses exclude the fair value of bifurcated embedded derivative features of certain securities as changes in value are recorded in net realized capital gains (losses).
|
|
March 31, 2015
|
|
December 31, 2014
|
||||||||||||||||||||||||||
Consecutive Months
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss [1]
|
|
Items
|
|
Cost or Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss [1]
|
||||||||||||||
Three months or less
|
103
|
|
|
$
|
122
|
|
|
$
|
93
|
|
|
$
|
(29
|
)
|
|
137
|
|
|
$
|
152
|
|
|
$
|
113
|
|
|
$
|
(39
|
)
|
Greater than three to six months
|
73
|
|
|
40
|
|
|
28
|
|
|
(12
|
)
|
|
39
|
|
|
17
|
|
|
11
|
|
|
(6
|
)
|
||||||
Greater than six to nine months
|
23
|
|
|
5
|
|
|
3
|
|
|
(2
|
)
|
|
11
|
|
|
4
|
|
|
1
|
|
|
(3
|
)
|
||||||
Greater than nine to eleven months
|
9
|
|
|
2
|
|
|
1
|
|
|
(1
|
)
|
|
9
|
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
||||||
Twelve months or more
|
50
|
|
|
27
|
|
|
16
|
|
|
(11
|
)
|
|
49
|
|
|
31
|
|
|
19
|
|
|
(12
|
)
|
||||||
Total
|
258
|
|
|
$
|
196
|
|
|
$
|
141
|
|
|
$
|
(55
|
)
|
|
245
|
|
|
$
|
205
|
|
|
$
|
144
|
|
|
$
|
(61
|
)
|
[1]
|
Unrealized losses exclude the fair value of bifurcated embedded derivatives features of certain securities as changes in value are recorded in net realized capital gains (losses).
|
|
|
Three Months Ended March 31,
|
|||||
|
2015
|
2014
|
||||
CRE CDOs
|
$
|
1
|
|
$
|
—
|
|
Corporate
|
5
|
|
18
|
|
||
Equity
|
1
|
|
2
|
|
||
RMBS
|
|
|
||||
Agency
|
—
|
|
2
|
|
||
Sub-prime
|
1
|
|
—
|
|
||
Foreign government
|
4
|
|
—
|
|
||
Total
|
$
|
12
|
|
$
|
22
|
|
Fixed maturities
|
$
|
25,655
|
|
Short-term investments
|
871
|
|
|
Cash
|
184
|
|
|
Less: Derivative collateral
|
173
|
|
|
Total
|
$
|
26,537
|
|
Fixed maturities
|
$
|
34,230
|
|
Short-term investments
|
1,925
|
|
|
Cash
|
315
|
|
|
Less: Derivative collateral
|
1,436
|
|
|
Total
|
$
|
35,034
|
|
|
As of
|
||
Contractholder Obligations
|
March 31, 2015
|
||
Total Life contractholder obligations
|
$
|
187,747
|
|
Less: Separate account assets [1]
|
135,803
|
|
|
General account contractholder obligations
|
$
|
51,944
|
|
Composition of General Account Contractholder Obligations
|
|
||
Contracts without a surrender provision and/or fixed payout dates [2]
|
$
|
22,252
|
|
U.S. Fixed MVA annuities and Other [3]
|
8,666
|
|
|
Guaranteed investment contracts (“GIC”) [4]
|
26
|
|
|
Other [5]
|
21,000
|
|
|
General account contractholder obligations
|
$
|
51,944
|
|
[1]
|
In the event customers elect to surrender separate account assets or international statutory separate accounts, Life Operations will use the proceeds from the sale of the assets to fund the surrender, and Life Operations’ liquidity position will not be impacted. In many instances Life Operations will receive a percentage of the surrender amount as compensation for early surrender (surrender charge), increasing Life Operations’ liquidity position. In addition, a surrender of variable annuity separate account or general account assets (see the following) will decrease Life Operations’ obligation for payments on guaranteed living and death benefits.
|
[2]
|
Relates to contracts such as payout annuities or institutional notes, other than guaranteed investment products with an MVA feature (discussed below) or surrenders of term life, group benefit contracts or death and living benefit reserves for which surrenders will have no current effect on Life Operations’ liquidity requirements.
|
[3]
|
Relates to annuities that are recorded in the general account (under U.S. GAAP as the contractholders are subject to the Company's credit risk, although these annuities are held in a statutory separate account. In the statutory separate account, Life Operations is required to maintain invested assets with a fair value greater than or equal to the MVA surrender value of the Fixed MVA contract. In the event assets decline in value at a greater rate than the MVA surrender value of the Fixed MVA contract, Life Operations is required to contribute additional capital to the statutory separate account. Life Operations will fund these required contributions with operating cash flows or short-term investments. In the event that operating cash flows or short-term investments are not sufficient to fund required contributions, the Company may have to sell other invested assets at a loss, potentially resulting in a decrease in statutory surplus. As the fair value of invested assets in the statutory separate account are generally equal to the MVA surrender value of the Fixed MVA contract, surrender of Fixed MVA annuities will have an insignificant impact on the liquidity requirements of Life Operations.
|
[4]
|
GICs are subject to discontinuance provisions which allow the policyholders to terminate their contracts prior to scheduled maturity at the lesser of the book value or market value. Generally, the market value adjustment reflects changes in interest rates and credit spreads. As a result, the market value adjustment feature in the GIC serves to protect the Company from interest rate risks and limit Life Operations’ liquidity requirements in the event of a surrender.
|
[5]
|
Surrenders of, or policy loans taken from, as applicable, these general account liabilities, which include the general account option for Life Operations' individual variable annuities and the variable life contracts of the former Individual Life business, the general account option for annuities of the former Retirement Plans business and universal life contracts sold by the former Individual Life business, may be funded through operating cash flows of Life Operations, available short-term investments, or Life Operations may be required to sell fixed maturity investments to fund the surrender payment. Sales of fixed maturity investments could result in the recognition of realized losses and insufficient proceeds to fully fund the surrender amount. In this circumstance, Life Operations may need to take other actions, including enforcing certain contract provisions which could restrict surrenders and/or slow or defer payouts. The Company has ceded reinsurance in connection with the sales of its Retirement Plans and Individual Life businesses in 2013 to MassMutual and Prudential, respectively. These reinsurance transactions do not extinguish the Company's primary liability on the insurance policies issued under these businesses.
|
|
March 31, 2015
|
December 31, 2014
|
Change
|
|||||
Short-term debt (includes current maturities of long-term debt)
|
$
|
167
|
|
$
|
456
|
|
(63
|
)%
|
Long-term debt
|
5,653
|
|
5,653
|
|
—
|
%
|
||
Total debt [1]
|
5,820
|
|
6,109
|
|
(5
|
)%
|
||
Stockholders’ equity excluding accumulated other comprehensive income (loss), net of tax (“AOCI”)
|
17,927
|
|
17,792
|
|
1
|
%
|
||
AOCI, net of tax
|
1,150
|
|
928
|
|
24
|
%
|
||
Total stockholders’ equity
|
$
|
19,077
|
|
$
|
18,720
|
|
2
|
%
|
Total capitalization including AOCI
|
$
|
24,897
|
|
$
|
24,829
|
|
—
|
%
|
Debt to stockholders’ equity
|
31
|
%
|
33
|
%
|
|
|||
Debt to capitalization
|
23
|
%
|
25
|
%
|
|
[1]
|
Total debt of the Company excludes
$69
and
$71
of consumer notes as of
March 31, 2015
and
December 31, 2014
, respectively
.
|
|
Three Months Ended March 31,
|
|||||
|
2015
|
2014
|
||||
Net cash provided by operating activities
|
$
|
447
|
|
$
|
349
|
|
Net cash provided by investing activities
|
$
|
295
|
|
$
|
196
|
|
Net cash used for financing activities
|
$
|
(619
|
)
|
$
|
(685
|
)
|
Cash – end of period
|
$
|
500
|
|
$
|
1,285
|
|
Insurance Financial Strength Ratings:
|
A.M. Best
|
Standard & Poor’s
|
Moody’s
|
Hartford Fire Insurance Company
|
A
|
A+
|
A1
|
Hartford Life and Accident Insurance Company
|
A
|
A
|
A2
|
Hartford Life Insurance Company
|
A-
|
BBB+
|
Baa2
|
Hartford Life and Annuity Insurance Company
|
A-
|
BBB+
|
Baa2
|
Other Ratings:
|
|
|
|
The Hartford Financial Services Group, Inc.:
|
|
|
|
Senior debt
|
bbb+
|
BBB+
|
Baa2
|
Commercial paper
|
AMB-2
|
A-2
|
P-2
|
|
March 31, 2015
|
December 31, 2014
|
||||
U.S. life insurance subsidiaries
|
$
|
6,602
|
|
$
|
7,157
|
|
Property & Casualty insurance subsidiaries
|
8,447
|
|
8,069
|
|
||
Total
|
$
|
15,049
|
|
$
|
15,226
|
|
Item 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Item 4.
|
CONTROLS AND PROCEDURES
|
Item 1.
|
LEGAL PROCEEDINGS
|
Item 1A.
|
RISK FACTORS
|
Item 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
Total Number
of Shares
Purchased [1]
|
|
Average Price
Paid Per
Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Approximate Dollar Value
of Shares that May Yet Be
Purchased Under
the Plans or Programs
|
||||||
|
|
|
|
|
(in millions)
|
||||||
January 1, 2015 - January 31, 2015
|
2,510,700
|
|
|
$
|
40.17
|
|
2,510,700
|
|
$
|
878
|
|
February 1, 2015 - February 28, 2015
|
1,863,820
|
|
|
$
|
40.66
|
|
1,863,820
|
|
$
|
802
|
|
March 1, 2015 - March 31, 2015
|
1,753,634
|
|
|
$
|
41.91
|
|
1,753,634
|
|
$
|
729
|
|
Total
|
6,128,154
|
|
|
$
|
40.82
|
|
6,128,154
|
|
|
[1]
|
Excludes
1,298,123
shares in net settlement of employee tax withholding obligations related to equity awards under the Company's Incentive Stock Plan. These net share settlements had the effect of share repurchases by the Company as they reduced the number of shares that otherwise would have been issued as a result of the vesting of equity awards. The Company paid approximately
$53 million
in employee tax withholding obligations related to net share settlements in the three months ended March 31, 2015.
|
Item 6.
|
EXHIBITS
|
See Exhibits Index on page
|
123
.
|
|
|
The Hartford Financial Services Group, Inc.
|
||
|
|
(Registrant)
|
||
|
|
|||
Date:
|
April 27, 2015
|
/s/ Scott R. Lewis
|
||
|
|
Scott R. Lewis
|
||
|
|
Senior Vice President and Controller
|
||
|
|
(Chief accounting officer and duly
authorized signatory)
|
Exhibit No.
|
|
Description
|
|
|
|
15.01
|
|
Deloitte & Touche LLP Letter of Awareness.**
|
|
|
|
31.01
|
|
Certification of Christopher J. Swift pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
|
|
|
|
31.02
|
|
Certification of Beth A. Bombara pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
|
|
|
|
32.01
|
|
Certification of Christopher J. Swift pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
|
|
|
32.02
|
|
Certification of Beth A. Bombara pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
|
|
|
101.INS
|
|
XBRL Instance Document.**
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema.**
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase.**
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase.**
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase.**
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase.**
|
|
|
|
**
|
|
Filed with the Securities and Exchange Commission as an exhibit to this report.
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
FUND | NUMBER OF SHARES | VALUE ($) | 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 |
---|