XML 138 R31.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Fair Value Measurements (Tables)
 12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Assets and liabilities measured at fair value
Assets and liabilities measured and carried at fair value in the financial statements are summarized below (in millions):
 
Level 1
 
Level 2
 
Level 3
 
Total
December 31, 2019
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Available for sale (“AFS”) fixed maturities:
 
 
 
 
 
 
 
U.S. Government and government agencies
$
151

 
$
43

 
$
15

 
$
209

States, municipalities and political subdivisions
—

 
6,858

 
105

 
6,963

Foreign government
—

 
172

 
—

 
172

Residential MBS
—

 
2,987

 
173

 
3,160

Commercial MBS
—

 
892

 
35

 
927

Collateralized loan obligations
—

 
4,265

 
15

 
4,280

Other asset-backed securities
—

 
5,842

 
1,286

 
7,128

Corporate and other
29

 
21,879

 
1,758

 
23,666

Total AFS fixed maturities
180

 
42,938

 
3,387

 
46,505

Trading fixed maturities
2

 
111

 
—

 
113

Equity securities
1,433

 
67

 
437

 
1,937

Equity index call options
—

 
924

 
—

 
924

Assets of managed investment entities (“MIE”)
213

 
4,506

 
17

 
4,736

Variable annuity assets (separate accounts) (*)
—

 
628

 
—

 
628

Other assets — derivatives
—

 
50

 
—

 
50

Total assets accounted for at fair value
$
1,828

 
$
49,224

 
$
3,841

 
$
54,893

Liabilities:
 
 
 
 
 
 
 
Liabilities of managed investment entities
$
206

 
$
4,349

 
$
16

 
$
4,571

Derivatives in annuity benefits accumulated
—

 
—

 
3,730

 
3,730

Other liabilities — derivatives
—

 
10

 
—

 
10

Total liabilities accounted for at fair value
$
206

 
$
4,359

 
$
3,746

 
$
8,311

 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Available for sale fixed maturities:
 
 
 
 
 
 
 
U.S. Government and government agencies
$
141

 
$
83

 
$
9

 
$
233

States, municipalities and political subdivisions
—

 
6,880

 
59

 
6,939

Foreign government
—

 
142

 
—

 
142

Residential MBS
—

 
2,547

 
197

 
2,744

Commercial MBS
—

 
864

 
56

 
920

Collateralized loan obligations
—

 
4,162

 
116

 
4,278

Other asset-backed securities
—

 
4,802

 
731

 
5,533

Corporate and other
28

 
19,184

 
1,996

 
21,208

Total AFS fixed maturities
169

 
38,664

 
3,164

 
41,997

Trading fixed maturities
9

 
96

 
—

 
105

Equity securities
1,410

 
68

 
336

 
1,814

Equity index call options
—

 
184

 
—

 
184

Assets of managed investment entities
203

 
4,476

 
21

 
4,700

Variable annuity assets (separate accounts) (*)
—

 
557

 
—

 
557

Other assets — derivatives
—

 
16

 
—

 
16

Total assets accounted for at fair value
$
1,791

 
$
44,061

 
$
3,521

 
$
49,373

Liabilities:
 
 
 
 
 
 
 
Liabilities of managed investment entities
$
195

 
$
4,297

 
$
20

 
$
4,512

Derivatives in annuity benefits accumulated
—

 
—

 
2,720

 
2,720

Other liabilities — derivatives
—

 
49

 
—

 
49

Total liabilities accounted for at fair value
$
195

 
$
4,346

 
$
2,740

 
$
7,281

 (*)   Variable annuity liabilities equal the fair value of variable annuity assets.
Fair value measurements, Levels 1 and 2 transfers

The transfers between Level 1 and Level 2 for the years ended December 31, 2019, 2018 and 2017 are reflected in the table below at fair value as of the end of the reporting period (dollars in millions):
 
Level 2 To Level 1 Transfers
 
Level 1 To Level 2 Transfers
 
# of Transfers
 
Fair Value
 
# of Transfers
 
Fair Value
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
 
2019
 
2018
 
2017
Perpetual preferred stocks
2

 
2

 
4

 
$
11

 
$
5

 
$
23

 
1

 
2

 
2

 
$
6

 
$
6

 
$
11

Common stocks
1

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1

 
—

 
—

 
—
Unobservable inputs used by management in determining fair value of embedded derivatives The following table presents information about the unobservable inputs used by management in determining fair value of these Level 3 liabilities. See Note F — “Derivatives.”
 
Unobservable Input
 
Range
 
 
Adjustment for insurance subsidiary’s credit risk
 
0.2% – 2.4% over the risk-free rate
 
 
Risk margin for uncertainty in cash flows
 
0.80% reduction in the discount rate
 
 
Surrenders
 
3% – 22% of indexed account value
 
 
Partial surrenders
 
2% – 9% of indexed account value
 
 
Annuitizations
 
0.1% – 1% of indexed account value
 
 
Deaths
 
1.5% – 10.6% of indexed account value
 
 
Budgeted option costs
 
2.5% – 3.3% of indexed account value
 
Changes in asset balances of Level 3 financial assets
Changes in balances of Level 3 financial assets and liabilities carried at fair value during 2019, 2018 and 2017 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs and $29 million of equity securities transferred into Level 3 in the first quarter of 2018 related to a small number of limited partnerships and similar investments carried at cost under the prior guidance that are carried at fair value through net earnings under new guidance adopted on January 1, 2018, as discussed in Note A — “Accounting Policies — Investments.” All transfers are reflected in the table at fair value as of the end of the reporting period.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2019
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
9

 
$
—

 
$
7

 
$
—

 
$
(1
)
 
$
—

 
$
—

 
$
15

State and municipal
59

 
—

 
5

 
—

 
(3
)
 
55

 
(11
)
 
105

Residential MBS
197

 
6

 
(3
)
 
—

 
(20
)
 
48

 
(55
)
 
173

Commercial MBS
56

 
2

 
—

 
—

 
(12
)
 
4

 
(15
)
 
35

Collateralized loan obligations
116

 
(5
)
 
5

 
—

 
—

 
28

 
(129
)
 
15

Other asset-backed securities
731

 
—

 
6

 
787

 
(192
)
 
23

 
(69
)
 
1,286

Corporate and other
1,996

 
(3
)
 
55

 
738

 
(335
)
 
30

 
(723
)
 
1,758

Total AFS fixed maturities
3,164

 
—

 
75

 
1,525

 
(563
)
 
188

 
(1,002
)
 
3,387

Equity securities
336

 
(5
)
 
—

 
52

 
(2
)
 
56

 
—

 
437

Assets of MIE
21

 
(5
)
 
—

 
1

 
—

 
—

 
—

 
17

Total Level 3 assets
$
3,521

 
$
(10
)
 
$
75

 
$
1,578

 
$
(565
)
 
$
244

 
$
(1,002
)
 
$
3,841

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(2,720
)
 
$
(919
)
 
$
—

 
$
(333
)
 
$
242

 
$
—

 
$
—

 
$
(3,730
)
Total Level 3 liabilities (b)
$
(2,720
)
 
$
(919
)
 
$
—

 
$
(333
)
 
$
242

 
$
—

 
$
—

 
$
(3,730
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives includes a favorable adjustment related to the unlocking of actuarial assumptions of $181 million in 2019.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2018
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1

 
$
—

 
$
9

State and municipal
148

 
—

 
(2
)
 
—

 
(3
)
 
—

 
(84
)
 
59

Residential MBS
122

 
(9
)
 
(4
)
 
—

 
(21
)
 
130

 
(21
)
 
197

Commercial MBS
36

 
—

 
—

 
20

 
—

 
—

 
—

 
56

Collateralized loan obligations
200

 
(3
)
 
(13
)
 
35

 
(20
)
 
3

 
(86
)
 
116

Other asset-backed securities
544

 
—

 
(2
)
 
391

 
(228
)
 
79

 
(53
)
 
731

Corporate and other
1,044

 
(10
)
 
(18
)
 
1,221

 
(204
)
 
27

 
(64
)
 
1,996

Total AFS fixed maturities
2,102

 
(22
)
 
(39
)
 
1,667

 
(476
)
 
240

 
(308
)
 
3,164

Equity securities
165

 
9

 
—

 
155

 
(6
)
 
30

 
(17
)
 
336

Assets of MIE
23

 
(8
)
 
—

 
6

 
—

 
—

 
—

 
21

Total Level 3 assets
$
2,290

 
$
(21
)
 
$
(39
)
 
$
1,828

 
$
(482
)
 
$
270

 
$
(325
)
 
$
3,521

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(2,542
)
 
$
204

 
$
—

 
$
(545
)
 
$
163

 
$
—

 
$
—

 
$
(2,720
)
Total Level 3 liabilities (b)
$
(2,542
)
 
$
204

 
$
—

 
$
(545
)
 
$
163

 
$
—

 
$
—

 
$
(2,720
)
(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives includes losses related to the unlocking of actuarial assumptions of $44 million in 2018.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2017
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8

State and municipal
140

 
—

 
2

 
—

 
(2
)
 
10

 
(2
)
 
148

Residential MBS
190

 
(4
)
 
2

 
1

 
(40
)
 
44

 
(71
)
 
122

Commercial MBS
25

 
2

 
—

 
15

 
(10
)
 
4

 
—

 
36

Collateralized loan obligations
174

 
(1
)
 
(1
)
 
55

 
(27
)
 
—

 
—

 
200

Other asset-backed securities
310

 
1

 
2

 
355

 
(105
)
 
202

 
(221
)
 
544

Corporate and other
712

 
(5
)
 
2

 
606

 
(237
)
 
29

 
(63
)
 
1,044

Total AFS fixed maturities
1,559

 
(7
)
 
7

 
1,032

 
(421
)
 
289

 
(357
)
 
2,102

Equity securities
174

 
(21
)
 
10

 
38

 
(16
)
 
—

 
(20
)
 
165

Assets of MIE
29

 
(11
)
 
—

 
9

 
—

 
—

 
(4
)
 
23

Total Level 3 assets
$
1,762

 
$
(39
)
 
$
17

 
$
1,079

 
$
(437
)
 
$
289

 
$
(381
)
 
$
2,290

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)
Total Level 3 liabilities (b)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives includes losses related to the unlocking of actuarial assumptions of $25 million in 2017.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
Changes in liability balances of Level 3 financial liabilities
Changes in balances of Level 3 financial assets and liabilities carried at fair value during 2019, 2018 and 2017 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs and $29 million of equity securities transferred into Level 3 in the first quarter of 2018 related to a small number of limited partnerships and similar investments carried at cost under the prior guidance that are carried at fair value through net earnings under new guidance adopted on January 1, 2018, as discussed in Note A — “Accounting Policies — Investments.” All transfers are reflected in the table at fair value as of the end of the reporting period.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2019
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
9

 
$
—

 
$
7

 
$
—

 
$
(1
)
 
$
—

 
$
—

 
$
15

State and municipal
59

 
—

 
5

 
—

 
(3
)
 
55

 
(11
)
 
105

Residential MBS
197

 
6

 
(3
)
 
—

 
(20
)
 
48

 
(55
)
 
173

Commercial MBS
56

 
2

 
—

 
—

 
(12
)
 
4

 
(15
)
 
35

Collateralized loan obligations
116

 
(5
)
 
5

 
—

 
—

 
28

 
(129
)
 
15

Other asset-backed securities
731

 
—

 
6

 
787

 
(192
)
 
23

 
(69
)
 
1,286

Corporate and other
1,996

 
(3
)
 
55

 
738

 
(335
)
 
30

 
(723
)
 
1,758

Total AFS fixed maturities
3,164

 
—

 
75

 
1,525

 
(563
)
 
188

 
(1,002
)
 
3,387

Equity securities
336

 
(5
)
 
—

 
52

 
(2
)
 
56

 
—

 
437

Assets of MIE
21

 
(5
)
 
—

 
1

 
—

 
—

 
—

 
17

Total Level 3 assets
$
3,521

 
$
(10
)
 
$
75

 
$
1,578

 
$
(565
)
 
$
244

 
$
(1,002
)
 
$
3,841

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(2,720
)
 
$
(919
)
 
$
—

 
$
(333
)
 
$
242

 
$
—

 
$
—

 
$
(3,730
)
Total Level 3 liabilities (b)
$
(2,720
)
 
$
(919
)
 
$
—

 
$
(333
)
 
$
242

 
$
—

 
$
—

 
$
(3,730
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives includes a favorable adjustment related to the unlocking of actuarial assumptions of $181 million in 2019.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2018
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1

 
$
—

 
$
9

State and municipal
148

 
—

 
(2
)
 
—

 
(3
)
 
—

 
(84
)
 
59

Residential MBS
122

 
(9
)
 
(4
)
 
—

 
(21
)
 
130

 
(21
)
 
197

Commercial MBS
36

 
—

 
—

 
20

 
—

 
—

 
—

 
56

Collateralized loan obligations
200

 
(3
)
 
(13
)
 
35

 
(20
)
 
3

 
(86
)
 
116

Other asset-backed securities
544

 
—

 
(2
)
 
391

 
(228
)
 
79

 
(53
)
 
731

Corporate and other
1,044

 
(10
)
 
(18
)
 
1,221

 
(204
)
 
27

 
(64
)
 
1,996

Total AFS fixed maturities
2,102

 
(22
)
 
(39
)
 
1,667

 
(476
)
 
240

 
(308
)
 
3,164

Equity securities
165

 
9

 
—

 
155

 
(6
)
 
30

 
(17
)
 
336

Assets of MIE
23

 
(8
)
 
—

 
6

 
—

 
—

 
—

 
21

Total Level 3 assets
$
2,290

 
$
(21
)
 
$
(39
)
 
$
1,828

 
$
(482
)
 
$
270

 
$
(325
)
 
$
3,521

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(2,542
)
 
$
204

 
$
—

 
$
(545
)
 
$
163

 
$
—

 
$
—

 
$
(2,720
)
Total Level 3 liabilities (b)
$
(2,542
)
 
$
204

 
$
—

 
$
(545
)
 
$
163

 
$
—

 
$
—

 
$
(2,720
)
(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives includes losses related to the unlocking of actuarial assumptions of $44 million in 2018.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2017
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8

State and municipal
140

 
—

 
2

 
—

 
(2
)
 
10

 
(2
)
 
148

Residential MBS
190

 
(4
)
 
2

 
1

 
(40
)
 
44

 
(71
)
 
122

Commercial MBS
25

 
2

 
—

 
15

 
(10
)
 
4

 
—

 
36

Collateralized loan obligations
174

 
(1
)
 
(1
)
 
55

 
(27
)
 
—

 
—

 
200

Other asset-backed securities
310

 
1

 
2

 
355

 
(105
)
 
202

 
(221
)
 
544

Corporate and other
712

 
(5
)
 
2

 
606

 
(237
)
 
29

 
(63
)
 
1,044

Total AFS fixed maturities
1,559

 
(7
)
 
7

 
1,032

 
(421
)
 
289

 
(357
)
 
2,102

Equity securities
174

 
(21
)
 
10

 
38

 
(16
)
 
—

 
(20
)
 
165

Assets of MIE
29

 
(11
)
 
—

 
9

 
—

 
—

 
(4
)
 
23

Total Level 3 assets
$
1,762

 
$
(39
)
 
$
17

 
$
1,079

 
$
(437
)
 
$
289

 
$
(381
)
 
$
2,290

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)
Total Level 3 liabilities (b)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives includes losses related to the unlocking of actuarial assumptions of $25 million in 2017.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
Fair value of financial instruments The carrying value and fair value of financial instruments that are not carried at fair value in the financial statements at December 31 are summarized below (in millions):
 
Carrying
 
Fair Value
 
Value
 
Total
 
Level 1
 
Level 2
 
Level 3
2019
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
2,314

 
$
2,314

 
$
2,314

 
$
—

 
$
—

Mortgage loans
1,329

 
1,346

 
—

 
—

 
1,346

Policy loans
164

 
164

 
—

 
—

 
164

Total financial assets not accounted for at fair value
$
3,807

 
$
3,824

 
$
2,314

 
$
—

 
$
1,510

Financial liabilities:
 
 
 
 
 
 
 
 
 
Annuity benefits accumulated (*)
$
40,159

 
$
40,182

 
$
—

 
$
—

 
$
40,182

Long-term debt
1,473

 
1,622

 
—

 
1,619

 
3

Total financial liabilities not accounted for at fair value
$
41,632

 
$
41,804

 
$
—

 
$
1,619

 
$
40,185

 
 
 
 
 
 
 
 
 
 
2018
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,515

 
$
1,515

 
$
1,515

 
$
—

 
$
—

Mortgage loans
1,068

 
1,056

 
—

 
—

 
1,056

Policy loans
174

 
174

 
—

 
—

 
174

Total financial assets not accounted for at fair value
$
2,757

 
$
2,745

 
$
1,515

 
$
—

 
$
1,230

Financial liabilities:
 
 
 
 
 
 
 
 
 
Annuity benefits accumulated (*)
$
36,384

 
$
34,765

 
$
—

 
$
—

 
$
34,765

Long-term debt
1,302

 
1,231

 
—

 
1,228

 
3

Total financial liabilities not accounted for at fair value
$
37,686

 
$
35,996

 
$
—

 
$
1,228

 
$
34,768

(*)
Excludes $247 million and $232 million of life contingent annuities in the payout phase at December 31, 2019 and 2018, respectively.