Fair Value (Tables)

3 Months Ended

Mar. 31, 2019

The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, including those items for which the Company has elected the FVO, are presented below at:



	March 31, 2019
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities AFS:
U.S. corporate	$	—	$	75,935	$	4,211	$	80,146
Foreign government	—		64,798		157		64,955
Foreign corporate	—		53,194		6,751		59,945
U.S. government and agency	21,022		19,986		—		41,008
RMBS	20		25,102		3,238		28,360
ABS	—		12,167		464		12,631
Municipals	—		11,898		—		11,898
CMBS	—		9,100		367		9,467
Total fixed maturity securities AFS	21,042		272,180		15,188		308,410
Equity securities	901		97		434		1,432
Unit-linked and FVO Securities (1)	10,780		2,008		457		13,245
Short-term investments (2)	1,487		2,195		138		3,820
Residential mortgage loans — FVO	—		—		276		276
Other investments	81		134		168		383
Derivative assets: (3)
Interest rate	—		5,385		44		5,429
Foreign currency exchange rate	—		2,400		68		2,468
Credit	—		185		30		215
Equity market	3		652		55		710
Total derivative assets	3		8,622		197		8,822
Embedded derivatives within asset host contracts (4)	—		—		69		69
Separate account assets (5)	84,812		100,049		904		185,765
Total assets (6)	$	119,106	$	385,285	$	17,831	$	522,222
Liabilities
Derivative liabilities: (3)
Interest rate	$	4	$	164	$	117	$	285
Foreign currency exchange rate	3		2,595		56		2,654
Credit	—		65		1		66
Equity market	18		701		92		811
Total derivative liabilities	25		3,525		266		3,816
Embedded derivatives within liability host contracts (4)	—		—		674		674
Separate account liabilities (5)	1		23		7		31
Total liabilities	$	26	$	3,548	$	947	$	4,521



	December 31, 2018
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities AFS:
U.S. corporate	$	—	$	74,874	$	4,074	$	78,948
Foreign government	—		62,150		138		62,288
Foreign corporate	—		50,310		6,393		56,703
U.S. government and agency	19,656		19,666		—		39,322
RMBS	—		24,734		3,227		27,961
ABS	—		11,775		697		12,472
Municipals	—		11,533		—		11,533
CMBS	—		8,696		342		9,038
Total fixed maturity securities AFS	19,656		263,738		14,871		298,265
Equity securities	916		105		419		1,440
Unit-linked and FVO Securities (1)	10,216		1,995		405		12,616
Short-term investments (2)	1,470		1,746		33		3,249
Residential mortgage loans — FVO	—		—		299		299
Other investments	80		118		39		237
Derivative assets: (3)
Interest rate	1		4,809		33		4,843
Foreign currency exchange rate	4		2,922		52		2,978
Credit	—		91		29		120
Equity market	13		956		59		1,028
Total derivative assets	18		8,778		173		8,969
Embedded derivatives within asset host contracts (4)	—		—		71		71
Separate account assets (5)	79,726		94,886		944		175,556
Total assets (6)	$	112,082	$	371,366	$	17,254	$	500,702
Liabilities
Derivative liabilities: (3)
Interest rate	$	3	$	194	$	218	$	415
Foreign currency exchange rate	—		2,660		89		2,749
Credit	—		48		4		52
Equity market	77		550		87		714
Total derivative liabilities	80		3,452		398		3,930
Embedded derivatives within liability host contracts (4)	—		—		810		810
Separate account liabilities (5)	1		20		7		28
Total liabilities	$	81	$	3,472	$	1,215	$	4,768

__________________


(1)	Unit-linked and FVO Securities were primarily comprised of Unit-linked investments at both March 31, 2019 and December 31, 2018.


(2)	Short-term investments as presented in the tables above differ from the amounts presented on the consolidated balance sheets because certain short-term investments are not measured at estimated fair value on a recurring basis.

(3)

Derivative assets are presented within other invested assets on the interim condensed consolidated balance sheets and derivative liabilities are presented within other liabilities on the interim condensed consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the interim condensed consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.


(4)	Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables and other invested assets on the interim condensed consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities on the interim condensed consolidated balance sheets.


(5)	Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets. Separate account liabilities presented in the tables above represent derivative liabilities.


(6)	Total assets included in the fair value hierarchy excluded other limited partnership interests that are measured at estimated fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient. At March 31, 2019 and December 31, 2018, the estimated fair value of such investments was $113 million and $145 million, respectively.

Fair Value Inputs, Quantitative Information

The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:



					March 31, 2019				December 31, 2018				Impact of Increase in Input on Estimated Fair Value (2)
	Valuation Techniques		Significant Unobservable Inputs		Range			Weighted Average (1)	Range			Weighted Average (1)	Impact of Increase in Input on Estimated Fair Value (2)
Fixed maturity securities AFS (3)
U.S. corporate and foreign corporate	•	Matrix pricing	•	Offered quotes (4)	88	-	140	108	85	-	134	104	Increase
	•	Market pricing	•	Quoted prices (4)	25	-	583	114	25	-	638	110	Increase
	•	Consensus pricing	•	Offered quotes (4)	97	-	110	102	100	-	110	102	Increase
RMBS	•	Market pricing	•	Quoted prices (4)	—	-	108	95	—	-	106	94	Increase (5)
ABS	•	Market pricing	•	Quoted prices (4)	3	-	118	98	3	-	116	97	Increase (5)
	•	Consensus pricing	•	Offered quotes (4)	98	-	104	101	100	-	103	101	Increase (5)
Derivatives
Interest rate	•	Present value techniques	•	Swap yield (6)	240	-	322		268	-	317		Increase (7)
			•	Repurchase rates (8)	(3)	-	20		(5)	-	6		Decrease (7)
Foreign currency exchange rate	•	Present value techniques	•	Swap yield (6)	(23)	-	328		(20)	-	328		Increase (7)
Credit	•	Present value techniques	•	Credit spreads (9)	97	-	101		97	-	103		Decrease (7)
	•	Consensus pricing	•	Offered quotes (10)
Equity market	•	Present value techniques or option pricing models	•	Volatility (11)	14%	-	23%		21%	-	26%		Increase (7)
			•	Correlation (12)	10%	-	30%		10%	-	30%
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates:
				Ages 0 - 40	0%	-	0.18%		0%	-	0.18%		Decrease (13)
				Ages 41 - 60	0.03%	-	0.80%		0.03%	-	0.80%		Decrease (13)
				Ages 61 - 115	0.12%	-	100%		0.12%	-	100%		Decrease (13)
			•	Lapse rates:
				Durations 1 - 10	0.25%	-	100%		0.25%	-	100%		Decrease (14)
				Durations 11 - 20	2%	-	100%		2%	-	100%		Decrease (14)
				Durations 21 - 116	1.25%	-	100%		1.25%	-	100%		Decrease (14)
			•	Utilization rates	0%	-	25%		0%	-	25%		Increase (15)
			•	Withdrawal rates	0%	-	20%		0%	-	20%		(16)
			•	Long-term equity volatilities	6.18%	-	30%		7.16%	-	30%		Increase (17)
			•	Nonperformance risk spread	0%	-	1.53%		0.04%	-	1.77%		Decrease (18)

__________________


(1)	The weighted average for fixed maturity securities AFS is determined based on the estimated fair value of the securities.


(2)	The impact of a decrease in input would have resulted in the opposite impact on estimated fair value. For embedded derivatives, changes to direct and assumed guaranteed minimum benefits are based on liability positions; changes to ceded guaranteed minimum benefits are based on asset positions.


(3)	Significant increases (decreases) in expected default rates in isolation would have resulted in substantially lower (higher) valuations.


(4)	Range and weighted average are presented in accordance with the market convention for fixed maturity securities AFS of dollars per hundred dollars of par.


(5)	Changes in the assumptions used for the probability of default would have been accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumptions used for prepayment rates.

(6)

Ranges represent the rates across different yield curves and are presented in basis points. The swap yield curves are utilized among different types of derivatives to project cash flows, as well as to discount future cash flows to present value. Since this valuation methodology uses a range of inputs across a yield curve to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.


(7)	Changes in estimated fair value are based on long U.S. dollar net asset positions and will be inversely impacted for short U.S. dollar net asset positions.


(8)	Ranges represent different repurchase rates utilized as components within the valuation methodology and are presented in basis points.


(9)	Represents the risk quoted in basis points of a credit default event on the underlying instrument. Credit derivatives with significant unobservable inputs are primarily comprised of written credit default swaps.


(10)	At both March 31, 2019 and December 31, 2018, independent non-binding broker quotations were used in the determination of less than 1% of the total net derivative estimated fair value.


(11)	Ranges represent the underlying equity volatility quoted in percentage points. Since this valuation methodology uses a range of inputs across multiple volatility surfaces to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.


(12)	Ranges represent the different correlation factors utilized as components within the valuation methodology. Presenting a range of correlation factors is more representative of the unobservable input used in the valuation. Increases (decreases) in correlation in isolation will increase (decrease) the significance of the change in valuations.


(13)	Mortality rates vary by age and by demographic characteristics such as gender. Mortality rate assumptions are based on company experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(14)

Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in the money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. For any given contract, lapse rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(15)

The utilization rate assumption estimates the percentage of contractholders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible. The rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder. For any given contract, utilization rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(16)

The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.


(17)	Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.


(18)	Nonperformance risk spread varies by duration and by currency. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.

Fair Value, Measured on Recurring Basis, Unobservable Input Reconciliation

The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities AFS
	Corporate (1)			Foreign Government			Structured Securities			Equity Securities			Unit-linked and FVO Securities
	(In millions)
Three Months Ended March 31, 2019
Balance, beginning of period	$	10,467		$	138		$	4,266		$	419		$	405
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	9			—			14			30			14
Total realized/unrealized gains (losses) included in AOCI	394			—			22			—			—
Purchases (4)	463			20			264			6			41
Sales (4)	(270		)	(1		)	(139		)	(21		)	(3		)
Issuances (4)	—			—			—			—			—
Settlements (4)	—			—			—			—			—
Transfers into Level 3 (5)	284			—			1			—			4
Transfers out of Level 3 (5)	(385		)	—			(359		)	—			(4		)
Balance, end of period	$	10,962		$	157		$	4,069		$	434		$	457
Three Months Ended March 31, 2018
Balance, beginning of period	$	11,219		$	209		$	4,841		$	428		$	362
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	7			1			23			(6		)	5
Total realized/unrealized gains (losses) included in AOCI	(68		)	(3		)	24			—			—
Purchases (4)	512			2			657			1			27
Sales (4)	(542		)	(2		)	(324		)	(1		)	(59		)
Issuances (4)	—			—			—			—			—
Settlements (4)	—			—			—			—			—
Transfers into Level 3 (5)	46			—			45			—			—
Transfers out of Level 3 (5)	(364		)	(28		)	(684		)	—			(49		)
Balance, end of period	$	10,810		$	179		$	4,582		$	422		$	286
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2019 (6)	$	(1	)	$	—		$	13		$	23		$	15
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2018 (6)	$	1		$	1		$	21		$	—		$	4



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Short-term Investments			Residential Mortgage Loans — FVO			Other Investments		Net Derivatives (7)			Net Embedded Derivatives (8)			Separate Accounts (9)
	(In millions)
Three Months Ended March 31, 2019
Balance, beginning of period	$	33		$	299		$	39	$	(225	)	$	(739	)	$	937
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	—			2			—		70			193			3
Total realized/unrealized gains (losses) included in AOCI	1			—			—		97			7			—
Purchases (4)	110			—			129		—			—			80
Sales (4)	(6		)	(16		)	—		—			—			(122		)
Issuances (4)	—			—			—		—			—			2
Settlements (4)	—			(9		)	—		(11		)	(66		)	(1		)
Transfers into Level 3 (5)	—			—			—		—			—			—
Transfers out of Level 3 (5)	—			—			—		—			—			(2		)
Balance, end of period	$	138		$	276		$	168	$	(69	)	$	(605	)	$	897
Three Months Ended March 31, 2018
Balance, beginning of period	$	33		$	520		$	—	$	(132	)	$	(274	)	$	959
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	—			2			—		11			36			2
Total realized/unrealized gains (losses) included in AOCI	—			—			—		(104		)	(16		)	—
Purchases (4)	605			—			—		—			—			409
Sales (4)	(3		)	(64		)	—		—			—			(124		)
Issuances (4)	—			—			—		—			—			1
Settlements (4)	—			(20		)	—		43			(74		)	(1		)
Transfers into Level 3 (5)	—			—			—		—			—			53
Transfers out of Level 3 (5)	(20		)	—			—		—			—			(75		)
Balance, end of period	$	615		$	438		$	—	$	(182	)	$	(328	)	$	1,224
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2019 (6)	$	—		$	—		$	—	$	69		$	192		$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2018 (6)	$	—		$	(8	)	$	—	$	48		$	31		$	—

__________________


(1)	Comprised of U.S. and foreign corporate securities.

(2)

Amortization of premium/accretion of discount is included within net investment income. Impairments charged to net income (loss) on securities are included in net investment gains (losses), while changes in estimated fair value of residential mortgage loans — FVO are included in net investment income. Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).


(3)	Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.


(4)	Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.


(5)	Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.


(6)	Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).


(7)	Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.


(8)	Embedded derivative assets and liabilities are presented net for purposes of the rollforward.

(9)

Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses). Separate account assets and liabilities are presented net for the purposes of the rollforward.

Fair Value Option

The following table presents information for residential mortgage loans, which are accounted for under the FVO and were initially measured at fair value.



	March 31, 2019			December 31, 2018
	(In millions)
Unpaid principal balance	$	324		$	344
Difference between estimated fair value and unpaid principal balance	(48		)	(45		)
Carrying value at estimated fair value	$	276		$	299
Loans in nonaccrual status	$	79		$	89
Loans more than 90 days past due	$	34		$	41
Loans in nonaccrual status or more than 90 days past due, or both — difference between aggregate estimated fair value and unpaid principal balance	$	(35	)	$	(36	)

Fair Value of Financial Instruments Carried at Other Than Fair Value

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:



	March 31, 2019
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	78,325	$	—	$	—	$	79,936	$	79,936
Policy loans	$	9,670	$	—	$	335	$	11,121	$	11,456
Other invested assets	$	1,154	$	—	$	793	$	361	$	1,154
Premiums, reinsurance and other receivables	$	3,760	$	—	$	1,018	$	2,901	$	3,919
Other assets	$	314	$	—	$	153	$	177	$	330
Liabilities
Policyholder account balances	$	116,767	$	—	$	—	$	118,800	$	118,800
Long-term debt	$	12,836	$	—	$	14,298	$	—	$	14,298
Collateral financing arrangement	$	1,048	$	—	$	—	$	851	$	851
Junior subordinated debt securities	$	3,148	$	—	$	3,958	$	—	$	3,958
Other liabilities	$	3,287	$	—	$	1,666	$	2,258	$	3,924
Separate account liabilities	$	109,926	$	—	$	109,926	$	—	$	109,926



	December 31, 2018
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	75,453	$	—	$	—	$	76,379	$	76,379
Policy loans	$	9,699	$	—	$	338	$	11,028	$	11,366
Other invested assets	$	1,177	$	—	$	793	$	383	$	1,176
Premiums, reinsurance and other receivables	$	3,658	$	—	$	903	$	2,894	$	3,797
Other assets	$	326	$	—	$	164	$	186	$	350
Liabilities
Policyholder account balances	$	114,040	$	—	$	—	$	114,924	$	114,924
Long-term debt	$	12,820	$	—	$	13,611	$	—	$	13,611
Collateral financing arrangement	$	1,060	$	—	$	—	$	853	$	853
Junior subordinated debt securities	$	3,147	$	—	$	3,738	$	—	$	3,738
Other liabilities	$	2,963	$	—	$	1,324	$	2,194	$	3,518
Separate account liabilities	$	104,010	$	—	$	104,010	$	—	$	104,010