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Fair Value of Assets and Liabilities

12 Months Ended

Dec. 31, 2019

FAIR VALUE OF ASSETS AND LIABILITIES

Fair Value Measurement—Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative fair value guidance establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1—Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. The Company’s Level 1 assets and liabilities primarily include certain cash equivalents and short-term investments, equity securities and derivative contracts that trade on an active exchange market.

Level 2—Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, and other market observable inputs. The Company’s Level 2 assets and liabilities include: fixed maturities (corporate public and private bonds, most government securities, certain asset-backed and mortgage-backed securities, etc.), certain equity securities (mutual funds, which do not trade in active markets because they are not publicly available), certain commercial mortgage loans, short-term investments and certain cash equivalents (primarily commercial paper), and certain OTC derivatives.

Level 3—Fair value is based on at least one significant unobservable input for the asset or liability. The assets and liabilities in this category may require significant judgment or estimation in determining the fair value. The Company’s Level 3 assets and liabilities primarily include: certain private fixed maturities and equity securities, certain manually priced public equity securities and fixed maturities, certain highly structured OTC derivative contracts, certain consolidated real estate funds for which the Company is the general partner and embedded derivatives resulting from certain products with guaranteed benefits.

Assets and Liabilities by Hierarchy Level—The tables below present the balances of assets and liabilities reported at fair value on a recurring basis, as of the dates indicated.



	As of December 31, 2019
	Level 1		Level 2		Level 3		Netting(1)			Total
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	35,554	$	105	$			$	35,659
Obligations of U.S. states and their political subdivisions	0		11,493		4					11,497
Foreign government bonds	0		119,032		22					119,054
U.S. corporate public securities	0		97,959		380					98,339
U.S. corporate private securities(2)	0		34,749		1,784					36,533
Foreign corporate public securities	0		29,756		69					29,825
Foreign corporate private securities	0		27,237		1,003					28,240
Asset-backed securities(3)	0		12,238		936					13,174
Commercial mortgage-backed securities	0		15,574		0					15,574
Residential mortgage-backed securities	0		3,189		12					3,201
Subtotal	0		386,781		4,315					391,096
Assets supporting experience-rated contractholder liabilities:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	0		185		0					185
Obligations of U.S. states and their political subdivisions	0		212		0					212
Foreign government bonds	0		790		24					814
Corporate securities	0		12,966		637					13,603
Asset-backed securities(3)	0		1,593		69					1,662
Commercial mortgage-backed securities	0		1,896		0					1,896
Residential mortgage-backed securities	0		1,158		0					1,158
Equity securities	1,505		285		0					1,790
All other(4)	0		261		0					261
Subtotal	1,505		19,346		730					21,581
Fixed maturities, trading	0		3,597		287					3,884
Equity securities	5,813		939		633					7,385
Commercial mortgage and other loans	0		228		0					228
Other invested assets(5)	6		14,379		567		(13,519		)	1,433
Short-term investments	1,806		1,975		155					3,936
Cash equivalents	2,079		6,796		131					9,006
Other assets	0		0		113					113
Separate account assets(6)(7)	46,574		240,433		1,717					288,724
Total assets	$	57,783	$	674,474	$	8,648	$	(13,519	)	$	727,386
Future policy benefits(8)	$	0	$	0	$	12,831	$			$	12,831
Policyholders’ account balances	0		0		1,316					1,316
Other liabilities	41		7,495		105		(6,705		)	936
Notes issued by consolidated VIEs	0		0		800					800
Total liabilities	$	41	$	7,495	$	15,052	$	(6,705	)	$	15,883



	As of December 31, 2018
	Level 1		Level 2		Level 3		Netting(1)			Total
	(in millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	30,513	$	81	$			$	30,594
Obligations of U.S. states and their political subdivisions	0		10,488		5					10,493
Foreign government bonds	0		112,985		125					113,110
U.S. corporate public securities	0		83,282		133					83,415
U.S. corporate private securities(2)	0		31,265		1,755					33,020
Foreign corporate public securities	0		29,148		53					29,201
Foreign corporate private securities	0		23,787		744					24,531
Asset-backed securities(3)	0		11,726		1,247					12,973
Commercial mortgage-backed securities	0		13,302		13					13,315
Residential mortgage-backed securities	0		2,925		79					3,004
Subtotal	0		349,421		4,235					353,656
Assets supporting experience-rated contractholder liabilities:
U.S. Treasury securities and obligations of U.S. government authorities and agencies	0		381		0					381
Obligations of U.S. states and their political subdivisions	0		196		0					196
Foreign government bonds	0		858		225					1,083
Corporate securities	0		12,675		444					13,119
Asset-backed securities(3)	0		1,516		149					1,665
Commercial mortgage-backed securities	0		2,324		0					2,324
Residential mortgage-backed securities	0		811		0					811
Equity securities	1,222		237		1					1,460
All other(4)	0		215		0					215
Subtotal	1,222		19,213		819					21,254
Fixed maturities, trading	0		3,037		206					3,243
Equity securities	4,819		610		671					6,100
Commercial mortgage and other loans	0		763		0					763
Other invested assets(5)	23		10,454		263		(9,331		)	1,409
Short-term investments	2,713		2,691		89					5,493
Cash equivalents	2,848		6,553		77					9,478
Other assets	0		0		25					25
Separate account assets(6)(7)	39,534		212,998		1,534					254,066
Total assets	$	51,159	$	605,740	$	7,919	$	(9,331	)	$	655,487
Future policy benefits(8)	$	0	$	0	$	8,926	$			$	8,926
Policyholders’ account balances	0		0		56					56
Other liabilities	18		5,398		0		(5,281		)	135
Notes issued by consolidated VIEs	0		0		595					595
Total liabilities	$	18	$	5,398	$	9,577	$	(5,281	)	$	9,712

__________


(1)	“Netting” amounts represent cash collateral of $6,814 million and $4,050 million as of December 31, 2019 and 2018, respectively.


(2)	Excludes notes with fair value of $4,757 million (carrying amount of $4,751 million) and $4,216 million (carrying amount of $4,216 million) as of December 31, 2019 and 2018, respectively, which have been offset with the associated payables under a netting agreement.


(3)	Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types.


(4)	All other represents cash equivalents and short-term investments.


(5)	Other invested assets excluded from the fair value hierarchy include certain hedge funds, private equity funds and other funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At December 31, 2019 and 2018, the fair values of such investments were $4,213 million and $4,115 million respectively.

(6)

Separate account assets included in the fair value hierarchy exclude investments in entities that calculate NAV per share (or its equivalent) as a practical expedient. Such investments excluded from the fair value hierarchy include investments in real estate, hedge funds and other invested assets. At December 31, 2019 and 2018, the fair value of such investments were $23,557 million and $25,070 million, respectively.

(7)

Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company’s Consolidated Statements of Financial Position.

(8)

As of December 31, 2019, the net embedded derivative liability position of $12.8 billion includes $0.7 billion of embedded derivatives in an asset position and $13.5 billion of embedded derivatives in a liability position. As of December 31, 2018, the net embedded derivative liability position of $8.9 billion includes $0.7 billion of embedded derivatives in an asset position and $9.6 billion of embedded derivatives in a liability position.

The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below.

Fixed Maturity Securities—The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent pricing services. Prices for each security are generally sourced from multiple pricing vendors, and a vendor hierarchy is maintained by asset type based on historical pricing experience and vendor expertise. The Company ultimately uses the price from the pricing service highest in the vendor hierarchy based on the respective asset type. The pricing hierarchy is updated for new financial products and recent pricing experience with various vendors. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. Typical inputs used by these pricing services include but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers, and/or estimated cash flow, prepayment speeds and default rates. If the pricing information received from third-party pricing services is deemed not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process with the pricing service or classify the securities as Level 3. If the pricing service updates the price to be more consistent with the presented market observations, the security remains within Level 2.

Internally-developed valuations or indicative broker quotes are also used to determine fair value in circumstances where vendor pricing is not available, or where the Company ultimately concludes that pricing information received from the independent pricing services is not reflective of market activity. If the Company concludes the values from both pricing services and brokers are not reflective of market activity, it may override the information with an internally-developed valuation. As of December 31, 2019 and 2018, overrides on a net basis were not material. Pricing service overrides, internally-developed valuations and indicative broker quotes are generally included in Level 3 in the fair value hierarchy.

The Company conducts several specific price monitoring activities. Daily analyses identify price changes over predetermined thresholds defined at the financial instrument level. Various pricing integrity reports are reviewed on a daily and monthly basis to determine if pricing is reflective of market activity or if it would warrant any adjustments. Other procedures performed include, but are not limited to, reviews of third-party pricing services methodologies, reviews of pricing trends and back testing.

The fair values of private fixed maturities, which are originated by internal private asset managers, are primarily determined using discounted cash flow models. These models primarily use observable inputs that include Treasury or similar base rates plus estimated credit spreads to value each security. The credit spreads are obtained through a survey of private market intermediaries who are active in both primary and secondary transactions, and consider, among other factors, the credit quality and the reduced liquidity associated with private placements. Internal adjustments are made to reflect variation in observed sector spreads. Since most private placements are valued using standard market observable inputs and inputs derived from, or corroborated by, market observable data including, but not limited to observed prices and spreads for similar publicly-traded issues, they have been reflected within Level 2. For certain private fixed maturities, the discounted cash flow model may incorporate significant unobservable inputs, which reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset. To the extent management determines that such unobservable inputs are significant to the price of a security, a Level 3 classification is made.

Assets Supporting Experience-Rated Contractholder Liabilities—Assets supporting experience-rated contractholder liabilities consist primarily of fixed maturity securities, equity securities and derivatives whose fair values are determined consistent with similar instruments described above under “Fixed Maturity Securities” and below under “Equity Securities” and “Derivative Instruments.”

Equity Securities—Equity securities consist principally of investments in common and preferred stock of publicly-traded companies, perpetual preferred stock, privately-traded securities, as well as mutual fund shares. The fair values of most publicly-traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy. Estimated fair values for most privately traded equity securities are determined using discounted cash flow, earnings multiple and other valuation models that require a substantial level of judgment around inputs and therefore are classified within Level 3. The fair values of mutual fund shares that transact regularly (but do not trade in active markets because they are not publicly available) are based on transaction prices of identical fund shares and are classified within Level 2 in the fair value hierarchy. The fair values of perpetual preferred stock are based on inputs obtained from independent pricing services that are primarily based on indicative broker quotes. As a result, the fair values of perpetual preferred stock are classified as Level 3.

Commercial Mortgage and Other Loans—The fair value of loans held and accounted for using the fair value option is determined utilizing pricing indicators from the whole loan market, where investors are committed to purchase these loans at a predetermined price, which is considered the principal exit market for these loans. The Company evaluates the valuation inputs used for these assets, including the existence of predetermined exit prices, the terms of the loans, prevailing interest rates and credit risk, and deems the primary pricing inputs are Level 2 inputs in the fair value hierarchy.

Other Invested Assets—Other invested assets primarily include investments in LPs/LLCs, derivatives and certain limited partnerships which are consolidated because the Company is either deemed to exercise control or considered the primary beneficiary of a variable interest entity. These entities are primarily investment companies and follow specialized industry accounting whereby their assets are carried at fair value. The investments held by these entities include various feeder fund investments in underlying master funds (whose underlying holdings generally include public fixed maturities, equity securities and mutual funds), as well as wholly-owned real estate held within other investment funds. For the unconsolidated fund investments, the fair value is primarily determined by the fund managers and is measured at net asset value (“NAV”) as a practical expedient.

Other Assets—Other assets reflected in Level 3 include reinsurance recoverables which are carried at fair value and relate to the reinsurance of the Company’s living benefit guarantees on certain variable annuity contracts. The methods and assumptions used to estimate the fair value are consistent with those described below under “Future Policy Benefits.”

Derivative Instruments—Derivatives are recorded at fair value either as assets, within “Assets supporting experience-rated contractholder liabilities,” or “Other invested assets, at fair value,” or as liabilities, within “Other liabilities,” except for embedded derivatives which are recorded with the associated host contract. The fair values of derivative contracts can be affected by changes in interest rates, foreign exchange rates, commodity prices, credit spreads, market volatility, expected returns, NPR, liquidity and other factors. For derivative positions included within Level 3 of the fair value hierarchy, liquidity valuation adjustments are made to reflect the cost of exiting significant risk positions, and consider the bid-ask spread, maturity, complexity and other specific attributes of the underlying derivative position.

The Company’s exchange-traded futures and options include Treasury futures, Eurodollar futures, commodity futures, Eurodollar options and commodity options. Exchange-traded futures and options are valued using quoted prices in active markets and are classified within Level 1 in the fair value hierarchy.

The majority of the Company’s derivative positions are traded in the OTC derivative market and are classified within Level 2 in the fair value hierarchy. OTC derivatives classified within Level 2 are valued using models that utilize actively quoted or observable market input values from external market data providers, third-party pricing vendors and/or recent trading activity. The Company’s policy is to use mid-market pricing in determining its best estimate of fair value. The fair values of most OTC derivatives, including interest rate and cross-currency swaps, currency forward contracts, commodity swaps, commodity forward contracts, single name credit default swaps, loan commitments held for sale and TBA forward contracts on highly rated mortgage-backed securities issued by U.S. government sponsored entities are determined using discounted cash flow models. The fair values of European style option contracts are determined using Black-Scholes option pricing models. These models’ key inputs include the contractual terms of the respective contract, along with significant observable inputs, including interest rates, currency rates, credit spreads, equity prices, index dividend yields, NPR, volatility and other factors.

The Company’s cleared interest rate swaps and credit derivatives linked to an index are valued using models that utilize actively quoted or observable market inputs, including Overnight Indexed Swap discount rates, obtained from external market data providers, third-party pricing vendors and/or recent trading activity. These derivatives are classified as Level 2 in the fair value hierarchy.

The majority of the Company’s derivative agreements are with highly rated major international financial institutions. To reflect the market’s perception of its own and the counterparty’s NPR, the Company incorporates additional spreads over LIBOR into the discount rate used in determining the fair value of OTC derivative assets and liabilities that are not otherwise collateralized.

Derivatives classified as Level 3 include look-back equity options and other structured products. These derivatives are valued based upon models, such as Monte Carlo simulation models and other techniques that utilize significant unobservable inputs. Level 3 methodologies are validated through periodic comparison of the Company’s fair values to external broker-dealer values.

Cash Equivalents and Short-Term Investments—Cash equivalents and short-term investments include money market instruments, commercial paper and other highly liquid debt instruments. Certain money market instruments are valued using unadjusted quoted prices in active markets that are accessible for identical assets and are primarily classified as Level 1. The remaining instruments in this category are generally fair valued based on market observable inputs and these investments have primarily been classified within Level 2.

Separate Account Assets—Separate account assets include mutual funds, fixed maturity securities, treasuries, equity securities, real estate and commercial mortgage loans for which values are determined consistent with similar instruments described above under “Fixed Maturity Securities,” “Equity Securities” and “Commercial Mortgage and Other Loans.”

Future Policy Benefits—The liability for future policy benefits is related to guarantees primarily associated with the living benefit features of certain variable annuity contracts offered by the Company’s Individual Annuities segment, including guaranteed minimum accumulation benefits (“GMAB”), guaranteed withdrawal benefits (“GMWB”) and guaranteed minimum income and withdrawal benefits (“GMIWB”), accounted for as embedded derivatives. The fair values of these liabilities are calculated as the present value of future expected benefit payments to customers less the present value of future expected rider fees attributable to the embedded derivative feature. This methodology could result in either a liability or contra-liability balance, given changing capital market conditions and various actuarial assumptions. Since there is no observable active market for the transfer of these obligations, the valuations are calculated using internally-developed models with option pricing techniques. The models are based on a risk neutral valuation framework and incorporate premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows. The determination of these risk premiums requires the use of management’s judgment.

The significant inputs to the valuation models for these embedded derivatives include capital market assumptions, such as interest rate levels and volatility assumptions, the Company’s market-perceived NPR, as well as actuarially determined assumptions, including contractholder behavior, such as lapse rates, benefit utilization rates, withdrawal rates, and mortality rates. Since many of these assumptions are unobservable and are considered to be significant inputs to the liability valuation, the liability included in future policy benefits has been reflected within Level 3 in the fair value hierarchy.

Capital market inputs and actual policyholders’ account values are updated each quarter based on capital market conditions as of the end of the quarter, including interest rates, equity markets and volatility. In the risk neutral valuation, the initial swap curve drives the total return used to grow the policyholders’ account values. The Company’s discount rate assumption is based on the LIBOR swap curve adjusted for an additional spread relative to LIBOR to reflect NPR.

Actuarial assumptions, including contractholder behavior and mortality, are reviewed at least annually, and updated based upon emerging experience, future expectations and other data, including any observable market data. These assumptions are generally updated annually unless a material change that the Company feels is indicative of a long-term trend is observed in an interim period.

Policyholders’ Account Balances—The liability for policyholders’ account balances is related to certain embedded derivative instruments associated with certain universal life and fixed annuity products that provide the policyholders with the index-linked interest credited over contract specified term periods. The fair values of these liabilities are determined using discounted cash flow models which include capital market assumptions such as interest rates and equity index volatility assumptions, the Company’s market-perceived NPR and actuarially determined assumptions for mortality, lapses and projected hedge costs.

As there is no observable active market for these liabilities, the fair value is determined as the present value of account balances paid to policyholders in excess of contractually guaranteed minimums using option pricing techniques for index term periods that contain deposits as of the valuation date, and the expected option cost for future index term periods, where the terms of index crediting rates have not yet been declared by the Company. Premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows are also incorporated in the fair value of these

liabilities. The determination of these risk premiums requires the use of management’s judgment, and hence these liabilities are reflected within Level 3 in the fair value hierarchy.

Capital market inputs, including interest rates and equity markets volatility, and actual policyholders’ account values are updated each quarter. Actuarial assumptions are reviewed at least annually and updated based upon emerging experience, future expectations and other data, including any observable market data. Aside from these annual updates, assumptions are generally updated only if a material change is observed in an interim period that the Company believes is indicative of a long-term trend.

Other Liabilities—Other liabilities include certain derivative instruments and the contingent consideration liability associated with the acquisition of Assurance IQ. The fair values of derivative instruments are primarily determined consistent with those described above under “Derivative Instruments.” For the contingent consideration liability, see Note 1 for additional information.

Notes issued by Consolidated VIEs—These notes are based on the fair values of corresponding bank loan collateral. Since the notes are valued based on reference collateral, they are classified as Level 3. See Note 4 and “Fair Value Option” below for additional information.

Quantitative Information Regarding Internally-Priced Level 3 Assets and Liabilities—The tables below present quantitative information on significant internally-priced Level 3 assets and liabilities.



	As of December 31, 2019
	Fair Value		Valuation Techniques	Unobservable Inputs	Minimum	Maximum	Weighted Average		Impact of Increase in Input on Fair Value(1)
	(in millions)
Assets:
Corporate securities(2)	$	1,424	Discounted cash flow(4)	Discount rate	0.49%	20%	7.41	%	Decrease
			Market comparables	EBITDA multiples(3)	5.7X	9.2X	7.3X		Increase
			Liquidation	Liquidation value	14.25%	83.61%	59.47	%	Increase
Equity securities	$	210	Discounted cash flow(4)	Discount rate	10%	30%			Decrease
			Market comparables	EBITDA multiples(3)	1X	10.1X	5.4X		Increase
			Net Asset Value	Share price	$5	$1,353	$451		Increase
Separate account assets-commercial mortgage loans(5)	$	796	Discounted cash flow	Spread	1.11%	1.85%	1.26	%	Decrease
Liabilities:
Future policy benefits(6)	$	12,831	Discounted cash flow	Lapse rate(8)	1%	18%			Decrease
				Spread over LIBOR(9)	0.10%	1.23%			Decrease
				Utilization rate(10)	43%	97%			Increase
				Withdrawal rate	See table footnote (11) below.
				Mortality rate(12)	0%	15%			Decrease
				Equity volatility curve	13%	23%			Increase
Policyholders’ account balances(7)	$	1,316	Discounted cash flow	Lapse rate(8)	1%	42%			Decrease
				Spread over LIBOR(9)	0.1%	1.23%			Decrease
				Mortality rate(12)	0%	24%			Decrease
				Equity volatility curve	6%	25%			Increase

As of December 31, 2018

Fair Value

Valuation

Techniques

Unobservable Inputs

Minimum

Maximum

Weighted

Average

Impact of

Increase in

Input on

Fair

Value(1)

(in millions)

Assets:

Corporate securities(2)

1,392

Discounted cash flow

Discount rate

0.57%

20%

8.58%

Decrease

Market comparables

EBITDA multiples(3)

4.5X

8.5X

8.1X

Increase

Liquidation

Liquidation value

11.77%

94%

32.16%

Increase

Separate account assets-commercial mortgage loans(5)

785

Discounted cash flow

Spread

1.12%

2.55%

1.29%

Decrease

Liabilities:

Future policy benefits(6)

8,926

Discounted cash flow

Lapse rate(8)

13%

Decrease

Spread over LIBOR(9)

0.36%

1.60%

Decrease

Utilization rate(10)

50%

97%

Increase

Withdrawal rate

See table footnote (11) below.

Mortality rate(12)

15%

Decrease

Equity volatility curve

18%

22%

Increase

__________


(1)	Conversely, the impact of a decrease in input would have the opposite impact on fair value as that presented in the table.


(2)	Includes assets classified as fixed maturities available-for-sale, assets supporting experience-rated contractholder liabilities and fixed maturities, trading.


(3)	Represents multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”), and are amounts used when the Company has determined that market participants would use such multiples when valuing the investments.


(4)	Includes certain investments where enterprise value is less than the amount needed to support senior and subordinated claims. These investments typically use a range of discount rates (10% to 20%), therefore presenting a range, rather than a weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.


(5)	Changes in the fair value of separate account assets are borne by customers and thus are offset by changes in separate account liabilities on the Company’s Consolidated Statements of Financial Position. As a result, changes in value associated with these investments are not reflected in the Company’s Consolidated Statements of Operations.

(6)

Future policy benefits primarily represent general account liabilities for the living benefit features of the Company’s variable annuity contracts which are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than a weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(7)

Policyholders’ account balances primarily represent general account liabilities for the index-linked interest credited on certain of the Company’s life and annuity products that are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than a weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.

(8)

Lapse rates for contracts with living benefit guarantees are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates for contracts with index-linked crediting guarantees may be adjusted at the contract level based on the applicability of any surrender charges, product type, and market related factors such as interest rates. Lapse rates are also generally assumed to be lower for the period where surrender charges apply. For any given contract, lapse rates vary throughout the period over which cash flows are projected for the purposes of valuing these embedded derivatives.

(9)

The spread over the London Inter-Bank Offered Rate (“LIBOR”) swap curve represents the premium added to the proxy for the risk-free rate (LIBOR) to reflect the Company’s estimates of rates that a market participant would use to value the living benefits in both the accumulation and payout phases and index-linked interest crediting guarantees. This spread includes an estimate of NPR, which is the risk that the obligation will not be fulfilled by the Company. NPR is primarily estimated by utilizing the credit spreads associated with issuing funding agreements, adjusted for any illiquidity risk premium. In order to reflect the financial strength ratings of the Company, credit spreads associated with funding agreements, as opposed to credit spread associated with debt, are utilized in developing this estimate because funding agreements, living benefit guarantees, and index-linked interest crediting guarantees are insurance liabilities and are therefore senior to debt.

(10)

The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration, and begin lifetime withdrawals at various time intervals from contract inception. The remaining contractholders are assumed to either begin lifetime withdrawals immediately or never utilize the benefit. Utilization assumptions may vary by product type, tax status, and age. The impact of changes in these assumptions is highly dependent on the product type, the age of the contractholder at the time of the sale, and the timing of the first lifetime income withdrawal. Range reflects the utilization rate for the vast majority of business with living benefits.

(11)

The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. These assumptions vary based on the age of the contractholder, the tax status of the contract and the duration since the contractholder began lifetime withdrawals. As of both December 31, 2019 and 2018, the minimum withdrawal rate assumption is 78% and the maximum withdrawal rate assumption may be greater than 100%. The fair value of the liability will generally increase the closer the withdrawal rate is to 100% and decrease as the withdrawal rate moves further away from 100%.

(12)

The range reflects the mortality rates for the vast majority of business with living benefits and other contracts, with policyholders ranging from 45 to 90 years old. While the majority of living benefits have a minimum age requirement, certain other contracts do not have an age restriction. This results in contractholders with mortality rates approaching 0% for certain benefits. Mortality rates may vary by product, age, and duration. A mortality improvement assumption is also incorporated into the overall mortality table.

Interrelationships Between Unobservable Inputs—In addition to the sensitivities of fair value measurements to changes in each unobservable input in isolation, as reflected in the table above, interrelationships between these inputs may also exist, such that a change in one unobservable input may give rise to a change in another or multiple inputs. Examples of such interrelationships for significant internally-priced Level 3 assets and liabilities are as follows:

Corporate Securities—The rate used to discount future cash flows reflects current risk-free rates plus credit and liquidity spread requirements that market participants would use to value an asset. The discount rate may be influenced by many factors, including market cycles, expectations of default, collateral, term, and asset complexity. Each of these factors can influence discount rates, either in isolation, or in response to other factors.

Future Policy Benefits—The Company expects efficient benefit utilization and withdrawal rates to generally be correlated with lapse rates. However, behavior is generally highly dependent on the facts and circumstances surrounding the individual contractholder, such as their liquidity needs or tax situation, which could drive lapse behavior independent of other contractholder behavior assumptions. To the extent more efficient contractholder behavior results in greater in-the-moneyness at the contract level, lapse rates may decline for those contracts. Similarly, to the extent that increases in equity volatility are correlated with overall declines in the capital markets, lapse rates may decline as contracts become more in-the-money.

Changes in Level 3 Assets and Liabilities––The following tables describe changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods. When a determination is made to classify assets and liabilities within Level 3, the determination is based on significance of the unobservable inputs in the overall fair value measurement. All transfers are based on changes in the observability of the valuation inputs, including the availability of pricing service information that the Company can validate. Transfers into Level 3 are generally the result of unobservable inputs utilized within valuation methodologies and the use of indicative broker quotes for assets that were previously valued using observable inputs. Transfers out of Level 3 are generally due to the use of observable inputs in valuation methodologies as well as the availability of pricing service information for certain assets that the Company can validate.



	Year Ended December 31, 2019
	Fair Value, beginning of period			Total realized and unrealized gains (losses)			Purchases		Sales			Issuances			Settlements			Other(1)			Transfers into Level 3		Transfers out of Level 3			Fair Value, end of period			Unrealized gains (losses) for assets still held(2)
	(in millions)
Fixed maturities, available-for-sale:
U.S. government	$	81		$	0		$	24	$	0		$	0		$	0		$	0		$	0	$	0		$	105		$	0
U.S. states	5			0			0		0			0			(1		)	0			0		0			4			0
Foreign government	125			0			0		0			0			0			(1		)	10		(112		)	22			(2		)
Corporate securities(3)	2,685			(3		)	1,462		(47		)	0			(1,137		)	10			353		(87		)	3,236			(96		)
Structured securities(4)	1,339			40			952		(67		)	0			(507		)	(4		)	755		(1,560		)	948			0
Assets supporting experience-rated contractholder liabilities:
Foreign government	225			0			0		0			0			(5		)	(196		)	0		0			24			0
Corporate securities(3)	444			4			146		0			0			(189		)	196			46		(10		)	637			(6		)
Structured securities(4)	149			0			29		0			0			(35		)	0			0		(74		)	69			0
Equity securities	1			1			0		(2		)	0			0			0			0		0			0			1
All other activity	0			0			8		0			0			(8		)	0			0		0			0			0
Other assets:
Fixed maturities, trading	206			(26		)	105		(31		)	0			0			(7		)	41		(1		)	287			(27		)
Equity securities	671			42			79		(52		)	0			(85		)	1			1		(24		)	633			34
Other invested assets	263			11			341		0			0			(42		)	(6		)	0		0			567			(1		)
Short-term investments	89			0			597		0			0			(526		)	(5		)	0		0			155			0
Cash equivalents	77			0			131		0			0			(77		)	0			0		0			131			0
Other assets	25			44			44		0			0			0			0			0		0			113			44
Separate account assets(5)	1,534			184			346		(111		)	0			(144		)	0			55		(147		)	1,717			170
Liabilities:
Future policy benefits	(8,926		)	(2,685		)	0		0			(1,221		)	0			1			0		0			(12,831		)	(2,999		)
Policyholders’ account balances(6)	(56		)	(933		)	0		0			(324		)	0			(3		)	0		0			(1,316		)	(917		)
Other liabilities	0			(5		)	0		0			(100		)	0			0			0		0			(105		)	(5		)
Notes issued by consolidated VIEs	(595		)	15			0		0			(858		)	638			0			0		0			(800		)	15



	Year Ended December 31, 2019
	Total realized and unrealized gains (losses)												Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net			Other income (loss)			Interest credited to policyholders’ account balances		Included in other comprehensive income (losses)		Net investment income		Realized investment gains (losses), net			Other income (loss)			Interest credited to policyholders’ account balances
	(in millions)
Fixed maturities, available-for-sale	$	(67	)	$	0		$	0	$	86	$	18	$	(98	)	$	0		$	0
Assets supporting experience-rated contractholder liabilities	0			(4		)	0		0		9		0			(5		)	0
Other assets:
Fixed maturities, trading	0			(27		)	0		0		1		0			(27		)	0
Equity securities	0			42			0		0		0		0			34			0
Other invested assets	(1		)	12			0		0		0		(1		)	0			0
Short-term investments	0			0			0		0		0		0			0			0
Cash equivalents	0			0			0		0		0		0			0			0
Other assets	44			0			0		0		0		44			0			0
Separate account assets(5)	0			0			180		0		4		0			0			170
Liabilities:
Future policy benefits	(2,685		)	0			0		0		0		(2,999		)	0			0
Policyholders’ account balances	(933		)	0			0		0		0		(917		)	0			0
Other liabilities	0			(5		)	0		0		0		0			(5		)	0
Notes issued by consolidated VIEs	15			0			0		0		0		15			0			0



	Year Ended December 31, 2018
	Fair Value, beginning of period			Total realized and unrealized gains (losses)			Purchases		Sales			Issuances			Settlements			Other(1)			Transfers into Level 3		Transfers out of Level 3			Fair Value, end of period			Unrealized gains (losses) for assets still held(2)
	(in millions)
Fixed maturities, available-for-sale:
U.S. government	$	52		$	0		$	29	$	0		$	0		$	0		$	0		$	0	$	0		$	81		$	0
U.S. states	5			0			0		0			0			0			0			0		0			5			0
Foreign government	148			(3		)	5		0			0			0			(9		)	20		(36		)	125			0
Corporate securities(3)	2,776			(110		)	919		(25		)	0			(991		)	(15		)	485		(354		)	2,685			(60		)
Structured securities(4)	6,715			(40		)	2,808		(612		)	0			(1,589		)	1			1,212		(7,156		)	1,339			0
Assets supporting experience-rated contractholder liabilities:
Foreign government	223			7			0		0			0			(5		)	0			0		0			225			1
Corporate securities(3)	462			(35		)	147		0			0			(179		)	0			72		(23		)	444			(37		)
Structured securities(4)	723			(1		)	97		0			0			(165		)	0			33		(538		)	149			(2		)
Equity securities	4			0			0		(3		)	0			0			0			0		0			1			0
All other activity	7			(2		)	91		(3		)	0			(93		)	0			0		0			0			0
Other assets:
Fixed maturities, trading	156			6			96		(59		)	0			(3		)	3			13		(6		)	206			8
Equity securities	795			(6		)	66		(100		)	0			(82		)	18			5		(25		)	671			(19		)
Other invested assets	137			4			136		(18		)	0			0			4			0		0			263			3
Short-term investments	8			0			287		0			0			(201		)	(5		)	0		0			89			(1		)
Cash equivalents	0			(1		)	95		(2		)	0			(15		)	0			0		0			77			0
Other assets	13			(34		)	46		0			0			0			0			0		0			25			(34		)
Separate account assets(5)	2,122			(64		)	587		(36		)	0			(358		)	0			287		(1,004		)	1,534			(52		)
Liabilities:
Future policy benefits	(8,720		)	947			0		0			(1,153		)	0			0			0		0			(8,926		)	611
Policyholders’ account balances(6)	(47		)	30			0		0			(39		)	0			0			0		0			(56		)	30
Other liabilities	(3		)	2			0		0			0			0			1			0		0			0			3
Notes issued by consolidated VIEs	(1,196		)	14			0		0			0			0			587			0		0			(595		)	14



	Year Ended December 31, 2018
	Total realized and unrealized gains (losses)														Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net			Other income (loss)			Interest credited to policyholders’ account balances			Included in other comprehensive income (losses)			Net investment income		Realized investment gains (losses), net			Other income (loss)			Interest credited to policyholders’ account balances
	(in millions)
Fixed maturities, available-for-sale	$	(29	)	$	0		$	0		$	(141	)	$	17	$	(60	)	$	0		$	0
Assets supporting experience-rated contractholder liabilities	0			(39		)	0			0			8		0			(38		)	0
Other assets:
Fixed maturities, trading	0			5			0			0			1		0			8			0
Equity securities	0			(6		)	0			0			0		0			(19		)	0
Other invested assets	4			0			0			0			0		2			1			0
Short-term investments	0			0			0			0			0		(1		)	0			0
Cash equivalents	(1		)	0			0			0			0		0			0			0
Other assets	(34		)	0			0			0			0		(34		)	0			0
Separate account assets(5)	0			0			(66		)	0			2		0			0			(52		)
Liabilities:
Future policy benefits	947			0			0			0			0		611			0			0
Policyholders’ account balances	30			0			0			0			0		30			0			0
Other liabilities	2			0			0			0			0		3			0			0
Notes issued by consolidated VIEs	14			0			0			0			0		14			0			0

The following tables summarize the portion of changes in fair values of Level 3 assets and liabilities included in earnings and OCI for the year ended December 31, 2017, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held as of December 31, 2017.



	Year Ended December 31, 2017
	Total realized and unrealized gains (losses)													Unrealized gains (losses) for assets still held(2)
	Realized investment gains (losses), net			Other income (loss)			Interest credited to policyholders’ account balances		Included in other comprehensive income (losses)			Net investment income		Realized investment gains (losses), net			Other income (loss)			Interest credited to policyholders’ account balances
	(in millions)
Fixed maturities, available-for-sale	$	(23	)	$	0		$	0	$	(12	)	$	26	$	(154	)	$	0		$	0
Assets supporting experience-rated contractholder liabilities	0			(35		)	0		0			8		0			(34		)	0
Other assets:
Fixed maturities, trading	0			(2		)	0		0			1		0			(1		)	0
Equity securities	2			25			0		17			0		(4		)	38			0
Other invested assets	1			0			0		0			0		0			0			0
Short-term investments	0			0			0		0			0		0			0			0
Cash equivalents	0			0			0		0			2		0			0			0
Other assets	(20		)	0			0		0			0		(21		)	0			0
Separate account assets(5)	0			0			81		0			2		0			0			78
Liabilities:
Future policy benefits	637			0			0		0			0		372			0			0
Policyholders’ account balances	(31		)	0			0		0			0		(31		)	0			0
Other liabilities	(6		)	0			0		0			0		(6		)	0			0
Notes issued by consolidated VIEs	(4		)	0			0		0			0		(4		)	0			0

__________


(1)	“Other,” for the periods ended December 31, 2019 and 2018, primarily represent deconsolidation of VIE, reclassifications of certain assets between reporting categories and foreign currency translation.


(2)	Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.


(3)	Includes U.S. corporate public, U.S. corporate private, foreign corporate public and foreign corporate private securities.


(4)	Includes asset-backed, commercial mortgage-backed and residential mortgage-backed securities.

(5)

(6)

Issuances and settlements for Policyholders’ account balances are presented net in the rollforward. Prior period amounts have been updated to conform to current period presentation.

Derivative Fair Value Information

The following tables present the balances of derivative assets and liabilities measured at fair value on a recurring basis, as of the date indicated, by primary underlying risks.These tables exclude embedded derivatives and associated reinsurance recoverables. The derivative assets and liabilities shown below are included in “Other invested assets” or “Other liabilities” in the tables contained within the sections “—Assets and Liabilities by Hierarchy Level” and “—Changes in Level 3 Assets and Liabilities,” above.



	As of December 31, 2019
	Level 1		Level 2		Level 3		Netting(1)			Total

	(in millions)
Derivative assets:
Interest Rate	$	4	$	11,238	$	1	$			$	11,243
Currency	0		230		0					230
Credit	0		21		0					21
Currency/Interest Rate	0		2,207		0					2,207
Equity	2		683		0					685
Commodity	0		0		0					0
Netting(1)							(13,519		)	(13,519		)
Total derivative assets	$	6	$	14,379	$	1	$	(13,519	)	$	867
Derivative liabilities:
Interest Rate	$	38	$	5,176	$	0	$			$	5,214
Currency	0		271		0					271
Credit	0		0		0					0
Currency/Interest Rate	0		647		0					647
Equity	3		1,401		0					1,404
Commodity	0		0		0					0
Netting(1)							(6,705		)	(6,705		)
Total derivative liabilities	$	41	$	7,495	$	0	$	(6,705	)	$	831



	As of December 31, 2018
	Level 1		Level 2		Level 3		Netting(1)			Total

	(in millions)
Derivative assets:
Interest Rate	$	23	$	6,341	$	2	$			$	6,366
Currency	0		273		0					273
Credit	0		33		0					33
Currency/Interest Rate	0		2,292		0					2,292
Equity	0		1,515		0					1,515
Commodity	0		0		0					0
Netting(1)							(9,331		)	(9,331		)
Total derivative assets	$	23	$	10,454	$	2	$	(9,331	)	$	1,148
Derivative liabilities:
Interest Rate	$	2	$	3,818	$	0	$			$	3,820
Currency	0		140		0					140
Credit	0		23		0					23
Currency/Interest Rate	0		778		0					778
Equity	7		640		0					647
Commodity	0		0		0					0
Netting(1)							(5,281		)	(5,281		)
Total derivative liabilities	$	9	$	5,399	0		$	(5,281	)	$	127

__________


(1)	“Netting” amounts represent cash collateral and the impact of offsetting asset and liability positions held with the same counterparty, subject to master netting agreement.

Changes in Level 3 derivative assets and liabilities—The following tables provide a summary of the changes in fair value of Level 3 derivative assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods.



	Year Ended December 31, 2019
	Fair Value, beginning of period		Total realized and unrealized gains (losses) (4)			Purchases		Sales		Issuances		Settlements		Other(1)		Transfers into Level 3 (2)		Transfers out of Level 3 (2)		Fair Value, end of period		Unrealized gains (losses) for assets still held (4)
	(in millions)
Net Derivative - Equity	$	0	$	0		$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Net Derivative - Interest Rate	2		(1		)	0		0		0		0		0		0		0		1		(2		)



	Year Ended December 31, 2018
	Fair Value, beginning of period			Total realized and unrealized gains (losses) (4)		Purchases		Sales		Issuances		Settlements		Other(1)			Transfers into Level 3 (2)		Transfers out of Level 3 (2)		Fair Value, end of period		Unrealized gains (losses) for assets still held (4)
	(in millions)
Net Derivative - Equity	$	10		$	1	$	0	$	0	$	0	$	0	$	(11	)	$	0	$	0	$	0	$	0
Net Derivative - Interest Rate	(3		)	5		0		0		0		0		0			0		0		2		5



	Year Ended December 31, 2017
	Fair Value, beginning of period		Total realized and unrealized gains (losses) (4)			Purchases		Sales		Issuances		Settlements		Other(3)		Transfers into Level 3 (2)		Transfers out of Level 3 (2)		Fair Value, end of period			Unrealized gains (losses) for assets still held (4)
	(in millions)
Net Derivative - Equity	$	0	$	0		$	0	$	0	$	0	$	0	$	10	$	0	$	0	$	10		$	0
Net Derivative - Interest Rate	4		(7		)	0		0		0		0		0		0		0		(3		)	(7		)

__________


(1)	Represents conversion of warrants to equity shares.


(2)	Transfers into or out of Level 3 are generally reported at the value as of the beginning of the quarter in which the transfers occur for any such positions still held at the end of the quarter.


(3)	Related to warrants received in restructuring a certain asset that resulted in reclassification of reporting category.

(4)

Total realized and unrealized gains (losses) as well as unrealized gains (losses) for assets still held at the end of the period are recorded in “Realized investment gains (losses), net.”

Nonrecurring Fair Value Measurements—The following tables represent information for assets measured at fair value on a nonrecurring basis. The fair value measurement is nonrecurring as these assets are measured at fair value only when there is a triggering event (e.g., an evidence of impairment). Assets included in the table are those that were impaired during the respective reporting periods and that are still held as of the reporting date. The estimated fair values for these amounts were determined using significant unobservable inputs (Level 3).



	Year Ended December 31,
	2019		2018			2017
	(in millions)
Realized investment gains (losses) net:
Commercial mortgage loans(1)	$	2	$	(12	)	$	(2	)
Mortgage servicing rights(2)	$	11	$	10		$	7



	Year Ended December 31,
	2019		2018
	(in millions)
Carrying value after measurement as of period end
Commercial mortgage loans(1):	$	15	$	47
Mortgage servicing rights(2):	$	87	$	73

__________


(1)	Commercial mortgage loans are valued based on discounted cash flows utilizing market rates or the fair value of the underlying real estate collateral.

(2)

Mortgage servicing rights are valued using a discounted cash flow model. The model incorporates assumptions for servicing revenues, which are adjusted for expected prepayments, delinquency rates, escrow deposit income and estimated loan servicing expenses. The discount rates incorporated into the model are determined based on the estimated returns a market participant would require for this business plus a liquidity and risk premium. This estimate includes available relevant data from any active market sales of mortgage servicing rights.

Fair Value Option

The fair value option allows the Company to elect fair value as an alternative measurement for selected financial assets and financial liabilities not otherwise reported at fair value. Such elections have been made by the Company to help mitigate volatility in earnings that result from different measurement attributes. Electing the fair value option also allows the Company to achieve consistent accounting for certain assets and liabilities. Changes in fair value are reflected in “Realized investment gains (losses), net” for commercial mortgage and other loans and “Other income (loss)” for other assets and notes issued by consolidated VIEs. Changes in fair value due to instrument-specific credit risk are estimated using changes in credit spreads and quality ratings for the period reported. Interest income on commercial mortgage and other loans is included in “Net investment income.” Interest income on these loans is recorded based on the effective interest rate as determined at the closing of the loan.

The following tables present information regarding assets and liabilities where the fair value option has been elected.



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Liabilities:
Notes issued by consolidated VIEs:
Changes in fair value	$	(15	)	$	(14	)	$	4



	Year Ended December 31,
	2019		2018		2017
	(in millions)
Commercial mortgage and other loans:
Interest income	$	20	$	18	$	13
Notes issued by consolidated VIEs:
Interest expense	$	45	$	36	$	75



	Year Ended December 31,
	2019		2018
	(in millions)
Commercial mortgage and other loans(1):
Fair value as of period end	$	228	$	763
Aggregate contractual principal as of period end	$	224	$	754
Other assets:
Fair value as of period end	10		10
Notes issued by consolidated VIEs:
Fair value as of period end	$	800	$	595
Aggregate contractual principal as of period end	$	857	$	632

__________

(1)

As of December 31, 2019, for loans for which the fair value option has been elected, there were no loans in non-accrual status and none of the loans were more than 90 days past due and still accruing.

Fair Value of Financial Instruments

The table below presents the carrying amount and fair value by fair value hierarchy level of certain financial instruments that are not reported at fair value. The financial instruments presented below are reported at carrying value on the Company’s Consolidated Statements of Financial Position. In some cases, as described below, the carrying amount equals or approximates fair value.



	December 31, 2019
	Fair Value								Carrying Amount(1)
	Level 1		Level 2		Level 3		Total		Total
	(in millions)
Assets:
Fixed maturities, held-to-maturity(2)	$	0	$	2,217	$	85	$	2,302	$	1,933
Assets supporting experience-rated contractholder liabilities	16		0		0		16		16
Commercial mortgage and other loans	0		107		65,558		65,665		63,331
Policy loans	0		0		12,096		12,096		12,096
Other invested assets	0		36		0		36		36
Short-term investments	1,492		39		0		1,531		1,531
Cash and cash equivalents	6,278		1,043		0		7,321		7,321
Accrued investment income	0		3,330		0		3,330		3,330
Other assets	147		2,526		643		3,316		3,315
Total assets	$	7,933	$	9,298	$	78,382	$	95,613	$	92,909
Liabilities:
Policyholders’ account balances—investment contracts	$	0	$	32,940	$	69,216	$	102,156	$	101,241
Securities sold under agreements to repurchase	0		9,681		0		9,681		9,681
Cash collateral for loaned securities	0		4,213		0		4,213		4,213
Short-term debt	0		1,748		205		1,953		1,933
Long-term debt(3)	1,950		18,188		1,186		21,324		18,646
Notes issued by consolidated VIEs	0		0		474		474		474
Other liabilities	0		6,403		579		6,982		6,982
Separate account liabilities—investment contracts	0		77,134		24,407		101,541		101,541
Total liabilities	$	1,950	$	150,307	$	96,067	$	248,324	$	244,711



	December 31, 2018
	Fair Value								Carrying Amount(1)
	Level 1		Level 2		Level 3		Total		Total
	(in millions)
Assets:
Fixed maturities, held-to-maturity(2)	$	0	$	1,468	$	904	$	2,372	$	2,013
Assets supporting experience-rated contractholder liabilities	0		0		0		0		0
Commercial mortgage and other loans	0		109		59,106		59,215		59,067
Policy loans	0		0		12,016		12,016		12,016
Other invested assets	0		40		0		40		40
Short-term investments	951		25		0		976		976
Cash and cash equivalents	4,871		1,004		0		5,875		5,875
Accrued investment income	0		3,318		0		3,318		3,318
Other assets	141		2,189		483		2,813		2,813
Total assets	$	5,963	$	8,153	$	72,509	$	86,625	$	86,118
Liabilities:
Policyholders’ account balances—investment contracts	$	0	$	31,422	$	67,006	$	98,428	$	99,829
Securities sold under agreements to repurchase	0		9,950		0		9,950		9,950
Cash collateral for loaned securities	0		3,929		0		3,929		3,929
Short-term debt	0		1,854		658		2,512		2,451
Long-term debt(3)	1,734		15,057		1,181		17,972		17,378
Notes issued by consolidated VIEs	0		0		360		360		360
Other liabilities	0		6,338		510		6,848		6,848
Separate account liabilities—investment contracts	0		66,914		26,022		92,936		92,936
Total liabilities	$	1,734	$	135,464	$	95,737	$	232,935	$	233,681

__________


(1)	Carrying values presented herein differ from those in the Company’s Consolidated Statements of Financial Position because certain items within the respective financial statement captions are not considered financial instruments or out of scope under authoritative guidance relating to disclosures of the fair value of financial instruments.


(2)	Excludes notes with fair value of $5,401 million (carrying amount of $4,998 million) and $4,879 million (carrying amount of $4,879 million) as of December 31, 2019 and 2018, respectively, which have been offset with the associated payables under a netting agreement.


(3)	Includes notes with fair value of $10,158 million (carrying amount of $9,749 million) and $9,095 million (carrying amount of $9,095 million) as of December 31, 2019 and 2018, respectively, which have been offset with the associated receivables under a netting agreement.

The fair values presented above have been determined by using available market information and by applying market valuation methodologies, as described in more detail below.

Fixed Maturities, Held-to-Maturity

The fair values of public fixed maturity securities are generally based on prices from third-party pricing services, which are reviewed for reasonableness; however, for certain public fixed maturity securities and investments in private placement fixed maturity securities, this information is either not available or not reliable. For these public fixed maturity securities, the fair value is based on indicative broker quotes, if available, or determined using a discounted cash flow model or other internally-developed models. For private fixed maturities, fair value is determined using a discounted cash flow model. In determining the fair value of certain fixed maturity securities, the discounted cash flow model may also use unobservable inputs, which reflect the Company’s own assumptions about the inputs market participants would use in pricing the security.

Commercial Mortgage and Other Loans

The fair value of most commercial mortgage loans is based upon the present value of the expected future cash flows discounted at the appropriate U.S. Treasury rate or foreign government bond rate (for non-U.S. dollar-denominated loans) plus an appropriate credit spread for loans of similar quality, average life and currency. The quality ratings for these loans, a primary determinant of the credit spreads and a significant component of the pricing process, are based on an internally-developed methodology. Certain commercial mortgage loans are valued incorporating other factors, including the terms of the loans, the principal exit strategies for the loans, prevailing interest rates and credit risk.

Policy Loans

The Company’s valuation technique for policy loans is to discount cash flows at the current policy loan coupon rate. Policy loans are fully collateralized by the cash surrender value of underlying insurance policies. As a result, the carrying value of the policy loans approximates the fair value.

Short-Term Investments, Cash and Cash Equivalents, Accrued Investment Income and Other Assets

The Company believes that due to the short-term nature of certain assets, the carrying value approximates fair value. These assets include: certain short-term investments, which are not securities, recorded at amortized cost and include quality loans; cash and cash equivalent instruments; accrued investment income; and other assets that meet the definition of financial instruments, including receivables, such as reinsurance recoverables, unsettled trades, accounts receivable and restricted cash.

Policyholders’ Account Balances—Investment Contracts

Only the portion of policyholders’ account balances related to products that are investment contracts (those without significant mortality or morbidity risk) are reflected in the table above. For fixed deferred annuities, single premium endowments, payout annuities and other similar contracts without life contingencies, fair values are generally derived using discounted projected cash flows based on interest rates that are representative of the Company’s financial strength ratings, and hence reflect the Company’s NPR. For GICs, funding agreements, structured settlements without life contingencies and other similar products, fair values are generally derived using discounted projected cash flows based on interest rates being offered for similar contracts with maturities consistent with those of the contracts being valued. For those balances that can be withdrawn by the customer at any time without prior notice or penalty, the fair value is the amount estimated to be payable to the customer as of the reporting date, which is generally the carrying value. For defined contribution and defined benefit contracts and certain other products, the fair value is the market value of the assets supporting the liabilities.

Securities Sold Under Agreements to Repurchase

The Company receives collateral for selling securities under agreements to repurchase, or pledges collateral under agreements to resell. Repurchase and resale agreements are also generally short-term in nature and, therefore, the carrying amounts of these instruments approximate fair value.

Cash Collateral for Loaned Securities

Cash collateral for loaned securities represents the collateral received or paid in connection with loaning or borrowing securities, similar to the securities sold under agreement to repurchase above. Due to the short-term nature of these transactions, the carrying value approximates fair value.

Debt

The fair value of short-term and long-term debt, as well as notes issued by consolidated VIEs, is generally determined by either prices obtained from independent pricing services, which are validated by the Company, or discounted cash flow models. With the exception of the notes issued by consolidated VIEs for which recourse is limited to the assets of the respective VIE and does not extend to the general credit of the Company, the fair values of these instruments consider the Company’s NPR. Discounted cash flow models predominately use market observable inputs such as the borrowing rates currently available to the Company for debt and financial instruments with similar terms and remaining maturities. For commercial paper issuances and other debt with a maturity of less than 90 days, the carrying value approximates fair value.

Other Liabilities

Other liabilities are primarily payables, such as reinsurance payables, unsettled trades, drafts and accrued expense payables. Due to the short-term until settlement of most of these liabilities, the Company believes that carrying value approximates fair value.

Separate Account Liabilities—Investment Contracts

Only the portion of separate account liabilities related to products that are investment contracts are reflected in the table above. Separate account liabilities are recorded at the amount credited to the contractholder, which reflects the change in fair value of the corresponding separate account assets including contractholder deposits less withdrawals and fees; therefore, carrying value approximates fair value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details