Fair Value (Tables)

6 Months Ended

Jun. 30, 2020

The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, are presented in the tables below. Investments that do not have a readily determinable fair value and are measured at net asset value (or equivalent) as a practical expedient to estimated fair value are excluded from the fair value hierarchy.


	June 30, 2020
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	33,566	$	699	$	34,265
Foreign corporate	—		10,096		195		10,291
RMBS	—		8,544		40		8,584
U.S. government and agency	1,858		7,067		—		8,925
CMBS	—		6,229		26		6,255
State and political subdivision	—		4,232		—		4,232
ABS	—		2,356		107		2,463
Foreign government	—		1,781		—		1,781
Total fixed maturity securities	1,858		73,871		1,067		76,796
Equity securities	12		113		4		129
Short-term investments	3,007		1,530		—		4,537
Derivative assets: (1)
Interest rate	—		4,503		—		4,503
Foreign currency exchange rate	—		649		29		678
Credit	—		11		8		19
Equity market	—		937		13		950
Total derivative assets	—		6,100		50		6,150
Embedded derivatives within asset host contracts (2)	—		—		323		323
Separate account assets	159		99,437		3		99,599
Total assets	$	5,036	$	181,051	$	1,447	$	187,534
Liabilities
Derivative liabilities: (1)
Interest rate	$	—	$	265	$	—	$	265
Foreign currency exchange rate	—		15		—		15
Credit	—		1		1		2
Equity market	—		1,940		29		1,969
Total derivative liabilities	—		2,221		30		2,251
Embedded derivatives within liability host contracts (2)	—		—		5,649		5,649
Total liabilities	$	—	$	2,221	$	5,679	$	7,900


	December 31, 2019
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	30,831	$	329	$	31,160
Foreign corporate	—		9,712		132		9,844
RMBS	—		9,074		44		9,118
U.S. government and agency	1,636		5,760		—		7,396
CMBS	—		5,755		—		5,755
State and political subdivision	—		3,984		73		4,057
ABS	—		1,882		73		1,955
Foreign government	—		1,751		—		1,751
Total fixed maturity securities	1,636		68,749		651		71,036
Equity securities	14		125		8		147
Short-term investments	1,271		682		5		1,958
Derivative assets: (1)
Interest rate	—		1,778		—		1,778
Foreign currency exchange rate	—		281		5		286
Credit	—		25		11		36
Equity market	—		850		71		921
Total derivative assets	—		2,934		87		3,021
Embedded derivatives within asset host contracts (2)	—		—		217		217
Separate account assets	180		106,924		3		107,107
Total assets	$	3,101	$	179,414	$	971	$	183,486
Liabilities
Derivative liabilities: (1)
Interest rate	$	—	$	330	$	—	$	330
Foreign currency exchange rate	—		43		—		43
Equity market	—		2,093		71		2,164
Total derivative liabilities	—		2,466		71		2,537
Embedded derivatives within liability host contracts (2)	—		—		4,248		4,248
Total liabilities	$	—	$	2,466	$	4,319	$	6,785

_______________

(1)Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets.

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

Fair Value Inputs, Quantitative Information

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) were as follows at:


					June 30, 2020					December 31, 2019		Impact of Increase in Input on Estimated Fair Value
	Valuation Techniques			Significant Unobservable Inputs			Range				Range
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates	0.02%	-	11.31%	0.02%	-	11.31%	Decrease (1)
			•	Lapse rates	0.25%	-	16.00%	0.25%	-	16.00%	Decrease (2)
			•	Utilization rates	0.00%	-	25.00%	0.00%	-	25.00%	Increase (3)
			•	Withdrawal rates	0.25%	-	10.00%	0.25%	-	10.00%	(4)
			•	Long-term equity volatilities	16.24%	-	21.65%	16.24%	-	21.65%	Increase (5)
			•	Nonperformance risk spread	0.52%	-	2.78%	0.54%	-	1.99%	Decrease (6)

_______________

(1)Mortality rates vary by age and by demographic characteristics such as gender. The range shown reflects the mortality rate for policyholders between 35 and 90 years old, which represents the majority of the business with living benefits. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement.

(2)The range shown reflects base lapse rates for major product categories for duration 1-20, which represents majority of business with living benefit riders. 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.

(3)The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization 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.

(4)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.

(5)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.

(6)Nonperformance risk spread varies by duration. 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 changes in assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3) were summarized as follows:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities
	Corporate (1)		Structured Securities		State and Political Subdivision		Foreign Government		Equity Securities		Short-term Investments		Net Derivatives (2)		Net Embedded Derivatives (3)		Separate Account Assets (4)
	(In millions)
Three Months Ended June 30, 2020
Balance, beginning of period	$	851	$	218	$	73	$	7	$	4	$	2	$	50	$	(4,263)	$	4
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	(2)		—		—		—		—		—		(3)		(883)		—
Total realized/unrealized gains (losses) included in AOCI	59		3		—		—		—		—		(10)		—		—
Purchases (7)	187		85		—		—		—		—		—		—		—
Sales (7)	(46)		(1)		—		—		—		(2)		(17)		—		—
Issuances (7)	—		—		—		—		—		—		—		—		—
Settlements (7)	—		—		—		—		—		—		—		(180)		—
Transfers into Level 3 (8)	86		26		—		—		—		—		—		—		—
Transfers out of Level 3 (8)	(241)		(158)		(73)		(7)		—		—		—		—		(1)
Balance, end of period	$	894	$	173	$	—	$	—	$	4	$	—	$	20	$	(5,326)	$	3
Three Months Ended June 30, 2019
Balance, beginning of period	$	697	$	228	$	74	$	—	$	4	$	—	$	(136)	$	(2,436)	$	—
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	—		—		—		—		—		—		(1)		(462)		—
Total realized/unrealized gains (losses) included in AOCI	1		1		—		—		—		—		4		—		—
Purchases (7)	64		15		—		—		—		6		—		—		—
Sales (7)	(49)		(9)		—		—		—		—		—		—		—
Issuances (7)	—		—		—		—		—		—		—		—		—
Settlements (7)	—		—		—		—		—		—		—		(223)		—
Transfers into Level 3 (8)	124		61		—		—		—		—		—		—		—
Transfers out of Level 3 (8)	(72)		(188)		—		—		—		—		(1)		—		—
Balance, end of period	$	765	$	108	$	74	$	—	$	4	$	6	$	(134)	$	(3,121)	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2020 (9)	$	—	$	—	$	—	$	—	$	—	$	—	$	3	$	(928)	$	—
Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at June 30, 2020 (9)	$	58	$	3	$	—	$	—	$	—	$	—	$	(10)	$	—	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2019 (9)	$	—	$	—	$	—	$	—	$	—	$	—	$	(1)	$	(538)	$	—


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities
	Corporate (1)		Structured Securities		State and Political Subdivision		Foreign Government		Equity Securities		Short-term Investments		Net Derivatives (2)		Net Embedded Derivatives (3)		Separate Account Assets (4)
	(In millions)
Six Months Ended June 30, 2020
Balance, beginning of period	$	461	$	117	$	73	$	—	$	8	$	5	$	16	$	(4,031)	$	3
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	(4)		—		—		—		—		—		(2)		(962)		—
Total realized/unrealized gains (losses) included in AOCI	15		—		—		—		—		—		20		—		—
Purchases (7)	433		104		—		—		—		—		—		—		—
Sales (7)	(51)		(5)		—		—		—		(5)		(14)		—		—
Issuances (7)	—		—		—		—		—		—		—		—		—
Settlements (7)	—		—		—		—		—		—		—		(333)		—
Transfers into Level 3 (8)	153		30		—		—		—		—		—		—		—
Transfers out of Level 3 (8)	(113)		(73)		(73)		—		(4)		—		—		—		—
Balance, end of period	$	894	$	173	$	—	$	—	$	4	$	—	$	20	$	(5,326)	$	3
Six Months Ended June 30, 2019
Balance, beginning of period	$	732	$	173	$	74	$	—	$	3	$	—	$	(122)	$	(1,998)	$	1
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	—		—		—		—		—		—		(10)		(686)		—
Total realized/unrealized gains (losses) included in AOCI	10		2		—		—		—		—		1		—		—
Purchases (7)	67		15		—		—		—		6		—		—		—
Sales (7)	(55)		(27)		—		—		—		—		—		—		(1)
Issuances (7)	—		—		—		—		—		—		—		—		—
Settlements (7)	—		—		—		—		—		—		—		(437)		—
Transfers into Level 3 (8)	141		87		—		—		1		—		—		—		—
Transfers out of Level 3 (8)	(130)		(142)		—		—		—		—		(3)		—		—
Balance, end of period	$	765	$	108	$	74	$	—	$	4	$	6	$	(134)	$	(3,121)	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2020 (9)	$	(1)	$	—	$	—	$	—	$	—	$	—	$	(17)	$	(1,019)	$	—
Changes in unrealized gains (losses) included in other comprehensive income for the instruments still held at June 30, 2020 (9)	$	16	$	—	$	—	$	—	$	—	$	—	$	20	$	—	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2019 (9)	$	—	$	—	$	—	$	—	$	—	$	—	$	(9)	$	(826)	$	—

_______________

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

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

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

(4)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders 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).

(5)Amortization of premium/accretion of discount is included within net investment income. Changes in the allowance for credit losses and direct write-offs are charged to net income (loss) on securities are included in net investment gains (losses). 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).

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

(7)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.

(8)Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.

(9)Changes in unrealized gains (losses) included in net income (loss) for fixed maturities are reported in either net investment income or net investment gains (losses). 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).

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:


	June 30, 2020
			Fair Value Hierarchy
	Carrying Value				Level 1			Level 2			Level 3			Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	15,791	$	—		$	—		$	16,439		$	16,439
Policy loans	$	1,201	$	—		$	424		$	1,588		$	2,012
Other invested assets	$	93	$	—		$	81		$	12		$	93
Premiums, reinsurance and other receivables	$	2,518	$	—		$	56		$	3,025		$	3,081
Liabilities
Policyholder account balances	$	16,926	$	—		$	—		$	17,670		$	17,670
Long-term debt	$	3,979	$	—		$	4,017		$	—		$	4,017
Other liabilities	$	998	$	—		$	351		$	647		$	998
Separate account liabilities	$	1,146	$	—		$	1,146		$	—		$	1,146


	December 31, 2019
			Fair Value Hierarchy
	Carrying Value				Level 1			Level 2			Level 3			Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	15,753	$	—		$	—		$	16,383		$	16,383
Policy loans	$	1,292	$	—		$	516		$	1,062		$	1,578
Other invested assets	$	51	$	—		$	39		$	12		$	51
Premiums, reinsurance and other receivables	$	2,224	$	—		$	41		$	2,593		$	2,634
Liabilities
Policyholder account balances	$	15,614	$	—		$	—		$	15,710		$	15,710
Long-term debt	$	4,365	$	—		$	3,334		$	1,000		$	4,334
Other liabilities	$	846	$	—		$	191		$	655		$	846
Separate account liabilities	$	1,189	$	—		$	1,189		$	—		$	1,189