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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Financial assets and liabilities carried at fair value

(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
	As of		As of		As of		As of		As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2019		2018		2019		2018		2019		2018		2019		2018
Financial assets at fair value
Debt securities
Federal government and agency	$	219	$	209	$	548	$	501	$	-	$	-	$	767	$	710
State and local government		-		-		898		985		-		-		898		985
Foreign government		-		-		2,211		2,356		28		6		2,239		2,362
Corporate		-		-		19,199		18,127		231		234		19,430		18,361
Mortgage and other asset-backed		-		-		387		372		140		138		527		510
Total debt securities		219		209		23,243		22,341		399		378		23,861		22,928
Equity securities⁽¹⁾		8		384		51		43		32		32		91		459
Short-term investments		-		-		257		316		-		-		257		316
Derivative assets		-		-		63		53		-		-		63		53
Real estate funds priced at NAV as a practical expedient⁽²⁾														217		239
Financial liabilities at fair value
Derivative liabilities	$	-	$	-	$	14	$	10	$	-	$	-	$	14	$	10
(1) Excludes certain equity securities that have no readily determinable fair value.
(2) As a practical expedient, certain real estate funds are carried at fair value based on the Company’s ownership share of the equity of the investee (Net Asset Value (“NAV“))including changes in the fair value of its underlying investments. The funds have a quarterly redemption frequency, 45-90 day redemption notice period and $57 million in unfunded commitments as of June 30, 2019.

Level 3 debt and equity securities priced using significant unobservable inputs

	Fair Value as of					Unobservable Adjustment Range (Weighted Average) as of
	June 30,		December 31,		Unobservable Input	June 30,	December 31,
(Fair value in millions )	2019		2018		June 30, 2019	2019	2018
Debt securities
Corporate and government debt securities	$	259	$	229	Liquidity	70 - 930 (270) bps	50 - 930 (230) bps
Mortgage and other asset-backed securities		140		138	Liquidity	60 - 350 (70) bps	60 - 340 (70) bps
					Weighting of credit spreads	230 - 420 (310) bps	190 - 340 (260) bps
Securities not priced by the Company ⁽¹⁾		-		11
Total Level 3 debt securities	$	399	$	378

(1) The fair values for these securities use single, unadjusted non-binding broker quotes not developed directly by the Company.

Changes in level 3 financial assets and liabilities carried at fair value

Debt and Equity Securities
(In millions)	For the Three Months Ended June 30,
	2019		2018
Balance at April 1,	$	436	$	596
Total (losses) included in shareholders’ net income		-		(1)
Gains (losses) included in other comprehensive income		5		(5)
(Losses) required to adjust future policy benefits for settlement annuities⁽¹⁾		-		(2)
Purchases, sales, settlements
Purchases		43		6
Sales		-		-
Settlements		(9)		(13)
Total purchases, sales and settlements		34		(7)
Transfers into/(out of) Level 3
Transfers into Level 3		13		-
Transfers out of Level 3		(57)		(53)
Total transfers (out of) Level 3		(44)		(53)
Balance at June 30,	$	431	$	528
Total gains (losses) included in shareholders' net income attributable to instruments held at the reporting date	$	(1)	$	(1)

(1) Amounts do not accrue to shareholders.

Debt and Equity Securities
(In millions)	For the Six Months Ended June 30,
	2019		2018
Balance at January 1,	$	410	$	732
Total (losses) included in shareholders’ net income		(1)		(21)
Gains (losses) included in other comprehensive income		12		(10)
Gains (losses) required to adjust future policy benefits for settlement annuities⁽¹⁾		2		(6)
Purchases, sales, settlements
Purchases		43		16
Sales		-		(11)
Settlements		(10)		(15)
Total purchases, sales and settlements		33		(10)
Transfers into/(out of) Level 3
Transfers into Level 3		33		20
Transfers out of Level 3 ⁽²⁾		(58)		(177)
Total transfers (out of) Level 3		(25)		(157)
Balance at June 30,	$	431	$	528
Total (losses) included in shareholders’ net income attributable to instruments held at the reporting date	$	(1)	$	(8)

(1) Amounts do not accrue to shareholders.
(2) Beginning in 2018, certain private equity securities are no longer carried at fair value under the policy election of ASU 2016-01 (Recognition and Measurement of Financial Assets and Financial Liabilities). Private equity securities of $70 million as of December 31, 2017 are included in the 2018 Transfers out of Level 3 amount.

Separate account assets schedule

(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
	June 30,		December 31,		June 30,		December 31,		June 30,		December 31,		June 30,		December 31,
	2019		2018		2019		2018		2019		2018		2019		2018
Guaranteed separate accounts (See Note 16)	$	209	$	187	$	281	$	267	$	-	$	-	$	490	$	454
Non-guaranteed separate accounts ⁽¹⁾		1,342		1,204		5,554		5,216		235		233		7,131		6,653
Subtotal	$	1,551	$	1,391	$	5,835	$	5,483	$	235	$	233		7,621		7,107
Non-guaranteed separate accounts priced at NAV as a practical expedient⁽¹⁾														724		732
Total separate account assets													$	8,345	$	7,839

(1) Non-guaranteed separate accounts included $3.9 billion as of June 30, 2019 and $3.8 billion as of December 31, 2018 in assets supporting the Company’s pension plans, including $0.2 billion classified in Level 3 as of June 30, 2019 and December 31, 2018.

Separate account assets priced at net asset value

						Unfunded
						Commitments	Redemption Frequency
	Fair Value as of					as of	(if currently	Redemption Notice
(In millions)	June 30, 2019		December 31, 2018			June 30, 2019	eligible)	Period
Securities partnerships	$	494	$	477	$	360	Not applicable	Not applicable
Real estate funds		218		237		-	Quarterly	30 - 90 days
Hedge funds		12		18		-	Up to annually, varying by fund	30 - 90 days
Total	$	724	$	732	$	360

Financial instruments not carried at fair value

(In millions)			June 30, 2019				December 31, 2018
	Classification in Fair Value Hierarchy		Fair Value		Carrying Value		Fair Value		Carrying Value
Commercial mortgage loans	Level 3	$	1,906	$	1,873	$	1,832	$	1,858
Long-term debt, including current maturities, excluding finance leases	Level 2	$	40,237	$	38,113	$	40,819	$	40,829

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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