Fair Value of Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2018

Summary of quantitative information about the significant unobservable inputs used in Level 3 fair value measurements

The following table summarizes the Company’s assets and liabilities measured at fair value as of December 31, 2018.



($ in millions)	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Counterparty and cash collateral netting			Balance as of December 31, 2018
Assets
Fixed income securities:
U.S. government and agencies	$	493		$	280		$	—					$	773
Municipal	—			2,156			39						2,195
Corporate - public	—			11,891			33						11,924
Corporate - privately placed	—			5,552			97						5,649
Foreign government	—			179			—						179
ABS - CDO	—			26			6						32
ABS - consumer and other	—			381			16						397
RMBS	—			197			—						197
CMBS	—			40			—						40
Redeemable preferred stock	—			14			—						14
Total fixed income securities	493			20,716			191						21,400
Equity securities	1,182			14			129						1,325
Short-term investments	443			367			—						810
Other investments: Free-standing derivatives	—			30			1			$	(8	)	23
Separate account assets	2,783			—			—						2,783
Total recurring basis assets	$	4,901		$	21,127		$	321		$	(8	)	$	26,341
% of total assets at fair value	18.6		%	80.2		%	1.2		%	—		%	100		%

Investments reported at NAV													787
Total													$	27,128

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(223	)				$	(223	)
Other liabilities: Free-standing derivatives	—			(7		)	—			$	2		(5		)
Total recurring basis liabilities	$	—		$	(7	)	$	(223	)	$	2		$	(228	)
% of total liabilities at fair value	—		%	3.1		%	97.8		%	(0.9		)%	100		%

The following table summarizes the Company’s assets and liabilities measured at fair value as of December 31, 2017.



($ in millions)	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Counterparty and cash collateral netting			Balance as of December 31, 2017
Assets
Fixed income securities:
U.S. government and agencies	$	488		$	316		$	—					$	804
Municipal	—			2,216			57						2,273
Corporate - public	—			13,168			49						13,217
Corporate - privately placed	—			5,699			220						5,919
Foreign government	—			299			—						299
ABS - CDO	—			38			10						48
ABS - consumer and other	—			297			40						337
RMBS	—			253			—						253
CMBS	—			97			—						97
Redeemable preferred stock	—			14			—						14
Total fixed income securities	488			22,397			376						23,261
Equity securities	1,508			16			90						1,614
Short-term investments	110			615			—						725
Other investments: Free-standing derivatives	—			117			1			$	(3	)	115
Separate account assets	3,422			—			—						3,422
Total recurring basis assets	$	5,528		$	23,145		$	467		$	(3	)	$	29,137
% of total assets at fair value	19.0		%	79.4		%	1.6		%	—		%	100.0		%

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(284	)				$	(284	)
Other liabilities: Free-standing derivatives	—			(62		)	—			$	1		(61		)
Total recurring basis liabilities	$	—		$	(62	)	$	(284	)	$	1		$	(345	)
% of total liabilities at fair value	—		%	18.0		%	82.3		%	(0.3		)%	100		%

The following table summarizes quantitative information about the significant unobservable inputs used in Level 3 fair value measurements.



($ in millions)	Fair value			Valuation technique	Unobservable input	Range	Weighted average
December 31, 2018
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(184	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.74	%
December 31, 2017
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(250	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.74	%

Schedule of rollforward of Level 3 assets and liabilities held at fair value on a recurring basis

The following table presents the rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2018.



($ in millions)				Total gains (losses) included in:
	Balance as of December 31, 2017			Net income⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	57		$	—		$	(2	)	$	—		$	(16	)
Corporate - public	49			—			(2		)	3			(3		)
Corporate - privately placed	220			(2		)	(2		)	10			(101		)
ABS - CDO	10			—			—			—			—
ABS - consumer and other	40			—			—			12			(18		)
Total fixed income securities	376			(2		)	(6		)	25			(138		)
Equity securities	90			16			—			—			—
Free-standing derivatives, net	1			—			—			—			—
Total recurring Level 3 assets	$	467		$	14		$	(6	)	$	25		$	(138	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(284	)	$	57		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(284	)	$	57		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of December 31, 2018
Assets
Fixed income securities:
Municipal	$	2		$	(2	)	$	—		$	—		$	39
Corporate - public	—			(11		)	—			(3		)	33
Corporate - privately placed	12			—			—			(40		)	97
ABS - CDO	—			—			—			(4		)	6
ABS - consumer and other	20			(19		)	—			(19		)	16
Total fixed income securities	34			(32		)	—			(66		)	191
Equity securities	30			(7		)	—			—			129
Free-standing derivatives, net	—			—			—			—			1			⁽²⁾
Total recurring Level 3 assets	$	64		$	(39	)	$	—		$	(66	)	$	321
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(2	)	$	6		$	(223	)
Total recurring Level 3 liabilities	$	—		$	—		$	(2	)	$	6		$	(223	)

_____________________


⁽¹⁾	The effect to net income totals $71 million and is reported in the Consolidated Statements of Operations and Comprehensive Income as follows: $14 million in realized capital gains and losses, $62 million in interest credited to contractholder funds and $(5) million in contract benefits.


⁽²⁾	Comprises $1 million of assets.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2017.



($ in millions)				Total gains (losses) included in:
	Balance as of December 31, 2016			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	59		$	—		$	2		$	—		$	—
Corporate - public	47			1			—			3			(15		)
Corporate - privately placed	264			7			(2		)	11			(16		)
ABS - CDO	27			—			6			4			(10		)
ABS - consumer and other	42			—			—			—			(26		)
Total fixed income securities	439			8			6			18			(67		)
Equity securities	76			8			3			—			—
Free-standing derivatives, net	(2		)	3			—			—			—
Other assets	1			(1		)	—			—			—
Total recurring Level 3 assets	$	514		$	18		$	9		$	18		$	(67	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(289	)	$	1		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(289	)	$	1		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of December 31, 2017
Assets
Fixed income securities:
Municipal	$	—		$	(2	)	$	—		$	(2	)	$	57
Corporate - public	17			—			—			(4		)	49
Corporate - privately placed	20			(30		)	—			(34		)	220
ABS - CDO	5			—			—			(22		)	10
ABS - consumer and other	29			—			—			(5		)	40
Total fixed income securities	71			(32		)	—			(67		)	376
Equity securities	13			(10		)	—			—			90
Free-standing derivatives, net	—			—			—			—			1			⁽²⁾
Other assets	—			—			—			—			—
Total recurring Level 3 assets	$	84		$	(42	)	$	—		$	(67	)	$	467
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(2	)	$	6		$	(284	)
Total recurring Level 3 liabilities	$	—		$	—		$	(2	)	$	6		$	(284	)

____________________


⁽¹⁾	The effect to net income totals $19 million and is reported in the Consolidated Statements of Operations and Comprehensive Income as follows: $9 million in realized capital gains and losses, $10 million in net investment income, $(9) million in interest credited to contractholder funds and $9 million in contract benefits.


⁽²⁾	Comprises $1 million of assets.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2016.



($ in millions)				Total gains (losses) included in:
	Balance as of December 31, 2015			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	78		$	12		$	(8	)	$	6		$	—
Corporate - public	44			—			—			16			(15		)
Corporate - privately placed	447			15			18			16			(277		)
ABS - CDO	53			1			5			8			(1		)
ABS - consumer and other	44			—			(3		)	3			(7		)
Total fixed income securities	666			28			12			49			(300		)
Equity securities	60			(15		)	5			—			(4		)
Free-standing derivatives, net	(7		)	6			—			—			—
Other assets	1			—			—			—			—
Total recurring Level 3 assets	$	720		$	19		$	17		$	49		$	(304	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(299	)	$	6		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(299	)	$	6		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of December 31, 2016
Assets
Fixed income securities:
Municipal	$	—		$	(27	)	$	—		$	(2	)	$	59
Corporate - public	6			(3		)	—			(1		)	47
Corporate - privately placed	108			(15		)	—			(48		)	264
ABS - CDO	—			(2		)	—			(37		)	27
ABS - consumer and other	7			—			—			(2		)	42
Total fixed income securities	121			(47		)	—			(90		)	439
Equity securities	32			(2		)	—			—			76
Free-standing derivatives, net	—			—			—			(1		)	(2		)	⁽²⁾
Other assets	—			—			—			—			1
Total recurring Level 3 assets	$	153		$	(49	)	$	—		$	(91	)	$	514
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(3	)	$	7		$	(289	)
Total recurring Level 3 liabilities	$	—		$	—		$	(3	)	$	7		$	(289	)

_________________________


⁽¹⁾	The effect to net income totals $25 million and is reported in the Consolidated Statements of Operations and Comprehensive Income as follows: $8 million in realized capital gains and losses, $11 million in net investment income, $(3) million in interest credited to contractholder funds and $9 million in contract benefits.


⁽²⁾	Comprises $1 million of assets and $3 million of liabilities.

Schedule of change in unrealized gains and losses included in net income for Level 3 assets and liabilities held

The table below provides valuation changes included in net income for Level 3 assets and liabilities held as of December 31.



($ in millions)	2018		2017			2016
Assets
Fixed income securities:
Municipal	$	—	$	—		$	2
Corporate	—		1			1
Total fixed income securities	—		1			3
Equity securities	16		9			(15		)
Free-standing derivatives, net	—		—			5
Other assets	—		(1		)	—
Total recurring Level 3 assets	$	16	$	9		$	(7	)

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	57	$	1		$	6
Total recurring Level 3 liabilities	$	57	$	1		$	6

Schedule of carrying values and fair value estimates of financial instruments not carried at fair value

Financial liabilities



($ in millions)		December 31, 2018				December 31, 2017
	Fair value level	Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	Level 3	$	9,213	$	9,629	$	10,331	$	11,036
Liability for collateral	Level 2	525		525		542		542
Notes due to related parties	Level 3	140		138		140		141

Financial assets



($ in millions)		December 31, 2018				December 31, 2017
	Fair value level	Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	Level 3	$	3,995	$	4,028	$	3,876	$	4,052
Bank loans	Level 3	422		408		437		437
Agent loans	Level 3	620		617		538		536