Fair Value Measurements Level 3 (Tables)

6 Months Ended

Jun. 30, 2016

Assets and (liabilities) carried at fair value by hierarchy level



	June 30, 2016
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS
ABS	$	1,019		$	—	$	1,012		$	7
CDOs	1,269			—		1,003			266
CMBS	2,146			—		2,131			15
Corporate	15,594			—		14,877			717
Foreign government/government agencies	296			—		278			18
Municipal	1,282			—		1,209			73
RMBS	1,732			—		1,042			690
U.S. Treasuries	2,362			299		2,063			—
Total fixed maturities	25,700			299		23,615			1,786
Fixed maturities, FVO	123			—		123			—
Equity securities, trading [1]	11			11		—			—
Equity securities, AFS	136			52		42			42
Derivative assets
Credit derivatives	12			—		12			—
Foreign exchange derivatives	1			—		1			—
Interest rate derivatives	123			—		123			—
Guaranteed minimum withdrawal benefit ("GMWB") hedging instruments	85			—		(2		)	87
Macro hedge program	49			—		—			49
Total derivative assets [2]	270			—		134			136
Short-term investments	874			258		616			—
Limited partnerships and other alternative investments [5]	5			—		—			—
Reinsurance recoverable for GMWB	106			—		—			106
Modified coinsurance reinsurance contracts	32			—		32			—
Separate account assets [3]	114,607			73,805		39,605			171
Total assets accounted for at fair value on a recurring basis	$	141,864		$	74,425	$	64,167		$	2,241
Liabilities accounted for at fair value on a recurring basis
Other policyholder funds and benefits payable
GMWB	$	(412	)	$	—	$	—		$	(412	)
Equity linked notes	(28		)	—		—			(28		)
Total other policyholder funds and benefits payable	(440		)	—		—			(440		)
Derivative liabilities
Credit derivatives	(21		)	—		(21		)	—
Equity derivatives	28			—		27			1
Foreign exchange derivatives	(281		)	—		(281		)	—
Interest rate derivatives	(447		)	—		(413		)	(34		)
GMWB hedging instruments	118			—		40			78
Macro hedge program	98			—		6			92
Total derivative liabilities [4]	(505		)	—		(642		)	137
Total liabilities accounted for at fair value on a recurring basis	$	(945	)	$	—	$	(642	)	$	(303	)



	December 31, 2015
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS
ABS	$	846		$	—	$	841		$	5
CDOs	1,408			—		1,078			330
CMBS	1,964			—		1,902			62
Corporate	15,175			—		14,641			534
Foreign government/government agencies	331			—		314			17
Municipal	1,132			—		1,083			49
RMBS	1,503			—		875			628
U.S. Treasuries	2,298			123		2,175			—
Total fixed maturities	24,657			123		22,909			1,625
Fixed maturities, FVO	165			1		162			2
Equity securities, trading [1]	11			11		—			—
Equity securities, AFS	459			396		25			38
Derivative assets
Credit derivatives	7			—		7			—
Foreign exchange derivatives	4			—		4			—
Interest rate derivatives	54			—		54			—
GMWB hedging instruments	111			—		27			84
Macro hedge program	74			—		—			74
Total derivative assets [2]	250			—		92			158
Short-term investments	572			131		441			—
Reinsurance recoverable for GMWB	83			—		—			83
Modified coinsurance reinsurance contracts	79			—		79			—
Separate account assets [3]	118,163			78,099		38,700			140
Total assets accounted for at fair value on a recurring basis	$	144,439		$	78,761	$	62,408		$	2,046
Liabilities accounted for at fair value on a recurring basis
Other policyholder funds and benefits payable
GMWB	$	(262	)	$	—	$	—		$	(262	)
Equity linked notes	(26		)	—		—			(26		)
Total other policyholder funds and benefits payable	(288		)	—		—			(288		)
Derivative liabilities
Credit derivatives	(7		)	—		(7		)	—
Equity derivatives	41			—		41			—
Foreign exchange derivatives	(376		)	—		(376		)	—
Interest rate derivatives	(431		)	—		(402		)	(29		)
GMWB hedging instruments	47			—		(4		)	51
Macro hedge program	73			—		—			73
Total derivative liabilities [4]	(653		)	—		(748		)	95
Total liabilities accounted for at fair value on a recurring basis	$	(941	)	$	—	$	(748	)	$	(193	)


[1]	Included in other investments on the Condensed Consolidated Balance Sheets.


[2]	Includes over-the-counter ("OTC") and OTC-cleared derivative instruments in a net positive fair value position after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements, clearing house rules and applicable law. See the following footnote 4 for derivative liabilities.

[3]

Approximately $3.2 billion and $1.8 billion of investment sales receivable, as of June 30, 2016 and December 31, 2015, respectively, are excluded from this disclosure requirement because they are trade receivables in the ordinary course of business where the carrying amount approximates fair value. Included in the total fair value amount are $1.0 billion and $1.2 billion of investments, as of June 30, 2016 and December 31, 2015 for which the fair value is estimated using the net asset value per unit as a practical expedient which are excluded from the disclosure requirement to classify amounts in the fair value hierarchy in connection with the adoption of ASU 2015-07, Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent), on January 1, 2016.


[4]	Includes OTC and OTC-cleared derivative instruments in a net negative fair value position (derivative liability) after consideration of the accrued interest and impact of collateral posting requirements, which may be imposed by agreements, clearing house rules and applicable law.

[5]

Represents hedge funds where investment company accounting has been applied to a wholly-owned fund of funds measured at fair value. The fair value is estimated using the net asset value per unit as a practical expedient and is excluded from the disclosure requirement to classify amounts in the fair value hierarchy in connection with the adoption of ASU 2015-07, Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent), on January 1, 2016.

Information about significant unobservable inputs used in Level 3 assets measured at fair value

Significant Unobservable Inputs for Level 3 Assets Measured at Fair Values (continued)



	As of June 30, 2016
Freestanding Derivatives						Unobservable Inputs
	Fair Value			Predominant Valuation Method	Significant Unobservable Input	Minimum	Maximum	Impact of Increase in Input on Fair Value [1]
Interest rate derivative
Interest rate swaps	$	(34	)	Discounted cash flows	Swap curve beyond 30 years	2%	2%	Decrease
GMWB hedging instruments
Equity variance swaps	(34		)	Option model	Equity volatility	22%	24%	Increase
Equity options	33			Option model	Equity volatility	27%	30%	Increase
Customized swaps	166			Discounted cash flows	Equity volatility	12%	30%	Increase
Macro hedge program [2]
Equity options	175			Option model	Equity volatility	12%	28%	Increase
	As of December 31, 2015
Interest rate derivative
Interest rate swaps	$	(30	)	Discounted cash flows	Swap curve beyond 30 years	3%	3%	Decrease
GMWB hedging instruments
Equity variance swaps	(31		)	Option model	Equity volatility	19%	21%	Increase
Equity options	35			Option model	Equity volatility	27%	29%	Increase
Customized swaps	131			Discounted cash flows	Equity volatility	10%	40%	Increase
Macro hedge program
Equity options	179			Option model	Equity volatility	14%	28%	Increase


[1]	Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. Changes are based on long positions, unless otherwise noted. Changes in fair value will be inversely impacted for short positions.


[2]	Excludes derivatives for which the Company bases fair value on broker quotations as noted in the following discussion.

Significant Unobservable Inputs for Level 3 Assets Measured at Fair Value

The following tables present information about significant unobservable inputs used in Level 3 assets measured at fair value. The tables exclude ABS, CRE CDOs, certain CMBS, corporate and municipal securities as well as index options for which fair values are based on broker quotations.



	As of June 30, 2016
Securities					Unobservable Inputs
Assets accounted for at fair value on a recurring basis	Fair Value		Predominant Valuation Technique	Significant Unobservable Input	Minimum	Maximum	Weighted Average [1]	Impact of Increase in Input on Fair Value [2]
CMBS [3]	$	14	Discounted cash flows	Spread (encompasses prepayment, default risk and loss severity)	10bps	1,275bps	234bps	Decrease
Corporate [3]	385		Discounted cash flows	Spread	158bps	1,531bps	360bps	Decrease
Municipal [3]	55		Discounted cash flows	Spread	223bps	283bps	240bps	Decrease
RMBS	690		Discounted cash flows	Spread	54bps	1,896bps	205bps	Decrease
				Constant prepayment rate	—%	20%	3%	Decrease [4]
				Constant default rate	1%	10%	6%	Decrease
				Loss severity	—%	100%	79%	Decrease
	As of December 31, 2015
CMBS [3]	$	61	Discounted cash flows	Spread (encompasses prepayment, default risk and loss severity)	31bps	1,505bps	230bps	Decrease
Corporate [3]	213		Discounted cash flows	Spread	63bps	800bps	290bps	Decrease
Municipal [3]	31		Discounted cash flows	Spread	193bps	193bps	193bps	Decrease
RMBS	628		Discounted cash flows	Spread	30bps	1,696bps	172bps	Decrease
				Constant prepayment rate	—%	20%	3%	Decrease [4]
				Constant default rate	1%	10%	6%	Decrease
				Loss severity	—%	100%	79%	Decrease


[1]	The weighted average is determined based on the fair value of the securities.


[2]	Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.


[3]	Excludes securities for which the Company bases fair value on broker quotations as noted in the following discussion.


[4]	Decrease for above market rate coupons and increase for below market rate coupons.



	As of June 30, 2016
Significant Unobservable Input	Minimum	Maximum	Impact of Increase in Input on Fair Value Measurement [1]
Withdrawal Utilization [2]	20%	100%	Increase
Withdrawal Rates [3]	—%	8%	Increase
Lapse Rates [4]	—%	75%	Decrease
Reset Elections [5]	20%	75%	Increase
Equity Volatility [6]	12%	30%	Increase
	As of December 31, 2015
Significant Unobservable Input	Minimum	Maximum	Impact of Increase in Input on Fair Value Measurement [1]
Withdrawal Utilization [2]	20%	100%	Increase
Withdrawal Rates [3]	—%	8%	Increase
Lapse Rates [4]	—%	75%	Decrease
Reset Elections [5]	20%	75%	Increase
Equity Volatility [6]	10%	40%	Increase


[1]	Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.


[2]	Range represents assumed cumulative percentages of policyholders taking withdrawals.


[3]	Range represents assumed cumulative annual amount withdrawn by policyholders.


[4]	Range represents assumed annual percentages of full surrender of the underlying variable annuity contracts across all policy durations for in force business.


[5]	Range represents assumed cumulative percentages of policyholders that would elect to reset their guaranteed benefit base.


[6]	Range represents implied market volatilities for equity indices based on multiple pricing sources.

Generally a change in withdrawal utilization assumptions would be accompanied by a directionally opposite change in lapse rate assumptions, as the behavior of policyholders that utilize GMWB riders is typically different from policyholders that do not utilize these riders.

Roll-forward of Financial Instruments Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

The following tables provide fair value roll-forwards for the three and six months ended June 30, 2016 for financial instruments classified as Level 3.

For the three months ended June 30, 2016



	Fixed Maturities, AFS																						Fixed Maturities, FVO
Assets	ABS		CDOs			CMBS			Corporate			Foreign Govt./Govt. Agencies			Municipal		RMBS			Total Fixed Maturities, AFS
Fair value as of March 31, 2016	$	2	$	328		$	51		$	538		$	20		$	50	$	701		$	1,690		$	1
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	—		(1		)	—			(1		)	—			—		—			(2		)	—
Included in OCI [3]	—		(1		)	1			16			1			3		3			23			—
Purchases	—		—			3			19			—			12		40			74			—
Settlements	—		(60		)	(4		)	(48		)	(1		)	—		(44		)	(157		)	—
Sales	—		—			(2		)	(32		)	(2		)	—		—			(36		)	(1		)
Transfers into Level 3 [4]	5		—			—			263			—			8		—			276			—
Transfers out of Level 3 [4]	—		—			(34		)	(38		)	—			—		(10		)	(82		)	—
Fair value as of June 30, 2016	$	7	$	266		$	15		$	717		$	18		$	73	$	690		$	1,786		$	—
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2016 [2] [7]	$	—	$	—		$	—		$	(1	)	$	—		$	—	$	—		$	(1	)	$	—



			Freestanding Derivatives [5]
Assets (Liabilities)	Equity Securities, AFS		Equity			Interest Rate			GMWB Hedging		Macro Hedge Program			Total Free-Standing Derivatives [5]
Fair value as of March 31, 2016	$	36	$	3		$	(32	)	$	144	$	145		$	260
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	—		(2		)	(2		)	15		(4		)	7
Included in OCI [3]	4		—			—			—		—			—
Purchases	2		—			—			—		—			—
Settlements	—		—			—			—		—			—
Sales	—		—			—			—		—			—
Transfers into Level 3 [4]	—		—			—			—		—			—
Transfers out of Level 3 [4]	—		—			—			6		—			6
Fair value as of June 30, 2016	$	42	$	1		$	(34	)	$	165	$	141		$	273
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2016 [2] [7]	$	—	$	(2	)	$	(2	)	$	15	$	(4	)	$	7



Assets	Reinsurance Recoverable for GMWB		Separate Accounts
Fair value as of March 31, 2016	$	99	$	154
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	3		—
Included in OCI [3]	—		3
Purchases	—		22
Settlements	4		(3		)
Sales	—		(6		)
Transfers into Level 3 [4]	—		3
Transfers out of Level 3 [4]	—		(2		)
Fair value as of June 30, 2016	$	106	$	171
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2016 [2] [7]	$	3	$	—



	Other Policyholder Funds and Benefits Payable
Liabilities	Guaranteed Withdrawal Benefits			Equity Linked Notes			Total Other Policyholder Funds and Benefits Payable
Fair value as of March 31, 2016	$	(361	)	$	(25	)	$	(386	)
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	(35		)	(3		)	(38		)
Settlements	(16		)	—			(16		)
Fair value as of June 30, 2016	$	(412	)	$	(28	)	$	(440	)
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2016 [2] [7]	$	(35	)	$	(3	)	$	(38	)

For the six months ended June 30, 2016



	Fixed Maturities, AFS																							Fixed Maturities, FVO
Assets	ABS			CDOs			CMBS			Corporate			Foreign Govt./Govt. Agencies			Municipal		RMBS			Total Fixed Maturities, AFS
Fair value as of January 1, 2016	$	5		$	330		$	62		$	534		$	17		$	49	$	628		$	1,625		$	2
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	—			(1		)	—			(7		)	—			—		—			(8		)	—
Included in OCI [3]	—			(4		)	(1		)	4			2			4		(2		)	3			—
Purchases	—			—			19			34			3			12		148			216			1
Settlements	—			(59		)	(8		)	(45		)	(2		)	—		(76		)	(190		)	—
Sales	—			—			(2		)	(35		)	(2		)	—		—			(39		)	(1		)
Transfers into Level 3 [4]	5			—			—			307			—			8		2			322			—
Transfers out of Level 3 [4]	(3		)	—			(55		)	(75		)	—			—		(10		)	(143		)	(2		)
Fair value as of June 30, 2016	$	7		$	266		$	15		$	717		$	18		$	73	$	690		$	1,786		$	—
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2016 [2] [7]	$	—		$	—		$	—		$	(1	)	$	—		$	—	$	—		$	—		$	—



				Freestanding Derivatives [5]
Assets (Liabilities)	Equity Securities, AFS			Equity			Interest Rate			GMWB Hedging		Macro Hedge Program			Total Free- Standing Derivatives [5]
Fair value as of January 1, 2016	$	38		$	—		$	(29	)	$	135	$	147		$	253
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	—			(7		)	(5		)	24		(4		)	8
Included in OCI [3]	4			—			—			—		—			—
Purchases	2			8			—			—		—			8
Settlements	—			—			—			—		(2		)	(2		)
Sales	(2		)	—			—			—		—			—
Transfers into Level 3 [4]	—			—			—			—		—			—
Transfers out of Level 3 [4]	—			—			—			6		—			6
Fair value as of June 30, 2016	$	42		$	1		$	(34	)	$	165	$	141		$	273
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2016 [2] [7]	$	—		$	(7	)	$	(5	)	$	24	$	(4	)	$	8



Assets	Reinsurance Recoverable for GMWB		Separate Accounts
Fair value as of January 1, 2016	$	83	$	139
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	16		—
Included in OCI [3]	—		7
Purchases	—		61
Settlements	7		(9		)
Sales	—		(16		)
Transfers into Level 3 [4]	—		6
Transfers out of Level 3 [4]	—		(17		)
Fair value as of June 30, 2016	$	106	$	171
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2016 [2] [7]	$	16	$	—



	Other Policyholder Funds and Benefits Payable
Liabilities	Guaranteed Living Benefits [7]			Equity Linked Notes			Total Other Policyholder Funds and Benefits Payable
Fair value as of January 1, 2016	$	(262	)	$	(26	)	$	(288	)
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	(117		)	(2		)	(119		)
Included in OCI [3]	—			—			—
Settlements	(33		)	—			(33		)
Fair value as of June 30, 2016	$	(412	)	$	(28	)	$	(440	)
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2016 [2] [7]	$	(117	)	$	(2	)	$	(119	)

The following tables provide fair value roll-forwards for the three and six months ended June 30, 2015 for financial instruments classified as Level 3.

For the three months ended June 30, 2015



	Fixed Maturities, AFS
Assets	ABS			CDOs			CMBS			Corporate			Foreign Govt./Govt. Agencies			Municipal			RMBS			Total Fixed Maturities, AFS			Fixed Maturities, FVO
Fair value as of March 31, 2015	$	96		$	362		$	119		$	670		$	17		$	52		$	674		$	1,990		$	72
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	—			—			—			—			—			—			—			—			—
Included in OCI [3]	(2		)	(2		)	1			(10		)	(2		)	(3		)	1			(17		)	—
Purchases	9			—			—			2			2			—			35			48			1
Settlements	—			(12		)	(13		)	(26		)	(1		)	—			(29		)	(81		)	1
Sales	(6		)	—			(3		)	(12		)	(1		)	—			(35		)	(57		)	(1		)
Transfers into Level 3 [4]	—			—			—			—			—			—			16			16			—
Transfers out of Level 3 [4]	(83		)	—			(17		)	(77		)	—			—			—			(177		)	(1		)
Fair value as of June 30, 2015	$	14		$	348		$	87		$	547		$	15		$	49		$	662		$	1,722		$	72
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2015 [2] [7]	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—



				Freestanding Derivatives [5]
Assets (Liabilities)	Equity Securities, AFS			Credit			Commodity			Equity			Interest Rate			GMWB Hedging			Macro Hedge Program			Total Free-Standing Derivatives [5]
Fair value as of March 31, 2015	$	48		$	(6	)	$	—		$	5		$	(30	)	$	159		$	187		$	315
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	6			(2		)	(4		)	(2		)	3			(34		)	(22		)	(61		)
Included in OCI [3]	—			—			—			—			—			—			—			—
Purchases	1			(2		)	—			—			—			—			—			(2		)
Settlements	—			—			—			—			(1		)	—			—			(1		)
Sales	(8		)	—			—			—			—			—			—			—
Transfers into Level 3 [4]	—			—			6			—			—			—			—			6
Transfers out of Level 3 [4]	(3		)	10			—			—			—			—			—			10
Fair value as of June 30, 2015	$	44		$	—		$	2		$	3		$	(28	)	$	125		$	165		$	267
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2015 [2] [7]	$	—		$	—		$	(4	)	$	—		$	3		$	(32	)	$	(18	)	$	(51	)



Assets	Reinsurance Recoverable for GMWB and Japan GMWB, GMIB, and GMAB			Separate Accounts
Fair value as of March 31, 2015	$	65		$	137
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	(16		)	—
Included in OCI [3]	—			(1		)
Purchases	—			222
Settlements	1			(5		)
Sales	—			(19		)
Transfers into Level 3 [4]	—			5
Transfers out of Level 3 [4]	—			(53		)
Fair value as of June 30, 2015	$	50		$	286
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2015 [2] [7]	$	(16	)	$	—



	Other Policyholder Funds and Benefits Payable
Liabilities	Guaranteed Withdrawal Benefits			Equity Linked Notes			Total Other Policyholder Funds and Benefits Payable			Consumer Notes
Fair value as of March 31, 2015	$	(176	)	$	(26	)	$	(202	)	$	(3	)
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	78			—			78			—
Settlements	(14		)	—			(14		)	—
Fair value as of June 30, 2015	$	(112	)	$	(26	)	$	(138	)	$	(3	)
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2015 [2] [7]	$	78		$	—		$	78		$	—

For the six months ended June 30, 2015



	Fixed Maturities, AFS
Assets	ABS			CDOs			CMBS			Corporate			Foreign Govt./Govt. Agencies			Municipal			RMBS			Total Fixed Maturities, AFS			Fixed Maturities, FVO
Fair value as of January 1, 2015	$	82		$	360		$	119		$	646		$	30		$	54		$	734		$	2,025		$	84
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	—			(1		)	—			(2		)	—			—			(1		)	(4		)	(4		)
Included in OCI [3]	(2		)	13			(1		)	(26		)	(2		)	(5		)	1			(22		)	—
Purchases	22			—			12			3			3			—			46			86			5
Settlements	—			(18		)	(19		)	(24		)	(2		)	—			(58		)	(121		)	2
Sales	(6		)	—			(3		)	(15		)	(14		)	—			(57		)	(95		)	(5		)
Transfers into Level 3 [4]	1			—			4			58			—			—			16			79			—
Transfers out of Level 3 [4]	(83		)	(6		)	(25		)	(93		)	—			—			(19		)	(226		)	(10		)
Fair value as of June 30, 2015	$	14		$	348		$	87		$	547		$	15		$	49		$	662		$	1,722		$	72
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2015 [2] [7]	$	—		$	(1	)	$	(1	)	$	(1	)	$	—		$	—		$	—		$	(3	)	$	(2	)



				Freestanding Derivatives [5]
Assets (Liabilities)	Equity Securities, AFS			Credit			Commodity			Equity			Interest Rate			GMWB Hedging			Macro Hedge Program			Total Free-Standing Derivatives [5]
Fair value as of January 1, 2015	$	48		$	(3	)	$	—		$	5		$	(27	)	$	170		$	141		$	286
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	6			1			(4		)	8			—			(25		)	(23		)	(43		)
Included in OCI [3]	(2		)	—			—			—			—			—			—			—
Purchases	3			(8		)	—			—			—			—			47			39
Settlements	—			—			—			(10		)	(1		)	(20		)	—			(31		)
Sales	(8		)	—			—			—			—			—			—			—
Transfers into Level 3 [4]	—			—			6			—			—			—			—			6
Transfers out of Level 3 [4]	(3		)	10			—			—			—			—			—			10
Fair value as of June 30, 2015	$	44		$	—		$	2		$	3		$	(28	)	$	125		$	165		$	267
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2015 [2] [7]	$	—		$	3		$	(4	)	$	1		$	(2	)	$	(16	)	$	(15	)	$	(33	)



Assets	Reinsurance Recoverable for GMWB and Japan GMWB, GMIB, and GMAB			Separate Accounts
Fair value as of January 1, 2015	$	56		$	112
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	(9		)	1
Included in OCI [3]	—			(1		)
Purchases	—			260
Settlements	3			(10		)
Sales	—			(25		)
Transfers into Level 3 [4]	—			6
Transfers out of Level 3 [4]	—			(57		)
Fair value as of June 30, 2015	$	50		$	286
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2015 [2] [7]	$	(15	)	$	1



	Other Policyholder Funds and Benefits Payable [1]
Liabilities	Guaranteed Living Benefits [7][8]			Equity Linked Notes			Total Other Policyholder Funds and Benefits Payable			Consumer Notes
Fair value as of January 1, 2015	$	(139	)	$	(26	)	$	(165	)	$	(3	)
Total realized/unrealized gains (losses)
Included in net income [1] [2] [6]	59			—			59			—
Included in OCI [3]	—			—			—			—
Settlements	(32		)	—			(32		)	—
Fair value as of June 30, 2015	$	(112	)	$	(26	)	$	(138	)	$	(3	)
Changes in unrealized gains (losses) included in net income related to financial instruments still held at June 30, 2015 [2] [7]	$	59		$	—		$	59		$	—


[1]	The Company classifies realized and unrealized gains and losses on GMWB reinsurance derivatives and GMWB embedded derivatives as unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract basis the realized gains (losses) for these derivatives and embedded derivatives.


[2]	All amounts in these rows are reported in net realized capital gains (losses). The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. All amounts are before income taxes and amortization of DAC.


[3]	All amounts are before income taxes and amortization of DAC.


[4]	Transfers in and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.


[5]	Derivative instruments are reported in this table on a net basis for asset/(liability) positions and reported in the Condensed Consolidated Balance Sheet in other investments and other liabilities.


[6]	Includes both market and non-market impacts in deriving realized and unrealized gains (losses).


[7]	Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein.

Fair value of assets and liabilities accounted for using the fair value option

Fair Value Option

FVO investments include certain securities that contain embedded credit derivatives with underlying credit risk primarily related to residential and commercial real estate, for which the Company has elected the fair value option. The Company also classifies the underlying fixed maturities held in a consolidated investment fund within the Fixed Maturities, FVO line on the Condensed Consolidated Balance Sheets. The Company reports this consolidated investment company at fair value with changes in the fair value of the underlying securities recognized in net realized capital gains and losses, which is consistent with accounting requirements for investment companies. As of December 31, 2015, the fund held fixed income securities in multiple sectors and the Company had management and control of the funds as well as a significant ownership interest. The Company did not hold any of these funds as of June 30, 2016.

The Company also elected the fair value option for certain equity securities in order to align the accounting with total return swap contracts that hedge the risk associated with the investments. The swaps do not qualify for hedge accounting and the change in value of both the equity securities and the total return swaps are recorded in net realized capital gains and losses. These equity securities are classified within equity securities, AFS on the Condensed Consolidated Balance Sheets. As of June 30, 2016, the Company no longer has any of these investments. Income earned from FVO securities is recorded in net investment income and changes in fair value are recorded in net realized capital gains and losses.

The following table presents the changes in fair value of those assets and liabilities accounted for using the fair value option reported in net realized capital gains and losses in the Company’s Condensed Consolidated Statements of Operations.



	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016			2015
Assets
Fixed maturities, FVO
Corporate	$	—	$	(2	)	$	—		$	1
CDOs	—		—			—			1
Foreign government	—		—			—			—
RMBS	2		(4		)	2			(3		)
Total fixed maturities, FVO	$	2	$	(6	)	$	2		$	(1	)
Equity, FVO	—		2			(34		)	2
Total realized capital gains (losses)	$	2	$	(4	)	$	(32	)	$	1

Fair value of assets and liabilities accounted for using the fair value option

The following table presents the fair value of assets and liabilities accounted for using the fair value option included in the Company's Condensed Consolidated Balance Sheets.



	As of
	June 30, 2016		December 31, 2015
Assets
Fixed maturities, FVO
ABS	$	—	$	4
Corporate	—		31
CDOs	—		1
CMBS	—		6
Foreign government	—		1
RMBS	123		119
U.S. Government	—		3
Total fixed maturities, FVO	$	123	$	165
Equity, FVO	$	—	$	281

Financial Instruments Not Carried at Fair Value

The following table presents carrying amounts and fair values of the Company's financial instruments not carried at fair value.



		June 30, 2016				December 31, 2015
	Fair Value Hierarchy Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Policy loans	Level 3	$	1,434	$	1,434	$	1,446	$	1,446
Mortgage loans	Level 3	2,871		3,053		2,918		2,995
Liabilities
Other policyholder funds and benefits payable [1]	Level 3	$	6,390	$	6,682	$	6,611	$	6,802
Consumer notes [2] [3]	Level 3	32		32		38		38
Assumed investment contracts [3]	Level 3	738		795		619		682


[1]	Excludes group accident and health and universal life insurance contracts, including corporate owned life insurance.


[2]	Excludes amounts carried at fair value and included in preceding disclosures.


[3]	Included in other liabilities in the Condensed Consolidated Balance Sheets.

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

+ References + Details