Fair Value Measurements Level 3 (Tables)

12 Months Ended

Dec. 31, 2016

Dec. 31, 2015

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



Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 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
Asset backed securities ("ABS")	$	993		$	—	$	956		$	37
Collateralized debt obligations ("CDOs")	940			—		680			260
Commercial mortgage-backed securities ("CMBS")	2,146			—		2,125			21
Corporate	14,693			—		14,127			566
Foreign government/government agencies	345			—		328			17
Municipal	1,189			—		1,117			72
Residential mortgage-backed securities ("RMBS")	1,760			—		1,049			711
U.S. Treasuries	1,753			230		1,523			—
Total fixed maturities	23,819			230		21,905			1,684
Fixed maturities, FVO	82			—		82			—
Equity securities, trading [1]	11			11		—			—
Equity securities, AFS	152			20		88			44
Derivative assets
Credit derivatives	(1		)	—		(1		)	—
Foreign exchange derivatives	4			—		4			—
Interest rate derivatives	30			—		30			—
GMWB hedging instruments	74			—		14			60
Macro hedge program	128			—		8			120
Total derivative assets [2]	235			—		55			180
Short-term investments	1,349			637		712			—
Reinsurance recoverable for GMWB	73			—		—			73
Modified coinsurance reinsurance contracts	68			—		68			—
Separate account assets [3]	111,634			71,606		38,856			201
Total assets accounted for at fair value on a recurring basis	$	137,423		$	72,504	$	61,766		$	2,182
Liabilities accounted for at fair value on a recurring basis
Other policyholder funds and benefits payable
GMWB embedded derivative	$	(241	)	$	—	$	—		$	(241	)
Equity linked notes	(33		)	—		—			(33		)
Total other policyholder funds and benefits payable	(274		)	—		—			(274		)
Derivative liabilities
Credit derivatives	1			—		1			—
Equity derivatives	33			—		33			—
Foreign exchange derivatives	(247		)	—		(247		)	—
Interest rate derivatives	(434		)	—		(404		)	(30		)
GMWB hedging instruments	20			—		(1		)	21
Macro hedge program	50			—		3			47
Total derivative liabilities [4]	(577		)	—		(615		)	38
Total liabilities accounted for at fair value on a recurring basis	$	(851	)	$	—	$	(615	)	$	(236	)



Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of 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			—
Equity derivatives	—			—		—			—
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 embedded derivative	$	(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 Consolidated Balance Sheets.


[2]	Includes 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 footnote 4 to this table for derivative liabilities.

[3]

Approximately $4.0 billion and $1.8 billion of investment sales receivable, as of December 31, 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 December 31, 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.


[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.

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

Significant Unobservable Inputs for Level 3 - Freestanding Derivatives



	Fair Value			Predominant Valuation Technique	Significant Unobservable Input	Minimum	Maximum	Impact of Increase in Input on Fair Value [1]
As of December 31, 2016
Interest rate derivatives
Interest rate swaps	$	(29	)	Discounted cash flows	Swap curve beyond 30 years	3%	3%	Decrease
GMWB hedging instruments
Equity variance swaps	(36		)	Option model	Equity volatility	20%	23%	Increase
Equity options	17			Option model	Equity volatility	27%	30%	Increase
Customized swaps	100			Discounted cash flows	Equity volatility	12%	30%	Increase
Macro hedge program
Equity options [2]	188			Option model	Equity volatility	17%	28%	Increase



As of December 31, 2015
Interest rate derivatives
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

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]

As of December 31, 2016

CMBS [3]

Discounted cash flows

Spread (encompasses
prepayment, default risk and loss severity)

10bps

1,273bps

249bps

Decrease

Corporate [4]

265

Discounted cash flows

Spread

122bps

1,021bps

373bps

Decrease

Municipal [3]

Discounted cash flows

Spread

135bps

286bps

195bps

Decrease

RMBS [3]

704

Discounted cash flows

Spread

16bps

1,830bps

189bps

Decrease

Constant prepayment rate

—

Decrease [5]

Constant default rate

Decrease

Loss severity

—

100

Decrease

As of December 31, 2015

CMBS [3]

Discounted cash flows

Spread (encompasses
prepayment, default risk and loss severity)

31bps

1,505bps

230bps

Decrease

Corporate [4]

213

Discounted cash flows

Spread

63bps

800bps

290bps

Decrease

Municipal [3]

Discounted cash flows

Spread

193bps

Decrease

RMBS

628

Discounted cash flows

Spread

30bps

1,696bps

172bps

Decrease

Constant prepayment rate

—

Decrease [5]

Constant default rate

Decrease

Loss severity

—

100

Decrease

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

Changes in Unrealized Gains (Losses) included in Net Income for Financial Instruments Classified as Level 3 Still Held at Year End



		December 31, 2016 [1] [2]			December 31, 2015 [1] [2]
Assets
Fixed Maturities, AFS
	CDOs	$	—		$	(1	)
	CMBS	(1		)	(1		)
	Corporate	(13		)	(17		)
	RMBS	—			(3		)
Total Fixed Maturities, AFS		(14		)	(22		)
Fixed Maturities, FVO		—			(3		)
Equity Securities, AFS		(1		)	(5		)
Freestanding Derivatives
	GMWB hedging instruments	(52		)	(5		)
	Macro hedge program	(33		)	(34		)
Total Freestanding Derivatives		(85		)	(39		)
Reinsurance Recoverable for GMWB		(24		)	9
Separate Accounts		—			27
Total Assets		$	(124	)	$	(33	)
(Liabilities)
Other Policyholder Funds and Benefits Payable
	Guaranteed Withdrawal Benefits	88			(59		)
	Equity Linked Notes	(7		)	—
Total Other Policyholder Funds and Benefits Payable		81			(59		)
Consumer Notes		—			3
Total Liabilities		$	81		$	(56	)


[1]	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.


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

The Company uses derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instrument may not be classified with the same fair value hierarchy level as the associated asset or liability. Therefore, the realized and unrealized gains and losses on derivatives reported in the Level 3 roll-forward may be offset by realized and unrealized gains and losses of the associated assets and liabilities in other line items of the financial statements.

Fair Value Roll-forwards for Financial Instruments Classified as Level 3 for the Year Ended December 31, 2016



					Total realized/unrealized gains (losses)
		Fair value as of January 1, 2016			Included in net income [1] [2] [6]			Included in OCI [3]			Purchases		Settlements			Sales			Transfers into Level 3 [4]		Transfers out of Level 3 [4]			Fair value as of December 31, 2016
Assets
Fixed Maturities, AFS
	ABS	$	5		$	—		$	—		$	35	$	(2	)	$	(2	)	$	5	$	(4	)	$	37
	CDOs	330			(1		)	(14		)	62		(117		)	—			—		—			260
	CMBS	62			—			(2		)	43		(13		)	(2		)	—		(67		)	21
	Corporate	534			(6		)	10			87		(63		)	(126		)	368		(238		)	566
	Foreign Govt./Govt. Agencies	17			—			1			8		(4		)	(5		)	—		—			17
	Municipal	49			—			—			16		(1		)	—			8		—			72
	RMBS	628			(1		)	4			268		(154		)	(26		)	2		(10		)	711
Total Fixed Maturities, AFS		1,625			(8		)	(1		)	519		(354		)	(161		)	383		(319		)	1,684
Fixed Maturities, FVO		2			—			—			1		—			(1		)	—		(2		)	—
Equity Securities, AFS		38			(1		)	6			4		—			(3		)	—		—			44
Freestanding Derivatives
	Equity	—			(8		)	—			8		—			—			—		—			—
	Interest rate	(29		)	(1		)	—			—		—			—			—		—			(30		)
	GMWB hedging instruments	135			(60		)	—			—		—			—			—		6			81
	Macro hedge program	147			(38		)	—			63		(6		)	—			—		1			167
Total Freestanding Derivatives [5]		253			(107		)	—			71		(6		)	—			—		7			218
Reinsurance Recoverable for GMWB		83			(24		)	—			—		14			—			—		—			73
Separate Accounts		139			(1		)	(3		)	320		(15		)	(78		)	17		(178		)	201
Total Assets		$	2,140		$	(141	)	$	2		$	915	$	(361	)	$	(243	)	$	400	$	(492	)	$	2,220
(Liabilities)
Other Policyholder Funds and Benefits Payable
	Guaranteed Withdrawal Benefits	(262		)	88			—			—		(67		)	—			—		—			(241		)
	Equity Linked Notes	(26		)	(7		)	—			—		—			—			—		—			(33		)
Total Other Policyholder Funds and Benefits Payable		(288		)	81			—			—		(67		)	—			—		—			(274		)
Total Liabilities		$	(288	)	$	81		$	—		$	—	$	(67	)	$	—		$	—	$	—		$	(274	)

Fair Value Option

The Company has elected the fair value option for certain securities that contain embedded credit derivatives with underlying credit risk, primarily related to residential real estate, and these securities are included within Fixed Maturities, FVO on the Consolidated Balance Sheets. The Company also classifies the underlying fixed maturities held in certain consolidated investment funds within Fixed Maturities, FVO. The Company reports the underlying fixed maturities of these consolidated investment companies at fair value with changes in the fair value of these securities recognized in net realized capital gains and losses, which is consistent with accounting requirements for investment companies. The consolidated investment funds hold fixed income securities in multiple sectors and the Company has management and control of the funds as well as a significant ownership interest.

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 Consolidated Balance Sheets. As of December 31, 2016, the Company no longer holds 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.

Fair Value Roll-forwards for Financial Instruments Classified as Level 3 for the Year Ended December 31, 2015



					Total realized/unrealized gains (losses)
		Fair value as of January 1, 2015			Included in net income [1] [2] [6]			Included in OCI [3]			Purchases			Settlements			Sales			Transfers into Level 3 [4]		Transfers out of Level 3 [4]			Fair value as of December 31, 2015
Assets
Fixed Maturities, AFS
	ABS	$	82		$	—		$	(2	)	$	22		$	—		$	(6	)	$	1	$	(92	)	$	5
	CDOs	360			(1		)	3			—			(26		)	—			—		(6		)	330
	CMBS	119			—			(5		)	18			(36		)	(3		)	4		(35		)	62
	Corporate	646			(18		)	(38		)	45			(21		)	(43		)	99		(136		)	534
	Foreign Govt./Govt. Agencies	30			—			(3		)	5			(3		)	(15		)	3		—			17
	Municipal	54			—			(5		)	—			—			—			—		—			49
	RMBS	734			(2		)	(2		)	154			(126		)	(127		)	16		(19		)	628
Total Fixed Maturities, AFS		2,025			(21		)	(52		)	244			(212		)	(194		)	123		(288		)	1,625
Fixed Maturities, FVO		84			(5		)	1			6			(23		)	(50		)	—		(11		)	2
Equity Securities, AFS		48			(5		)	1			11			(1		)	(13		)	—		(3		)	38
Freestanding Derivatives
	Credit	(3		)	1			—			(8		)	—			—			—		10			—
	Commodity	—			(3		)	—			—			(3		)	—			6		—			—
	Equity	5			5			—			—			(10		)	—			—		—			—
	Interest rate	(27		)	(1		)	—			—			(1		)	—			—		—			(29		)
	GMWB hedging instruments	170			(16		)	—			—			(19		)	—			—		—			135
	Macro hedge program	141			(41		)	—			47			—			—			—		—			147
	Other contracts	—			—			—			—			—			—			—		—			—
Total Freestanding Derivatives [5]		286			(55		)	—			39			(33		)	—			6		10			253
Reinsurance Recoverable for GMWB		56			9			—			—			18			—			—		—			83
Separate Accounts		112			28			(5		)	375			(20		)	(238		)	12		(125		)	139
Total Assets		$	2,611		$	(49	)	$	(55	)	$	675		$	(271	)	$	(495	)	$	141	$	(417	)	$	2,140
(Liabilities)
Other Policyholder Funds and Benefits Payable
	Guaranteed Withdrawal Benefits	(139		)	(59		)	—			—			(64		)	—			—		—			(262		)
	Equity Linked Notes	(26		)	—			—			—			—			—			—		—			(26		)
Total Other Policyholder Funds and Benefits Payable		(165		)	(59		)	—			—			(64		)	—			—		—			(288		)
Consumer Notes		(3		)	3			—			—			—			—			—		—			—
Total Liabilities		$	(168	)	$	(56	)	$	—		$	—		$	(64	)	$	—		$	—	$	—		$	(288	)

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



	For the year ended December 31,
	2016			2015			2014
Assets
Fixed maturities, FVO
CDOs	$	—		$	1		$	21
Corporate	—			(3		)	(3		)
Foreign government	—			2			16
RMBS	3			—			—
Total fixed maturities, FVO	$	3		$	—		$	34
Equity, FVO	(34		)	(12		)	(2		)
Total realized capital gains (losses)	$	(31	)	$	(12	)	$	32

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



	As of December 31,
	2016		2015
Assets
Fixed maturities, FVO
ABS	$	—	$	4
CDOs	—		1
CMBS	—		6
Corporate	—		31
Foreign government	—		1
RMBS	82		119
U.S. Government	—		3
Total fixed maturities, FVO	$	82	$	165
Equity, FVO [1]	$	—	$	281

Financial Instruments Not Carried at Fair Value

Financial Assets and Liabilities Not Carried at Fair Value



		December 31, 2016				December 31, 2015
	Fair Value Hierarchy Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Policy loans	Level 3	$	1,442	$	1,442	$	1,446	$	1,446
Mortgage loans	Level 3	2,811		2,843		2,918		2,995
Liabilities
Other policyholder funds and benefits payable [1]	Level 3	6,436		6,626		6,611		6,802
Consumer notes [2] [3]	Level 3	20		20		38		38
Assumed investment contracts [3]	Level 3	487		526		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 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.

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