Fair Value Measurements Level 3 (Tables)

3 Months Ended

Mar. 31, 2019

Mar. 31, 2018

Fair Value Disclosures [Abstract]

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

Successor Company
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of March 31, 2019
	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")	$	383		$	—	$	381		$	2
Collateralized loan obligations ("CLOs")	997			—		899			98
Commercial mortgage-backed securities ("CMBS")	1,481			—		1,443			38
Corporate	8,020			—		7,778			242
Foreign government/government agencies	390			—		390			—
Bonds of municipalities and political subdivisions ("municipal bonds")	732			—		732			—
Residential mortgage-backed securities ("RMBS")	986			—		602			384
U.S. Treasuries	988			81		907			—
Total fixed maturities, AFS	13,977			81		13,132			764
Fixed maturities, FVO	11			—		11			—
Equity securities, at fair value	173			52		86			35
Derivative assets
Credit derivatives	1			—		1			—
Foreign exchange derivatives	1			—		1			—
Interest rate derivatives	39			—		39			—
Guaranteed minimum withdrawal benefit ("GMWB") hedging instruments	27			—		4			23
Macro hedge program	59			—		—			59
Total derivative assets [1]	127			—		45			82
Short-term investments	1,204			455		749			—
Reinsurance recoverable for GMWB	28			—		—			28
Modified coinsurance reinsurance contracts	(12		)	—		(12		)	—
Separate account assets [2]	100,323			64,134		36,134			55
Total assets accounted for at fair value on a recurring basis	$	115,831		$	64,722	$	50,145		$	964
Liabilities accounted for at fair value on a recurring basis
Other policyholder funds and benefits payable
GMWB embedded derivative	$	(29	)	$	—	$	—		$	(29	)
Total other policyholder funds and benefits payable	(29		)	—		—			(29		)
Derivative liabilities
Credit derivatives	3			—		3			—
Equity derivatives	1			—		—			1
Foreign exchange derivatives	(97		)	—		(97		)	—
Interest rate derivatives	(143		)	—		(114		)	(29		)
GMWB hedging instruments	20			—		23			(3		)
Macro hedge program	(24		)	—		—			(24		)
Total derivative liabilities [3]	(240		)	—		(185		)	(55		)
Total liabilities accounted for at fair value on a recurring basis	$	(269	)	$	—	$	(185	)	$	(84	)

Successor Company
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2018
	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	$	516		$	—	$	514		$	2
CLOs	963			—		886			77
CMBS	1,407			—		1,366			41
Corporate	7,678			—		7,351			327
Foreign government/government agencies	377			—		377			—
Municipal bonds	734			—		734			—
RMBS	1,033			—		590			443
U.S. Treasuries	1,131			322		809			—
Total fixed maturities, AFS	13,839			322		12,627			890
Fixed maturities, FVO	12			—		12			—
Equity securities, at fair value	116			54		16			46
Derivative assets
Interest rate derivatives	36			—		36			—
GMWB hedging instruments	44			—		8			36
Macro hedge program	132			—		—			132
Total derivative assets [1]	212			—		44			168
Short-term investments	844			464		380			—
Reinsurance recoverable for GMWB	40			—		—			40
Modified coinsurance reinsurance contracts	12			—		12			—
Separate account assets [2]	94,724			59,361		35,323			40
Total assets accounted for at fair value on a recurring basis	$	109,799		$	60,201	$	48,414		$	1,184
Liabilities accounted for at fair value on a recurring basis
Other policyholder funds and benefits payable
GMWB embedded derivative	$	(80	)	$	—	$	—		$	(80	)
Total other policyholder funds and benefits payable	(80		)	—		—			(80		)
Derivative liabilities
Credit derivatives	2			—		2			—
Foreign exchange derivatives	(91		)	—		(91		)	—
Interest rate derivatives	(137		)	—		(110		)	(27		)
GMWB hedging instruments	27			—		18			9
Macro hedge program	115			—		—			115
Total derivative liabilities [3]	(84		)	—		(181		)	97
Total liabilities accounted for at fair value on a recurring basis	$	(164	)	$	—	$	(181	)	$	17

[1] Includes 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 and applicable law. See footnote 3 to this table for derivative liabilities.

[2] Approximately $4.0 billion and $3.6 billion of investment sales receivable, as of March 31, 2019 (Successor Company) and December 31, 2018 (Successor Company), 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 $467 and $468 of investments, as of March 31, 2019 (Successor Company) and December 31, 2018 (Successor Company), respectively, 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.

[3] Includes 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 and applicable law.

Fair Value Roll-forwards for Financial Instruments Classified as Level 3
					Total Realized/Unrealized Gains (Losses)
		Fair Value as of January 1, 2019			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 March 31, 2019
Assets
Fixed maturities, AFS
	ABS	$	2		$	—		$	—	$	—	$	—		$	—		$	—	$	—		$	2
	CLOs	77			—			—		38		—			(5		)	—		(12		)	98
	CMBS	41			—			—		29		—			—			—		(32		)	38
	Corporate	327			1			4		4		(3		)	(86		)	4		(9		)	242
	RMBS	443			—			1		—		(22		)	(21		)	—		(17		)	384
Total fixed maturities, AFS		890			1			5		71		(25		)	(112		)	4		(70		)	764
Equity securities, at fair value		46			(2		)	—		—		—			(9		)	—		—			35
Freestanding derivatives
	Equity	—			—			—		1		—			—			—		—			1
	Interest rate	(27		)	(2		)			—		—			—			—		—			(29		)
	GMWB hedging instruments	45			(25		)			—		—			—			—		—			20
	Macro hedge program	247			(213		)			1		—			—			—		—			35
Total freestanding derivatives [5]		265			(240		)	—		2		—			—			—		—			27
Reinsurance recoverable for GMWB		40			(14		)	—		—		2			—			—		—			28
Separate accounts		40			—			—		28		—			(1		)	—		(12		)	55
Total assets		$	1,281		$	(255	)	$	5	$	101	$	(23	)	$	(122	)	$	4	$	(82	)	$	909
Liabilities
Other policyholder funds and benefits payable
	Guaranteed withdrawal benefits	$	(80	)	$	65		$	—	$	—	$	(14	)	$	—		$	—	$	—		$	(29	)
Total other policyholder funds and benefits payable		(80		)	65			—		—		(14		)	—			—		—			(29		)
Total liabilities		$	(80	)	$	65		$	—	$	—	$	(14	)	$	—		$	—	$	—		$	(29	)

Fair Value Roll-forwards for Financial Instruments Classified as Level 3
					Total Realized/Unrealized Gains (Losses)
		Fair Value as of January 1, 2018			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 March 31, 2018
Assets
Fixed maturities, AFS
	ABS	$	13		$	—		$	—		$	—	$	(1	)	$	—		$	—	$	(3	)	$	9
	CLOs	73			—			—			5		—			—			—		(6		)	72
	CMBS	26			—			—			—		(1		)	(4		)	—		—			21
	Corporate	443			—			(7		)	20		(13		)	(30		)	54		(20		)	447
	Foreign Govt./Govt. agencies	1			—			—			—		—			—			—		—			1
	Municipal	38			—			(1		)	—		—			—			—		—			37
	RMBS	692			—			(2		)	3		(47		)	—			—		(5		)	641
Total fixed maturities, AFS		1,286			—			(10		)	28		(62		)	(34		)	54		(34		)	1,228
Equity securities, at fair value		46			10			—			—		—			(14		)	—		—			42
Freestanding derivatives
	Interest rate	(29		)	1			—			—		—			—			—		—			(28		)
	GMWB hedging instruments	34			—			—			—		—			(2		)	—		—			32
	Macro hedge program	23			10			—			—		—			—			—		—			33
Total freestanding derivatives [5]		28			11			—			—		—			(2		)	—		—			37
Reinsurance recoverable for GMWB		36			(8		)	—			—		3			—			—		—			31
Separate accounts		185			—			—			10		—			(162		)	17		(9		)	41
Total assets		$	1,581		$	13		$	(10	)	$	38	$	(59	)	$	(212	)	$	71	$	(43	)	$	1,379
Liabilities
Other policyholder funds and benefits payable
	Guaranteed withdrawal benefits	$	(75	)	$	39		$	—		$	—	$	(17	)	$	—		$	—	$	—		$	(53	)
Total other policyholder funds and benefits payable		(75		)	39			—			—		(17		)	—			—		—			(53		)
Total liabilities		$	(75	)	$	39		$	—		$	—	$	(17	)	$	—		$	—	$	—		$	(53	)

[1] The Company classifies realized and unrealized gains (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] Amounts in these rows are generally 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.

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

[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 Sheets in other investments and other liabilities.

[6]

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

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

Significant Unobservable Inputs for Level 3 - Securities
As of March 31, 2019 (Successor Company)
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]
CLOs [3]	$	71	Discounted cash flows	Spread	60bps	256bps	253bps	Decrease
CMBS [3]	$	30	Discounted cash flows	Spread (encompasses prepayment, default risk and loss severity)	9bps	1,816bps	241bps	Decrease
Corporate [4]	$	158	Discounted cash flows	Spread	121bps	665bps	291bps	Decrease
RMBS [3]	$	384	Discounted cash flows	Spread	26bps	1,214bps	85bps	Decrease
				Constant prepayment rate	—%	16%	6%	Decrease [5]
				Constant default rate	1%	6%	3%	Decrease
				Loss severity	—%	100%	60%	Decrease
As of December 31, 2018 (Successor Company)
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]	$	1	Discounted cash flows	Spread (encompasses prepayment, default risk and loss severity)	9bps	1,816bps	278bps	Decrease
Corporate [4]	$	144	Discounted cash flows	Spread	145bps	1,145bps	400bps	Decrease
RMBS [3]	$	426	Discounted cash flows	Spread	31bps	346bps	92bps	Decrease
				Constant prepayment rate	—%	13%	6%	Decrease [5]
				Constant default rate	2%	8%	3%	Decrease
				Loss severity	—%	100%	58%	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 based fair value on broker quotations.

[4] Excludes securities for which the Company bases fair value on broker quotations; however, included are broker priced lower-rated private placement securities for which the Company receives spread and yield information to corroborate the fair value.

[5]

Decrease for above market rate coupons and increase for below market rate coupons.

Significant Unobservable Inputs for Level 3 GMWB Embedded Customized and Reinsurance Derivatives
As of March 31, 2019 (Successor Company)
Significant Unobservable Input	Unobservable Inputs (Minimum)	Unobservable Inputs (Maximum)	Impact of Increase in Input on Fair Value Liability [1]
Withdrawal utilization [2]	15%	100%	Increase
Withdrawal rates [3]	—%	8%	Increase
Lapse rates [4]	1%	40%	Decrease
Reset elections [5]	20%	45%	Increase
Equity volatility [6]	12%	25%	Increase
Credit standing adjustment [7]	0.04%	0.28%	Decrease
As of December 31, 2018 (Successor Company)
Significant Unobservable Input	Unobservable Inputs (Minimum)	Unobservable Inputs (Maximum)	Impact of Increase in Input on Fair Value Liability [1]
Withdrawal utilization [2]	15%	100%	Increase
Withdrawal rates [3]	—%	8%	Increase
Lapse rates [4]	1%	40%	Decrease
Reset elections [5]	20%	45%	Increase
Equity volatility [6]	17%	30%	Increase
Credit standing adjustment [7]	0.04%	0.28%	Decrease

Significant Unobservable Inputs for Level 3 - Freestanding Derivatives
As of March 31, 2019 (Successor Company)
	Fair Value			Predominant Valuation Technique	Significant Unobservable Input	Minimum	Maximum	Impact of Increase in Input on Fair Value [1]
Equity derivatives
Equity options	$1			Option model	Equity volatility	1%	1%	Increase
Interest rate derivatives
Interest rate swaps	$	(29	)	Discounted cash flows	Swap curve  beyond 30 years	3%	3%	Decrease
GMWB hedging instruments
Equity variance swaps	$	(29	)	Option model	Equity volatility	17%	17%	Increase
Equity options	$	1		Option model	Equity volatility	31%	33%	Increase
Customized swaps	$	46		Discounted cash flows	Equity volatility	12%	25%	Increase
Interest rate swaption	$	2		Option model	Interest rate volatility	2%	2%	Increase
Macro hedge program [2]
Equity options	$	37		Option model	Equity volatility	1%	30%	Increase
As of December 31, 2018 (Successor Company)
	Fair Value			Predominant Valuation Technique	Significant Unobservable Input	Minimum	Maximum	Impact of Increase in Input on Fair Value [1]
Interest rate derivatives
Interest rate swaps	$	(27	)	Discounted cash flows	Swap curve  beyond 30 years	3%	3%	Decrease
GMWB hedging instruments
Equity variance swaps	$	(26	)	Option model	Equity volatility	22%	22%	Increase
Equity options	$	(1	)	Option model	Equity volatility	30%	32%	Increase
Customized swaps	$	71		Discounted cash flows	Equity volatility	18%	30%	Increase
Interest rate swaption	$	1		Option model	Interest rate volatility	3%	3%	Increase
Macro hedge program [2]
Equity options	$	250		Option model	Equity volatility	17%	30%	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.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended March 31, 2018 (Predecessor Company), for which the Company used significant unobservable inputs (Level 3):

Fair Value Roll-forwards for Financial Instruments Classified as Level 3
					Total Realized/Unrealized Gains (Losses)
		Fair Value as of January 1, 2018			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 March 31, 2018
Assets
Fixed maturities, AFS
	ABS	$	13		$	—		$	—		$	—	$	(1	)	$	—		$	—	$	(3	)	$	9
	CLOs	73			—			—			5		—			—			—		(6		)	72
	CMBS	26			—			—			—		(1		)	(4		)	—		—			21
	Corporate	443			—			(7		)	20		(13		)	(30		)	54		(20		)	447
	Foreign Govt./Govt. agencies	1			—			—			—		—			—			—		—			1
	Municipal	38			—			(1		)	—		—			—			—		—			37
	RMBS	692			—			(2		)	3		(47		)	—			—		(5		)	641
Total fixed maturities, AFS		1,286			—			(10		)	28		(62		)	(34		)	54		(34		)	1,228
Equity securities, at fair value		46			10			—			—		—			(14		)	—		—			42
Freestanding derivatives
	Interest rate	(29		)	1			—			—		—			—			—		—			(28		)
	GMWB hedging instruments	34			—			—			—		—			(2		)	—		—			32
	Macro hedge program	23			10			—			—		—			—			—		—			33
Total freestanding derivatives [5]		28			11			—			—		—			(2		)	—		—			37
Reinsurance recoverable for GMWB		36			(8		)	—			—		3			—			—		—			31
Separate accounts		185			—			—			10		—			(162		)	17		(9		)	41
Total assets		$	1,581		$	13		$	(10	)	$	38	$	(59	)	$	(212	)	$	71	$	(43	)	$	1,379
Liabilities
Other policyholder funds and benefits payable
	Guaranteed withdrawal benefits	$	(75	)	$	39		$	—		$	—	$	(17	)	$	—		$	—	$	—		$	(53	)
Total other policyholder funds and benefits payable		(75		)	39			—			—		(17		)	—			—		—			(53		)
Total liabilities		$	(75	)	$	39		$	—		$	—	$	(17	)	$	—		$	—	$	—		$	(53	)

[1] The Company classifies realized and unrealized gains (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] Amounts in these rows are generally 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.

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

[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 Sheets in other investments and other liabilities.

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

Changes in Unrealized Gains (Losses) Included in Net Income for Financial Instruments Classified as Level 3 Still Held at End of Period
		Successor Company			Predecessor Company
		For the Three Months Ended March 31, 2019 [1] [2]			For the Three Months Ended March 31, 2018 [1] [2]
Assets
Freestanding derivatives
	Interest rate	$	(2	)	$	1
	GMWB hedging instruments	(25		)	(2		)
	Macro hedge program	(213		)	12
Total freestanding derivatives		(240		)	11
Reinsurance recoverable for GMWB		(14		)	(8		)
Separate accounts		—			—
Total assets		$	(254	)	$	3
Liabilities
Other policyholder funds and benefits payable
	Guaranteed withdrawal benefits	$	65		$	39
Total other policyholder funds and benefits payable		65			39
Total liabilities		$	65		$	39

[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.

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

Financial Instruments Not Carried at Fair Value

Financial Assets and Liabilities Not Carried at Fair Value
		Successor Company
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		March 31, 2019				December 31, 2018
Assets
Policy loans	Level 3	$	1,452	$	1,452	$	1,441	$	1,441
Mortgage loans	Level 3	$	2,085	$	2,118	$	2,100	$	2,125
Liabilities
Other policyholder funds and benefits payable [1]	Level 3	$	6,187	$	5,951	$	6,186	$	5,888
Assumed investment contracts [2]	Level 3	$	183	$	182	$	185	$	185

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

[2]

Included in other liabilities in the Condensed Consolidated Balance Sheets.