FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2017

5. Fair Value Measurements

Fair Value Measurements on a Recurring Basis

Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs:

Level 1: Fair value measurements based on quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.
Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions about the inputs a hypothetical market participant would use to value that asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:

March 31, 2017							Counterparty		Cash
(in millions)		Level 1		Level 2		Level 3		Netting^(b)	Collateral			Total
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	51	$	2,311	$	-	$	-	$	-	$	2,362
Obligations of states, municipalities and political subdivisions		-		17,662		2,041		-		-		19,703
Non-U.S. governments		183		14,108		16		-		-		14,307
Corporate debt		-		128,251		1,079		-		-		129,330
RMBS		-		18,800		16,487		-		-		35,287
CMBS		-		12,606		1,003		-		-		13,609
CDO/ABS		-		8,345		7,755		-		-		16,100
Total bonds available for sale		234		202,083		28,381		-		-		230,698
Other bond securities:
U.S. government and government sponsored entities		-		2,931		-		-		-		2,931
Non-U.S. governments		-		50		-		-		-		50
Corporate debt		-		1,755		18		-		-		1,773
RMBS		-		469		1,502		-		-		1,971
CMBS		-		471		65		-		-		536
CDO/ABS		-		836		5,508		-		-		6,344
Total other bond securities		-		6,512		7,093		-		-		13,605
Equity securities available for sale:
Common stock		978		-		8		-		-		986
Preferred stock		825		-		-		-		-		825
Mutual funds		286		2		-		-		-		288
Total equity securities available for sale		2,089		2		8		-		-		2,099
Other equity securities		500		-		-		-		-		500
Mortgage and other loans receivable		-		-		11		-		-		11
Other invested assets^(a)		-		404		180		-		-		584
Derivative assets:
Interest rate contracts		-		2,349		-		-		-		2,349
Foreign exchange contracts		-		1,111		-		-		-		1,111
Equity contracts		274		111		62		-		-		447
Credit contracts		-		-		2		-		-		2
Other contracts		-		4		17		-		-		21
Counterparty netting and cash collateral		-		-		-		(1,269)		(1,414)		(2,683)
Total derivative assets		274		3,575		81		(1,269)		(1,414)		1,247
Short-term investments		2,110		343		-		-		-		2,453
Separate account assets		80,323		5,594		-		-		-		85,917
Total	$	85,530	$	218,513	$	35,754	$	(1,269)	$	(1,414)	$	337,114
Liabilities:
Policyholder contract deposits	$	-	$	25	$	3,072	$	-	$	-	$	3,097
Other policyholder funds		5		-		-		-		-		5
Derivative liabilities:
Interest rate contracts		2		2,481		32		-		-		2,515
Foreign exchange contracts		-		1,099		6		-		-		1,105
Equity contracts		38		10		-		-		-		48
Credit contracts		-		-		317		-		-		317
Other contracts		-		-		6		-		-		6
Counterparty netting and cash collateral		-		-		-		(1,269)		(1,461)		(2,730)
Total derivative liabilities		40		3,590		361		(1,269)		(1,461)		1,261
Long-term debt		-		3,093		58		-		-		3,151
Total	$	45	$	6,708	$	3,491	$	(1,269)	$	(1,461)	$	7,514

December 31, 2016							Counterparty		Cash
(in millions)		Level 1		Level 2		Level 3		Netting^(b)	Collateral			Total
Assets:
Bonds available for sale:
U.S. government and government sponsored entities	$	63	$	1,929	$	-	$	-	$	-	$	1,992
Obligations of states, municipalities and political subdivisions		-		22,732		2,040		-		-		24,772
Non-U.S. governments		52		14,466		17		-		-		14,535
Corporate debt		-		131,047		1,133		-		-		132,180
RMBS		-		20,468		16,906		-		-		37,374
CMBS		-		12,231		2,040		-		-		14,271
CDO/ABS		-		8,578		7,835		-		-		16,413
Total bonds available for sale		115		211,451		29,971		-		-		241,537
Other bond securities:
U.S. government and government sponsored entities		-		2,939		-		-		-		2,939
Non-U.S. governments		-		51		-		-		-		51
Corporate debt		-		1,755		17		-		-		1,772
RMBS		-		420		1,605		-		-		2,025
CMBS		-		448		155		-		-		603
CDO/ABS		-		905		5,703		-		-		6,608
Total other bond securities		-		6,518		7,480		-		-		13,998
Equity securities available for sale:
Common stock		1,056		9		-		-		-		1,065
Preferred stock		752		-		-		-		-		752
Mutual funds		260		1		-		-		-		261
Total equity securities available for sale		2,068		10		-		-		-		2,078
Other equity securities		482		-		-		-		-		482
Mortgage and other loans receivable		-		-		11		-		-		11
Other invested assets^(a)		-		1		204		-		-		205
Derivative assets:
Interest rate contracts		-		2,328		-		-		-		2,328
Foreign exchange contracts		-		1,320		-		-		-		1,320
Equity contracts		188		59		58		-		-		305
Credit contracts		-		-		2		-		-		2
Other contracts		-		6		16		-		-		22
Counterparty netting and cash collateral		-		-		-		(1,265)		(903)		(2,168)
Total derivative assets		188		3,713		76		(1,265)		(903)		1,809
Short-term investments		2,660		681		-		-		-		3,341
Separate account assets		77,318		5,654		-		-		-		82,972
Total	$	82,831	$	228,028	$	37,742	$	(1,265)	$	(903)	$	346,433
Liabilities:
Policyholder contract deposits	$	-	$	25	$	3,033	$	-	$	-	$	3,058
Other policyholder funds		5		-		-		-		-		5
Derivative liabilities:
Interest rate contracts		-		3,039		38		-		-		3,077
Foreign exchange contracts		-		1,358		11		-		-		1,369
Equity contracts		12		7		-		-		-		19
Credit contracts		-		-		331		-		-		331
Other contracts		-		1		5		-		-		6
Counterparty netting and cash collateral		-		-		-		(1,265)		(1,521)		(2,786)
Total derivative liabilities		12		4,405		385		(1,265)		(1,521)		2,016
Long-term debt		-		3,357		71		-		-		3,428
Total	$	17	$	7,787	$	3,489	$	(1,265)	$	(1,521)	$	8,507

(a) Excludes investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent), which totaled $6.5 billion and $6.7 billion as of March 31, 2017 and December 31, 2016, respectively.

(b) Represents netting of derivative exposures covered by qualifying master netting agreements.

Transfers of Level 1 and Level 2 Assets and Liabilities

Our policy is to record transfers of assets and liabilities between Level 1 and Level 2 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. Assets are transferred out of Level 1 when they are no longer transacted with sufficient frequency and volume in an active market. Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are indicative of an active market.

During the three-month periods ended March 31, 2017 and 2016, we transferred $53 million and $83 million, respectively, of securities issued by Non-U.S. government entities from Level 1 to Level 2, as they are no longer considered actively traded. For similar reasons, during the three-month period ended March 31, 2017, we transferred $63 million of securities issued by the U.S. government and government sponsored entities from Level 1 to Level 2; there were no such transfers during the three-month period ended March 31, 2016. We had no material transfers from Level 2 to Level 1 during the three-month periods ended March 31, 2017 and 2016.

Changes in Level 3 Recurring Fair Value Measurements

The following tables present changes during the three-month periods ended March 31, 2017 and 2016 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) related to the Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets at March 31, 2017 and 2016:

				Net																Changes in
				Realized and				Purchases,												Unrealized Gains
				Unrealized				Sales,								Reclassified				(Losses) Included
		Fair Value		Gains (Losses)		Other		Issues and		Gross		Gross				to Assets		Fair Value		in Income on
		Beginning		Included		Comprehensive		Settlements,		Transfers		Transfers		Divested		Held for		End		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		in		out		Businesses		Sale		of Period		at End of Period
Three Months Ended March 31, 2017
Assets:
Bonds available for sale:
Obligations of states,
municipalities and
political subdivisions	$	2,040	$	2	$	(4)	$	21	$	-	$	(18)	$	-	$	-	$	2,041	$	-
Non-U.S. governments		17		-		-		(1)		-		-		-		-		16		-
Corporate debt		1,133		(4)		(3)		(13)		136		(170)		-		-		1,079		-
RMBS		16,906		289		151		(858)		8		(9)		-		-		16,487		-
CMBS		2,040		5		5		(348)		-		(699)		-		-		1,003		-
CDO/ABS		7,835		6		48		(102)		-		(32)		-		-		7,755		-
Total bonds available for sale		29,971		298		197		(1,301)		144		(928)		-		-		28,381		-
Other bond securities:
Corporate debt		17		1		-		-		-		-		-		-		18		1
RMBS		1,605		55		-		(125)		-		(33)		-		-		1,502		24
CMBS		155		-		-		(17)		-		(73)		-		-		65		1
CDO/ABS		5,703		173		-		(368)		-		-		-		-		5,508		70
Total other bond securities		7,480		229		-		(510)		-		(106)		-		-		7,093		96
Equity securities available for sale:
Common stock		-		-		-		8		-		-		-		-		8		-
Total equity securities available for sale		-		-		-		8		-		-		-		-		8		-
Mortgage and other loans receivable		11		-		-		-		-		-		-		-		11		-
Other invested assets		204		(1)		(5)		(17)		-		(1)		-		-		180		-
Total	$	37,666	$	526	$	192	$	(1,820)	$	144	$	(1,035)	$	-	$	-	$	35,673	$	96
				Net																Changes in
				Realized and				Purchases,												Unrealized Gains
				Unrealized				Sales,								Reclassified				(Losses) Included
		Fair Value		(Gains) Losses		Other		Issues and		Gross		Gross				to Liabilities		Fair Value		in Income on
		Beginning		Included		Comprehensive		Settlements,		Transfers		Transfers		Divested		Held for		End		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		in		out		Businesses		Sale		of Period		at End of
Liabilities:
Policyholder contract deposits	$	3,033	$	(45)	$	-	$	84	$	-	$	-	$	-	$	-	$	3,072	$	(5)
Derivative liabilities, net:
Interest rate contracts		38		(3)		-		(3)		-		-		-		-		32		3
Foreign exchange contracts		11		-		-		(5)		-		-		-		-		6		-
Equity contracts		(58)		(11)		-		7		-		-		-		-		(62)		5
Commodity contracts		-		-		-		-		-		-		-		-		-		-
Credit contracts		329		(15)		-		1		-		-		-		-		315		11
Other contracts		(11)		(19)		-		19		-		-		-		-		(11)		(1)
Total derivative liabilities, net^(a)		309		(48)		-		19		-		-		-		-		280		18
Long-term debt^(b)		71		12		-		(25)		-		-		-		-		58		(2)
Total	$	3,413	$	(81)	$	-	$	78	$	-	$	-	$	-	$	-	$	3,410	$	11

				Net																Changes in
				Realized and				Purchases,												Unrealized Gains
				Unrealized				Sales,								Reclassified				(Losses) Included
		Fair Value		Gains (Losses)		Other		Issues and		Gross		Gross				to Assets		Fair Value		in Income on
		Beginning		Included		Comprehensive		Settlements,		Transfers		Transfers		Divested		Held for		End		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		in		out		Businesses		Sale		of Period		at End of Period
Three Months Ended March 31, 2016
Assets:
Bonds available for sale:
Obligations of states,
municipalities and
political subdivisions	$	2,124	$	-	$	58	$	14	$	-	$	-	$	-	$	-	$	2,196	$	-
Non-U.S. governments		32		-		(2)		-		-		-		-		-		30		-
Corporate debt		1,370		1		(24)		29		121		(473)		-		-		1,024		-
RMBS		16,537		245		(420)		(233)		33		-		-		-		16,162		-
CMBS		2,585		42		(88)		(81)		-		(90)		-		-		2,368		-
CDO/ABS		6,169		12		(50)		438		23		-		-		-		6,592		-
Total bonds available for sale		28,817		300		(526)		167		177		(563)		-		-		28,372		-
Other bond securities:
Corporate debt		17		1		-		-		-		-		-		-		18		1
RMBS		1,581		(37)		-		(13)		-		(18)		-		-		1,513		(45)
CMBS		193		(2)		-		(21)		-		-		-		-		170		(2)
CDO/ABS		7,055		(133)		-		(411)		65		-		-		-		6,576		(306)
Total other bond securities		8,846		(171)		-		(445)		65		(18)		-		-		8,277		(352)
Equity securities available for sale:
Common stock		-		-		-		-		-		-		-		-		-		-
Total equity securities available for sale		-		-		-		-		-		-		-		-		-		-
Other equity securities		14		1		-		-		-		-		-		-		15		1
Mortgage and other loans receivable		11		-		-		-		-		-		-		-		11		-
Other invested assets		332		11		(5)		(21)		-		(54)		-		-		263		(1)
Total	$	38,020	$	141	$	(531)	$	(299)	$	242	$	(635)	$	-	$	-	$	36,938	$	(352)
				Net																Changes in
				Realized and				Purchases,												Unrealized Gains
				Unrealized				Sales,								Reclassified				(Losses) Included
		Fair Value		(Gains) Losses		Other		Issues and		Gross		Gross				to Liabilities		Fair Value		in Income on
		Beginning		Included		Comprehensive		Settlements,		Transfers		Transfers		Divested		Held for		End		Instruments Held
(in millions)		of Period		in Income		Income (Loss)		Net		in		out		Businesses		Sale		of Period		at End of
Liabilities:
Policyholder contract deposits	$	2,289	$	845	$	-	$	117	$	-	$	-	$	-	$	-	$	3,251	$	22
Derivative liabilities, net:
Interest rate contracts		50		4		-		(6)		-		-		-		-		48		(4)
Foreign exchange contracts		7		1		-		1		-		-		-		-		9		(1)
Equity contracts		(54)		4		-		(1)		-		-		-		-		(51)		(4)
Commodity contracts		-		-		-		-		-		-		-		-		-		-
Credit contracts		505		(6)		-		(9)		-		-		-		-		490		14
Other contracts		48		54		-		19		-		-		-		-		121		(54)
Total derivative liabilities, net^(a)		556		57		-		4		-		-		-		-		617		(49)
Long-term debt^(b)		183		2		-		(1)		-		-		-		-		184		(2)
Total	$	3,028	$	904	$	-	$	120	$	-	$	-	$	-	$	-	$	4,052	$	(29)

(a) Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.

(b) Includes guaranteed investment agreements (GIAs), notes, bonds, loans and mortgages payable.

Net realized and unrealized gains and losses included in income related to Level 3 assets and liabilities shown above are reported in the Condensed Consolidated Statements of Income as follows:

		Net		Net Realized
		Investment		Capital		Other
(in millions)		Income	Gains (Losses)			Income		Total
Three Months Ended March 31, 2017
Bonds available for sale	$	298	$	-	$	-	$	298
Other bond securities		75		6		148		229
Other equity securities		-		-		-		-
Other invested assets		-		(3)		2		(1)
Three Months Ended March 31, 2016
Bonds available for sale	$	298	$	1	$	1	$	300
Other bond securities		(34)		-		(137)		(171)
Other equity securities		1		-		-		1
Other invested assets		(2)		51		(38)		11

	Net		Net Realized
	Investment		Capital	Other
(in millions)	Income	(Gains) Losses		Income	Total
Three Months Ended March 31, 2017
Policyholder contract deposits	-		(45)	-	(45)
Derivative liabilities, net	-		(7)	(41)	(48)
Long-term debt	-		-	12	12
Three Months Ended March 31, 2016
Policyholder contract deposits	-		845	-	845
Derivative liabilities, net	-		4	53	57
Long-term debt	-		-	2	2

The following table presents the gross components of purchases, sales, issues and settlements, net, shown above, for the three-month periods ended March 31, 2017 and 2016 related to Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets:

								Purchases,
								Sales, Issues and
(in millions)		Purchases		Sales		Settlements		Settlements, Net^(a)
Three Months Ended March 31, 2017
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	37	$	(5)	$	(11)	$	21
Non-U.S. governments		-		(1)		-		(1)
Corporate debt		-		-		(13)		(13)
RMBS		339		(244)		(953)		(858)
CMBS		39		(67)		(320)		(348)
CDO/ABS		13		-		(115)		(102)
Total bonds available for sale		428		(317)		(1,412)		(1,301)
Other bond securities:
RMBS		98		(167)		(56)		(125)
CMBS		-		(11)		(6)		(17)
CDO/ABS		-		-		(368)		(368)
Total other bond securities		98		(178)		(430)		(510)
Equity securities available for sale		8		-		-		8
Other invested assets		1		-		(18)		(17)
Total assets	$	535	$	(495)	$	(1,860)	$	(1,820)
Liabilities:
Policyholder contract deposits	$	-	$	70	$	14	$	84
Derivative liabilities, net		-		-		19		19
Long-term debt^(b)		-		-		(25)		(25)
Total liabilities	$	-	$	70	$	8	$	78
Three Months Ended March 31, 2016
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions	$	29	$	-	$	(15)	$	14
Non-U.S. governments		1		-		(1)		-
Corporate debt		29		-		-		29
RMBS		503		(58)		(678)		(233)
CMBS		102		(31)		(152)		(81)
CDO/ABS		539		-		(101)		438
Total bonds available for sale		1,203		(89)		(947)		167
Other bond securities:
RMBS		63		(26)		(50)		(13)
CMBS		53		(71)		(3)		(21)
CDO/ABS		8		(17)		(402)		(411)
Total other bond securities		124		(114)		(455)		(445)

Other equity securities		14		-		(14)		-
Other invested assets		9		-		(30)		(21)
Total assets	$	1,350	$	(203)	$	(1,446)	$	(299)
Liabilities:
Policyholder contract deposits	$	-	$	130	$	(13)	$	117
Derivative liabilities, net		(2)		-		6		4
Long-term debt^(b)		-		-		(1)		(1)
Total liabilities	$	(2)	$	130	$	(8)	$	120

(a) There were no issuances during the three-month periods ended March 31, 2017 and 2016, respectively.

(b) Includes GIAs, notes, bonds, loans and mortgages payable.

Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at March 31, 2017 and 2016 may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable inputs (e.g., changes in unobservable long-dated volatilities).

Transfers of Level 3 Assets and Liabilities

We record transfers of assets and liabilities into or out of Level 3 classification at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. The Net realized and unrealized gains (losses) included in income or Other comprehensive income (loss) as shown in the table above excluded $8 million and $13 million of net losses related to assets and liabilities transferred into Level 3 during the three-month periods ended March 31, 2017 and 2016, respectively, and included $1 million of net gains and $45 million of net losses related to assets and liabilities transferred out of Level 3 during the three-month periods ended March 31, 2017 and 2016, respectively.

Transfers of Level 3 Assets

During the three-month periods ended March 31, 2017 and 2016, transfers into Level 3 assets primarily included certain investments in private placement corporate debt, CDO/ABS and RMBS. Transfers of private placement corporate debt and certain ABS into Level 3 assets were primarily the result of limited market pricing information that required us to determine fair value for these securities based on inputs that are adjusted to better reflect our own assumptions regarding the characteristics of a specific security or associated market liquidity. The transfers of investments in RMBS and CDO and certain ABS into Level 3 assets were due to decreases in market transparency and liquidity for individual security types.

During the three-month periods ended March 31, 2017 and 2016, transfers out of Level 3 assets primarily included private placement and other corporate debt, CMBS, RMBS, CDO/ABS and certain investments in municipal securities. Transfers of certain investments municipal securities, corporate debt, RMBS, CMBS and CDO/ABS out of Level 3 assets were based on consideration of market liquidity as well as related transparency of pricing and associated observable inputs for these investments. Transfers of certain investments in private placement corporate debt and certain ABS out of Level 3 assets were primarily the result of using observable pricing information that reflects the fair value of those securities without the need for adjustment based on our own assumptions regarding the characteristics of a specific security or the current liquidity in the market.

Transfers of Level 3 Liabilities

There were no significant transfers of derivative or other liabilities into or out of Level 3 for the three-month periods ended March 31, 2017 and 2016.

Quantitative Information about Level 3 Fair Value Measurements

The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments, and includes only those instruments for which information about the inputs is reasonably available to us, such as data from independent third-party valuation service providers and from internal valuation models. Because input information from third-parties with respect to certain Level 3 instruments (primarily CDO/ABS) may not be reasonably available to us, balances shown below may not equal total amounts reported for such Level 3 assets and liabilities:

	Fair Value at
	March 31,		Valuation		Range
(in millions)	2017		Technique	Unobservable Input^(b)	(Weighted Average)
Assets:

Obligations of states, municipalities
and political subdivisions	$	1,263	Discounted cash flow	Yield	3.97% - 5.06% (4.51%)

Corporate debt		536	Discounted cash flow	Yield	3.16% - 6.10% (4.63%)

RMBS^(a)		16,780	Discounted cash flow	Constant prepayment rate	1.81% - 9.65% (5.73%)
				Loss severity	48.00% - 80.38% (64.19%)
				Constant default rate	3.20% - 8.38% (5.79%)
				Yield	3.17% - 5.73% (4.45%)

CDO/ABS^(a)		4,699	Discounted cash flow	Yield	3.38% - 5.68% (4.53%)

CMBS		615	Discounted cash flow	Yield	2.32% - 8.45% (5.38%)
Liabilities:

Embedded derivatives within
Policyholder contract deposits:

Guaranteed minimum withdrawal benefits (GMWB)		1,671	Discounted cash flow	Equity volatility	8.00% - 50.00%
				Base lapse rate	0.50% - 20.00%
				Dynamic lapse multiplier	30.00% - 170.00%
				Mortality multiplier^(c)	42.00% - 161.00%
				Utilization	100.00%
				Equity / interest-rate correlation	20.00% - 40.00%

Index Annuities		964	Discounted cash flow	Lapse rate	1.00% - 66.00%
				Mortality multiplier^(c)	101.00% - 103.00%

Indexed Life		414	Discounted cash flow	Base lapse rate	2.00% to 19.00%
				Mortality rate	0.00% to 40.00%


		Fair Value at
		December 31,	Valuation		Range
(in millions)		2016	Technique	Unobservable Input^(b)	(Weighted Average)
Assets:

Obligations of states, municipalities
and political subdivisions	$	1,248	Discounted cash flow	Yield	4.12% - 4.91% (4.52%)

Corporate debt		498	Discounted cash flow	Yield	3.41% - 6.38% (4.90%)

RMBS^(a)		17,412	Discounted cash flow	Constant prepayment rate	3.95% - 6.54% (5.25%)
				Loss severity	47.51% - 80.98% (64.24%)
				Constant default rate	3.28% - 8.64% (5.96%)
				Yield	3.28% - 5.87% (4.57%)

CDO/ABS^(a)		4,368	Discounted cash flow	Yield	3.67% - 5.85% (4.76%)

CMBS		1,511	Discounted cash flow	Yield	0.48% - 10.21% (5.34%)
Liabilities:

Embedded derivatives within
Policyholder contract deposits:

GMWB		1,777	Discounted cash flow	Equity volatility	13.00% - 50.00%
				Base lapse rate	0.50% - 20.00%
				Dynamic lapse multiplier	30.00% - 170.00%
				Mortality multiplier^(c)	42.00% - 161.00%
				Utilization	100.00%
				Equity / interest-rate correlation	20.00% - 40.00%

Index Annuities		859	Discounted cash flow	Lapse rate	1.00% - 66.00%
				Mortality multiplier^(c)	101.00% - 103.00%

Indexed Life		381	Discounted cash flow	Base lapse rate	2.00% - 19.00%
				Mortality rate	0.00% - 40.00%

(a) Information received from third-party valuation service providers. The ranges of the unobservable inputs for constant prepayment rate, loss severity and constant default rate relate to each of the individual underlying mortgage loans that comprise the entire portfolio of securities in the RMBS and CDO securitization vehicles and not necessarily to the securitization vehicle bonds (tranches) purchased by us. The ranges of these inputs do not directly correlate to changes in the fair values of the tranches purchased by us, because there are other factors relevant to the fair values of specific tranches owned by us including, but not limited to, purchase price, position in the waterfall, senior versus subordinated position and attachment points.

(b) Represents discount rates, estimates and assumptions that we believe would be used by market participants when valuing these assets and liabilities.

(c) Mortality inputs are shown as multipliers of the 2012 Individual Annuity Mortality Basic table for GMWB, and the 1975-1980 Modified Basic Table for index annuities.

The ranges of reported inputs for Obligations of states, municipalities and political subdivisions, Corporate debt, RMBS, CDO/ABS, and CMBS valued using a discounted cash flow technique consist of one standard deviation in either direction from the value-weighted average. The preceding table does not give effect to our risk management practices that might offset risks inherent in these Level 3 assets and liabilities.

Sensitivity to Changes in Unobservable Inputs

We consider unobservable inputs to be those for which market data is not available and that are developed using the best information available to us about the assumptions that market participants would use when pricing the asset or liability. Relevant inputs vary depending on the nature of the instrument being measured at fair value. The following paragraphs provide a general description of sensitivities of significant unobservable inputs along with interrelationships between and among the significant unobservable inputs and their impact on the fair value measurements. The effect of a change in a particular assumption in the sensitivity analysis below is considered independently of changes in any other assumptions. In practice, simultaneous changes in assumptions may not always have a linear effect on the inputs discussed below. Interrelationships may also exist between observable and unobservable inputs. Such relationships have not been included in the discussion below. For each of the individual relationships described below, the inverse relationship would also generally apply.

Obligations of States, Municipalities and Political Subdivisions

The significant unobservable input used in the fair value measurement of certain investments in obligations of states, municipalities and political subdivisions is yield. In general, increases in the yield would decrease the fair value of investments in obligations of states, municipalities and political subdivisions.

Corporate Debt

Corporate debt securities included in Level 3 are primarily private placement issuances that are not traded in active markets or that are subject to transfer restrictions. Fair value measurements consider illiquidity and non-transferability. When observable price quotations are not available, fair value is determined based on discounted cash flow models using discount rates based on credit spreads, yields or price levels of publicly-traded debt of the issuer or other comparable securities, considering illiquidity and structure. The significant unobservable input used in the fair value measurement of corporate debt is the yield. The yield is affected by the market movements in credit spreads and U.S. Treasury yields. In addition, the migration in credit quality of a given security generally has a corresponding effect on the fair value measurement of the security. For example, a downward migration of credit quality would increase spreads. Holding U.S. Treasury rates constant, an increase in corporate credit spreads would decrease the fair value of corporate debt.

RMBS and CDO/ABS

The significant unobservable inputs used in fair value measurements of RMBS and certain CDO/ABS valued by third-party valuation service providers are constant prepayment rates (CPR), loss severity, constant default rates (CDR), and yield. A change in the assumptions used for the probability of default will generally be accompanied by a corresponding change in the assumption used for the loss severity and an inverse change in the assumption used for prepayment rates. In general, increases in CPR, loss severity, CDR, and yield, in isolation, would result in a decrease in the fair value measurement. Changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship between the directional change of each input is not usually linear.

CMBS

The significant unobservable input used in fair value measurements for CMBS is the yield. Prepayment assumptions for each mortgage pool are factored into the yield. CMBS generally feature a lower degree of prepayment risk than RMBS because commercial mortgages generally contain a penalty for prepayment. In general, increases in the yield would decrease the fair value of CMBS.

Embedded derivatives within Policyholder contract deposits

Embedded derivatives reported within Policyholder contract deposits include guaranteed minimum withdrawal benefits (GMWB) within variable annuity products and interest crediting rates based on market indices within index annuities, indexed life and guaranteed investment contracts (GICs). For any given contract, assumptions for unobservable inputs vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. The following unobservable inputs are used for valuing embedded derivatives measured at fair value:

Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. Increases in assumed volatility will generally increase the fair value of both the projected cash flows from rider fees as well as the projected cash flows related to benefit payments. Therefore, the net change in the fair value of the liability may be either a decrease or an increase, depending on the relative changes in projected rider fees and projected benefit payments.
Equity / interest rate correlation estimates the relationship between changes in equity returns and interest rates in the economic scenario generator used to value our GMWB embedded derivatives. In general, a higher positive correlation assumes that equity markets and interest rates move in a more correlated fashion, which generally increases the fair value of the liability.
Base lapse rate assumptions are determined by company experience and are adjusted at the contract level using a dynamic lapse function, which reduces the base lapse rate when the contract is in-the-money (when the contract holder’s guaranteed value, as estimated by the company, is worth more than their underlying account value). Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. Increases in assumed lapse rates will generally decrease the fair value of the liability, as fewer policyholders would persist to collect guaranteed withdrawal amounts, but in certain scenarios, increases in assumed lapse rates may increase the fair value of the liability.
Mortality rate assumptions, which vary by age and gender, are based on company experience and include a mortality improvement assumption. Increases in assumed mortality rates will decrease the fair value of the liability, while lower mortality rate assumptions will generally increase the fair value of the liability, because guaranteed payments will be made for a longer period of time.
Utilization assumptions estimate the timing when policyholders with a GMWB will elect to utilize their benefit and begin taking withdrawals. The assumptions may vary by the type of guarantee, tax-qualified status, the contract’s withdrawal history and the age of the policyholder. Utilization assumptions are based on company experience, which includes partial withdrawal behavior. Increases in assumed utilization rates will generally increase the fair value of the liability.

Investments in Certain Entities Carried at Fair Value Using Net Asset Value Per Share

The following table includes information related to our investments in certain other invested assets, including private equity funds, hedge funds and other alternative investments that calculate net asset value per share (or its equivalent). For these investments, which are measured at fair value on a recurring basis, we use the net asset value per share to measure fair value.

		March 31, 2017				December 31, 2016
			Fair Value			Fair Value
			Using NAV			Using NAV
			Per Share (or		Unfunded	Per Share (or			Unfunded
(in millions)	Investment Category Includes		its equivalent)		Commitments	its equivalent)			Commitments
Investment Category
Private equity funds:
Leveraged buyout	Debt and/or equity investments made as part of a transaction in which assets of mature companies are acquired from the current shareholders, typically with the use of financial leverage	$	1,355	$	751	$	1,424	$	750

Real Estate / Infrastructure	Investments in real estate properties and infrastructure positions, including power plants and other energy generating facilities		248		196		258		208

Venture capital	Early-stage, high-potential, growth companies expected to generate a return through an eventual realization event, such as an initial public offering or sale of the company		126		36		137		31

Distressed	Securities of companies that are in default, under bankruptcy protection, or troubled		123		43		123		44

Other	Includes multi-strategy, mezzanine and other strategies		343		265		312		215
Total private equity funds			2,195		1,291		2,254		1,248
Hedge funds:
Event-driven	Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations		1,406		8		1,453		9

Long-short	Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk		1,391		-		1,429		-

Macro	Investments that take long and short positions in financial instruments based on a top-down view of certain economic and capital market conditions		996		-		992		-

Distressed	Securities of companies that are in default, under bankruptcy protection or troubled		324		7		416		8

Emerging markets	Investments in the financial markets of developing countries		-		-		-		-

Other	Includes investments held in funds that are less liquid, as well as other strategies which allow for broader allocation between public and private investments		198		14		197		14
Total hedge funds			4,315		29		4,487		31
Total		$	6,510	$	1,320	$	6,741	$	1,279

Private equity fund investments included above are not redeemable, because distributions from the funds will be received when underlying investments of the funds are liquidated. Private equity funds are generally expected to have 10-year lives at their inception, but these lives may be extended at the fund manager’s discretion, typically in one or two-year increments. At March 31, 2017, assuming average original expected lives of 10 years for the funds, 70 percent of the total fair value using net asset value per share (or its equivalent) presented above would have expected remaining lives of three years or less, 17 percent between four and six years and 13 percent between seven and 10 years.

The hedge fund investments included above, which are carried at fair value, are generally redeemable monthly (19 percent), quarterly (44 percent), semi-annually (11 percent) and annually (26 percent), with redemption notices ranging from one day to 180 days. At March 31, 2017, investments representing approximately 67 percent of the total fair value of these hedge fund investments had partial contractual redemption restrictions. These partial redemption restrictions are generally related to one or more investments held in the hedge funds that the fund manager deemed to be illiquid. The majority of these contractual restrictions, which may have been put in place at the fund’s inception or thereafter, have pre-defined end dates. The majority of these restrictions are generally expected to be lifted by the end of 2017.

Fair Value Option

The following table presents the gains or losses recorded related to the eligible instruments for which we elected the fair value option:

Three Months Ended March 31,	Gain (Loss)
(in millions)		2017		2016
Assets:
Bond and equity securities	$	349	$	50
Alternative investments^(a)		181		(247)
Other, including Short-term investments		-		-
Liabilities:
Long-term debt^(b)		(15)		(176)
Other liabilities		-		-
Total gain (loss)	$	515	$	(373)

(a) Includes certain hedge funds, private equity funds and other investment partnerships.

(b) Includes GIAs, notes, bonds and mortgages payable.

We recognized gains of $3 million and $5 million during the three-month periods ended March 31, 2017 and 2016, respectively, attributable to the observable effect of changes in credit spreads on our own liabilities for which the fair value option was elected. We calculate the effect of these credit spread changes using discounted cash flow techniques that incorporate current market interest rates, our observable credit spreads on these liabilities and other factors that mitigate the risk of nonperformance such as cash collateral posted.

The following table presents the difference between fair values and the aggregate contractual principal amounts of mortgage and other loans receivable and long-term debt for which the fair value option was elected:

	March 31, 2017						December 31, 2016
			Outstanding						Outstanding
(in millions)	Fair Value		Principal Amount		Difference		Fair Value		Principal Amount		Difference
Assets:
Mortgage and other loans receivable	$	11	$	7	$	4	$	11	$	8	$	3
Liabilities:
Long-term debt^*	$	3,151	$	2,370	$	781	$	3,428	$	2,628	$	800

* Includes GIAs, notes, bonds, loans and mortgages payable.

FAIR VALUE MEASUREMENTS ON A NON-RECURRING BASIS

The following table presents assets measured at fair value on a non-recurring basis at the time of impairment and the related impairment charges recorded during the periods presented:

		Assets at Fair Value							Impairment Charges
		Non-Recurring Basis							Three Months Ended March 31,
(in millions)		Level 1		Level 2		Level 3		Total		2017		2016
March 31, 2017
Other investments	$	-	$	-	$	14	$	14	$	17	$	2
Investments in life settlements		-		-		167		167		41		157
Other assets^*		-		-		-		-		35		-
Total	$	-	$	-	$	181	$	181	$	93	$	159
December 31, 2016
Other investments	$	-	$	-	$	364	$	364
Investments in life settlements		-		-		736		736
Other assets		-		-		2		2
Total	$	-	$	-	$	1,102	$	1,102

* Impairments in 2017 included $35 million related to assets of $179 million that were reclassified to assets held for sale.

FAIR VALUE INFORMATION ABOUT FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE

The following table presents the carrying amounts and estimated fair values of our financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:

	Estimated Fair Value									Carrying
(in millions)		Level 1		Level 2		Level 3		Total		Value
March 31, 2017
Assets:
Mortgage and other loans receivable	$	-	$	160	$	34,206	$	34,366	$	33,867
Other invested assets		-		617		1,716		2,333		2,732
Short-term investments		-		8,620		-		8,620		8,620
Cash		1,918		-		-		1,918		1,918
Liabilities:
Policyholder contract deposits associated
with investment-type contracts		-		350		121,989		122,339		113,278
Other liabilities		-		4,262		-		4,262		4,262
Long-term debt		-		22,891		3,423		26,314		27,596
December 31, 2016
Assets:
Mortgage and other loans receivable	$	-	$	161	$	33,575	$	33,736	$	33,229
Other invested assets		-		955		2,053		3,008		3,474
Short-term investments		-		8,961		-		8,961		8,961
Cash		1,868		-		-		1,868		1,868
Liabilities:
Policyholder contract deposits associated
with investment-type contracts		-		382		121,742		122,124		112,705
Other liabilities		-		4,196		-		4,196		4,196
Long-term debt		-		23,117		3,333		26,450		27,484

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details