XML 32 R19.htm IDEA: XBRL DOCUMENT

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2024

The carrying values and estimated fair values of our financial instruments (in millions) were as follows:


	As of September 30, 2024				As of December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Fixed maturity AFS securities	$	90,682	$	90,682	$	88,738	$	88,738


Trading securities	2,206		2,206		2,359		2,359
Equity securities	293		293		306		306
Mortgage loans on real estate	20,856		19,945		18,963		17,407
Derivative investments	9,522		9,522		6,474		6,474
Other investments	5,743		5,743		5,015		5,015
Cash and invested cash	6,013		6,013		3,365		3,365

MRB assets	4,565		4,565		3,894		3,894
Other assets:


Ceded MRBs	2		2		2		2

Indexed annuity ceded embedded derivatives	1,132		1,132		940		940
Separate account assets	171,483		171,483		158,257		158,257

Liabilities
Policyholder account balances:
Account balances of certain investment contracts	(45,822)		(35,885)		(44,640)		(34,041)
RILA, fixed annuity and IUL contracts	(12,270)		(12,270)		(9,077)		(9,077)
Funds withheld reinsurance liabilities – reinsurance-related
embedded derivatives	(668)		(668)		(552)		(552)
MRB liabilities	(1,272)		(1,272)		(1,716)		(1,716)
Short-term debt	(300)		(297)		(250)		(249)
Long-term debt	(5,897)		(5,370)		(5,699)		(5,182)
Other liabilities:
Ceded MRBs	(341)		(341)		(239)		(239)

Derivative liabilities	(85)		(85)		(356)		(356)
Remaining guaranteed interest and similar contracts	(355)		(355)		(411)		(411)

Valuation Methodologies and Associated Inputs for Financial Instruments Not Carried at Fair Value

The following discussion outlines the methodologies and assumptions used to determine the fair value of our financial instruments not carried at fair value on the Consolidated Balance Sheets. Considerable judgment is required to develop these assumptions used to measure fair value. Accordingly, the estimates shown are not necessarily indicative of the amounts that would be realized in a one-time, current market exchange of all of our financial instruments.

Mortgage Loans on Real Estate

The fair value of mortgage loans on real estate, excluding mortgage loans accounted for using the fair value option, is established using a discounted cash flow method based on credit rating, maturity and future income. The ratings for mortgages in good standing are based on property type, location, market conditions, occupancy, debt-service coverage, LTV, quality of tenancy, borrower and payment record. The fair value for impaired mortgage loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price or the fair value of the collateral if the loan is collateral dependent. The inputs used to measure the fair value of our mortgage loans on real estate, excluding mortgage loans accounted for using the fair value option, are classified as Level 2 within the fair value hierarchy.

Other Investments

The carrying value of our assets classified as other investments, excluding short-term investments, approximates fair value. Other investments includes primarily LPs and other privately held investments that are accounted for using the equity method of accounting and the carrying value is based on our proportional share of the net assets of the LPs. Other investments also includes FHLB stock carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. The inputs used to measure the fair value of our LPs, other privately held investments and FHLB stock are classified as Level 3 within the fair value hierarchy. The remaining assets in other investments include cash collateral receivables and securities that are not LPs or other privately held investments. The inputs used to measure the fair value of these assets are classified as Level 2 within the fair value hierarchy.

Separate Account Assets

Separate account assets are primarily carried at fair value. A portion of our separate account assets includes LPs, which are accounted for using the equity method of accounting. The carrying value is based on our proportional share of the net assets of the LPs and approximates fair value. The inputs used to measure the fair value of the separate account asset LPs are classified as Level 3 within the fair value hierarchy.

Policyholder Account Balances

Policyholder account balances include account balances of certain investment contracts. The fair value of the account balances of certain investment contracts is based on their approximate surrender value as of the balance sheet date. The inputs used to measure the fair value of these policyholder account balances are classified as Level 3 within the fair value hierarchy.

Other Liabilities

Other liabilities include remaining guaranteed interest and similar contracts. The fair value for the remaining guaranteed interest and similar contracts is estimated using discounted cash flow calculations as of the balance sheet date. These calculations are based on interest rates currently offered on similar contracts with maturities that are consistent with those remaining for the contracts being valued. As of September 30, 2024, and December 31, 2023, the remaining guaranteed interest and similar contracts carrying value approximated fair value. The inputs used to measure the fair value of these other liabilities are classified as Level 3 within the fair value hierarchy.

Short-Term and Long-Term Debt

The fair value of short-term and long-term debt is based on quoted market prices. The inputs used to measure the fair value of our short-term and long-term debt are classified as Level 2 within the fair value hierarchy.

Fair Value Option

Mortgage loans on real estate, net of allowance for credit losses, as reported on the Consolidated Balance Sheets, includes mortgage loans on real estate for which the fair value option was elected. The fair value option allows us to elect fair value as an alternative measurement for mortgage loans not otherwise reported at fair value. We have made these elections for certain mortgage loans associated with modified coinsurance agreements to help mitigate the inconsistency in earnings that would otherwise result from the use of embedded derivatives included with these loans. Changes in fair value are reflected in realized gain (loss) on the Consolidated Statement of Comprehensive Income (Loss). Changes in fair value due to instrument-specific credit risk are estimated using changes in credit spreads and quality ratings for the period reported. Mortgage loans on real estate for which the fair value option was elected are valued using third-party pricing services. We have procedures in place to review the valuations each quarter to ensure they are reasonable, including utilizing a separate third party to reperform the valuation for a selection of mortgage loans on an annual basis. Due to lack of observable inputs, mortgage loans electing the fair value option are classified as Level 3 within the fair value hierarchy.

The fair value and aggregate contractual principal for mortgage loans on real estate where the fair value option was elected (in millions) were as follows:


	As of September 30,		As of December 31,
	2024		2023

Fair value	$	263	$	288
Aggregate contractual principal	297		326

For information on current and past due composition and accruing status for loans where we have elected the fair value option, see Note 3.

Financial Instruments Carried at Fair Value

We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of September 30, 2024, or December 31, 2023.

The following summarizes our financial instruments carried at fair value (in millions) on a recurring basis by the fair value hierarchy levels:


	As of September 30, 2024
	Quoted
	Prices
	in Active
	Markets for		Significant		Significant
	Identical		Observable		Unobservable		Total
	Assets		Inputs		Inputs		Fair
	(Level 1)		(Level 2)		(Level 3)		Value

Assets
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	–	$	67,568	$	2,666	$	70,234
U.S. government bonds	378		20		–		398
State and municipal bonds	–		2,567		–		2,567
Foreign government bonds	–		252		–		252


RMBS	–		1,869		13		1,882
CMBS	–		1,622		21		1,643

ABS	–		11,343		2,101		13,444
Hybrid and redeemable preferred securities	51		134		77		262


Trading securities	–		1,932		274		2,206
Equity securities	–		258		35		293
Mortgage loans on real estate	–		–		263		263
Derivative investments (1)	–		16,134		9		16,143
Other investments – short-term investments	–		209		20		229
Cash and invested cash	–		6,013		–		6,013

MRB assets	–		–		4,565		4,565
Other assets:


Ceded MRBs	–		–		2		2

Indexed annuity ceded embedded derivatives	–		–		1,132		1,132
Separate account assets	403		171,080		–		171,483
Total assets	$	832	$	281,001	$	11,178	$	293,011

Liabilities
Policyholder account balances – RILA, fixed annuity

and IUL contracts	$	–	$	–	$	(12,270)	$	(12,270)


Funds withheld reinsurance liabilities – reinsurance-related
embedded derivatives	–		(1,125)		457		(668)

MRB liabilities	–		–		(1,272)		(1,272)
Other liabilities:
Ceded MRBs	–		–		(341)		(341)
Derivative liabilities (1)	–		(6,696)		(10)		(6,706)
Total liabilities	$	–	$	(7,821)	$	(13,436)	$	(21,257)


	As of December 31, 2023
	Quoted
	Prices
	in Active
	Markets for		Significant		Significant
	Identical		Observable		Unobservable		Total
	Assets		Inputs		Inputs		Fair
	(Level 1)		(Level 2)		(Level 3)		Value
Assets
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	–	$	67,160	$	2,497	$	69,657
U.S. government bonds	374		19		–		393
State and municipal bonds	–		2,785		5		2,790
Foreign government bonds	–		283		–		283
RMBS	–		1,760		13		1,773
CMBS	–		1,416		8		1,424
ABS	–		10,687		1,484		12,171


Hybrid and redeemable preferred securities	46		153		48		247
Trading securities	–		2,075		284		2,359
Equity securities	1		263		42		306



Mortgage loans on real estate	–		–		288		288
Derivative investments (1)	–		10,874		622		11,496
Other investments – short-term investments	–		233		–		233

Cash and invested cash	–		3,365		–		3,365
MRB assets	–		–		3,894		3,894
Other assets:
Ceded MRBs	–		–		2		2

Indexed annuity ceded embedded derivatives	–		–		940		940
Separate account assets	402		157,855		–		158,257
Total assets	$	823	$	258,928	$	10,127	$	269,878

Liabilities
Policyholder account balances – RILA, fixed annuity
and IUL contracts	$	–	$	–	$	(9,077)	$	(9,077)
Funds withheld reinsurance liabilities – reinsurance-related
embedded derivatives	–		237		(789)		(552)

MRB liabilities	–		–		(1,716)		(1,716)




Other liabilities:
Ceded MRBs	–		–		(239)		(239)
Derivative liabilities (1)	–		(4,792)		(586)		(5,378)
Total liabilities	$	–	$	(4,555)	$	(12,407)	$	(16,962)

(1) Derivative investment assets and liabilities are presented within the fair value hierarchy on a gross basis by derivative type and not on a master netting basis by counterparty.

The following summarizes changes to our financial instruments carried at fair value (in millions) and classified within Level 3 of the fair value hierarchy. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology. The summary schedule excludes changes to MRB assets and MRB liabilities as these balances are rolled forward in Note 8.


	For the Three Months Ended September 30, 2024
					Gains		Issuances,		Transfers
			Items		(Losses)		Sales,		Into or
			Included		in		Maturities,		Out
	Beginning		in		OCI		Settlements,		of		Ending
	Fair		Net		and		Calls,		Level 3,		Fair
	Value		Income		Other (1)		Net		Net		Value
Assets
Investments: (2)
Fixed maturity AFS securities:
Corporate bonds	$	2,581	$	(1)	$	43	$	50	$	(7)	$	2,666



RMBS	18		–		–		–		(5)		13
CMBS	23		–		–		14		(16)		21

ABS	1,997		–		50		232		(178)		2,101
Hybrid and redeemable preferred
securities	50		–		1		16		10		77

Trading securities	273		7		–		(6)		–		274
Equity securities	38		–		–		1		(4)		35
Mortgage loans on real estate	258		2		4		(1)		–		263
Derivative investments	(8)		6		–		1		–		(1)
Other investments (4)	–		–		–		10		10		20
Other assets:
Ceded MRBs (3)	2		–		–		–		–		2
Indexed annuity ceded embedded
derivatives (4)	967		191		–		(26)		–		1,132

Liabilities
Policyholder account balances –
RILA, fixed annuity and
IUL contracts (4)	(11,417)		(898)		–		45		–		(12,270)






Funds withheld reinsurance
liabilities – reinsurance-related
embedded derivatives (4)	(204)		661		–		–		–		457
Other liabilities – ceded MRBs (3)	(344)		3		–		–		–		(341)

Total, net	$	(5,766)	$	(29)	$	98	$	336	$	(190)	$	(5,551)


	For the Three Months Ended September 30, 2023
					Gains		Issuances,		Transfers
			Items		(Losses)		Sales,		Into or
			Included		in		Maturities,		Out
	Beginning		in		OCI		Settlements,		of		Ending
	Fair		Net		and		Calls,		Level 3,		Fair
	Value		Income		Other (1)		Net		Net		Value
Assets
Investments: (2)
Fixed maturity AFS securities:
Corporate bonds	$	2,366	$	(4)	$	(14)	$	105	$	(43)	$	2,410
State and municipal bonds	36		(4)		1		–		–		33



RMBS	6		–		(1)		–		7		12
ABS	1,208		–		(5)		247		(113)		1,337


Hybrid and redeemable preferred
securities	60		–		1		–		(13)		48


Trading securities	351		(3)		–		(4)		6		350
Equity securities	125		12		–		–		–		137
Mortgage loans on real estate	404		2		(3)		(88)		–		315
Derivative investments	31		(26)		–		8		–		13




Other assets:
Ceded MRBs (3)	2		–		–		–		–		2
Indexed annuity ceded embedded
derivatives (4)	603		(49)		–		32		–		586
Liabilities
Policyholder account balances –
RILA, fixed annuity and
IUL contracts (4)	(7,600)		621		–		(195)		–		(7,174)







Other liabilities – ceded MRBs (3)	(293)		(12)		–		–		–		(305)
Total, net	$	(2,701)	$	537	$	(21)	$	105	$	(156)	$	(2,236)


	For the Nine Months Ended September 30, 2024

					Gains		Issuances,		Transfers
			Items		(Losses)		Sales,		Into or
			Included		in		Maturities,		Out
	Beginning		in		OCI		Settlements,		of		Ending
	Fair		Net		and		Calls,		Level 3,		Fair
	Value		Income		Other (1)		Net		Net		Value
Assets
Investments: (2)
Fixed maturity AFS securities:
Corporate bonds	$	2,497	$	1	$	25	$	264	$	(121)	$	2,666

State and municipal bonds	5		–		–		–		(5)		–

RMBS	13		–		(1)		6		(5)		13
CMBS	8		–		–		29		(16)		21

ABS	1,484		–		55		798		(236)		2,101
Hybrid and redeemable preferred
securities	48		–		3		16		10		77




Trading securities	284		7		–		(17)		–		274
Equity securities	42		(3)		–		–		(4)		35
Mortgage loans on real estate	288		6		5		(36)		–		263
Derivative investments	36		11		–		3		(51)		(1)
Other investments (4)	–		–		–		10		10		20
Other assets:


Ceded MRBs (3)	2		–		–		–		–		2
Indexed annuity ceded embedded
derivatives (4)	940		238		–		(46)		–		1,132
Liabilities
Policyholder account balances –
RILA, fixed annuity and
IUL contracts (4)	(9,077)		(2,915)		–		(278)		–		(12,270)
Funds withheld reinsurance
liabilities – reinsurance-related
embedded derivatives (4)	(789)		1,246		–		–		–		457



Other liabilities – ceded MRBs (3)	(239)		(102)		–		–		–		(341)
Total, net	$	(4,458)	$	(1,511)	$	87	$	749	$	(418)	$	(5,551)


	For the Nine Months Ended September 30, 2023
					Gains		Issuances,		Transfers
			Items		(Losses)		Sales,		Into or
			Included		in		Maturities,		Out
	Beginning		in		OCI		Settlements,		of		Ending
	Fair		Net		and		Calls,		Level 3,		Fair
	Value		Income		Other (1)		Net		Net		Value
Assets
Investments: (2)
Fixed maturity AFS securities:
Corporate bonds	$	2,295	$	1	$	(13)	$	130	$	(3)	$	2,410

State and municipal bonds	35		(4)		3		(1)		–		33

RMBS	1		–		(1)		5		7		12
CMBS	–		–		–		(4)		4		–

ABS	1,117		–		(3)		567		(344)		1,337
Hybrid and redeemable preferred
securities	49		–		(2)		(2)		3		48

Trading securities	581		(1)		–		(236)		6		350
Equity securities	153		(17)		–		1		–		137
Mortgage loans on real estate	487		–		2		(174)		–		315
Derivative investments	2		(28)		–		8		31		13

Other assets:
Ceded MRBs (3)	12		(10)		–		–		–		2
Indexed annuity ceded embedded
derivatives (4)	525		(37)		–		98		–		586
Liabilities
Policyholder account balances –
RILA, fixed annuity and
IUL contracts (4)	(4,783)		(1,669)		–		(722)		–		(7,174)





Other liabilities – ceded MRBs (3)	(205)		(100)		–		–		–		(305)

Total, net	$	269	$	(1,865)	$	(14)	$	(330)	$	(296)	$	(2,236)

(1) The changes in fair value of the interest rate swaps are offset by an adjustment to derivative investments (see Note 5).

(2) Amortization and accretion of premiums and discounts are included in net investment income on the Consolidated Statements of Comprehensive Income (Loss). Gains (losses) from sales, maturities, settlements and calls and credit loss expense are included in realized gain (loss) on the Consolidated Statements of Comprehensive Income (Loss).

(3) Gains (losses) from the changes in fair value are included in market risk benefit gain (loss) on the Consolidated Statements of Comprehensive Income (Loss).

(4) Gains (losses) from the changes in fair value are included in realized gain (loss) on the Consolidated Statements of Comprehensive Income (Loss).

The following provides the components of the items included in issuances, sales, maturities, settlements and calls, net, (in millions) as reported above:


	For the Three Months Ended September 30, 2024
	Issuances		Sales		Maturities		Settlements		Calls		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	281	$	(61)	$	–	$	(170)	$	–	$	50




CMBS	14		–		–		–		–		14
ABS	402		(20)		–		(104)		(46)		232

Hybrid and redeemable preferred
securities	16		–		–		–		–		16




Trading securities	1		–		–		(7)		–		(6)
Equity securities	1		–		–		–		–		1
Mortgage loans on real estate	–		–		–		(1)		–		(1)
Derivative investments	–		–		1		–		–		1
Other investments	10		–		–		–		–		10
Other assets – indexed annuity ceded
embedded derivatives	51		–		–		(77)		–		(26)
Policyholder account balances –
RILA, fixed annuity and
IUL contracts	(317)		–		–		362		–		45




Total, net	$	459	$	(81)	$	1	$	3	$	(46)	$	336


	For the Three Months Ended September 30, 2023
	Issuances		Sales		Maturities		Settlements		Calls		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	178	$	(28)	$	–	$	(45)	$	–	$	105





ABS	279		–		–		(32)		–		247





Trading securities	–		–		–		(4)		–		(4)

Mortgage loans on real estate	1		–		–		(89)		–		(88)
Derivative investments	9		–		(1)		–		–		8
Other assets – indexed annuity ceded
embedded derivatives	28		–		–		4		–		32
Policyholder account balances –
RILA, fixed annuity and
IUL contracts	(231)		–		–		36		–		(195)



Total, net	$	264	$	(28)	$	(1)	$	(130)	$	–	$	105


	For the Nine Months Ended September 30, 2024
	Issuances		Sales		Maturities		Settlements		Calls		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	922	$	(260)	$	(2)	$	(395)	$	(1)	$	264



RMBS	6		–		–		–		–		6
CMBS	29		–		–		–		–		29


ABS	1,128		(50)		–		(223)		(57)		798
Hybrid and redeemable preferred
securities	16		–		–		–		–		16




Trading securities	6		(2)		–		(21)		–		(17)
Equity securities	1		(1)		–		–		–		–
Mortgage loans on real estate	1		(31)		–		(6)		–		(36)
Derivative investments	4		–		(1)		–		–		3
Other investments	10		–		–		–		–		10
Other assets – indexed annuity ceded
embedded derivatives	103		–		–		(149)		–		(46)
Policyholder account balances –
RILA, fixed annuity and
IUL contracts	(849)		–		–		571		–		(278)




Total, net	$	1,377	$	(344)	$	(3)	$	(223)	$	(58)	$	749


	For the Nine Months Ended September 30, 2023
	Issuances		Sales		Maturities		Settlements		Calls		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	587	$	(65)	$	(34)	$	(347)	$	(11)	$	130

State and municipal bonds	–		(1)		–		–		–		(1)

RMBS	5		–		–		–		–		5
CMBS	–		–		–		(4)		–		(4)
ABS	736		(2)		–		(167)		–		567

Hybrid and redeemable preferred
securities	–		–		–		–		(2)		(2)
Trading securities	–		(155)		–		(81)		–		(236)
Equity securities	1		–		–		–		–		1
Mortgage loans on real estate	5		–		–		(179)		–		(174)
Derivative investments	9		–		(1)		–		–		8
Other assets – indexed annuity ceded
embedded derivatives	112		–		–		(14)		–		98
Policyholder account balances –
RILA, fixed annuity and
IUL contracts	(846)		–		–		124		–		(722)





Total, net	$	609	$	(223)	$	(35)	$	(668)	$	(13)	$	(330)

The following summarizes changes in unrealized gains (losses) included in net income related to financial instruments carried at fair value classified within Level 3 that we still held (in millions):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023			2024		2023










Trading securities (1)	$	7	$	(3)		$	6	$	(2)
Equity securities (1)	–		12			(2)		(17)
Mortgage loans on real estate (1)	2		2			(2)		(1)
Derivative investments (1)	5		(25)			14		(27)

MRBs (2)	(665)		1,415			1,357		2,783
Funds withheld reinsurance liabilities –
reinsurance-related embedded derivatives (1)	661		–			1,246		–
Embedded derivatives – indexed annuity
and IUL contracts (1)	23		(4)			755		(223)



Total, net	$	33	$	1,397		$	3,374	$	2,513

(1) Included in realized gain (loss) on the Consolidated Statements of Comprehensive Income (Loss).

(2) Included in market risk benefit gain (loss) on the Consolidated Statements of Comprehensive Income (Loss).

The following summarizes changes in unrealized gains (losses) included in OCI, net of tax, related to financial instruments carried at fair value classified within Level 3 that we still held (in millions):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023			2024		2023
Fixed maturity AFS securities:
Corporate bonds	$	43	$	(19)		$	2	$	(21)

State and municipal bonds	–		2			–		3

RMBS	1		(1)			–		(1)

ABS	47		(5)			27		(4)

Hybrid and redeemable preferred
securities	1		–			2		(2)

Mortgage loans on real estate	4		(3)			5		1








Total, net	$	96	$	(26)		$	36	$	(24)

The following provides the components of the transfers into and out of Level 3 (in millions) as reported above:


	For the Three Months Ended September 30, 2024						For the Three Months Ended September 30, 2023
	Transfers		Transfers				Transfers		Transfers
	Into		Out of				Into		Out of
	Level 3		Level 3		Total		Level 3		Level 3		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	–	$	(7)	$	(7)	$	36	$	(79)	$	(43)



RMBS	–		(5)		(5)		12		(5)		7
CMBS	–		(16)		(16)		–		–		–


ABS	–		(178)		(178)		–		(113)		(113)
Hybrid and redeemable preferred
securities	10		–		10		–		(13)		(13)



Trading securities	–		–		–		6		–		6
Equity securities	–		(4)		(4)		–		–		–

Other investments	10		–		10		–		–		–













Total, net	$	20	$	(210)	$	(190)	$	54	$	(210)	$	(156)


	For the Nine Months Ended September 30, 2024						For the Nine Months Ended September 30, 2023

	Transfers		Transfers					Transfers		Transfers
	Into		Out of					Into		Out of
	Level 3		Level 3		Total			Level 3		Level 3		Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	22	$	(143)	$	(121)		$	195	$	(198)	$	(3)


RMBS	–		(5)		(5)			12		(5)		7
CMBS	–		(16)		(16)			4		–		4

State and municipal bonds	–		(5)		(5)			–		–		–
ABS	50		(286)		(236)			2		(346)		(344)

Hybrid and redeemable preferred
securities	10		–		10			16		(13)		3







Trading securities	–		–		–			6		–		6
Equity securities	–		(4)		(4)			–		–		–

Derivative investments	–		(51)		(51)			31		–		31
Other investments	10		–		10			–		–		–








Total, net	$	92	$	(510)	$	(418)		$	266	$	(562)	$	(296)

Transfers into and out of Level 3 are generally the result of observable market information on financial instruments no longer being available or becoming available to our pricing vendors. For the three and nine months ended September 30, 2024 and 2023, transfers in and out of Level 3 were attributable primarily to the financial instruments’ observable market information no longer being available or becoming available.

The following summarizes the fair value (in millions), valuation techniques and significant unobservable inputs of the Level 3 fair value measurements as of September 30, 2024:


										Weighted
	Fair		Valuation	Significant	Assumption or					Average Input
	Value		Technique	Unobservable Inputs	Input Ranges					Range (1)
Assets
Investments:
Fixed maturity AFS
securities:
Corporate bonds	$	183	Discounted cash flow	Liquidity/duration adjustment (2)	0	%	–	4.2	%	2.0	%





ABS	11		Discounted cash flow	Liquidity/duration adjustment (2)	1.5	%	–	1.5	%	1.5	%
CMBS	8		Discounted cash flow	Liquidity/duration adjustment (2)	2.1	%	—	2.1	%	2.1	%
Hybrid and redeemable
preferred securities	24		Discounted cash flow	Liquidity/duration adjustment (2)	1.4	%	–	2.0	%	1.8	%
Equity securities	5		Discounted cash flow	Liquidity/duration adjustment (2)	4.5	%	–	4.5	%	4.5	%

MRB assets	4,565
Other assets – ceded MRBs	2		Discounted cash flow	Lapse (3)	1	%	–	30	%	(10)
				Utilization of GLB withdrawals (4)	85	%	–	100	%	94	%
				Claims utilization factor (5)	60	%	–	100	%	(10)
				Premiums utilization factor (5)	80	%	–	115	%	(10)
				Non-performance risk (6)	0.27	%	–	2.24	%	1.81	%
				Mortality (7)				(9)		(10)
				Volatility (8)	1	%	–	29	%	14.47	%

Other assets – indexed
annuity ceded embedded
derivatives	1,132		Discounted cash flow	Lapse (3)	0	%	–	9	%	(10)
				Mortality (7)				(9)		(10)
Liabilities
Policyholder account
balances – indexed annuity
contracts embedded
derivatives	$	(12,176)	Discounted cash flow	Lapse (3)	0	%	–	9	%	(10)
				Mortality (7)				(9)		(10)

MRB liabilities	(1,272)
Other liabilities – ceded
MRBs	(341)		Discounted cash flow	Lapse (3)	1	%	–	30	%	(10)
				Utilization of GLB withdrawals (4)	85	%	–	100	%	94	%
				Claims utilization factor (5)	60	%	–	100	%	(10)
				Premiums utilization factor (5)	80	%	–	115	%	(10)
				Non-performance risk (6)	0.27	%	–	2.24	%	1.81	%
				Mortality (7)				(9)		(10)
				Volatility (8)	1	%	–	29	%	14.47	%

The following summarizes the fair value (in millions), valuation techniques and significant unobservable inputs of the Level 3 fair value measurements as of December 31, 2023:


										Weighted
	Fair		Valuation	Significant	Assumption or					Average Input
	Value		Technique	Unobservable Inputs	Input Ranges					Range (1)
Assets
Investments:
Fixed maturity AFS
securities:
Corporate bonds	$	186	Discounted cash flow	Liquidity/duration adjustment (2)	(0.2)	%	–	3.7	%	2.1	%

State and municipal
bonds	5		Discounted cash flow	Liquidity/duration adjustment (2)	0.9	%	–	2.2	%	2.1	%


CMBS	8		Discounted cash flow	Liquidity/duration adjustment (2)	2.3	%	–	2.3	%	2.3	%
ABS	12		Discounted cash flow	Liquidity/duration adjustment (2)	1.8	%	–	1.8	%	1.8	%
Hybrid and redeemable
preferred securities	7		Discounted cash flow	Liquidity/duration adjustment (2)	1.4	%	–	1.5	%	1.5	%
Equity securities	5		Discounted cash flow	Liquidity/duration adjustment (2)	4.5	%	–	4.5	%	4.5	%

MRB assets	3,894
Other assets – ceded MRBs	2		Discounted cash flow	Lapse (3)	1	%	–	30	%	(10)
				Utilization of GLB withdrawals (4)	85	%	–	100	%	94	%
				Claims utilization factor (5)	60	%	–	100	%	(10)
				Premiums utilization factor (5)	80	%	–	115	%	(10)
				Non-performance risk (6)	0.51	%	–	2.13	%	1.78	%
				Mortality (7)				(9)		(10)
				Volatility (8)	1	%	–	29	%	13.92	%

Other assets – indexed
annuity ceded embedded
derivatives	940		Discounted cash flow	Lapse (3)	0	%	–	9	%	(10)
				Mortality (7)				(9)		(10)
Liabilities
Policyholder account
balances – indexed annuity
contracts embedded
derivatives	$	(9,013)	Discounted cash flow	Lapse (3)	0	%	–	9	%	(10)
				Mortality (7)				(9)		(10)

MRB liabilities	(1,716)
Other liabilities – ceded
MRBs	(239)		Discounted cash flow	Lapse (3)	1	%	–	30	%	(10)
				Utilization of GLB withdrawals (4)	85	%	–	100	%	94	%
				Claims utilization factor (5)	60	%	–	100	%	(10)
				Premiums utilization factor (5)	80	%	–	115	%	(10)
				Non-performance risk (6)	0.51	%	–	2.13	%	1.78	%
				Mortality (7)				(9)		(10)
				Volatility (8)	1	%	–	29	%	13.92	%

(1) Unobservable inputs were weighted by the relative fair value of the instruments, unless otherwise noted.

(2) The liquidity/duration adjustment input represents an estimated market participant composite of adjustments attributable to liquidity premiums, expected durations, structures and credit quality that would be applied to the market observable information of an investment.

(3) The lapse input represents the estimated probability of a contract surrendering during a year, and thereby forgoing any future benefits. The range for indexed annuity contracts represents the lapses during the surrender charge period.

(4) The utilization of GLB withdrawals input represents the estimated percentage of policyholders that utilize the GLB withdrawal riders.

(5) The utilization factors are applied to the present value of claims or premiums, as appropriate, in the MRB calculation to estimate the impact of inefficient GLB withdrawal behavior, including taking less than or more than the maximum GLB withdrawal.

(6) The non-performance risk input represents the estimated additional credit spread that market participants would apply to the market observable discount rate when pricing a contract. The non-performance risk input was weighted by the absolute value of the sensitivity of the reserve to the non-performance risk assumption.

(7) The mortality input represents the estimated probability of when an individual belonging to a particular group, categorized according to age or some other factor such as gender, will die.

(8) The volatility input represents overall volatilities assumed for the underlying variable annuity funds, which include a mixture of equity and fixed-income assets. Volatility assumptions vary by fund due to the benchmarking of different indices. The volatility input was weighted by the relative account balance assigned to each index.

(9) The mortality is based on a combination of company and industry experience, adjusted for improvement factors.

(10) A weighted average input range is not a meaningful measurement for lapse, utilization factors or mortality.

From the table above, we have excluded Level 3 fair value measurements obtained from independent, third-party pricing sources. We do not develop the significant inputs used to measure the fair value of these assets and liabilities, and the information regarding the significant inputs is not readily available to us. Independent broker-quoted fair values are non-binding quotes developed by market makers or broker-dealers obtained from third-party sources recognized as market participants. The fair value of a broker-quoted asset or liability is based solely on the receipt of an updated quote from a single market maker or a broker-dealer recognized as a market participant as we do not adjust broker quotes when used as the fair value measurement for an asset or liability. Significant increases or decreases in any of the quotes received from a third-party broker-dealer may result in a significantly higher or lower fair value measurement.

The embedded derivative liability associated with Fortitude Re was excluded from the above table. As discussed in Note 7, this embedded derivative liability was created through a coinsurance with funds withheld reinsurance agreement where the investments supporting the reinsurance agreement were withheld by and continue to be reported on the Consolidated Balance Sheet. This reinsurance-related embedded derivative is valued as a total return swap with reference to the fair value of the investments held by us. Accordingly, the unobservable inputs utilized in the valuation of the reinsurance-related embedded derivative are a component of the investments supporting the reinsurance agreement that are reported on the Consolidated Balance Sheet.

Changes in any of the significant inputs presented in the table above would have resulted in a significant change in the fair value measurement of the asset or liability as follows:

•Investments – An increase in the liquidity/duration adjustment input would have resulted in a decrease in the fair value measurement.

•Indexed annuity contracts embedded derivatives – For direct embedded derivatives, an increase in the lapse or mortality inputs would have resulted in a decrease in the fair value measurement.

•MRBs – Assuming our MRBs are in a liability position: an increase in our lapse, non-performance risk or mortality inputs would have resulted in a decrease in the fair value measurement, except for policies with guaranteed death benefit (“GDB”) riders only, in which case an increase in mortality inputs would have resulted in an increase in the fair value measurement.

For each category discussed above, the unobservable inputs are not inter-related; therefore, a directional change in one input would not have affected the other inputs. As part of our ongoing valuation process, we assess the reasonableness of our valuation techniques or models and make adjustments as necessary.

- 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