Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Financial assets and liabilities carried at fair value

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In millions)	(Level 1)		(Level 2)		(Level 3)		Total
September 30, 2017
Financial assets at fair value:
Fixed maturities:
Federal government and agency	$	376	$	526	$	-	$	902
State and local government		-		1,323		-		1,323
Foreign government		-		2,268		39		2,307
Corporate		-		17,423		510		17,933
Mortgage and other asset-backed		-		333		146		479
Total fixed maturities⁽¹⁾		376		21,873		695		22,944
Equity securities		411		121		109		641
Subtotal		787		21,994		804		23,585
Short-term investments		-		175		-		175
GMIB assets		-		-		798		798
Other derivative assets		-		1		-		1
Total financial assets at fair value, excluding separate accounts	$	787	$	22,170	$	1,602	$	24,559
Financial liabilities at fair value:
GMIB liabilities	$	-	$	-	$	780	$	780
Other derivative liabilities		-		19		-		19
Total financial liabilities at fair value, excluding separate accounts	$	-	$	19	$	780	$	799

December 31, 2016
Financial assets at fair value:
Fixed maturities:
Federal government and agency	$	374	$	503	$	-	$	877
State and local government		-		1,435		-		1,435
Foreign government		-		2,066		47		2,113
Corporate		-		15,552		498		16,050
Mortgage and other asset-backed		-		329		157		486
Total fixed maturities⁽¹⁾		374		19,885		702		20,961
Equity securities		396		113		74		583
Subtotal		770		19,998		776		21,544
Short-term investments		-		691		-		691
GMIB assets		-		-		799		799
Other derivative assets		-		10		-		10
Total financial assets at fair value, excluding separate accounts	$	770	$	20,699	$	1,575	$	23,044
Financial liabilities at fair value:
GMIB liabilities	$	-	$	-	$	780	$	780
Other derivative liabilities		-		5		-		5
Total financial liabilities at fair value, excluding separate accounts	$	-	$	5	$	780	$	785

(1) At September 30, 2017, fixed maturities includes $627 million of net appreciation required to adjust future policy benefits for run-off settlement annuity business including $16 million of appreciation for securities classified in Level 3. At December 31, 2016, fixed maturities includes $524 million of net appreciation required to adjust future policy benefits for run-off settlement annuity business including $14 million of appreciation for securities classified in Level 3. See Note 10 for additional information.

Level 3 fixed maturities and equity securities priced using significant unobservable inputs


			Unobservable Input	Unobservable Adjustment Range (Weighted Average)
(Fair value in millions)		Fair Value	Unobservable Input	Unobservable Adjustment Range (Weighted Average)
As of September 30, 2017
Fixed maturities:
Mortgage and other asset-backed securities	$	146	Liquidity	60 - 350 (90) bps
			Weighting of credit spreads	180 - 280 (220) bps
Corporate and government fixed maturities		523	Liquidity	70 - 930 (260) bps
Total fixed maturities		669
Equity securities:
Private equity securities		76	Price-to-EBITDA multiples	5.0 - 12.0 (8.5)
Hybrid equity securities		33	Liquidity	270 (270) bps
Total equity securities		109
Subtotal		778
Securities not priced by the Company⁽¹⁾		26
Total Level 3 securities	$	804
(1) The fair values for these securities use single, unadjusted non-binding broker quotes not developed directly by the Company.









			Unobservable Input	Unobservable Adjustment Range (Weighted Average)
(Fair value in millions)		Fair Value	Unobservable Input	Unobservable Adjustment Range (Weighted Average)
As of December 31, 2016
Fixed maturities:
Mortgage and other asset-backed securities	$	157	Liquidity	60 - 330 (90) bps
			Weighting of credit spreads	160 - 470 (230) bps
Corporate and government fixed maturities		490	Liquidity	80 - 1,300 (340) bps
Total fixed maturities		647
Private equity securities		74	Price-to-EBITDA multiples	4.2 - 11.6 (8.5)
Subtotal		721
Securities not priced by the Company⁽¹⁾		55
Total Level 3 securities	$	776
(1) The fair values for these securities use single, unadjusted non-binding broker quotes not developed directly by the Company.

Changes in level 3 financial assets and liabilities carried at fair value

For the Three Months Ended September 30, 2017	Changes in Level 3 financial assets and financial liabilities
(In millions)	Fixed Maturities & Equity Securities		GMIB Assets		GMIB Liabilities		GMIB Net
Balance at July 1, 2017	$	751	$	777	$	(764)	$	13
Gains (losses) included in shareholders' net income:
GMIB fair value gain/(loss)		-		40		(40)		-
Other		(2)		(1)		6		5
Total gains (losses) included in shareholders' net income		(2)		39		(34)		5
Losses included in other comprehensive income		(9)		-		-		-
Losses required to adjust future policy benefits for settlement annuities⁽¹⁾		(2)		-		-		-
Purchases, sales and settlements:
Purchases		37		-		-		-
Sales		(3)		-		-		-
Settlements		(30)		(18)		18		-
Total purchases, sales and settlements		4		(18)		18		-
Transfers into/(out of) Level 3:
Transfers into Level 3		178		-		-		-
Transfers out of Level 3		(116)		-		-		-
Total transfers into/(out of) Level 3		62		-		-		-
Balance at September 30, 2017	$	804	$	798	$	(780)	$	18
Total gains (losses) included in shareholders' net income attributable
to instruments held at the reporting date	$	1	$	39	$	(34)	$	5

(1) Amounts do not accrue to shareholders.





For the Three Months Ended September 30, 2016
(In millions)	Fixed Maturities & Equity Securities		GMIB Assets		GMIB Liabilities		GMIB Net
Balance at July 1, 2016	$	743	$	975	$	(947)	$	28
Gains (losses) included in shareholders' net income:
GMIB fair value gain/(loss)		-		(22)		22		-
Other		-		1		(6)		(5)
Total gains (losses) included in shareholders' net income		-		(21)		16		(5)
Gains included in other comprehensive income		12		-		-		-
Gains required to adjust future policy benefits for settlement annuities⁽¹⁾		-		-		-		-
Purchases, sales and settlements:
Purchases		20		-		-		-
Sales		(1)		-		-		-
Settlements		(55)		(23)		23		-
Total purchases, sales and settlements		(36)		(23)		23		-
Transfers into/(out of) Level 3:
Transfers into Level 3		44		-		-		-
Transfers out of Level 3		(30)		-		-		-
Total transfers into/(out of) Level 3		14		-		-		-
Balance at September 30, 2016	$	733	$	931	$	(908)	$	23
Total gains (losses) included in shareholders' net income attributable
to instruments held at the reporting date	$	-	$	(21)	$	16	$	(5)


For the Nine Months Ended September 30, 2017
Balance at January 1, 2017	$	776	$	799	$	(780)	$	19
Gains (losses) included in shareholders' net income:
GMIB fair value gain/(loss)		-		44		(44)		-
Other		22		-		(1)		(1)
Total gains (losses) included in shareholders' net income		22		44		(45)		(1)
Losses included in other comprehensive income		(12)		-		-		-
Gains required to adjust future policy benefits for settlement annuities⁽¹⁾		7		-		-		-
Purchases, sales and settlements:
Purchases		127		-		-		-
Sales		(73)		-		-		-
Settlements		(69)		(45)		45		-
Total purchases, sales and settlements		(15)		(45)		45		-
Transfers into/(out of) Level 3:
Transfers into Level 3		254		-		-		-
Transfers out of Level 3		(228)		-		-		-
Total transfers into/(out of) Level 3		26		-		-		-
Balance at September 30, 2017	$	804	$	798	$	(780)	$	18
Total gains (losses) included in shareholders' net income attributable
to instruments held at the reporting date	$	-	$	44	$	(45)	$	(1)

(1) Amounts do not accrue to shareholders.







For the Nine Months Ended September 30, 2016
(In millions)	Fixed Maturities & Equity Securities		GMIB Assets		GMIB Liabilities		GMIB Net
Balance at January 1, 2016	$	726	$	907	$	(885)	$	22
Gains (losses) included in shareholders' net income:
GMIB fair value gain/(loss)		-		71		(71)		-
Other		(16)		-		1		1
Total gains (losses) included in shareholders' net income		(16)		71		(70)		1
Gains included in other comprehensive income		11		-		-		-
Gains required to adjust future policy benefits for settlement annuities⁽¹⁾		35		-		-		-
Purchases, sales and settlements:
Purchases		67		-		-		-
Sales		(126)		-		-		-
Settlements		(71)		(47)		47		-
Total purchases, sales and settlements		(130)		(47)		47		-
Transfers into/(out of) Level 3:
Transfers into Level 3		235		-		-		-
Transfers out of Level 3		(128)		-		-		-
Total transfers into/(out of) Level 3		107		-		-		-
Balance at September 30, 2016	$	733	$	931	$	(908)	$	23
Total gains (losses) included in shareholders' net income attributable
to instruments held at the reporting date	$	(11)	$	71	$	(70)	$	1

(1) Amounts do not accrue to shareholders.

Separate account assets schedule

(In millions)	Quoted Prices in Active Markets for Identical Assets(Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
September 30, 2017
Guaranteed separate accounts - see Note 16(A)	$	216	$	313	$	-	$	529
Non-guaranteed separate accounts⁽¹⁾		1,511		5,240		300		7,051
Subtotal	$	1,727	$	5,553	$	300		7,580
Non-guaranteed separate accounts priced at NAV as a practical expedient⁽¹⁾								852
Total separate account assets							$	8,432
December 31, 2016
Guaranteed separate accounts - see Note 16(A)	$	238	$	262	$	-	$	500
Non-guaranteed separate accounts⁽¹⁾		1,368		4,885		331		6,584
Subtotal	$	1,606	$	5,147	$	331		7,084
Non-guaranteed separate accounts priced at NAV as a practical expedient⁽¹⁾								856
Total separate account assets							$	7,940

(1) Non-guaranteed separate accounts included $3.9 billion as of September 30, 2017 and $3.7 billion as of December 31, 2016 in assets supporting the Company's pension plans, including $0.3 billion classified in Level 3 for both periods and $0.8 billion as of September 30, 2017 and $0.9 billion as of December 31, 2016 priced at net asset value (“NAV”) as a practical expedient.

Changes in level 3 separate account assets

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2017		2016		2017		2016
Balance, beginning of period	$	316	$	333	$	331	$	297
Policyholder gains (losses)		(1)		2		36		3
Purchases, sales and settlements:
Purchases		9		7		26		12
Sales		-		-		(52)		(1)
Settlements		(12)		(3)		(13)		(5)
Total purchases, sales and settlements		(3)		4		(39)		6
Transfers into/(out of) Level 3:
Transfers into Level 3		4		7		5		46
Transfers out of Level 3		(16)		-		(33)		(6)
Total transfers into/(out of) Level 3		(12)		7		(28)		40
Balance, end of period	$	300	$	346	$	300	$	346

Separate account assets priced at net asset value

	Fair Value as of
(In millions)	September 30, 2017		December 31, 2016		Unfunded Commitments		Redemption Frequency (if currently eligible) ⁽¹⁾	Redemption Notice Period ⁽¹⁾
Securities Partnerships	$	437	$	424	$	374	Not applicable	Not applicable
Real Estate Funds		237		231		-	Quarterly	45-90 days
Hedge Funds		178		201		-	Up to Annually, varying by fund	30-90 days
Total	$	852	$	856	$	374

(1) The attributes noted are effective as of September 30, 2017 and December 31, 2016.

Financial instruments not carried at fair value

			September 30, 2017				December 31, 2016
(In millions)	Classification in the Fair Value Hierarchy		Fair Value		Carrying Value		Fair Value		Carrying Value
Commercial mortgage loans	Level 3	$	1,700	$	1,684	$	1,682	$	1,666
Contractholder deposit funds, excluding universal life products	Level 3	$	1,145	$	1,141	$	1,215	$	1,212
Long-term debt, including current maturities, excluding capital leases	Level 2	$	5,800	$	5,326	$	5,460	$	4,991

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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