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Fair Values of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of balances of assets and liabilities measured at fair value on a recurring basis [Table Text Block]

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis:



	March 31, 2020
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Corporate debt securities	$	—	$	9,722	$	721	$	10,443
Residential mortgage backed securities	—		3,161		17		3,178
Commercial mortgage backed securities	—		3,638		—		3,638
State and municipal obligations	—		1,272		—		1,272
Asset backed securities	—		663		300		963
Foreign government bonds and obligations	—		247		—		247
U.S. government and agency obligations	1		—		—		1
Total Available-for-Sale securities	1		18,703		1,038		19,742
Cash equivalents	1,920		3,100		—		5,020
Other assets:
Interest rate derivative contracts	1		3,096		—		3,097
Equity derivative contracts	661		1,882		—		2,543
Foreign exchange derivative contracts	—		37		—		37
Credit derivative contracts	—		13		—		13
Total other assets	662		5,028		—		5,690
Separate account assets at net asset value (“NAV”)							70,842		⁽¹⁾
Total assets at fair value	$	2,583	$	26,831	$	1,038	$	101,294



Liabilities
Policyholder account balances, future policy benefits and claims:
Fixed deferred indexed annuity embedded derivatives	$	—	$	2	$	33		$	35
IUL embedded derivatives	—		—		725			725
GMWB and GMAB embedded derivatives	—		—		3,276			3,276			⁽²⁾
Structured annuity embedded derivatives	—		—		(9		)	(9		)
Total policyholder account balances, future policy benefits and claims	—		2		4,025			4,027			⁽³⁾
Other liabilities:
Interest rate derivative contracts	—		1,238		—			1,238
Equity derivative contracts	293		1,864		—			2,157
Foreign exchange derivative contracts	3		11		—			14
Total other liabilities	296		3,113		—			3,409
Total liabilities at fair value	$	296	$	3,115	$	4,025		$	7,436



	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Corporate debt securities	$	—	$	10,787	$	735	$	11,522
Residential mortgage backed securities	—		3,091		17		3,108
Commercial mortgage backed securities	—		3,618		—		3,618
State and municipal obligations	—		1,306		—		1,306
Asset backed securities	—		691		389		1,080
Foreign government bonds and obligations	—		267		—		267
U.S. government and agency obligations	1		—		—		1
Total Available-for-Sale securities	1		19,760		1,141		20,902
Cash equivalents	—		1,256		—		1,256
Other assets:
Interest rate derivative contracts	—		1,451		—		1,451
Equity derivative contracts	162		2,650		—		2,812
Foreign exchange derivative contracts	1		15		—		16
Credit derivative contracts	—		4		—		4
Total other assets	163		4,120		—		4,283
Separate account assets at NAV							82,425		⁽¹⁾
Total assets at fair value	$	164	$	25,136	$	1,141	$	108,866



Liabilities
Policyholder account balances, future policy benefits and claims:
Fixed deferred indexed annuity embedded derivatives	$	—	$	3	$	43	$	46
IUL embedded derivatives	—		—		881		881
GMWB and GMAB embedded derivatives	—		—		763		763		⁽⁴⁾
Total policyholder account balances, future policy benefits and claims	—		3		1,687		1,690		⁽⁵⁾
Other liabilities:
Interest rate derivative contracts	—		418		—		418
Equity derivative contracts	36		3,018		—		3,054
Foreign exchange derivative contracts	1		5		—		6
Total other liabilities	37		3,441		—		3,478
Total liabilities at fair value	$	37	$	3,444	$	1,687	$	5,168


⁽¹⁾	Amounts are comprised of certain financial instruments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient and have not been classified in the fair value hierarchy.


⁽²⁾	The fair value of the GMWB and GMAB embedded derivatives included $3.3 billion of individual contracts in a liability position and $12 million of individual contracts in an asset position as of March 31, 2020.


⁽³⁾	The Company’s adjustment for nonperformance risk resulted in a $(2.7) billion cumulative increase (decrease) to the embedded derivatives as of March 31, 2020.


⁽⁴⁾	The fair value of the GMWB and GMAB embedded derivatives included $981 million of individual contracts in a liability position and $218 million of individual contracts in an asset position as of December 31, 2019.

⁽⁵⁾

The Company’s adjustment for nonperformance risk resulted in a $(502) million cumulative increase (decrease) to the embedded derivatives as of December 31, 2019.

Summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis [Table Text Block]

The following tables provide a summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis:



	Available-for-Sale Securities
	Corporate Debt Securities			Residential Mortgage Backed Securities		Asset Backed Securities			Total
	(in millions)
Balance, January 1, 2020	$	735		$	17	$	389		$	1,141
Total gains (losses) included in:
Other comprehensive income (loss)	(6		)	—		(89		)	(95		)
Purchases	6			—		—			6
Settlements	(14		)	—		—			(14		)
Balance, March 31, 2020	$	721		$	17	$	300		$	1,038
Changes in unrealized gains (losses) in net income relating to assets held at March 31, 2020	$	—		$	—	$	—		$	—
Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at March 31, 2020	$	(6	)	$	—	$	(89	)	$	(95	)



	Policyholder Account Balances, Future Policy Benefits and Claims
	Fixed Deferred Indexed Annuity Embedded Derivatives				IUL Embedded Derivatives				GMWB and GMAB Embedded Derivatives			Structured Annuity Embedded Derivatives				Total
	(in millions)
Balance, January 1, 2020	$	43			$	881			$	763		$	—			$	1,687
Total (gains) losses included in:
Net income	(12		)	⁽¹⁾	(145		)	⁽¹⁾	2,420		⁽²⁾	(3		)	⁽²⁾	2,260
Issues	2				8				88			(6		)		92
Settlements	—				(19		)		5			—				(14		)
Balance, March 31, 2020	$	33			$	725			$	3,276		$	(9	)		$	4,025
Changes in unrealized (gains) losses in net income relating to liabilities held at March 31, 2020	$	—			$	(145	)	⁽¹⁾	$	2,423	⁽²⁾	$	—			$	2,278



	Available-for-Sale Securities
	Corporate Debt Securities			Residential Mortgage Backed Securities			Asset Backed Securities		Total
	(in millions)
Balance, January 1, 2019	$	871		$	64		$	374	$	1,309
Total gains (losses) included in:
Other comprehensive income (loss)	14			—			5		19
Settlements	(71		)	(1		)	—		(72		)
Transfers out of Level 3	—			(45		)	—		(45		)
Balance, March 31, 2019	$	814		$	18		$	379	$	1,211
Changes in unrealized gains (losses) in net income relating to assets held at March 31, 2019	$	—		$	—		$	—	$	—



	Policyholder Account Balances, Future Policy Benefits and Claims
	Fixed Deferred Indexed Annuity Embedded Derivatives			IUL Embedded Derivatives				GMWB and GMAB Embedded Derivatives				Total
	(in millions)
Balance, January 1, 2019	$	14		$	628			$	328			$	970
Total (gains) losses included in:
Net income	2		⁽¹⁾	98			⁽¹⁾	(230		)	⁽²⁾	(130		)
Issues	7			36				84				127
Settlements	—			(17		)		(2		)		(19		)
Balance, March 31, 2019	$	23		$	745			$	180			$	948
Changes in unrealized (gains) losses in net income relating to liabilities held at March 31, 2019	$	—		$	98		⁽¹⁾	$	(230	)	⁽²⁾	$	(132	)


⁽¹⁾	Included in interest credited to fixed accounts in the Consolidated Statements of Income.


⁽²⁾	Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Income.

Significant unobservable inputs used in the fair value measurements [Table Text Block]

The following tables provide a summary of the significant unobservable inputs used in the fair value measurements developed by the Company or reasonably available to the Company of Level 3 assets and liabilities:



	March 31, 2020
	Fair Value			Valuation Technique	Unobservable Input	Range				Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	720		Discounted cash flow	Yield/spread to U.S. Treasuries ⁽¹⁾	1.8	%	–	6.0%	2.8	%
Asset backed securities	$	300		Discounted cash flow	Annual default rate	3.8%				3.8	%
					Loss severity	25.0%				25.0	%
					Yield/spread to swap rates ⁽²⁾	1,500 bps		–	2,000 bps	1,528 bps
IUL embedded derivatives	$	725		Discounted cash flow	Nonperformance risk ⁽³⁾	210 bps				210 bps
Fixed deferred indexed annuity embedded derivatives	$	33		Discounted cash flow	Surrender rate ⁽⁴⁾	0.0	%	–	50.0%	1.4	%
					Nonperformance risk ⁽³⁾	210 bps				210 bps
GMWB and GMAB embedded derivatives	$	3,276		Discounted cash flow	Utilization of guaranteed withdrawals ^{(5) (6)}	0.0	%	–	36.0%	10.8	%
					Surrender rate ⁽⁴⁾	0.1	%	–	73.5%	3.4	%
					Market volatility ^{(7) (8)}	4.8	%	–	19.2%	12.6	%
					Nonperformance risk ⁽³⁾	210 bps				210 bps
Structured annuity embedded derivatives	$	(9	)	Discounted cash flow	Surrender rate ⁽⁴⁾	0.8	%	–	40.0%	0.9	%
					Nonperformance risk ⁽³⁾	210 bps				210 bps



	December 31, 2019
	Fair Value		Valuation Technique	Unobservable Input	Range				Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	735	Discounted cash flow	Yield/spread to U.S. Treasuries	0.8	%	–	2.8%	1.3	%
Asset backed securities	$	389	Discounted cash flow	Annual default rate	3.5%
				Loss severity	25.0%
				Yield/spread to swap rates	120 bps		–	170 bps	123 bps
IUL embedded derivatives	$	881	Discounted cash flow	Nonperformance risk ⁽³⁾	65 bps
Fixed deferred indexed annuity embedded derivatives	$	43	Discounted cash flow	Surrender rate	0.0	%	–	50.0%
				Nonperformance risk ⁽³⁾	65 bps
GMWB and GMAB embedded derivatives	$	763	Discounted cash flow	Utilization of guaranteed withdrawals ⁽⁵⁾	0.0	%	–	36.0%
				Surrender rate	0.1	%	–	73.5%
				Market volatility ⁽⁷⁾	3.7	%	–	15.9%
				Nonperformance risk ⁽³⁾	65 bps

⁽¹⁾The weighted average for the spread to U.S. Treasuries for corporate debt securities (private placements) is weighted based on the security’s market value as a percentage of the aggregate market value of the securities.

⁽²⁾The weighted average for the spread to swap rates for asset backed securities is calculated as the sum of each tranche’s balance multiplied by its spread to swap divided by the aggregate balances of the tranches.

⁽³⁾The nonperformance risk is the spread added to the observable interest rates used in the valuation of the embedded derivatives.

⁽⁴⁾The weighted average surrender rate is weighted based on the benefit base of each contract and represents the average assumption in the current year including the effect of a dynamic surrender formula.


⁽⁵⁾	The utilization of guaranteed withdrawals represents the percentage of contractholders that will begin withdrawing in any given year.


⁽⁶⁾	The weighted average utilization rate represents the average assumption for the current year, weighting each policy evenly. The calculation excludes policies that have already started taking withdrawals.


⁽⁷⁾	Market volatility is implied volatility of fund of funds and managed volatility funds.

⁽⁸⁾

The weighted average market volatility represents the average volatility across all contracts, weighted by the size of the guaranteed benefit.

Schedule of carrying value and the estimated fair value of financial instruments that are not reported at fair value [Table Text Block]

The following tables provide the carrying value and the estimated fair value of financial instruments that are not reported at fair value:



	March 31, 2020
	Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,653	$	—	$	—	$	2,617	$	2,617
Policy loans	869		—		—		810		810
Other investments	418		—		265		112		377
Other receivables	1,484		—		—		1,647		1,647

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	9,075	$	—	$	—	$	9,884	$	9,884
Short-term borrowings	200		—		201		—		201
Other liabilities	17		—		—		16		16
Separate account liabilities — investment contracts	269		—		269		—		269



	December 31, 2019
	Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,655	$	—	$	—	$	2,707	$	2,707
Policy loans	867		—		—		810		810
Other investments	410		—		376		34		410
Other receivables	1,514		—		—		1,648		1,648

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	9,110	$	—	$	—	$	10,061	$	10,061
Short-term borrowings	201		—		201		—		201
Line of credit with Ameriprise Financial	50		—		—		50		50
Other liabilities	22		—		—		21		21
Separate account liabilities — investment contracts	340		—		340		—		340