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Fair Values of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 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:


	June 30, 2020
			Level 1			Level 2			Level 3			Total
			(in millions)
Assets
Available-for-Sale securities:
Corporate debt securities	$	—		$	10,586		$	731		$	11,317
Residential mortgage backed securities	—			3,279			56			3,335
Commercial mortgage backed securities	—			3,978			—			3,978
State and municipal obligations	—			1,320			—			1,320
Asset backed securities	—			1,023			352			1,375
Foreign government bonds and obligations	—			261			—			261
U.S. government and agency obligations	1			—			—			1
Total Available-for-Sale securities	1			20,447			1,139			21,587
Cash equivalents	2,950			1,064			—			4,014
Other assets:
Interest rate derivative contracts	—			3,096			—			3,096
Equity derivative contracts	386			2,197			—			2,583
Foreign exchange derivative contracts	1			31			—			32

Total other assets	387			5,324			—			5,711
Separate account assets at net asset value (“NAV”)										79,059		(1)
Total assets at fair value	$	3,338		$	26,835		$	1,139		$	110,371


Liabilities
Policyholder account balances, future policy benefits and claims:
Fixed deferred indexed annuity embedded derivatives	$	—	$	3	$	41	$	44
IUL embedded derivatives	—		—		882		882
GMWB and GMAB embedded derivatives	—		—		3,129		3,129		(2)
Structured variable annuity embedded derivatives	—		—		9		9
Total policyholder account balances, future policy benefits and claims	—		3		4,061		4,064		(3)
Other liabilities:
Interest rate derivative contracts	—		1,031		—		1,031
Equity derivative contracts	182		2,349		—		2,531
Foreign exchange derivative contracts	3		10		—		13
Credit derivative contracts	—		10		—		10
Total other liabilities	185		3,400		—		3,585
Total liabilities at fair value	$	185	$	3,403	$	4,061	$	7,649


	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 $3.2 billion of individual contracts in a liability position and $25 million of individual contracts in an asset position as of June 30, 2020.

⁽³⁾The Company’s adjustment for nonperformance risk resulted in a $(1.2) billion cumulative increase (decrease) to the embedded derivatives as of June 30, 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, April 1, 2020	$	721	$	17	$	300	$	1,038
Total gains (losses) included in:
Net income	(1)		—		—		(1)		(1)
Other comprehensive income (loss)	14		1		52		67
Purchases	—		38		—		38
Settlements	(3)		—		—		(3)


Balance, June 30, 2020	$	731	$	56	$	352	$	1,139

Changes in unrealized gains (losses) in net income relating to assets held at June 30, 2020	$	(1)	$	—	$	—	$	(1)	(1)
Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at June 30, 2020	$	14	$	1	$	52	$	67


	Policyholder Account Balances, Future Policy Benefits and Claims
	Fixed Deferred Indexed Annuity Embedded Derivatives			IUL Embedded Derivatives			GMWB and GMAB Embedded Derivatives			Structured Variable Annuity Embedded Derivatives			Total
	(in millions)
Balance, April 1, 2020	$	33		$	725		$	3,276		$	(9)		$	4,025
Total (gains) losses included in:
Net income	7		(2)	148		(2)	(224)		(3)	16		(3)	(53)
Issues	1			30			86			2			119
Settlements	—			(21)			(9)			—			(30)
Balance, June 30, 2020	$	41		$	882		$	3,129		$	9		$	4,061

Changes in unrealized (gains) losses in net income relating to liabilities held at June 30, 2020	$	—		$	148	(2)	$	(204)	(3)	$	—		$	(56)


	Available-for-Sale Securities
	Corporate Debt Securities		Residential Mortgage Backed Securities		Asset Backed Securities		Total
	(in millions)
Balance, April 1, 2019	$	814	$	18	$	379	$	1,211
Total (gains) losses included in:
Net income	(1)		—		—		(1)		(1)
Other comprehensive income (loss)	14		—		5		19
Purchases	14		27		—		41
Settlements	(51)		—		—		(51)
Transfers out of Level 3	—		(1)		—		(1)
Balance, June 30, 2019	$	790	$	44	$	384	$	1,218

Changes in unrealized gains (losses) in net income relating to assets held at June 30, 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, April 1, 2019	$	23		$	745		$	180		$	948
Total (gains) losses included in:
Net income	1		(2)	60		(2)	433		(3)	494
Issues	7			31			86			124
Settlements	—			(17)			(3)			(20)
Balance, June 30, 2019	$	31		$	819		$	696		$	1,546

Changes in unrealized (gains) losses in net income relating to liabilities held at June 30, 2019	$	—		$	60	(2)	$	430	(3)	$	490


	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:
Net income	(1)		—		—		(1)		(1)
Other comprehensive income (loss)	8		1		(37)		(28)
Purchases	6		38		—		44
Settlements	(17)		—		—		(17)


Balance, June 30, 2020	$	731	$	56	$	352	$	1,139

Changes in unrealized gains (losses) in net income relating to assets held at June 30, 2020	$	(1)	$	—	$	—	$	(1)	(1)
Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at June 30, 2020	$	8	$	1	$	(37)	$	(28)


	Policyholder Account Balances, Future Policy Benefits and Claims
	Fixed Deferred Indexed Annuity Embedded Derivatives			IUL Embedded Derivatives			GMWB and GMAB Embedded Derivatives			Structured Variable Annuity Embedded Derivatives			Total
	(in millions)
Balance, January 1, 2020	$	43		$	881		$	763		$	—		$	1,687
Total (gains) losses included in:
Net income	(5)		(2)	3		(2)	2,196		(3)	13		(3)	2,207
Issues	3			38			174			(4)			211
Settlements	—			(40)			(4)			—			(44)
Balance, June 30, 2020	$	41		$	882		$	3,129		$	9		$	4,061

Changes in unrealized (gains) losses in net income relating to liabilities held at June 30, 2020	$	—		$	3	(2)	$	2,219	(3)	$	—		$	2,222


	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:
Net income	(1)		—		—		(1)		(1)
Other comprehensive income (loss)	28		—		10		38
Purchases	14		27		—		41
Settlements	(122)		(1)		—		(123)
Transfers out of Level 3	—		(46)		—		(46)
Balance, June 30, 2019	$	790	$	44	$	384	$	1,218

Changes in unrealized gains (losses) in net income relating to assets held at June 30, 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	3		(2)	158		(2)	203		(3)	364
Issues	14			67			170			251
Settlements	—			(34)			(5)			(39)
Balance, June 30, 2019	$	31		$	819		$	696		$	1,546

Changes in unrealized (gains) losses in net income relating to liabilities held at June 30, 2019	$	—		$	158	(2)	$	200	(3)	$	358

⁽¹⁾Included in net investment income in the Consolidated Statements of Income.

⁽²⁾Included in interest credited to fixed accounts in the Consolidated Statements of Income.

⁽³⁾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:


	June 30, 2020
	Fair Value		Valuation Technique	Unobservable Input		Range						Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	730	Discounted cash flow		Yield/spread to U.S. Treasuries⁽¹⁾			1.4%	–	5.3%		2.2%
Asset backed securities	$	352	Discounted cash flow		Annual default rate		4.3%						4.3%
				Loss severity		25.0%						25.0%
				Yield/spread to swap rates⁽²⁾		750 bps	–	1,000 bps			764 bps
IUL embedded derivatives	$	882	Discounted cash flow		Nonperformance risk⁽³⁾		95 bps						95 bps
Fixed deferred indexed annuity embedded derivatives	$	41	Discounted cash flow		Surrender rate⁽⁴⁾		0.0%	–	50.0%		1.4%
				Nonperformance risk⁽³⁾		95 bps						95 bps
GMWB and GMAB embedded derivatives	$	3,129	Discounted cash flow		Utilization of guaranteed withdrawals^{(5) (6)}		0.0%	–	36.0%			11.0%
				Surrender rate⁽⁴⁾		0.1%	–	73.5%			3.6%
				Market volatility^{(7) (8)}		4.6%	–	18.0%			11.9%
				Nonperformance risk⁽³⁾		95 bps						95 bps
Structured variable annuity embedded derivatives	$	9	Discounted cash flow		Surrender rate⁽⁴⁾		0.8%	–	40.0%			0.9%
				Nonperformance risk⁽³⁾		95 bps						95 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

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:


	June 30, 2020
			Carrying Value			Fair Value
									Level 1			Level 2			Level 3	Total
			(in millions)
Financial Assets
Mortgage loans, net	$	2,665		$	—		$	—		$	2,698		$	2,698
Policy loans	855			—			—			824			824
Other investments	412			—			343			50			393
Other receivables	1,465			—			—			1,675			1,675
Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	9,272		$	—		$	—		$	10,927		$	10,927
Short-term borrowings	200			—			200			—			200
Other liabilities	17			—			—			16			16
Separate account liabilities — investment contracts	314			—			314			—			314


	December 31, 2019
	Carrying Value		Fair 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