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Fair Values of Assets and Liabilities (Tables)

9 Months Ended

Sep. 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:


	September 30, 2020
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Corporate debt securities	$	—	$	11,198	$	736	$	11,934
Residential mortgage backed securities	—		3,297		18		3,315
Commercial mortgage backed securities	—		4,247		—		4,247
State and municipal obligations	—		1,334		—		1,334
Asset backed securities	—		928		398		1,326
Foreign government bonds and obligations	—		262		—		262
U.S. government and agency obligations	201		—		—		201
Total Available-for-Sale securities	201		21,266		1,152		22,619
Cash equivalents	2,404		1,134		—		3,538
Other assets:
Interest rate derivative contracts	—		2,015		—		2,015
Equity derivative contracts	441		2,940		—		3,381
Foreign exchange derivative contracts	—		34		—		34
Credit derivative contracts	—		5		—		5
Total other assets	441		4,994		—		5,435
Separate account assets at net asset value (“NAV”)							81,348		(1)
Total assets at fair value	$	3,046	$	27,394	$	1,152	$	112,940


Liabilities
Policyholder account balances, future policy benefits and claims:
Fixed deferred indexed annuity embedded derivatives	$	—	$	3	$	44	$	47
IUL embedded derivatives	—		—		926		926
GMWB and GMAB embedded derivatives	—		—		2,943		2,943		(2)
Structured variable annuity embedded derivatives	—		—		9		9
Total policyholder account balances, future policy benefits and claims	—		3		3,922		3,925		(3)
Other liabilities:
Interest rate derivative contracts	—		934		—		934
Equity derivative contracts	167		2,798		—		2,965
Foreign exchange derivative contracts	2		5		—		7

Total other liabilities	169		3,737		—		3,906
Total liabilities at fair value	$	169	$	3,740	$	3,922	$	7,831


	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 $3.0 billion of individual contracts in a liability position and $36 million of individual contracts in an asset position as of September 30, 2020.

(3) The Company’s adjustment for nonperformance risk resulted in a $(1.0) billion cumulative increase (decrease) to the embedded derivatives as of September 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, July 1, 2020	$	731	$	56	$	352	$	1,139
Total gains (losses) included in:

Other comprehensive income (loss)	5		—		32		37
Purchases	7		1		—		8
Settlements	(7)		—		—		(7)
Transfers into Level 3	—		—		14		14
Transfers out of Level 3	—		(39)		—		(39)
Balance, September 30, 2020	$	736	$	18	$	398	$	1,152

Changes in unrealized gains (losses) in net income relating to assets held at September 30, 2020	$	—	$	—	$	—	$	—
Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at September 30, 2020	$	5	$	—	$	32	$	37


	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, July 1, 2020	$	41		$	882		$	3,129		$	9		$	4,061
Total (gains) losses included in:
Net income	3		(1)	50		(1)	(296)		(2)	3		(2)	(240)
Issues	—			15			93			(3)			105
Settlements	—			(21)			17			—			(4)
Balance, September 30, 2020	$	44		$	926		$	2,943		$	9		$	3,922

Changes in unrealized (gains) losses in net income relating to liabilities held at September 30, 2020	$	—		$	50	(1)	$	(283)	(2)	$	—		$	(233)


	Available-for-Sale Securities
	Corporate Debt Securities		Residential Mortgage Backed Securities		Asset Backed Securities		Total
	(in millions)
Balance, July 1, 2019	$	790	$	44	$	384	$	1,218
Total (gains) losses included in:

Other comprehensive income (loss)	4		—		(3)		1
Purchases	21		—		—		21
Settlements	(35)		(2)		—		(37)
Transfers into Level 3	—		—		10		10

Balance, September 30, 2019	$	780	$	42	$	391	$	1,213

Changes in unrealized gains (losses) in net income relating to assets held at September 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, July 1, 2019	$	31	$	819		$	696		$	1,546
Total (gains) losses included in:
Net income	—		(5)		(1)	663		(2)	658
Issues	6		25			96			127
Settlements	—		(17)			(3)			(20)
Balance, September 30, 2019	$	37	$	822		$	1,452		$	2,311

Changes in unrealized (gains) losses in net income relating to liabilities held at September 30, 2019	$	—	$	(5)	(1)	$	660	(2)	$	655


	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)		(3)
Other comprehensive income (loss)	13		1		(5)		9
Purchases	13		39		—		52
Settlements	(24)		—		—		(24)
Transfers into Level 3	—		—		14		14
Transfers out of Level 3	—		(39)		—		(39)
Balance, September 30, 2020	$	736	$	18	$	398	$	1,152

Changes in unrealized gains (losses) in net income relating to assets held at September 30, 2020	$	(1)	$	—	$	—	$	(1)	(3)
Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at September 30, 2020	$	13	$	1	$	(5)	$	9


	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	(2)		(1)	53		(1)	1,900		(2)	16		(2)	1,967
Issues	3			53			267			(7)			316
Settlements	—			(61)			13			—			(48)
Balance, September 30, 2020	$	44		$	926		$	2,943		$	9		$	3,922

Changes in unrealized (gains) losses in net income relating to liabilities held at September 30, 2020	$	—		$	53	(1)	$	1,936	(2)	$	—		$	1,989


	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)		(3)
Other comprehensive income (loss)	32		—		7		39
Purchases	35		27		—		62
Settlements	(157)		(3)		—		(160)
Transfers into Level 3	—		—		10		10
Transfers out of Level 3	—		(46)		—		(46)
Balance, September 30, 2019	$	780	$	42	$	391	$	1,213

Changes in unrealized gains (losses) in net income relating to assets held at September 30, 2019	$	(1)	$	—	$	—	$	(1)	(3)


	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		(1)	153		(1)	866		(2)	1,022
Issues	20			92			266			378
Settlements	—			(51)			(8)			(59)
Balance, September 30, 2019	$	37		$	822		$	1,452		$	2,311

Changes in unrealized (gains) losses in net income relating to liabilities held at September 30, 2019	$	—		$	153	(1)	$	859	(2)	$	1012

(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.

(3) Included in net investment income 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:


	September 30, 2020
	Fair Value		Valuation Technique	Unobservable Input	Range			Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	728	Discounted cash flow	Yield/spread to U.S. Treasuries (1)	1.2%	–	4.5%	1.9%
Asset backed securities	$	398	Discounted cash flow	Annual default rate	4.8%			4.8%
				Loss severity	25.0%			25.0%
				Yield/spread to swap rates (2)	300 bps	–	450 bps	308 bps
IUL embedded derivatives	$	926	Discounted cash flow	Nonperformance risk (3)	85 bps			85 bps
Fixed deferred indexed annuity embedded derivatives	$	44	Discounted cash flow	Surrender rate (4)	0.0%	–	50.0%	1.2%
				Nonperformance risk (3)	85 bps			85 bps
GMWB and GMAB embedded derivatives	$	2,943	Discounted cash flow	Utilization of guaranteed withdrawals (5) (6)	0.0%	–	48.0%	10.5%
				Surrender rate (4)	0.1%	–	73.5%	3.6%
				Market volatility (7) (8)	4.6%	–	17.9%	11.8%
				Nonperformance risk (3)	85 bps			85 bps
Structured variable annuity embedded derivatives	$	9	Discounted cash flow	Surrender rate (4)	0.8%	–	40.0%	0.9%
				Nonperformance risk (3)	85 bps			85 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:


	September 30, 2020
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,628	$	—	$	—	$	2,749	$	2,749
Policy loans	849		—		849		—		849		(1)
Other investments	482		—		402		69		471
Other receivables	1,449		—		—		1,734		1,734
Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	9,600	$	—	$	—	$	11,300	$	11,300
Short-term borrowings	200		—		200		—		200
Other liabilities	15		—		—		15		15
Separate account liabilities — investment contracts	323		—		323		—		323


	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		—		867		—		867		(1)
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

(1) During the third quarter of 2020, management changed the fair value methodology for policy loans from estimating future expected cash flows and discounting the cash flows at a rate based on the U.S. Treasury curve to using the carrying value as an approximation of fair value as the policy loans are fully collateralized by the cash surrender value of the underlying policies. As a result, policy loans were reclassified from Level 3 to Level 2 in the valuation hierarchy. For comparability and consistency purposes, prior period amounts were revised to reflect the current methodology and classification.