FAIR VALUE DISCLOSURES

Assets and liabilities measured at fair value on a recurring basis are summarized below. At December 31, 2015 and 2014, no assets were required to be measured at fair value on a non-recurring basis. Fair value measurements are required on a non-recurring basis for certain assets, including goodwill and mortgage loans on real estate, only when an OTTI or other event occurs. When such fair value measurements are recorded, they must be classified and disclosed within the fair value hierarchy.

Fair Value Measurements at December 31, 2015



	Level 1			Level 2			Level 3		Total
	(In Millions)
Assets
Investments:
Fixed maturities, available-for-sale:
Corporate	$	—		$	19,882		$	420	$	20,302
U.S. Treasury, government and agency	—			8,775			—		8,775
States and political subdivisions	—			459			45		504
Foreign governments	—			414			1		415
Commercial mortgage-backed	—			30			503		533
Residential mortgage-backed⁽¹⁾	—			640			—		640
Asset-backed⁽²⁾	—			37			40		77
Redeemable preferred stock	258			389			—		647
Subtotal	258			30,626			1,009		31,893
Other equity investments	97			—			49		146
Trading securities	654			6,151			—		6,805
Other invested assets:
Short-term investments	—			369			—		369
Swaps	—			230			—		230
Credit Default Swaps	—			(22		)	—		(22		)
Futures	(1		)	—			—		(1		)
Options	—			390			—		390
Floors	—			61			—		61
Currency Contracts	—			1			—		1
Subtotal	(1		)	1,029			—		1,028
Cash equivalents	2,150			—			—		2,150
Segregated securities	—			565			—		565
GMIB reinsurance contracts	—			—			10,570		10,570
Separate Accounts’ assets	104,058			2,964			313		107,335
Total Assets	$	107,216		$	41,335		$	11,941	$	160,492
Liabilities
GWBL and other features’ liability	$	—		$	—		$	184	184
SCS, SIO, MSO and IUL indexed features’ liability	—			310			—		310
Contingent payment arrangements	—			—			31		31
Total Liabilities	$	—		$	310		$	215	$	525


(1)	Includes publicly traded agency pass-through securities and collateralized obligations.


(2)	Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.

Fair Value Measurements at December 31, 2014



	Level 1			Level 2			Level 3		Total
	(In Millions)
Assets
Investments:
Fixed maturities, available-for-sale:
Corporate	$	—		$	21,840		$	380	$	22,220
U.S. Treasury, government and agency	—			7,331			—		7,331
States and political subdivisions	—			472			47		519
Foreign governments	—			446			—		446
Commercial mortgage-backed	—			20			715		735
Residential mortgage-backed⁽¹⁾	—			793			2		795
Asset-backed⁽²⁾	—			46			53		99
Redeemable preferred stock	254			635			—		889
Subtotal	254			31,583			1,197		33,034
Other equity investments	217			—			61		278
Trading securities	710			4,433			—		5,143
Other invested assets:
Short-term investments	—			103			—		103
Swaps	—			597			—		597
Credit Default Swaps	—			(18		)	—		(18		)
Futures	(2		)	—			—		(2		)
Options	—			473			—		473
Floors	—			120			—		120
Currency Contracts	—			1			—		1
Swaptions	—			72			—		72
Subtotal	(2		)	1,348			—		1,346
Cash equivalents	2,725			—			—		2,725
Segregated securities	—			476			—		476
GMIB reinsurance contracts	—			—			10,711		10,711
Separate Accounts’ assets	107,539			3,072			260		110,871
Total Assets	$	111,443		$	40,912		$	12,229	$	164,584
Liabilities
GWBL and other features’ liability	$	—		$	—		$	128	128
SCS, SIO, MSO and IUL indexed features’ liability	—			380			—		380
Contingent payment arrangements	—			—			42		42
Total Liabilities	$	—		$	380		$	170	$	550


(1)	Includes publicly traded agency pass-through securities and collateralized obligations.


(2)	Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.

At December 31, 2015 and 2014, respectively, the fair value of public fixed maturities is approximately $24,216 million and $24,779 million or approximately 16.2% and 16.2% of the Company’s total assets measured at fair value on a recurring basis (excluding GMIB reinsurance contracts and segregated securities measured at fair value on a recurring basis). The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent valuation service providers and for which the Company maintains a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. Although each security generally is priced by multiple independent valuation service providers, the Company ultimately uses the price received from the independent valuation service provider highest in the vendor hierarchy based on the respective asset type, with limited exception. To validate reasonableness, prices also are internally reviewed by those with relevant expertise through comparison with directly observed recent market trades. Consistent with the fair value hierarchy, public fixed maturity securities validated in this manner generally are reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. If the pricing information received from independent valuation service providers is not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process in accordance with the terms of the respective independent valuation service provider agreement. If, as a result, it is determined that the independent valuation service provider is able to reprice the security in a manner agreed as more consistent with current market observations, the security remains within Level 2. Alternatively, a Level 3 classification may result if the pricing information then is sourced from another vendor, non-binding broker quotes, or internally-developed valuations for which the Company’s own assumptions about market-participant inputs would be used in pricing the security.

At December 31, 2015 and 2014, respectively, the fair value of private fixed maturities is approximately $7,677 million and $8,255 million or approximately 5.1% and 5.4% of the Company’s total assets measured at fair value on a recurring basis. The fair values of some of the Company’s private fixed maturities are determined from prices obtained from independent valuation service providers. Prices not obtained from an independent valuation service provider are determined by using a discounted cash flow model or a market comparable company valuation technique. In certain cases, these models use observable inputs with a discount rate based upon the average of spread surveys collected from private market intermediaries who are active in both primary and secondary transactions, taking into account, among other factors, the credit quality and industry sector of the issuer and the reduced liquidity associated with private placements. Generally, these securities have been reflected within Level 2. For certain private fixed maturities, the discounted cash flow model or a market comparable company valuation technique may also incorporate unobservable inputs, which reflect the Company’s own assumptions about the inputs market participants would use in pricing the asset. To the extent management determines that such unobservable inputs are significant to the fair value measurement of a security, a Level 3 classification generally is made.

As disclosed in Note 3, at December 31, 2015 and 2014, respectively, the net fair value of freestanding derivative positions is approximately $659 million and $1,243 million or approximately 64.1% and 92.3% of Other invested assets measured at fair value on a recurring basis. The fair values of the Company’s derivative positions are generally based on prices obtained either from independent valuation service providers or derived by applying market inputs from recognized vendors into industry standard pricing models. The majority of these derivative contracts are traded in the Over-The-Counter (“OTC”) derivative market and are classified in Level 2. The fair values of derivative assets and liabilities traded in the OTC market are determined using quantitative models that require use of the contractual terms of the derivative instruments and multiple market inputs, including interest rates, prices, and indices to generate continuous yield or pricing curves, including overnight index swap (“OIS”) curves, and volatility factors, which then are applied to value the positions. The predominance of market inputs is actively quoted and can be validated through external sources or reliably interpolated if less observable. If the pricing information received from independent valuation service providers is not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process in accordance with the terms of the respective independent valuation service provider agreement. If as a result it is determined that the independent valuation service provider is able to reprice the derivative instrument in a manner agreed as more consistent with current market observations, the position remains within Level 2. Alternatively, a Level 3 classification may result if the pricing information then is sourced from another vendor, non-binding broker quotes, or internally-developed valuations for which the Company’s own assumptions about market-participant inputs would be used in pricing the security.

At December 31, 2015 and 2014, respectively, investments classified as Level 1 comprise approximately 71.8% and 72.7% of assets measured at fair value on a recurring basis and primarily include redeemable preferred stock, trading securities, cash equivalents and Separate Accounts assets. Fair value measurements classified as Level 1 include exchange-traded prices of fixed maturities, equity securities and derivative contracts, and net asset values for transacting subscriptions and redemptions of mutual fund shares held by Separate Accounts. Cash equivalents classified as Level 1 include money market accounts, overnight commercial paper and highly liquid debt instruments purchased with an original maturity of three months or less, and are carried at cost as a proxy for fair value measurement due to their short-term nature.

At December 31, 2015 and 2014, respectively, investments classified as Level 2 comprise approximately 27.3% and 26.4% of assets measured at fair value on a recurring basis and primarily include U.S. government and agency securities and certain corporate debt securities, such as public and private fixed maturities. As market quotes generally are not readily available or accessible for these securities, their fair value measures are determined utilizing relevant information generated by market transactions involving comparable securities and often are based on model pricing techniques that effectively discount prospective cash flows to present value using appropriate sector-adjusted credit spreads commensurate with the security’s duration, also taking into consideration issuer-specific credit quality and liquidity. Segregated securities classified as Level 2 are U.S. Treasury Bills segregated by AB in a special reserve bank custody account for the exclusive benefit of brokerage customers, as required by Rule 15c3-3 of the Exchange Act and for which fair values are based on quoted yields in secondary markets.

Observable inputs generally used to measure the fair value of securities classified as Level 2 include benchmark yields, reported secondary trades, issuer spreads, benchmark securities and other reference data. Additional observable inputs are used when available, and as may be appropriate, for certain security types, such as prepayment, default, and collateral information for the purpose of measuring the fair value of mortgage- and asset-backed securities. At December 31, 2015 and 2014, respectively, approximately $673 million and $821 million of AAA-rated mortgage- and asset-backed securities are classified as Level 2 for which the observability of market inputs to their pricing models is supported by sufficient, albeit more recently contracted, market activity in these sectors.

The Company’s SCS and EQUI-VEST variable annuity products, the IUL product, and in the MSO fund available in some life contracts offer investment options which permit the contract owner to participate in the performance of an index, ETF or commodity price. These investment options, which depending on the product and on the index selected can currently have 1, 3, or 5 year terms, provide for participation in the performance of specified indices, ETF or commodity price movement up to a segment-specific declared maximum rate. Under certain conditions that vary by product, e.g. holding these segments for the full term, these segments also shield policyholders from some or all negative investment performance associated with these indices, ETF or commodity prices. These investment options have defined formulaic liability amounts, and the current values of the option component of these segment reserves are accounted for as Level 2 embedded derivatives. The fair values of these embedded derivatives are based on prices obtained from independent valuation service providers.

At December 31, 2015 and 2014, respectively, investments classified as Level 3 comprise approximately 0.9% and 1.0% of assets measured at fair value on a recurring basis and primarily include commercial mortgage-backed securities (“CMBS”) and corporate debt securities, such as private fixed maturities. Determinations to classify fair value measures within Level 3 of the valuation hierarchy generally are based upon the significance of the unobservable factors to the overall fair value measurement. Included in the Level 3 classification at December 31, 2015 and 2014, respectively, were approximately $119 million and $135 million of fixed maturities with indicative pricing obtained from brokers that otherwise could not be corroborated to market observable data. The Company applies various due-diligence procedures, as considered appropriate, to validate these non-binding broker quotes for reasonableness, based on its understanding of the markets, including use of internally-developed assumptions about inputs a market participant would use to price the security. In addition, approximately $543 million and $770 million of mortgage- and asset-backed securities, including CMBS, are classified as Level 3 at December 31, 2015 and 2014, respectively. The Company utilizes prices obtained from an independent valuation service vendor to measure fair value of CMBS securities.

The Company also issues certain benefits on its variable annuity products that are accounted for as derivatives and are also considered Level 3. The GMWB feature allows the policyholder to withdraw at minimum, over the life of the contract, an amount based on the contract’s benefit base. The GWBL feature allows the policyholder to withdraw, each year for the life of the contract, a specified annual percentage of an amount based on the contract’s benefit base. The GMAB feature increases the contract account value at the end of a specified period to a GMAB base. The GIB feature provides a lifetime annuity based on predetermined annuity purchase rates if and when the contract account value is depleted. This lifetime annuity is based on predetermined annuity purchase rates applied to a GIB base.

Level 3 also includes the GMIB reinsurance contract asset which is accounted for as derivative contracts. The GMIB reinsurance contract asset’s fair value reflects the present value of reinsurance premiums and recoveries and risk margins over a range of market consistent economic scenarios while the GIB and GWBL and other features related liability reflects the present value of expected future payments (benefits) less fees, adjusted for risk margins, attributable to the GIB and GWBL and other features over a range of market-consistent economic scenarios. The valuations of both the GMIB reinsurance contract asset and GIB and GWBL and other features’ liability incorporate significant non-observable assumptions related to policyholder behavior, risk margins and projections of equity Separate Account funds. The credit risks of the counterparty and of the Company are considered in determining the fair values of its GMIB reinsurance contract asset and GIB and GWBL and other features’ liability positions, respectively, after taking into account the effects of collateral arrangements. Incremental adjustment to the swap curve, adjusted for non-performance risk, is made to the resulting fair values of the GMIB reinsurance contract asset to reflect change in the claims-paying ratings of counterparties to the reinsurance treaties. After giving consideration to collateral arrangements, the Company reduced the fair value of its GMIB reinsurance contract asset by $123 million and $147 million at December 31, 2015 and 2014, respectively, to recognize incremental counterparty non-performance risk. The unadjusted swap curve was determined to reflect a level of general swap market counterparty risk; therefore, no adjustment was made for purpose of determining the fair value of the GIB and GWBL and other features’ liability embedded derivative at December 31, 2015. Equity and fixed income volatilities were modeled to reflect the current market volatility.

In second quarter 2014, the Company refined the fair value calculation of the GMIB reinsurance contract asset and GWBL, GIB and GMAB liabilities, utilizing scenarios that explicitly reflect risk free bond and equity components separately (previously aggregated and including counterparty risk premium embedded in swap rates) and stochastic interest rates for projecting and discounting cash flows (previously a single yield curve). The net impacts of these refinements were a $510 million increase to the GMIB reinsurance contract asset and a $37 million increase in the GWBL, GIB and GMAB liability which are reported in the Company’s consolidated statements of Earnings (Loss) as Increase (decrease) in the fair value of the reinsurance contract asset and Policyholders’ benefits, respectively.

The Company’s Level 3 liabilities include contingent payment arrangements associated with acquisitions in 2010, 2013 and 2014 by AB. At each reporting date, AB estimates the fair values of the contingent consideration expected to be paid based upon probability-weighted AUM and revenue projections, using unobservable market data inputs, which are included in Level 3 of the valuation hierarchy.

In 2015, AFS fixed maturities with fair values of $125 million were transferred out of Level 3 and into Level 2 principally due to the availability of trading activity and/or market observable inputs to measure and validate their fair values. In addition, AFS fixed maturities with fair value of $99 million were transferred from Level 2 into the Level 3 classification. These transfers in the aggregate represent approximately 1.3% of total equity at December 31, 2015.

In 2014, AFS fixed maturities with fair values of $82 million were transferred out of Level 3 and into Level 2 principally due to the availability of trading activity and/or market observable inputs to measure and validate their fair values. In addition, AFS fixed maturities with fair value of $15 million were transferred from Level 2 into the Level 3 classification. These transfers in the aggregate represent approximately 0.50% of total equity at December 31, 2014.

The table below presents a reconciliation for all Level 3 assets and liabilities at December 31, 2015 and 2014, respectively.

Level 3 Instruments

Fair Value Measurements



	Corporate			State and Political Sub-divisions			Foreign Govts		Commercial Mortgage- backed			Residential Mortgage- backed			Asset- backed
	(In Millions)
Balance, January 1, 2015	$	380		$	47		$	—	$	715		$	2		$	53
Total gains (losses), realized and unrealized, included in:
Earnings (loss) as:
Net investment income (loss)	3			—			—		1			—			—
Investment gains (losses), net	2			—			—		(38		)	—			—
Subtotal	5			—			—		(37		)	—			—
Other comprehensive income (loss)	(25		)	(1		)	—		64			—			(4		)
Purchases⁽³⁾	60			—			1		—			—			—
Sales⁽⁴⁾	(38		)	(1		)	—		(175		)	(2		)	(9		)
Transfers into Level 3⁽¹⁾	99			—			—		—			—			—
Transfers out of Level 3⁽¹⁾	(61		)	—			—		(64		)	—			—
Balance, December 31, 2015	$	420		$	45		$	1	$	503		$	—		$	40
Balance, January 1, 2014	$	291		$	46		$	—	$	700		$	4		$	83
Total gains (losses), realized and unrealized, included in:
Earnings (loss) as:
Net investment income (loss)	2			—			—		2			—			—
Investment gains (losses), net	3			—			—		(89		)	—			—
Subtotal	$	5		$	—		$	—	$	(87	)	$	—		$	—
Other comprehensive income (loss)	6			2			—		135			—			7
Purchases⁽³⁾	162			—			—		—			—			—
Sales⁽⁴⁾	(30		)	(1		)	—		(20		)	(2		)	(37		)
Transfers into Level 3⁽¹⁾	15			—			—		—			—			—
Transfers out of Level 3⁽¹⁾	(69		)	—			—		(13		)	—			—
Balance, December 31, 2014	$	380		$	47		$	—	$	715		$	2		$	53

Level 3 Instruments

Fair Value Measurements



	Corporate			State and Political Sub-divisions			Foreign Govts			Commercial Mortgage- backed			Residential Mortgage- backed			Asset- backed
	(In Millions)
Balance, January 1, 2013	$	355		$	50		$	19		$	900		$	9		$	113
Total gains (losses), realized and unrealized, included in:
Earnings (loss) as:
Net investment income (loss)	2			—			—			—			—			—
Investment gains (losses), net	5			—			—			(68		)	—			—
Subtotal	7			—			—			(68		)	—			—
Other comprehensive income (loss)	(1		)	(3		)	(2		)	13			(1		)	3
Purchases⁽³⁾	70			—			—			31			—			—
Sales⁽⁴⁾	(150		)	(1		)	(17		)	(160		)	(4		)	(22		)
Transfers into Level 3⁽¹⁾	20			—			—			—			—			—
Transfers out of Level 3⁽¹⁾	(10		)	—			—			(16		)	—			(11		)
Balance, December 31, 2013	$	291		$	46		$	—		$	700		$	4		$	83



	Redeem-able Preferred Stock			Other Equity Investments			GMIB Reinsurance Asset			Separate Accounts Assets			GWBL and Other Features Liability			Contingent Payment Arrangement
	(In Millions)
Balance, January 1, 2015	$	—		$	61		$	10,711		$	260		$	128		42
Total gains (losses), realized and unrealized, included in:
Earnings (loss) as:
Net investment income (loss)	—			—			—			—			—			—
Investment gains (losses), net	—			5			—			36			—			—
Increase (decrease) in the fair value of reinsurance contracts	—			—			(327		)	—			—			—
Policyholders’ benefits	—			—			—			—			(130		)	—
Subtotal	—			5			(327		)	36			(130		)	—
Other comprehensive income (loss)	—			2			—			—			—			—
Purchases ⁽²⁾	—			1			228			26			186			—
Sales ⁽³⁾	—			(20		)	(42		)	(2		)	—			(11	)
Settlements ⁽⁴⁾	—			—			—			(5		)	—			—
Transfers into Level 3⁽¹⁾	—			—			—			—			—			—
Transfers out of Level 3⁽¹⁾	—			—			—			(2		)	—			—
Balance, December 31, 2015	$	—		$	49		$	10,570		$	313		$	184		31
Balance, January 1, 2014	$	15		$	52		$	6,747		$	237		$	—		38
Total gains (losses), realized and unrealized, included in:
Earnings (loss) as:
Net investment income (loss)	—			3			—			—			—			—
Investment gains (losses), net	—			1			—			15			—			—
Increase (decrease) in the fair value of reinsurance contracts	—			—			3,774			—			—			—
Policyholders’ benefits	—			—			—			—			(8		)	—
Subtotal	$	—		$	4		$	3,774		$	15		$	(8	)	—
Other comprehensive income(loss)	—			—			—			—			—
Purchases ⁽²⁾	—			8			225			16			136			9
Sales ⁽³⁾	(15		)	(1		)	(35		)	(3		)	—			(5	)
Settlements ⁽⁴⁾	—			—			—			(5		)	—			—
Transfers into Level 3⁽¹⁾	—			—			—			—			—			—
Transfers out of Level 3⁽¹⁾	—			(2		)	—			—			—			—
Balance, December 31, 2014	$	—		$	61		$	10,711		$	260		$	128		42



	Redeem- able Preferred Stock		Other Equity Investments			Other Invested Assets			GMIB Reinsurance Asset			Separate Accounts Assets			GWBL and Other Features Liability
	(In Millions)
Balance, January 1, 2013	$	15	$	77		$	(2	)	$	11,044		$	224		$	265
Total gains (losses), realized and unrealized, included in:
Earnings (loss) as:
Net Investment Income (loss)			10
Investment gains (losses), net	—		(7		)	—			—			10			—
Increase (decrease) in the fair value of reinsurance contracts	—		—			—			(4,496		)	—			—
Policyholders’ benefits	—		—			—			—			—			(351		)
Subtotal	—		3			—			(4,496		)	10			(351		)
Other comprehensive income (loss)	—		—			2			—			(1		)	—
Purchases ⁽²⁾	—		4			—			237			6			86
Sales ⁽³⁾	—		(3		)	—			(38		)	(3		)	—
Settlements ⁽⁴⁾	—		—			—			—			(2		)	—
Transfers into Level 3 ⁽¹⁾	—		—			—			—			3			—
Transfers out of Level 3 ⁽¹⁾	—		(29		)	—			—			—			—
Balance, December 31, 2013	$	15	$	52		$	—		$	6,747		$	237		$	—


(1)	Transfers into/out of Level 3 classification are reflected at beginning-of-period fair values.


(2)	For the GMIB reinsurance contract asset and GWBL and other features reserves, represents premiums.


(3)	For the GMIB reinsurance contract asset, represents recoveries from reinsurers and for GWBL and other features reserves represents benefits paid.


(4)	For contingent payment arrangements, it represents payments under the arrangement.

The table below details changes in unrealized gains (losses) for 2015 and 2014 by category for Level 3 assets and liabilities still held at December 31, 2015 and 2014, respectively:



	Earnings (Loss)
	Net Investment Income (Loss)		Investment Gains (Losses), Net		Increase (Decrease) in the Fair Value of Reinsurance Contracts			OCI			Policy- holders’ Benefits
	(In Millions)
Level 3 Instruments
Full Year 2015
Still Held at December 31, 2015
Change in unrealized gains (losses):
Fixed maturities, available-for-sale:
Corporate	$	—	$	—	$	—		$	(25	)	$	—
State and political subdivisions	—		—		—			(2		)	—
Commercial mortgage-backed	—		—		—			61			—
Asset-backed	—		—		—			(4		)	—
Other fixed maturities, available-for-sale	—		—		—			—			—
Subtotal	$	—	$	—	$	—		$	30		$	—
GMIB reinsurance contracts	—		—		(141		)	—			—
Separate Accounts’ assets	—		36		—			—			—
GWBL and other features’ liability	—		—		—			—			184
Total	$	—	$	36	$	(141	)	$	30		$	184
Level 3 Instruments
Full Year 2014
Still Held at December 31, 2014
Change in unrealized gains (losses):
Fixed maturities, available-for-sale:
Corporate	$	—	$	—	$	—		$	6		$	—
State and political subdivisions	—		—		—			2			—
Commercial mortgage-backed	—		—		—			112			—
Asset-backed	—		—		—			7			—
Other fixed maturities, available-for-sale	—		—		—			—			—
Subtotal	$	—	$	—	$	—		$	127		$	—
GMIB reinsurance contracts	—		—		3,964			—			—
Separate Accounts’ assets	—		15		—			—			—
GWBL and other features’ liability	—		—		—			—			128
Total	$	—	$	15	$	3,964		$	127		$	128

The following table discloses quantitative information about Level 3 fair value measurements by category for assets and liabilities as of December 31, 2015 and 2014, respectively.

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2015



	Fair Value		Valuation Technique	Significant Unobservable Input	Range
Assets:	(In Millions)
Investments:
Fixed maturities, available-for-sale:
Corporate	$	61	Matrix pricing model	Spread over the industry-specific benchmark yield curve	50 bps - 565 bps
	154		Market comparable companies	EBITDA multiples Discount rate Cash flow Multiples	7.8x - 19.1x 7.0% - 12.6% 14.0x - 16.5x
Asset-backed	3		Matrix pricing model	Spread over U.S. Treasury curve	30 bps - 687 bps
Other equity investments	10		Market comparable companies	Revenue multiple Marketability Discount	2.5x - 4.8x 30.0%
Separate Accounts’ assets	271		Third party appraisal	Capitalization rate Exit capitalization rate Discount rate	4.9% 5.9% 6.7%
	7		Discounted cash flow	Spread over U.S. Treasury curve Gross domestic product rate Discount factor	280 bps - 411 bps 0.0% - 1.09% 2.3% - 5.9%
GMIB reinsurance contracts	10,570		Discounted cash flow	Lapse Rates Withdrawal rates GMIB Utilization Rates Non-performance risk Volatility rates—Equity	0.6% - 5.7% 0.2% - 8.0% 0.0% - 15% 5 bps - 18 bps 9% - 35%
Liabilities:
GMWB/GWBL⁽¹⁾	120		Discounted cash flow	Lapse Rates Withdrawal rates Volatility rates—Equity	1.0% - 5.7% 0.0% - 7.0% 9% - 35%


(1)	Excludes GMAB and GIB liabilities.

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2014



	Fair Value		Valuation Technique	Significant Unobservable Input	Range
Assets:	(In Millions)
Investments:
Fixed maturities, available-for-sale:
Corporate	$	75	Matrix pricing model	Spread over the industry-specific benchmark yield curve	0 bps - 590 bps
	132		Market comparable companies	Discount rate	11.2% - 15.2%
Asset-backed	5		Matrix pricing model	Spread over U.S. Treasury curve	30 bps - 687 bps
Other equity investments	20		Market comparable companies	Revenue multiple Discount rate Discount years	2.0x - 3.5x 18.0% 2
Separate Accounts’ assets	234		Third party appraisal	Capitalization rate Exit capitalization rate Discount rate	5.2% 6.2% 7.1%
	7		Discounted cash flow	Spread over U.S. Treasury curve Gross domestic product rate Discount factor	238 bps - 395 bps 0.0% - 2.4% 1.3% - 5.4%
GMIB reinsurance contracts	10,711		Discounted cash flow	Lapse Rates Withdrawal Rates GMIB Utilization Rates Non-performance risk Volatility rates - Equity	1.0% - 8.0% 0.2% - 8.0% 0.0% - 15.0% 5 bps - 16 bps 9.0% - 34.0%
Liabilities:
GMWB/GWBL ⁽¹⁾	107		Discounted cash flow	Lapse Rates Withdrawal Rates Volatility rates - Equity	1.0% - 8.0% 0.0% - 7.0% 9.0% - 34.0%


(1)	Excludes GMAB and GIB liabilities.

Excluded from the tables above at December 31, 2015 and 2014, respectively, are approximately $865 million and $1,045 million Level 3 fair value measurements of investments for which the underlying quantitative inputs are not developed by the Company and are not readily available. The fair value measurements of these Level 3 investments comprise approximately 63.1% and 68.8% of total assets classified as Level 3 and represent only 0.6% and 0.7% of total assets measured at fair value on a recurring basis at December 31, 2015 and 2014 respectively. These investments primarily consist of certain privately placed debt securities with limited trading activity, including commercial mortgage-, residential mortgage- and asset-backed instruments, and their fair values generally reflect unadjusted prices obtained from independent valuation service providers and indicative, non-binding quotes obtained from third-party broker-dealers recognized as market participants. Significant increases or decreases in the fair value amounts received from these pricing sources may result in the Company’s reporting significantly higher or lower fair value measurements for these Level 3 investments.

Included in the tables above at December 31, 2015 and 2014, respectively, are approximately $215 million and $207 million fair value of privately placed, available-for-sale corporate debt securities classified as Level 3. The fair value of private placement securities is determined by application of a matrix pricing model or a market comparable company value technique, representing approximately 51.2% and 54.4% of the total fair value of Level 3 securities in the corporate fixed maturities asset class. The significant unobservable input to the matrix pricing model valuation technique is the spread over the industry-specific benchmark yield curve. Generally, an increase or decrease in spreads would lead to directionally inverse movement in the fair value measurements of these securities. The significant unobservable input to the market comparable company valuation technique is the discount rate. Generally, a significant increase (decrease) in the discount rate would result in significantly lower (higher) fair value measurements of these securities.

Residential mortgage-backed securities classified as Level 3 primarily consist of non-agency paper with low trading activity. Included in the tables above at December 31, 2015 and 2014, there were no Level 3 securities that were determined by application of a matrix pricing model and for which the spread over the U.S. Treasury curve is the most significant unobservable input to the pricing result. Generally, a change in spreads would lead to directionally inverse movement in the fair value measurements of these securities.

Asset-backed securities classified as Level 3 primarily consist of non-agency mortgage loan trust certificates, including subprime and Alt-A paper, credit tenant loans, and equipment financings. Included in the tables above at December 31, 2015 and 2014, are approximately 7.5% and 9.4%, respectively, of the total fair value of these Level 3 securities that is determined by application of a matrix pricing model and for which the spread over the U.S. Treasury curve is the most significant unobservable input to the pricing result. Significant increases (decreases) in spreads would result in significantly lower (higher) fair value measurements.

Other equity investments classified as Level 3 primarily consist of private venture capital fund investments of AB for which fair values are adjusted to reflect expected exit values as evidenced by financing and sale transactions with third parties or when consideration of other factors, such as current company performance and market conditions, is determined by management to require valuation adjustment. Significant increase (decrease) in isolation in the underlying enterprise value to revenue multiple and enterprise value to R&D investment multiple, if applicable, would result in significantly higher (lower) fair value measurement. Significant increase (decrease) in the discount rate would result in a significantly lower (higher) fair value measurement. Significant increase (decrease) in isolation in the discount factor ascribed for lack of marketability and various risk factors would result in significantly lower (higher) fair value measurement. Changes in the discount factor generally are not correlated to changes in the value multiples. Also classified as Level 3 at December 31, 2015 and 2014, respectively, are approximately $32 million and $31 million private venture capital fund-of-fund investments of AB for which fair value is estimated using the capital account balances provided by the partnerships. The interests in these partnerships cannot be redeemed. As of December 31, 2015 and 2014, AB’s aggregate unfunded commitments to these investments were approximately $3 million and $3 million, respectively.

Separate Accounts’ assets classified as Level 3 in the table at December 31, 2015 and 2014, primarily consist of a private real estate fund with a fair value of approximately $271 million and $234 million, a private equity investment with a fair value of approximately $2 million and $2 million and mortgage loans with fair value of approximately $5 million and $5 million, respectively. A third party appraisal valuation technique is used to measure the fair value of the private real estate investment fund, including consideration of observable replacement cost and sales comparisons for the underlying commercial properties, as well as the results from applying a discounted cash flow approach. Significant increase (decrease) in isolation in the capitalization rate and exit capitalization rate assumptions used in the discounted cash flow approach to the appraisal value would result in a higher (lower) measure of fair value. A discounted cash flow approach is applied to determine the private equity investment for which the significant unobservable assumptions are the gross domestic product rate formula and a discount factor that takes into account various risks, including the illiquid nature of the investment. A significant increase (decrease) in the gross domestic product rate would have a directionally inverse effect on the fair value of the security. With respect to the fair value measurement of mortgage loans a discounted cash flow approach is applied, a significant increase (decrease) in the assumed spread over U.S. Treasuries would produce a lower (higher) fair value measurement. Changes in the discount rate or factor used in the valuation techniques to determine the fair values of these private equity investments and mortgage loans generally are not correlated to changes in the other significant unobservable inputs. Significant increase (decrease) in isolation in the discount rate or factor would result in significantly lower (higher) fair value measurements. The remaining Separate Accounts’ investments classified as Level 3 excluded from the table consist of mortgage- and asset-backed securities with fair values of approximately $28 million and $7 million at December 31, 2015 and $11 million and $8 million at December 31, 2014, respectively. These fair value measurements are determined using substantially the same valuation techniques as earlier described above for the Company’s General Account investments in these securities.

Significant unobservable inputs with respect to the fair value measurement of the Level 3 GMIB reinsurance contract asset and the Level 3 liabilities identified in the table above are developed using Company data. Validations of unobservable inputs are performed to the extent the Company has experience. When an input is changed the model is updated and the results of each step of the model are analyzed for reasonableness.

The significant unobservable inputs used in the fair value measurement of the Company’s GMIB reinsurance contract asset are lapse rates, withdrawal rates and GMIB utilization rates. Significant increases in GMIB utilization rates or decreases in lapse or withdrawal rates in isolation would tend to increase the GMIB reinsurance contract asset.

Fair value measurement of the GMIB reinsurance contract asset includes dynamic lapse and GMIB utilization assumptions whereby projected contractual lapses and GMIB utilization reflect the projected net amount of risks of the contract. As the net amount of risk of a contract increases, the assumed lapse rate decreases and the GMIB utilization increases. Increases in volatility would increase the asset.

The significant unobservable inputs used in the fair value measurement of the Company’s GMWB and GWBL liability are lapse rates and withdrawal rates. Significant increases in withdrawal rates or decreases in lapse rates in isolation would tend to increase these liabilities. Increases in volatility would increase these liabilities.

The three AB acquisition-related contingent consideration liabilities (with a combined fair value of $31 million and $42 million as of December 31, 2015 and 2014, respectively) are currently valued using projected AUM growth rates with a weighted average of 46.0%, revenue growth rates with a weighted average of 43.0%, and discount rates of 3.0% (using a cost of debt assumption). During the fourth quarters of 2015 and 2014, AB recorded changes in estimates of the contingent consideration payable relating to recent acquisitions of $7 million and $4 million, respectively.

The carrying values and fair values at December 31, 2015 and 2014 for financial instruments not otherwise disclosed in Notes 3 and 12 are presented in the table below. Certain financial instruments are exempt from the requirements for fair value disclosure, such as insurance liabilities other than financial guarantees and investment contracts, limited partnerships accounted for under the equity method and pension and other postretirement obligations.



	Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
	(In Millions)
December 31, 2015:
Mortgage loans on real estate	$	7,171	$	—	$	—	$	7,257	$	7,257
Loans to affiliates	1,087		—		795		390		1,185
Policyholders liabilities: Investment contracts	7,825		—		—		7,930		7,930
Policy loans	3,393		—		—		4,343		4,343
Short-term debt	584		—		584		—		584
Separate Account Liabilities	5,124		—		—		5,124		5,124
December 31, 2014:
Mortgage loans on real estate	$	6,463	$	—	$	—	$	6,617	6,617
Loans to affiliates	1,087		—		1,203		—		1,203
Policyholders liabilities: Investment contracts	2,799		—		—		2,941		2,941
Policy loans	3,408		—		—		4,406		4,406
Short-term debt	688		—		700		—		700
Separate Account Liabilities	5,019		—		—		5,019		5,019

Fair values for commercial and agricultural mortgage loans on real estate are measured by discounting future contractual cash flows to be received on the mortgage loan using interest rates at which loans with similar characteristics and credit quality would be made. The discount rate is derived from taking the appropriate U.S. Treasury rate with a like term to the remaining term of the loan and adding a spread reflective of the risk premium associated with the specific loan. Fair values for mortgage loans anticipated to be foreclosed and problem mortgage loans are limited to the fair value of the underlying collateral, if lower.

The Company’s short-term debt primarily includes commercial paper issued by AB with short-term maturities and book value approximates fair value. The fair values of the Company’s borrowing and lending arrangements with AXA affiliated entities are determined from quotations provided by brokers knowledgeable about these securities and internally assessed for reasonableness, including matrix pricing models for debt securities and discounted cash flow analysis for mortgage loans.

The fair value of policy loans is calculated by discounting expected cash flows based upon the U.S. treasury yield curve and historical loan repayment patterns.

The fair values for the Company’s association plans contracts, supplementary contracts not involving life contingencies (“SCNILC”), deferred annuities and certain annuities, which are included in Policyholder’s account balances and liabilities for investment contracts with fund investments in Separate Accounts are estimated using projected cash flows discounted at rates reflecting current market rates. Significant unobservable inputs reflected in the cash flows include lapse rates and withdrawal rates. Incremental adjustments may be made to the fair value to reflect non-performance risk. Certain other products such as Access Accounts and FHLBNY funding agreements and escrow shield plus product reserves are held at book value.