Fair Value (Tables)

9 Months Ended

Sep. 30, 2019



	September 30, 2019
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	29,875	$	432	$	30,307
U.S. government and agency	1,570		6,020		—		7,590
RMBS	—		9,063		77		9,140
Foreign corporate	—		9,112		376		9,488
CMBS	—		5,511		34		5,545
State and political subdivision	—		3,897		73		3,970
ABS	—		1,847		64		1,911
Foreign government	—		1,725		—		1,725
Total fixed maturity securities	1,570		67,050		1,056		69,676
Equity securities	11		133		4		148
Short-term investments	1,018		465		—		1,483
Derivative assets: (1)
Interest rate	—		3,114		—		3,114
Foreign currency exchange rate	—		436		13		449
Credit	—		21		9		30
Equity market	—		803		99		902
Total derivative assets	—		4,374		121		4,495
Embedded derivatives within asset host contracts (2)	—		—		303		303
Separate account assets	224		96,558		—		96,782
Total assets	$	2,823	$	168,580	$	1,484	$	172,887
Liabilities
Derivative liabilities: (1)
Interest rate	$	—	$	422	$	—	$	422
Foreign currency exchange rate	—		28		1		29
Equity market	—		1,534		251		1,785
Total derivative liabilities	—		1,984		252		2,236
Embedded derivatives within liability host contracts (2)	—		—		4,673		4,673
Total liabilities	$	—	$	1,984	$	4,925	$	6,909



	December 31, 2018
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	23,740	$	319	$	24,059
U.S. government and agency	2,334		6,310		—		8,644
RMBS	—		8,429		6		8,435
Foreign corporate	—		7,503		392		7,895
CMBS	—		5,004		129		5,133
State and political subdivision	—		3,512		74		3,586
ABS	—		2,072		39		2,111
Foreign government	—		1,485		—		1,485
Total fixed maturity securities	2,334		58,055		959		61,348
Equity securities	13		124		3		140
Derivative assets: (1)
Interest rate	—		717		—		717
Foreign currency exchange rate	—		288		11		299
Credit	—		10		7		17
Equity market	—		1,634		98		1,732
Total derivative assets	—		2,649		116		2,765
Embedded derivatives within asset host contracts (2)	—		—		228		228
Separate account assets	217		91,293		1		91,511
Total assets	$	2,564	$	152,121	$	1,307	$	155,992
Liabilities
Derivative liabilities: (1)
Interest rate	$	—	$	619	$	—	$	619
Foreign currency exchange rate	—		48		—		48
Credit	—		2		1		3
Equity market	—		1,205		237		1,442
Total derivative liabilities	—		1,874		238		2,112
Embedded derivatives within liability host contracts (2)	—		—		2,516		2,516
Total liabilities	$	—	$	1,874	$	2,754	$	4,628

__________________

(1)

Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.

(2)

Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables and other invested assets on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances on the consolidated balance sheets.

Fair Value Inputs, Quantitative Information

The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:



					September 30, 2019			December 31, 2018			Impact of Increase in Input on Estimated Fair Value
	Valuation Techniques		Significant Unobservable Inputs		Range			Range			Impact of Increase in Input on Estimated Fair Value
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates	0.02%	-	11.31%	0.02%	-	11.31%	Decrease (1)
			•	Lapse rates	0.25%	-	16.00%	0.25%	-	16.00%	Decrease (2)
			•	Utilization rates	0.00%	-	25.00%	0.00%	-	25.00%	Increase (3)
			•	Withdrawal rates	0.25%	-	10.00%	0.25%	-	10.00%	(4)
			•	Long-term equity volatilities	16.50%	-	22.00%	16.50%	-	22.00%	Increase (5)
			•	Nonperformance risk spread	0.61%	-	2.37%	1.91%	-	2.66%	Decrease (6)

___________________


(1)	Mortality rates vary by age and by demographic characteristics such as gender. Range shown reflects the mortality rate for policyholders between 35 and 90 years old, which represents the majority of the business with living benefits. Mortality rate assumptions are set based on company experience and include an assumption for mortality improvement.

(2)

Range reflects base lapse rates for major product categories for duration 1-20, which represents majority of business with living benefit riders. Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in-the-money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies.

(3)

The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible in a given year. The range shown represents the floor and cap of the GMIB dynamic election rates across varying levels of in-the-money. For lifetime withdrawal guarantee riders, the assumption is that everyone will begin withdrawals once account value reaches zero which is equivalent to a 100% utilization rate. Utilization rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder.

(4)

The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.


(5)	Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(6)

Nonperformance risk spread varies by duration. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.

Fair Value, Measured on Recurring Basis, Unobservable Input Reconciliation

The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities
	Corporate (1)			Structured Securities			State and Political Subdivision			Foreign Government		Equity Securities			Short-term Investments		Net Derivatives (2)			Net Embedded Derivatives (3)			Separate Account Assets (4)
	(In millions)
Three Months Ended September 30, 2019
Balance, beginning of period	$	748		$	108		$	74		$	—	$	4		$	—	$	(134	)	$	(3,450	)	$	—
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	—			—			—			—		—			—		(2		)	(703		)	—
Total realized/unrealized gains (losses) included in AOCI	—			1			—			—		—			—		3			—			—
Purchases (7)	117			61			—			—		—			—		—			—			—
Sales (7)	(22		)	(6		)	(1		)	—		—			—		—			—			—
Issuances (7)	—			—			—			—		—			—		—			—			—
Settlements (7)	—			—			—			—		—			—		—			(217		)	—
Transfers into Level 3 (8)	49			29			—			—		—			—		—			—			—
Transfers out of Level 3 (8)	(84		)	(18		)	—			—		—			—		2			—			—
Balance, end of period	$	808		$	175		$	73		$	—	$	4		$	—	$	(131	)	$	(4,370	)	$	—
Three Months Ended September 30, 2018
Balance, beginning of period	$	1,815		$	1,261		$	8		$	—	$	120		$	—	$	(284	)	$	(1,498	)	$	4
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	—			10			2			—		(2		)	—		(4		)	(15		)	—
Total realized/unrealized gains (losses) included in AOCI	(44		)	(8		)	(2		)	—		—			—		—			—			—
Purchases (7)	56			287			—			—		—			—		—			—			1
Sales (7)	(50		)	(114		)	(6		)	—		—			—		—			—			—
Issuances (7)	—			—			—			—		—			—		—			—			—
Settlements (7)	—			—			—			—		—			—		—			(152		)	—
Transfers into Level 3 (8)	20			3			—			—		9			—		—			—			—
Transfers out of Level 3 (8)	(208		)	(170		)	(2		)	—		(5		)	—		—			—			(1		)
Balance, end of period	$	1,589		$	1,269		$	—		$	—	$	122		$	—	$	(288	)	$	(1,665	)	$	4
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2019 (9)	$	—		$	—		$	—		$	—	$	—		$	—	$	(2	)	$	(778	)	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2018 (9)	$	—		$	4		$	—		$	—	$	—		$	—	$	(4	)	$	(13	)	$	—



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities
	Corporate (1)			Structured Securities			State and Political Subdivision			Foreign Government			Equity Securities			Short-term Investments			Net Derivatives (2)			Net Embedded Derivatives (3)			Separate Account Assets (4)
	(In millions)
Nine Months Ended September 30, 2019
Balance, beginning of period	$	711		$	174		$	74		$	—		$	3		$	—		$	(122	)	$	(2,288	)	$	1
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	—			1			—			—			—			—			(10		)	(1,436		)	—
Total realized/unrealized gains (losses) included in AOCI	11			3			—			—			—			—			5						—
Purchases (7)	178			74			—			—			—			—			—			—			—
Sales (7)	(78		)	(24		)	(1		)	—			—			—			—			—			(1		)
Issuances (7)	—			—			—			—			—			—			—			—			—
Settlements (7)	—			—			—			—			—			—			—			(646		)	—
Transfers into Level 3 (8)	147			92			—			—			1			—			—			—			—
Transfers out of Level 3 (8)	(161		)	(145		)	—			—			—			—			(4		)	—			—
Balance, end of period	$	808		$	175		$	73		$	—		$	4		$	—		$	(131	)	$	(4,370	)	$	—
Nine Months Ended September 30, 2018
Balance, beginning of period	$	1,937		$	1,222		$	—		$	5		$	124		$	14		$	(279	)	$	(2,007	)	$	5
Total realized/unrealized gains (losses) included in net income (loss) (5) (6)	2			21			—			—			(4		)	—			(12		)	767			—
Total realized/unrealized gains (losses) included in AOCI	(118		)	(10		)	—			—			—			—			—			—			—
Purchases (7)	164			339			—			—			—			—			3			—			1
Sales (7)	(183		)	(227		)	—			—			(3		)	(14		)	—			—			(1		)
Issuances (7)	—			—			—			—			—			—			—			—			—
Settlements (7)	—			—			—			—			—			—			—			(425		)	(1		)
Transfers into Level 3 (8)	20			—			—			—			10			—			—			—			—
Transfers out of Level 3 (8)	(233		)	(76		)	—			(5		)	(5		)	—			—			—			—
Balance, end of period	$	1,589		$	1,269		$	—		$	—		$	122		$	—		$	(288	)	$	(1,665	)	$	4
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2019 (9)	$	—		$	1		$	—		$	—		$	—		$	—		$	(11	)	$	(1,647	)	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2018 (9)	$	(1	)	$	14		$	—		$	—		$	(4	)	$	—		$	(12	)	$	739		$	—

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(1)	Comprised of U.S. and foreign corporate securities.


(2)	Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.


(3)	Embedded derivative assets and liabilities are presented net for purposes of the rollforward.


(4)	Investment performance related to separate account assets is fully offset by corresponding amounts credited to contract holders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses).

(5)

Amortization of premium/accretion of discount is included within net investment income. Impairments charged to net income (loss) on securities are included in net investment gains (losses). Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).


(6)	Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.


(7)	Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.


(8)	Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.

(9)

Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).

Fair Value of Financial Instruments Carried at Other Than Fair Value

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:



	September 30, 2019
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	15,269	$	—	$	—	$	15,980	$	15,980
Policy loans	$	915	$	—	$	518	$	522	$	1,040
Other invested assets	$	63	$	—	$	50	$	13	$	63
Premiums, reinsurance and other receivables	$	1,612	$	—	$	46	$	1,982	$	2,028
Liabilities
Policyholder account balances	$	15,469	$	—	$	—	$	15,682	$	15,682
Long-term debt	$	845	$	—	$	40	$	887	$	927
Other liabilities	$	898	$	—	$	553	$	349	$	902
Separate account liabilities	$	1,122	$	—	$	1,122	$	—	$	1,122



	December 31, 2018
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	13,596	$	—	$	—	$	13,761	$	13,761
Policy loans	$	1,001	$	—	$	619	$	452	$	1,071
Other invested assets	$	77	$	—	$	64	$	13	$	77
Premiums, reinsurance and other receivables	$	1,426	$	—	$	31	$	1,501	$	1,532
Liabilities
Policyholder account balances	$	15,183	$	—	$	—	$	13,732	$	13,732
Long-term debt	$	434	$	—	$	38	$	380	$	418
Other liabilities	$	395	$	—	$	54	$	323	$	377
Separate account liabilities	$	1,025	$	—	$	1,025	$	—	$	1,025