Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:



	Level 1			Level 2			Level 3			Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	489		$	58		$	—		$	547
U.S. Government agencies and authorities	—			—			—			—
State, municipalities and political subdivisions	—			763			—			763
U.S. corporate public securities	—			8,200			18			8,218
U.S. corporate private securities	—			2,951			738			3,689
Foreign corporate public securities and foreign governments⁽¹⁾	—			2,518			—			2,518
Foreign corporate private securities ⁽¹⁾	—			3,149			122			3,271
Residential mortgage-backed securities	—			2,913			33			2,946
Commercial mortgage-backed securities	—			1,597			16			1,613
Other asset-backed securities	—			988			97			1,085
Total fixed maturities, including securities pledged	489			23,137			1,024			24,650
Equity securities	10			—			53			63
Derivatives:
Interest rate contracts	—			148			—			148
Foreign exchange contracts	—			3			—			3
Equity contracts	—			5			—			5
Credit contracts	—			7			—			7
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	924			—			1			925
Assets held in separate accounts	68,652			5,491			38			74,181
Total assets	$	70,075		$	28,791		$	1,116		$	99,982
Percentage of Level to Total	70		%	29		%	1		%	100		%
Liabilities:
Derivatives:
Guaranteed benefit derivatives:
FIA	$	—		$	—		$	16		$	16
Stabilizer and MCGs	—			—			63			63
Other derivatives:
Interest rate contracts	—			19			—			19
Foreign exchange contracts	—			44			—			44
Equity contracts	—			4			—			4
Credit contracts	—			3			—			3
Embedded derivative on reinsurance	—			(70		)	—			(70		)
Total liabilities	$	—		$	—		$	79		$	79

⁽¹⁾Primarily U.S. dollar denominated.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2017:



	Level 1			Level 2			Level 3			Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	597		$	59		$	—		$	656
U.S. Government agencies and authorities	—			3			—			3
State, municipalities and political subdivisions	—			878			—			878
U.S. corporate public securities	—			9,210			26			9,236
U.S. corporate private securities	—			2,855			642			3,497
Foreign corporate public securities and foreign governments⁽¹⁾	—			2,777			—			2,777
Foreign corporate private securities ⁽¹⁾	—			3,123			92			3,215
Residential mortgage-backed securities	—			2,608			21			2,629
Commercial mortgage-backed securities	—			1,463			7			1,470
Other asset-backed securities	—			638			43			681
Total fixed maturities, including securities pledged	597			23,614			831			25,042
Equity securities, available-for-sale	10			—			50			60
Derivatives:
Interest rate contracts	—			117			—			117
Foreign exchange contracts	—			—			—			—
Equity contracts	—			9			—			9
Credit contracts	—			10			—			10
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	1,078			—			—			1,078
Assets held in separate accounts	67,966			5,059			11			73,036
Total assets	$	69,651		$	28,809		$	892		$	99,352
Percentage of Level to total	70		%	29		%	1		%	100		%
Liabilities:
Derivatives:
Guaranteed benefit derivatives:
FIA	$	—		$	—		$	20		$	20
Stabilizer and MCGs	—			—			97			97
Other derivatives:
Interest rate contracts	—			20			—			20
Foreign exchange contracts	—			52			—			52
Equity contracts	—			7			—			7
Credit contracts	—			6			—			6
Embedded derivative on reinsurance	—			(21		)	—			(21		)
Total liabilities	$	—		$	64		$	117		$	181

⁽¹⁾Primarily U.S. dollar denominated.

Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The following tables summarize the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the period indicated:



	Three Months Ended June 30, 2018
	Fair Value as of April 1			Total Realized/Unrealized Gains (Losses) Included in:						Purchases		Issuances		Sales			Settlements			Transfers into Level 3⁽³⁾		Transfers out of Level 3⁽³⁾			Fair Value as of June 30			Change In Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. Corporate public securities	$	15		$	—		$	—		$	3	$	—	$	—		$	—		$	—	$	—		$	18		$	—
U.S. Corporate private securities	651			—			(3		)	91		—		(5		)	(8		)	12		—			738			—
Foreign corporate private securities⁽¹⁾	101			—			2			75		—		(56		)	—			—		—			122			—
Residential mortgage-backed securities	73			(1		)	(1		)	19		—		(40		)	—			—		(17		)	33			2
Commercial mortgage-backed securities	—			—			—			16		—		—			—			—		—			16			—
Other asset-backed securities	126			—			(1		)	57		—		—			(1		)	21		(105		)	97			—
Total fixed maturities, including securities pledged	966			(1		)	(3		)	261		—		(101		)	(9		)	33		(122		)	1,024			2
Equity securities	48			2			—			3		—		—			—			—		—			53			2
Derivatives:
Guaranteed benefit derivatives:
Stabilizer and MCGs⁽²⁾	(77		)	13			—			—		—		—			1			—		—			(63		)	—
FIA⁽²⁾	(18		)	(1		)	—			—		—		—			3			—		—			(16		)	—
Cash and cash equivalents, short-term investments, and short-term investments under securities loan agreement	—			—			—			1		—		—			—			—		—			1			—
Assets held in separate accounts⁽⁵⁾	11			—			—			27		—		—			—			—		—			38			—
⁽¹⁾Primarily U.S. dollar denominated.
⁽²⁾All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽³⁾ The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
⁽⁴⁾ For financial instruments still held as of June 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽⁵⁾ The investment income and realized gains (losses) and change in unrealized gains (losses) included in net income (loss) for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on Net income (loss) for the Company.



	Six Months Ended June 30, 2018
	Fair Value as of January 1			Total Realized/Unrealized Gains (Losses) Included in:						Purchases		Issuances			Sales			Settlements			Transfers into Level 3⁽³⁾		Transfers out of Level 3⁽³⁾			Fair Value as of June 30			Change in Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. Corporate public securities	$	26		$	—		$	—		$	3	$	—		$	(5	)	$	—		$	—	$	(6	)	$	18		$	—
U.S. Corporate private securities	642			—			(18		)	103		—			(5		)	(4		)	20		—			738			—
Foreign corporate private securities⁽¹⁾	92			(9		)	20			75		—			(56		)	—			—		—			122			(9		)
Residential mortgage-backed securities	21			(3		)	—			20		—			—			—			—		(5		)	33			(3		)
Commercial mortgage-backed securities	7			—			—			16		—			—			—			—		(7		)	16			—
Other asset-backed securities	43			—			(2		)	57		—			—			(2		)	22		(21		)	97			—
Total fixed maturities, including securities pledged	831			(12		)	—			274		—			(66		)	(6		)	42		(39		)	1,024			(12		)
Equity securities	50			—			—			3		—			—			—			—		—			53			—
Derivatives:
Guaranteed benefit derivatives:
Stabilizer and MCGs⁽²⁾	(97		)	34			—			—		(1		)	—			1			—		—			(63		)	—
FIA⁽²⁾	(20		)	(2		)	—			—		1			—			5			—		—			(16		)	—
Cash and cash equivalents, short-term investments, and short-term investments under securities loan agreements	—			—			—			1		—			—			—			—		—			1			—
Assets held in separate accounts⁽⁵⁾	11			—			—			27		—			—			—			—		—			38			—
⁽¹⁾Primarily U.S. dollar denominated.
⁽²⁾All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽³⁾ The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
⁽⁴⁾ For financial instruments still held as of June 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽⁵⁾ The investment income and realized gains (losses) and change in unrealized gains (losses) included in net income (loss) for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on Net income (loss) for the Company.

The following tables summarize the change in fair value of the Company’s Level 3 assets and liabilities and transfers in and out of Level 3 for the periods indicated:



	Three Months Ended June 30, 2017
	Fair Value as of April 1			Total Realized/Unrealized Gains (Losses) Included in:					Purchases		Issuances			Sales			Settlements			Transfers into Level 3⁽³⁾		Transfers out of Level 3⁽³⁾			Fair Value as of June 30			Change In Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. Corporate public securities	$	30		$	—		$	—	$	6	$	—		$	—		$	1		$	—	$	(10	)	$	27		$	—
U.S. Corporate private securities	565			—			4		8		—			—			(1		)	28		(9		)	595			—
Foreign corporate private securities⁽¹⁾	161			—			—		—		—			—			—			—		(33		)	128			—
Residential mortgage-backed securities	30			(2		)	1		17		—			—			—			1		(10		)	37			(2		)
Commercial mortgage-backed securities	6			—			—		2		—			—			(2		)	—		—			6			—
Other asset-backed securities	23			—			—		24		—			—			—			—		(11		)	36			—
Total fixed maturities, including securities pledged	815			(2		)	5		57		—			—			(2		)	29		(73		)	829			(2		)
Equity securities, available-for-sale	50			—			1		—		—			—			—			—		—			51			—
Derivatives:
Guaranteed benefit derivatives:
Stabilizer and MCGs⁽²⁾	(131		)	(9		)	—		—		(1		)	—			—			—		—			(141		)	—
FIA⁽²⁾	(23		)	—			—		—		—			—			—			—		—			(23		)	—
Cash and cash equivalents, short-term investments, and short-term investments under securities loan agreement	—			—			—		—		—			—			—			—		—			—			—
Assets held in separate accounts⁽⁵⁾	13			—			—		1		—			(3		)	—			—		(8		)	3			—
⁽¹⁾Primarily U.S. dollar denominated.
⁽²⁾All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽³⁾ The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
⁽⁴⁾ For financial instruments still held as of June 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽⁵⁾ The investment income and realized gains (losses) and change in unrealized gains (losses) included in net income (loss) for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on Net income (loss) for the Company.



	Six Months Ended June 30, 2017
	Fair Value as of January 1			Total Realized/Unrealized Gains (Losses) Included in:						Purchases		Issuances			Sales			Settlements			Transfers into Level 3⁽³⁾		Transfers out of Level 3⁽³⁾			Fair Value as of June 30			Change in Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. Corporate public securities	$	7		$	—		$	—		$	11	$	—		$	—		$	—		$	9	$	—		$	27		$	—
U.S. Corporate private securities	525			—			4			45		—			—			(2		)	32		(9		)	595			—
Foreign corporate private securities⁽¹⁾	154			—			(1		)	18		—			—			(10		)	—		(33		)	128			—
Residential mortgage-backed securities	21			(3		)	—			17		—			—			—			2		—			37			(4		)
Commercial mortgage-backed securities	10			—			—			2		—			—			(3		)	—		(3		)	6			—
Other asset-backed securities	27			—			1			24		—			—			(1		)	—		(15		)	36			—
Total fixed maturities, including securities pledged	744			(3		)	4			117		—			—			(16		)	43		(60		)	829			(4		)
Equity securities, available-for-sale	48			—			1			2		—			—			—			—		—			51			—
Derivatives:
Guaranteed benefit derivatives:
Stabilizer and MCGs⁽²⁾	(151		)	12			—			—		(2		)	—			—			—		—			(141		)	—
FIA⁽²⁾	(23		)	(1		)	—			—		—			—			1			—		—			(23		)	—
Cash and cash equivalents, short-term investments, and short-term investments under securities loan agreements	—			—			—			—		—			—			—			—		—			—			—
Assets held in separate accounts⁽⁵⁾	6			—			—			6		—			(3		)	—			2		(8		)	3			—
⁽¹⁾Primarily U.S. dollar denominated.
⁽²⁾All gains and losses on Level 3 liabilities are classified as realized gains (losses) for the purpose of this disclosure because it is impracticable to track realized and unrealized gains (losses) separately on a contract-by-contract basis. These amounts are included in Other net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽³⁾ The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.
⁽⁴⁾ For financial instruments still held as of June 30, amounts are included in Net investment income and Total net realized capital gains (losses) in the Condensed Consolidated Statements of Operations.
⁽⁵⁾ The investment income and realized gains (losses) and change in unrealized gains (losses) included in net income (loss) for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on Net income (loss) for the Company.

Fair Value Inputs, Liabilities, Quantitative Information

The following table presents the unobservable inputs for Level 3 fair value measurements as of June 30, 2018:



	Range⁽¹⁾
Unobservable Input	FIA		Stabilizer / MCG
Interest rate implied volatility	—		0.1% to 6.5%
Nonperformance risk	0.07% to 1.2%		0.07% to 1.2%
Actuarial Assumptions:
Partial Withdrawals	0% to 7%		—
Lapses	0% to 42%	⁽²⁾	0% to 50%	⁽³⁾
Policyholder Deposits⁽⁴⁾	—		0% to 50%	⁽³⁾

⁽¹⁾ Represents the range of reasonable assumptions that management has used in its fair value calculations.

⁽²⁾ Lapse rates tend to be lower during the contractual surrender charge period and higher after the surrender charge period ends; the highest lapse rates occur in the year immediately after the end of the surrender charge period.

⁽³⁾ Stabilizer contracts with recordkeeping agreements have different range of lapse and policyholder deposit assumptions from Stabilizer (Investment only) and MCG contracts as shown below:



	Percentage of Plans		Overall Range of Lapse Rates	Range of Lapse Rates for 85% of Plans	Overall Range of Policyholder Deposits	Range of Policyholder Deposits for 85% of Plans
Stabilizer (Investment Only) and MCG Contracts	92	%	0-25%	0-15%	0-30%	0-15%
Stabilizer with Recordkeeping Agreements	8	%	0-50%	0-30%	0-50%	0-25%
Aggregate of all plans	100	%	0-50%	0-30%	0-50%	0-25%

⁽⁴⁾ Measured as a percentage of assets under management or assets under administration.

The following table presents the unobservable inputs for Level 3 fair value measurements as of December 31, 2017:



	Range⁽¹⁾
Unobservable Input	FIA		Stabilizer / MCG
Interest rate implied volatility	—		0.1% to 6.3%
Nonperformance risk	0.02% to 1.1%		0.02% to 1.1%
Actuarial Assumptions:
Partial Withdrawals	0.5% to 7%		—
Lapses	0% to 42%	⁽²⁾	0% to 50%	⁽³⁾
Policyholder Deposits⁽⁴⁾	—		0% to 50%	⁽³⁾

⁽¹⁾ Represents the range of reasonable assumptions that management has used in its fair value calculations.

⁽³⁾ Stabilizer contracts with recordkeeping agreements have different range of lapse and policyholder deposit assumptions from Stabilizer (Investment only) and MCG contracts as shown below:



	Percentage of Plans		Overall Range of Lapse Rates	Range of Lapse Rates for 85% of Plans	Overall Range of Policyholder Deposits	Range of Policyholder Deposits for 85% of Plans
Stabilizer (Investment Only) and MCG Contracts	92	%	0-25%	0-15%	0-30%	0-15%
Stabilizer with Recordkeeping Agreements	8	%	0-50%	0-30%	0-50%	0-25%
Aggregate of all plans	100	%	0-50%	0-30%	0-50%	0-25%

⁽⁴⁾ Measured as a percentage of assets under management or assets under administration.

Fair Value, by Balance Sheet Grouping

The carrying values and estimated fair values of the Company’s financial instruments as of the dates indicated:



	June 30, 2018						December 31, 2017
	Carrying Value			Fair Value			Carrying Value			Fair Value
Assets:
Fixed maturities, including securities pledged	$	24,650		$	24,650		$	25,042		$	25,042
Equity securities	63			63			60			60
Mortgage loans on real estate	5,002			5,018			4,910			4,924
Policy loans	212			212			214			214
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	925			925			1,078			1,078
Derivatives	163			163			136			136
Notes receivable from affiliate	—			—			175			222
Short-term loan to affiliate	—			—			80			80
Other Investments	39			39			—			—
Assets held in separate accounts	74,181			74,181			73,036			73,036
Liabilities:
Investment contract liabilities:
Funding agreements without fixed maturities and deferred annuities⁽¹⁾	25,391			28,025			25,314			29,431
Funding agreements with fixed maturities	627			637			—			—
Supplementary contracts, immediate annuities and other	347			383			365			418
Deposit liabilities	77			114			135			198
Derivatives:
Guaranteed benefit derivatives:
FIA	16			16			20			20
Stabilizer and MCGs	63			63			97			97
Other derivatives	70			70			85			85
Short-term debt	1			1			—			—
Long-term debt	4			4			5			5
Embedded derivatives on reinsurance	(70		)	(70		)	(21		)	(21		)

⁽¹⁾ Certain amounts included in Funding agreements without fixed maturities and deferred annuities are also reflected within the Guaranteed benefit derivatives section of the table above.