Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2019

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 March 31, 2019:



	Level 1			Level 2			Level 3			Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	506		$	61		$	—		$	567
State, municipalities and political subdivisions	—			789			—			789
U.S. corporate public securities	—			7,920			52			7,972
U.S. corporate private securities	—			2,998			888			3,886
Foreign corporate public securities and foreign governments⁽¹⁾	—			2,636			—			2,636
Foreign corporate private securities ⁽¹⁾	—			3,203			122			3,325
Residential mortgage-backed securities	—			3,214			31			3,245
Commercial mortgage-backed securities	—			2,142			11			2,153
Other asset-backed securities	—			1,240			89			1,329
Total fixed maturities, including securities pledged	506			24,203			1,193			25,902
Equity securities	7			—			80			87
Derivatives:
Interest rate contracts	1			112			—			113
Foreign exchange contracts	—			7			—			7
Equity contracts	—			2			—			2
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	1,400			—			—			1,400
Assets held in separate accounts	67,616			5,686			67			73,369
Total assets	$	69,530		$	30,010		$	1,340		$	100,880
Percentage of Level to Total	69		%	30		%	1		%	100		%
Liabilities:
Derivatives:
Guaranteed benefit derivatives:
FIA	$	—		$	—		$	11		$	11
Stabilizer and MCGs	—			—			4			4
Other derivatives:
Interest rate contracts	—			156			—			156
Foreign exchange contracts	—			22			—			22
Equity contracts	—			2			—			2
Credit contracts	—			2			—			2
Embedded derivative on reinsurance	—			(41		)	—			(41		)
Total liabilities	$	—		$	141		$	15		$	156

⁽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, 2018:



	Level 1			Level 2			Level 3			Total
Assets:
Fixed maturities, including securities pledged:
U.S. Treasuries	$	679		$	59		$	—		$	738
State, municipalities and political subdivisions	—			764			—			764
U.S. corporate public securities	—			7,987			28			8,015
U.S. corporate private securities	—			2,882			771			3,653
Foreign corporate public securities and foreign governments⁽¹⁾	—			2,540			—			2,540
Foreign corporate private securities ⁽¹⁾	—			3,051			124			3,175
Residential mortgage-backed securities	—			3,026			10			3,036
Commercial mortgage-backed securities	—			1,893			12			1,905
Other asset-backed securities	—			1,114			94			1,208
Total fixed maturities, including securities pledged	679			23,316			1,039			25,034
Equity securities, available-for-sale	7			—			50			57
Derivatives:
Interest rate contracts	—			117			—			117
Foreign exchange contracts	—			10			—			10
Equity contracts	—			1			—			1
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	1,207			—			—			1,207
Assets held in separate accounts	61,457			5,805			61			67,323
Total assets	$	63,350		$	29,249		$	1,150		$	93,749
Percentage of Level to total	68		%	31		%	1		%	100		%
Liabilities:
Derivatives:
Guaranteed benefit derivatives:
FIA	$	—		$	—		$	11		$	11
Stabilizer and MCGs	—			—			4			4
Other derivatives:
Interest rate contracts	—			76			—			76
Foreign exchange contracts	—			20			—			20
Equity contracts	—			1			—			1
Credit contracts	—			2			—			2
Embedded derivative on reinsurance	—			(80		)	—			(80		)
Total liabilities	$	—		$	19		$	15		$	34

⁽¹⁾Primarily U.S. dollar denominated.

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

The following table summarizes 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 March 31, 2019
	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 March 31			Change In Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. Corporate public securities	$	28		$	—		$	1	$	—	$	—		$	—		$	—		$	23	$	—		$	52		$	—
U.S. Corporate private securities	771			—			29		102		—			(6		)	(8		)	—		—			888			—
Foreign corporate private securities⁽¹⁾	124			(17		)	23		48		—			(56		)	—			—		—			122			—
Residential mortgage-backed securities	10			(1		)	—		22		—			—			—			—		—			31			(1		)
Commercial mortgage-backed securities	12			—			—		—		—			—			(1		)	—		—			11			—
Other asset-backed securities	94			—			—		16		—			—			(1		)	—		(20		)	89			—
Total fixed maturities, including securities pledged	1,039			(18		)	53		188		—			(62		)	(10		)	23		(20		)	1,193			(1		)
Equity securities	50			1			—		29		—			—			—			—		—			80			1
Derivatives:
Guaranteed benefit derivatives:
Stabilizer and MCGs⁽²⁾	(4		)	1			—		—		(1		)	—			—			—		—			(4		)	—
FIA⁽²⁾	(11		)	(1		)	—		—		—			—			1			—		—			(11		)	—
Assets held in separate accounts⁽⁵⁾	61			1			—		6		—			—			—			3		(4		)	67			—
⁽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 March 31, 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 table summarizes 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 March 31, 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 March 31			Change In Unrealized Gains (Losses) Included in Earnings⁽⁴⁾
				Net Income			OCI
Fixed maturities, including securities pledged:
U.S. Corporate public securities	$	26		$	—		$	—		$	—	$	—		$	(11	)	$	—		$	—	$	—		$	15		$	—
U.S. Corporate private securities	642			—			(15		)	12		—			—			(2		)	14		—			651			—
Foreign corporate private securities⁽¹⁾	92			(9		)	18			—		—			—			—			—		—			101			(9		)
Residential mortgage-backed securities	21			(1		)	—			58		—			—			—			—		(5		)	73			(2		)
Commercial mortgage-backed securities	7			—			—			—		—			—			—			—		(7		)	—			—
Other asset-backed securities	43			—			—			100		—			—			(1		)	—		(16		)	126			—
Total fixed maturities, including securities pledged	831			(10		)	3			170		—			(11		)	(3		)	14		(28		)	966			(11		)
Equity securities, available-for-sale	50			(2		)	—			—		—			—			—			—		—			48			(2		)
Derivatives:
Guaranteed benefit derivatives:
Stabilizer and MCGs⁽²⁾	(97		)	21			—			—		(1		)	—			—			—		—			(77		)	—
FIA⁽²⁾	(20		)	(1		)	—			—		1			—			2			—		—			(18		)	—
Assets held in separate accounts⁽⁵⁾	11			—			—			—		—			—			—			—		—			11			—
⁽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 March 31, 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 March 31, 2019:



	Range⁽¹⁾
Unobservable Input	FIA		Stabilizer / MCG
Interest rate implied volatility	—		0.1% to 5.8%
Nonperformance risk	0.25% to 0.99%		0.25% to 0.99%
Actuarial Assumptions:
Partial Withdrawals	0% to 7%		—
Lapses	0% to 56%	⁽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, 2018:



	Range⁽¹⁾
Unobservable Input	FIA		Stabilizer / MCG
Interest rate implied volatility	—		0.1% to 6.5%
Nonperformance risk	0.38% to 1.2%		0.38% 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.

⁽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:



	March 31, 2019						December 31, 2018
	Carrying Value			Fair Value			Carrying Value			Fair Value
Assets:
Fixed maturities, including securities pledged	$	25,902		$	25,902		$	25,034		$	25,034
Equity securities	87			87			57			57
Mortgage loans on real estate	4,811			4,930			4,918			4,983
Policy loans	207			207			210			210
Cash and cash equivalents, short-term investments and short-term investments under securities loan agreements	1,400			1,400			1,207			1,207
Derivatives	122			122			128			128
Short-term loan to affiliate	103			103			—			—
Other Investments	35			35			40			40
Assets held in separate accounts	73,369			73,369			67,323			67,323
Liabilities:
Investment contract liabilities:
Funding agreements without fixed maturities and deferred annuities⁽¹⁾	25,920			29,990			26,068			29,108
Funding agreements with fixed maturities	687			685			658			652
Supplementary contracts, immediate annuities and other	579			679			333			354
Deposit liabilities	77			126			77			122
Derivatives:
Guaranteed benefit derivatives:
FIA	11			11			11			11
Stabilizer and MCGs	4			4			4			4
Other derivatives	182			182			99			99
Short-term debt⁽²⁾	1			1			1			1
Long-term debt⁽²⁾	4			4			4			4
Embedded derivatives on reinsurance	(41		)	(41		)	(80		)	(80		)

⁽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.

⁽²⁾ Included in Other Liabilities on the Consolidated Balance Sheets.