Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of assets and liabilities that are measured at fair value on a recurring and non-recurring basis

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2017.



($ in millions)	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Counterparty and cash collateral netting			Balance as of September 30, 2017
Assets
Fixed income securities:
U.S. government and agencies	$	3,190		$	710		$	—					$	3,900
Municipal	—			7,687			107						7,794
Corporate - public	—			32,269			104						32,373
Corporate - privately placed	—			11,923			250						12,173
Foreign government	—			1,093			—						1,093
ABS - CDO	—			545			19						564
ABS - consumer and other	—			640			66						706
RMBS	—			611			—						611
CMBS	—			127			26						153
Redeemable preferred stock	—			24			—						24
Total fixed income securities	3,190			55,629			572						59,391
Equity securities	5,938			328			168						6,434
Short-term investments	380			1,818			—						2,198
Other investments: Free-standing derivatives	—			109			1			$	(9	)	101
Separate account assets	3,422			—			—						3,422
Other assets	1			—			—						1
Total recurring basis assets	12,931			57,884			741			(9		)	71,547
Non-recurring basis⁽¹⁾	—			—			24						24
Total assets at fair value	$	12,931		$	57,884		$	765		$	(9	)	$	71,571
% of total assets at fair value	18.0		%	80.9		%	1.1		%	—		%	100		%

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(292	)				$	(292	)
Other liabilities: Free-standing derivatives	(1		)	(69		)	—			$	21		(49		)
Total liabilities at fair value	$	(1	)	$	(69	)	$	(292	)	$	21		$	(341	)
% of total liabilities at fair value	0.3		%	20.2		%	85.6		%	(6.1		)%	100		%

_______________


⁽¹⁾	Includes $14 million of limited partnership interests and $10 million of mortgage loans written-down to fair value in connection with recognizing other-than-temporary impairments.

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2016.



($ in millions)	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Counterparty and cash collateral netting			Balance as of December 31, 2016
Assets
Fixed income securities:
U.S. government and agencies	$	2,918		$	719		$	—					$	3,637
Municipal	—			7,208			125						7,333
Corporate - public	—			31,414			78						31,492
Corporate - privately placed	—			11,846			263						12,109
Foreign government	—			1,075			—						1,075
ABS - CDO	—			650			27						677
ABS - consumer and other	—			452			42						494
RMBS	—			727			1						728
CMBS	—			248			22						270
Redeemable preferred stock	—			24			—						24
Total fixed income securities	2,918			54,363			558						57,839
Equity securities	5,247			256			163						5,666
Short-term investments	850			3,423			15						4,288
Other investments: Free-standing derivatives	—			119			1			$	(9	)	111
Separate account assets	3,393			—			—						3,393
Other assets	—			—			1						1
Total recurring basis assets	12,408			58,161			738			(9		)	71,298
Non-recurring basis ⁽¹⁾	—			—			24						24
Total assets at fair value	$	12,408		$	58,161		$	762		$	(9	)	$	71,322
% of total assets at fair value	17.4		%	81.5		%	1.1		%	—		%	100		%
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(290	)				$	(290	)
Other liabilities: Free-standing derivatives	(1		)	(68		)	(3		)	$	28		(44		)
Total liabilities at fair value	$	(1	)	$	(68	)	$	(293	)	$	28		$	(334	)
% of total liabilities at fair value	0.3		%	20.4		%	87.7		%	(8.4		)%	100		%

_______________


⁽¹⁾	Includes $24 million of limited partnership interests written-down to fair value in connection with recognizing other-than-temporary impairments.

Summary of quantitative information about the significant unobservable inputs

The following table summarizes quantitative information about the significant unobservable inputs used in Level 3 fair value measurements.



($ in millions)	Fair value			Valuation technique	Unobservable input	Range	Weighted average
September 30, 2017
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(253	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.74%
December 31, 2016
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(247	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.75%

Schedule of the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the three months ended September 30, 2017.



($ in millions)				Total gains (losses) included in:
	Balance as of June 30, 2017			Net income ⁽¹⁾			OCI		Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	114		$	—		$	—	$	—		$	(4	)
Corporate - public	60			—			—		—			(4		)
Corporate - privately placed	266			1			2		—			(34		)
ABS - CDO	91			—			1		—			(68		)
ABS - consumer and other	120			—			—		—			(62		)
CMBS	24			—			—		—			—
Total fixed income securities	675			1			3		—			(172		)
Equity securities	166			2			1		—			(1		)
Free-standing derivatives, net	1			—			—		—			—
Total recurring Level 3 assets	$	842		$	3		$	4	$	—		$	(173	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(285	)	$	(9	)	$	—	$	—		$	—
Total recurring Level 3 liabilities	$	(285	)	$	(9	)	$	—	$	—		$	—

	Purchases			Sales			Issues		Settlements			Balance as of September 30, 2017
Assets
Fixed income securities:
Municipal	$	1		$	(3	)	$	—	$	(1	)	$	107
Corporate - public	51			(1		)	—		(2		)	104
Corporate - privately placed	18			(1		)	—		(2		)	250
ABS - CDO	—			—			—		(5		)	19
ABS - consumer and other	10			—			—		(2		)	66
CMBS	3			—			—		(1		)	26
Total fixed income securities	83			(5		)	—		(13		)	572
Equity securities	—			—			—		—			168
Free-standing derivatives, net	—			—			—		—			1			⁽²⁾
Total recurring Level 3 assets	$	83		$	(5	)	$	—	$	(13	)	$	741
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	—	$	2		$	(292	)
Total recurring Level 3 liabilities	$	—		$	—		$	—	$	2		$	(292	)

_____________


⁽¹⁾	The effect to net income totals $(6) million and is reported in the Condensed Consolidated Statements of Operations as follows: $3 million in net investment income, $(5) million in interest credited to contractholder funds and $(4) million in life and annuity contract benefits.


⁽²⁾	Comprises $1 million of assets.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the nine months ended September 30, 2017.



($ in millions)				Total gains (losses) included in:
	Balance as of December 31, 2016			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	125		$	(1	)	$	6		$	—		$	(5	)
Corporate - public	78			—			—			—			(20		)
Corporate - privately placed	263			7			—			30			(34		)
ABS - CDO	27			—			3			30			(190		)
ABS - consumer and other	42			—			—			—			(69		)
RMBS	1			—			—			—			—
CMBS	22			—			—			—			—
Total fixed income securities	558			6			9			60			(318		)
Equity securities	163			15			4			—			(4		)
Short-term investments	15			—			—			—			—
Free-standing derivatives, net	(2		)	3			—			—			—
Other assets	1			(1		)	—			—			—
Total recurring Level 3 assets	$	735		$	23		$	13		$	60		$	(322	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(290	)	$	(6	)	$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(290	)	$	(6	)	$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2017
Assets
Fixed income securities:
Municipal	$	6		$	(23	)	$	—		$	(1	)	$	107
Corporate - public	50			—			—			(4		)	104
Corporate - privately placed	22			(30		)	—			(8		)	250
ABS - CDO	160			—			—			(11		)	19
ABS - consumer and other	99			—			—			(6		)	66
RMBS	—			—			—			(1		)	—
CMBS	6			—			—			(2		)	26
Total fixed income securities	343			(53		)	—			(33		)	572
Equity securities	3			(13		)	—			—			168
Short-term investments	25			(40		)	—			—			—
Free-standing derivatives, net	—			—			—			—			1			⁽²⁾
Other assets	—			—			—			—			—
Total recurring Level 3 assets	$	371		$	(106	)	$	—		$	(33	)	$	741
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(1	)	$	5		$	(292	)
Total recurring Level 3 liabilities	$	—		$	—		$	(1	)	$	5		$	(292	)

_____________


⁽¹⁾	The effect to net income totals $17 million and is reported in the Condensed Consolidated Statements of Operations as follows: $7 million in realized capital gains and losses, $17 million in net investment income, $(11) million in interest credited to contractholder funds and $4 million in life and annuity contract benefits.


⁽²⁾	Comprises $1 million of assets.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the three months ended September 30, 2016.



($ in millions)				Total gains (losses) included in:
	Balance as of June 30, 2016			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	149		$	1		$	(1	)	$	—		$	—
Corporate - public	74			—			—			—			(6		)
Corporate - privately placed	585			—			2			—			(280		)
ABS - CDO	33			—			3			—			—
ABS - consumer and other	45			—			—			—			—
RMBS	1			—			—			—			—
CMBS	20			—			—			—			—
Total fixed income securities	907			1			4			—			(286		)
Equity securities	118			(1		)	—			—			—
Free-standing derivatives, net	(7		)	4			—			—			—
Other assets	1			—			—			—			—
Total recurring Level 3 assets	$	1,019		$	4		$	4		$	—		$	(286	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(304	)	$	(3	)	$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(304	)	$	(3	)	$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2016
Assets
Fixed income securities:
Municipal	$	22		$	(11	)	$	—		$	—		$	160
Corporate - public	40			(10		)	—			—			98
Corporate - privately placed	38			—			—			(29		)	316
ABS - CDO	40			—			—			(2		)	74
ABS - consumer and other	35			—			—			(1		)	79
RMBS	—			—			—			—			1
CMBS	3			—			—			—			23
Total fixed income securities	178			(21		)	—			(32		)	751
Equity securities	43			—			—			—			160
Free-standing derivatives, net	—			—			—			—			(3		)	⁽²⁾
Other assets	—			—			—			—			1
Total recurring Level 3 assets	$	221		$	(21	)	$	—		$	(32	)	$	909
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(1	)	$	1		$	(307	)
Total recurring Level 3 liabilities	$	—		$	—		$	(1	)	$	1		$	(307	)

_____________________


⁽¹⁾	The effect to net income totals $1 million and is reported in the Condensed Consolidated Statements of Operations as follows: $1 million in realized capital gains and losses, $3 million in net investment income, $(6) million in interest credited to contractholder funds and $3 million in life and annuity contract benefits.


⁽²⁾	Comprises $1 million of assets and $4 million of liabilities.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the nine months ended September 30, 2016.



($ in millions)				Total gains (losses) included in:
	Balance as of December 31, 2015			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	5		$	—		$	—		$	—		$	(4	)
Municipal	161			11			(6		)	6			—
Corporate - public	46			—			1			25			(13		)
Corporate - privately placed	502			4			15			16			(363		)
ABS - CDO	61			—			5			10			(3		)
ABS - consumer and other	50			—			(2		)	3			—
RMBS	1			—			—			—			—
CMBS	20			—			—			—			—
Total fixed income securities	846			15			13			60			(383		)
Equity securities	133			(33		)	8			—			—
Free-standing derivatives, net	(7		)	4			—			—			—
Other assets	1			—			—			—			—
Total recurring Level 3 assets	$	973		$	(14	)	$	21		$	60		$	(383	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(299	)	$	(11	)	$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(299	)	$	(11	)	$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2016
Assets
Fixed income securities:
U.S. government and agencies	$	—		$	—		$	—		$	(1	)	$	—
Municipal	22			(33		)	—			(1		)	160
Corporate - public	47			(6		)	—			(2		)	98
Corporate - privately placed	181			—			—			(39		)	316
ABS - CDO	40			(2		)	—			(37		)	74
ABS - consumer and other	35			(5		)	—			(2		)	79
RMBS	—			—			—			—			1
CMBS	5			—			—			(2		)	23
Total fixed income securities	330			(46		)	—			(84		)	751
Equity securities	52			—			—			—			160
Free-standing derivatives, net	—			—			—			—			(3		)	⁽²⁾
Other assets	—			—			—			—			1
Total recurring Level 3 assets	$	382		$	(46	)	$	—		$	(84	)	$	909
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(2	)	$	5		$	(307	)
Total recurring Level 3 liabilities	$	—		$	—		$	(2	)	$	5		$	(307	)

_____________________


⁽¹⁾	The effect to net income totals $(25) million and is reported in the Condensed Consolidated Statements of Operations as follows: $(24) million in realized capital gains and losses, $10 million in net investment income, $(12) million in interest credited to contractholder funds and $1 million in life and annuity contract benefits.


⁽²⁾	Comprises $1 million of assets and $4 million of liabilities.

Schedule of gains and losses included in net income for Level 3 assets and liabilities still held at the balance sheet date

The following table provides the change in unrealized gains and losses included in net income for Level 3 assets and liabilities held as of September 30.



($ in millions)	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Assets
Fixed income securities:
Municipal	$	—		$	1		$	(3	)	$	2
Corporate	1			—			1			1
Total fixed income securities	1			1			(2		)	3
Equity securities	2			(1		)	16			(33		)
Free-standing derivatives, net	(3		)	4			—			4
Other assets	—			—			(1		)	—
Total recurring Level 3 assets	$	—		$	4		$	13		$	(26	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(9	)	$	(3	)	$	(6	)	$	(11	)
Total recurring Level 3 liabilities	$	(9	)	$	(3	)	$	(6	)	$	(11	)

Schedule of carrying values and fair value estimates of financial instruments not carried at fair value

Presented below are the carrying values and fair value estimates of financial instruments not carried at fair value.

Financial assets



($ in millions)	September 30, 2017				December 31, 2016
	Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	$	4,322	$	4,535	$	4,486	$	4,514
Cost method limited partnerships	1,339		1,579		1,282		1,493
Bank loans	1,731		1,734		1,669		1,677
Agent loans	523		520		467		467

Financial liabilities



($ in millions)	September 30, 2017				December 31, 2016
	Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	$	10,618	$	11,203	$	11,313	$	12,009
Long-term debt	6,349		7,161		6,347		6,920
Liability for collateral	1,156		1,156		1,129		1,129

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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