Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2019

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



Assets and liabilities measured at fair value
	As of March 31, 2019
($ 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			Total
Assets
Fixed income securities:
U.S. government and agencies	$	3,498		$	394		$	—					$	3,892
Municipal	—			9,196			68						9,264
Corporate - public	—			30,982			90						31,072
Corporate - privately placed	—			11,537			90						11,627
Foreign government	—			752			—						752
ABS - CDO	—			250			6						256
ABS - consumer and other	—			721			81						802
RMBS	—			442			—						442
CMBS	—			38			35						73
Redeemable preferred stock	—			22			—						22
Total fixed income securities	3,498			54,334			370						58,202
Equity securities	5,149			350			303						5,802
Short-term investments	1,981			2,136			40						4,157
Other investments: Free-standing derivatives	—			124			1			$	(27	)	98
Separate account assets	3,050			—			—						3,050
Other assets	1			—			—						1
Total recurring basis assets	13,679			56,944			714			(27		)	71,310
Non-recurring basis⁽¹⁾	—			—			39						39
Total assets at fair value	$	13,679		$	56,944		$	753		$	(27	)	$	71,349
% of total assets at fair value	19.2		%	79.8		%	1.0		%	—		%	100.0		%

Investments reported at NAV													1,738
Total													$	73,087

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(251	)				$	(251	)
Other liabilities: Free-standing derivatives	(2		)	(51		)	—			$	7		(46		)
Total recurring basis liabilities	$	(2	)	$	(51	)	$	(251	)	$	7		$	(297	)
% of total liabilities at fair value	0.7		%	17.2		%	84.5		%	(2.4		)%	100.0		%

⁽¹⁾Includes $3 million of limited partnerships and $36 million of bank loans written-down to fair value in connection with recognizing OTTI impairments.



Assets and liabilities measured at fair value
	As of December 31, 2018
($ 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			Total
Assets
Fixed income securities:
U.S. government and agencies	$	5,085		$	432		$	—					$	5,517
Municipal	—			9,099			70						9,169
Corporate - public	—			29,200			70						29,270
Corporate - privately placed	—			10,776			90						10,866
Foreign government	—			747			—						747
ABS - CDO	—			263			6						269
ABS - consumer and other	—			713			63						776
RMBS	—			464			—						464
CMBS	—			44			26						70
Redeemable preferred stock	—			22			—						22
Total fixed income securities	5,085			51,760			325						57,170
Equity securities	4,364			331			341						5,036
Short-term investments	1,338			1,659			30						3,027
Other investments: Free-standing derivatives	—			139			1			$	(23	)	117
Separate account assets	2,805			—			—						2,805
Other assets	2			—			—						2
Total recurring basis assets	$	13,594		$	53,889		$	697		$	(23	)	$	68,157
% of total assets at fair value	19.9		%	79.1		%	1.0		%	—		%	100.0		%

Investments reported at NAV													1,779
Total													$	69,936
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(224	)				$	(224	)
Other liabilities: Free-standing derivatives	(1		)	(62		)	—			$	6		(57		)
Total recurring basis liabilities	$	(1	)	$	(62	)	$	(224	)	$	6		$	(281	)
% of total liabilities at fair value	0.3		%	22.1		%	79.7		%	(2.1		)%	100.0		%

Summary of quantitative information about the significant unobservable inputs



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
March 31, 2019
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(220	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.74%

December 31, 2018
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(185	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.74%

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



Rollforward of Level 3 assets and liabilities at fair value during the three month period ended March 31, 2019
	Balance as of December 31, 2018			Total gains (losses) included in:					Transfers into Level 3			Transfers out of Level 3
($ in millions)	Balance as of December 31, 2018			Net income ⁽¹⁾			OCI		Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	70		$	—		$	1	$	—		$	—
Corporate - public	70			—			1		—			—
Corporate - privately placed	90			(2		)	2		15			—
ABS - CDO	6			—			—		—			—
ABS - consumer and other	63			—			—		—			(47		)
CMBS	26			—			—		3			—
Total fixed income securities	325			(2		)	4		18			(47		)
Equity securities	341			28			—		—			—
Short-term investments	30			—			—		—			—
Free-standing derivatives, net	1			—			—		—			—
Total recurring Level 3 assets	$	697		$	26		$	4	$	18		$	(47	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(224	)	$	(28	)	$	—	$	—		$	—
Total recurring Level 3 liabilities	$	(224	)	$	(28	)	$	—	$	—		$	—

	Purchases			Sales			Issues		Settlements			Balance as of March 31, 2019
Assets
Fixed income securities:
Municipal	$	—		$	(2	)	$	—	$	(1	)	$	68
Corporate - public	20			—			—		(1		)	90
Corporate - privately placed	—			(13		)	—		(2		)	90
ABS - CDO	—			—			—		—			6
ABS - consumer and other	78			(10		)	—		(3		)	81
CMBS	6			—			—		—			35
Total fixed income securities	104			(25		)	—		(7		)	370
Equity securities	2			(68		)	—		—			303
Short-term investments	10			—			—		—			40
Free-standing derivatives, net	—			—			—		—			1			⁽²⁾
Total recurring Level 3 assets	$	116		$	(93	)	$	—	$	(7	)	$	714
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	—	$	1		$	(251	)
Total recurring Level 3 liabilities	$	—		$	—		$	—	$	1		$	(251	)


⁽¹⁾	The effect to net income totals $(2) million and is reported in the Condensed Consolidated Statements of Operations as follows: $26 million in realized capital gains and losses, $(36) million in interest credited to contractholder funds and $8 million in life contract benefits.


⁽²⁾	Comprises $1 million of assets.



Rollforward of Level 3 assets and liabilities at fair value during the three month period ended March 31, 2018
	Balance as of December 31, 2017			Total gains (losses) included in:						Transfers into Level 3			Transfers out of Level 3
($ in millions)	Balance as of December 31, 2017			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	101		$	1		$	(1	)	$	—		$	(2	)
Corporate - public	108			—			(1		)	4			(5		)
Corporate - privately placed	224			—			(1		)	—			(19		)
ABS - CDO	99			—			—			—			(89		)
ABS - consumer and other	48			—			1			5			—
CMBS	26			—			—			—			—
Total fixed income securities	606			1			(2		)	9			(115		)
Equity securities	210			3			—			—			—
Short-term investments	20			—			—			—			—
Free-standing derivatives, net	1			—			—			—			—
Total recurring Level 3 assets	$	837		$	4		$	(2	)	$	9		$	(115	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(286	)	$	23		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(286	)	$	23		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of March 31, 2018
Assets
Fixed income securities:
Municipal	$	—		$	(2	)	$	—		$	(1	)	$	96
Corporate - public	—			(26		)	—			(3		)	77
Corporate - privately placed	13			—			—			(2		)	215
ABS - CDO	—			—			—			—			10
ABS - consumer and other	45			(35		)	—			(2		)	62
CMBS	1			—			—			—			27
Total fixed income securities	59			(63		)	—			(8		)	487
Equity securities	30			(1		)	—			—			242
Short-term investments	25			(45		)	—			—			—
Free-standing derivatives, net	—			—			—			—			1			⁽²⁾
Total recurring Level 3 assets	$	114		$	(109	)	$	—		$	(8	)	$	730
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(1	)	$	2		$	(262	)
Total recurring Level 3 liabilities	$	—		$	—		$	(1	)	$	2		$	(262	)


⁽¹⁾	The effect to net income totals $27 million and is reported in the Condensed Consolidated Statements of Operations as follows: $4 million in realized capital gains and losses, $19 million in interest credited to contractholder funds and $4 million in life contract benefits.

⁽²⁾

Comprises $1 million of assets.

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



Valuation changes included in net income for Level 3 assets and liabilities held as of March 31,
($ in millions)	Three months ended March 31,
($ in millions)	2019			2018
Assets
Equity securities	$	4		$	2
Total recurring Level 3 assets	$	4		$	2
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(28	)	$	23
Total recurring Level 3 liabilities	$	(28	)	$	23

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

Financial assets



Carrying values and fair value estimates of financial instruments not carried at fair value
($ in millions)		March 31, 2019				December 31, 2018
($ in millions)	Fair value level	Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	Level 3	$	4,681	$	4,787	$	4,670	$	4,703
Bank loans	Level 3	1,300		1,271		1,350		1,298
Agent loans	Level 3	639		639		620		617

Financial liabilities



Carrying values and fair value estimates of financial instruments not carried at fair value
($ in millions)		March 31, 2019				December 31, 2018
($ in millions)	Fair value level	Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	Level 3	$	9,015	$	9,626	$	9,250	$	9,665
Long-term debt	Level 2	6,453		6,985		6,451		6,708
Liability for collateral	Level 2	1,973		1,973		1,458		1,458

- 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.

+ References + Details