Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 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 June 30, 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	$	3,757		$	403		$	—					$	4,160
Municipal	—			8,828			63						8,891
Corporate - public	—			30,733			46						30,779
Corporate - privately placed	—			12,405			89						12,494
Foreign government	—			791			—						791
ABS - CDO	—			344			10						354
ABS - consumer and other	—			462			43						505
RMBS	—			417			1						418
CMBS	—			36			34						70
Redeemable preferred stock	—			22			—						22
Total fixed income securities	3,757			54,441			286						58,484
Equity securities	7,235			352			319						7,906
Short-term investments	1,821			1,914			5						3,740
Other investments: Free-standing derivatives	—			161			—			$	(35	)	126
Separate account assets	3,058			—			—						3,058
Other assets	2			—			—						2
Total recurring basis assets	15,873			56,868			610			(35		)	73,316
Non-recurring basis⁽¹⁾	—			—			11						11
Total assets at fair value	$	15,873		$	56,868		$	621		$	(35	)	$	73,327
% of total assets at fair value	21.6		%	77.6		%	0.8		%	—		%	100.0		%

Investments reported at NAV													1,785
Total													$	75,112

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(437	)				$	(437	)
Other liabilities: Free-standing derivatives	(1		)	(54		)	—			$	5		(50		)
Total recurring basis liabilities	$	(1	)	$	(54	)	$	(437	)	$	5		$	(487	)
% of total liabilities at fair value	0.2		%	11.1		%	89.7		%	(1.0		)%	100.0		%

⁽¹⁾Includes $11 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
June 30, 2019
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(401	)	Stochastic cash flow model	Projected option cost	1.0 - 4.2%	2.61%

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 months period ended June 30, 2019
	Balance as of March 31, 2019			Total gains (losses) included in:					Transfers into Level 3			Transfers out of Level 3
($ in millions)	Balance as of March 31, 2019			Net income ⁽¹⁾			OCI		Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	68		$	—		$	1	$	—		$	(5	)
Corporate - public	90			—			1		—			(40		)
Corporate - privately placed	90			1			—		—			(2		)
ABS - CDO	6			—			—		1			—
ABS - consumer and other	81			—			—		—			(68		)
RMBS	—			—			—		1			—
CMBS	35			—			—		—			—
Total fixed income securities	370			1			2		2			(115		)
Equity securities	303			10			—		—			—
Short-term investments	40			—			—		—			—
Free-standing derivatives, net	1			(1		)	—		—			—
Total recurring Level 3 assets	$	714		$	10		$	2	$	2		$	(115	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(251	)	$	(12	)	$	—	$	(175	)	$	—
Total recurring Level 3 liabilities	$	(251	)	$	(12	)	$	—	$	(175	)	$	—

	Purchases			Sales			Issues		Settlements			Balance as of June 30, 2019
Assets
Fixed income securities:
Municipal	$	—		$	(1	)	$	—	$	—		$	63
Corporate - public	—			(5		)	—		—			46
Corporate - privately placed	1			—			—		(1		)	89
ABS - CDO	3			—			—		—			10
ABS - consumer and other	43			(12		)	—		(1		)	43
RMBS	—			—			—		—			1
CMBS	—			—			—		(1		)	34
Total fixed income securities	47			(18		)	—		(3		)	286
Equity securities	20			(14		)	—		—			319
Short-term investments	5			(40		)	—		—			5
Free-standing derivatives, net	—			—			—		—			—
Total recurring Level 3 assets	$	72		$	(72	)	$	—	$	(3	)	$	610
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	—	$	1		$	(437	)
Total recurring Level 3 liabilities	$	—		$	—		$	—	$	1		$	(437	)


⁽¹⁾	The effect to net income totals $(2) million and is reported in the Condensed Consolidated Statements of Operations as follows: $5 million in realized capital gains and losses, $5 million in net investment income, $(7) million in interest credited to contractholder funds and $(5) million in life contract benefits.



Rollforward of Level 3 assets and liabilities held at fair value during the six months period ended June 30, 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		$	—		$	2	$	—		$	(5	)
Corporate - public	70			—			2		—			(40		)
Corporate - privately placed	90			(1		)	2		15			(2		)
ABS - CDO	6			—			—		1			—
ABS - consumer and other	63			—			—		—			(115		)
RMBS	—			—			—		1			—
CMBS	26			—			—		3			—
Total fixed income securities	325			(1		)	6		20			(162		)
Equity securities	341			38			—		—			—
Short-term investments	30			—			—		—			—
Free-standing derivatives, net	1			(1		)	—		—			—
Total recurring Level 3 assets	$	697		$	36		$	6	$	20		$	(162	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(224	)	$	(40	)	$	—	$	(175	)	$	—
Total recurring Level 3 liabilities	$	(224	)	$	(40	)	$	—	$	(175	)	$	—

	Purchases			Sales			Issues		Settlements			Balance as of June 30, 2019
Assets
Fixed income securities:
Municipal	$	—		$	(3	)	$	—	$	(1	)	$	63
Corporate - public	20			(5		)	—		(1		)	46
Corporate - privately placed	1			(13		)	—		(3		)	89
ABS - CDO	3			—			—		—			10
ABS - consumer and other	121			(22		)	—		(4		)	43
RMBS	—			—			—		—			1
CMBS	6			—			—		(1		)	34
Total fixed income securities	151			(43		)	—		(10		)	286
Equity securities	22			(82		)	—		—			319
Short-term investments	15			(40		)	—		—			5
Free-standing derivatives, net	—			—			—		—			—
Total recurring Level 3 assets	$	188		$	(165	)	$	—	$	(10	)	$	610
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	—	$	2		$	(437	)
Total recurring Level 3 liabilities	$	—		$	—		$	—	$	2		$	(437	)


⁽¹⁾	The effect to net income totals $(4) million and is reported in the Condensed Consolidated Statements of Operations as follows: $31 million in realized capital gains and losses, $5 million in net investment income, $(43) million in interest credited to contractholder funds and $3 million in life contract benefits.



Rollforward of Level 3 assets and liabilities at fair value during the three months period ended June 30, 2018
	Balance as of March 31, 2018			Total gains (losses) included in:						Transfers into Level 3			Transfers out of Level 3
($ in millions)	Balance as of March 31, 2018			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	96		$	—		$	—		$	—		$	—
Corporate - public	77			—			(1		)	—			—
Corporate - privately placed	215			(2		)	—			20			(10		)
ABS - CDO	10			—			—			—			—
ABS - consumer and other	62			—			—			5			(16		)
CMBS	27			—			—			—			—
Total fixed income securities	487			(2		)	(1		)	25			(26		)
Equity securities	242			13			—			—			—
Short-term investments	—			—			—			—			—
Free-standing derivatives, net	1			—			—			—			—
Total recurring Level 3 assets	$	730		$	11		$	(1	)	$	25		$	(26	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(262	)	$	1		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(262	)	$	1		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of June 30, 2018
Assets
Fixed income securities:
Municipal	$	10		$	—		$	—		$	—		$	106
Corporate - public	—			—			—			—			76
Corporate - privately placed	2			(3		)	—			(27		)	195
ABS - CDO	—			—			—			(1		)	9
ABS - consumer and other	30			(7		)	—			(1		)	73
CMBS	—			—			—			(1		)	26
Total fixed income securities	42			(10		)	—			(30		)	485
Equity securities	49			(13		)	—			—			291
Short-term investments	—			—			—			—			—
Free-standing derivatives, net	—			—			—			—			1			⁽²⁾
Total recurring Level 3 assets	$	91		$	(23	)	$	—		$	(30	)	$	777
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	—		$	1		$	(260	)
Total recurring Level 3 liabilities	$	—		$	—		$	—		$	1		$	(260	)


⁽¹⁾	The effect to net income totals $12 million and is reported in the Condensed Consolidated Statements of Operations as follows: $11 million in realized capital gains and losses and $1 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 June 30,
($ in millions)	Three months ended June 30,					Six months ended June 30,
($ in millions)	2019			2018		2019			2018
Assets
Equity securities	$	10		$	13	$	14		$	15
Free-standing derivatives, net	(1		)	—		(1		)	—
Total recurring Level 3 assets	$	9		$	13	$	13		$	15
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(12	)	$	1	$	(40	)	$	24
Total recurring Level 3 liabilities	$	(12	)	$	1	$	(40	)	$	24

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)		June 30, 2019				December 31, 2018
($ in millions)	Fair value level	Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	Level 3	$	4,687	$	4,833	$	4,670	$	4,703
Bank loans	Level 3	1,259		1,237		1,350		1,298
Agent loans	Level 3	654		656		620		617

Financial liabilities



Carrying values and fair value estimates of financial instruments not carried at fair value
($ in millions)		June 30, 2019				December 31, 2018
($ in millions)	Fair value level	Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	Level 3	$	8,820	$	9,566	$	9,250	$	9,665
Long-term debt	Level 2	6,628		7,468		6,451		6,708
Liability for collateral	Level 2	1,871		1,871		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