Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value

Assets and liabilities measured and carried at fair value in the financial statements are summarized below (in millions):

	Level 1		Level 2		Level 3		Total
March 31, 2015
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	123	$	192	$	15	$	330
States, municipalities and political subdivisions	—		7,045		61		7,106
Foreign government	—		184		—		184
Residential MBS	—		4,019		306		4,325
Commercial MBS	—		2,359		44		2,403
Asset-backed securities (“ABS”)	—		4,013		211		4,224
Corporate and other	38		12,775		583		13,396
Total AFS fixed maturities	161		30,587		1,220		31,968
Trading fixed maturities	13		260		—		273
Equity securities	1,388		238		84		1,710
Assets of managed investment entities (“MIE”)	120		3,130		29		3,279
Variable annuity assets (separate accounts) (*)	—		667		—		667
Other investments — derivatives	—		318		—		318
Total assets accounted for at fair value	$	1,682	$	35,200	$	1,333	$	38,215
Liabilities:
Liabilities of managed investment entities	$	108	$	2,818	$	26	$	2,952
Derivatives in annuity benefits accumulated	—		—		1,243		1,243
Other liabilities — derivatives	—		13		—		13
Total liabilities accounted for at fair value	$	108	$	2,831	$	1,269	$	4,208
December 31, 2014
Assets:
Available for sale fixed maturities:
U.S. Government and government agencies	$	164	$	174	$	15	$	353
States, municipalities and political subdivisions	—		6,647		100		6,747
Foreign government	—		194		—		194
Residential MBS	—		4,142		300		4,442
Commercial MBS	—		2,407		44		2,451
Asset-backed securities	—		3,661		226		3,887
Corporate and other	36		12,078		546		12,660
Total AFS fixed maturities	200		29,303		1,231		30,734
Trading fixed maturities	12		254		—		266
Equity securities	1,306		297		93		1,696
Assets of managed investment entities	174		2,903		31		3,108
Variable annuity assets (separate accounts) (*)	—		662		—		662
Other investments — derivatives	—		322		—		322
Total assets accounted for at fair value	$	1,692	$	33,741	$	1,355	$	36,788
Liabilities:
Liabilities of managed investment entities	$	118	$	—	$	2,701	$	2,819
Derivatives in annuity benefits accumulated	—		—		1,160		1,160
Other liabilities — derivatives	—		13		—		13
Total liabilities accounted for at fair value	$	118	$	13	$	3,861	$	3,992

(*)    Variable annuity liabilities equal the fair value of variable annuity assets.

Unobservable inputs used by management in determining fair value of embedded derivatives

The following table presents information about the unobservable inputs used by management in determining fair value of these embedded derivatives. See Note F — “Derivatives.”

Unobservable Input	Range
Adjustment for insurance subsidiary’s credit risk	0.40% – 1.75% over the risk free rate
Risk margin for uncertainty in cash flows	0.52% reduction in the discount rate
Surrenders	4% – 16% of indexed account value
Partial surrenders	2% – 10% of indexed account value
Annuitizations	1% – 1.5% of indexed account value
Deaths	1.5% – 3.0% of indexed account value
Budgeted option costs	2.0% – 3.25% of indexed account value

Changes in balances of Level 3 financial assets and liabilities

Changes in balances of Level 3 financial assets and liabilities carried at fair value during the first three months of 2015 and 2014 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.

						Total realized/unrealized gains (losses) included in
	Balance at December 31, 2014			Impact of accounting change (*)		Net income			Other comprehensive income (loss)			Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at March 31, 2015
AFS fixed maturities:
U.S. government agency	$	15		$	—	$	—		$	—		$	—		$	—		$	—	$	—		$	15
State and municipal	100			—		—			—			—			—			—		(39		)	61
Residential MBS	300			—		(1		)	3			—			(7		)	41		(30		)	306
Commercial MBS	44			—		—			—			—			—			—		—			44
Asset-backed securities	226			—		—			—			5			(41		)	21		—			211
Corporate and other	546			—		—			6			44			(13		)	—		—			583
Equity securities	93			—		—			(2		)	10			—			—		(17		)	84
Assets of MIE	31			—		(2		)	—			—			—			—		—			29
Liabilities of MIE	(2,701		)	2,701		—			—			—			—			—		—			—
Embedded derivatives	(1,160		)	—		(50		)	—			(47		)	14			—		—			(1,243		)

(*) The impact of implementing new guidance adopted in 2015, as discussed above and in Note A — “Accounting Policies — Managed Investment Entities.”

				Total realized/unrealized gains (losses) included in
	Balance at December 31, 2013			Net income			Other comprehensive income (loss)		Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at March 31, 2014
AFS fixed maturities:
U.S. government agency	$	15		$	—		$	—	$	—		$	—		$	—	$	—		$	15
State and municipal	61			—			—		—			—			—		—			61
Residential MBS	316			1			4		—			(8		)	32		(73		)	272
Commercial MBS	28			—			—		—			—			—		—			28
Asset-backed securities	75			—			1		50			(1		)	81		—			206
Corporate and other	335			1			3		1			(16		)	—		(2		)	322
Equity securities	31			1			2		30			(9		)	—		(14		)	41
Assets of MIE	30			(1		)	—		—			—			—		—			29
Liabilities of MIE (*)	(2,411		)	1			—		(45		)	133			—		—			(2,322		)
Embedded derivatives	(804		)	(54		)	—		(55		)	9			—		—			(904		)

(*) Total realized/unrealized gains (losses) included in net income includes gains of $4 million related to liabilities outstanding as of March 31, 2014. See Note H — “Managed Investment Entities.”

Fair value of financial instruments

The carrying value and fair value of financial instruments that are not carried at fair value in the financial statements are summarized below (in millions):

	Carrying Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2015
Financial assets:
Cash and cash equivalents	$	1,212	$	1,212	$	1,212	$	—	$	—
Mortgage loans	1,091		1,100		—		—		1,100
Policy loans	226		226		—		—		226
Total financial assets not accounted for at fair value	$	2,529	$	2,538	$	1,212	$	—	$	1,326
Financial liabilities:
Annuity benefits accumulated (*)	$	24,209	$	23,966	$	—	$	—	$	23,966
Long-term debt	1,061		1,197		—		1,123		74
Total financial liabilities not accounted for at fair value	$	25,270	$	25,163	$	—	$	1,123	$	24,040
December 31, 2014
Financial assets:
Cash and cash equivalents	$	1,343	$	1,343	$	1,343	$	—	$	—
Mortgage loans	1,117		1,124		—		—		1,124
Policy loans	228		228		—		—		228
Total financial assets not accounted for at fair value	$	2,688	$	2,695	$	1,343	$	—	$	1,352
Financial liabilities:
Annuity benefits accumulated (*)	$	23,561	$	23,187	$	—	$	—	$	23,187
Long-term debt	1,061		1,180		—		1,106		74
Total financial liabilities not accounted for at fair value	$	24,622	$	24,367	$	—	$	1,106	$	23,261

(*) Excludes life contingent annuities in the payout phase.