Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2015

Assets and liabilities measured at fair value

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



	Level 1		Level 2			Level 3		Total
December 31, 2015
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	100	$	192		$	15	$	307
States, municipalities and political subdivisions	—		6,767			89		6,856
Foreign government	—		154			—		154
Residential MBS	—		3,305			224		3,529
Commercial MBS	—		2,148			39		2,187
Asset-backed securities (“ABS”)	—		4,464			470		4,934
Corporate and other	50		13,634			633		14,317
Total AFS fixed maturities	150		30,664			1,470		32,284
Trading fixed maturities	13		241			—		254
Equity securities	1,362		217			140		1,719
Assets of managed investment entities (“MIE”)	309		3,712			26		4,047
Variable annuity assets (separate accounts) (*)	—		608			—		608
Other investments — derivatives	—		241			—		241
Other assets — derivatives	—		2			—		2
Total assets accounted for at fair value	$	1,834	$	35,685		$	1,636	$	39,155
Liabilities:
Liabilities of managed investment entities	$	289	$	3,468		$	24	$	3,781
Derivatives in annuity benefits accumulated	—		—			1,369		1,369
Derivatives in long-term debt	—		(2		)	—		(2		)
Other liabilities — derivatives	—		8			—		8
Total liabilities accounted for at fair value	$	289	$	3,474		$	1,393	$	5,156

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.

Fair value measurements, Levels 1 and 2 transfers

The transfers between Level 1 and Level 2 for the years ended December 31, 2015, 2014 and 2013 are reflected in the table below at fair value as of the end of the reporting period (dollars in millions):



	Level 2 To Level 1 Transfers									Level 1 To Level 2 Transfers
	# of Transfers			Fair Value						# of Transfers			Fair Value
	2015	2014	2013	2015		2014		2013		2015	2014	2013	2015		2014		2013
Perpetual preferred stocks	5	14	15	$	19	$	96	$	70	7	13	2	$	31	$	83	$	10
Common stocks	7	—	2	80		—		35		—	7	—	—		26		—
Redeemable preferred stocks	2	1	3	11		5		21		—	—	—	—		—		—

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		0.30% – 2.95% over the risk free rate
Risk margin for uncertainty in cash flows		0.58% reduction in the discount rate
Surrenders		3% – 18% of indexed account value
Partial surrenders		2% – 10% of indexed account value
Annuitizations		0.75% – 1.5% of indexed account value
Deaths		1.5% – 4.0% of indexed account value
Budgeted option costs		1.75% – 3.5% 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 2015, 2014 and 2013 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
	Bal. at Dec. 31, 2014			Impact of accounting change (a)		Net income			Other comprehensive income (loss)			Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Sale of subsidiaries			Bal. at Dec. 31, 2015
AFS fixed maturities:
U.S. government agency	$	15		$	—	$	—		$	—		$	—		$	—		$	—	$	—		$	—		$	15
State and municipal	100			—		—			(1		)	34			(1		)	2		(39		)	(6		)	89
Residential MBS	300			—		(11		)	(1		)	—			(34		)	86		(88		)	(28		)	224
Commercial MBS	44			—		(1		)	(1		)	—			(2		)	4		(1		)	(4		)	39
Asset-backed securities	226			—		1			(7		)	265			(56		)	53		(10		)	(2		)	470
Corporate and other	546			—		(5		)	(9		)	161			(90		)	41		(5		)	(6		)	633
Equity securities	93			—		(4		)	(9		)	77			—			—		(17		)	—			140
Assets of MIE	31			—		(11		)	—			6			—			—		—			—			26
Liabilities of MIE	(2,701		)	2,701		—			—			—			—			—		—			—			—
Embedded derivatives (b)	(1,160		)	—		(17		)	—			(257		)	65			—		—			—			(1,369		)


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


(b)	Total realized/unrealized gains (losses) included in net income for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $28 million in 2015.



				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 December 31, 2014
AFS fixed maturities:
U.S. government agency	$	15		$	—		$	—		$	—		$	—		$	—	$	—		$	15
State and municipal	61			(1		)	—			30			—			10		—			100
Residential MBS	316			4			3			13			(31		)	111		(116		)	300
Commercial MBS	28			(1		)	—			—			—			17		—			44
Asset-backed securities	75			3			(2		)	99			(39		)	117		(27		)	226
Corporate and other	335			2			13			102			(73		)	172		(5		)	546
Equity securities	31			1			2			62			(9		)	22		(16		)	93
Assets of MIE	30			(3		)	—			6			(2		)	—		—			31
Liabilities of MIE (a)	(2,411		)	22			—			(817		)	505			—		—			(2,701		)
Embedded derivatives (b)	(804		)	(182		)	—			(221		)	47			—		—			(1,160		)


(a)	Total realized/unrealized gains (losses) included in net income includes gains of $50 million related to liabilities outstanding as of December 31, 2014. See Note H — “Managed Investment Entities.”


(b)	Total realized/unrealized gains (losses) included in net income for the embedded derivatives reflects gains related to the unlocking of actuarial assumptions of $58 million in 2014.



				Total realized/unrealized gains (losses) included in
	Balance at December 31, 2012			Net income			Other comprehensive income (loss)			Purchases and issuances			Sales and settlements			Transfer into Level 3		Transfer out of Level 3			Balance at December 31, 2013
AFS fixed maturities:
U.S. government agency	$	20		$	(2	)	$	(3	)	$	—		$	—		$	—	$	—		$	15
State and municipal	58			(1		)	(2		)	10			—			—		(4		)	61
Residential MBS	371			5			24			6			(53		)	86		(123		)	316
Commercial MBS	22			(1		)	(1		)	—			—			8		—			28
Asset-backed securities	253			4			(3		)	12			(57		)	11		(145		)	75
Corporate and other	236			1			(14		)	113			(17		)	24		(8		)	335
Equity securities	37			(1		)	6			53			(12		)	—		(52		)	31
Assets of MIE	40			(5		)	—			8			(7		)	—		(6		)	30
Liabilities of MIE (a)	(2,745		)	(25		)	—			(728		)	1,068			—		19			(2,411		)
Embedded derivatives (b)	(465		)	(182		)	—			(192		)	35			—		—			(804		)


(a)	Total realized/unrealized gains (losses) included in net income includes gains of $7 million related to liabilities outstanding as of December 31, 2013. See Note H — “Managed Investment Entities.”


(b)	Total realized/unrealized gains (losses) included in net income for the embedded derivatives reflects gains related to the unlocking of actuarial assumptions of $2 million in 2013.

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 at December 31 are summarized below (in millions):



	Carrying Value		Fair Value		Level 1		Level 2		Level 3
2015
Financial assets:
Cash and cash equivalents	$	1,220	$	1,220	$	1,220	$	—	$	—
Mortgage loans	1,067		1,074		—		—		1,074
Policy loans	201		201		—		—		201
Total financial assets not accounted for at fair value	$	2,488	$	2,495	$	1,220	$	—	$	1,275
Financial liabilities:
Annuity benefits accumulated (*)	$	26,422	$	25,488	$	—	$	—	$	25,488
Long-term debt	1,022		1,120		—		1,105		15
Total financial liabilities not accounted for at fair value	$	27,444	$	26,608	$	—	$	1,105	$	25,503

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 $200 million and $203 million of life contingent annuities in the payout phase at December 31, 2015 and 2014, respectively.