XML 45 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Fair Value Measurements (Tables)
 12 Months Ended
Dec. 31, 2018
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
December 31, 2018
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Available for sale (“AFS”) fixed maturities:
 
 
 
 
 
 
 
U.S. Government and government agencies
$
141

 
$
83

 
$
9

 
$
233

States, municipalities and political subdivisions
—

 
6,880

 
59

 
6,939

Foreign government
—

 
142

 
—

 
142

Residential MBS
—

 
2,547

 
197

 
2,744

Commercial MBS
—

 
864

 
56

 
920

Asset-backed securities
—

 
8,964

 
847

 
9,811

Corporate and other
28

 
19,184

 
1,996

 
21,208

Total AFS fixed maturities
169

 
38,664

 
3,164

 
41,997

Trading fixed maturities
9

 
96

 
—

 
105

Equity securities
1,410

 
68

 
336

 
1,814

Equity index call options
—

 
184

 
—

 
184

Assets of managed investment entities (“MIE”)
203

 
4,476

 
21

 
4,700

Variable annuity assets (separate accounts) (*)
—

 
557

 
—

 
557

Other assets — derivatives
—

 
16

 
—

 
16

Total assets accounted for at fair value
$
1,791

 
$
44,061

 
$
3,521

 
$
49,373

Liabilities:
 
 
 
 
 
 
 
Liabilities of managed investment entities
$
195

 
$
4,297

 
$
20

 
$
4,512

Derivatives in annuity benefits accumulated
—

 
—

 
2,720

 
2,720

Other liabilities — derivatives
—

 
49

 
—

 
49

Total liabilities accounted for at fair value
$
195

 
$
4,346

 
$
2,740

 
$
7,281

 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Available for sale fixed maturities:
 
 
 
 
 
 
 
U.S. Government and government agencies
$
122

 
$
112

 
$
8

 
$
242

States, municipalities and political subdivisions
—

 
6,975

 
148

 
7,123

Foreign government
—

 
127

 
—

 
127

Residential MBS
—

 
3,105

 
122

 
3,227

Commercial MBS
—

 
926

 
36

 
962

Asset-backed securities
—

 
7,218

 
744

 
7,962

Corporate and other
30

 
17,662

 
1,044

 
18,736

Total AFS fixed maturities
152

 
36,125

 
2,102

 
38,379

Trading fixed maturities
44

 
304

 
—

 
348

Equity securities
1,411

 
86

 
165

 
1,662

Equity index call options
—

 
701

 
—

 
701

Assets of managed investment entities
307

 
4,572

 
23

 
4,902

Variable annuity assets (separate accounts) (*)
—

 
644

 
—

 
644

Other assets — derivatives
—

 
—

 
—

 
—

Total assets accounted for at fair value
$
1,914

 
$
42,432

 
$
2,290

 
$
46,636

Liabilities:
 
 
 
 
 
 
 
Liabilities of managed investment entities
$
293

 
$
4,372

 
$
22

 
$
4,687

Derivatives in annuity benefits accumulated
—

 
—

 
2,542

 
2,542

Other liabilities — derivatives
—

 
35

 
—

 
35

Total liabilities accounted for at fair value
$
293

 
$
4,407

 
$
2,564

 
$
7,264

 (*)   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, 2018, 2017 and 2016 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
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
Perpetual preferred stocks
2

 
4

 
6

 
$
5

 
$
23

 
$
35

 
2

 
2

 
7

 
$
6

 
$
11

 
$
28

Common stocks
—

 
—

 
3

 
—

 
—

 
—

 
—

 
1

 
2

 
—

 
—

 
—
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 Level 3 liabilities. See Note F — “Derivatives.”
 
Unobservable Input
 
Range
 
 
Adjustment for insurance subsidiary’s credit risk
 
0.6% – 2.1% over the risk free rate
 
 
Risk margin for uncertainty in cash flows
 
0.73% reduction in the discount rate
 
 
Surrenders
 
3% – 23% of indexed account value
 
 
Partial surrenders
 
2% – 9% of indexed account value
 
 
Annuitizations
 
0.1% – 1% of indexed account value
 
 
Deaths
 
1.5% – 9.5% of indexed account value
 
 
Budgeted option costs
 
2.6% – 3.6% of indexed account value
 
Changes in asset balances of Level 3 financial assets
Changes in balances of Level 3 financial assets and liabilities carried at fair value during 2018, 2017 and 2016 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs and $29 million of equity securities transferred into Level 3 in the first quarter of 2018 related to a small number of limited partnerships and similar investments carried at cost under the prior guidance that are carried at fair value through net earnings under new guidance adopted on January 1, 2018, as discussed in Note A — “Accounting Policies — Investments.” 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, 2017
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2018
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1

 
$
—

 
$
9

State and municipal
148

 
—

 
(2
)
 
—

 
(3
)
 
—

 
(84
)
 
59

Residential MBS
122

 
(9
)
 
(4
)
 
—

 
(21
)
 
130

 
(21
)
 
197

Commercial MBS
36

 
—

 
—

 
20

 
—

 
—

 
—

 
56

Asset-backed securities
744

 
(3
)
 
(15
)
 
426

 
(248
)
 
82

 
(139
)
 
847

Corporate and other
1,044

 
(10
)
 
(18
)
 
1,221

 
(204
)
 
27

 
(64
)
 
1,996

Total AFS fixed maturities
2,102

 
(22
)
 
(39
)
 
1,667

 
(476
)
 
240

 
(308
)
 
3,164

Equity securities
165

 
9

 
—

 
155

 
(6
)
 
30

 
(17
)
 
336

Assets of MIE
23

 
(8
)
 
—

 
6

 
—

 
—

 
—

 
21

Total Level 3 assets
$
2,290

 
$
(21
)
 
$
(39
)
 
$
1,828

 
$
(482
)
 
$
270

 
$
(325
)
 
$
3,521

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(2,542
)
 
$
204

 
$
—

 
$
(545
)
 
$
163

 
$
—

 
$
—

 
$
(2,720
)
Total Level 3 liabilities (b)
$
(2,542
)
 
$
204

 
$
—

 
$
(545
)
 
$
163

 
$
—

 
$
—

 
$
(2,720
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $44 million in 2018.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2017
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8

State and municipal
140

 
—

 
2

 
—

 
(2
)
 
10

 
(2
)
 
148

Residential MBS
190

 
(4
)
 
2

 
1

 
(40
)
 
44

 
(71
)
 
122

Commercial MBS
25

 
2

 
—

 
15

 
(10
)
 
4

 
—

 
36

Asset-backed securities
484

 
—

 
1

 
410

 
(132
)
 
202

 
(221
)
 
744

Corporate and other
712

 
(5
)
 
2

 
606

 
(237
)
 
29

 
(63
)
 
1,044

Total AFS fixed maturities
1,559

 
(7
)
 
7

 
1,032

 
(421
)
 
289

 
(357
)
 
2,102

Equity securities
174

 
(21
)
 
10

 
38

 
(16
)
 
—

 
(20
)
 
165

Assets of MIE
29

 
(11
)
 
—

 
9

 
—

 
—

 
(4
)
 
23

Total Level 3 assets
$
1,762

 
$
(39
)
 
$
17

 
$
1,079

 
$
(437
)
 
$
289

 
$
(381
)
 
$
2,290

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)
Total Level 3 liabilities (b)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)
(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $25 million in 2017.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2016
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
15

 
$
(8
)
 
$
1

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8

State and municipal
89

 
—

 
(4
)
 
57

 
(2
)
 
—

 
—

 
140

Residential MBS
224

 
(4
)
 
(2
)
 
8

 
(28
)
 
34

 
(42
)
 
190

Commercial MBS
39

 
(1
)
 
—

 
—

 
(7
)
 
—

 
(6
)
 
25

Asset-backed securities
470

 
(1
)
 
1

 
50

 
(52
)
 
60

 
(44
)
 
484

Corporate and other
633

 
—

 
(10
)
 
176

 
(100
)
 
30

 
(17
)
 
712

Total AFS fixed maturities
1,470

 
(14
)
 
(14
)
 
291

 
(189
)
 
124

 
(109
)
 
1,559

Equity securities
140

 
(12
)
 
35

 
44

 
(28
)
 
15

 
(20
)
 
174

Assets of MIE
26

 
(9
)
 
—

 
12

 
—

 
—

 
—

 
29

Total Level 3 assets
$
1,636

 
$
(35
)
 
$
21

 
$
347

 
$
(217
)
 
$
139

 
$
(129
)
 
$
1,762

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(1,369
)
 
$
(211
)
 
$
—

 
$
(277
)
 
$
98

 
$
—

 
$
—

 
$
(1,759
)
Total Level 3 liabilities (b)
$
(1,369
)
 
$
(211
)
 
$
—

 
$
(277
)
 
$
98

 
$
—

 
$
—

 
$
(1,759
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $17 million in 2016.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
Changes in liability balances of Level 3 financial liabilities
Changes in balances of Level 3 financial assets and liabilities carried at fair value during 2018, 2017 and 2016 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs and $29 million of equity securities transferred into Level 3 in the first quarter of 2018 related to a small number of limited partnerships and similar investments carried at cost under the prior guidance that are carried at fair value through net earnings under new guidance adopted on January 1, 2018, as discussed in Note A — “Accounting Policies — Investments.” 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, 2017
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2018
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1

 
$
—

 
$
9

State and municipal
148

 
—

 
(2
)
 
—

 
(3
)
 
—

 
(84
)
 
59

Residential MBS
122

 
(9
)
 
(4
)
 
—

 
(21
)
 
130

 
(21
)
 
197

Commercial MBS
36

 
—

 
—

 
20

 
—

 
—

 
—

 
56

Asset-backed securities
744

 
(3
)
 
(15
)
 
426

 
(248
)
 
82

 
(139
)
 
847

Corporate and other
1,044

 
(10
)
 
(18
)
 
1,221

 
(204
)
 
27

 
(64
)
 
1,996

Total AFS fixed maturities
2,102

 
(22
)
 
(39
)
 
1,667

 
(476
)
 
240

 
(308
)
 
3,164

Equity securities
165

 
9

 
—

 
155

 
(6
)
 
30

 
(17
)
 
336

Assets of MIE
23

 
(8
)
 
—

 
6

 
—

 
—

 
—

 
21

Total Level 3 assets
$
2,290

 
$
(21
)
 
$
(39
)
 
$
1,828

 
$
(482
)
 
$
270

 
$
(325
)
 
$
3,521

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(2,542
)
 
$
204

 
$
—

 
$
(545
)
 
$
163

 
$
—

 
$
—

 
$
(2,720
)
Total Level 3 liabilities (b)
$
(2,542
)
 
$
204

 
$
—

 
$
(545
)
 
$
163

 
$
—

 
$
—

 
$
(2,720
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $44 million in 2018.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2017
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8

State and municipal
140

 
—

 
2

 
—

 
(2
)
 
10

 
(2
)
 
148

Residential MBS
190

 
(4
)
 
2

 
1

 
(40
)
 
44

 
(71
)
 
122

Commercial MBS
25

 
2

 
—

 
15

 
(10
)
 
4

 
—

 
36

Asset-backed securities
484

 
—

 
1

 
410

 
(132
)
 
202

 
(221
)
 
744

Corporate and other
712

 
(5
)
 
2

 
606

 
(237
)
 
29

 
(63
)
 
1,044

Total AFS fixed maturities
1,559

 
(7
)
 
7

 
1,032

 
(421
)
 
289

 
(357
)
 
2,102

Equity securities
174

 
(21
)
 
10

 
38

 
(16
)
 
—

 
(20
)
 
165

Assets of MIE
29

 
(11
)
 
—

 
9

 
—

 
—

 
(4
)
 
23

Total Level 3 assets
$
1,762

 
$
(39
)
 
$
17

 
$
1,079

 
$
(437
)
 
$
289

 
$
(381
)
 
$
2,290

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)
Total Level 3 liabilities (b)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)
(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $25 million in 2017.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2016
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
15

 
$
(8
)
 
$
1

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8

State and municipal
89

 
—

 
(4
)
 
57

 
(2
)
 
—

 
—

 
140

Residential MBS
224

 
(4
)
 
(2
)
 
8

 
(28
)
 
34

 
(42
)
 
190

Commercial MBS
39

 
(1
)
 
—

 
—

 
(7
)
 
—

 
(6
)
 
25

Asset-backed securities
470

 
(1
)
 
1

 
50

 
(52
)
 
60

 
(44
)
 
484

Corporate and other
633

 
—

 
(10
)
 
176

 
(100
)
 
30

 
(17
)
 
712

Total AFS fixed maturities
1,470

 
(14
)
 
(14
)
 
291

 
(189
)
 
124

 
(109
)
 
1,559

Equity securities
140

 
(12
)
 
35

 
44

 
(28
)
 
15

 
(20
)
 
174

Assets of MIE
26

 
(9
)
 
—

 
12

 
—

 
—

 
—

 
29

Total Level 3 assets
$
1,636

 
$
(35
)
 
$
21

 
$
347

 
$
(217
)
 
$
139

 
$
(129
)
 
$
1,762

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(1,369
)
 
$
(211
)
 
$
—

 
$
(277
)
 
$
98

 
$
—

 
$
—

 
$
(1,759
)
Total Level 3 liabilities (b)
$
(1,369
)
 
$
(211
)
 
$
—

 
$
(277
)
 
$
98

 
$
—

 
$
—

 
$
(1,759
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $17 million in 2016.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
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
 
Fair Value
 
Value
 
Total
 
Level 1
 
Level 2
 
Level 3
2018
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,515

 
$
1,515

 
$
1,515

 
$
—

 
$
—

Mortgage loans
1,068

 
1,056

 
—

 
—

 
1,056

Policy loans
174

 
174

 
—

 
—

 
174

Total financial assets not accounted for at fair value
$
2,757

 
$
2,745

 
$
1,515

 
$
—

 
$
1,230

Financial liabilities:
 
 
 
 
 
 
 
 
 
Annuity benefits accumulated (*)
$
36,384

 
$
34,765

 
$
—

 
$
—

 
$
34,765

Long-term debt
1,302

 
1,231

 
—

 
1,228

 
3

Total financial liabilities not accounted for at fair value
$
37,686

 
$
35,996

 
$
—

 
$
1,228

 
$
34,768

 
 
 
 
 
 
 
 
 
 
2017
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
2,338

 
$
2,338

 
$
2,338

 
$
—

 
$
—

Mortgage loans
1,125

 
1,119

 
—

 
—

 
1,119

Policy loans
184

 
184

 
—

 
—

 
184

Total financial assets not accounted for at fair value
$
3,647

 
$
3,641

 
$
2,338

 
$
—

 
$
1,303

Financial liabilities:
 
 
 
 
 
 
 
 
 
Annuity benefits accumulated (*)
$
33,110

 
$
32,461

 
$
—

 
$
—

 
$
32,461

Long-term debt
1,301

 
1,354

 
—

 
1,351

 
3

Total financial liabilities not accounted for at fair value
$
34,411

 
$
33,815

 
$
—

 
$
1,351

 
$
32,464

(*)
Excludes $232 million and $206 million of life contingent annuities in the payout phase at December 31, 2018 and 2017, respectively.