Fair Value Measurements (Tables)
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9 Months Ended |
Sep. 30, 2020 |
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| Fair Value Disclosures [Abstract] |
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| 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 | | September 30, 2020 | | | | | | | | | Assets: | | | | | | | | | Available for sale (“AFS”) fixed maturities: | | | | | | | | | U.S. Government and government agencies | $ | 182 | | | $ | 27 | | | $ | 15 | | | $ | 224 | | | States, municipalities and political subdivisions | — | | | 6,616 | | | 106 | | | 6,722 | | | Foreign government | — | | | 195 | | | — | | | 195 | | | Residential MBS | — | | | 2,959 | | | 178 | | | 3,137 | | | Commercial MBS | — | | | 846 | | | 10 | | | 856 | | | Collateralized loan obligations | — | | | 4,395 | | | 212 | | | 4,607 | | | Other asset-backed securities | — | | | 6,075 | | | 1,344 | | | 7,419 | | | Corporate and other | 24 | | | 23,528 | | | 1,481 | | | 25,033 | | | Total AFS fixed maturities | 206 | | | 44,641 | | | 3,346 | | | 48,193 | | | Trading fixed maturities | — | | | 92 | | | — | | | 92 | | | Equity securities | 1,090 | | | 72 | | | 444 | | | 1,606 | | | Equity index call options | — | | | 697 | | | — | | | 697 | | | Assets of managed investment entities (“MIE”) | 148 | | | 4,554 | | | 15 | | | 4,717 | | | Variable annuity assets (separate accounts) (*) | — | | | 603 | | | — | | | 603 | | | Other assets — derivatives | — | | | 114 | | | — | | | 114 | | | Total assets accounted for at fair value | $ | 1,444 | | | $ | 50,773 | | | $ | 3,805 | | | $ | 56,022 | | | Liabilities: | | | | | | | | | Liabilities of managed investment entities | $ | 142 | | | $ | 4,384 | | | $ | 15 | | | $ | 4,541 | | | Derivatives in annuity benefits accumulated | — | | | — | | | 3,657 | | | 3,657 | | | Other liabilities — derivatives | — | | | 9 | | | — | | | 9 | | | Total liabilities accounted for at fair value | $ | 142 | | | $ | 4,393 | | | $ | 3,672 | | | $ | 8,207 | | | | | | | | | | | December 31, 2019 | | | | | | | | | Assets: | | | | | | | | | Available for sale fixed maturities: | | | | | | | | | U.S. Government and government agencies | $ | 151 | | | $ | 43 | | | $ | 15 | | | $ | 209 | | | States, municipalities and political subdivisions | — | | | 6,858 | | | 105 | | | 6,963 | | | Foreign government | — | | | 172 | | | — | | | 172 | | | Residential MBS | — | | | 2,987 | | | 173 | | | 3,160 | | | Commercial MBS | — | | | 892 | | | 35 | | | 927 | | | Collateralized loan obligations | — | | | 4,265 | | | 15 | | | 4,280 | | | Other asset-backed securities | — | | | 5,842 | | | 1,286 | | | 7,128 | | | Corporate and other | 29 | | | 21,879 | | | 1,758 | | | 23,666 | | | Total AFS fixed maturities | 180 | | | 42,938 | | | 3,387 | | | 46,505 | | | Trading fixed maturities | 2 | | | 111 | | | — | | | 113 | | | Equity securities | 1,433 | | | 67 | | | 437 | | | 1,937 | | | Equity index call options | — | | | 924 | | | — | | | 924 | | | Assets of managed investment entities | 213 | | | 4,506 | | | 17 | | | 4,736 | | | Variable annuity assets (separate accounts) (*) | — | | | 628 | | | — | | | 628 | | | Other assets — derivatives | — | | | 50 | | | — | | | 50 | | | Total assets accounted for at fair value | $ | 1,828 | | | $ | 49,224 | | | $ | 3,841 | | | $ | 54,893 | | | Liabilities: | | | | | | | | | Liabilities of managed investment entities | $ | 206 | | | $ | 4,349 | | | $ | 16 | | | $ | 4,571 | | | Derivatives in annuity benefits accumulated | — | | | — | | | 3,730 | | | 3,730 | | | Other liabilities — derivatives | — | | | 10 | | | — | | | 10 | | | Total liabilities accounted for at fair value | $ | 206 | | | $ | 4,359 | | | $ | 3,746 | | | $ | 8,311 | |
(*)Variable annuity liabilities equal the fair value of variable annuity assets.
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| 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 | | 0.2% – 2.9% over the risk-free rate | | | Risk margin for uncertainty in cash flows | | 0.99% reduction in the discount rate | | | Surrenders | | 4% – 23% of indexed account value | | | Partial surrenders | | 2% – 11% of indexed account value | | | Annuitizations | | 0.1% – 1% of indexed account value | | | Deaths | | 1.8% – 13.2% of indexed account value | | | Budgeted option costs | | 2.2% – 2.8% of indexed account value | |
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| Changes in balances of Level 3 financial assets |
Changes in balances of Level 3 financial assets and liabilities carried at fair value during the third quarter and first nine months of 2020 and 2019 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 June 30, 2020 | | Net
earnings (loss) | | Other
comprehensive
income (loss) | | Purchases
and
issuances | | Sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | Balance at September 30, 2020 | | AFS fixed maturities: | | | | | | | | | | | | | | | | U.S. government agency | $ | 15 | | | $ | 1 | | | $ | (1) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 15 | | | State and municipal | 107 | | | — | | | — | | | — | | | (1) | | | — | | | — | | | 106 | | | Residential MBS | 156 | | | (4) | | | 1 | | | — | | | (6) | | | 49 | | | (18) | | | 178 | | | Commercial MBS | 33 | | | (1) | | | — | | | — | | | — | | | — | | | (22) | | | 10 | | | Collateralized loan obligations | 207 | | | (1) | | | 6 | | | — | | | — | | | — | | | — | | | 212 | | Other asset-backed securities | 1,328 | | | (2) | | | 13 | | | 39 | | | (75) | | | 77 | | | (36) | | | 1,344 | | | Corporate and other | 1,525 | | | 6 | | | 4 | | | 53 | | | (77) | | | 121 | | | (151) | | | 1,481 | | | Total AFS fixed maturities | 3,371 | | | (1) | | | 23 | | | 92 | | | (159) | | | 247 | | | (227) | | | 3,346 | | | Equity securities | 452 | | | (10) | | | — | | | 12 | | | — | | | — | | | (10) | | | 444 | | | Assets of MIE | 17 | | | (2) | | | — | | | — | | | — | | | — | | | — | | | 15 | | | Total Level 3 assets | $ | 3,840 | | | $ | (13) | | | $ | 23 | | | $ | 104 | | | $ | (159) | | | $ | 247 | | | $ | (237) | | | $ | 3,805 | | | | | | | | | | | | | | | | | | | Embedded derivatives (a) | $ | (3,675) | | | $ | (5) | | | $ | — | | | $ | (56) | | | $ | 79 | | | $ | — | | | $ | — | | | $ | (3,657) | | Total Level 3 liabilities (b) | $ | (3,675) | | | $ | (5) | | | $ | — | | | $ | (56) | | | $ | 79 | | | $ | — | | | $ | — | | | $ | (3,657) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total realized/unrealized
gains (losses) included in | | | | | | | | | | | | Balance at June 30, 2019 | | Net
earnings (loss) | | Other
comprehensive
income (loss) | | Purchases
and
issuances | | Sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | Balance at September 30, 2019 | | AFS fixed maturities: | | | | | | | | | | | | | | | | U.S. government agency | $ | 8 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 8 | | | State and municipal | 82 | | | — | | | 2 | | | — | | | — | | | 18 | | | — | | | 102 | | | Residential MBS | 139 | | | 1 | | | (1) | | | — | | | (4) | | | 22 | | | (1) | | | 156 | | | Commercial MBS | 50 | | | 1 | | | — | | | — | | | — | | | 4 | | | — | | | 55 | | | Collateralized loan obligations | 50 | | | (2) | | | 1 | | | 8 | | | — | | | — | | | — | | | 57 | | Other asset-backed securities | 367 | | | — | | | 1 | | | 49 | | | (3) | | | — | | | — | | | 414 | | | Corporate and other | 2,014 | | | — | | | 20 | | | 324 | | | (81) | | | 10 | | | (1) | | | 2,286 | | Total AFS fixed maturities | 2,710 | | | — | | | 23 | | | 381 | | | (88) | | | 54 | | | (2) | | | 3,078 | | | Equity securities | 377 | | | (7) | | | — | | | 18 | | | (2) | | | 34 | | | — | | | 420 | | | Assets of MIE | 19 | | | (1) | | | — | | | — | | | — | | | — | | | — | | | 18 | | | Total Level 3 assets | $ | 3,106 | | | $ | (8) | | | $ | 23 | | | $ | 399 | | | $ | (90) | | | $ | 88 | | | $ | (2) | | | $ | 3,516 | | | | | | | | | | | | | | | | | | | Embedded derivatives (a) | $ | (3,541) | | | $ | 70 | | | $ | — | | | $ | (63) | | | $ | 65 | | | $ | — | | | $ | — | | | $ | (3,469) | | Total Level 3 liabilities (b) | $ | (3,541) | | | $ | 70 | | | $ | — | | | $ | (63) | | | $ | 65 | | | $ | — | | | $ | — | | | $ | (3,469) | |
(a)Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects a favorable adjustment related to the unlocking of actuarial assumptions of $240 million in the third quarter of 2020 compared to $181 million in the third quarter of 2019. (b)As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of MIE assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total realized/unrealized
gains (losses) included in | | | | | | | | | | | | Balance at December 31, 2019 | | Net
earnings (loss) | | Other
comprehensive
income (loss) | | Purchases
and
issuances | | Sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | Balance at September 30, 2020 | | AFS fixed maturities: | | | | | | | | | | | | | | | | U.S. government agency | $ | 15 | | | $ | 3 | | | $ | (3) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 15 | | | State and municipal | 105 | | | — | | | 6 | | | — | | | (3) | | | — | | | (2) | | | 106 | | | Residential MBS | 173 | | | 1 | | | (7) | | | — | | | (15) | | | 51 | | | (25) | | | 178 | | | Commercial MBS | 35 | | | — | | | — | | | — | | | (3) | | | — | | | (22) | | | 10 | | | Collateralized loan obligations | 15 | | | (11) | | | 21 | | | — | | | — | | | 187 | | | — | | | 212 | | Other asset-backed securities | 1,286 | | | (16) | | | 6 | | | 314 | | | (278) | | | 211 | | | (179) | | | 1,344 | | | Corporate and other | 1,758 | | | 4 | | | 24 | | | 220 | | | (133) | | | 130 | | | (522) | | | 1,481 | | | Total AFS fixed maturities | 3,387 | | | (19) | | | 47 | | | 534 | | | (432) | | | 579 | | | (750) | | | 3,346 | | | Equity securities | 437 | | | (35) | | | — | | | 35 | | | — | | | 17 | | | (10) | | | 444 | | | Assets of MIE | 17 | | | (4) | | | — | | | — | | | — | | | 2 | | | — | | | 15 | | | Total Level 3 assets | $ | 3,841 | | | $ | (58) | | | $ | 47 | | | $ | 569 | | | $ | (432) | | | $ | 598 | | | $ | (760) | | | $ | 3,805 | | | | | | | | | | | | | | | | | | | Embedded derivatives (a) | $ | (3,730) | | | $ | 41 | | | $ | — | | | $ | (180) | | | $ | 212 | | | $ | — | | | $ | — | | | $ | (3,657) | | Total Level 3 liabilities (b) | $ | (3,730) | | | $ | 41 | | | $ | — | | | $ | (180) | | | $ | 212 | | | $ | — | | | $ | — | | | $ | (3,657) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total realized/unrealized
gains (losses) included in | | | | | | | | | | | | Balance at December 31, 2018 | | Net
earnings (loss) | | Other
comprehensive
income (loss) | | Purchases
and
issuances | | Sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | Balance at September 30, 2019 | | AFS fixed maturities: | | | | | | | | | | | | | | | | U.S. government agency | $ | 9 | | | $ | — | | | $ | — | | | $ | — | | | $ | (1) | | | $ | — | | | $ | — | | | $ | 8 | | | State and municipal | 59 | | | — | | | 9 | | | — | | | (2) | | | 36 | | | — | | | 102 | | | Residential MBS | 197 | | | 10 | | | (6) | | | — | | | (14) | | | 24 | | | (55) | | | 156 | | | Commercial MBS | 56 | | | 3 | | | — | | | — | | | (3) | | | 4 | | | (5) | | | 55 | | | Collateralized loan obligations | 116 | | | (5) | | | 7 | | | 8 | | | — | | | 13 | | | (82) | | | 57 | | Other asset-backed securities | 731 | | | — | | | 6 | | | 141 | | | (135) | | | — | | | (329) | | | 414 | | | Corporate and other | 1,996 | | | 2 | | | 71 | | | 985 | | | (330) | | | 12 | | | (450) | | | 2,286 | | Total AFS fixed maturities | 3,164 | | | 10 | | | 87 | | | 1,134 | | | (485) | | | 89 | | | (921) | | | 3,078 | | | Equity securities | 336 | | | (7) | | | — | | | 38 | | | (3) | | | 56 | | | — | | | 420 | | | Assets of MIE | 21 | | | (3) | | | — | | | — | | | — | | | — | | | — | | | 18 | | | Total Level 3 assets | $ | 3,521 | | | $ | — | | | $ | 87 | | | $ | 1,172 | | | $ | (488) | | | $ | 145 | | | $ | (921) | | | $ | 3,516 | | | | | | | | | | | | | | | | | | | Embedded derivatives (a) | $ | (2,720) | | | $ | (643) | | | $ | — | | | $ | (276) | | | $ | 170 | | | $ | — | | | $ | — | | | $ | (3,469) | | Total Level 3 liabilities (b) | $ | (2,720) | | | $ | (643) | | | $ | — | | | $ | (276) | | | $ | 170 | | | $ | — | | | $ | — | | | $ | (3,469) | |
(a)Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects a favorable adjustment related to the unlocking of actuarial assumptions of $240 million in the first nine months of 2020 compared to $181 million in the first nine months of 2019. (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 balances of Level 3 financial liabilities |
Changes in balances of Level 3 financial assets and liabilities carried at fair value during the third quarter and first nine months of 2020 and 2019 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 June 30, 2020 | | Net
earnings (loss) | | Other
comprehensive
income (loss) | | Purchases
and
issuances | | Sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | Balance at September 30, 2020 | | AFS fixed maturities: | | | | | | | | | | | | | | | | U.S. government agency | $ | 15 | | | $ | 1 | | | $ | (1) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 15 | | | State and municipal | 107 | | | — | | | — | | | — | | | (1) | | | — | | | — | | | 106 | | | Residential MBS | 156 | | | (4) | | | 1 | | | — | | | (6) | | | 49 | | | (18) | | | 178 | | | Commercial MBS | 33 | | | (1) | | | — | | | — | | | — | | | — | | | (22) | | | 10 | | | Collateralized loan obligations | 207 | | | (1) | | | 6 | | | — | | | — | | | — | | | — | | | 212 | | Other asset-backed securities | 1,328 | | | (2) | | | 13 | | | 39 | | | (75) | | | 77 | | | (36) | | | 1,344 | | | Corporate and other | 1,525 | | | 6 | | | 4 | | | 53 | | | (77) | | | 121 | | | (151) | | | 1,481 | | | Total AFS fixed maturities | 3,371 | | | (1) | | | 23 | | | 92 | | | (159) | | | 247 | | | (227) | | | 3,346 | | | Equity securities | 452 | | | (10) | | | — | | | 12 | | | — | | | — | | | (10) | | | 444 | | | Assets of MIE | 17 | | | (2) | | | — | | | — | | | — | | | — | | | — | | | 15 | | | Total Level 3 assets | $ | 3,840 | | | $ | (13) | | | $ | 23 | | | $ | 104 | | | $ | (159) | | | $ | 247 | | | $ | (237) | | | $ | 3,805 | | | | | | | | | | | | | | | | | | | Embedded derivatives (a) | $ | (3,675) | | | $ | (5) | | | $ | — | | | $ | (56) | | | $ | 79 | | | $ | — | | | $ | — | | | $ | (3,657) | | Total Level 3 liabilities (b) | $ | (3,675) | | | $ | (5) | | | $ | — | | | $ | (56) | | | $ | 79 | | | $ | — | | | $ | — | | | $ | (3,657) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total realized/unrealized
gains (losses) included in | | | | | | | | | | | | Balance at June 30, 2019 | | Net
earnings (loss) | | Other
comprehensive
income (loss) | | Purchases
and
issuances | | Sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | Balance at September 30, 2019 | | AFS fixed maturities: | | | | | | | | | | | | | | | | U.S. government agency | $ | 8 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 8 | | | State and municipal | 82 | | | — | | | 2 | | | — | | | — | | | 18 | | | — | | | 102 | | | Residential MBS | 139 | | | 1 | | | (1) | | | — | | | (4) | | | 22 | | | (1) | | | 156 | | | Commercial MBS | 50 | | | 1 | | | — | | | — | | | — | | | 4 | | | — | | | 55 | | | Collateralized loan obligations | 50 | | | (2) | | | 1 | | | 8 | | | — | | | — | | | — | | | 57 | | Other asset-backed securities | 367 | | | — | | | 1 | | | 49 | | | (3) | | | — | | | — | | | 414 | | | Corporate and other | 2,014 | | | — | | | 20 | | | 324 | | | (81) | | | 10 | | | (1) | | | 2,286 | | Total AFS fixed maturities | 2,710 | | | — | | | 23 | | | 381 | | | (88) | | | 54 | | | (2) | | | 3,078 | | | Equity securities | 377 | | | (7) | | | — | | | 18 | | | (2) | | | 34 | | | — | | | 420 | | | Assets of MIE | 19 | | | (1) | | | — | | | — | | | — | | | — | | | — | | | 18 | | | Total Level 3 assets | $ | 3,106 | | | $ | (8) | | | $ | 23 | | | $ | 399 | | | $ | (90) | | | $ | 88 | | | $ | (2) | | | $ | 3,516 | | | | | | | | | | | | | | | | | | | Embedded derivatives (a) | $ | (3,541) | | | $ | 70 | | | $ | — | | | $ | (63) | | | $ | 65 | | | $ | — | | | $ | — | | | $ | (3,469) | | Total Level 3 liabilities (b) | $ | (3,541) | | | $ | 70 | | | $ | — | | | $ | (63) | | | $ | 65 | | | $ | — | | | $ | — | | | $ | (3,469) | |
(a)Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects a favorable adjustment related to the unlocking of actuarial assumptions of $240 million in the third quarter of 2020 compared to $181 million in the third quarter of 2019. (b)As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of MIE assets. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total realized/unrealized
gains (losses) included in | | | | | | | | | | | | Balance at December 31, 2019 | | Net
earnings (loss) | | Other
comprehensive
income (loss) | | Purchases
and
issuances | | Sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | Balance at September 30, 2020 | | AFS fixed maturities: | | | | | | | | | | | | | | | | U.S. government agency | $ | 15 | | | $ | 3 | | | $ | (3) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 15 | | | State and municipal | 105 | | | — | | | 6 | | | — | | | (3) | | | — | | | (2) | | | 106 | | | Residential MBS | 173 | | | 1 | | | (7) | | | — | | | (15) | | | 51 | | | (25) | | | 178 | | | Commercial MBS | 35 | | | — | | | — | | | — | | | (3) | | | — | | | (22) | | | 10 | | | Collateralized loan obligations | 15 | | | (11) | | | 21 | | | — | | | — | | | 187 | | | — | | | 212 | | Other asset-backed securities | 1,286 | | | (16) | | | 6 | | | 314 | | | (278) | | | 211 | | | (179) | | | 1,344 | | | Corporate and other | 1,758 | | | 4 | | | 24 | | | 220 | | | (133) | | | 130 | | | (522) | | | 1,481 | | | Total AFS fixed maturities | 3,387 | | | (19) | | | 47 | | | 534 | | | (432) | | | 579 | | | (750) | | | 3,346 | | | Equity securities | 437 | | | (35) | | | — | | | 35 | | | — | | | 17 | | | (10) | | | 444 | | | Assets of MIE | 17 | | | (4) | | | — | | | — | | | — | | | 2 | | | — | | | 15 | | | Total Level 3 assets | $ | 3,841 | | | $ | (58) | | | $ | 47 | | | $ | 569 | | | $ | (432) | | | $ | 598 | | | $ | (760) | | | $ | 3,805 | | | | | | | | | | | | | | | | | | | Embedded derivatives (a) | $ | (3,730) | | | $ | 41 | | | $ | — | | | $ | (180) | | | $ | 212 | | | $ | — | | | $ | — | | | $ | (3,657) | | Total Level 3 liabilities (b) | $ | (3,730) | | | $ | 41 | | | $ | — | | | $ | (180) | | | $ | 212 | | | $ | — | | | $ | — | | | $ | (3,657) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total realized/unrealized
gains (losses) included in | | | | | | | | | | | | Balance at December 31, 2018 | | Net
earnings (loss) | | Other
comprehensive
income (loss) | | Purchases
and
issuances | | Sales and
settlements | | Transfer
into
Level 3 | | Transfer
out of
Level 3 | | Balance at September 30, 2019 | | AFS fixed maturities: | | | | | | | | | | | | | | | | U.S. government agency | $ | 9 | | | $ | — | | | $ | — | | | $ | — | | | $ | (1) | | | $ | — | | | $ | — | | | $ | 8 | | | State and municipal | 59 | | | — | | | 9 | | | — | | | (2) | | | 36 | | | — | | | 102 | | | Residential MBS | 197 | | | 10 | | | (6) | | | — | | | (14) | | | 24 | | | (55) | | | 156 | | | Commercial MBS | 56 | | | 3 | | | — | | | — | | | (3) | | | 4 | | | (5) | | | 55 | | | Collateralized loan obligations | 116 | | | (5) | | | 7 | | | 8 | | | — | | | 13 | | | (82) | | | 57 | | Other asset-backed securities | 731 | | | — | | | 6 | | | 141 | | | (135) | | | — | | | (329) | | | 414 | | | Corporate and other | 1,996 | | | 2 | | | 71 | | | 985 | | | (330) | | | 12 | | | (450) | | | 2,286 | | Total AFS fixed maturities | 3,164 | | | 10 | | | 87 | | | 1,134 | | | (485) | | | 89 | | | (921) | | | 3,078 | | | Equity securities | 336 | | | (7) | | | — | | | 38 | | | (3) | | | 56 | | | — | | | 420 | | | Assets of MIE | 21 | | | (3) | | | — | | | — | | | — | | | — | | | — | | | 18 | | | Total Level 3 assets | $ | 3,521 | | | $ | — | | | $ | 87 | | | $ | 1,172 | | | $ | (488) | | | $ | 145 | | | $ | (921) | | | $ | 3,516 | | | | | | | | | | | | | | | | | | | Embedded derivatives (a) | $ | (2,720) | | | $ | (643) | | | $ | — | | | $ | (276) | | | $ | 170 | | | $ | — | | | $ | — | | | $ | (3,469) | | Total Level 3 liabilities (b) | $ | (2,720) | | | $ | (643) | | | $ | — | | | $ | (276) | | | $ | 170 | | | $ | — | | | $ | — | | | $ | (3,469) | |
(a)Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects a favorable adjustment related to the unlocking of actuarial assumptions of $240 million in the first nine months of 2020 compared to $181 million in the first nine months of 2019. (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.
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| 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 | | Fair Value | | Value | | Total | | Level 1 | | Level 2 | | Level 3 | | September 30, 2020 | | | | | | | | | | | Financial assets: | | | | | | | | | | | Cash and cash equivalents | $ | 3,747 | | | $ | 3,747 | | | $ | 3,747 | | | $ | — | | | $ | — | | | Mortgage loans | 1,482 | | | 1,507 | | | — | | | — | | | 1,507 | | | Policy loans | 154 | | | 154 | | | — | | | — | | | 154 | | Total financial assets not accounted for at fair value | $ | 5,383 | | | $ | 5,408 | | | $ | 3,747 | | | $ | — | | | $ | 1,661 | | | Financial liabilities: | | | | | | | | | | | Annuity benefits accumulated (*) | $ | 41,082 | | | $ | 42,938 | | | $ | — | | | $ | — | | | $ | 42,938 | | | Long-term debt | 2,108 | | | 2,397 | | | — | | | 2,394 | | | 3 | | Total financial liabilities not accounted for at fair value | $ | 43,190 | | | $ | 45,335 | | | $ | — | | | $ | 2,394 | | | $ | 42,941 | | | | | | | | | | | | | December 31, 2019 | | | | | | | | | | | Financial assets: | | | | | | | | | | | Cash and cash equivalents | $ | 2,314 | | | $ | 2,314 | | | $ | 2,314 | | | $ | — | | | $ | — | | | Mortgage loans | 1,329 | | | 1,346 | | | — | | | — | | | 1,346 | | | Policy loans | 164 | | | 164 | | | — | | | — | | | 164 | | Total financial assets not accounted for at fair value | $ | 3,807 | | | $ | 3,824 | | | $ | 2,314 | | | $ | — | | | $ | 1,510 | | | Financial liabilities: | | | | | | | | | | | Annuity benefits accumulated (*) | $ | 40,159 | | | $ | 40,182 | | | $ | — | | | $ | — | | | $ | 40,182 | | | Long-term debt | 1,473 | | | 1,622 | | | — | | | 1,619 | | | 3 | | Total financial liabilities not accounted for at fair value | $ | 41,632 | | | $ | 41,804 | | | $ | — | | | $ | 1,619 | | | $ | 40,185 | |
(*)Excludes $850 million and $247 million of life contingent annuities in the payout phase at September 30, 2020 and December 31, 2019, respectively.
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