XML 26 R14.htm IDEA: XBRL DOCUMENT

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2020

(6) Fair Value of Financial Instruments

Recurring Fair Value Measurements

We have fixed maturity securities, short-term investments, equity securities, limited partnerships, derivatives, embedded derivatives, securities held as collateral, separate account assets and certain other financial instruments, which are carried at fair value. Below is a description of the valuation techniques and inputs used to determine fair value by class of instrument.

Fixed maturity, short-term investments and equity securities

The fair value of fixed maturity securities, short-term investments and equity securities are estimated primarily based on information derived from third-party pricing services (“pricing services”), internal models and/or broker quotes, which use a market approach, income approach or a combination of the market and income approach depending on the type of instrument and availability of information. In general, a market approach is utilized if there is readily available and relevant market activity for an individual security. In certain cases where market information is not available for a specific security but is available for similar securities, that security is valued using market information for similar securities, which is also a market approach. When market information is not available for a specific security (or similar securities) or is available but such information is less relevant or reliable, an income approach or a combination of a market and income approach is utilized. For securities with optionality, such as call or prepayment features (including mortgage-backed or asset-backed securities), an income approach may be used. In addition, a combination of the results from market and income approaches may be used to estimate fair value. These valuation techniques may change from period to period, based on the relevance and availability of market data.

Further, while we consider the valuations provided by pricing services and broker quotes to be of high quality, management determines the fair value of our investment securities after considering all relevant and available information.

In general, we first obtain valuations from pricing services. If prices are unavailable for public securities, we obtain broker quotes. For all securities, excluding certain private fixed maturity securities, if neither a pricing service nor broker quotes valuation is available, we determine fair value using internal models. For certain private fixed maturity securities where we do not obtain valuations from pricing services, we utilize an internal model to determine fair value since transactions for similar securities are not readily observable and these securities are not typically valued by pricing services.

Given our understanding of the pricing methodologies and procedures of pricing services, the securities valued by pricing services are typically classified as Level 2 unless we determine the valuation process for a security or group of securities utilizes significant unobservable inputs, which would result in the valuation being classified as Level 3.

Broker quotes are typically based on an income approach given the lack of available market data. As the valuation typically includes significant unobservable inputs, we classify the securities where fair value is based on our consideration of broker quotes as Level 3 measurements.

For private fixed maturity securities, we utilize an income approach where we obtain public bond spreads and utilize those in an internal model to determine fair value. Other inputs to the model include rating and weighted-average life, as well as sector which is used to assign the spread. We then add an additional premium, which represents an unobservable input, to the public bond spread to adjust for the liquidity and other features of

our private placements. We utilize the estimated market yield to discount the expected cash flows of the security to determine fair value. We utilize price caps for securities where the estimated market yield results in a valuation that may exceed the amount that would be received in a market transaction. When a security does not have an external rating, we assign the security an internal rating to determine the appropriate public bond spread that should be utilized in the valuation. While we generally consider the public bond spreads by sector and maturity to be observable inputs, we evaluate the similarities of our private placement with the public bonds, any price caps utilized, liquidity premiums applied, and whether external ratings are available for our private placements to determine whether the spreads utilized would be considered observable inputs. We classify private securities without an external rating or public bond spread as Level 3. In general, a significant increase (decrease) in credit spreads would have resulted in a significant decrease (increase) in the fair value for our fixed maturity securities as of September 30, 2020.

For remaining securities priced using internal models, we determine fair value using an income approach. We maximize the use of observable inputs but typically utilize significant unobservable inputs to determine fair value. Accordingly, the valuations are typically classified as Level 3.

Our assessment of whether or not there were significant unobservable inputs related to fixed maturity securities was based on our observations obtained through the course of managing our investment portfolio, including interaction with other market participants, observations related to the availability and consistency of pricing and/or rating, and understanding of general market activity such as new issuance and the level of secondary market trading for a class of securities. Additionally, we considered data obtained from pricing services to determine whether our estimated values incorporate significant unobservable inputs that would result in the valuation being classified as Level 3.

A summary of the inputs used for our fixed maturity securities, short-term investments and equity securities based on the level in which instruments are classified is included below. We have combined certain classes of instruments together as the nature of the inputs is similar.

Level 1 measurements

Equity securities.

The primary inputs to the valuation of exchange-traded equity securities include quoted prices for the identical instrument.

Separate account assets.

The fair value of separate account assets is based on the quoted prices of the underlying fund investments and, therefore, represents Level 1 pricing.

Level 2 measurements

Fixed maturity securities

•

Third-party pricing services:

In estimating the fair value of fixed maturity securities, approximately 91% of our portfolio was priced using third-party pricing services as of September 30, 2020. These pricing services utilize industry-standard valuation techniques that include market-based approaches, income-based approaches, a combination of market-based and income-based approaches or other proprietary, internally generated models as part of the valuation processes. These third-party pricing vendors maximize the use of publicly available data inputs to generate valuations for each asset class. Priority and type of inputs used may change frequently as certain inputs may be more direct drivers of valuation at the time of pricing. Examples of significant inputs incorporated by pricing services may

include sector and issuer spreads, seasoning, capital structure, security optionality, collateral data, prepayment assumptions, default assumptions, delinquencies, debt covenants, benchmark yields, trade data, dealer quotes, credit ratings, maturity and weighted-average life. We conduct regular meetings with our pricing services for the purpose of understanding the methodologies, techniques and inputs used by the third-party pricing providers.

The following table presents a summary of the significant inputs used by our pricing services for certain fair value measurements of fixed maturity securities that are classified as Level

as of September

30,

2020


(Amounts in millions)	Fair value		Primary methodologies	Significant inputs
U.S. government, agencies and government-sponsored enterprises	$	4,792	Price quotes from trading desk, broker feeds	Bid side prices, trade prices, Option Adjusted Spread (“OAS”) to swap curve, Bond Market Association OAS, Treasury Curve, Agency Bullet Curve, maturity to issuer spread

State and political subdivisions	$	3,058	Multi-dimensional attribute-based modeling systems, third-party pricing vendors	Trade prices, material event notices, Municipal Market Data benchmark yields, broker quotes

Non-U.S. government	$	1,395	Matrix pricing, spread priced to benchmark curves, price quotes from market makers	Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources

U.S. corporate	$	31,695	Multi-dimensional attribute-based modeling systems, broker quotes, price quotes from market makers, OAS-based models	Bid side prices to Treasury Curve, Issuer Curve, which includes sector, quality, duration, OAS percentage and change for spread matrix, trade prices, comparative transactions, Trade Reporting and Compliance Engine (“TRACE”) reports

Non-U.S. corporate	$	9,220	Multi-dimensional attribute-based modeling systems, OAS-based models, price quotes from market makers	Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources

Residential mortgage-backed	$	2,061	OAS-based models, single factor binomial models, internally priced	Prepayment and default assumptions, aggregation of bonds with similar characteristics, including collateral type, vintage, tranche type, weighted-average life, weighted-average loan age, issuer program and delinquency ratio, pay up and pay down factors, TRACE reports

Commercial mortgage-backed	$	2,956	Multi-dimensional attribute-based modeling systems, pricing matrix, spread matrix priced to swap curves, Trepp commercial mortgage-backed securities analytics model	Credit risk, interest rate risk, prepayment speeds, new issue data, collateral performance, origination year, tranche type, original credit ratings, weighted-average life, cash flows, spreads derived from broker quotes, bid side prices, spreads to daily updated swaps curves, TRACE reports

Other asset-backed	$	3,125	Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makers	Spreads to daily updated swap curves, spreads derived from trade prices and broker quotes, bid side prices, new issue data, collateral performance, analysis of prepayment speeds, cash flows, collateral loss analytics, historical issue analysis, trade data from market makers, TRACE reports

•

Internal models:

A portion of our U.S. corporate and non-U.S. corporate securities are valued using internal models. The fair value of these fixed maturity securities was $1,299 million and $673 million, respectively, as of September 30, 2020. Internally modeled securities are primarily private fixed maturity securities where we use market observable inputs such as an interest rate yield curve, published credit spreads for similar securities based on the external ratings of the instrument and related industry sector of the issuer. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps and liquidity premiums are established using inputs from market participants.

Equity securities.

The primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active.

Securities lending collateral

The fair value of securities held as collateral is primarily based on Level 2 inputs from market information for the collateral that is held on our behalf by the custodian. We determine fair value after considering prices obtained by pricing services.

Short-term investments

The fair value of short-term investments classified as Level 2 is determined after considering prices obtained by pricing services.

Level 3 measurements

Fixed maturity securities

•

Broker quotes:

A portion of our state and political subdivisions, U.S. corporate, non-U.S. corporate, residential mortgage-backed, commercial mortgage-backed and other asset-backed securities are valued using broker quotes. Broker quotes are obtained from third-party providers that have current market knowledge to provide a reasonable price for securities not routinely priced by pricing services. Brokers utilized for valuation of assets are reviewed annually. The fair value of our Level 3 fixed maturity securities priced by broker quotes was $828 million as of September 30, 2020.

•

Internal models:

A portion of our state and political subdivisions, U.S. corporate, non-U.S. corporate, residential mortgage-backed and other asset-backed securities are valued using internal models. The primary inputs to the valuation of the bond population include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, duration, call provisions, issuer rating, benchmark yields and credit spreads. Certain private fixed maturity securities are valued using an internal model using market observable inputs such as the interest rate yield curve, as well as published credit spreads for similar securities, which includes significant unobservable inputs. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps are established using inputs from market participants. For structured securities, the primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, weighted-average coupon, weighted-average maturity, issuer rating, structure of the security, expected prepayment speeds and volumes, collateral type, current and forecasted loss severity, average delinquency rates, vintage of the loans, geographic region, debt service coverage ratios, payment priority with the tranche, benchmark yields and credit spreads. The fair value of our Level 3 fixed maturity securities priced using internal models was $3,314 million as of September 30, 2020.

Equity securities.

The primary inputs to the valuation include broker quotes where the underlying inputs are unobservable and for internal models, structure of the security and issuer rating.

Net asset value

Limited partnerships

Limited partnerships are valued based on comparable market transactions, discounted future cash flows, quoted market prices and/or estimates using the most recent data available for the underlying instrument. We utilize the net asset value (“NAV”) from the underlying fund statements as a practical expedient for fair value.

Derivatives

We consider counterparty collateral arrangements and rights of set-off when evaluating our net credit risk exposure to our derivative counterparties. Accordingly, we are permitted to include consideration of these arrangements when determining whether any incremental adjustment should be made for both the counterparty’s and our non-performance risk in measuring fair value for our derivative instruments. As a result of these counterparty arrangements, we determined that any adjustment for credit risk would not be material and we have not recorded any incremental adjustment for our non-performance risk or the non-performance risk of the derivative counterparty for our derivative assets or liabilities.

Interest rate swaps.

The valuation of interest rate swaps is determined using an income approach. The primary input into the valuation represents the forward interest rate swap curve, which is generally considered an observable input, and results in the derivative being classified as Level 2. For certain interest rate swaps, the inputs into the valuation also include the total returns of certain bonds that would primarily be considered an observable input and result in the derivative being classified as Level 2.

Interest rate caps.

The valuation of interest rate caps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, forward interest rate volatility and time value component associated with the optionality in the derivative which are generally considered observable inputs and results in the derivatives being classified as Level 2.

Foreign currency swaps.

The valuation of foreign currency swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and foreign currency exchange rates, both of which are considered observable inputs, and results in the derivative being classified as Level 2.

Equity index options.

We have equity index options associated with various equity indices. The valuation of equity index options is determined using an income approach. The primary inputs into the valuation represent forward interest rates, equity index volatility, equity index and time value component associated with the optionality in the derivative. The equity index volatility surface is determined based on market information that is not readily observable and is developed based upon inputs received from several third-party sources. Accordingly, these options are classified as Level 3. As of September 30, 2020, a significant increase (decrease) in the equity index volatility discussed above would have resulted in a significantly higher (lower) fair value measurement.

Financial futures.

The fair value of financial futures is based on the closing exchange prices. Accordingly, these financial futures are classified as Level 1. The period end valuation is zero as a result of settling the margins on these contracts on a daily basis.

Equity return swaps.

The valuation of equity return swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and underlying equity index values, which are generally considered observable inputs, and results in the derivative being classified as Level 2.

Other foreign currency contracts.

We have certain foreign currency options classified as other foreign currency contracts. The valuation of foreign currency options is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, foreign currency exchange rates, forward interest rate, foreign currency exchange rate volatility and time value component associated with the optionality in the derivative, which are generally considered observable inputs and results in the derivative being classified as Level 2. We also have foreign currency forward contracts where the valuation is determined using an income approach. The primary inputs into the valuation represent the forward foreign currency exchange rates, which are generally considered observable inputs and results in the derivative being classified as Level 2.

GMWB embedded derivatives

We are required to bifurcate an embedded derivative for certain features associated with annuity products and related reinsurance agreements where we provide a GMWB to the policyholder and are required to record the GMWB embedded derivative at fair value. The valuation of our GMWB embedded derivative is based on an income approach that incorporates inputs such as forward interest rates, equity index volatility, equity index and fund correlation, and policyholder assumptions such as utilization, lapse and mortality. We determine fair value using an internal model based on the various inputs noted above.

Non-performance risk is integrated into the discount rate used to value GMWB liabilities. Our discount rate used to determine fair value of our GMWB liabilities includes market credit spreads above U.S. Treasury rates to reflect an adjustment for the non-performance risk of the GMWB liabilities. As of September 30, 2020 and December 31, 2019, the impact of non-performance risk resulted in a lower fair value of our GMWB liabilities of $85 million and $62 million, respectively.

We classify the GMWB valuation as Level 3 based on having significant unobservable inputs, with equity index volatility and non-performance risk being considered the more significant unobservable inputs. As equity index volatility increases, the fair value of the GMWB liabilities will increase. Any increase in non-performance risk would increase the discount rate and would decrease the fair value of the GMWB liability. Additionally, we consider lapse and utilization assumptions to be significant unobservable inputs. An increase in our lapse assumption would decrease the fair value of the GMWB liability, whereas an increase in our utilization rate would increase the fair value. As of September 30, 2020, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.

Fixed index annuity embedded derivatives

We have fixed indexed annuity products where interest is credited to the policyholder’s account balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and recorded at fair value. Fair value is determined using an income approach where the present value of the excess cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature. The inputs used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder behavior and expected future interest credited being considered significant unobservable inputs, we classify these instruments

as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As expected future interest credited decreases, the value of our embedded derivative liability will decrease. As of September 30, 2020, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.

Indexed universal life embedded derivatives

We have indexed universal life insurance products where interest is credited to the policyholder’s account balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and recorded at fair value. Fair value is determined using an income approach where the present value of the excess cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature. The inputs used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder behavior and expected future interest credited being considered significant unobservable inputs, we classify these instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As expected future interest credited decreases, the value of our embedded derivative liability will decrease. As of September 30, 2020, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.

The following tables set forth our assets by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:


	September 30, 2020
(Amounts in millions)	Total		Level 1		Level 2		Level 3		NAV (1)
Assets
Investments:
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	4,792	$	—	$	4,792	$	—	$	—
State and political subdivisions		3,115		—		3,058		57		—
Non-U.S. government		1,395		—		1,395		—		—
U.S. corporate:
Utilities		5,217		—		4,376		841		—
Energy		2,765		—		2,651		114		—
Finance and insurance		8,735		—		8,204		531		—
Consumer—non-cyclical		6,368		—		6,265		103		—
Technology and communications		3,527		—		3,401		126		—
Industrial		1,551		—		1,511		40		—
Capital goods		3,057		—		2,960		97		—
Consumer—cyclical		2,044		—		1,874		170		—
Transportation		1,581		—		1,527		54		—
Other		389		—		225		164		—

Total U.S. corporate		35,234		—		32,994		2,240		—

Non-U.S. corporate:
Utilities		935		—		588		347		—
Energy		1,348		—		1,111		237		—
Finance and insurance		2,618		—		2,314		304		—
Consumer—non-cyclical		806		—		752		54		—
Technology and communications		1,256		—		1,228		28		—
Industrial		1,068		—		975		93		—
Capital goods		626		—		453		173		—
Consumer—cyclical		436		—		269		167		—
Transportation		648		—		537		111		—
Other		1,802		—		1,666		136		—

Total non-U.S. corporate		11,543		—		9,893		1,650		—

Residential mortgage-backed		2,075		—		2,061		14		—
Commercial mortgage-backed		2,976		—		2,956		20		—
Other asset-backed		3,286		—		3,125		161		—

Total fixed maturity securities		64,416		—		60,274		4,142		—

Equity securities		629		465		112		52		—

Other invested assets:
Derivative assets:
Interest rate swaps		708		—		708		—		—
Foreign currency swaps		10		—		10		—		—
Equity index options		67		—		—		67		—
Other foreign currency contracts		19		—		19		—		—

Total derivative assets		804		—		737		67		—

Securities lending collateral		75		—		75		—		—
Short-term investments		251		—		251		—		—
Limited partnerships		674		—		—		—		674

Total other invested assets		1,804		—		1,063		67		674

Reinsurance recoverable (2)		35		—		—		35		—
Separate account assets		5,700		5,700		—		—		—

Total assets	$	72,584	$	6,165	$	61,449	$	4,296	$	674

(1)	Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy.

(2)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.


	December 31, 2019
(Amounts in millions)	Total		Level 1		Level 2		Level 3		NAV (1)
Assets
Investments:
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	5,025	$	—	$	5,025	$	—	$	—
State and political subdivisions		2,747		—		2,645		102		—
Non-U.S. government		1,350		—		1,350		—		—
U.S. corporate:
Utilities		4,997		—		4,132		865		—
Energy		2,699		—		2,570		129		—
Finance and insurance		7,774		—		7,202		572		—
Consumer—non-cyclical		5,701		—		5,607		94		—
Technology and communications		3,245		—		3,195		50		—
Industrial		1,396		—		1,356		40		—
Capital goods		2,711		—		2,609		102		—
Consumer—cyclical		1,760		—		1,587		173		—
Transportation		1,506		—		1,428		78		—
Other		322		—		186		136		—

Total U.S. corporate		32,111		—		29,872		2,239		—

Non-U.S. corporate:
Utilities		829		—		455		374		—
Energy		1,319		—		1,072		247		—
Finance and insurance		2,319		—		2,085		234		—
Consumer—non-cyclical		684		—		625		59		—
Technology and communications		1,138		—		1,110		28		—
Industrial		988		—		884		104		—
Capital goods		605		—		444		161		—
Consumer—cyclical		397		—		250		147		—
Transportation		629		—		438		191		—
Other		1,617		—		1,477		140		—

Total non-U.S. corporate		10,525		—		8,840		1,685		—

Residential mortgage-backed		2,270		—		2,243		27		—
Commercial mortgage-backed		3,026		—		3,020		6		—
Other asset-backed		3,285		—		3,153		132		—

Total fixed maturity securities		60,339		—		56,148		4,191		—

Equity securities		239		62		126		51		—

Other invested assets:
Derivative assets:
Interest rate swaps		197		—		197		—		—
Foreign currency swaps		4		—		4		—		—
Equity index options		81		—		—		81		—
Other foreign currency contracts		8		—		8		—		—

Total derivative assets		290		—		209		81		—

Securities lending collateral		51		—		51		—		—
Short-term investments		211		—		211		—		—
Limited partnerships		503		—		—		—		503

Total other invested assets		1,055		—		471		81		503

Reinsurance recoverable (2)		20		—		—		20		—
Separate account assets		6,108		6,108		—		—		—

Total assets	$	67,761	$	6,170	$	56,745	$	4,343	$	503

(1)	Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy.

(2)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

The following tables present additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:


	Beginning balance as of July 1, 2020		Total realized and unrealized gains (losses)																					Ending balance as of September 30, 2020		Total gains (losses) attributable to assets still held
(Amounts in millions)	Beginning balance as of July 1, 2020		Included in net income (loss)			Included in OCI			Purchases		Sales			Issuances		Settlements			Transfer into Level 3 (1)		Transfer out of Level 3 (1)			Ending balance as of September 30, 2020		Included in net income (loss)			Included in OCI
Fixed maturity securities:
State and political subdivisions	$	63	$	1		$	(7	)	$	—	$	—		$	—	$	—		$	—	$	—		$	57	$	1		$	(6	)
U.S. corporate:
Utilities		936		10			(4	)		15		—			—		(52	)		—		(64	)		841		—			1
Energy		123		—			—			7		—			—		(16	)		—		—			114		—			—
Finance and insurance		551		—			2			71		—			—		(16	)		—		(77	)		531		—			2
Consumer—non-cyclical		103		—			—			—		—			—		—			—		—			103		—			1
Technology and communications		66		—			3			57		—			—		—			—		—			126		—			3
Industrial		39		—			1			—		—			—		—			—		—			40		—			—
Capital goods		97		—			—			—		—			—		—			—		—			97		—			—
Consumer— cyclical		198		3			(1	)		—		—			—		(30	)		—		—			170		—			1
Transportation		54		—			1			—		—			—		(1	)		—		—			54		—			1
Other		165		—			—			—		—			—		(1	)		—		—			164		—			—

Total U.S. corporate		2,332		13			2			150		—			—		(116	)		—		(141	)		2,240		—			9

Non-U.S. corporate:
Utilities		357		—			4			—		—			—		—			6		(20	)		347		—			3
Energy		237		—			—			—		—			—		—			—		—			237		—			1
Finance and insurance		311		1			(2	)		—		—			—		—			19		(25	)		304		1			(2	)
Consumer—non-cyclical		54		—			—			—		—			—		—			—		—			54		—			—
Technology and communications		28		—			—			—		—			—		—			—		—			28		—			—
Industrial		92		—			1			—		—			—		—			—		—			93		—			1
Capital goods		173		—			—			10		—			—		(10	)		—		—			173		—			(1	)
Consumer—cyclical		156		—			4			17		—			—		—			—		(10	)		167		—			4
Transportation		141		—			(2	)		—		—			—		—			—		(28	)		111		—			(3	)
Other		145		—			3			—		—			—		(12	)		—		—			136		—			3

Total non-U.S. corporate		1,694		1			8			27		—			—		(22	)		25		(83	)		1,650		1			6

Residential mortgage-backed		24		—			(1	)		—		—			—		—			—		(9	)		14		—			—
Commercial mortgage-backed		21		—			(1	)		—		—			—		—			—		—			20		—			—
Other asset-backed		121		—			1			78		—			—		(10	)		—		(29	)		161		—			1

Total fixed maturity securities		4,255		15			2			255		—			—		(148	)		25		(262	)		4,142		2			10

Equity securities		53		—			—			—		(1	)		—		—			—		—			52		—			—

Other invested assets:
Derivative assets:
Equity index options		66		7			—			27		—			—		(33	)		—		—			67		(1	)		—

Total derivative assets		66		7			—			27		—			—		(33	)		—		—			67		(1	)		—

Total other invested assets		66		7			—			27		—			—		(33	)		—		—			67		(1	)		—

Reinsurance recoverable (2)		38		(3	)		—			—		—			—		—			—		—			35		(3	)		—

Total Level 3 assets	$	4,412	$	19		$	2		$	282	$	(1	)	$	—	$	(181	)	$	25	$	(262	)	$	4,296	$	(2	)	$	10

(1)

The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.

(2)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.


	Beginning balance as of July 1, 2019		Total realized and unrealized gains (losses)																			Ending balance as of September 30, 2019		Total gains (losses) included in net income (loss) attributable to assets still held
(Amounts in millions)	Beginning balance as of July 1, 2019		Included in net income (loss)		Included in OCI		Purchases		Sales			Issuances		Settlements			Transfer into Level 3 (1)		Transfer out of Level 3 (1)			Ending balance as of September 30, 2019
Fixed maturity securities:
State and political subdivisions	$	61	$	—	$	11	$	—	$	—		$	—	$	—		$	—	$	—		$	72	$	1
U.S. corporate:
Utilities		789		1		28		13		—			—		(7	)		—		—			824		—
Energy		122		—		2		12		—			—		(1	)		—		—			135		—
Finance and insurance		607		—		11		—		—			—		(26	)		20		—			612		—
Consumer—non-cyclical		89		—		1		9		—			—		(1	)		—		—			98		—
Technology and communications		44		—		1		—		—			—		—			5		—			50		—
Industrial		40		—		—		—		—			—		—			—		—			40		—
Capital goods		98		—		2		—		—			—		—			—		—			100		—
Consumer—cyclical		185		—		2		—		—			—		(2	)		—		(9	)		176		—
Transportation		54		—		1		3		—			—		(1	)		—		—			57		—
Other		199		—		—		—		—			—		—			—		(31	)		168		—

Total U.S. corporate		2,227		1		48		37		—			—		(38	)		25		(40	)		2,260		—

Non-U.S. corporate:
Utilities		417		—		5		—		—			—		(25	)		—		—			397		—
Energy		241		—		5		31		—			—		(12	)		—		—			265		—
Finance and insurance		179		1		4		—		—			—		(3	)		16		—			197		1
Consumer—non-cyclical		68		—		1		—		—			—		(5	)		—		—			64		—
Technology and communications		27		—		1		—		—			—		—			—		—			28		—
Industrial		64		—		—		13		—			—		—			—		—			77		—
Capital goods		181		—		2		—		—			—		(4	)		—		—			179		—
Consumer—cyclical		126		—		2		9		—			—		—			—		—			137		—
Transportation		199		—		1		—		—			—		—			—		—			200		—
Other		129		—		3		—		—			—		(1	)		—		—			131		—

Total non-U.S. corporate		1,631		1		24		53		—			—		(50	)		16		—			1,675		1

Residential mortgage-backed		36		—		1		—		—			—		(1	)		—		(4	)		32		—
Commercial mortgage-backed		92		—		14		—		—			—		—			—		—			106		—
Other asset-backed		234		—		—		13		—			—		(11	)		—		(106	)		130		—

Total fixed maturity securities		4,281		2		98		103		—			—		(100	)		41		(150	)		4,275		2

Equity securities		56		—		—		—		(2	)		—		—			—		—			54		—

Other invested assets:
Derivative assets:
Equity index options		65		1		—		13		—			—		(17	)		—		—			62		—

Total derivative assets		65		1		—		13		—			—		(17	)		—		—			62		—

Total other invested assets		65		1		—		13		—			—		(17	)		—		—			62		—

Reinsurance recoverable (2)		20		5		—		—		—			—		—			—		—			25		5

Total Level 3 assets	$	4,422	$	8	$	98	$	116	$	(2	)	$	—	$	(117	)	$	41	$	(150	)	$	4,416	$	7

(1)

(2)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.


	Beginning balance as of January 1, 2020		Total realized and unrealized gains (losses)																					Ending balance as of September 30, 2020		Total gains (losses) attributable to assets still held
(Amounts in millions)	Beginning balance as of January 1, 2020		Included in net income (loss)			Included in OCI			Purchases		Sales			Issuances		Settlements			Transfer into Level 3 (1)		Transfer out of Level 3 (1)			Ending balance as of September 30, 2020		Included in net income (loss)		Included in OCI
Fixed maturity securities:
State and political subdivisions	$	102	$	2		$	(19	)	$	—	$	—		$	—	$	(1	)	$	—	$	(27	)	$	57	$	2	$	(19	)
Non-U.S. government		—		—			—			—		—			—		(1	)		1		—			—		—		—
U.S. corporate:
Utilities		865		10			8			47		—			—		(54	)		42		(77	)		841		—		14
Energy		129		1			(2	)		17		(21	)		—		(19	)		22		(13	)		114		—		(4	)
Finance and insurance		572		2			4			92		—			—		(40	)		—		(99	)		531		—		7
Consumer—non-cyclical		94		—			2			8		—			—		(1	)		—		—			103		—		3
Technology and communications		50		—			4			77		—			—		—			—		(5	)		126		—		4
Industrial		40		—			—			—		—			—		—			—		—			40		—		—
Capital goods		102		—			(1	)		—		—			—		(4	)		—		—			97		—		(1	)
Consumer—cyclical		173		3			3			—		—			—		(33	)		24		—			170		—		5
Transportation		78		—			(1	)		—		—			—		(3	)		10		(30	)		54		—		1
Other		136		—			1			5		—			—		(5	)		27		—			164		—		1

Total U.S. corporate		2,239		16			18			246		(21	)		—		(159	)		125		(224	)		2,240		—		30

Non-U.S. corporate:
Utilities		374		—			7			12		—			—		—			27		(73	)		347		—		5
Energy		247		—			(8	)		—		—			—		(26	)		24		—			237		—		(7	)
Finance and insurance		234		3			7			15		—			—		—			77		(32	)		304		3		8
Consumer—non-cyclical		59		—			2			8		—			—		—			1		(16	)		54		—		1
Technology and communications		28		—			—			—		—			—		—			—		—			28		—		—
Industrial		104		—			2			—		—			—		(5	)		—		(8	)		93		—		2
Capital goods		161		1			(2	)		10		—			—		(26	)		29		—			173		—		(2	)
Consumer—cyclical		147		—			1			21		—			—		(7	)		32		(27	)		167		—		(1	)
Transportation		191		—			—			—		—			—		—			22		(102	)		111		—		3
Other		140		—			3			5		—			—		(13	)		1		—			136		—		3

Total non-U.S. corporate		1,685		4			12			71		—			—		(77	)		213		(258	)		1,650		3		12

Residential mortgage-backed		27		—			(1	)		—		—			—		(1	)		4		(15	)		14		—		—
Commercial mortgage-backed		6		—			1			—		—			—		—			20		(7	)		20		—		1
Other asset-backed		132		—			(1	)		93		—			—		(32	)		—		(31	)		161		—		(1	)

Total fixed maturity securities		4,191		22			10			410		(21	)		—		(271	)		363		(562	)		4,142		5		23

Equity securities		51		—			—			6		(5	)		—		—			—		—			52		—		—

Other invested assets:
Derivative assets:
Equity index options		81		(2	)		—			45		—			—		(57	)		—		—			67		4		—

Total derivative assets		81		(2	)		—			45		—			—		(57	)		—		—			67		4		—

Total other invested assets		81		(2	)		—			45		—			—		(57	)		—		—			67		4		—

Reinsurance recoverable (2)		20		14			—			—		—			1		—			—		—			35		14		—

Total Level 3 assets	$	4,343	$	34		$	10		$	461	$	(26	)	$	1	$	(328	)	$	363	$	(562	)	$	4,296	$	23	$	23

(1)

(2)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.


	Beginning balance as of January 1, 2019		Total realized and unrealized gains (losses)																			Ending balance as of September 30, 2019		Total gains (losses) included in net income (loss) attributable to assets still held
(Amounts in millions)	Beginning balance as of January 1, 2019		Included in net income (loss)		Included in OCI		Purchases		Sales			Issuances		Settlements			Transfer into Level 3 (1)		Transfer out of Level 3 (1)			Ending balance as of September 30, 2019
Fixed maturity securities:
State and political subdivisions	$	51	$	2	$	19	$	—	$	—		$	—	$	—		$	—	$	—		$	72	$	2
U.S. corporate:
Utilities		643		1		70		109		(14	)		—		(47	)		72		(10	)		824		—
Energy		121		—		9		17		—			—		(12	)		—		—			135		—
Finance and insurance		534		—		49		40		—			—		(38	)		27		—			612		—
Consumer—non-cyclical		73		—		4		23		—			—		(11	)		9		—			98		—
Technology and communications		50		—		6		—		—			—		—			5		(11	)		50		—
Industrial		39		—		1		—		—			—		—			—		—			40		—
Capital goods		92		—		8		—		—			—		—			—		—			100		—
Consumer—cyclical		211		—		12		—		(13	)		—		(16	)		—		(18	)		176		—
Transportation		57		—		2		7		—			—		(9	)		—		—			57		—
Other		178		—		6		22		—			—		(15	)		8		(31	)		168		—

Total U.S. corporate		1,998		1		167		218		(27	)		—		(148	)		121		(70	)		2,260		—

Non-U.S. corporate:
Utilities		404		—		28		30		(7	)		—		(42	)		—		(16	)		397		—
Energy		217		—		17		47		—			—		(16	)		—		—			265		—
Finance and insurance		171		3		22		7		—			—		(16	)		16		(6	)		197		3
Consumer—non-cyclical		106		2		5		—		—			—		(49	)		—		—			64		—
Technology and communications		26		—		2		—		—			—		—			—		—			28		—
Industrial		61		—		3		13		—			—		—			—		—			77		—
Capital goods		173		—		11		10		—			—		(15	)		—		—			179		—
Consumer—cyclical		122		—		10		9		—			—		(4	)		—		—			137		—
Transportation		171		—		10		19		—			—		—			—		—			200		—
Other		81		—		11		35		—			—		(2	)		6		—			131		—

Total non-U.S. corporate		1,532		5		119		170		(7	)		—		(144	)		22		(22	)		1,675		3

Residential mortgage-backed		35		—		2		—		—			—		(1	)		—		(4	)		32		—
Commercial mortgage-backed		95		—		23		2		—			—		—			—		(14	)		106		—
Other asset-backed		154		—		2		109		—			—		(53	)		28		(110	)		130		—

Total fixed maturity securities		3,865		8		332		499		(34	)		—		(346	)		171		(220	)		4,275		5

Equity securities		58		—		—		2		(6	)		—		—			—		—			54		—

Other invested assets:
Derivative assets:
Equity index options		39		28		—		34		—			—		(39	)		—		—			62		(2	)

Total derivative assets		39		28		—		34		—			—		(39	)		—		—			62		(2	)

Total other invested assets		39		28		—		34		—			—		(39	)		—		—			62		(2	)

Reinsurance recoverable (2)		20		4		—		—		—			1		—			—		—			25		4

Total Level 3 assets	$	3,982	$	40	$	332	$	535	$	(40	)	$	1	$	(385	)	$	171	$	(220	)	$	4,416	$	7

(1)

(2)	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

The following table presents the gains and losses included in net income (loss) from assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value and the related income statement line item in which these gains and losses were presented for the periods indicated:


	Three months ended September 30,					Nine months ended September 30,
(Amounts in millions)	2020			2019		2020		2019
Total realized and unrealized gains (losses) included in net income (loss):
Net investment income	$	15		$	2	$	21	$	8
Net investment gains (losses)		4			6		13		32

Total	$	19		$	8	$	34	$	40

Total gains (losses) included in net income (loss) attributable to assets still held:
Net investment income	$	2		$	2	$	5	$	5
Net investment gains (losses)		(4	)		5		18		2

Total	$	(2	)	$	7	$	23	$	7

The amount presented for realized and unrealized gains (losses) included in net income (loss) for fixed maturity securities primarily represents amortization and accretion of premiums and discounts on certain fixed maturity securities.

The following table presents a summary of the significant unobservable inputs used for certain asset fair value measurements that are based on internal models and classified as Level 3 as of September 30, 2020:

(Amounts in millions)

Valuation
technique

Fair value

Unobservable
input

Range

Weighted-average

(1)

Fixed maturity securities:

U.S. corporate:

Utilities

Internal models

774

Credit spreads

71bps – 368bps

183bps

Energy

Internal models

Credit spreads

91bps

Not applicable

Finance and insurance

Internal models

493

Credit spreads

66bps – 321bps

178bps

Consumer—non-cyclical

Internal models

103

Credit spreads

78bps – 358bps

174bps

Technology and communications

Internal models

126

Credit spreads

133bps – 358bps

224bps

Industrial

Internal models

Credit spreads

156bps – 373bps

230bps

Capital goods

Internal models

Credit spreads

102bps – 273bps

190bps

Consumer—cyclical

Internal models

133

Credit spreads

139bps – 276bps

201bps

Transportation

Internal models

Credit spreads

67bps – 156bps

118bps

Other

Internal models

164

Credit spreads

93bps – 206bps

114bps

Total U.S. corporate

Internal models

1,980

Credit spreads

66bps – 373bps

179bps

Non-U.S. corporate:

Utilities

Internal models

347

Credit spreads

89bps – 292bps

164bps

Energy

Internal models

Credit spreads

102bps – 241bps

156bps

Finance and insurance

Internal models

199

Credit spreads

86bps – 174bps

134bps

Consumer—non-cyclical

Internal models

Credit spreads

97bps – 162bps

142bps

Technology and communications

Internal models

Credit spreads

102bps – 238bps

184bps

Industrial

Internal models

Credit spreads

91bps – 241bps

165bps

Capital goods

Internal models

146

Credit spreads

97bps – 254bps

177bps

Consumer—cyclical

Internal models

Credit spreads

102bps – 241bps

197bps

Transportation

Internal models

Credit spreads

78bps – 241bps

129bps

Other

Internal models

135

Credit spreads

110bps – 490bps

209bps

Total non-U.S. corporate

Internal models

1,232

Credit spreads

78bps – 490bps

163bps

Derivative assets:

Equity index options

Discounted cash
flows

Equity index
volatility

6% – 41%

28%

(1)	Unobservable inputs weighted by the relative fair value of the associated instrument for fixed maturity securities and by notional for derivative assets.

Certain classes of instruments classified as Level 3 are excluded above as a result of not being material or due to limitations in being able to obtain the underlying inputs used by certain third-party sources, such as broker quotes, used as an input in determining fair value.

The following tables set forth our liabilities by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:


	September 30, 2020
(Amounts in millions)	Total		Level 1		Level 2		Level 3
Liabilities
Policyholder account balances:
GMWB embedded derivatives (1)	$	508	$	—	$	—	$	508
Fixed index annuity embedded derivatives		432		—		—		432
Indexed universal life embedded derivatives		25		—		—		25

Total policyholder account balances		965		—		—		965

Derivative liabilities:
Interest rate swaps		4		—		4		—
Other foreign currency contracts		5		—		5		—

Total derivative liabilities		9		—		9		—

Total liabilities	$	974	$	—	$	9	$	965

(1)	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.


	December 31, 2019
(Amounts in millions)	Total		Level 1		Level 2		Level 3
Liabilities
Policyholder account balances:
GMWB embedded derivatives (1)	$	323	$	—	$	—	$	323
Fixed index annuity embedded derivatives		452		—		—		452
Indexed universal life embedded derivatives		19		—		—		19

Total policyholder account balances		794		—		—		794

Derivative liabilities:
Interest rate swaps		10		—		10		—
Other foreign currency contracts		1		—		1		—

Total derivative liabilities		11		—		11		—

Total liabilities	$	805	$	—	$	11	$	794

(1)	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

The following tables present additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:


	Beginning balance as of July 1, 2020		Total realized and unrealized (gains) losses																		Ending balance as of September 30, 2020		Total (gains) losses attributable to liabilities still held
(Amounts in millions)	Beginning balance as of July 1, 2020		Included in net (income) loss			Included in OCI		Purchases		Sales		Issuances		Settlements			Transfer into Level 3		Transfer out of Level 3		Ending balance as of September 30, 2020		Included in net (income) loss			Included in OCI
Policyholder account balances:
GMWB embedded derivatives (1)	$	559	$	(57	)	$	—	$	—	$	—	$	6	$	—		$	—	$	—	$	508	$	(57	)	$	—
Fixed index annuity embedded derivatives		447		18			—		—		—		—		(33	)		—		—		432		18			—
Indexed universal life embedded derivatives		23		(3	)		—		—		—		5		—			—		—		25		(3	)		—

Total policyholder account balances		1,029		(42	)		—		—		—		11		(33	)		—		—		965		(42	)		—

Total Level 3 liabilities	$	1,029	$	(42	)	$	—	$	—	$	—	$	11	$	(33	)	$	—	$	—	$	965	$	(42	)	$	—

(1)	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.


	Beginning balance as of July 1, 2019		Total realized and unrealized (gains) losses																		Ending balance as of September 30, 2019		Total (gains) losses included in net (income) loss attributable to liabilities still held
(Amounts in millions)	Beginning balance as of July 1, 2019		Included in net (income) loss			Included in OCI		Purchases		Sales		Issuances		Settlements			Transfer into Level 3		Transfer out of Level 3		Ending balance as of September 30, 2019
Policyholder account balances:
GMWB embedded derivatives (1)	$	325	$	49		$	—	$	—	$	—	$	7	$	—		$	—	$	—	$	381	$	50
Fixed index annuity embedded derivatives		438		14			—		—		—		—		(8	)		—		—		444		14
Indexed universal life embedded derivatives		15		(1	)		—		—		—		4		—			—		—		18		(1	)

Total policyholder account balances		778		62			—		—		—		11		(8	)		—		—		843		63

Total Level 3 liabilities	$	778	$	62		$	—	$	—	$	—	$	11	$	(8	)	$	—	$	—	$	843	$	63

(1)	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.


	Beginning balance as of January 1, 2020		Total realized and unrealized (gains) losses																		Ending balance as of September 30, 2020		Total (gains) losses attributable to liabilities still held
(Amounts in millions)	Beginning balance as of January 1, 2020		Included in net (income) loss			Included in OCI		Purchases		Sales		Issuances		Settlements			Transfer into Level 3		Transfer out of Level 3		Ending balance as of September 30, 2020		Included in net (income) loss			Included in OCI
Policyholder account balances:
GMWB embedded derivatives (1)	$	323	$	167		$	—	$	—	$	—	$	18	$	—		$	—	$	—	$	508	$	174		$	—
Fixed index annuity embedded derivatives		452		31			—		—		—		—		(51	)		—		—		432		31			—
Indexed universal life embedded derivatives		19		(10	)		—		—		—		16		—			—		—		25		(10	)		—

Total policyholder account balances		794		188			—		—		—		34		(51	)		—		—		965		195			—

Total Level 3 liabilities	$	794	$	188		$	—	$	—	$	—	$	34	$	(51	)	$	—	$	—	$	965	$	195		$	—

(1)	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.


	Beginning balance as of January 1, 2019		Total realized and unrealized (gains) losses																		Ending balance as of September 30, 2019		Total (gains) losses included in net (income) loss attributable to liabilities still held
(Amounts in millions)	Beginning balance as of January 1, 2019		Included in net (income) loss			Included in OCI		Purchases		Sales		Issuances		Settlements			Transfer into Level 3		Transfer out of Level 3		Ending balance as of September 30, 2019
Policyholder account balances:
GMWB embedded derivatives (1)	$	337	$	25		$	—	$	—	$	—	$	19	$	—		$	—	$	—	$	381	$	29
Fixed index annuity embedded derivatives		389		72			—		—		—		—		(17	)		—		—		444		72
Indexed universal life embedded derivatives		12		(1	)		—		—		—		7		—			—		—		18		(1	)

Total policyholder account balances		738		96			—		—		—		26		(17	)		—		—		843		100

Total Level 3 liabilities	$	738	$	96		$	—	$	—	$	—	$	26	$	(17	)	$	—	$	—	$	843	$	100

(1)	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

The following table presents the gains and losses included in net (income) loss from liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value and the related income statement line item in which these gains and losses were presented for the periods indicated:


	Three months ended September 30,					Nine months ended September 30,
(Amounts in millions)	2020			2019		2020		2019
Total realized and unrealized (gains) losses included in net (income) loss:
Net investment income	$	—		$	—	$	—	$	—
Net investment (gains) losses		(42	)		62		188		96

Total	$	(42	)	$	62	$	188	$	96

Total (gains) losses included in net (income) loss attributable to liabilities still held:
Net investment income	$	—		$	—	$	—	$	—
Net investment (gains) losses		(42	)		63		195		100

Total	$	(42	)	$	63	$	195	$	100

Purchases, sales, issuances and settlements represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases, sales and settlements of fixed maturity and equity securities and purchases, issuances and settlements of derivative instruments.

Issuances presented for GMWB embedded derivative liabilities are characterized as the change in fair value associated with the product fees recognized that are attributed to the embedded derivative to equal the expected future benefit costs upon issuance. Issuances for fixed index annuity and indexed universal life embedded derivative liabilities represent the amount of the premium received that is attributed to the value of the embedded derivative. Settlements of embedded derivatives are characterized as the change in fair value upon exercising the embedded derivative instrument, effectively representing a settlement of the embedded derivative instrument. We have shown these changes in fair value separately based on the classification of this activity as effectively issuing and settling the embedded derivative instrument with all remaining changes in the fair value of these embedded derivative instruments being shown separately in the category labeled “included in net (income) loss” in the tables presented above.

The following table presents a summary of the significant unobservable inputs used for certain liability fair value measurements that are based on internal models and classified as Level 3 as of September 30, 2020:

(Amounts in millions)

Valuation technique

Fair value

Unobservable input

Range

Weighted-
average

(1)

Policyholder account balances:

Withdrawal
utilization rate

56% – 88%

73%

Lapse rate

2% – 9%

Non-performance risk

(credit spreads)

12bps –83bps

67bps

GMWB embedded derivatives

(2)

Stochastic cash flow
model

508

Equity index
volatility

21% – 27%

23%

Fixed index annuity embedded derivatives

Option budget
method

432

Expected future
interest credited

— % – 3%

Indexed universal life embedded derivatives

Option budget
method

Expected future
interest credited

3% – 10%

(1)	Unobservable inputs weighted by the policyholder account balances associated with the instrument.

(2)	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. The unobservable inputs associated with GMWB embedded derivatives are not interrelated and therefore, a directional change in one input will not affect the other inputs.

Assets and Liabilities Not Required to Be Carried at Fair Value

Assets and liabilities that are reflected in the accompanying unaudited condensed consolidated financial statements at fair value are not included in the following disclosure of fair value. Such items include cash, cash equivalents and restricted cash, short-term investments, investment securities, separate accounts, securities held as collateral and derivative instruments. Apart from certain of our borrowings and certain marketable securities, few of the instruments are actively traded and their fair values must often be determined using models. The fair value estimates are made at a specific point in time, based upon available market information and judgments about the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets.

The following represents our estimated fair value of financial assets and liabilities that are not required to be carried at fair value as of the dates indicated:


	September 30, 2020
	Notional amount			Carrying amount		Fair value
(Amounts in millions)	Notional amount			Carrying amount		Total		Level 1		Level 2		Level 3
Assets:
Commercial mortgage loans			(1)	$	6,880	$	7,169	$	—	$	—	$	7,169
Other invested assets			(1)		410		411		—		23		388
Liabilities:
Long-term borrowings			(1)		3,570		3,148		—		2,979		169
Investment contracts			(1)		10,872		12,016		—		—		12,016
Other firm commitments:
Commitments to fund limited partnerships		1,112			—		—		—		—		—
Commitments to fund bank loan investments		35			—		—		—		—		—
Ordinary course of business lending commitments		126			—		—		—		—		—

(1)	These financial instruments do not have notional amounts.


	December 31, 2019
	Notional amount			Carrying amount		Fair value
(Amounts in millions)	Notional amount			Carrying amount		Total		Level 1		Level 2		Level 3
Assets:
Commercial mortgage loans			(1)	$	6,963	$	7,239	$	—	$	—	$	7,239
Other invested assets			(1)		432		432		—		49		383
Liabilities:
Long-term borrowings			(1)		3,277		3,093		—		2,951		142
Non-recourse funding obligations			(1)		311		207		—		—		207
Investment contracts			(1)		11,466		12,086		—		—		12,086
Other firm commitments:
Commitments to fund limited partnerships		976			—		—		—		—		—
Commitments to fund bank loan investments		52			—		—		—		—		—
Ordinary course of business lending commitments		69			—		—		—		—		—

(1)	These financial instruments do not have notional amounts.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details