Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The following summarizes the carrying value and maximum loss exposure of these non-consolidated VIEs and VOEs:



	June 30, 2017				December 31, 2016
(In millions)	Carrying Value		Maximum Loss Exposure		Carrying Value		Maximum Loss Exposure
Investment funds	$	697	$	1,079	$	689	$	1,026
Investment in related parties – investment funds	1,260		1,772		1,198		1,485
Assets of consolidated variable interest entities – investment funds	595		621		573		593
Investment in fixed maturity securities	20,763		20,113		19,171		19,090
Investment in related parties – fixed maturity securities	503		500		530		536
Total non-consolidated VIEs	$	23,818	$	24,085	$	22,161	$	22,730

The following table presents the carrying value by ownership percentage of equity method investment funds, including related party investment funds and investment funds owned by consolidated VIEs:



(In millions)	June 30, 2017		December 31, 2016
Ownership Percentage
100%	$	14	$	27
50% – 99%	593		478
Greater than 3% – 49%	1,268		1,294
Equity method investment funds	$	1,875	$	1,799

The following represents the gains (losses) recorded for instruments within the consolidated VIEs for which we have elected the fair value option:



	Three months ended June 30,					Six months ended June 30,
(In millions)	2017		2016			2017		2016
Trading securities
Fixed maturity securities	$	1	$	—		$	1	$	—
Equity securities	9		(26		)	5		(44		)
Investment funds	—		4			5		8
Total gains (losses)	$	10	$	(22	)	$	11	$	(36	)

The following summarizes our investment funds, including related party investment funds and investment funds owned by consolidated VIEs:



	June 30, 2017							December 31, 2016
(In millions, except for percentages and years)	Carrying value		Percent of total		Remaining life in years			Carrying value		Percent of total		Remaining life in years
Investment funds
Private equity	$	244	35.0	%	0	–	13	$	268	38.9	%	0	–	7
Mortgage and real estate	155		22.2	%	0	–	8	118		17.2	%	0	–	4
Natural resources	5		0.7	%	0	–	1	5		0.7	%	1	–	2
Hedge funds	66		9.5	%	0	–	3	72		10.4	%	0	–	3
Credit funds	227		32.6	%	0	–	5	226		32.8	%	0	–	5
Total investment funds	697		100.0	%				689		100.0	%
Investment funds – related parties
Private equity – A-A Mortgage¹	389		30.9	%	3	–	3	343		28.6	%	3	–	3
Private equity – other	167		13.3	%	0	–	10	131		11.0	%	0	–	10
Mortgage and real estate	231		18.3	%	1	–	9	247		20.6	%	1	–	4
Natural resources	67		5.3	%	5	–	6	49		4.1	%	5	–	5
Hedge funds	156		12.4	%	9	–	10	192		16.0	%	9	–	9
Credit funds	250		19.8	%	2	–	5	236		19.7	%	2	–	3
Total investment funds – related parties	1,260		100.0	%				1,198		100.0	%
Investment funds owned by consolidated VIEs
Private equity – MidCap²	528		88.7	%	N/A			524		91.4	%	N/A
Credit funds	34		5.8	%	0	–	3	38		6.7	%	0	–	3
Mortgage and real assets	33		5.5	%	2	–	3	11		1.9	%	2	–	3
Total investment funds owned by consolidated VIEs	595		100.0	%				573		100.0	%
Total investment funds including related parties and funds owned by consolidated VIEs	$	2,552						$	2,460

¹A-A Mortgage Opportunities, LP (A-A Mortgage) is a platform to originate residential mortgage loans and mortgage servicing rights.
² Our total investment in MidCap, including amounts advanced under credit facilities, totaled $766 million and $761 million as of June 30, 2017 and December 31, 2016, respectively, which is less than 10% of total AHL shareholder's equity at June 30, 2017, but was greater than 10% at December 31, 2016.

The following represents the hierarchy for assets and liabilities of our consolidated VIEs measured at fair value on a recurring basis:



	June 30, 2017
(In millions)	Total		Level 1		Level 2		Level 3
Assets of consolidated variable interest entities
Investments
AFS securities
Equity securities	$	206	$	206	$	—	$	—
Trading securities
Fixed maturity securities	51		—		—		51
Equity securities	134		104		—		30
Investment funds	561		—		—		561
Cash and cash equivalents	2		2		—		—
Total assets of consolidated VIEs measured at fair value	$	954	$	312	$	—	$	642



	December 31, 2016
(In millions)	Total		Level 1		Level 2		Level 3
Assets of consolidated variable interest entities
Investments
AFS securities
Equity securities	$	161	$	161	$	—	$	—
Trading securities
Fixed maturity securities	50		—		—		50
Equity securities	117		74		—		43
Investment funds	562		—		—		562
Cash and cash equivalents	14		14		—		—
Total assets of consolidated VIEs measured at fair value	$	904	$	249	$	—	$	655

The following is a reconciliation for all VIE Level 3 assets and liabilities measured at fair value on a recurring basis:



	Three months ended June 30, 2017
(In millions)	Beginning Balance		Total realized and unrealized gains (losses) included in income			Purchases		Sales			Transfers in (out)		Ending Balance		Total gains (losses) included in earnings¹
Assets of consolidated variable interest entities
Trading securities
Fixed maturity securities	$	50	$	1		$	—	$	—		$	—	$	51	$	—
Equity securities	32		(2		)	—		—			—		30		(2		)
Investment funds	567		1			—		(7		)	—		561		1
Total Level 3 assets of consolidated VIEs	$	649	$	—		$	—	$	(7	)	$	—	$	642	$	(1	)

¹ Related to instruments held at end of period.



	Three months ended June 30, 2016
(In millions)	Beginning Balance		Total realized and unrealized gains (losses) included in income		Purchases		Sales			Transfers in (out)		Ending Balance		Total gains (losses) included in earnings¹
Assets of consolidated variable interest entities
Trading securities
Fixed maturity securities	$	53	$	—	$	—	$	—		$	—	$	53	$	—
Equity securities	40		12		—		—			—		52		12
Investment funds	525		4		—		(1		)	—		528		4
Total Level 3 assets of consolidated VIEs	$	618	$	16	$	—	$	(1	)	$	—	$	633	$	16

¹ Related to instruments held at end of period.



	Six months ended June 30, 2017
(In millions)	Beginning Balance		Total realized and unrealized gains (losses) included in income			Purchases		Sales			Transfers in (out)		Ending Balance		Total gains (losses) included in earnings¹
Assets of consolidated variable interest entities
Trading securities
Fixed maturity securities	$	50	$	1		$	—	$	—		$	—	$	51	$	1
Equity securities	43		(13		)	—		—			—		30		(13		)
Investment funds	562		5			1		(7		)	—		561		5
Total Level 3 assets of consolidated VIEs	$	655	$	(7	)	$	1	$	(7	)	$	—	$	642	$	(7	)

¹ Related to instruments held at end of period.



	Six months ended June 30, 2016
(In millions)	Beginning Balance		Total realized and unrealized gains (losses) included in income		Purchases		Sales			Transfers in (out)		Ending Balance		Total gains (losses) included in earnings¹
Assets of consolidated variable interest entities
Trading securities
Fixed maturity securities	$	53	$	—	$	—	$	—		$	—	$	53	$	—
Equity securities	38		13		1		—			—		52		13
Investment funds	516		8		8		(4		)	—		528		8
Total Level 3 assets of consolidated VIEs	$	607	$	21	$	9	$	(4	)	$	—	$	633	$	21

¹ Related to instruments held at end of period.

The following table presents the carrying value by ownership percentage of investment funds where we elected the fair value option, including related party investment funds and investment funds owned by consolidated VIEs:



(In millions)	June 30, 2017		December 31, 2016
Ownership Percentage
Greater than 3% – 49%	$	561	$	562
3% or less	116		99
Fair value option investment funds	$	677	$	661

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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