Variable Interest Entities (Tables)

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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)	September 30, 2018		December 31, 2017
Ownership Percentage
3% – 49%	$	685	$	590
Less than 3%	135		134
Fair value option investment funds	$	820	$	724

The following table summarizes the change in unrealized gains (losses) on trading and equity securities of our consolidated variable interest entities still held as of the respective period end:



	Three months ended September 30,				Nine months ended September 30,
(In millions)	2018		2017		2018			2017
Trading securities – related party	$	—	$	1	$	1		$	2
Equity securities – related party	13		7		(26		)	12

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 September 30,				Nine months ended September 30,
(In millions)	2018		2017		2018		2017
Trading securities	$	—	$	—	$	1	$	1
Investment funds	9		—		18		5
Total gains (losses)	$	9	$	—	$	19	$	6

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



	September 30, 2018				December 31, 2017
(In millions)	Carrying Value		Maximum Loss Exposure		Carrying Value		Maximum Loss Exposure
Investment funds	$	692	$	1,284	$	699	$	1,036
Investment in related parties – investment funds	2,093		4,439		1,310		2,598
Assets of consolidated variable interest entities – investment funds	605		606		571		594
Investment in fixed maturity securities	21,554		21,010		21,022		20,278
Investment in related parties – fixed maturity securities	1,502		1,631		713		792
Total non-consolidated investments	$	26,446	$	28,970	$	24,315	$	25,298

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)	September 30, 2018		December 31, 2017
Ownership Percentage
100%	$	16	$	35
50% – 99%	1,039		520
3% – 49%	1,515		1,301
Equity method investment funds	$	2,570	$	1,856

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



	Three months ended September 30, 2018
(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 VIEs
Trading securities	$	48	$	—		$	—	$	—	$	—	$	48	$	—
Equity securities	26		(1		)	—		—		—		25		(1		)
Investment funds	1		—			14		—		—		15		—
Total Level 3 assets of consolidated VIEs	$	75	$	(1	)	$	14	$	—	$	—	$	88	$	(1	)

¹ Related to instruments held at end of period.



	Three months ended September 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 VIEs
Trading securities	$	51	$	—		$	—	$	(1	)	$	—	$	50	$	—
Equity securities	30		(1		)	—		—			—		29		(1		)
Investment funds	33		—			—		—			—		33		—
Total Level 3 assets of consolidated VIEs	$	114	$	(1	)	$	—	$	(1	)	$	—	$	112	$	(1	)

¹ Related to instruments held at end of period.



	Nine months ended September 30, 2018
(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 VIEs
Trading securities	$	48	$	1		$	—	$	(1	)	$	—	$	48	$	1
Equity securities	28		(3		)	—		—			—		25		(3		)
Investment funds	21		(3		)	14		(17		)	—		15		(3		)
Total Level 3 assets of consolidated VIEs	$	97	$	(5	)	$	14	$	(18	)	$	—	$	88	$	(5	)

¹ Related to instruments held at end of period.



	Nine months ended September 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 VIEs
Trading securities	$	50	$	1		$	—	$	(1	)	$	—	$	50	$	1
Equity securities	43		(15		)	1		—			—		29		(15		)
Investment funds	38		—			1		(6		)	—		33		—
Total Level 3 assets of consolidated VIEs	$	131	$	(14	)	$	2	$	(7	)	$	—	$	112	$	(14	)

¹ Related to instruments held at end of period.

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



	September 30, 2018
(In millions)	Total		NAV¹		Level 1		Level 2		Level 3
Assets of consolidated VIEs
Investments
Fixed maturity securities, trading	$	48	$	—	$	—	$	—	$	48
Equity securities	176		—		151		—		25
Investment funds	564		549		—		—		15
Cash and cash equivalents	2		—		2		—		—
Total assets of consolidated VIEs measured at fair value	$	790	$	549	$	153	$	—	$	88

¹ Investments measured at NAV as a practical expedient in determining fair value have not been classified in the fair value hierarchy.



	December 31, 2017
(In millions)	Total		NAV¹		Level 1		Level 2		Level 3
Assets of consolidated VIEs
Investments
Fixed maturity securities, trading	$	48	$	—	$	—	$	—	$	48
Equity securities	240		—		212		—		28
Investment funds	549		528		—		—		21
Cash and cash equivalents	4		—		4		—		—
Total assets of consolidated VIEs measured at fair value	$	841	$	528	$	216	$	—	$	97

¹ Investments measured at NAV as a practical expedient in determining fair value have not been classified in the fair value hierarchy.

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



	September 30, 2018							December 31, 2017
(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	$	254	36.7	%	0	–	5	$	271	38.8	%	0	–	7
Real estate and other real assets	205		29.6	%	0	–	6	161		23.0	%	1	–	7
Natural resources	4		0.6	%	0	–	0	4		0.6	%	1	–	1
Hedge funds	50		7.2	%	0	–	1	61		8.7	%	0	–	3
Credit funds	179		25.9	%	0	–	4	202		28.9	%	0	–	5
Total investment funds	692		100.0	%				699		100.0	%
Investment funds – related parties
Private equity – A-A Mortgage¹	449		21.5	%	5	–	5	403		30.8	%	5	–	5
Private equity – other	680		32.5	%	0	–	9	180		13.7	%	0	–	10
Real estate and other real assets	499		23.8	%	0	–	10	297		22.7	%	0	–	7
Natural resources	95		4.5	%	3	–	4	74		5.6	%	4	–	6
Hedge funds	98		4.7	%	11	–	11	93		7.1	%	9	–	9
Credit funds	272		13.0	%	0	–	3	263		20.1	%	2	–	4
Total investment funds – related parties	2,093		100.0	%				1,310		100.0	%
Investment funds owned by consolidated VIEs
Private equity – MidCap²	549		90.7	%	N/A			528		92.5	%	N/A
Credit funds	1		0.2	%	0	–	1	21		3.7	%	0	–	3
Real estate and other real assets	55		9.1	%	0	–	6	22		3.8	%	2	–	3
Total investment funds owned by consolidated VIEs	605		100.0	%				571		100.0	%
Total investment funds including related parties and funds owned by consolidated VIEs	$	3,390						$	2,580

¹A-A Mortgage Opportunities, L.P. (A-A Mortgage) is a platform to originate residential mortgage loans and mortgage servicing rights. Our total investment in A-A Mortgage, including amounts loaned to A-A Mortgage affiliates, was $459 million and $455 million as of September 30, 2018 and December 31, 2017, respectively.
² Our total investment in MidCap, including amounts advanced under credit facilities, was $788 million and $766 million as of September 30, 2018 and December 31, 2017, respectively.

- 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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