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Fair Value

6 Months Ended

Jun. 30, 2022

6. Fair Value

Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. We determine fair value based on the following fair value hierarchy:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in an active market.

Level 2 – Quoted prices for inactive markets or valuation techniques that require observable direct or indirect inputs for substantially the full term of the asset or liability. Level 2 inputs include the following:

•Quoted prices for similar assets or liabilities in active markets,

•Observable inputs other than quoted market prices, and

•Observable inputs derived principally from market data through correlation or other means.

Level 3 – Prices or valuation techniques with unobservable inputs significant to the overall fair value estimate. These valuations use critical assumptions not readily available to market participants. Level 3 valuations are based on market standard valuation methodologies, including discounted cash flows, matrix pricing or other similar techniques.

Net Asset Value (NAV) – Investment funds are typically measured using NAV as a practical expedient in determining fair value and are not classified in the fair value hierarchy. Our carrying value reflects our pro rata ownership percentage as indicated by NAV in the investment fund financial statements, which we may adjust if we determine NAV is not calculated consistent with investment company fair value principles. The underlying investments of the investment funds may have significant unobservable inputs, which may include but are not limited to, comparable multiples and weighted average cost of capital rates applied in valuation models or a discounted cash flow model.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the instrument’s fair value measurement.

We use a number of valuation sources to determine fair values. Valuation sources can include quoted market prices; third-party commercial pricing services; third-party brokers; industry-standard, vendor modeling software that uses market observable inputs; and other internal modeling techniques based on projected cash flows. We periodically review the assumptions and inputs of third-party commercial pricing services through internal valuation price variance reviews, comparisons to internal pricing models, back testing to recent trades, or monitoring trading volumes.

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


	Successor
	June 30, 2022
(In millions)	Total		NAV		Level 1		Level 2		Level 3
Assets
AFS securities
US government and agencies	$	2,794	$	—	$	2,792	$	2	$	—
US state, municipal and political subdivisions	1,000		—		—		1,000		—
Foreign governments	896		—		—		894		2
Corporate	56,218		—		—		54,630		1,588
CLO	13,485		—		—		13,485		—
ABS	9,547		—		—		5,953		3,594
CMBS	2,904		—		—		2,904		—
RMBS	5,167		—		—		5,099		68
Total AFS securities	92,011		—		2,792		83,967		5,252
Trading securities	1,735		—		25		1,652		58
Equity securities	1,108		—		105		941		62
Mortgage loans	25,218		—		—		—		25,218
Investment funds	25		6		—		—		19
Funds withheld at interest – embedded derivative	(3,958)		—		—		—		(3,958)
Derivative assets	2,932		—		20		2,912		—
Short-term investments	238		—		68		112		58
Other investments	142		—		—		142		—
Cash and cash equivalents	11,172		—		11,172		—		—
Restricted cash	753		—		753		—		—
Investments in related parties
AFS securities
Corporate	1,007		—		—		158		849
CLO	2,679		—		—		2,354		325
ABS	5,269		—		—		243		5,026
Total AFS securities – related party	8,955		—		—		2,755		6,200
Trading securities	898		—		—		7		891
Equity securities	163		—		—		—		163
Mortgage loans	1,416		—		—		—		1,416
Investment funds	818		—		—		—		818
Funds withheld at interest – embedded derivative	(1,129)		—		—		—		(1,129)


Reinsurance recoverable	1,580		—		—		—		1,580
Assets of consolidated VIEs
Trading securities	386		—		—		56		330
Mortgage loans	1,626		—		—		—		1,626
Investment funds	9,494		8,153		5		283		1,053
Other investments	31		—		—		—		31
Cash and cash equivalents	198		—		198		—		—
Total assets measured at fair value	$	155,812	$	8,159	$	15,138	$	92,827	$	39,688
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	5,451	$	—	$	—	$	—	$	5,451
Universal life benefits	943		—		—		—		943
Future policy benefits
AmerUs Life Insurance Company (AmerUs) Closed Block	1,247		—		—		—		1,247
Indianapolis Life Insurance Company (ILICO) Closed Block and life benefits	623		—		—		—		623
Derivative liabilities	1,223		—		(9)		1,231		1

Total liabilities measured at fair value	$	9,487	$	—	$	(9)	$	1,231	$	8,265


	Predecessor
	December 31, 2021
(In millions)	Total		NAV		Level 1		Level 2		Level 3
Assets
AFS securities
US government and agencies	$	223	$	—	$	214	$	9	$	—
US state, municipal and political subdivisions	1,213		—		—		1,213		—
Foreign governments	1,128		—		—		1,126		2
Corporate	66,226		—		—		64,887		1,339
CLO	13,652		—		—		13,638		14
ABS	8,989		—		—		5,370		3,619
CMBS	2,758		—		—		2,715		43
RMBS	5,970		—		—		5,970		—
Total AFS securities	100,159		—		214		94,928		5,017
Trading securities	2,056		—		3		1,984		69
Equity securities	1,170		—		86		655		429
Mortgage loans	17		—		—		—		17
Investment funds	183		165		—		—		18
Funds withheld at interest – embedded derivative	782		—		—		—		782
Derivative assets	4,387		—		67		4,320		—
Short-term investments	139		—		49		61		29
Other investments	130		—		—		130		—

Cash and cash equivalents	9,479		—		9,479		—		—
Restricted cash	796		—		796		—		—

Investments in related parties
AFS securities
Corporate	859		—		—		189		670
CLO	2,549		—		—		2,347		202
ABS	6,994		—		—		549		6,445
Total AFS securities – related party	10,402		—		—		3,085		7,317
Trading securities	1,781		—		—		10		1,771
Equity securities	284		—		—		—		284
Investment funds	2,958		103		—		—		2,855
Funds withheld at interest – embedded derivative	578		—		—		—		578

Reinsurance recoverable	1,991		—		—		—		1,991
Assets of consolidated VIEs
Investment funds	1,297		—		—		—		1,297
Cash and cash equivalents	154		—		154		—		—
Total assets measured at fair value	$	138,743	$	268	$	10,848	$	105,173	$	22,454
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	14,907	$	—	$	—	$	—	$	14,907
Universal life benefits	1,235		—		—		—		1,235
Future policy benefits
AmerUs Closed Block	1,520		—		—		—		1,520
ILICO Closed Block and life benefits	742		—		—		—		742
Derivative liabilities	472		—		—		469		3
Funds withheld liability – embedded derivative	45		—		—		45		—
Total liabilities measured at fair value	$	18,921	$	—	$	—	$	514	$	18,407

Fair Value Valuation Methods—We used the following valuation methods and assumptions to estimate fair value:

AFS and trading securities – We obtain the fair value for most marketable securities without an active market from several commercial pricing services. These are classified as Level 2 assets. The pricing services incorporate a variety of market observable information in their valuation techniques, including benchmark yields, trading activity, credit quality, issuer spreads, bids, offers and other reference data. This category typically includes US and non-US corporate bonds, US agency and government guaranteed securities, CLO, ABS, CMBS and RMBS.

We also have fixed maturity securities priced based on indicative broker quotes or by employing market accepted valuation models. For certain fixed maturity securities, the valuation model uses significant unobservable inputs and are included in Level 3 in our fair value hierarchy. Significant unobservable inputs used include: discount rates, issue specific credit adjustments, material non-public financial information, estimation of future earnings and cash flows, default rate assumptions, liquidity assumptions and indicative quotes from market makers. These inputs are usually considered unobservable, as not all market participants have access to this data.

We value privately placed fixed maturity securities based on the credit quality and duration of comparable marketable securities, which may be securities of another issuer with similar characteristics. In some instances, we use a matrix-based pricing model. These models consider the current level of risk-free interest rates, corporate spreads, credit quality of the issuer and cash flow characteristics of the security. We also consider additional factors such as net worth of the borrower, value of collateral, capital structure of the borrower, presence of guarantees and our evaluation of the borrower’s ability to compete in its relevant market. Privately placed fixed maturity securities are classified as Level 2 or 3.

Equity securities – Fair values of publicly traded equity securities are based on quoted market prices and classified as Level 1. Other equity securities, typically private equities or equity securities not traded on an exchange, we value based on other sources, such as commercial pricing services or brokers, and are classified as Level 2 or 3.

Mortgage loans – We estimate fair value on a monthly basis using discounted cash flow analysis and rates being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. The discounted cash flow model uses unobservable inputs, including estimates of discount rates and loan prepayments. Mortgage loans are classified as Level 3.

Investment funds – Certain investment funds for which we elected the fair value option are included in Level 3 and are priced based on market accepted valuation models. The valuation models use significant unobservable inputs, which include material non-public financial information, estimation of future distributable earnings and demographic assumptions. These inputs are usually considered unobservable, as not all market participants have access to this data.

Funds withheld at interest embedded derivative – We estimate the fair value of the embedded derivative based on the change in the fair value of the assets supporting the funds withheld payable under modco and funds withheld reinsurance agreements. As a result, the fair value of the embedded derivative is classified as Level 3 based on the valuation methods used for the assets held supporting the reinsurance agreements.

Derivatives – Derivative contracts can be exchange traded or over-the-counter. Exchange-traded derivatives typically fall within Level 1 of the fair value hierarchy depending on trading activity. Over-the-counter derivatives are valued using valuation models or an income approach using third-party broker valuations. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates and correlation of the inputs. We consider and incorporate counterparty credit risk in the valuation process through counterparty credit rating requirements and monitoring of overall exposure. We also evaluate and include our own nonperformance risk in valuing derivatives. The majority of our derivatives trade in liquid markets; therefore, we can verify model inputs and model selection does not involve significant management judgment. These are typically classified within Level 2 of the fair value hierarchy.

Cash and cash equivalents, including restricted cash – The carrying amount for cash equals fair value. We estimate the fair value for cash equivalents based on quoted market prices. These assets are classified as Level 1.

Interest sensitive contract liabilities embedded derivative – Embedded derivatives related to interest sensitive contract liabilities with fixed indexed annuity products are classified as Level 3. The valuations include significant unobservable inputs associated with economic assumptions and actuarial assumptions for policyholder behavior.

AmerUs Closed Block – We elected the fair value option for the future policy benefits liability in the AmerUs Closed Block. Our valuation technique is to set the fair value of policyholder liabilities equal to the fair value of assets. There is an additional component which captures the fair value of the open block’s obligations to the closed block business. This component is the present value of the projected release of required capital and future earnings before income taxes on required capital supporting the AmerUs Closed Block, discounted at a rate which represents a market participant’s required rate of return, less the initial required capital. Unobservable inputs include estimates for these items. The AmerUs Closed Block policyholder liabilities and any corresponding reinsurance recoverable are classified as Level 3.

ILICO Closed Block – We elected the fair value option for the ILICO Closed Block. Our valuation technique is to set the fair value of policyholder liabilities equal to the fair value of assets. There is an additional component which captures the fair value of the open block’s obligations to the closed block business. This component uses the present value of future cash flows which include commissions, administrative expenses, reinsurance premiums and benefits, and an explicit cost of capital. The discount rate includes a margin to reflect the business and nonperformance risk. Unobservable inputs include estimates for these items. The ILICO Closed Block policyholder liabilities and corresponding reinsurance recoverable are classified as Level 3.

Universal life liabilities and other life benefits – We elected the fair value option for certain blocks of universal and other life business ceded to Global Atlantic. We use a present value of liability cash flows. Unobservable inputs include estimates of mortality, persistency, expenses, premium payments and a risk margin used in the discount rates that reflects the riskiness of the business. These universal life policyholder liabilities and corresponding reinsurance recoverable are classified as Level 3.

Fair Value Option—The following represents the gains (losses) recorded for instruments for which we have elected the fair value option, including related parties and consolidated VIEs:


	Successor		Predecessor		Successor		Predecessor
(In millions)	Three months ended June 30, 2022		Three months ended June 30, 2021		Six months ended June 30, 2022		Six months ended June 30, 2021
Trading securities	$	(161)	$	61	$	(368)	$	(8)
Mortgage loans	(1,149)		—		(2,065)		—
Investment funds	36		495		56		435
Future policy benefits	131		(54)		273		49
Total gains (losses)	$	(1,143)	$	502	$	(2,104)	$	476

Gains and losses on trading securities are recorded in investment related gains (losses) on the condensed consolidated statements of income (loss). For fair value option mortgage loans, we record interest income in net investment income and subsequent changes in fair value in investment related gains (losses) on the condensed consolidated statements of income (loss). Gains and losses related to investment funds, including related party investment funds, are recorded in net investment income on the condensed consolidated statements of income (loss). We record the change in fair value of future policy benefits to future policy and other policy benefits on the condensed consolidated statements of income (loss).

The following summarizes information for fair value option mortgage loans, including related parties and consolidated VIEs:


	Successor		Predecessor
(In millions)	June 30, 2022		December 31, 2021
Unpaid principal balance	$	29,883	$	15
Mark to fair value	(1,623)		2
Fair value	$	28,260	$	17

The following represents our commercial mortgage loan portfolio 90 days or more past due and/or in non-accrual status:


	Successor
(In millions)	June 30, 2022
Unpaid principal balance of commercial mortgage loans 90 days or more past due and/or in non-accrual status	$	127
Mark to fair value of commercial mortgage loans 90 days or more past due and/or in non-accrual status	(46)
Fair value of commercial mortgage loans 90 days or more past due and/or in non-accrual status	$	81

Fair value of commercial mortgage loans 90 days or more past due	$	132
Fair value of commercial mortgage loans in non-accrual status	81

The following represents our residential loan portfolio 90 days or more past due and/or in non-accrual status:


	Successor
(In millions)	June 30, 2022
Unpaid principal balance of residential mortgage loans 90 days or more past due and/or in non-accrual status	$	581
Mark to fair value of residential mortgage loans 90 days or more past due and/or in non-accrual status	(36)
Fair value of residential mortgage loans 90 days or more past due and/or in non-accrual status	$	545

Fair value of residential mortgage loans 90 days or more past due1	$	545
Fair value of residential mortgage loans in non-accrual status	207

1 Includes $338 million of residential mortgage loans that are guaranteed by US government-sponsored agencies.

There were no fair value option mortgage loans 90 days or more past due as of December 31, 2021.

The following is the estimated amount of gains (losses) included in earnings during the period attributable to changes in instrument-specific credit risk on our mortgage loan portfolio:


	Successor		Predecessor		Successor		Predecessor
(In millions)	Three months ended June 30, 2022		Three months ended June 30, 2021		Six months ended June 30, 2022		Six months ended June 30, 2021
Mortgage loans	$	(34)	$	—	$	(52)	$	—

We estimated the portion of gains and losses attributable to changes in instrument-specific credit risk by identifying commercial loans with loan-to-value ratios meeting credit quality criteria, and residential mortgage loans with delinquency status meeting credit quality criteria.

Level 3 Financial Instruments—The following are reconciliations for Level 3 assets and liabilities measured at fair value on a recurring basis. All transfers in and out of Level 3 are based on changes in the availability of pricing sources, as described in the valuation methods above.


	Successor
	Three months ended June 30, 2022
			Total realized and unrealized gains (losses)
(In millions)	Beginning balance		Included in income		Included in OCI		Net purchases, issuances, sales and settlements		Net transfers in (out)		Ending balance		Total gains (losses) included in earnings1		Total gains (losses) included in OCI1
Assets
AFS securities

Foreign governments	$	2	$	—	$	—	$	—	$	—	$	2	$	—	$	—
Corporate	1,499		—		(58)		40		107		1,588		—		(58)
CLO	5		—		(3)		(2)		—		—		—		—
ABS	3,783		2		(65)		148		(274)		3,594		—		(66)
CMBS	10		—		—		—		(10)		—		—		—
RMBS	—		—		—		68		—		68		—		—
Trading securities	90		(1)		—		2		(33)		58		—		—
Equity securities	438		8		—		(3)		(381)		62		8		—
Mortgage loans	23,696		(1,027)		—		2,549		—		25,218		(1,025)		—
Investment funds	19		—		—		—		—		19		—		—
Funds withheld at interest – embedded derivative	(1,882)		(2,076)		—		—		—		(3,958)		—		—
Short-term investments	59		—		(1)		—		—		58		—		—

Investments in related parties
AFS securities
Corporate	761		—		(7)		42		53		849		—		(7)
CLO	332		—		(7)		—		—		325		—		(7)
ABS	4,409		16		(125)		(1,096)		1,822		5,026		—		(126)
Trading securities	252		4		—		(808)		1,443		891		—		—
Equity securities	166		(9)		—		(119)		125		163		—		—
Mortgage loans	1,456		(72)		—		32		—		1,416		(73)		—
Investment funds	814		4		—		—		—		818		28		—
Funds withheld at interest – embedded derivative	(570)		(559)		—		—		—		(1,129)		—		—
Short-term investments	53		—		—		—		(53)		—		—		—
Reinsurance recoverable	1,814		(234)		—		—		—		1,580		—		—
Assets of consolidated VIEs
Trading securities	—		—		—		—		330		330		—		—
Mortgage loans	1,880		(50)		—		(2)		(202)		1,626		(50)		—
Investment funds	10,577		33		—		(77)		(9,480)		1,053		27		—
Other investments	1,902		—		—		31		(1,902)		31		—		—
Total Level 3 assets	$	51,565	$	(3,961)	$	(266)	$	805	$	(8,455)	$	39,688	$	(1,085)	$	(264)

Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(6,704)	$	1,487	$	—	$	(234)	$	—	$	(5,451)	$	—	$	—
Universal life benefits	(1,096)		153		—		—		—		(943)		—		—
Future policy benefits
AmerUs Closed Block	(1,378)		131		—		—		—		(1,247)		—		—
ILICO Closed Block and life benefits	(704)		81		—		—		—		(623)		—		—
Derivative liabilities	(3)		2		—		—		—		(1)		—		—
Total Level 3 liabilities	$	(9,885)	$	1,854	$	—	$	(234)	$	—	$	(8,265)	$	—	$	—

1 Related to instruments held at end of period.


	Predecessor
	Three months ended June 30, 2021
			Total realized and unrealized gains (losses)
(In millions)	Beginning balance		Included in income		Included in OCI		Net purchases, issuances, sales and settlements		Net transfers in (out)		Ending balance		Total gains (losses) included in earnings1		Total gains (losses) included in OCI1
Assets
AFS securities

Foreign governments	$	2	$	—	$	—	$	—	$	—	$	2	$	—	$	—
Corporate	782		4		6		74		117		983		—		6
CLO	174		—		—		102		—		276		—		—
ABS	1,207		16		(5)		304		(41)		1,481		—		(5)
CMBS	48		1		—		2		—		51		—		1

Trading securities	94		(5)		—		5		5		99		(1)		—
Equity securities	14		8		—		—		—		22		7		—
Mortgage loans	18		—		—		—		—		18		—		—
Investment funds	17		1		—		—		—		18		1		—
Funds withheld at interest – embedded derivative	636		737		—		—		—		1,373		—		—

Investments in related parties
AFS securities
Corporate	201		—		—		—		(201)		—		—		—

ABS	4,131		5		2		99		—		4,237		—		2
Trading securities	1,685		1		—		31		(7)		1,710		—		—
Equity securities	114		(8)		—		9		—		115		(8)		—
Investment funds	1,970		482		—		—		—		2,452		483		—
Funds withheld at interest – embedded derivative	580		172		—		—		—		752		—		—

Reinsurance recoverable	1,880		66		—		—		—		1,946		—		—
Assets of consolidated VIEs


Investment funds	154		13		—		250		—		417		12		—


Total Level 3 assets	$	13,707	$	1,493	$	3	$	876	$	(127)	$	15,952	$	494	$	4
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(12,473)	$	(1,183)	$	—	$	21	$	—	$	(13,635)	$	—	$	—
Universal life benefits	(1,108)		(80)		—		—		—		(1,188)		—		—
Future policy benefits
AmerUs Closed Block	(1,497)		(54)		—		—		—		(1,551)		—		—
ILICO Closed Block and life benefits	(757)		14		—		—		—		(743)		—		—
Derivative liabilities	(5)		1		—		—		—		(4)		1		—

Total Level 3 liabilities	$	(15,840)	$	(1,302)	$	—	$	21	$	—	$	(17,121)	$	1	$	—

1 Related to instruments held at end of period.


	Successor
	Six months ended June 30, 2022
			Total realized and unrealized gains (losses)
(In millions)	Balance at January 1, 2022		Included in income		Included in OCI		Net purchases, issuances, sales and settlements		Net transfers in (out)		Ending balance		Total gains (losses) included in earnings1		Total gains (losses) included in OCI1
Assets
AFS securities

Foreign governments	$	2	$	—	$	—	$	—	$	—	$	2	$	—	$	—
Corporate	1,339		(3)		(77)		180		149		1,588		—		(76)
CLO	14		(2)		—		(12)		—		—		—		—
ABS	3,619		7		(95)		—		63		3,594		—		(89)
CMBS	43		—		(17)		—		(26)		—		—		1
RMBS	—		—		—		68		—		68		—		—
Trading securities	69		(6)		—		8		(13)		58		—		—
Equity securities	429		17		—		(3)		(381)		62		16		—
Mortgage loans	21,154		(1,771)		—		5,835		—		25,218		(1,767)		—
Investment funds	18		1		—		—		—		19		1		—
Funds withheld at interest – embedded derivative	—		(3,958)		—		—		—		(3,958)		—		—
Short-term investments	29		—		(1)		30		—		58		—		—
Investments in related parties
AFS securities
Corporate	670		(4)		(6)		136		53		849		—		(6)
CLO	202		—		(7)		130		—		325		—		(7)
ABS	6,445		(1)		(135)		(1,241)		(42)		5,026		—		(138)
Trading securities	1,771		(1)		—		(1,062)		183		891		—		—
Equity securities	284		(14)		—		(119)		12		163		—		—
Mortgage loans	1,369		(124)		—		171		—		1,416		(124)		—
Investment funds	2,855		28		—		(34)		(2,031)		818		28		—
Funds withheld at interest – embedded derivative	—		(1,129)		—		—		—		(1,129)		—		—
Short-term investments	—		—		—		53		(53)		—		—		—
Reinsurance recoverable	1,991		(411)		—		—		—		1,580		—		—
Assets of consolidated VIEs
Trading securities	—		—		—		—		330		330		—		—
Mortgage loans	2,152		(170)		—		(154)		(202)		1,626		(170)		—
Investment funds	1,297		28		—		161		(433)		1,053		28		—
Other investments	—		—		—		31		—		31		—		—
Total Level 3 assets	$	45,752	$	(7,513)	$	(338)	$	4,178	$	(2,391)	$	39,688	$	(1,988)	$	(315)

Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(7,559)	$	2,444	$	—	$	(336)	$	—	$	(5,451)	$	—	$	—
Universal life benefits	(1,235)		292		—		—		—		(943)		—		—
Future policy benefits
AmerUs Closed Block	(1,520)		273		—		—		—		(1,247)		—		—
ILICO Closed Block and life benefits	(742)		119		—		—		—		(623)		—		—
Derivative liabilities	(3)		2		—		—		—		(1)		—		—
Total Level 3 liabilities	$	(11,059)	$	3,130	$	—	$	(336)	$	—	$	(8,265)	$	—	$	—

1 Related to instruments held at end of period.


	Predecessor
	Six months ended June 30, 2021
			Total realized and unrealized gains (losses)
(In millions)	Beginning balance		Included in income		Included in OCI		Net purchases, issuances, sales and settlements		Net transfers in (out)		Ending balance		Total gains (losses) included in earnings1		Total gains (losses) included in OCI1
Assets
AFS securities
US state, municipal and political subdivisions	$	34	$	—	$	(1)	$	(1)	$	(32)	$	—	$	—	$	(1)
Foreign governments	2		—		—		—		—		2		—		—
Corporate	778		8		21		56		120		983		—		22
CLO	208		—		1		67		—		276		—		1
ABS	800		1		27		743		(90)		1,481		—		35
CMBS	43		—		5		3		—		51		—		4

Trading securities	86		(8)		—		1		20		99		(3)		—
Equity securities	11		11		—		—		—		22		11		—
Mortgage loans	19		—		—		(1)		—		18		—		—
Investment funds	17		1		—		—		—		18		1		—
Funds withheld at interest – embedded derivative	1,944		(571)		—		—		—		1,373		—		—
Short-term investments	2		—		—		—		(2)		—		—		—
Investments in related parties
AFS securities
Corporate	195		—		6		—		(201)		—		—		—

ABS	4,109		—		(25)		214		(61)		4,237		—		(25)
Trading securities	1,525		52		—		162		(29)		1,710		58		—
Equity securities	72		1		—		42		—		115		1		—
Investment funds	2,033		419		—		—		—		2,452		419		—
Funds withheld at interest – embedded derivative	862		(110)		—		—		—		752		—		—

Reinsurance recoverable	2,100		(154)		—		—		—		1,946		—		—



Assets of consolidated VIEs –investment funds	—		15		—		293		109		417		15		—


Total Level 3 assets	$	14,840	$	(335)	$	34	$	1,579	$	(166)	$	15,952	$	502	$	36
Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	(12,873)	$	(848)	$	—	$	86	$	—	$	(13,635)	$	—	$	—
Universal life benefits	(1,308)		120		—		—		—		(1,188)		—		—
Future policy benefits
AmerUs Closed Block	(1,600)		49		—		—		—		(1,551)		—		—
ILICO Closed Block and life benefits	(776)		33		—		—		—		(743)		—		—
Derivative liabilities	(4)		—		—		—		—		(4)		—		—

Total Level 3 liabilities	$	(16,561)	$	(646)	$	—	$	86	$	—	$	(17,121)	$	—	$	—

1 Related to instruments held at end of period.

The following represents the gross components of purchases, issuances, sales and settlements, net, and net transfers in (out) shown above:


	Successor
	Three months ended June 30, 2022
(In millions)	Purchases		Issuances		Sales		Settlements		Net purchases, issuances, sales and settlements		Transfers in1		Transfers out2		Net transfers in (out)
Assets
AFS securities


Corporate	$	129	$	—	$	(2)	$	(87)	$	40	$	150	$	(43)	$	107
CLO	—		—		—		(2)		(2)		—		—		—
ABS	746		—		(341)		(257)		148		30		(304)		(274)
CMBS	—		—		—		—		—		—		(10)		(10)
RMBS	68		—		—		—		68		—		—		—
Trading securities	2		—		—		—		2		9		(42)		(33)
Equity securities	—		—		(3)		—		(3)		19		(400)		(381)
Mortgage loans	3,386		—		(48)		(789)		2,549		—		—		—

Short-term investments	29		—		—		(29)		—		—		—		—
Investments in related parties
AFS securities
Corporate	52		—		—		(10)		42		53		—		53

ABS	899		—		(6)		(1,989)		(1,096)		1,822		—		1,822
Trading securities	7		—		(787)		(28)		(808)		1,443		—		1,443
Equity securities	—		—		(119)		—		(119)		125		—		125
Mortgage loans	36		—		—		(4)		32		—		—		—

Short-term investments	—		—		—		—		—		—		(53)		(53)

Assets of consolidated VIEs
Trading securities	—		—		—		—		—		330		—		330
Mortgage loans	—		—		—		(2)		(2)		21		(223)		(202)
Investment funds	33		—		(110)		—		(77)		1,006		(10,486)		(9,480)
Other investments	31		—		—		—		31		—		(1,902)		(1,902)

Total Level 3 assets	$	5,418	$	—	$	(1,416)	$	(3,197)	$	805	$	5,008	$	(13,463)	$	(8,455)

Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	—	$	(361)	$	—	$	127	$	(234)	$	—	$	—	$	—





Total Level 3 liabilities	$	—	$	(361)	$	—	$	127	$	(234)	$	—	$	—	$	—

1 Transfers in are primarily fixed maturity securities we hold that are issued by VIEs that we consolidated as of March 31, 2022 and did not consolidate at June 30, 2022.
2 Transfers out are primarily the deconsolidation of certain VIEs that we consolidated as of March 31, 2022.


	Predecessor
	Three months ended June 30, 2021
(In millions)	Purchases		Issuances		Sales		Settlements		Net purchases, issuances, sales and settlements		Transfers in		Transfers out		Net transfers in (out)
Assets
AFS securities

Foreign governments	$	1	$	—	$	—	$	(1)	$	—	$	—	$	—	$	—
Corporate	132		—		(8)		(50)		74		203		(86)		117
CLO	110		—		—		(8)		102		—		—		—
ABS	1,128		—		(20)		(804)		304		3		(44)		(41)
CMBS	3		—		—		(1)		2		—		—		—

Trading securities	40		—		(35)		—		5		7		(2)		5





Investments in related parties
AFS securities
Corporate	—		—		—		—		—		—		(201)		(201)

ABS	365		—		—		(266)		99		—		—		—
Trading securities	113		—		—		(82)		31		12		(19)		(7)
Equity securities	11		—		—		(2)		9		—		—		—







Assets of consolidated VIEs – investment funds	250		—		—		—		250		—		—		—


Total Level 3 assets	$	2,153	$	—	$	(63)	$	(1,214)	$	876	$	225	$	(352)	$	(127)

Liabilities
Interest sensitive contract liabilities – embedded derivative	$	—	$	(197)	$	—	$	218	$	21	$	—	$	—	$	—


Total Level 3 liabilities	$	—	$	(197)	$	—	$	218	$	21	$	—	$	—	$	—


	Successor
	Six months ended June 30, 2022
(In millions)	Purchases		Issuances		Sales		Settlements		Net purchases, issuances, sales and settlements		Transfers in1		Transfers out2		Net transfers in (out)
Assets
AFS securities


Corporate	$	453	$	—	$	(170)	$	(103)	$	180	$	193	$	(44)	$	149
CLO	—		—		—		(12)		(12)		—		—		—
ABS	2,235		—		(1,791)		(444)		—		368		(305)		63
CMBS	—		—		—		—		—		—		(26)		(26)
RMBS	68		—		—		—		68		—		—		—
Trading securities	8		—		—		—		8		39		(52)		(13)
Equity securities	—		—		(3)		—		(3)		19		(400)		(381)
Mortgage loans	7,477		—		(130)		(1,512)		5,835		—		—		—

Short-term investments	59		—		—		(29)		30		—		—		—
Investments in related parties
AFS securities
Corporate	367		—		(217)		(14)		136		53		—		53
CLO	130		—		—		—		130		—		—		—
ABS	1,273		—		(93)		(2,421)		(1,241)		1,822		(1,864)		(42)
Trading securities	36		—		(1,052)		(46)		(1,062)		1,443		(1,260)		183
Equity securities	—		—		(119)		—		(119)		125		(113)		12
Mortgage loans	182		—		—		(11)		171		—		—		—
Investment funds	—		—		(34)		—		(34)		—		(2,031)		(2,031)
Short-term investments	53		—		—		—		53		—		(53)		(53)

Assets of consolidated VIEs
Trading securities	—		—		—		—		—		330		—		330
Mortgage loans	—		—		—		(154)		(154)		21		(223)		(202)
Investment funds	286		—		(125)		—		161		11,087		(11,520)		(433)
Other investments	31		—		—		—		31		1,902		(1,902)		—
Total Level 3 assets	$	12,658	$	—	$	(3,734)	$	(4,746)	$	4,178	$	17,402	$	(19,793)	$	(2,391)

Liabilities
Interest sensitive contract liabilities
Embedded derivative	$	—	$	(616)	$	—	$	280	$	(336)	$	—	$	—	$	—





Total Level 3 liabilities	$	—	$	(616)	$	—	$	280	$	(336)	$	—	$	—	$	—

1 Transfers in are primarily assets of VIEs that we consolidated in 2022.
2 Transfers out are primarily assets of VIEs that changed consolidation status in 2022.


	Predecessor
	Six months ended June 30, 2021
(In millions)	Purchases		Issuances		Sales		Settlements		Net purchases, issuances, sales and settlements		Transfers in		Transfers out		Net transfers in (out)
Assets
AFS securities
US state, municipal and political subdivisions	$	—	$	—	$	—	$	(1)	$	(1)	$	—	$	(32)	$	(32)
Foreign governments	1		—		—		(1)		—		—		—		—
Corporate	110		—		(9)		(45)		56		235		(115)		120
CLO	110		—		—		(43)		67		—		—		—
ABS	935		—		—		(192)		743		57		(147)		(90)
CMBS	3		—		—		—		3		—		—		—

Trading securities	40		—		(39)		—		1		23		(3)		20

Mortgage loans	—		—		—		(1)		(1)		—		—		—


Short-term investments	—		—		—		—		—		—		(2)		(2)
Investments in related parties
AFS securities
Corporate	—		—		—		—		—		—		(201)		(201)

ABS	1,026		—		(751)		(61)		214		—		(61)		(61)
Trading securities	236		—		(1)		(73)		162		—		(29)		(29)
Equity securities	45		—		—		(3)		42		—		—		—






Assets of consolidated VIEs – investment funds	293		—		—		—		293		109		—		109

Total Level 3 assets	$	2,799	$	—	$	(800)	$	(420)	$	1,579	$	424	$	(590)	$	(166)

Liabilities

Interest sensitive contract liabilities – embedded derivative	$	—	$	(372)	$	—	$	458	$	86	$	—	$	—	$	—






Total Level 3 liabilities	$	—	$	(372)	$	—	$	458	$	86	$	—	$	—	$	—

Significant Unobservable Inputs—Significant unobservable inputs occur when we could not obtain or corroborate the quantitative detail of the inputs. This applies to fixed maturity securities, equity securities, mortgage loans and certain derivatives, as well as embedded derivatives in liabilities. Additional significant unobservable inputs are described below.

AFS and trading securities – We use discounted cash flow models to calculate the fair value for certain fixed maturity securities. The discount rate is a significant unobservable input because the credit spread includes adjustments made to the base rate. The base rate represents a market comparable rate for securities with similar characteristics. This excludes assets for which fair value is provided by independent broker quotes, but includes assets for which fair value is provided by affiliated quotes.

Mortgage loans – We use discounted cash flow models from independent commercial pricing services to calculate the fair value of our mortgage loan portfolio. The discount rate is a significant unobservable input. This approach uses market transaction information and client portfolio-oriented information, such as prepayments or defaults, to support the valuations.

Interest sensitive contract liabilities – embedded derivative – Significant unobservable inputs we use in the fixed indexed annuities embedded derivative of the interest sensitive contract liabilities valuation include:

1.Nonperformance risk – For contracts we issue, we use the credit spread, relative to the US Department of the Treasury (US Treasury) curve based on our public credit rating as of the valuation date. This represents our credit risk for use in the estimate of the fair value of embedded derivatives.

2.Option budget – We assume future hedge costs in the derivative’s fair value estimate. The level of option budgets determines the future costs of the options and impacts future policyholder account value growth.

3.Policyholder behavior – We regularly review the lapse and withdrawal assumptions (surrender rate). These are based on our initial pricing assumptions updated for actual experience. Actual experience may be limited for recently issued products.

The following summarizes the unobservable inputs for AFS and trading securities, mortgage loans and the embedded derivatives of fixed indexed annuities:


	Successor
	June 30, 2022
(In millions, except for percentages)	Fair value		Valuation technique	Unobservable inputs	Minimum		Maximum		Weighted average			Impact of an increase in the input on fair value
AFS and trading securities	$	10,186	Discounted cash flow	Discount rate	1.6	%	22.0	%	5.3	%	1	Decrease

Mortgage loans	$	28,259	Discounted cash flow	Discount rate	2.5	%	23.9	%	5.2	%	1	Decrease

Interest sensitive contract liabilities – fixed indexed annuities embedded derivatives	$	5,451	Discounted cash flow	Nonperformance risk	0.4	%	2.0	%	1.3	%	2	Decrease
				Option budget	0.5	%	4.1	%	1.7	%	3	Increase
				Surrender rate	5.0	%	10.9	%	7.9	%	4	Decrease

	Predecessor
	December 31, 2021
(In millions, except for percentages)	Fair value		Valuation technique	Unobservable inputs	Minimum		Maximum		Weighted average			Impact of an increase in the input on fair value
AFS and trading securities	$	10,167	Discounted cash flow	Discount rate	1.4	%	19.4	%	5.2	%	1	Decrease

Interest sensitive contract liabilities – fixed indexed annuities embedded derivatives	$	14,907	Option budget method	Nonperformance risk	0.1	%	1.0	%	0.6	%	2	Decrease
				Option budget	0.4	%	3.4	%	1.9	%	3	Increase
				Surrender rate	5.9	%	10.7	%	8.0	%	4	Decrease

1 The discount rate weighted average is calculated based on the relative fair values of the securities or loans.
2 The nonperformance risk weighted average is based on the projected excess benefits of reserves used in the calculation of the embedded derivative.
3 The option budget weighted average is calculated based on the indexed account values.
4 The surrender rate weighted average is calculated based on projected account values.

Financial Instruments Without Readily Determinable Fair Values—We have elected the measurement alternative for certain equity securities that do not have a readily determinable fair value. As of June 30, 2022 and December 31, 2021, the carrying amount of the equity securities was $400 million and $0 million, respectively, with no cumulative recorded impairment.

Fair Value of Financial Instruments Not Carried at Fair Value—The following represents our financial instruments not carried at fair value on the condensed consolidated balance sheets:


	Successor
	June 30, 2022
(In millions)	Carrying Value		Fair Value		NAV		Level 1		Level 2		Level 3
Financial assets
Investment funds	$	108	$	108	$	108	$	—	$	—	$	—
Policy loans	358		358		—		—		358		—
Funds withheld at interest	41,596		41,596		—		—		—		41,596
Short-term investments	26		26		—		—		—		26
Other investments	713		713		—		—		—		713
Investments in related parties

Investment funds	720		720		720		—		—		—
Funds withheld at interest	11,804		11,804		—		—		—		11,804
Other investments	272		272		—		—		—		272
Assets of consolidated VIEs
Mortgage loans	366		366		—		—		—		366

Other investments	80		80		—		—		—		80
Total financial assets not carried at fair value	$	56,043	$	56,043	$	828	$	—	$	358	$	54,857

Financial liabilities
Interest sensitive contract liabilities	$	116,164	$	105,039	$	—	$	—	$	—	$	105,039

Debt	3,279		2,586		—		—		2,586		—
Securities to repurchase	4,109		4,109		—		—		4,109		—

Total financial liabilities not carried at fair value	$	123,552	$	111,734	$	—	$	—	$	6,695	$	105,039


	Predecessor
	December 31, 2021
(In millions)	Carrying Value		Fair Value		NAV		Level 1		Level 2		Level 3
Financial assets
Mortgage loans	$	20,731	$	21,138	$	—	$	—	$	—	$	21,138
Investment funds	995		995		995		—		—		—
Policy loans	312		312		—		—		312		—
Funds withheld at interest	43,125		43,125		—		—		—		43,125

Other investments	1,343		1,343		—		—		—		1,343
Investments in related parties
Mortgage loans	1,360		1,369		—		—		—		1,369
Investment funds	4,433		4,433		4,433		—		—		—
Funds withheld at interest	11,629		11,629		—		—		—		11,629
Other investments	222		223		—		—		—		223
Assets of consolidated VIEs – mortgage loans	2,040		2,152		—		—		—		2,152
Total financial assets not carried at fair value	$	86,190	$	86,719	$	5,428	$	—	$	312	$	80,979

Financial liabilities
Interest sensitive contract liabilities	$	105,293	$	108,621	$	—	$	—	$	—	$	108,621

Debt	2,964		3,295		—		—		3,295		—
Securities to repurchase	3,110		3,110		—		—		3,110		—
Funds withheld liability	394		394		—		—		394		—
Total financial liabilities not carried at fair value	$	111,761	$	115,420	$	—	$	—	$	6,799	$	108,621

We estimate the fair value for financial instruments not carried at fair value using the same methods and assumptions as those we carry at fair value. The financial instruments presented above are reported at carrying value on the condensed consolidated balance sheets; however, in the case of policy loans, short-term investments, funds withheld at interest and liability, securities to repurchase, and debt of consolidated VIEs, the carrying amount approximates fair value.

Other investments – The fair value of other investments is determined using a discounted cash flow model using discount rates for similar investments.

Interest sensitive contract liabilities – The carrying and fair value of interest sensitive contract liabilities above includes fixed indexed and traditional fixed annuities without mortality or morbidity risks, funding agreements and payout annuities without life contingencies. The embedded derivatives within fixed indexed annuities without mortality or morbidity risks are excluded, as they are carried at fair value. The valuation of these investment contracts is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates, adding a spread to reflect our nonperformance risk and subtracting a risk margin to reflect uncertainty inherent in the projected cash flows.

Debt – We obtain the fair value of debt from commercial pricing services. These are classified as Level 2. The pricing services incorporate a variety of market observable information in their valuation techniques including benchmark yields, trading activity, credit quality, issuer spreads, bids, offers and other reference data.

- 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