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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2024

Our measurement of fair value is based on assumptions used by market participants in pricing the asset or liability, which may include inherent risk, restrictions on the sale or use of an asset, or non-performance risk, which may include our own credit risk. We estimate an exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability (“exit price”) in the principal market, or the most advantageous market for that asset or liability in the absence of a principal market as opposed to the price that would be paid to acquire the asset or assume a liability (“entry price”). We categorize financial instruments carried at fair value into a three-level fair value hierarchy, based on the priority of inputs to the respective valuation technique, along with net asset value. The three-level hierarchy for fair value measurement is defined as follows:

Level 1 – Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date.

Level 2 – Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads, and yield curves.

Level 3 – Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date based on the best information available in the circumstances.

Net Asset Value (“NAV”) – Certain equity investments are measured using NAV as a practical expedient in determining fair value. In addition, our unconsolidated affiliates (primarily limited partnerships) are primarily accounted for using the equity method of accounting with fair value determined using NAV as a practical expedient. Our carrying value reflects our pro rata ownership percentage as indicated by NAV in the unconsolidated affiliate’s 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 unconsolidated affiliates 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. Additionally, management inquires quarterly with the general partner to determine whether any credit or other market events have occurred since prior period financial statements to ensure any material events are properly included in current period valuation and investment income.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

When a determination is made to classify an asset or liability within Level 3 of the fair value hierarchy, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. Because certain securities trade in less liquid or illiquid markets with limited or no pricing information, the determination of fair value for these securities is inherently more difficult. In addition to the unobservable inputs, Level 3 fair value investments may include observable components, which are components that are actively quoted or can be validated to market-based sources.

Our assets and liabilities measured at fair value on a recurring basis, summarized according to the hierarchy previously described, are as follows (in millions):


	March 31, 2024
	Level 1		Level 2		Level 3		NAV		Fair Value
Assets
Cash and cash equivalents	$	2,372	$	—	$	—	$	—	$	2,372
Fixed maturity securities, available-for-sale:
Asset-backed securities	—		7,372		7,736		—		15,108
Commercial mortgage-backed securities	—		4,746		12		—		4,758
Corporates	—		15,491		2,178		—		17,669
Hybrids	99		534		—		—		633
Municipals	—		1,486		18		—		1,504
Residential mortgage-backed securities	—		2,455		4		—		2,459
U.S. Government	276		—		—		—		276
Foreign Governments	—		219		5		—		224
Preferred securities	125		249		7		—		381
Equity securities	79		—		—		59		138
Derivative investments	—		1,015		9		—		1,024
Investment in unconsolidated affiliates	—		—		343		—		343
Short term investments	254		—		9		—		263
Reinsurance related embedded derivative, included in other assets	—		134		—		—		134
Other long-term investments	—		—		39				39
Market risk benefits asset	—		—		95		—		95
Total financial assets at fair value	$	3,205	$	33,701	$	10,455	$	59	$	47,420
Liabilities

Derivatives:
Indexed annuities/IUL embedded derivatives, included in contractholder funds	$	—	$	—	$	4,679	$	—	$	4,679
Interest rate swaps	—		—		19		—		19
Contingent consideration obligation	—		—		57		—		57
Market risk benefits liability	—		—		425		—		425

Total financial liabilities at fair value	$	—	$	—	$	5,180	$	—	$	5,180


	December 31, 2023
	Level 1		Level 2		Level 3		NAV		Fair Value
Assets
Cash and cash equivalents	$	1,563	$	—	$	—	$	—	$	1,563
Fixed maturity securities, available-for-sale:
Asset-backed securities	—		7,212		7,122		—		14,334
Commercial mortgage-backed securities	—		4,392		18		—		4,410
Corporates	—		14,609		1,970		—		16,579
Hybrids	95		523		—		—		618
Municipals	—		1,518		49		—		1,567
Residential mortgage-backed securities	—		2,421		3		—		2,424
U.S. Government	261		—		—		—		261
Foreign Governments	—		210		16		—		226
Preferred securities	152		310		7		—		469
Equity securities	78		—		—		59		137
Derivative investments	—		740		57		—		797
Investment in unconsolidated affiliates	—		—		285		—		285
Short term investments	1,444		8		—		—		1,452
Reinsurance related embedded derivative, included in other assets	—		152		—		—		152
Other long-term investments	—		—		37		—		37
Market risk benefits asset	—		—		88		—		88
Total financial assets at fair value	$	3,593	$	32,095	$	9,652	$	59	$	45,399
Liabilities

Derivatives:
Indexed annuities/IUL embedded derivatives, included in contractholder funds	$	—	$	—	$	4,258	$	—	$	4,258


Market risk benefits liability	—		—		403		—		403

Total financial liabilities at fair value	$	—	$	—	$	4,661	$	—	$	4,661

Valuation Methodologies

Cash and Cash Equivalents

The carrying amounts reported in the unaudited Condensed Consolidated Balance Sheets for these instruments approximate fair value.

Fixed Maturity, Preferred and Equity Securities

We measure the fair value of our securities based on assumptions used by market participants in pricing the security. The most appropriate valuation methodology is selected based on the specific characteristics of the fixed maturity, preferred or equity security, and we will then consistently apply the valuation methodology to measure the security’s fair value. Our fair value measurement is based on a market approach, which utilizes prices and other relevant information generated by market transactions involving identical or comparable securities. Sources of inputs to the market approach include third-party pricing services, independent broker quotations, or pricing matrices. We use observable and unobservable inputs in our valuation methodologies. Observable inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. In addition, market indicators and industry and economic events are monitored and further market data will be acquired when certain thresholds are met.

For certain security types, additional inputs may be used, or some of the inputs described above may not be applicable. The significant input used in the fair value measurement of equity securities for which the market approach valuation technique is employed is yield for comparable securities. Increases or decreases in the yields would result in lower or higher, respectively, fair value measurements. For broker-quoted only securities, quotes from market makers or broker-dealers are obtained from sources recognized to be market participants. We believe

the broker quotes are prices at which trades could be executed based on historical trades executed at broker-quoted or slightly higher prices.

We analyze the third-party valuation methodologies and related inputs to perform assessments to determine the appropriate level within the fair value hierarchy. However, we did not adjust prices received from third parties as of March 31, 2024 or December 31, 2023.

Certain equity investments are measured using NAV as a practical expedient in determining fair value.

Derivative Financial Instruments

Our call options, futures contracts, and interest rate swaps can either be exchange traded or over the counter. Exchange traded derivatives typically fall within Level 1 of the fair value hierarchy if there is active trading activity. Two methods are used to value over-the-counter derivatives. When required inputs are available, certain derivatives are valued using valuation pricing models, which represent what we would expect to receive or pay at the balance sheet date if we cancelled or exercised the derivative, or entered into offsetting positions. Valuation models require a variety of inputs, which include the use of market-observable inputs, including interest rate, yield curve volatilities, and other factors. These over-the-counter derivatives are typically classified within Level 2 of the fair value hierarchy as the majority trade in liquid markets, we can verify model inputs and model selection does not involve significant management judgment. When inputs aren’t available for valuation models, certain over-the-counter derivatives are valued using independent broker quotes, which are based on unobservable market data and classified within Level 3.

The fair value of the reinsurance-related embedded derivatives in our funds withheld reinsurance agreements are estimated based upon the fair value of the assets supporting the funds withheld from reinsurance liabilities. The fair value of the assets is based on a quoted market price of similar assets (Level 2), and therefore the fair value of the embedded derivative is based on market-observable inputs and classified as Level 2.

The fair value measurement of the indexed annuities/IUL embedded derivatives included in contractholder funds is determined through a combination of market observable information and significant unobservable inputs using the option budget method. The market observable inputs are the market value of option and treasury rates. The significant unobservable inputs are the budgeted option cost (i.e., the expected cost to purchase call options in future periods to fund the equity indexed linked feature), surrender rates, mortality multiplier and non-performance spread. The mortality multiplier at March 31, 2024 and December 31, 2023 was applied to the 2012 Individual Annuity mortality tables. Increases or decreases in the market value of an option in isolation would result in a higher or lower, respectively, fair value measurement. Increases or decreases in treasury rates, mortality multiplier, surrender rates, or non-performance spread in isolation would result in a lower or higher fair value measurement, respectively. Generally, a change in any one unobservable input would not directly result in a change in any other unobservable input.

Investments in Unconsolidated affiliates

We have elected the fair value option (“FVO”) for certain investments in unconsolidated affiliates as we believe this better aligns them with other investments in unconsolidated affiliates that are measured using NAV as a practical expedient in determining fair value. Investments measured using the fair value option are included in Level 3 and the fair value of these investments are determined using either a multiple of the affiliates’ EBITDA, which is derived from market analysis of transactions involving comparable companies, or an adjusted transaction value, which contemplates measures such as EBITDA margins, revenue growth over certain time periods, growth opportunities and marketability. The fair values are based on the affiliates’ financial information. The inputs are usually considered unobservable, as not all market participants have access to this data.

Short-term Investments

The carrying amounts reported in the unaudited Condensed Consolidated Balance Sheets for these instruments approximate fair value.

Other Long-term Investments

We hold a fund-linked note, which provides for an additional payment at maturity based on the value of an embedded derivative based on the actual return of a dedicated return fund. Fair value of the embedded derivative is based on an unobservable input, the NAV of the fund at the balance sheet date. The embedded derivative is similar to a call option on the net asset value of the fund with a strike price of zero since we will not be required to make any additional payments at maturity of the fund-linked note in order to receive the NAV of the fund on the maturity date. A Black-Scholes model determines the NAV of the fund as the fair value of the call option regardless of the values used for the other inputs to the option pricing model. The NAV of the fund is provided by the fund manager at the end of each calendar month and represents the value an investor would receive if it withdrew its investment on the balance sheet date. Therefore, the key unobservable input used in the Black-Scholes model is the value of the fund. As the value of the fund increases or decreases, the fair value of the embedded derivative will increase or decrease. See further discussion on the available-for-sale embedded derivative in Note D - Derivative Financial Instruments.

The fair value of the credit-linked note is based on a weighted average of a broker quote and a discounted cash flow analysis. The discounted cash flow approach is based on the expected portfolio cash flows and amortization schedule reflecting investment expectations, adjusted for assumptions on the portfolio's default and recovery rates, and the note's discount rate. The fair value of the note is provided by the fund manager at the end of each quarter.

Contingent Consideration

The contingent consideration liability is measured at fair value using a discounted cash flow model applied using a Monte Carlo simulation of estimated EBITDA at each measurement period and for each simulated path relative to contractual EBITDA milestones. The Monte Carlo simulation utilizes a risk-adjusted discount rate, volatility assumption, and risk-free rates to assess the probability Roar's EBITDA trajectory reaches required milestones for the earn out payments to be made. The discounted cash flow approach applies a company-specific discount rate based on F&G credit profile to future expected earn out payments to calculate the estimated fair value based on the average outcome from the simulation. See further discussion on the contingent consideration in Note N - Commitments and Contingencies.

Market Risk Benefits (“MRB”)

MRBs are measured at fair value using an attributed fee measurement approach where attributed fees are explicit rider charges collectible from the policyholder used to cover the excess benefits. The fair value is calculated using a risk neutral valuation method and is based on current net amounts at risk, market data, internal and industry experience, and other factors. The balances are computed using assumptions including mortality, full and partial surrender, rider benefit utilization, risk-free rates including non-performance spread and risk margin, market value of options and economic scenarios. Policyholder behavior assumptions are reviewed at least annually, typically in the third quarter, for any revisions. See further discussion on MRBs in Note G - Market Risk Benefits.

Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of March 31, 2024 and December 31, 2023, excluding assets and liabilities for which significant quantitative unobservable inputs are not developed internally and not readily available to the Company (primarily those valued using broker quotes and certain third-party pricing services), are as follows (in millions):

Valuation Technique

Unobservable Input(s)

Range (Weighted average)

Fair Value at

March 31, 2024

Assets

Asset-backed securities

Third-Party Valuation

Discount Rate

5.27% - 6.54%

(6.03%)

Commercial mortgage-backed securities

Third-Party Valuation

Discount Rate

6.90% - 7.84%%

(7.22%)

Corporates

760

Third-Party Valuation

Discount Rate

4.16% - 12.87%

(7.06%)

Residential mortgage-backed securities

Third-Party Valuation

Discount Rate

5.64% - 5.64%

(5.64%)

Foreign Governments

Third-Party Valuation

Discount Rate

6.77% - 6.77%

(6.77%)

Investment in unconsolidated affiliates

343

Market Comparable Company Analysis

EBITDA Multiple

14.1x - 20.2x

(16.0x)

Adjusted Transaction Value

N/A

Other long-term investments:

Available-for-sale embedded derivative

Black Scholes Model

Market Value of AnchorPath Fund

100.00%

Market risk benefits asset

Discounted Cash Flow

Mortality

100.00% - 100.00%

(100.00%)

Surrender Rates

0.25% - 10.00%

(5.13%)

Partial Withdrawal Rates

2.00% - 20.41%%

(2.50%)

Non-Performance Spread

0.35% - 1.02%%

(0.87%)

GMWB Utilization

50.00% - 60.00%

(50.81%)

Total financial assets at fair value (a)

1,326


			Valuation Technique	Unobservable Input(s)	Range (Weighted average)
	Fair Value at
	March 31, 2024				March 31, 2024
Liabilities
Derivatives:
Indexed annuity/IUL embedded derivatives, included in contractholder funds	$	4,679	Discounted Cash Flow	Market Value of Option	0.00% - 24.11% (3.52%)

				Mortality Multiplier	100.00% - 100.00% (100.00%)
				Surrender Rates	0.25% - 70.00% (6.80%)
				Partial Withdrawals	2.00% - 35.71% (2.74%)
				Non-Performance Spread	0.35% - 1.02% (0.87%)
				Option Cost	0.07% - 5.70% (2.47%)

Contingent consideration	57		Discounted Cash Flow	Risk-Adjusted Discount Rate	13.50% - 13.50% (13.50%)
				EBITDA Volatility	35.00% - 35.00% (35.00%)

				Counterparty-Discount Rate	7.00% - 7.00% (7.00%)
Market risk benefits liability	425		Discounted Cash Flow	Mortality	100.00% - 100.00% (100.00%)
				Surrender Rates	0.25% - 10.00% (5.13%)
				Partial Withdrawal Rates	2.00% - 20.41% (2.50%)
				Non-Performance Spread	0.35% - 1.02% (0.87%)
				GMWB Utilization	50.00% - 60.00% (50.81%)
Total financial liabilities at fair value (a)	$	5,161

(a) Assets of $9,129 million and liabilities of $19 million for which significant quantitative unobservable inputs are not developed internally and not readily available to the Company (primarily those valued using broker quotes and certain third-party pricing services) are excluded from the respective totals in the table above.


			Valuation Technique	Unobservable Input(s)	Range (Weighted average)
	Fair Value at
	December 31, 2023				December 31, 2023
Assets


Asset-backed securities	$	57	Third-Party Valuation	Discount Rate	5.09% - 6.95% (6.00%)






Corporates	787		Third-Party Valuation	Discount Rate	0.00% - 12.87% (6.91%)

Municipals	32		Third-Party Valuation	Discount Rate	6.25% - 6.25% (6.25%)



Residential mortgage-backed securities	3		Third-Party Valuation	Discount Rate	5.46% - 5.46% (5.46%)

Foreign Governments	16		Third-Party Valuation	Discount Rate	6.94% - 7.68% (7.45%)


Investment in unconsolidated affiliates	285		Market Comparable Company Analysis	EBITDA Multiple	4.4x - 31.8x (23.2x)




Other long-term investments:
Available-for-sale embedded derivative	28		Black Scholes Model	Market Value of Fund	100.00%
Market risk benefits asset	88		Discounted Cash Flow	Mortality	100.00% - 100.00% (100.00%)
				Surrender Rates	0.25% - 10.00% (5.22%)
				Partial Withdrawal Rates	0.00% - 23.26% (2.50%)
				Non-Performance Spread	0.38% -1.10% (0.96%)
				GMWB Utilization	50.00% -60.00% (50.81%)
Total financial assets at fair value (a)	$	1,296

Liabilities








Derivatives:
Indexed annuity/ IUL embedded derivatives, included in contractholder funds	$	4,258	Discounted Cash Flow	Market Value of Option	0.00% - 18.93% (2.63%)

				Mortality Multiplier	100.00% - 100.00% (100.00%)
				Surrender Rates	0.25% - 70.00% (6.83%)
				Partial Withdrawals	2.00% - 34.48% (2.74%)
				Non-Performance Spread	0.38% - 1.10% (0.96%)
				Option Cost	0.07% - 5.48% (2.38%)
Market risk benefits liability	403		Discounted Cash Flow	Mortality	100.00% - 100.00% (100.00%)
				Surrender Rates	0.25% - 10.00% (5.22%)
				Partial Withdrawal Rates	0.00% - 23.26% (2.50%)
				Non-Performance Spread	0.38% - 1.10% (0.96%)
				GMWB Utilization	50.00% -60.00% (50.81%)
Total financial liabilities at fair value	$	4,661

(a) Assets of $8,356 million for which significant quantitative unobservable inputs are not developed internally and not readily available to the Company (primarily those valued using broker quotes and certain third-party pricing services) are excluded from the table above.

The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three months ended March 31, 2024 and 2023 (in millions). The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.


	Three months ended March 31, 2024
	Balance at Beginning of Period		Total Gains (Losses)				Purchases		Sales		Settlements		Net transfer In (Out) of Level 3 (a)		Balance at End of Period		Change in Unrealized Gains (Losses) Incl in OCI
			Included in Earnings		Included in AOCI
Assets
Fixed maturity securities, available-for-sale:
Asset-backed securities	$	7,122	$	(12)	$	104	$	762	$	(19)	$	(202)	$	(19)	$	7,736	$	104
Commercial mortgage-backed securities	18		—		—		1		—		—		(7)		12		—
Corporates	1,970		—		13		217		—		(22)		—		2,178		13

Municipals	49		—		1		—		(32)		—		—		18		1
Residential mortgage-backed securities	3		—		—		1		—		—		—		4		—
Foreign Governments	16		—		—		—		—		(11)		—		5

Preferred securities	7		—		—		—		—		—		—		7		—
Interest rate swaps	57		(48)		—		—		—		—		—		9		—
Investment in unconsolidated affiliates	285		58		—		—		—		—		—		343		—
Short term investments	—		—		—		9		—		—		—		9		—
Other long-term investments:

Available-for-sale embedded derivative	27		—		3		—		—		—		—		30		3

Credit linked note	10		—		—		—		—		(1)		—		9		—

Subtotal assets at Level 3 fair value	$	9,564	$	(2)	$	121	$	990	$	(51)	$	(236)	$	(26)	$	10,360	$	121
Market risk benefits asset (b)	88														95
Total assets at Level 3 fair value	$	9,652													$	10,455
Liabilities

Indexed annuity/ IUL embedded derivatives, included in contractholder funds	$	4,258	$	200	$	—	$	288	$	—	$	(67)	$	—	$	4,679	$	—
Interest rate swaps	—		19		—		—		—		—		—		19		—
Contingent consideration (c)	—		9		—		48		—		—		—		57
Subtotal liabilities at Level 3 fair value	$	4,258	$	228	$	—	$	336	$	—	$	(67)	$	—	$	4,755	$	—
Market risk benefits liability (b)	403														425
Total liabilities at Level 3 fair value	$	4,661													$	5,180

(a) The net transfers out of Level 3 during the three months ended March 31, 2024 were exclusively to Level 2.

(b) Refer to Note G - Market Risk Benefits for roll forward activity of the net Market Risk Benefits Asset and Liability.

(c) The initial contingent consideration recorded in the Roar transaction is included in purchases in the table above. Refer to Note P - Acquisition for more information.


	Three months ended March 31, 2023
	Balance at Beginning of Period		Total Gains (Losses)				Purchases		Sales		Settlements		Net transfer In (Out) of Level 3 (a)		Balance at End of Period		Change in Unrealized Included in OCI
			Included in Earnings		Included in AOCI
Assets
Fixed maturity securities, available-for-sale:
Asset-backed securities	$	6,263	$	(8)	$	18	$	416	$	(83)	$	(235)	$	(71)	$	6,300	$	18
Commercial mortgage-backed securities	37		—		1		12		—		—		(21)		29		1
Corporates	1,427		(1)		(23)		134		—		(5)		—		1,532		(23)

Municipals	29		—		3		—		—		—		—		32		3
Residential mortgage-backed securities	302		1		8		8		—		(8)		(299)		12		8
Foreign Governments	16		—		—		—		—		—		—		16		—
Investment in unconsolidated affiliates	23		—		—		84		—		—		—		107		—
Short-term investments	—		—		—		23		—		—		—		23		—


Other long-term investments:

Available-for-sale embedded derivative	23		—		2		—		—		—		—		25		2

Credit linked note	15		—		—		—		—		(2)		—		13		—
Secured borrowing receivable	10		—		—		—		—		—		—		10		—

Subtotal assets at Level 3 fair value	$	8,145	$	(8)	$	9	$	677	$	(83)	$	(250)	$	(391)	$	8,099	$	9
Market risk benefits asset (b)	117														106
Total assets at Level 3 fair value	$	8,262													$	8,205
Liabilities

Indexed annuity/IUL embedded derivatives, included in contractholder funds	$	3,115	$	385	$	—	$	96	$	—	$	(27)	$	—	$	3,569	$	—
Subtotal liabilities at Level 3 fair value	$	3,115	$	385	$	—	$	96	$	—	$	(27)	$	—	$	3,569	$	—
Market risk benefits liability (b)	282														324
Total liabilities at Level 3 fair value	$	3,397													$	3,893

(a)The net transfers out of Level 3 during the three months ended March 31, 2023 were to Level 2.

(b)Refer to Note G - Market Risk Benefits for roll forward activity of the net Market Risk Benefits Asset and Liability.

Valuation Methodologies and Associated Inputs for Financial Instruments Not Carried at Fair Value

The following discussion outlines the methodologies and assumptions used to determine the fair value of our financial instruments not carried at fair value. Considerable judgment is required to develop these assumptions used to measure fair value. Accordingly, the estimates shown are not necessarily indicative of the amounts that would be realized in a one-time, current market exchange of all of our financial instruments.

Mortgage Loans

The fair value of mortgage loans is established using a discounted cash flow method based on internal credit rating, maturity and future income. This yield-based approach is sourced from our third-party vendor. The internal ratings for mortgages in good standing are based on property type, location, market conditions, occupancy, debt service coverage, loan-to-value, quality of tenancy, borrower, and payment record. The inputs used to measure the fair value of our mortgage loans are classified as Level 3 within the fair value hierarchy.

Investments in Unconsolidated affiliates

The fair value of investments in unconsolidated affiliates is primarily determined using NAV as a practical expedient. Recognition of income and adjustments to the carrying amount are delayed due to the availability of the related financial statements, which are obtained from the general partner typically on a one to three-month delay.

Policy Loans (included within Other long-term investments)

Policy loans are reported at the unpaid principal balance and are fully collateralized by the cash surrender value of underlying insurance policies. The carrying value of the policy loans approximates the fair value and are classified as Level 3 in the fair value hierarchy.

Company Owned Life Insurance

Company owned life insurance (“COLI”) is a life insurance program used to finance certain employee benefit expenses. The fair value of COLI is based on net realizable value, which is generally cash surrender value. COLI is classified as Level 3 within the fair value hierarchy.

Investment Contracts

Investment contracts include deferred annuities (indexed annuities and fixed rate annuities), IUL policies, funding agreements and PRT and immediate annuity contracts without life contingencies. The indexed annuities/IUL embedded derivatives, included in contractholder funds, are excluded as they are carried at fair value. The fair value of the deferred annuities (indexed annuities and fixed rate annuities) and IUL contracts is based on their cash surrender value (i.e., the cost the Company would incur to extinguish the liability) as these contracts are generally issued without an annuitization date. The fair value of funding agreements and PRT and immediate annuity contracts without life contingencies is derived by calculating a new fair value interest rate using the updated yield curve and treasury spreads as of the respective reporting date. The Company is not required to, and has not, estimated the fair value of the liabilities under contracts that involve significant mortality or morbidity risks, as these liabilities fall within the definition of insurance contracts that are exceptions from financial instruments that require disclosures of fair value.

Other

Federal Home Loan Bank of Atlanta (“FHLB”) common stock is carried at cost, which approximates fair value. The carrying amount of FHLB common stock represents the value it can be sold back to the FHLB and is classified as Level 2 within the hierarchy.

Debt

The fair value of the $345 million aggregate principal amount of its 7.95% F&G Notes, $500 million aggregate principal amount of its 7.40% Senior Notes and the $550 million aggregate principal amount of its 5.50% Senior Notes are based on quoted market prices of debt with similar credit risk and tenor. The inputs used to measure the fair value of these debts results in a Level 2 classification within the fair value hierarchy.

The carrying value of the revolving credit facility approximates fair value as the rates are comparable to those at which we could currently borrow under similar terms. As such, the fair value of the revolving credit facility was classified as a Level 2 measurement.

The following tables provide the carrying value and estimated fair value of our financial instruments that are carried on the unaudited Condensed Consolidated Balance Sheets at amounts other than fair value, summarized according to the fair value hierarchy previously described (in millions).


	March 31, 2024
	Level 1		Level 2		Level 3		NAV		Total Estimated Fair Value		Carrying Amount
Assets
FHLB common stock	$	—	$	138	$	—	$	—	$	138	$	138
Commercial mortgage loans	—		—		2,229		—		2,229		2,550
Residential mortgage loans	—		—		2,590		—		2,590		2,890
Investments in unconsolidated affiliates	—		—		6		3,018		3,024		3,024
Policy loans	—		—		78		—		78		78

Company-owned life insurance	—		—		379		—		379		379


Total	$	—	$	138	$	5,282	$	3,018	$	8,438	$	9,059

Liabilities
Investment contracts, included in contractholder funds	$	—	$	—	$	41,488	$	—	$	41,488	$	46,194
Debt	—		1,783		—		—		1,783		1,748

Total	$	—	$	1,783	$	41,488	$	—	$	43,271	$	47,942


	December 31, 2023
	Level 1		Level 2		Level 3		NAV		Total Estimated Fair Value		Carrying Amount
Assets
FHLB common stock	$	—	$	138	$	—	$	—	$	138	$	138
Commercial mortgage loans	—		—		2,253		—		2,253		2,538
Residential mortgage loans	—		—		2,545		—		2,545		2,798
Investments in unconsolidated affiliates	—		—		7		2,779		2,786		2,786
Policy loans	—		—		71		—		71		71
Company-owned life insurance	—		—		362		—		362		362



Total	$	—	$	138	$	5,238	$	2,779	$	8,155	$	8,693

Liabilities
Investment contracts, included in contractholder funds	$	—	$	—	$	40,229	$	—	$	40,229	$	44,540
Debt	—		1,777		—		—		1,777		1,754

Total	$	—	$	1,777	$	40,229	$	—	$	42,006	$	46,294

For investments for which NAV is used, we do not have any significant restrictions in our ability to liquidate our positions in these investments, other than obtaining general partner approval, nor do we believe it is probable a price less than NAV would be received in the event of a liquidation.

We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur. The transfers into and out of Level 3 were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value.

- 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.

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