Fair Value (Tables)

3 Months Ended

Mar. 31, 2017

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis are presented in the following tables.



March 31, 2017								Total Assets/Liabilities at Fair Value
(In millions)	Level 1		Level 2			Level 3		Total Assets/Liabilities at Fair Value
Assets
Fixed maturity securities:
Corporate and other bonds	$	—	$	19,125		$	121	$	19,246
States, municipalities and political subdivisions	—		13,451			1		13,452
Asset-backed:
Residential mortgage-backed	—		4,617			126		4,743
Commercial mortgage-backed	—		1,922			13		1,935
Other asset-backed	—		932			117		1,049
Total asset-backed	—		7,471			256		7,727
U.S. Treasury and obligations of government-sponsored enterprises	103		—			—		103
Foreign government	—		432			—		432
Redeemable preferred stock	20		—			—		20
Total fixed maturity securities	123		40,479			378		40,980
Equity securities	101		—			19		120
Other invested assets	—		5			—		5
Short term investments	225		829			—		1,054
Life settlement contracts, included in Other assets	—		—			46		46
Total assets	$	449	$	41,313		$	443	$	42,205
Liabilities
Other liabilities	$	—	$	(2	)	$	—	$	(2	)
Total liabilities	$	—	$	(2	)	$	—	$	(2	)



December 31, 2016								Total Assets/Liabilities at Fair Value
(In millions)	Level 1		Level 2			Level 3		Total Assets/Liabilities at Fair Value
Assets
Fixed maturity securities:
Corporate and other bonds	$	—	$	18,840		$	130	$	18,970
States, municipalities and political subdivisions	—		13,239			1		13,240
Asset-backed:
Residential mortgage-backed	—		4,944			129		5,073
Commercial mortgage-backed	—		2,027			13		2,040
Other asset-backed	—		968			57		1,025
Total asset-backed	—		7,939			199		8,138
U.S. Treasury and obligations of government-sponsored enterprises	93		—			—		93
Foreign government	—		445			—		445
Redeemable preferred stock	19		—			—		19
Total fixed maturity securities	112		40,463			330		40,905
Equity securities	91		—			19		110
Other invested assets	—		5			—		5
Short term investments	475		853			—		1,328
Life settlement contracts, included in Other assets	—		—			58		58
Total assets	$	678	$	41,321		$	407	$	42,406
Liabilities
Other liabilities	$	—	$	(3	)	$	—	$	(3	)
Total liabilities	$	—	$	(3	)	$	—	$	(3	)

Table of reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs

The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).



Level 3 (In millions)	Balance as of January 1, 2017		Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)*			Net change in unrealized appreciation (depreciation) included in Other comprehensive income (loss)		Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance as of March 31, 2017		Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2017 recognized in Net income (loss)*
Fixed maturity securities:
Corporate and other bonds	$	130	$	—		$	1	$	5	$	(1	)	$	(14	)	$	—	$	—		$	121	$	—
States, municipalities and political subdivisions	1		—			—		—		—			—			—		—			1		—
Asset-backed:
Residential mortgage-backed	129		1			2		—		—			(6		)	—		—			126		—
Commercial mortgage-backed	13		—			—		—		—			—			—		—			13		—
Other asset-backed	57		(1		)	—		38		—			—			28		(5		)	117		—
Total asset-backed	199		—			2		38		—			(6		)	28		(5		)	256		—
Total fixed maturity securities	330		—			3		43		(1		)	(20		)	28		(5		)	378		—
Equity securities	19		—			1		1		(2		)	—			—		—			19		—
Derivative financial instruments	—		1			—		—		(1		)	—			—		—			—		—
Life settlement contracts	58		6			—		—		(13		)	(5		)	—		—			46		—
Total	$	407	$	7		$	4	$	44	$	(17	)	$	(25	)	$	28	$	(5	)	$	443	$	—



Level 3 (In millions)	Balance as of January 1, 2016		Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)*			Net change in unrealized appreciation (depreciation) included in Other comprehensive income (loss)			Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance as of March 31, 2016		Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2016 recognized in Net income (loss)*
Fixed maturity securities:
Corporate and other bonds	$	168	$	(1	)	$	4		$	53	$	(16	)	$	(3	)	$	—	$	(12	)	$	193	$	—
States, municipalities and political subdivisions	2		—			—			—		—			—			—		—			2		—
Asset-backed:
Residential mortgage-backed	134		1			—			—		—			(5		)	—		(2		)	128		—
Commercial mortgage-backed	22		—			—			9		—			—			—		(4		)	27		—
Other asset-backed	53		—			—			—		—			—			2		(5		)	50		—
Total asset-backed	209		1			—			9		—			(5		)	2		(11		)	205		—
Total fixed maturity securities	379		—			4			62		(16		)	(8		)	2		(23		)	400		—
Equity securities	20		—			(1		)	—		—			—			—		—			19		—
Life settlement contracts	74		4			—			—		—			(6		)	—		—			72		1
Total	$	473	$	4		$	3		$	62	$	(16	)	$	(14	)	$	2	$	(23	)	$	491	$	1

*Net realized and unrealized gains and losses from Level 3 securities and derivatives are reported in Net income (loss) as follows:



Major Category of Assets and Liabilities		Condensed Consolidated Statements of Operations Line Items
Fixed maturity securities available-for-sale ⁽¹⁾		Net realized investment gains (losses)
Fixed maturity securities trading		Net investment income
Equity securities ⁽¹⁾		Net realized investment gains (losses)
Other invested assets - Derivative financial instruments held in a trading portfolio		Net investment income
Other invested assets - Derivative financial instruments not held in a trading portfolio		Net realized investment gains (losses)
Life settlement contracts		Other revenues
Other liabilities - Derivative financial instruments		Net realized investment gains (losses)

(1) Unrealized gains and losses are reported within AOCI.

Qualitative information about assets and liabilities

*Net realized and unrealized gains and losses from Level 3 securities and derivatives are reported in Net income (loss) as follows:



Major Category of Assets and Liabilities		Condensed Consolidated Statements of Operations Line Items
Fixed maturity securities available-for-sale ⁽¹⁾		Net realized investment gains (losses)
Fixed maturity securities trading		Net investment income
Equity securities ⁽¹⁾		Net realized investment gains (losses)
Other invested assets - Derivative financial instruments held in a trading portfolio		Net investment income
Other invested assets - Derivative financial instruments not held in a trading portfolio		Net realized investment gains (losses)
Life settlement contracts		Other revenues
Other liabilities - Derivative financial instruments		Net realized investment gains (losses)

(1) Unrealized gains and losses are reported within AOCI.

Quantitative information about significant unobservable inputs in the fair value measurement of level 3 assets

The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Valuations for assets and liabilities not presented in the tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of these unobservable inputs is neither provided nor reasonably available to the Company. The valuation of life settlement contracts was based on the terms of the sale of the contracts to a third party, therefore, the contracts are not included in the table below.



March 31, 2017	Estimated Fair Value (In millions)		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Fixed maturity securities	$	122	Discounted cash flow	Credit spread	2% - 40% (4%)



December 31, 2016	Estimated Fair Value (In millions)		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Fixed maturity securities	$	106	Discounted cash flow	Credit spread	2% - 40% (4%)

Carrying amount and estimated fair value of financial instrument assets and liabilities not measured at fair value

The carrying amount and estimated fair value of the Company's financial assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are presented in the following tables.



March 31, 2017	Carrying Amount		Estimated Fair Value
(In millions)	Carrying Amount		Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	611	$	—	$	—	$	616	$	616
Note receivable	10		—		—		10		10
Liabilities
Short term debt	$	150	$	—	$	156	$	—	$	156
Long term debt	2,560		—		2,811		—		2,811



December 31, 2016	Carrying Amount		Estimated Fair Value
(In millions)	Carrying Amount		Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	591	$	—	$	—	$	594	$	594
Liabilities
Long term debt	$	2,710	$	—	$	2,952	$	—	$	2,952

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) the reasons for electing a fair value option for each eligible item or group of similar eligible items and (b) if the fair value option is elected for some but not all eligible items within a group of similar eligible items: (i) a description of those similar items and the reasons for partial election and (ii) information of how the group of similar items relates to individual balance sheet line items; (c) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, information of how each line item in the statement of financial position relates to major categories of assets and liabilities presented in accordance with other fair value disclosures; (2) for items included in the income statement: (a) a description of how interest and dividends are measured and where they are reported in the income statement; (b) how the gains or losses attributable to changes in instrument-specific credit risk were determined; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk: (i) qualitative information about the reasons for the changes and (ii) how the gains and losses attributable to changes in instrument-specific credit risk were determined; and (3) certain other disclosures as required or determined to be provided.

+ References + Details