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FAIR VALUE OF FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company determined the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company has adopted the provisions from the FASB guidance that is referenced in the Fair Value Measurements and Disclosures Topic for non-financial assets and liabilities (such as property and equipment, goodwill, and other intangible assets) that are required to be measured at fair value on a periodic basis. The effect on the Company’s periodic fair value measurements for non-financial assets and liabilities was not material.
The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. 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 fair value measurement of the instrument.
 Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized as follows:
•Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market.

•Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:
 
a)    Quoted prices for similar assets or liabilities in active markets;
b)    Quoted prices for identical or similar assets or liabilities in non-active markets;
c)    Inputs other than quoted market prices that are observable; and
d)    Inputs that are derived principally from or corroborated by observable market data through correlation or other means.
 
•Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own estimates about the assumptions a market participant would use in pricing the asset or liability.
The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of September 30, 2021:
 Measurement
Category		Level 1Level 2Level 3Total
 (Dollars In Millions)
Assets:    
Fixed maturity securities - AFS    
Residential mortgage-backed securities4$— $7,346 $— $7,346 
Commercial mortgage-backed securities4— 2,256 31 2,287 
Other asset-backed securities4— 1,018 458 1,476 
U.S. government-related securities4410 402 — 812 
State, municipals, and political subdivisions4— 4,173 — 4,173 
Other government-related securities4— 762 — 762 
Corporate securities4— 51,972 1,635 53,607 
Redeemable preferred stocks4310 — — 310 
Total fixed maturity securities - AFS720 67,929 2,124 70,773 
Fixed maturity securities - trading    
Residential mortgage-backed securities3— 158 — 158 
Commercial mortgage-backed securities3— 211 — 211 
Other asset-backed securities3— 87 94 181 
U.S. government-related securities327 6 — 33 
State, municipals, and political subdivisions3— 288 — 288 
Other government-related securities3— 48 16 64 
Corporate securities3— 1,885 15 1,900 
Redeemable preferred stocks38 — — 8 
Total fixed maturity securities - trading35 2,683 125 2,843 
Total fixed maturity securities755 70,612 2,249 73,616 
Equity securities3614 — 158 772 
Other long-term investments(1)
3 & 465 917 299 1,281 
Short-term investments3463 166 — 629 
Total investments1,897 71,695 2,706 76,298 
Cash3409 — — 409 
Assets related to separate accounts    
Variable annuity313,112 — — 13,112 
Variable universal life31,756 — — 1,756 
Total assets measured at fair value on a recurring basis$17,174 $71,695 $2,706 $91,575 
Liabilities:    
Annuity account balances(2)
3$— $— $64 $64 
Other liabilities(1)
3 & 425 603 1,948 2,576 
Total liabilities measured at fair value on a recurring basis$25 $603 $2,012 $2,640 
Measurement category 3 represents fair value through net income and 4 represents fair value through other comprehensive income (loss).
(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:
 Measurement
Category		Level 1Level 2Level 3Total
 (Dollars In Millions)
Assets:    
Fixed maturity securities - AFS    
Residential mortgage-backed securities4$— $6,668 $— $6,668 
Commercial mortgage-backed securities4— 2,502 32 2,534 
Other asset-backed securities4— 1,143 435 1,578 
U.S. government-related securities41,015 500 — 1,515 
State, municipals, and political subdivisions4— 4,420 — 4,420 
Other government-related securities4— 717 — 717 
Corporate securities4— 50,675 1,432 52,107 
Redeemable preferred stocks4125 69 — 194 
Total fixed maturity securities - AFS1,140 66,694 1,899 69,733 
Fixed maturity securities - trading    
Residential mortgage-backed securities3— 209 — 209 
Commercial mortgage-backed securities3— 214 — 214 
Other asset-backed securities3— 91 72 163 
U.S. government-related securities379 12 — 91 
State, municipals, and political subdivisions3— 282 — 282 
Other government-related securities3— 30 — 30 
Corporate securities3— 1,843 17 1,860 
Redeemable preferred stocks313 — — 13 
Total fixed maturity securities - trading92 2,681 89 2,862 
Total fixed maturity securities1,232 69,375 1,988 72,595 
Equity securities3566 — 101 667 
Other long-term investments(1)
3 & 452 1,285 299 1,636 
Short-term investments3403 59 — 462 
Total investments2,253 70,719 2,388 75,360 
Cash3656 — — 656 
Assets related to separate accounts    
Variable annuity312,378 — — 12,378 
Variable universal life31,287 — — 1,287 
Total assets measured at fair value on a recurring basis$16,574 $70,719 $2,388 $89,681 
Liabilities:    
Annuity account balances(2)
3$— $— $67 $67 
Other liabilities(1)
3 & 414 867 2,238 3,119 
Total liabilities measured at fair value on a recurring basis$14 $867 $2,305 $3,186 
Measurement category 3 represents fair value through net income and 4 represents fair value through other comprehensive income (loss).
(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
Determination of Fair Values
The valuation methodologies used to determine the fair values of assets and liabilities reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Company determines the fair values of certain financial assets and financial liabilities based on quoted market prices, where available. The Company also determines certain fair values based on future cash flows discounted at the appropriate current market rate. Fair values reflect adjustments for counterparty credit quality, the Company’s credit standing, liquidity, and where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments as listed in the above table.
For a full description of the Company’s fair value calculations and accounting policies, refer to Note 5 in the Company’s Form 10-K for the year ended December 31, 2020.
Valuation of Level 3 Financial Instruments
The following tables present the valuation method for material AFS fixed maturity securities and embedded derivative financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments as of September 30, 2021 and December 31, 2020:
September 30, 2021
Fair Value		Valuation
Technique		Unobservable
Input		Range
(Weighted Average)
 (Dollars In Millions)   
Assets:    
Commercial mortgage-backed securities$31 Discounted cash flowSpread over treasury
2.12% - 2.29% (2.23%)
Other asset-backed securities458 Liquidation Liquidation value
$97.00 - $99.75 ($98.77)
Discounted cash flowLiquidity premium
0.84% - 2.31% (1.76%)
Paydown Rate
10.03% - 13.15% (11.95%)
Corporate securities1,635 Discounted cash flowSpread over treasury
0.00% - 4.00% (1.46%)
Liabilities:(1)
    
Embedded derivatives - GLWB(2)
$535 Actuarial cash flow modelMortality
88% to 100% of
Ruark 2015 ALB Table

   LapsePL-RBA Predictive Model
   UtilizationPL-RBA Predictive Model
   Nonperformance risk
0.18% - 0.81%
Embedded derivative - FIA570 Actuarial cash flow modelExpenses
$214 per policy
   Withdrawal rate
0.4% - 2.4% prior to age 72, 100% of the RMD for ages 72+ or WB withdrawal rate. Assume underutilized RMD for non-WB policies ages 72-88.
   Mortality
88% to 100% of Ruark 2015 ALB table
   Lapse
0.2% - 50.0%, depending on duration/surrender charge period
Dynamically adjusted for WB moneyness and projected market rates vs credited rates
   Nonperformance risk
0.18% - 0.81%
Embedded derivative - IUL251 Actuarial cash flow modelMortality
43% - 110% of base table (90%
of 2015 VBT Primary Tables adjusted for 5.5 years of 2020 SOA HMI)
94% - 248% of duration 8 point in scale 2015 VBT Primary Tables, depending on type of business
   Lapse
0.375% - 7.5%, depending on
issue age and duration,
smoking class, and level of funding
   Nonperformance risk
0.18% - 0.81%
(1) Excludes modified coinsurance arrangements.
(2) Fair value is presented as a net liability.
                                                        
December 31, 2020Fair ValueValuation
Technique		Unobservable
Input		Range
(Weighted Average)
 (Dollars In Millions)   
Assets:    
Commercial mortgage-backed securities$32 Discounted cash flowSpread over treasury
2.78% - 2.92% (2.87%)
Other asset-backed securities435 Liquidation Liquidation value
$95 - $97 ($96.19)
Discounted cash flowLiquidity premium
0.54% - 2.3% (1.63%)
Paydown Rate
8.79% - 12.49% (11.39%)
Corporate securities1,432 Discounted cash flowSpread over treasury
0.00% - 4.75% (1.89%)
Liabilities:(1)
    
Embedded derivatives - GLWB(2)
$822 Actuarial cash flow modelMortality
88% to 100% of
Ruark 2015 ALB Table
   LapsePL-RBA Predictive Model
   UtilizationPL-RBA Predictive Model
   Nonperformance risk
0.19% - 0.81%
Embedded derivative - FIA573 Actuarial cash flow modelExpenses
$207 per policy
   Withdrawal rate
0.4% - 2.4% prior to age 70 RMD for
ages 70+
or WB withdrawal rate
Assume underutilized RMD
for non-WB policies age 72-88
   Mortality
88% to 100% or Ruark 2015 ALB table
   Lapse
0.2% - 50.0%, depending on duration/surrender charge period
   Nonperformance risk
0.19% - 0.81%
Embedded derivative - IUL201 Actuarial cash flow modelMortality
36% - 161% of 2015
VBT Primary Tables
94% - 248% of duration
8 point in scale 2015
VBT Primary Tables,
depending on type of business
   Lapse
0.375% - 10%, depending on duration/distribution channel and smoking class
   Nonperformance risk
0.19% - 0.81%
(1) Excludes modified coinsurance arrangements.
(2) Fair value is presented as a net liability.
The charts above exclude Level 3 financial instruments that are valued using broker quotes and for which book value approximates fair value. Unobservable inputs were weighted by the relative fair value of instruments, except for other asset-backed securities which were weighted by the relative par amounts.
The Company has considered all reasonably available quantitative inputs as of September 30, 2021 and December 31, 2020, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $206 million and $116 million of financial instruments being classified as Level 3 as of September 30, 2021 and December 31, 2020, of which $148 million and $88 million were other asset-backed securities, $12 million and $17 million were corporate securities and $46 million and $11 million were equity securities, respectively.
In certain cases the Company has determined that book value materially approximates fair value. As of September 30, 2021 and December 31, 2020, the Company held $112 million and $90 million of financial instruments, respectively, where book value approximates fair value which was predominantly FHLB stock.
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended September 30, 2021, for which the Company has used significant unobservable inputs (Level 3):
Total
Realized and Unrealized
Gains		Total
Realized and Unrealized
Losses		Total Gains (losses) included in Operations related to Instruments still held at
the 
Reporting
Date
Beginning
Balance		Included
in
Operations		Included
in
Other
Comprehensive
Income (Loss)		Included
in
Operations		Included
in
Other
Comprehensive
Income (Loss)		PurchasesSalesIssuancesSettlementsTransfers
in/out of
Level 3		OtherEnding
Balance
 (Dollars In Millions)
Assets:             
Fixed maturity securities AFS             
Commercial mortgage-backed securities$32 $— $— $— $(1)$— $— $— $— $— $— $31 $— 
Other asset-backed securities451 — — — (2)6 — — — 3 — 458 — 
Corporate securities1,553 — 8 — (7)79 (35)— — 37 — 1,635 — 
Total fixed maturity securities - available-for-sale2,036 — 8 — (10)85 (35)— — 40 — 2,124 — 
Fixed maturity securities - trading             
Other asset-backed securities97 — — — — 3 (6)— — — — 94 — 
Other government-related securities16 — — — (1)— — — — — 1 16 — 
Corporate securities11 — — — — 4 — — — — — 15 — 
Total fixed maturity securities - trading124 — — — (1)7 (6)— — — 1 125 — 
Total fixed maturity securities2,160 — 8 — (11)92 (41)— — 40 1 2,249 — 
Equity securities112 — — — — 54 (8)— — — — 158 — 
Other long-term investments(1)
307 98 — (106)— — — — — — — 299 (8)
Total investments2,579 98 8 (106)(11)146 (49)— — 40 1 2,706 (8)
Total assets measured at fair value on a recurring basis$2,579 $98 $8 $(106)$(11)$146 $(49)$— $— $40 $1 $2,706 $(8)
Liabilities:             
Annuity account balances(2)
$65 $— $— $(1)$— $— $— $2 $— $— $64 $— 
Other liabilities(1)
2,016 197 — (129)— — — — — — — 1,948 68 
Total liabilities measured at fair value on a recurring basis$2,081 $197 $— $(130)$— $— $— $— $2 $— $— $2,012 $68 
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
For the three months ended September 30, 2021, there were $59 million of securities transferred into Level 3 from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods but were priced internally using significant unobservable inputs where market observable inputs were not available as of September 30, 2021.
For the three months ended September 30, 2021, there were $19 million of securities transferred into Level 2 from Level 3.
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended September 30, 2020, for which the Company has used significant unobservable inputs (Level 3):
Total
Realized and Unrealized
Gains		Total
Realized and Unrealized
Losses		Total Gains (losses) included in Operations related to Instruments still held at
the 
Reporting
Date
Beginning
Balance		Included
in
Operations		Included
in
Other
Comprehensive
Income (Loss)		Included
in
Operations		Included
in
Other
Comprehensive
Income (Loss)		PurchasesSalesIssuancesSettlementsTransfers
in/out of
Level 3		OtherEnding
Balance
 (Dollars In Millions)
Assets:             
Fixed maturity securities AFS             
Commercial mortgage-backed securities$10 $— $1 $— $— $— $— $— $— $— $— $11 $— 
Other asset-backed securities431 — 4 — (1)— (1)— — — 433 — 
Corporate securities1,366 — 28 — (3)62 (125)— — 31 (1)1,358 — 
Total fixed maturity securities - available-for-sale1,807 — 33 — (4)62 (126)— — 31 (1)1,802 — 
Fixed maturity securities - trading             
Other asset-backed securities60 3 — — — 1 (2)— — — — 62 3 
Corporate securities13 — — — — 5 — — — — — 18 — 
Total fixed maturity securities - trading73 3 — — — 6 (2)— — — — 80 3 
Total fixed maturity securities1,880 3 33 — (4)68 (128)— — 31 (1)1,882 3 
Equity securities78 2 — — — 7 — — — — — 87 1 
Other long-term investments(1)
337 127 — (73)— — — — — — — 391 54 
Total investments2,295 132 33 (73)(4)75 (128)— — 31 (1)2,360 58 
Total assets measured at fair value on a recurring basis$2,295 $132 $33 $(73)$(4)$75 $(128)$— $— $31 $(1)$2,360 $58 
Liabilities:             
Annuity account balances(2)
$68 $— $— $(1)$— $— $— $— $1 $— $— $68 $— 
Other liabilities(1)
2,423 301 — (249)— — — — — — — 2,371 (52)
Total liabilities measured at fair value on a recurring basis$2,491 $301 $— $(250)$— $— $— $— $1 $— $— $2,439 $(52)
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
For the three months ended September 30, 2020, there were $31 million of securities transferred into Level 3 from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods but were priced internally using significant unobservable inputs where market observable inputs were not available as of September 30, 2020.
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the nine months ended September 30, 2021, for which the Company has used significant unobservable inputs (Level 3):
Total
Realized and Unrealized
Gains		Total
Realized and Unrealized
Losses		Total Gains (losses) included in Operations related to Instruments still held at
the 
Reporting
Date
Beginning
Balance		Included
 in
Operations		Included 
in
Other
Comprehensive
Income (Loss)		Included 
in
Operations		Included 
in
Other
Comprehensive
Income (Loss)		PurchasesSalesIssuancesSettlementsTransfers
in/out of
Level 3		OtherEnding
Balance
 (Dollars In Millions)
Assets:             
Fixed maturity securities AFS            
Commercial mortgage-backed securities$32 $— $— $— $(1)$— $— $— $— $— $— $31 — 
Other asset-backed securities435 — 5 — (1)6 (2)— — 14 1 458 — 
Corporate securities1,432 — 7 — (21)240 (168)— — 146 (1)1,635 — 
Total fixed maturity securities-AFS1,899 — 12 — (23)246 (170)— — 160 — 2,124 — 
Fixed maturity securities - trading            
Other asset-backed securities71 — 2 — 1 14 (10)— — 16 — 94 — 
Other government-related securities— — — — — — — — — 16 — 16 — 
Corporate securities18 — — — (1)4 (1)— — (5)— 15 — 
Total fixed maturity securities - trading89 — 2 — — 18 (11)— — 27 — 125 — 
Total fixed maturity securities1,988 — 14 — (23)264 (181)— — 187 — 2,249 — 
Equity securities101 — — — — 94 (32)— — (5)— 158 — 
Other long-term investments(1)
298 169 — (168)— — — — — — — 299 1 
Total investments2,387 169 14 (168)(23)358 (213)— — 182 — 2,706 1 
Total assets measured at fair value on a recurring basis$2,387 $169 $14 $(168)$(23)$358 $(213)$— $— $182 $— $2,706 $1 
Liabilities:             
Annuity account balances(2)
$67 $— $— $(2)$— $— $— $— $5 $— $— $64 $— 
Other liabilities(1)
2,239 784 — (493)— — — — — — — 1,948 291 
Total liabilities measured at fair value on a recurring basis$2,306 $784 $— $(495)$— $— $— $— $5 $— $— $2,012 $291 
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
For the nine months ended September 30, 2021, there were $199 million of securities transferred into Level 3. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods but were priced internally using significant unobservable inputs where market observable inputs were not available as of September 30, 2021.
For the nine months ended September 30, 2021, there were $17 million of securities transferred into Level 2 from Level 3.
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the nine months ended September 30, 2020, for which the Company has used significant unobservable inputs (Level 3):
Total
Realized and Unrealized
Gains		Total
Realized and Unrealized
Losses		Total Gains (losses) included in Operations related to Instruments still held at
the 
Reporting
Date
Beginning
Balance		Included
 in
Operations		Included 
in
Other
Comprehensive
Income (Loss)		Included 
in
Operations		Included 
in
Other
Comprehensive
Income (Loss)		PurchasesSalesIssuancesSettlementsTransfers
in/out of
Level 3		OtherEnding
Balance
 (Dollars In Millions)
Assets:             
Fixed maturity securities AFS             
Commercial mortgage-backed securities$10 $— $2 $— $(1)$— $— $— $— $— $— $11 — 
Other asset-backed securities421 — 4 — (13)— (1)— — 22 — 433 — 
Corporate securities1,374 — 113 — (82)365 (498)— — 88 (2)1,358 — 
Total fixed maturity securities - AFS1,805 — 119 — (96)365 (499)— — 110 (2)1,802 — 
Fixed maturity securities - trading             
Other asset-backed securities65 4 — (8)— 4 (2)— — (1)— 62 3 
Corporate securities11 1 — — — 8 (2)— — — — 18 — 
Total fixed maturity securities - trading76 5 — (8)— 12 (4)— — (1)— 80 3 
Total fixed maturity securities1,881 5 119 (8)(96)377 (503)— — 109 (2)1,882 3 
Equity securities74 1 — (1)— 8 — — — 5 — 87 1 
Other long-term investments(1)
292 228 — (166)— 41 — — (4)— — 391 58 
Total investments2,247 234 119 (175)(96)426 (503)— (4)114 (2)2,360 62 
Total assets measured at fair value on a recurring basis$2,247 $234 $119 $(175)$(96)$426 $(503)$— $(4)$114 $(2)$2,360 $62 
Liabilities:             
Annuity account balances(2)
$70 $— $— $(2)$— $— $— $— $4 $— $— $68 $— 
Other liabilities(1)
1,332 649 — (1,688)— — — — — — — 2,371 (1,039)
Total liabilities measured at fair value on a recurring basis$1,402 $649 $— $(1,690)$— $— $— $— $4 $— $— $2,439 $(1,039)
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
For the nine months ended September 30, 2020, there were $115 million of securities transferred into Level 3. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods but were priced internally using significant unobservable inputs where market observable inputs were not available as of September 30, 2020.
For the nine months ended September 30, 2020, there were $1 million securities transferred into Level 2 from Level 3.
Total realized and unrealized gains (losses) on Level 3 assets and liabilities are reported in either realized gains (losses) within the consolidated condensed statements of income or other comprehensive income (loss) within shareowner’s equity based on the appropriate accounting treatment for the item.
Purchases, sales, issuances, and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily relates to purchases and sales of fixed maturity securities and issuances and settlements of fixed indexed annuities.
The amount of total gains (losses) for assets and liabilities still held as of the reporting date primarily represents changes in fair value of trading securities and certain derivatives that exist as of the reporting date and the change in fair value of fixed indexed annuities.
Estimated Fair Value of Financial Instruments
The carrying amounts and estimated fair values of the Company’s financial instruments as of the periods shown below are as follows:
As of
September 30, 2021December 31, 2020
Fair Value
Level		Carrying
Amounts		Fair ValuesCarrying
Amounts		Fair Values
  (Dollars In Millions)
Assets:     
Commercial mortgage loans(1)
3$10,506 $11,153 $10,006 $10,788 
Policy loans31,543 1,543 1,593 1,593 
  Other long-term investments(2)
21,412 1,487 1,186 1,283 
Liabilities:     
Stable value product account balances3$8,237 $8,373 $6,056 $6,231 
Future policy benefits and claims(3)
31,482 1,528 1,580 1,603 
Other policyholders’ funds(4)
399 106 102 108 
Debt:(5)
     
Subordinated funding obligations
3$110 $116 $110 $121 
Except as noted below, fair values were estimated using quoted market prices.
(1) The carrying amount is net of allowance for credit losses.
(2) Other long-term investments represents a Modco receivable, which is related to invested assets such as fixed income and structured securities, which are legally owned by the ceding company. The fair value is determined in a manner consistent with other similar invested assets held by the Company.
(3) Single premium immediate annuity and structured annuities without life contingencies.
(4) Supplementary contracts without life contingencies.
(5) Excludes immaterial capital lease obligations.