FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2021

Schedule of assets and liabilities measured at fair value on a recurring basis

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, 2021:


	Measurement
	Category	Level 1		Level 2		Level 3		Total

	(Dollars In Millions)
Assets:
Fixed maturity securities — AFS Residential mortgage-backed securities	4	$	—	$	6,765	$	40	$	6,805
Commercial mortgage-backed securities	4		—		2,127		180		2,307
Other asset-backed securities	4		—		905		515		1,420
U.S. government-related securities	4		411		397		—		808
State, municipalities, and political subdivisions	4		—		4,156		—		4,156
Other government-related securities	4		—		753		—		753
Corporate securities	4		—		52,117		1,582		53,699
Redeemable preferred stocks	4		307		—		—		307
Total fixed maturity securities — AFS			718		67,220		2,317		70,255
Fixed maturity securities — trading Residential mortgage-backed securities	3		—		133		—		133
Commercial mortgage-backed securities	3		—		209		—		209
Other asset-backed securities	3		—		92		93		185
U.S. government-related securities	3		27		6		—		33
State, municipalities, and political subdivisions	3		—		286		—		286
Other government-related securities	3		—		48		16		64
Corporate securities	3		—		1,867		8		1,875
Redeemable preferred stocks	3		8		—		—		8
Total fixed maturity securities — trading			35		2,641		117		2,793
Total fixed maturity securities		$	753	$	69,861	$	2,434	$	73,048
Equity securities	3		633		40		155		828
Other long-term investments(1)	3&4		59		1,093		295		1,447
Short-term investments	3		683		179		—		862
Total investments			2,128		71,173		2,884		76,185
Cash	3		390		—		—		390
Assets related to separate accounts
Variable annuity	3		13,648		—		—		13,648
Variable universal life	3		1,982		—		—		1,982
Total assets measured at fair value on a recurring basis		$	18,148	$	71,173	$	2,884	$	92,205
Liabilities:
Annuity account balances(2)	3	$	—	$	—	$	63	$	63
Other liabilities(1)	3&4		20		820		1,939		2,779
Total liabilities measured at fair value on a recurring basis		$	20	$	820	$	2,002	$	2,842

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.

5. FAIR VALUE OF FINANCIAL INSTRUMENTS – (Continued)

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 1		Level 2		Level 3		Total

	(Recast)
	(Dollars In Millions)
Assets:
Fixed maturity securities — AFS Residential mortgage-backed securities	4	$	—	$	6,668	$	—	$	6,668
Commercial mortgage-backed securities	4		—		2,502		32		2,534
Other asset-backed securities	4		—		1,143		435		1,578
U.S. government-related securities	4		1,014		501		—		1,515
State, municipalities, and political subdivisions	4		—		4,420		—		4,420
Other government-related securities	4		—		717		—		717
Corporate securities	4		—		50,675		1,432		52,107
Redeemable preferred stocks	4		125		69		—		194
Total fixed maturity securities — AFS			1,139		66,695		1,899		69,733
Fixed maturity securities — trading Residential mortgage-backed securities	3		—		209		—		209
Commercial mortgage-backed securities	3		—		214		—		214
Other asset-backed securities	3		—		92		71		163
U.S. government-related securities	3		79		12		—		91
State, municipalities, and political subdivisions	3		—		282		—		282
Other government-related securities	3		—		30		—		30
Corporate securities	3		—		1,842		18		1,860
Redeemable preferred stocks	3		13		—		—		13
Total fixed maturity securities — trading			92		2,681		89		2,862
Total fixed maturity securities			1,231		69,376		1,988		72,595
Equity securities	3		566		—		101		667
Other long-term investments(1)	3&4		52		1,285		298		1,635
Short-term investments	3		403		59		—		462
Total investments			2,252		70,720		2,387		75,359
Cash	3		656		—		—		656
Assets related to separate accounts Variable annuity	3		12,378		—		—		12,378
Variable universal life	3		1,287		—		—		1,287
Total assets measured at fair value on a recurring basis		$	16,573	$	70,720	$	2,387	$	89,680
Liabilities:
Annuity account balances(2)	3	$	—	$	—	$	67	$	67
Other liabilities(1)	3&4		14		867		2,239		3,120
Total liabilities measured at fair value on a recurring basis		$	14	$	867	$	2,306	$	3,187

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.

Schedule of the valuation method for material financial instruments included in level 3

The following table presents the valuation method for material financial instruments included in Level 3 as of December 31, 2021, as well as the unobservable inputs used in the valuation of those financial instruments:


	Fair Value
	As of
	December 31,		Valuation	Unobservable	Range
	2021		Technique	Input	(Weighted Average)
	(Dollars In
	Millions)
Assets:
Residential mortgage-backed securities	$	40	Trade Price	Spread	1.03% - 1.10% (1.07%)
Commercial mortgage-backed securities		180	Discounted cash flow	Spread over treasury	1.04% - 2.47% (1.30%)
Other asset-backed securities		436	Liquidation	Liquidation value	$98.63 - $99.75 ($99.07)
			Discounted cash flow	Liquidity premium	0.11% - 2.14% (1.54%)
				Paydown Rate	11.20% - 13.41% (12.30%)
				Liquidation value	$60.00 - 113.88% (112.92%)
Corporate securities		1,588	Discounted cash flow	Spread over treasury	0.00% - 4.00% (1.50%)
Liabilities:(1)(2)
Embedded derivatives — GLWB	$	475	Actuarial cash flow model	Mortality	88% to 100% of Ruark 2015 ALB Table
				Lapse	PL-RBA Predictive Model
				Utilization	PL-RBA Predictive Model
				Nonperformance risk	0.19% - 0.82%
Embedded derivative — FIA		595	Actuarial cash flow model	Expenses	$214 per policy
				Withdrawal rate	0.4% - 2.4% prior to age 70 RMD for ages 70+ or WB withdrawal rate Assume underutilized RMD for nonWB 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	0.19% - 0.82%
Embedded derivative — IUL	$	269	Actuarial cash flow model	Mortality	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 duration/distribution channel and smoking class
				Nonperformance risk	0.19% - 0.82%

(1)	Excludes modified coinsurance arrangements.

(2)	Fair value is presented as a net liability.

The following table presents the valuation method for material financial instruments included in Level 3, as of December 31, 2020, as well as the unobservable inputs used in the valuation of those financial instruments:


	Fair Value
	As of
	December 31,		Valuation	Unobservable	Range
	2020		Technique	Input	(Weighted Average)
	(Recast)
	(Dollars In
	Millions)
Assets:
Commercial mortgage-backed securities	$	32	Discounted cash flow	Spread over treasury	2.78% - 2.92% (2.87%)
Other asset-backed securities		435	Liquidation	Liquidation value	$95.00 - $97.00 ($96.19)
			Discounted cash flow	Liquidity premium	0.54% - 2.30% (1.63%)
				Paydown Rate	8.79% - 12.49% (11.39%)
Corporate securities		1,432	Discounted cash flow	Spread over treasury	0.00% - 4.75% (1.89%)
Liabilities:(1)(2)
Embedded derivatives — GLWB	$	822	Actuarial cash flow model	Mortality	88% to 100% of Ruark 2015 ALB Table
				Lapse	PL RBA Predictive Model
				Utilization	PL RBA Predictive Model
				Nonperformance risk	0.19% - 0.81%
Embedded derivative — FIA		573	Actuarial cash flow model	Expenses	$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% 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	0.19% - 0.81%
Embedded derivative — IUL	$	201	Actuarial cash flow model	Mortality	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.

Schedule of reconciliation of the beginning and ending balances for fair value measurements, for which the Company has used significant unobservable inputs (Level 3)

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2021, for which the Company has used significant unobservable inputs (Level 3):


			Total				Total
			Realized and Unrealized				Realized and Unrealized
			Gains				Losses
					Included in				Included in
					Other				Other
	Beginning		Included in		Comprehensive		Included in		Comprehensive
	Balance		Net Income		Income		Net Income		Income

	(Dollars In Millions)
Assets:
Fixed maturity securities AFS
Residential mortgage-backed securities	$	—	$	—	$	—	$	—	$	—
Commercial mortgage-backed securities		32		—		—		—		(2)
Other asset-backed securities		435		—		3		—		(1)
Corporate securities		1,432		—		11		—		(34)
Total fixed maturity securities — AFS		1,899		—		14		—		(37)
Fixed maturity securities — trading
Other asset-backed securities		71		—		3		—		—
Other government-related securities		—		—		—		—		—
Corporate securities		18		—		—		—		(1)
Total fixed maturity securities — trading		89		—		3		—		(1)
Total fixed maturity securities		1,988		—		17		—		(38)
Equity securities		101		—		—		—		—
Other long-term investments(1)		298		185		—		(188)		—
Total investments		2,387		185		17		(188)		(38)
Total assets measured at fair value on a recurring basis	$	2,387	$	185	$	17	$	(188)	$	(38)
Liabilities:
Annuity account balances(2)	$	67	$	—	$	—	$	(4)	$	—
Other liabilities(1)		2,239		877		—		(577)		—
Total liabilities measured at fair value on a recurring basis	$	2,306	$	877	$	—	$	(581)	$	—

(1)	Represents certain freestanding and embedded derivatives.

(2)	Represents liabilities related to fixed indexed annuities.


															Total Gains
															(losses)
															included in
															Net Income
															Related to
															Instruments
									Transfers						Still Held at
									in/out of				Ending		the Reporting
	Purchases		Sales		Issuances		Settlements		Level 3		Other		Balance		Date

	(Dollars In Millions)
Assets:
Fixed maturity securities AFS
Residential mortgage-backed securities	$	40	$	—	$	—	$	—	$	—	$	—	$	40	$	—
Commercial mortgage-backed securities		—		—		—		—		150		—		180		—
Other asset-backed securities		67		(4)		—		—		14		1		515		—
Corporate securities		274		(212)		—		—		112		(1)		1,582		—
Total fixed maturity securities — AFS		381		(216)		—		—		276		—		2,317		—
Fixed maturity securities — trading
Other asset-backed securities		22		(19)		—		—		16		—		93		—
Other government-related securities		—		—		—		—		16		—		16		—
Corporate securities		2		(6)		—		—		(5)		—		8		—
Total fixed maturity securities — trading		24		(25)		—		—		27		—		117		—
Total fixed maturity securities		405		(241)		—		—		303		—		2,434		—
Equity securities		91		(32)		—		—		(5)		—		155		—
Other long-term investments(1)		—		—		—		—		—		—		295		(3)
Total investments		496		(273)		—		—		298		—		2,884		(3)
Total assets measured at fair value on a recurring basis	$	496	$	(273)	$	—	$	—	$	298	$	—	$	2,884	$	(3)
Liabilities:
Annuity account balances(2)	$	—	$	—	$	—	$	8	$	—	$	—	$	63	$	—
Other liabilities(1)		—		—		—		—		—		—		1,939		300
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	—	$	8	$	—	$	—	$	2,002	$	300

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2020, for which the Company has used significant unobservable inputs (Level 3):


			Total				Total
			Realized and Unrealized				Realized and Unrealized
			Gains				Losses
					Included in
					Other				Included In
	Beginning		Included in		Comprehensive		Included in		Other Comprehensive
	Balance		Net Income		Income		Net Income		Income

	(Recast)
	(Dollars In Millions)
Assets:
Fixed maturity securities AFS
Commercial mortgage-backed securities	$	10	$	—	$	1	$	—	$	(1)
Other asset-backed securities		421		—		8		—		(13)
Corporate securities		1,374		—		135		—		(83)
Total fixed maturity securities — AFS		1,805		—		144		—		(97)
Fixed maturity securities — trading
Other asset-backed securities		65		6		—		(9)		—
Corporate securities		11		1		—		—		—
Total fixed maturity securities — trading		76		7		—		(9)		—
Total fixed maturity securities		1,881		7		144		(9)		(97)
Equity securities		73		1		—		—		—
Other long-term investments(1)		292		404		—		(300)		—
Total investments		2,246		412		144		(309)		(97)
Total assets measured at fair value on a recurring basis	$	2,246	$	412	$	144	$	(309)	$	(97)
Liabilities:
Annuity account balances(2)	$	70	$	—	$	—	$	(3)	$	—
Other liabilities(1)		1,332		926		—		(1,833)		—
Total liabilities measured at fair value on a recurring basis	$	1,402	$	926	$	—	$	(1,836)	$	—

(1)	Represents certain freestanding and embedded derivatives.

(2)	Represents liabilities related to fixed indexed annuities.


															Total Gains
															(losses)
															included in
															Net Income
															Related to
															Instruments
									Transfers						Still Held at
									in/out of				Ending		the Reporting
	Purchases		Sales		Issuances		Settlements		Level 3		Other		Balance		Date

	(Recast)
	(Dollars In Millions)
Assets:
Fixed maturity securities AFS
Commercial mortgage-backed securities	$	—	$	—	$	—	$	—	$	22	$	—	$	32	$	—
Other asset-backed securities		—		(2)		—		—		22		(1)		435		—
Corporate securities		436		(562)		—		—		135		(3)		1,432		—
Total fixed maturity securities — AFS		436		(564)		—		—		179		(4)		1,899		—
Fixed maturity securities — trading
Other asset-backed securities		12		(2)		—		—		(1)		—		71		2
Corporate securities		8		(2)		—		—		—		—		18		—
Total fixed maturity securities — trading		20		(4)		—		—		(1)		—		89		2
Total fixed maturity securities		456		(568)		—		—		178		(4)		1,988		2
Equity securities		27		(5)		—		—		5		—		101		—
Other long-term investments(1)		41		(135)		—		(4)		—		—		298		81
Total investments		524		(708)		—		(4)		183		(4)		2,387		83
Total assets measured at fair value on a recurring basis	$	524	$	(708)	$	—	$	(4)	$	183	$	(4)	$	2,387	$	83
Liabilities:
Annuity account balances(2)	$	—	$	—	$	—	$	6	$	—	$	—	$	67	$	—
Other liabilities(1)		—		—		—		—		—		—		2,239		(906)
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	—	$	6	$	—	$	—	$	2,306	$	(906)

Schedule of the carrying amounts and estimated fair value of the Company's financial instruments

The carrying amounts and estimated fair values of the Company’s financial instruments that are not reported at fair value as of the periods shown below are as follows:


		As of December 31,
		2021				2020
	Fair Value	Carrying				Carrying
	Level	Amounts		Fair Values		Amounts		Fair Values

	(Dollars In Millions)
Assets:
Commercial mortgage loans(1)	3	$	10,863	$	11,386	$	10,006	$	10,788
Policy loans	3		1,527		1,527		1,593		1,593
Other long-term investments(2)	3		1,930		1,990		1,186		1,283
Liabilities:
Stable value product account balances	3	$	8,526	$	8,598	$	6,056	$	6,231
Future policy benefits and claims(3)	3		1,457		1,504		1,580		1,603
Other policyholders' funds(4)	3		102		108		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. In addition, it includes the cash surrender value of the Company’s COLI policy.

(3)	Single premium immediate annuity without life contingencies.

(4)	Supplementary contracts without life contingencies.

(5)	Excludes immaterial capital lease obligations.