Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2022

Fair Value of Financial Instruments [Abstract]

14. Fair Value of Financial Instruments

The carrying values and estimated fair values of our financial instruments (in millions) were as follows:



	As of September 30, 2022						As of December 31, 2021
	Carrying			Fair			Carrying			Fair
	Value			Value			Value			Value
Assets
Fixed maturity AFS securities	$	97,572		$	97,572		$	118,746		$	118,746
Trading securities		3,580			3,580			4,482			4,482
Equity securities		427			427			318			318
Mortgage loans on real estate		18,066			16,426			17,991			18,700
Derivative investments ⁽¹⁾		3,681			3,681			5,437			5,437
Other investments		3,811			3,811			4,284			4,284
Cash and invested cash		1,472			1,472			2,612			2,612
Other assets:
GLB direct embedded derivatives		1,442			1,442			1,963			1,963
GLB ceded embedded derivatives		37			37			56			56
Reinsurance-related embedded derivatives		479			479			-			-
Indexed annuity ceded embedded derivatives		456			456			528			528
Separate account assets		137,295			137,295			182,583			182,583

Liabilities
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(3,194	)		(3,194	)		(6,131	)		(6,131	)
Other contract holder funds:
Remaining guaranteed interest and similar contracts		(1,739	)		(1,739	)		(1,788	)		(1,788	)
Account values of certain investment contracts		(42,922	)		(35,140	)		(41,194	)		(47,862	)
Short-term debt		(500	)		(497	)		(300	)		(302	)
Long-term debt		(5,959	)		(4,953	)		(6,325	)		(6,707	)
Reinsurance-related embedded derivatives		-			-			(206	)		(206	)
Other liabilities:
Derivative liabilities⁽¹⁾		(241	)		(241	)		(677	)		(677	)
GLB ceded embedded derivatives		(149	)		(149	)		(182	)		(182	)

⁽¹⁾We have master netting agreements with each of our derivative counterparties, which allow for the netting of our derivative asset and liability positions by counterparty.

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 on our Consolidated Balance Sheets. 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 on Real Estate

The fair value of mortgage loans on real estate, excluding mortgage loans accounted for using the fair value option, is established using a discounted cash flow method based on credit rating, maturity and future income. The 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 fair value for impaired mortgage loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price or the fair value of the collateral if the loan is collateral dependent. The inputs used to measure the fair value of our mortgage loans on real estate, excluding mortgage loans accounted for using the fair value option, are classified as Level 2 within the fair value hierarchy.

Other Investments

The carrying value of our assets classified as other investments, excluding short-term investments, approximates fair value. Other investments includes primarily LPs and other privately held investments that are accounted for using the equity method of accounting and the carrying value is based on our proportional share of the net assets of the LPs. Other investments also includes FHLB stock carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. The inputs used to measure the fair value of our

LPs, other privately held investments and FHLB stock are classified as Level 3 within the fair value hierarchy. The remaining assets in other investments include cash collateral receivables and securities that are not LPs or other privately held investments. The inputs used to measure the fair value of these assets are classified as Level 2 within the fair value hierarchy.

Separate Account Assets

Separate account assets are primarily carried at fair value. A portion of our separate account assets includes LPs, which are accounted for using the equity method of accounting. The carrying value is based on our proportional share of the net assets of the LPs and approximates fair value. The inputs used to measure the fair value of the separate account asset LPs are classified as Level 3 within the fair value hierarchy.

Other Contract Holder Funds

Other contract holder funds include remaining guaranteed interest and similar contracts and account values of certain investment contracts. The fair value for the remaining guaranteed interest and similar contracts is estimated using discounted cash flow calculations as of the balance sheet date. These calculations are based on interest rates currently offered on similar contracts with maturities that are consistent with those remaining for the contracts being valued. As of September 30, 2022, and December 31, 2021, the remaining guaranteed interest and similar contracts carrying value approximated fair value. The fair value of the account values of certain investment contracts is based on their approximate surrender value as of the balance sheet date. The inputs used to measure the fair value of our other contract holder funds are classified as Level 3 within the fair value hierarchy.

Short-Term and Long-Term Debt

The fair value of short-term and long-term debt is based on quoted market prices. The inputs used to measure the fair value of our short-term and long-term debt are classified as Level 2 within the fair value hierarchy.

Fair Value Option

Mortgage loans on real estate, net of allowance for credit losses, as reported on our Consolidated Balance Sheets, includes mortgage loans on real estate for which the fair value option was elected. The fair value option allows us to elect fair value as an alternative measurement for mortgage loans not otherwise reported at fair value. We have made these elections for certain mortgage loans associated with modified coinsurance agreements to help mitigate the inconsistency in earnings that would otherwise result from the use of embedded derivatives included with these loans. Changes in fair value are reflected in realized gain (loss) on our Consolidated Statement of Comprehensive Income (Loss). Changes in fair value due to instrument-specific credit risk are estimated using changes in credit spreads and quality ratings for the period reported. Mortgage loans on real estate for which the fair value option was elected are valued using third-party pricing services. We have procedures in place to review the valuations each quarter to ensure they are reasonable, including utilizing a separate third party to reperform the valuation for a selection of mortgage loans on an annual basis. Due to lack of observable inputs, mortgage loans electing the fair value option are classified as Level 3 within the fair value hierarchy.

The fair value and aggregate contractual principal for mortgage loans on real estate where the fair value option was elected (in millions) were as follows:


	As of		As of
	September 30,		December 31,
	2022		2021
Fair value	$	495	$	739
Aggregate contractual principal		516		742

As of September 30, 2022, and December 31, 2021, no loans for which the fair value option was elected were in non-accrual status, and none were more than 90 days past due and still accruing interest.

Financial Instruments Carried at Fair Value

Short-Term Investments

Short-term investments consist of securities with original maturities of one year or less, but greater than three months, and are included in other investments on our Consolidated Balance Sheets. Securities included in short-term investments are carried at fair value, with valuation methods and inputs consistent with those applied to fixed maturity AFS securities.

We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of September 30, 2022, or December 31, 2021.

‎

The following summarizes our financial instruments carried at fair value (in millions) on a recurring basis by the fair value hierarchy levels:



		As of September 30, 2022
		Quoted
		Prices
		in Active
	Markets for			Significant				Significant
		Identical		Observable				Unobservable				Total
		Assets			Inputs				Inputs			Fair
		(Level 1)			(Level 2)				(Level 3)			Value
Assets
Investments:
Fixed maturity AFS securities:
Corporate bonds		$	-		$	72,433			$	5,013		$	77,446
U.S. government bonds			364			20				-			384
State and municipal bonds			-			5,089				-			5,089
Foreign government bonds			-			304				34			338
RMBS			-			2,038				10			2,048
CMBS			-			1,549				-			1,549
ABS			-			9,256				1,091			10,347
Hybrid and redeemable preferred securities			44			268				59			371
Trading securities			-			2,978				602			3,580
Equity securities			13			246				168			427
Mortgage loans on real estate			-			-				495			495
Derivative investments ⁽¹⁾			-			6,400				636			7,036
Other investments – short-term investments			-			143				-			143
Cash and invested cash			-			1,472				-			1,472
Other assets:
GLB direct embedded derivatives			-			-				1,442			1,442
GLB ceded embedded derivatives			-			-				37			37
Reinsurance-related embedded derivatives			-			479				-			479
Indexed annuity ceded embedded derivatives			-			-				456			456
Separate account assets			420			136,875				-			137,295
Total assets		$	841		$	239,550			$	10,043		$	250,434

Liabilities
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		$	-		$	-			$	(3,194	)	$	(3,194	)
Other liabilities:
Derivative liabilities⁽¹⁾			-			(2,965	)			(631	)		(3,596	)
GLB ceded embedded derivatives			-			-				(149	)		(149	)
Total liabilities		$	-		$	(2,965	)		$	(3,974	)	$	(6,939	)

‎



		As of December 31, 2021
		Quoted
		Prices
		in Active
	Markets for			Significant				Significant
		Identical		Observable				Unobservable				Total
		Assets			Inputs				Inputs			Fair
		(Level 1)			(Level 2)				(Level 3)			Value
Assets
Investments:
Fixed maturity AFS securities:
Corporate bonds		$	-		$	92,400			$	5,720		$	98,120
U.S. government bonds			428			5				-			433
State and municipal bonds			-			6,621				-			6,621
Foreign government bonds			-			391				41			432
RMBS			-			2,521				4			2,525
CMBS			-			1,599				-			1,599
ABS			-			7,642				870			8,512
Hybrid and redeemable preferred securities			54			357				93			504
Trading securities			32			3,622				828			4,482
Equity securities			7			216				95			318
Mortgage loans on real estate			-			-				739			739
Derivative investments ⁽¹⁾			-			7,597				149			7,746
Other investments – short-term investments			-			154				-			154
Cash and invested cash			-			2,612				-			2,612
Other assets:
GLB direct embedded derivatives			-			-				1,963			1,963
GLB ceded embedded derivatives			-			-				56			56
Indexed annuity ceded embedded derivatives			-			-				528			528
Separate account assets			646			181,929				-			182,575
Total assets		$	1,167		$	307,666			$	11,086		$	319,919

Liabilities
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		$	-		$	-			$	(6,131	)	$	(6,131	)
Reinsurance-related embedded derivatives			-			(206	)			-			(206	)
Other liabilities:
Derivative liabilities⁽¹⁾			-			(2,858	)			(128	)		(2,986	)
GLB ceded embedded derivatives			-			-				(182	)		(182	)
Total liabilities		$	-		$	(3,064	)		$	(6,441	)	$	(9,505	)

⁽¹⁾Derivative investment assets and liabilities are presented within the fair value hierarchy on a gross basis by derivative type and not on a master netting basis by counterparty.

‎

The following summarizes changes to our financial instruments carried at fair value (in millions) and classified within Level 3 of the fair value hierarchy. This summary excludes any effect of amortization of DAC, VOBA, DSI and DFEL. 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.



	For the Three Months Ended September 30, 2022
							Gains		Issuances,				Transfers
				Items			(Losses)			Sales,			Into or
				Included			in		Maturities,				Out
	Beginning			in			OCI		Settlements,				of			Ending
	Fair			Net			and			Calls,			Level 3,			Fair
	Value			Income			Other ⁽¹⁾			Net			Net			Value
Investments: ⁽²⁾
Fixed maturity AFS securities:
Corporate bonds	$	5,476		$	1		$	(513	)	$	65		$	(16	)	$	5,013
Foreign government bonds		37			-			(3	)		-			-			34
RMBS		1			-			-			9			-			10
CMBS		-			-			-			-			-			-
ABS		1,153			-			(38	)		123			(147	)		1,091
Hybrid and redeemable preferred
securities		104			(2	)		(37	)		(6	)		-			59
Trading securities		620			(24	)		-			3			3			602
Equity securities		145			24			-			(1	)		-			168
Mortgage loans on real estate		528			(1	)		(4	)		(28	)		-			495
Derivative investments		3			3			-			-			(1	)		5
Other assets: ⁽³⁾
GLB direct embedded derivatives		1,400			42			-			-			-			1,442
GLB ceded embedded derivatives		41			(4	)		-			-			-			37
Indexed annuity ceded embedded derivatives		440			(47	)		-			63			-			456
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives ⁽³⁾		(3,366	)		394			-			(222	)		-			(3,194	)
Other liabilities – GLB ceded embedded
derivatives ⁽³⁾		(136	)		(13	)		-			-			-			(149	)
Total, net	$	6,446		$	373		$	(595	)	$	6		$	(161	)	$	6,069

‎



	For the Three Months Ended September 30, 2021
							Gains		Issuances,				Transfers
				Items			(Losses)			Sales,			Into or
				Included			in		Maturities,				Out
	Beginning			in			OCI		Settlements,				of			Ending
	Fair			Net			and			Calls,			Level 3,			Fair
	Value			Income			Other ⁽¹⁾			Net			Net			Value
Investments: ⁽²⁾
Fixed maturity AFS securities:
Corporate bonds	$	5,429		$	1		$	(88	)	$	55		$	(25	)	$	5,372
Foreign government bonds		43			-			(3	)		66			-			106
RMBS		1			-			-			-			-			1
CMBS		9			-			-			-			(8	)		1
ABS		630			-			(2	)		144			(38	)		734
Hybrid and redeemable preferred
securities		102			-			6			(27	)		-			81
Trading securities		630			3			-			(33	)		-			600
Equity securities		82			5			-			-			-			87
Mortgage loans on real estate		818			4			3			(33	)		-			792
Derivative investments		1			-			-			-			-			1
Other assets: ⁽³⁾
GLB direct embedded derivatives		1,767			(69	)		-			-			-			1,698
GLB ceded embedded derivatives		53			2			-			-			-			55
Indexed annuity ceded embedded derivatives		-			(14	)		-			(6	)		515			495
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives ⁽³⁾		-			47			-			86			(4,937	)		(4,804	)
Other liabilities – GLB ceded embedded
derivatives ⁽³⁾		(152	)		6			-			-			-			(146	)
Total, net	$	9,413		$	(15	)	$	(84	)	$	252		$	(4,493	)	$	5,073

‎


	For the Nine Months Ended September 30, 2022
							Gains		Issuances,				Transfers
				Items			(Losses)		Sales,				Into or
				Included			in		Maturities,				Out
	Beginning			in			OCI		Settlements,				of			Ending
	Fair			Net			and			Calls,			Level 3,			Fair
	Value			Income			Other ⁽¹⁾			Net			Net			Value
Investments: ⁽²⁾
Fixed maturity AFS securities:
Corporate bonds	$	5,720		$	2		$	(1,523	)	$	716		$	98		$	5,013
Foreign government bonds		41			-			(7	)		-			-			34
RMBS		4			-			-			21			(15	)		10
CMBS		-			-			-			17			(17	)		-
ABS		870			-			(98	)		576			(257	)		1,091
Hybrid and redeemable preferred
securities		93			(2	)		(26	)		(6	)		-			59
Trading securities		828			(82	)		-			(143	)		(1	)		602
Equity securities		95			56			-			17			-			168
Mortgage loans on real estate		739			(16	)		(10	)		(218	)		-			495
Derivative investments		21			5			(6	)		-			(15	)		5
Other assets: ⁽³⁾
GLB direct embedded derivatives		1,963			(521	)		-			-			-			1,442
GLB ceded embedded derivatives		56			(19	)		-			-			-			37
Indexed annuity ceded embedded derivatives		528			(214	)		-			142			-			456
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives ⁽³⁾		(6,131	)		3,244			-			(307	)		-			(3,194	)
Other liabilities – GLB ceded embedded
derivatives ⁽³⁾		(182	)		33			-			-			-			(149	)
Total, net	$	4,645		$	2,486		$	(1,670	)	$	815		$	(207	)	$	6,069

‎


	For the Nine Months Ended September 30, 2021
							Gains		Issuances,				Transfers
				Items			(Losses)		Sales,				Into or
				Included			in		Maturities,				Out
	Beginning			in			OCI		Settlements,				of			Ending
	Fair			Net			and			Calls,			Level 3,			Fair
	Value			Income			Other ⁽¹⁾			Net			Net			Value
Investments: ⁽²⁾
Fixed maturity AFS securities:
Corporate bonds	$	5,121		$	4		$	(139	)	$	440		$	(54	)	$	5,372
U.S. government bonds		5			-			-			(5	)		-			-
Foreign government bonds		74			-			(11	)		80			(37	)		106
RMBS		2			(1	)		-			-			-			1
CMBS		-			1			-			8			(8	)		1
ABS		570			1			(5	)		426			(258	)		734
Hybrid and redeemable preferred
securities		104			-			18			(41	)		-			81
Trading securities		644			2			-			(31	)		(15	)		600
Equity securities		59			31			-			(3	)		-			87
Mortgage loans on real estate		832			11			6			(57	)		-			792
Derivative investments		1,542			1,249			-			(132	)		(2,658	)		1
Other assets: ⁽³⁾
GLB direct embedded derivatives		450			1,248			-			-			-			1,698
GLB ceded embedded derivatives		82			(27	)		-			-			-			55
Indexed annuity ceded embedded derivatives		550			17			-			(60	)		(12	)		495
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives ⁽³⁾		(3,594	)		(579	)		-			136			(767	)		(4,804	)
Other liabilities – GLB ceded embedded
derivatives ⁽³⁾		-			(146	)		-			-			-			(146	)
Total, net	$	6,441		$	1,811		$	(131	)	$	761		$	(3,809	)	$	5,073

⁽¹⁾The changes in fair value of the interest rate swaps are offset by an adjustment to derivative investments (see Note 5).

⁽²⁾Amortization and accretion of premiums and discounts are included in net investment income on our Consolidated Statements of Comprehensive Income (Loss). Gains (losses) from sales, maturities, settlements and calls and credit loss expense are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

⁽³⁾Gains (losses) from the changes in fair value are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

‎

The following provides the components of the items included in issuances, sales, maturities, settlements and calls, net, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, (in millions) as reported above:



	For the Three Months Ended September 30, 2022
	Issuances			Sales			Maturities		Settlements				Calls			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	173		$	(4	)	$	(50	)	$	(52	)	$	(2	)	$	65
RMBS		9			-			-			-			-			9
CMBS		-			-			-			-			-			-
ABS		213			-			-			(90	)		-			123
Hybrid and redeemable preferred
securities		-			-			-			-			(6	)		(6	)
Trading securities		11			-			-			(8	)		-			3
Equity securities		-			(1	)		-			-			-			(1	)
Mortgage loans on real estate		2			-			-			(30	)		-			(28	)
Other assets – indexed annuity ceded
embedded derivatives		37			-			-			26			-			63
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(181	)		-			-			(41	)		-			(222	)
Total, net	$	264		$	(5	)	$	(50	)	$	(195	)	$	(8	)	$	6



	For the Three Months Ended September 30, 2021
	Issuances			Sales			Maturities		Settlements				Calls			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	219		$	(12	)	$	(82	)	$	(70	)	$	-		$	55
Foreign government bonds		66			-			-			-			-			66
ABS		195			-			-			(51	)		-			144
Hybrid and redeemable preferred
securities		3			-			-			-			(30	)		(27	)
Trading securities		3			(15	)		-			(21	)		-			(33	)
Mortgage loans on real estate		8			-			(22	)		(19	)		-			(33	)
Other assets – indexed annuity ceded
embedded derivatives		19			-			-			(25	)		-			(6	)
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(47	)		-			-			133			-			86
Total, net	$	466		$	(27	)	$	(104	)	$	(53	)	$	(30	)	$	252

‎



	For the Nine Months Ended September 30, 2022
	Issuances			Sales			Maturities		Settlements				Calls			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	1,026		$	(4	)	$	(75	)	$	(181	)	$	(50	)	$	716
RMBS		21			-			-			-			-			21
CMBS		17			-			-			-			-			17
ABS		768			-			-			(185	)		(7	)		576
Hybrid and redeemable preferred
securities		-			-			-			-			(6	)		(6	)
Trading securities		282			(220	)		-			(205	)		-			(143	)
Equity securities		26			(9	)		-			-			-			17
Mortgage loans on real estate		14			-			-			(232	)		-			(218	)
Other assets – indexed annuity ceded
embedded derivatives		76			-			-			66			-			142
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(410	)		-			-			103			-			(307	)
Total, net	$	1,820		$	(233	)	$	(75	)	$	(634	)	$	(63	)	$	815


	For the Nine Months Ended September 30, 2021
	Issuances			Sales			Maturities		Settlements				Calls			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	926		$	(29	)	$	(103	)	$	(337	)	$	(17	)	$	440
U.S. government bonds		-			-			(5	)		-			-			(5	)
Foreign government bonds		80			-			-			-			-			80
CMBS		8			-			-			-			-			8
ABS		563			-			-			(137	)		-			426
Hybrid and redeemable preferred
securities		9			(20	)		-			-			(30	)		(41	)
Trading securities		127			(23	)		-			(135	)		-			(31	)
Equity securities		6			(9	)		-			-			-			(3	)
Mortgage loans on real estate		89			(101	)		(26	)		(19	)		-			(57	)
Derivative investments		174			(124	)		(182	)		-			-			(132	)
Other assets – indexed annuity ceded
embedded derivatives		22			-			-			(82	)		-			(60	)
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		(155	)		-			-			291			-			136
Total, net	$	1,849		$	(306	)	$	(316	)	$	(419	)	$	(47	)	$	761

The following summarizes changes in unrealized gains (losses) included in net income, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, related to financial instruments carried at fair value classified within Level 3 that we still held (in millions):



	For the Three						For the Nine
	Months Ended						Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Trading securities	$	(23	)	$	3		$	(81	)	$	3
Equity securities		23			5			57			35
Mortgage loans on real estate		(1	)		4			(16	)		12
Derivative investments		2			-			5			-
GLB embedded derivatives		237			140			76			1,854
Embedded derivatives – indexed annuity
and IUL contracts		(55	)		(36	)		4			22
Total, net⁽¹⁾	$	183		$	116		$	45		$	1,926

⁽¹⁾Included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).

The following summarizes changes in unrealized gains (losses) included in OCI, net of tax, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, related to financial instruments carried at fair value classified within Level 3 that we still held (in millions):



	For the Three						For the Nine
	Months Ended						Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Fixed maturity AFS securities:
Corporate bonds	$	(519	)	$	(82	)	$	(1,532	)	$	(139	)
Foreign government bonds		(2	)		(3	)		(7	)		(11	)
ABS		(39	)		(1	)		(101	)		(5	)
Hybrid and redeemable preferred
securities		(38	)		6			(26	)		19
Mortgage loans on real estate		(4	)		3			(10	)		5
Total, net	$	(602	)	$	(77	)	$	(1,676	)	$	(131	)

‎

The following provides the components of the transfers into and out of Level 3 (in millions) as reported above:



	For the Three								For the Three
	Months Ended								Months Ended
	September 30, 2022								September 30, 2021
	Transfers		Transfers						Transfers			Transfers
	Into		Out of						Into			Out of
	Level 3		Level 3			Total			Level 3			Level 3			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	37	$	(53	)	$	(16	)	$	-		$	(25	)	$	(25	)
CMBS		-		-			-			-			(8	)		(8	)
ABS		15		(162	)		(147	)		8			(46	)		(38	)
Trading securities		4		(1	)		3			-			-			-
Derivative investments		-		(1	)		(1	)		-			-			-
Other assets – indexed annuity ceded
embedded derivatives		-		-			-			515			-			515
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		-		-			-			(4,937	)		-			(4,937	)
Total, net	$	56	$	(217	)	$	(161	)	$	(4,414	)	$	(79	)	$	(4,493	)



	For the Nine								For the Nine
	Months Ended								Months Ended
	September 30, 2022								September 30, 2021
	Transfers		Transfers						Transfers			Transfers
	Into		Out of						Into			Out of
	Level 3		Level 3			Total			Level 3			Level 3			Total
Investments:
Fixed maturity AFS securities:
Corporate bonds	$	265	$	(167	)	$	98		$	10		$	(64	)	$	(54	)
Foreign government bonds		-		-			-			-			(37	)		(37	)
RMBS		-		(15	)		(15	)		-			-			-
CMBS		-		(17	)		(17	)		-			(8	)		(8	)
ABS		16		(273	)		(257	)		8			(266	)		(258	)
Trading securities		4		(5	)		(1	)		14			(29	)		(15	)
Derivative investments		-		(15	)		(15	)		-			(2,658	)		(2,658	)
Other assets – indexed annuity ceded
embedded derivatives		-		-			-			515			(527	)		(12	)
Future contract benefits – indexed annuity
and IUL contracts embedded derivatives		-		-			-			(4,937	)		4,170			(767	)
Total, net	$	285	$	(492	)	$	(207	)	$	(4,390	)	$	581		$	(3,809	)

Transfers into and out of Level 3 are generally the result of observable market information on financial instruments no longer being available or becoming available to our pricing vendors. For the three and nine months ended September 30, 2022 and 2021, transfers in and out of Level 3 were attributable primarily to the financial instruments’ observable market information no longer being available or becoming available. In 2021, transfers out of Level 3 included derivative instruments for which we changed valuation techniques. This change in valuation technique was primarily from unobservable inputs in counterparty models to a mathematical model provided by a third party. The updated valuation technique is considered industry standard and provides us with greater visibility into the economic valuation inputs.
‎

The following summarizes the fair value (in millions), valuation techniques and significant unobservable inputs of the Level 3 fair value measurements as of September 30, 2022:



											Weighted
											Average
	Fair			Valuation	Significant	Assumption or					Input
	Value			Technique	Unobservable Inputs	Input Ranges					Range ⁽¹⁾
Assets
Investments:
Fixed maturity AFS and
trading securities:
Corporate bonds	$	2,850		Discounted cash flow	Liquidity/duration adjustment ⁽²⁾	0.9	%	-	7.3	%	2.1	%
Foreign government
bonds		34		Discounted cash flow	Liquidity/duration adjustment ⁽²⁾	1.2	%	-	19.1	%	16.4	%
ABS		15		Discounted cash flow	Liquidity/duration adjustment ⁽²⁾	2.4	%	-	2.4	%	2.4	%
Hybrid and redeemable
preferred securities		7		Discounted cash flow	Liquidity/duration adjustment ⁽²⁾	1.4	%	-	1.5	%	1.5	%
Equity securities		19		Discounted cash flow	Liquidity/duration adjustment ⁽²⁾	4.2	%	-	4.5	%	4.3	%
Other assets:
GLB direct and ceded		1,479		Discounted cash flow	Long-term lapse rate ⁽³⁾	1	%	-	30	%	⁽¹⁰⁾
embedded derivatives					Utilization of guaranteed withdrawals⁽⁴⁾	85	%	-	100	%	94	%
					Claims utilization factor ⁽⁵⁾	60	%	-	100	%	⁽¹⁰⁾
					Premiums utilization factor ⁽⁵⁾	80	%	-	115	%	⁽¹⁰⁾
					NPR ⁽⁶⁾	0.31	%	-	2.38	%	1.67	%
					Mortality rate ⁽⁷⁾				⁽⁹⁾		⁽¹⁰⁾
					Volatility ⁽⁸⁾	1	%	-	28	%	14.30	%

Indexed annuity ceded
embedded derivatives		456		Discounted cash flow	Lapse rate ⁽³⁾	0	%	-	9	%	⁽¹⁰⁾
					Mortality rate ⁽⁷⁾				⁽⁹⁾		⁽¹⁰⁾
Liabilities
Future contract benefits –
indexed annuity contracts
embedded derivatives	$	(3,293	)	Discounted cash flow	Lapse rate ⁽³⁾	0	%	-	9	%	⁽¹⁰⁾
					Mortality rate ⁽⁷⁾				⁽⁹⁾		⁽¹⁰⁾
Other liabilities –
GLB ceded embedded
derivatives		(149	)	Discounted cash flow	Long-term lapse rate ⁽³⁾	1	%	-	30	%	⁽¹⁰⁾
					Utilization of guaranteed withdrawals⁽⁴⁾	85	%	-	100	%	94	%
					Claims utilization factor ⁽⁵⁾	60	%	-	100	%	⁽¹⁰⁾
					Premiums utilization factor ⁽⁵⁾	80	%	-	115	%	⁽¹⁰⁾
					NPR ⁽⁶⁾	0.31	%	-	2.38	%	1.67	%
					Mortality rate ⁽⁷⁾				⁽⁹⁾		⁽¹⁰⁾
					Volatility ⁽⁸⁾	1	%	-	28	%	14.30	%

⁽¹⁾Unobservable inputs were weighted by the relative fair value of the instruments, unless otherwise noted.

⁽²⁾The liquidity/duration adjustment input represents an estimated market participant composite of adjustments attributable to liquidity premiums, expected durations, structures and credit quality that would be applied to the market observable information of an investment.

⁽³⁾The lapse rate input represents the estimated probability of a contract surrendering during a year, and thereby forgoing any future benefits. The range for indexed annuity contracts represents the lapse rates during the surrender charge period.

⁽⁴⁾The utilization of guaranteed withdrawals input represents the estimated percentage of contract holders that utilize the guaranteed withdrawal feature.

⁽⁵⁾The utilization factors are applied to the present value of claims or premiums, as appropriate, in the GLB reserve calculation to estimate the impact of inefficient withdrawal behavior, including taking less than or more than the maximum guaranteed withdrawal.

⁽⁶⁾The NPR input represents the estimated additional credit spread that market participants would apply to the market observable discount rate when pricing a contract. The NPR input was weighted by the absolute value of the sensitivity of the reserve to the NPR assumption.

⁽⁷⁾The mortality rate input represents the estimated probability of when an individual belonging to a particular group, categorized according to age or some other factor such as gender, will die.

⁽⁸⁾The volatility input represents overall volatilities assumed for the underlying variable annuity funds, which include a mixture of equity and fixed-income assets. Fair value of the variable annuity GLB embedded derivatives would increase if higher volatilities were used for valuation. Volatility assumptions vary by fund due to the benchmarking of different indices. The volatility input was weighted by the relative account value assigned to each index.

⁽⁹⁾The mortality rate is based on a combination of company and industry experience, adjusted for improvement factors.

⁽¹⁰⁾A weighted average input range is not a meaningful measurement for lapse rate, utilization factors or mortality rate.

From the table above, we have excluded Level 3 fair value measurements obtained from independent, third-party pricing sources. We do not develop the significant inputs used to measure the fair value of these assets and liabilities, and the information regarding the significant inputs is not readily available to us. Independent broker-quoted fair values are non-binding quotes developed by market makers or broker-dealers obtained from third-party sources recognized as market participants. The fair value of a broker-quoted asset or liability is based solely on the receipt of an updated quote from a single market maker or a broker-dealer recognized as a market participant as we do not adjust broker quotes when used as the fair value measurement for an asset or liability. Significant increases or decreases in any of the quotes received from a third-party broker-dealer may result in a significantly higher or lower fair value measurement.

Changes in any of the significant inputs presented in the table above would have resulted in a significant change in the fair value measurement of the asset or liability as follows:

Investments – An increase in the liquidity/duration adjustment input would have resulted in a decrease in the fair value measurement.

Indexed annuity contracts embedded derivatives – For direct embedded derivatives, an increase in the lapse rate or mortality rate inputs would have resulted in a decrease in the fair value measurement.

GLB embedded derivatives – Assuming our GLB direct embedded derivatives are in a liability position: an increase in our lapse rate, NPR or mortality rate inputs would have resulted in a decrease in the fair value measurement; and an increase in the utilization of guaranteed withdrawal or volatility inputs would have resulted in an increase in the fair value measurement.

For each category discussed above, the unobservable inputs are not inter-related; therefore, a directional change in one input would not have affected the other inputs. As part of our ongoing valuation process, we assess the reasonableness of our valuation techniques or models and make adjustments as necessary.

- 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