Fair Value (Tables)

12 Months Ended

Dec. 31, 2016

Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized in the tables below:

December 31, 2016

Level 1

Level 2

Level 3

Total

(In millions)

Fixed maturity securities:

Corporate and other bonds

18,828

130

18,958

States, municipalities and political subdivisions

13,239

13,240

Asset-backed:

Residential mortgage-backed

4,944

129

5,073

Commercial mortgage-backed

2,027

2,040

Other asset-backed

968

1,025

Total asset-backed

7,939

199

8,138

U.S. Treasury and obligations of government-sponsored enterprises

Foreign government

445

Redeemable preferred stock

Fixed maturities available-for-sale

112

40,451

330

40,893

Fixed maturities trading

595

601

Total fixed maturities

112

41,046

336

41,494

Equity securities available-for-sale

110

Equity securities trading

438

439

Total equity securities

529

549

Short term investments

3,833

853

4,686

Other invested assets

Receivables

Life settlement contracts

Payable to brokers

(44

)

(44)


December 31, 2015	Level 1			Level 2		Level 3		Total

(In millions)

Fixed maturity securities:
Corporate and other bonds				$	17,601	$	168	$	17,769
States, municipalities and political subdivisions					13,172		2		13,174
Asset-backed:
Residential mortgage-backed					4,938		134		5,072
Commercial mortgage-backed					2,175		22		2,197
Other asset-backed					868		53		921

Total asset-backed					7,981		209		8,190
U.S. Treasury and obligations of government-sponsored enterprises	$	66			1				67
Foreign government					346				346
Redeemable preferred stock		35							35

Fixed maturities available-for-sale		101			39,101		379		39,581
Fixed maturities trading					35		85		120

Total fixed maturities	$	101		$	39,136	$	464	$	39,701



Equity securities available-for-sale	$	177				$	20	$	197
Equity securities trading		554					1		555

Total equity securities	$	731		$	-	$	21	$	752



Short term investments	$	3,600		$	1,134			$	4,734
Other invested assets		102			44				146
Receivables					9	$	3		12
Life settlement contracts							74		74
Payable to brokers		(196	)						(196)

Reconciliations of Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs

The tables below present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2016 and 2015:


									Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, December 31		Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities Held at December 31


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)
2016	Balance, January 1		Included in Net Income			Included in OCI
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	168	$	1		$	1		$	163	$	(36	)	$	(103	)			$	(64	)	$	130
States, municipalities and political subdivisions		2													(1	)							1
Asset-backed:
Residential mortgage-backed		134		3			(5	)		15					(14	)	$	56		(60	)		129
Commercial mortgage-backed		22		(1	)		(1	)		32					(17	)		3		(25	)		13
Other asset-backed		53		(2	)		1			86		(25	)		(1	)		2		(57	)		57

Total asset-backed		209		-			(5	)		133		(25	)		(32	)		61		(142	)		199	$	-

Fixed maturities available-for-sale		379		1			(4	)		296		(61	)		(136	)		61		(206	)		330
Fixed maturities trading		85		5						2		(86	)										6		3

Total fixed maturities	$	464	$	6		$	(4	)	$	298	$	(147	)	$	(136	)	$	61	$	(206	)	$	336	$	3



Equity securities available-for-sale	$	20	$	(1	)																	$	19	$	(2	)
Equity securities trading		1		1							$	(1	)										1

Total equity securities	$	21	$	-		$	-		$	-	$	(1	)	$	-		$	-	$	-		$	20	$	(2	)



Life settlement contracts	$	74	$	5										$	(21	)						$	58	$	(3	)
Derivative financial instruments, net		3		(1	)						$	(2	)										-


2015	Balance, January 1								Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, December 31		Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities Held at December 31


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)
			Included in Net Income			Included in OCI
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	162	$	(2	)	$	(3	)	$	65	$	(13	)	$	(35	)	$	40	$	(46	)	$	168	$	(2	)
States, municipalities and political subdivisions		94		1											(10	)				(83	)		2
Asset-backed:
Residential mortgage-backed		189		5			(3	)		81					(35	)		14		(117	)		134
Commercial mortgage-backed		83		7			(4	)		23					(17	)		17		(87	)		22
Other asset-backed		655		3			3			130		(263	)		(52	)		7		(430	)		53

Total asset-backed		927		15			(4	)		234		(263	)		(104	)		38		(634	)		209		-

Fixed maturities available-for-sale		1,183		14			(7	)		299		(276	)		(149	)		78		(763	)		379		(2	)
Fixed maturities trading		90		(3	)							(2	)										85		(3	)

Total fixed maturities	$	1,273	$	11		$	(7	)	$	299	$	(278	)	$	(149	)	$	78	$	(763	)	$	464	$	(5	)



Equity securities available-for-sale	$	16				$	(1	)	$	4							$	1				$	20
Equity securities trading		1	$	1						1	$	(2	)										1	$	1

Total equity securities	$	17	$	1		$	(1	)	$	5	$	(2	)	$	-		$	1	$	-		$	21	$	1



Life settlement contracts	$	82	$	25										$	(33	)						$	74	$	1
Derivative financial instruments, net											$	3											3

Quantitative Information about Significant Unobservable Inputs Utilized by Company in Fair Value Measurements 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 unobservable inputs from these broker quotes is neither provided nor reasonably available to the Company. The valuation of life settlement contracts as of December 31, 2016 was based on the terms of the pending sale of the contracts to a third party, therefore the contracts are not included in the table below.


December 31, 2016	Estimated Fair Value	Valuation Techniques	Unobservable Inputs	Range (Weighted Average)
	(In millions)

Fixed maturity securities	$ 106	Discounted cash flow	Credit spread	2% – 40% (4%)

December 31, 2015

Fixed maturity securities	$ 138	Discounted cash flow	Credit spread	3% – 184% (6%)

Life settlement contracts	74	Discounted cash flow	Discount rate risk premium	9%
			Mortality assumption	55% – 1,676% (164%)

Carrying Amount, Estimated Fair Value and Level of Fair Value Hierarchy of Company's Financial Assets and Liabilities

The carrying amount, estimated fair value and the level of the fair value hierarchy of the Company’s financial assets and liabilities which are not measured at fair value on the Consolidated Balance Sheets are presented in the following tables. The carrying amounts and estimated fair values of short term debt and long term debt exclude capital lease obligations. The carrying amounts reported on the Consolidated Balance Sheets for cash and short term investments not carried at fair value and certain other assets and liabilities approximate fair value due to the short term nature of these items.


	Carrying Amount		Estimated Fair Value
December 31, 2016	Carrying Amount		Level 1	Level 2		Level 3		Total
(In millions)

Assets:
Other invested assets, primarily mortgage loans	$	591				$	594	$	594

Liabilities:
Short term debt		107		$	104		3		107
Long term debt		10,655			10,150		646		10,796

December 31, 2015

Assets:
Other invested assets, primarily mortgage loans	$	678				$	688	$	688

Liabilities:
Short term debt		1,038		$	1,050		2		1,052
Long term debt		9,507			8,538		595		9,133