FAIR VALUE DISCLOSURES

Assets and liabilities measured at fair value on a recurring basis are summarized below. At December 31, 2017 and 2016, no assets were required to be measured at fair value on a non-recurring basis. Fair value measurements are required on a non-recurring basis for certain assets, including goodwill and mortgage loans on real estate, only when an OTTI or other event occurs. When such fair value measurements are recorded, they are classified and disclosed within the fair value hierarchy. The Company recognizes transfers between valuation levels at the beginning of the reporting period.

Fair Value Measurements at December 31, 2017



	Level 1			Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Fixed maturities, available-for-sale:
Public Corporate	$	—		$	14,298	$	47	$	14,345
Private Corporate	—			6,045		1,092		7,137
U.S. Treasury, government and agency	—			13,135		—		13,135
States and political subdivisions	—			441		40		481
Foreign governments	—			409		—		409
Commercial mortgage-backed	—			—		—		—
Residential mortgage-backed⁽¹⁾	—			251		—		251
Asset-backed⁽²⁾	—			88		8		96
Redeemable preferred stock	180			324		—		504
Subtotal	180			34,991		1,187		36,358
Other equity investments	13			—		1		14
Trading securities	467			12,161		—		12,628
Other invested assets:
Short-term investments	—			768		—		768
Assets of consolidated VIEs/VOEs	1,060			215		27		1,302
Swaps	—			15		—		15
Credit Default Swaps	—			33		—		33
Futures	(2		)	—		—		(2		)
Options	—			1,907		—		1,907
Floors	—			—		—		—
Subtotal	1,058			2,938		27		4,023
Cash equivalents	2,360			—		—		2,360
Segregated securities	—			825		—		825
GMIB reinsurance contracts asset	—			—		10,488		10,488
Separate Accounts’ assets	118,983			2,983		349		122,315
Total Assets	$	123,061		$	53,898	$	12,052	$	189,011
Liabilities
GMxB derivative features’ liability	$	—		$	—	$	4,164	$	4,164
SCS, SIO, MSO and IUL indexed features’ liability	—			1,698		—		1,698
Liabilities of consolidated VIEs/VOEs	670			22		—		692
Contingent payment arrangements	—			—		11		11
Total Liabilities	$	670		$	1,720	$	4,175	$	6,565


(1)	Includes publicly traded agency pass-through securities and collateralized obligations.


(2)	Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.

Fair Value Measurements at December 31, 2016



	Level 1		Level 2			Level 3		Total
	(in millions)
Assets
Investments:
Fixed maturities, available-for-sale:
Public Corporate	$	—	$	12,984		$	28	$	13,012
Private Corporate	—		6,223			817		7,040
U.S. Treasury, government and agency	—		10,336			—		10,336
States and political subdivisions	—		451			42		493
Foreign governments	—		390			—		390
Commercial mortgage-backed	—		22			349		371
Residential mortgage-backed⁽¹⁾	—		314			—		314
Asset-backed⁽²⁾	—		36			24		60
Redeemable preferred stock	218		335			1		554
Subtotal	218		31,091			1,261		32,570
Other equity investments	3		—			5		8
Trading securities	478		8,656			—		9,134
Other invested assets:
Short-term investments	—		574			—		574
Assets of consolidated VIEs/VOEs	342		205			46		593
Swaps	—		(925		)	—		(925		)
Credit Default Swaps	—		5			—		5
Futures	—		—			—		—
Options	—		960			—		960
Floors	—		11			—		11
Subtotal	342		830			46		1,218
Cash equivalents	1,529		—			—		1,529
Segregated securities	—		946			—		946
GMIB reinsurance contracts asset	—		—			10,314		10,314
Separate Accounts’ assets	108,085		2,818			313		111,216
Total Assets	$	110,655	$	44,341		$	11,939	$	166,935
Liabilities
GMxB derivative features’ liability	$	—	$	—		$	5,319	$	5,319
SCS, SIO, MSO and IUL indexed features’ liability	—		887			—		887
Liabilities of consolidated VIEs/VOEs	248		2			—		250
Contingent payment arrangements	—		—			18		18
Total Liabilities	$	248	$	889		$	5,337	$	6,474


(1)	Includes publicly traded agency pass-through securities and collateralized obligations.


(2)	Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.

At December 31, 2017 and 2016, respectively, the fair value of public fixed maturities is approximately $28,826 million and $24,918 million or approximately 16.2% and 16.0% of the Company’s total assets measured at fair value on a recurring basis (excluding GMIB reinsurance contracts and segregated securities measured at fair value on a recurring basis). The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent valuation service providers and for which the Company maintains a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. Although each security generally is priced by multiple independent valuation service providers, the Company ultimately uses the price received from the independent valuation service provider highest in the vendor hierarchy based on the respective asset type, with limited exception. To validate reasonableness, prices also are internally reviewed by those with relevant expertise through comparison with directly observed recent market trades. Consistent with the fair value hierarchy, public fixed maturity securities validated in this manner generally are reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. If the pricing information received from independent valuation service providers is not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process in accordance with the terms of the respective independent valuation service provider agreement. If as a result it is determined that the independent valuation service provider is able to reprice the security in a manner agreed as more consistent with current market observations, the security remains within Level 2. Alternatively, a Level 3 classification may result if the pricing information then is sourced from another vendor, non-binding broker quotes, or internally-developed valuations for which the Company’s own assumptions about market-participant inputs would be used in pricing the security.

At December 31, 2017 and 2016, respectively, the fair value of private fixed maturities is approximately $7,532 million and $7,652 million or approximately 4.2% and 4.9% of the Company’s total assets measured at fair value on a recurring basis. The fair values of the Company’s private fixed maturities are determined from prices obtained from independent valuation service providers. Prices not obtained from an independent valuation service provider are determined by using a discounted cash flow model or a market comparable company valuation technique. In certain cases, these models use observable inputs with a discount rate based upon the average of spread surveys collected from private market intermediaries who are active in both primary and secondary transactions, taking into account, among other factors, the credit quality and industry sector of the issuer and the reduced liquidity associated with private placements. Generally, these securities have been reflected within Level 2. For certain private fixed maturities, the discounted cash flow model or a market comparable company valuation technique may also incorporate unobservable inputs, which reflect the Company’s own assumptions about the inputs market participants would use in pricing the asset. To the extent management determines that such unobservable inputs are significant to the fair value measurement of a security, a Level 3 classification generally is made.

As disclosed in Note 3, at December 31, 2017 and 2016, respectively, the net fair value of freestanding derivative positions is approximately $1,953 million and $51 million or approximately 48.5% and 8.2% of Other invested assets measured at fair value on a recurring basis. The fair values of the Company’s derivative positions are generally based on prices obtained either from independent valuation service providers or derived by applying market inputs from recognized vendors into industry standard pricing models. The majority of these derivative contracts are traded in the OTC derivative market and are classified in Level 2. The fair values of derivative assets and liabilities traded in the OTC market are determined using quantitative models that require use of the contractual terms of the derivative instruments and multiple market inputs, including interest rates, prices, and indices to generate continuous yield or pricing curves, including overnight index swap (“OIS”) curves, and volatility factors, which then are applied to value the positions. The predominance of market inputs is actively quoted and can be validated through external sources or reliably interpolated if less observable. If the pricing information received from independent valuation service providers is not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process in accordance with the terms of the respective independent valuation service provider agreement. If as a result it is determined that the independent valuation service provider is able to reprice the derivative instrument in a manner agreed as more consistent with current market observations, the position remains within Level 2. Alternatively, a Level 3 classification may result if the pricing information then is sourced from another vendor, non-binding broker quotes, or internally-developed valuations for which the Company’s own assumptions about market-participant inputs would be used in pricing the security.

At December 31, 2017 and 2016, respectively, investments classified as Level 1 comprise approximately 69.2% and 71.1% of assets measured at fair value on a recurring basis and primarily include redeemable preferred stock, trading securities, cash equivalents and Separate Account assets. Fair value measurements classified as Level 1 include exchange-traded prices of fixed maturities, equity securities and derivative contracts, and net asset values for transacting subscriptions and redemptions of mutual fund shares held by Separate Accounts. Cash equivalents classified as Level 1 include money market accounts, overnight commercial paper and highly liquid debt instruments purchased with an original maturity of three months or less, and are carried at cost as a proxy for fair value measurement due to their short-term nature.

At December 31, 2017 and 2016, respectively, investments classified as Level 2 comprise approximately 29.9% and 27.9% of assets measured at fair value on a recurring basis and primarily include U.S. government and agency securities and certain corporate debt securities, such as public and private fixed maturities. As market quotes generally are not readily available or accessible for these securities, their fair value measures are determined utilizing relevant information generated by market transactions involving comparable securities and often are based on model pricing techniques that effectively discount prospective cash flows to present value using appropriate sector-adjusted credit spreads commensurate with the security’s duration, also taking into consideration issuer-specific credit quality and liquidity. Segregated securities classified as Level 2 are U.S. Treasury Bills segregated by AB in a special reserve bank custody account for the exclusive benefit of brokerage customers, as required by Rule 15c3-3 of the Exchange Act and for which fair values are based on quoted yields in secondary markets.

Observable inputs generally used to measure the fair value of securities classified as Level 2 include benchmark yields, reported secondary trades, issuer spreads, benchmark securities and other reference data. Additional observable inputs are used when available, and as may be appropriate, for certain security types, such as prepayment, default, and collateral information for the purpose of measuring the fair value of mortgage- and asset-backed securities. At December 31, 2017 and 2016, respectively, approximately $257 million and $340 million of AAA-rated mortgage- and asset-backed securities are classified as Level 2 for which the observability of market inputs to their pricing models is supported by sufficient, albeit more recently contracted, market activity in these sectors.

The Company’s SCS and EQUI-VEST variable annuity products, the IUL product, and in the MSO fund available in some life contracts offer investment options which permit the contract owner to participate in the performance of an index, ETF or commodity price. These investment options, which depending on the product and on the index selected can currently have 1, 3, 5, or 6 year terms, provide for participation in the performance of specified indices, ETF or commodity price movement up to a segment-specific declared maximum rate. Under certain conditions that vary by product, e.g. holding these segments for the full term, these segments also shield policyholders from some or all negative investment performance associated with these indices, ETF or commodity prices. These investment options have defined formulaic liability amounts, and the current values of the option component of these segment reserves are accounted for as Level 2 embedded derivatives. The fair values of these embedded derivatives are based on data obtained from independent valuation service providers.

At December 31, 2017 and 2016, respectively, investments classified as Level 3 comprise approximately 0.9% and 1.0% of assets measured at fair value on a recurring basis and primarily include commercial mortgage-backed securities (“CMBS”) and corporate debt securities, such as private fixed maturities. Determinations to classify fair value measures within Level 3 of the valuation hierarchy generally are based upon the significance of the unobservable factors to the overall fair value measurement. Included in the Level 3 classification at December 31, 2017 and 2016, respectively, were approximately $97 million and $111 million of fixed maturities with indicative pricing obtained from brokers that otherwise could not be corroborated to market observable data. The Company applies various due-diligence procedures, as considered appropriate, to validate these non-binding broker quotes for reasonableness, based on its understanding of the markets, including use of internally-developed assumptions about inputs a market participant would use to price the security. In addition, approximately $8 million and $373 million of mortgage- and asset-backed securities, including CMBS, are classified as Level 3 at December 31, 2017 and 2016, respectively. The Company utilizes prices obtained from an independent valuation service vendor to measure fair value of CMBS securities.

The Company also issues certain benefits on its variable annuity products that are accounted for as derivatives and are also considered Level 3. The GMIBNLG feature allows the policyholder to receive guaranteed minimum lifetime annuity payments based on predetermined annuity purchase rates applied to the contract’s benefit base if and when the contract account value is depleted and the NLG feature is activated. The GMWB feature allows the policyholder to withdraw at minimum, over the life of the contract, an amount based on the contract’s benefit base. The GWBL feature allows the policyholder to withdraw, each year for the life of the contract, a specified annual percentage of an amount based on the contract’s benefit base. The GMAB feature increases the contract account value at the end of a specified period to a GMAB base. The GIB feature provides a lifetime annuity based on predetermined annuity purchase rates if and when the contract account value is depleted. This lifetime annuity is based on predetermined annuity purchase rates applied to a GIB base.

Level 3 also includes the GMIB reinsurance contract asset and liabilities which are accounted for as derivative contracts. The GMIB reinsurance contract asset and liabilities’ fair value reflects the present value of reinsurance premiums and recoveries and risk margins over a range of market consistent economic scenarios while GMxB derivative features liability reflects the present value of expected future payments (benefits) less fees, adjusted for risk margins and nonperformance risk, attributable to GMxB derivative features’ liability over a range of market-consistent economic scenarios.

The valuations of the GMIB reinsurance contract asset and GMxB derivative features liability incorporate significant non-observable assumptions related to policyholder behavior, risk margins and projections of equity separate account funds. The credit risks of the counterparty and of the Company are considered in determining the fair values of its GMIB reinsurance contract asset and GMxB derivative features liability positions, respectively, after taking into account the effects of collateral arrangements. Incremental adjustment to the swap curve, adjusted for non-performance risk, is made to the resulting fair values of the GMIB reinsurance contract asset and liabilities to reflect change in the claims-paying ratings of counterparties and the Company an adjustment to the swap curve for non-performance risk to reflect the claims-paying rating of the Company. Equity and fixed income volatilities were modeled to reflect current market volatilities. Due to the unique, long duration of the GMIBNLG feature, adjustments were made to the equity volatilities to remove the illiquidity bias associated with the longer tenors and risk margins were applied to the non-capital markets inputs to the GMIBNLG valuations.

After giving consideration to collateral arrangements, the Company reduced the fair value of its GMIB reinsurance contract asset by $69 million and $139 million at December 31, 2017 and 2016, respectively, to recognize incremental counterparty nonperformance risk.

Lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, which include other factors such as considering surrender charges. Generally, lapse rates are assumed to be lower in periods when a surrender charge applies. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in the money contracts are less likely to lapse. For valuing the embedded derivative, lapse rates vary throughout the period over which cash flows are projected.

The Company’s Level 3 liabilities include contingent payment arrangements associated with acquisitions in 2010, 2013 and 2014 by AB. At each reporting date, AB estimates the fair values of the contingent consideration expected to be paid based upon probability-weighted AUM and revenue projections, using unobservable market data inputs, which are included in Level 3 of the valuation hierarchy.

As of December 31, 2017, the Company’s consolidated VIEs/VOEs hold $2 million of investments that are classified as Level 3. They primarily consist of corporate bonds that are vendor priced with no ratings available, bank loans, non-agency collateralized mortgage obligations and asset-backed securities.

In 2017, AFS fixed maturities with fair values of $6 million were transferred out of Level 3 and into Level 2 principally due to the availability of trading activity or market observable inputs to measure and validate their fair values. In addition, AFS fixed maturities with fair value of $7 million were transferred from Level 2 into the Level 3 classification. These transfers in the aggregate represent approximately 0.1% of total equity at December 31, 2017.

In 2016, AFS fixed maturities with fair values of $62 million were transferred out of Level 3 and into Level 2 principally due to the availability of trading activity and/or market observable inputs to measure and validate their fair values. In addition, AFS fixed maturities with fair value of $25 million were transferred from Level 2 into the Level 3 classification. During 2016, one of AB’s private securities went public and, due to a trading restriction period, $56 million was transferred from a Level 3 to a Level 2 classification. These transfers in the aggregate represent approximately 0.9% of total equity at December 31, 2016.

In 2015, AFS fixed maturities with fair values of $125 million were transferred out of Level 3 and into Level 2 principally due to the availability of trading activity and/or market observable inputs to measure and validate their fair values. In addition, AFS fixed maturities with fair value of $99 million were transferred from Level 2 into the Level 3 classification. These transfers in the aggregate represent approximately 1.3% of total equity at December 31, 2015.

The table below presents a reconciliation for all Level 3 assets and liabilities at December 31, 2017, 2016 and 2015 respectively:

Level 3 Instruments

Fair Value Measurements



	Corporate			State and Political Sub-divisions			Foreign Govts			Commercial Mortgage- backed			Residential Mortgage- backed		Asset- backed
	(in millions)
Balance, January 1, 2017	$	845		$	42		$	—		$	349		$	—	$	24
Total gains (losses), realized and unrealized, included in:
Income (loss) as:
Net investment income (loss)	5			—			—			(2		)	—		—
Investment gains (losses), net	2			—			—			(63		)	—		15
Subtotal	7			—			—			(65		)	—		15
Other comprehensive income (loss)	4			(1		)	—			45			—		(9		)
Purchases	612			—			—			—			—		—
Sales	(331		)	(1		)	—			(329		)	—		(21		)
Transfers into Level 3⁽¹⁾	7			—			—			—			—		—
Transfers out of Level 3⁽¹⁾	(5		)	—			—			—			—		(1		)
Balance, December 31, 2017	$	1,139		$	40		$	—		$	—		$	—	$	8
Balance, January 1, 2016	$	420		$	45		$	1		$	503		$	—	$	40
Total gains (losses), realized and unrealized, included in:
Income (loss) as:
Net investment income (loss)	—			—			—			—			—		—
Investment gains (losses), net	1			—			—			(67		)	—		—
Subtotal	1			—			—			(67		)	—		—
Other comprehensive income (loss)	7			(2		)	—			14			—		1
Purchases	572			—			—			—			—		—
Sales	(142		)	(1		)	—			(87		)	—		(8		)
Transfers into Level 3⁽¹⁾	25			—			—			—			—		—
Transfers out of Level 3⁽¹⁾	(38		)	—			(1		)	(14		)	—		(9		)
Balance, December 31, 2016	$	845		$	42		$	—		$	349		$	—	$	24

Level 3 Instruments

Fair Value Measurements



	Corporate			State and Political Sub-divisions			Foreign Govts		Commercial Mortgage- backed			Residential Mortgage- backed			Asset- backed
	(In millions)
Balance, January 1, 2015	$	380		$	47		$	—	$	715		$	2		$	53
Total gains (losses), realized and unrealized, included in:
Income (loss) as:
Net investment income (loss)	3			—			—		1			—			—
Investment gains (losses), net	2			—			—		(38		)	—			—
Subtotal	5			—			—		(37		)	—			—
Other comprehensive income (loss)	(25		)	(1		)	—		64			—			(4		)
Purchases	60			—			1		—			—			—
Sales	(38		)	(1		)	—		(175		)	(2		)	(9		)
Transfers into Level 3⁽¹⁾	99			—			—		—			—			—
Transfers out of Level 3⁽¹⁾	(61		)	—			—		(64		)	—			—
Balance, December 31, 2015	$	420		$	45		$	1	$	503		$	—		$	40



	Redeem able Preferred Stock			Other Equity Investments⁽²⁾			GMIB Reinsurance Asset			Separate Accounts Assets			GMxB derivative features' liability			Contingent Payment Arrangement
	(in millions)
Balance, January 1, 2017	$	1		$	51		$	10,314		$	313		$	(5,319	)	18
Total gains (losses), realized and unrealized, included in:
Income (loss) as:
Net investment income (loss)	—			—			—			—			—			—
Investment gains (losses), net	—			—			—			29			—			—
Net derivative gains (losses)	—			—			69			—			1,494			—
Subtotal	—			—			69			29			1,494			—
Other comprehensive income (loss)	(1		)	(4		)	—			—			—			—
Purchases ⁽²⁾	—			6			221			13			(344		)	—
Sales ⁽³⁾	—			(3		)	(116		)	(2		)	5			—
Settlements ⁽⁴⁾	—			—			—			(4		)	—			(7		)
Activities related to VIEs/VOEs	—			(22		)	—			—			—			—
Transfers into Level 3⁽¹⁾	—			—			—			—			—			—
Transfers out of Level 3⁽¹⁾	—			—			—			—			—			—
Balance, December 31, 2017	$	—		$	28		$	10,488		$	349		$	(4,164	)	$	11
Balance, January 1, 2016	$	—		$	49		$	10,582		$	313		$	(5,146	)	31
Total gains (losses), realized and unrealized, included in:
Income (loss) as:
Net investment income (loss)	—			—			—			—			—			—
Investment gains (losses), net	—			—			—			19			—			—
Net derivative gains (losses)	—			—			(261		)	—			140			—
Subtotal	—			—			(261		)	19			140			—
Other comprehensive income(loss)	—			(2		)	—			—			—
Purchases ⁽²⁾	1			—			223			10			(317		)	11
Sales ⁽³⁾	—			—			(230		)	—			4			—
Settlements ⁽⁴⁾	—			—			—			(7		)	—			(24		)
Activities related to VIEs/VOEs	—			60			—			—			—			—
Transfers into Level 3⁽¹⁾	—			—			—			1			—			—
Transfers out of Level 3⁽¹⁾	—			(56		)	—			(23		)	—			—
Balance, December 31, 2016	$	1		$	51		$	10,314		$	313		$	(5,319	)	$	18



	Redeem able Preferred Stock		Other Equity Investments⁽²⁾			GMIB Reinsurance Asset			Separate Accounts Assets			GMxB derivative features' liability			Contingent Payment Arrangement
	(in millions)
Balance, January 1, 2015	$	—	$	61		$	10,723		$	260		$	(4,130	)	$	42
Total gains (losses), realized and unrealized, included in:
Income (loss) as:
Net investment income (loss)	—		—			—			—			—			—
Investment gains (losses), net	—		5			—			36			—			—
Net derivative gains (losses)	—		—			(316		)	—			(743		)	—
Subtotal	—		5			(316		)	36			(743		)	—
Other comprehensive income (loss)	—		2			—			—			—			—
Purchases ⁽²⁾	—		1			228			26			(274		)	—
Sales ⁽³⁾	—		(20		)	(53		)	(2		)	1			(11		)
Settlements ⁽⁴⁾	—		—			—			(5		)	—			—
Transfers into Level 3 ⁽¹⁾	—		—			—			—			—			—
Transfers out of Level 3 ⁽¹⁾	—		—			—			(2		)	—			—
Balance, December 31, 2015	$	—	$	49		$	10,582		$	313		$	(5,146	)	$	31


(1)	Transfers into/out of Level 3 classification are reflected at beginning-of-period fair values.


(2)	For the GMIB reinsurance contract asset, and GMxB derivative features’ liability, represents attributed fee.


(3)	For the GMIB reinsurance contract asset, represents recoveries from reinsurers and for GMxB derivative features liability represents benefits paid.


(4)	For contingent payment arrangements, it represents payments under the arrangement.

The table below details changes in unrealized gains (losses) for 2017 and 2016 by category for Level 3 assets and liabilities still held at December 31, 2017 and 2016, respectively:



	Income (Loss)
	Investment Gains (Losses), Net		Net Derivative Gains (losses)			OCI
	(in millions)
Level 3 Instruments
Full Year 2017
Still Held at December 31, 2017
Change in unrealized gains (losses):
Fixed maturities, available-for-sale:
Corporate	$	—	$	—		$	4
State and political subdivisions	—		—			—
Commercial mortgage-backed	—		—			45
Asset-backed	—		—			(9		)
Subtotal	$	—	$	—		$	40
GMIB reinsurance contracts	—		69			—
Separate Accounts’ assets⁽¹⁾	29		—			—
GMxB derivative features' liability	—		1,494			—
Total	$	29	$	1,563		$	40
Level 3 Instruments
Full Year 2016
Still Held at December 31, 2016
Change in unrealized gains (losses):
Fixed maturities, available-for-sale:
Corporate	$	—	$	—		$	11
State and political subdivisions	—		—			(1		)
Commercial mortgage-backed	—		—			9
Asset-backed	—		—			1
Subtotal	$	—	$	—		$	20
GMIB reinsurance contracts	—		(262		)	—
Separate Accounts’ assets⁽¹⁾	20		—			—
GMxB derivative features' liability	—		140			—
Total	$	20	$	(122	)	$	20

(1) There is an investment expense that offsets this investment gain (loss).

The following table discloses quantitative information about Level 3 fair value measurements by category for assets and liabilities as of December 31, 2017 and 2016, respectively.

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2017



	Fair Value			Valuation Technique	Significant Unobservable Input	Range	Weighted Average
Assets:	(in millions)
Investments:
Fixed maturities, available-for-sale:
Corporate	$	53		Matrix pricing model	Spread over the industry-specific benchmark yield curve	0 - 565 bps	125 bps
	789			Market comparable companies	EBITDA multiples Discount rate Cash flow Multiples	5.3x - 27.9x 7.2% - 17.0% 9.0x - 17.7x	12.9x 11.1% 13.1x
Separate Accounts’ assets	326			Third party appraisal	Capitalization rate Exit capitalization rate Discount rate	4.6% 5.6% 6.6%
	1			Discounted cash flow	Spread over U.S. Treasury curve Discount factor	243 bps 4.4%
GMIB reinsurance contract asset	10,488			Discounted cash flow	Lapse Rates Withdrawal rates GMIB Utilization Rates Non-performance risk Volatility rates—Equity	1.0% - 6.3% 0.0% - 8.0% 0.0% - 16.0% 5bps - 10bps 9.9% - 30.9%
Liabilities:
GMIBNLG	4,056			Discounted cash flow	Non-performance risk Lapse Rates Withdrawal Rates Utilization Rates NLG Forfeiture Rates Long-term equity Volatility	1.0% 0.8% - 26.2% 0.0% - 12.4% 0.0% - 16.0% 0.55% - 2.1% 20.0%
GWBL/GMWB	130			Discounted cash flow	Lapse Rates Withdrawal Rates Utilization Rates Volatility rates - Equity	0.9% - 5.7% 0.0% - 7.0% 100% after delay 9.9% - 30.9%
GIB	(27		)	Discounted cash flow	Lapse Rates Withdrawal Rates Utilization Rates Volatility rates - Equity	0.9% - 5.7% 0.0% - 7.0% 0.0% - 16.0% 9.9% - 30.9%
GMAB	5			Discounted cash flow	Lapse Rates Volatility rates - Equity	0.5% - 11.0% 9.9% - 30.9%

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2016



	Fair Value		Valuation Technique	Significant Unobservable Input	Range	Weighted Average
Assets:	(in millions)
Investments:
Fixed maturities, available-for-sale:
Corporate	$	55	Matrix pricing model	Spread over the industry-specific benchmark yield curve	0 bps - 565 bps	151 bps
	636		Market comparable companies	EBITDA multiples Discount rate Cash flow Multiples	4.3x - 25.6x 7.0% - 17.8% 14.0x - 16.5x	11.7x 11.4% 15.6x
Asset-backed	2		Matrix pricing model	Spread over U.S. Treasury curve	25 bps - 687 bps	38 bps
Separate Accounts’ assets	295		Third party appraisal	Capitalization rate Exit capitalization rate Discount rate	4.8% 5.7% 6.6%
	3		Discounted cash flow	Spread over U.S. Treasury curve Gross domestic product rate Discount factor	273 bps-512 bps 1.1% - 7.0%	283 bps 4.3%
GMIB reinsurance contract asset	10,314		Discounted cash flow	Lapse Rates Withdrawal rates GMIB Utilization Rates Non-performance risk Volatility rates - Equity	1.5% - 5.7% 0.0% - 8.0% 0.0% - 16.0% 5 bps - 17 bps 11.0% - 38.0%
Liabilities:
GMIBNLG	5,155		Discounted cash flow	Non-performance risk Lapse Rates Withdrawal Rates Utilization Rates NLG Forfeiture Rates Long-term equity Volatility	1.1% 1.2% - 26.2% 0.0% - 11.5% 0.0% - 16.0% 0.55% - 2.1% 20.0%
GWBL/GMWB	114		Discounted cash flow	Lapse Rates Withdrawal Rates Utilization Rates Volatility rates - Equity	1.0% - 5.7% 0.0% - 7.0% 100% after delay 9.0% - 35.0%
GIB	30		Discounted cash flow	Withdrawal Rates Utilization Rates Volatility rates - Equity	1.0% - 5.7% 0.0% - 8.0% 100% after delay 9.0% - 35.0%
GMAB	20		Discounted cash flow	Lapse Rates Volatility rates - Equity	1.0% - 11.0% 9.0% - 35.0%

Excluded from the tables above at December 31, 2017 and 2016, respectively, are approximately $370 million and $594 million Level 3 fair value measurements of investments for which the underlying quantitative inputs are not developed by the Company and are not readily available. The fair value measurements of these Level 3 investments comprise approximately 24.0% and 37.5% of total assets classified as Level 3 and represent only 0.2% and 0.4% of total assets measured at fair value on a recurring basis at December 31, 2017 and 2016, respectively. These investments primarily consist of certain privately placed debt securities with limited trading activity, including commercial mortgage, residential mortgage and asset-backed instruments, and their fair values generally reflect unadjusted prices obtained from independent valuation service providers and indicative, non-binding quotes obtained from third-party broker-dealers recognized as market participants. Significant increases or decreases in the fair value amounts received from these pricing sources may result in the Company’s reporting significantly higher or lower fair value measurements for these Level 3 investments.

Included in the tables above at December 31, 2017 and 2016, respectively, are approximately $842 million and $691 million fair value of privately placed, available-for-sale corporate debt securities classified as Level 3. The fair value of private placement securities is determined by application of a matrix pricing model or a market comparable company value technique, representing approximately 73.9% and 81.8% of the total fair value of Level 3 securities in the corporate fixed maturities asset class. The significant unobservable input to the matrix pricing model valuation technique is the spread over the industry-specific benchmark yield curve. Generally, an increase or decrease in spreads would lead to directionally inverse movement in the fair value measurements of these securities. The significant unobservable input to the market comparable company valuation technique is the discount rate. Generally, a significant increase (decrease) in the discount rate would result in significantly lower (higher) fair value measurements of these securities.

Residential mortgage-backed securities classified as Level 3 primarily consist of non-agency paper with low trading activity. Included in the tables above at December 31, 2017 and 2016, there were no Level 3 securities that were determined by application of a matrix pricing model and for which the spread over the U.S. Treasury curve is the most significant unobservable input to the pricing result. Generally, a change in spreads would lead to directionally inverse movement in the fair value measurements of these securities.

Asset-backed securities classified as Level 3 primarily consist of non-agency mortgage loan trust certificates, including subprime and Alt-A paper, credit tenant loans, and equipment financings. Included in the tables above at December 31, 2017 and 2016, are approximately 4.5% and 8.3%, respectively, of the total fair value of these Level 3 securities that is determined by application of a matrix pricing model and for which the spread over the U.S. Treasury curve is the most significant unobservable input to the pricing result. Significant increases (decreases) in spreads would result in significantly lower (higher) fair value measurements.

Included in other equity investments classified as Level 3 are reporting entities’ venture capital securities in the Technology, Media and Telecommunications industries. The fair value measurements of these securities include significant unobservable inputs including an enterprise value to revenue multiples and a discount rate to account for liquidity and various risk factors. Significant increases (decreases) in the enterprise value to revenue multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement.

Separate Accounts assets classified as Level 3 in the table at December 31, 2017 and 2016, primarily consist of a private real estate fund with a fair value of approximately $326 million and $295 million, a private equity investment with a fair value of approximately $0 million and $1 million and mortgage loans with fair value of approximately $1 million and $2 million, respectively. A third party appraisal valuation technique is used to measure the fair value of the private real estate investment fund, including consideration of observable replacement cost and sales comparisons for the underlying commercial properties, as well as the results from applying a discounted cash flow approach. Significant increase (decrease) in isolation in the capitalization rate and exit capitalization rate assumptions used in the discounted cash flow approach to the appraisal value would result in a higher (lower) measure of fair value. A discounted cash flow approach is applied to determine the private equity investment for which the significant unobservable assumptions are the gross domestic product rate formula and a discount factor that takes into account various risks, including the illiquid nature of the investment. A significant increase (decrease) in the gross domestic product rate would have a directionally inverse effect on the fair value of the security. With respect to the fair value measurement of mortgage loans a discounted cash flow approach is applied, a significant increase (decrease) in the assumed spread over U.S. Treasury securities would produce a lower (higher) fair value measurement. Changes in the discount rate or factor used in the valuation techniques to determine the fair values of these private equity investments and mortgage loans generally are not correlated to changes in the other significant unobservable inputs. Significant increase (decrease) in isolation in the discount rate or factor would result in significantly lower (higher) fair value measurements. The remaining Separate Accounts investments classified as Level 3 excluded from the table consist of mortgage- and asset-backed securities with fair values of approximately $14 million and $8 million at December 31, 2017 and $12 million and $3 million at December 31, 2016, respectively. These fair value measurements are determined using substantially the same valuation techniques as earlier described above for the Company’s General Account investments in these securities.

Significant unobservable inputs with respect to the fair value measurement of the Level 3 GMIB reinsurance contract asset and the Level 3 liabilities identified in the table above are developed using the Company data. Validations of unobservable inputs are performed to the extent the Company has experience. When an input is changed the model is updated and the results of each step of the model are analyzed for reasonableness.

The significant unobservable inputs used in the fair value measurement of the Company’s GMIB reinsurance contract asset are lapse rates, withdrawal rates and GMIB utilization rates. Significant increases in GMIB utilization rates or decreases in lapse or withdrawal rates in isolation would tend to increase the GMIB reinsurance contract asset.

Fair value measurement of the GMIB reinsurance contract asset and liabilities includes dynamic lapse and GMIB utilization assumptions whereby projected contractual lapses and GMIB utilization reflect the projected net amount of risks of the contract. As the net amount of risk of a contract increases, the assumed lapse rate decreases and the GMIB utilization increases. Increases in volatility would increase the asset and liabilities.

The significant unobservable inputs used in the fair value measurement of the Company’s GMIBNLG liability are lapse rates, withdrawal rates, GMIB utilization rates, adjustment for Non-performance risk and NLG forfeiture rates. NLG forfeiture rates are caused by excess withdrawals above the annual GMIB accrual rate that cause the NLG to expire. Significant decreases in lapse rates, NLG forfeiture rates, adjustment for non-performance risk and GMIB utilization rates would tend to increase the GMIBNLG liability, while decreases in withdrawal rates and volatility rates would tend to decrease the GMIBNLG liability.

The significant unobservable inputs used in the fair value measurement of the Company’s GMWB and GWBL liability are lapse rates and withdrawal rates. Significant increases in withdrawal rates or decreases in lapse rates in isolation would tend to increase these liabilities. Increases in volatility would increase these liabilities.

During 2017, AB made the final contingent consideration payment relating to its 2014 acquisition and recorded a change in estimate and wrote off the remaining contingent consideration payable relating to its 2010 acquisition. As of December 31, 2017, one acquisition-related contingent consideration liability of $11 million remains relating to AB's 2016 acquisition, which was valued using a revenue growth rate of 31.0% and a discount rate ranging from 1.4% to 2.3%.

The three AB acquisition-related contingent consideration liabilities (with a combined fair value of $18 million and $18 million as of December 31, 2017 and 2016, respectively) and are valued using a projected AUM growth rates with a weighted average of 18.0% for one acquisition and revenue growth rates and discount rates ranging from 4.0% to 31.0% and 1.4% to 6.4% respectively, for the three acquisitions.

The carrying values and fair values at December 31, 2017 and 2016 for financial instruments not otherwise disclosed in Notes 3 and 12 are presented in the table below. Certain financial instruments are exempt from the requirements for fair value disclosure, such as insurance liabilities other than financial guarantees and investment contracts, limited partnerships accounted for under the equity method and pension and other postretirement obligations.



	Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
December 31, 2017:
Mortgage loans on real estate	$	10,935	$	—	$	—	$	10,895	$	10,895
Loans to affiliates	703		$	—	700		—		700
Policyholders liabilities: Investment contracts	2,068		—		—		2,170		2,170
Funding Agreements	3,014		—		3,020		—		3,020
Policy loans	3,315				—		4,210		4,210
Short-term and Long-term debt	769		—		768		—		768
Separate Account Liabilities	7,537		—		—		7,537		7,537
December 31, 2016:
Mortgage loans on real estate	$	9,757	$	—	$	—	$	9,608	$	9,608
Loans to affiliates	703		—		775		—		775
Policyholders liabilities: Investment contracts	2,226		—		—		2,337		2,337
Funding Agreements	2,255		—		2,202		—		2,202
Policy loans	3,361		—		—		4,257		4,257
Short-term and Long-term debt	513		—		513		—		513
Separate Account Liabilities	6,194		—		—		6,194		6,194

Fair values for commercial and agricultural mortgage loans on real estate are measured by discounting future contractual cash flows to be received on the mortgage loan using interest rates at which loans with similar characteristics and credit quality would be made. The discount rate is derived from taking the appropriate U.S. Treasury rate with a like term to the remaining term of the loan and adding a spread reflective of the risk premium associated with the specific loan. Fair values for mortgage loans anticipated to be foreclosed and problem mortgage loans are limited to the fair value of the underlying collateral, if lower.

Fair values for the Company’s long-term debt related to real estate joint ventures is determined by a third party appraisal and assessed for reasonableness. The Company’s short-term debt primarily includes commercial paper issued by AB with short-term maturities and book value approximates fair value. The fair values of the Company’s borrowing and lending arrangements with AXA affiliated entities are determined from quotations provided by brokers knowledgeable about these securities and internally assessed for reasonableness, including matrix pricing models for debt securities and discounted cash flow analysis for mortgage loans.

The fair value of policy loans is calculated by discounting expected cash flows based upon the U.S. treasury yield curve and historical loan repayment patterns.

Fair values for FHLBNY funding agreements are determined from a matrix pricing model and are internally assessed for reasonableness. The matrix pricing model for FHLBNY funding agreements utilizes an independently sourced U.S. Treasury curve which is separately sourced from the Barclays’ suite of curves.

The fair values for the Company’s association plans contracts, supplementary contracts not involving life contingencies (“SCNILC”), deferred annuities and certain annuities, which are included in Policyholders' account balances and liabilities for investment contracts with fund investments in Separate Accounts are estimated using projected cash flows discounted at rates reflecting current market rates. Significant unobservable inputs reflected in the cash flows include lapse rates and withdrawal rates. Incremental adjustments may be made to the fair value to reflect non-performance risk. Certain other products such as Access Accounts and Escrow Shield Plus product reserves are held at book value.