FAIR VALUE OF ASSETS AND LIABILITIES

Fair Value Measurement – Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative fair value guidance establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1 - Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. The Company’s Level 1 assets and liabilities primarily include certain cash equivalents, equity securities, short-term investments, and derivative contracts that trade on an active exchange market.

Level 2 - Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, and other market observable inputs. The Company’s Level 2 assets and liabilities include: fixed maturities (corporate public and private bonds, most government securities, certain asset-backed and mortgage-backed securities, etc.), certain equity securities (mutual funds, which do not trade in active markets because they are not publicly available), certain short-term investments, certain cash equivalents and certain OTC derivatives.

Level 3 - Fair value is based on at least one significant unobservable input for the asset or liability. The assets and liabilities in this category may require significant judgment or estimation in determining the fair value. The Company’s Level 3 assets and liabilities primarily include: certain private fixed maturities and equity securities, certain manually priced fixed maturities, certain highly structured OTC derivative contracts and embedded derivatives resulting from reinsurance or certain products with guaranteed benefits.

Assets and Liabilities by Hierarchy Level – The tables below present the balances of assets and liabilities reported at fair value on a recurring basis, as of the dates indicated.



	As of December 31, 2018
	Level 1		Level 2		Level 3		Netting(1)			Total
	(in thousands)
Fixed maturities, available-for-sale:
U.S Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	4,875,959	$	8,132	$	0		$	4,884,091
Obligations of U.S. states and their political subdivisions	0		131,164		0		0			131,164
Foreign government bonds	0		199,636		0		0			199,636
U.S. corporate public securities	0		1,473,973		0		0			1,473,973
U.S. corporate private securities	0		1,008,632		54,321		0			1,062,953
Foreign corporate public securities	0		291,086		0		0			291,086
Foreign corporate private securities	0		781,101		31,131		0			812,232
Asset-backed securities(2)	0		495,908		9,336		0			505,244
Commercial mortgage-backed securities	0		361,880		0		0			361,880
Residential mortgage-backed securities	0		49,414		0		0			49,414
Subtotal	0		9,668,753		102,920		0			9,771,673
Fixed maturities, trading	0		289,752		0		0			289,752
Equity securities	4,896		12		5,705		0			10,613
Short-term investments	0		29,818		0		0			29,818
Cash equivalents	1,098,903		2,593,456		0		0			3,692,359
Other invested assets(3)	4,380		4,843,414		0		(4,804,816		)	42,978
Reinsurance recoverables	0		0		239,911		0			239,911
Receivables from parent and affiliates	0		37,193		0		0			37,193
Subtotal excluding separate account assets	1,108,179		17,462,398		348,536		(4,804,816		)	14,114,297
Separate account assets(4)	0		31,210,346		0		0			31,210,346
Total assets	$	1,108,179	$	48,672,744	$	348,536	$	(4,804,816	)	$	45,324,643
Future policy benefits(5)	$	0	$	0	$	8,332,474	$	0		$	8,332,474
Policyholders' account balances	0		0		42,350		0			42,350
Payables to parent and affiliates	0		2,133,496		0		(2,133,496		)	0
Other liabilities	7,293		0		0		(664		)	6,629
Total liabilities	$	7,293	$	2,133,496	$	8,374,824	$	(2,134,160	)	$	8,381,453



	As of December 31, 2017
	Level 1		Level 2		Level 3		Netting (1)			Total

	(in thousands)
Fixed maturities, available-for-sale:
U.S Treasury securities and obligations of U.S. government authorities and agencies	$	0	$	4,826,413	$	5,237	$	0		$	4,831,650
Obligations of U.S. states and their political subdivisions	0		104,640		0		0			104,640
Foreign government bonds	0		140,305		0		0			140,305
U.S. corporate public securities	0		1,806,888		1,562		0			1,808,450
U.S. corporate private securities	0		1,148,536		59,408		0			1,207,944
Foreign corporate public securities	0		229,006		215		0			229,221
Foreign corporate private securities	0		737,539		34,021		0			771,560
Asset-backed securities(2)	0		160,229		185,358		0			345,587
Commercial mortgage-backed securities	0		505,684		0		0			505,684
Residential mortgage-backed securities	0		165,745		0		0			165,745
Subtotal	0		9,824,985		285,801		0			10,110,786
Fixed maturities, trading(6)	0		166,360		0		0			166,360
Equity securities(6)	5,599		18		9,758		0			15,375
Short-term investments	448,712		262,272		87		0			711,071
Cash equivalents	0		1,146,466		0		0			1,146,466
Other invested assets(3)(6)	10,738		5,059,779		147		(4,919,486		)	151,178
Reinsurance recoverables	0		0		244,006		0			244,006
Receivables from parent and affiliates	0		38,145		0		0			38,145
Subtotal excluding separate account assets	465,049		16,498,025		539,799		(4,919,486		)	12,583,387
Separate account assets(4)	0		37,990,547		0		0			37,990,547
Total assets	$	465,049	$	54,488,572	$	539,799	$	(4,919,486	)	$	50,573,934
Future policy benefits(5)	$	0	$	0	$	8,151,902	$	0		$	8,151,902
Payables to parent and affiliates	0		1,941,403		0		(1,941,403		)	0
Other liabilities	0		0		0		0			0
Total liabilities	$	0	$	1,941,403	$	8,151,902	$	(1,941,403	)	$	8,151,902


(1)	“Netting” amounts represent cash collateral of $2,671 million and $2,978 million as of December 31, 2018 and 2017, respectively, and the impact of offsetting asset and liability positions held with the same counterparty, subject to master netting arrangements.


(2)	Includes credit tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types.


(3)	Other invested assets excluded from the fair value hierarchy include certain hedge funds, private equity funds and other funds for which fair value is measured at net asset value ("NAV") per share (or its equivalent) as a practical expedient. At December 31, 2018 and 2017, the fair values of such investments were $8 million and $0.3 million, respectively.

(4)

Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Statements of Financial Position.

(5)

As of December 31, 2018, the net embedded derivative liability position of $8,332 million includes $625 million of embedded derivatives in an asset position and $8,957 million of embedded derivatives in a liability position. As of December 31, 2017, the net embedded derivative liability position of $8,152 million includes $819 million of embedded derivatives in an asset position and $8,971 million of embedded derivatives in a liability position.


(6)	Prior period amounts have been reclassified to conform to current period presentation. See Note 2 for details.

The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below.

Fixed Maturity Securities – The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent pricing services. Prices for each security are generally sourced from multiple pricing vendors, and a vendor hierarchy is maintained by asset type based on historical pricing experience and vendor expertise. The Company ultimately uses the price from the pricing service highest in the vendor hierarchy based on the respective asset type. The pricing hierarchy is updated for new financial products and recent pricing experience with various vendors. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. Typical inputs used by these pricing services include but are not limited to reported trades, benchmark yields, issuer spreads, bids, offers, and/or estimated cash flow, prepayment speeds and default rates. If the pricing information received from third-party pricing services is deemed not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process with the pricing service or classify the securities as Level 3. If the pricing service updates the price to be more consistent with the presented market observations, the security remains within Level 2.

Internally-developed valuations or indicative broker quotes are also used to determine fair value in circumstances where vendor pricing is not available, or where the Company ultimately concludes that pricing information received from the independent pricing services is not reflective of market activity. If the Company concludes the values from both pricing services and brokers are not reflective of market activity, it may override the information with an internally developed valuation. As of December 31, 2018 and 2017 overrides on a net basis were not material. Pricing service overrides, internally-developed valuations and indicative broker quotes are generally included in Level 3 in the fair value hierarchy.

The Company conducts several specific price monitoring activities. Daily analyses identify price changes over predetermined thresholds defined at the financial instrument level. Various pricing integrity reports are reviewed on a daily and monthly basis to determine if pricing is reflective of market activity or if it would warrant any adjustments. Other procedures performed include, but are not limited to, reviews of third-party pricing services methodologies, reviews of pricing trends, and back testing.

The fair values of private fixed maturities, which are originated by internal private asset managers, are primarily determined using discounted cash flow models. These models primarily use observable inputs that include Treasury or similar base rates plus estimated credit spreads to value each security. The credit spreads are obtained through a survey of private market intermediaries who are active in both primary and secondary transactions, and consider, among other factors, the credit quality and the reduced liquidity associated with private placements. Internal adjustments are made to reflect variation in observed sector spreads. Since most private placements are valued using standard market observable inputs and inputs derived from, or corroborated by, market observable data including, but not limited to observed prices and spreads for similar publicly or privately traded issues, they have been reflected within Level 2. For certain private fixed maturities, the discounted cash flow model may incorporate significant unobservable inputs, which reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset. To the extent management determines that such unobservable inputs are significant to the price of a security, a Level 3 classification is made.

Equity Securities – Equity securities consist principally of investments in common of publicly traded companies, privately traded securities, as well as mutual fund shares. The fair values of most publicly traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy. Estimated fair values for most privately traded equity securities are determined using discounted cash flow, earnings multiple and other valuation models that require a substantial level of judgment around inputs and therefore are classified within Level 3. The fair values of mutual fund shares that transact regularly (but do not trade in active markets because they are not publicly available) are based on transaction prices of identical fund shares and are classified within Level 2 in the fair value hierarchy.

Derivative Instruments – Derivatives are recorded at fair value either as assets, within "Other invested assets", or as liabilities, within “Payables to parent and affiliates” or "Other liabilities", except for embedded derivatives which are recorded with the associated host contract. The fair values of derivative contracts can be affected by changes in interest rates, foreign exchange rates, credit spreads, market volatility, expected returns, NPR, liquidity and other factors.

The Company's exchange-traded futures and options include treasury and equity futures. Exchange-traded futures and options are valued using quoted prices in active markets and are classified within Level 1 in the fair value hierarchy.

The majority of the Company’s derivative positions are traded in the OTC derivative market and are classified within Level 2 in the fair value hierarchy. OTC derivatives classified within Level 2 are valued using models that utilize actively quoted or observable market input values from external market data providers, third-party pricing vendors and/or recent trading activity. The Company’s policy is to use mid-market pricing in determining its best estimate of fair value. The fair values of most OTC derivatives, including interest rate and cross-currency swaps, currency forward contracts and single name credit default swaps are determined using discounted cash flow models. The fair values of European style option contracts are determined using Black-Scholes option pricing models. These models’ key inputs include the contractual terms of the respective contract, along with significant observable inputs, including interest rates, currency rates, credit spreads, equity prices, index dividend yields, NPR, volatility and other factors.

The Company’s cleared interest rate swaps and credit derivatives linked to an index are valued using models that utilize actively quoted or observable market inputs, including Overnight Indexed Swap discount rates, obtained from external market data providers, third-party pricing vendors, and/or recent trading activity. These derivatives are classified as Level 2 in the fair value hierarchy.

Cash Equivalents and Short-Term Investments – Cash equivalents and short-term investments include money market instruments and other highly liquid debt instruments. Certain money market instruments are valued using unadjusted quoted prices in active markets that are accessible for identical assets and are primarily classified as Level 1. The remaining instruments in this category are generally fair valued based on market observable inputs and these investments have primarily been classified within Level 2.

Separate Account Assets – Separate account assets include fixed maturity securities, treasuries, equity securities, mutual funds, and commercial mortgage loans for which values are determined consistent with similar instruments described above under “Fixed Maturity Securities” and “Equity Securities”.

Receivables from Parent and Affiliates – Receivables from parent and affiliates carried at fair value include affiliated bonds within the Company’s legal entity where fair value is determined consistent with similar securities described above under “Fixed Maturity Securities” managed by affiliated asset managers.

Reinsurance Recoverables – Reinsurance recoverables carried at fair value include the reinsurance of the Company’s living benefit guarantees on certain variable annuity contracts. These guarantees are accounted for as embedded derivatives and are recorded in “Reinsurance recoverables” or “Reinsurance payables” when fair value is in an asset or liability position, respectively. The methods and assumptions used to estimate the fair value are consistent with those described below in “Future policy benefits”. The reinsurance agreements covering these guarantees are derivatives with fair value determined in the same manner as the living benefit guarantee.

Future Policy Benefits – The liability for future policy benefits is related to guarantees primarily associated with the living benefit features of certain variable annuity contracts, including guaranteed minimum accumulation benefits ("GMAB"), guaranteed withdrawal benefits ("GMWB") and guaranteed minimum income and withdrawal benefits ("GMIWB"), accounted for as embedded derivatives. The fair values of these liabilities are calculated as the present value of future expected benefit payments to customers less the present value of future expected rider fees attributable to the embedded derivative feature. This methodology could result in either a liability or contra-liability balance, given changing capital market conditions and various actuarial assumptions. Since there is no observable active market for the transfer of these obligations, the valuations are calculated using internally developed models with option pricing techniques. The models are based on a risk neutral valuation framework and incorporate premiums for risks inherent in valuation techniques, inputs, and the general uncertainty around the timing and amount of future cash flows. The determination of these risk premiums requires the use of management's judgment.

The significant inputs to the valuation models for these embedded derivatives include capital market assumptions, such as interest rate levels and volatility assumptions, the Company’s market-perceived NPR, as well as actuarially determined assumptions, including contractholder behavior, such as lapse rates, benefit utilization rates, withdrawal rates, and mortality rates. Since many of these assumptions are unobservable and are considered to be significant inputs to the liability valuation, the liability included in future policy benefits has been reflected within Level 3 in the fair value hierarchy.

Capital market inputs and actual policyholders’ account values are updated each quarter based on capital market conditions as of the end of the quarter, including interest rates, equity markets and volatility. In the risk neutral valuation, the initial swap curve drives the total return used to grow the policyholders’ account values. The Company’s discount rate assumption is based on the LIBOR swap curve adjusted for an additional spread relative to LIBOR to reflect NPR.

Actuarial assumptions, including contractholder behavior and mortality, are reviewed at least annually, and updated based upon emerging experience, future expectations and other data, including any observable market data. These assumptions are generally updated annually unless a material change that the Company feels is indicative of a long-term trend is observed in an interim period.

Policyholders' Account Balances - The liability for policyholders' account balances is related to certain embedded derivative instruments associated with certain policyholders' account balances. The fair values are determined consistent with similar derivative instruments described above under "Derivative Instruments".

Quantitative Information Regarding Internally-Priced Level 3 Assets and Liabilities – The tables below present quantitative information on significant internally-priced Level 3 assets and liabilities.



	As of December 31, 2018
	Fair Value		Valuation Techniques	Unobservable Inputs	Minimum		Maximum		Weighted Average		Impact of Increase in Input on Fair Value(1)

	(in thousands)
Assets:
Corporate securities(2)	$	18,609	Discounted cash flow	Discount rate	7.00	%	20.00	%	11.30	%	Decrease
			Market Comparables(3)	EBITDA multiples	6.7X		6.7X		6.7X		Increase
			Liquidation	Liquidation	41	%	41	%	41	%	Increase
Reinsurance recoverables	$	239,911	Fair values are determined using the same unobservable inputs as future policy benefits.
Liabilities:
Future policy benefits(4)	$	8,332,474	Discounted cash flow	Lapse rate(5)	1	%	13	%			Decrease
				Spread over LIBOR(6)	0.36	%	1.60	%			Decrease
				Utilization rate(7)	50	%	97	%			Increase
				Withdrawal rate	See table footnote (8) below
				Mortality rate(9)	0	%	15	%			Decrease
				Equity volatility curve	18	%	22	%			Increase



	As of December 31, 2017
	Fair Value		Valuation Techniques	Unobservable Inputs	Minimum		Maximum		Weighted Average		Impact of Increase in Input on Fair Value (1)

	(in thousands)
Assets:
Corporate securities(2)	$	22,215	Discounted cash flow	Discount rate	5.06	%	22.23	%	8.57	%	Decrease
Reinsurance recoverables	$	244,006	Fair values are determined using the same unobservable inputs as future policy benefits.
Liabilities:
Future policy benefits(4)	$	8,151,902	Discounted cash flow	Lapse rate(5)	1	%	12	%			Decrease
				Spread over LIBOR(6)	0.12	%	1.10	%			Decrease
				Utilization rate(7)	52	%	97	%			Increase
				Withdrawal rate	See table footnote (8) below
				Mortality rate(9)	0	%	14	%			Decrease
				Equity volatility curve	13	%	24	%			Increase


(1)	Conversely, the impact of a decrease in input would have the opposite impact on fair value as that presented in the table.


(2)	Includes assets classified as fixed maturities, available-for-sale.


(3)	Represents multiples of earnings before interest, taxes, depreciation and amortization ("EBITDA"), and are amounts used when the Company has determined that market participants would use such multiples when valuing the investments.

(4)

Future policy benefits primarily represent general account liabilities for the living benefit features of the Company’s variable annuity contracts which are accounted for as embedded derivatives. Since the valuation methodology for these liabilities uses a range of inputs that vary at the contract level over the cash flow projection period, presenting a range, rather than weighted average, is a more meaningful representation of the unobservable inputs used in the valuation.


(5)	Lapse rates are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates are also generally assumed to be lower for the period where surrender charges apply.

(6)

The spread over the LIBOR swap curve represents the premium added to the proxy for the risk-free rate (LIBOR) to reflect our estimates of rates that a market participant would use to value the living benefit contracts in both the accumulation and payout phases. This spread includes an estimate of NPR, which is the risk that the obligation will not be fulfilled by the Company. NPR is primarily estimated by utilizing the credit spreads associated with issuing funding agreements, adjusted for any illiquidity risk premium. In order to reflect the financial strength ratings of the Company, credit spreads associated with funding agreements, as opposed to credit spread associated with debt, are utilized in developing this estimate because both funding agreements and living benefit contracts are insurance liabilities and are therefore senior to debt.

(7)

The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration and begin lifetime withdrawals at various time intervals from contract inception. The remaining contractholders are assumed to either begin lifetime withdrawals immediately or never utilize the benefit. Utilization assumptions may vary by product type, tax status and age. The impact of changes in these assumptions is highly dependent on the product type, the age of the contractholder at the time of the sale, and the timing of the first lifetime income withdrawal. Range reflects the utilization rate for the vast majority of business with living benefits.

(8)

The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. These assumptions vary based on the age of the contractholder, the tax status of the contract and the duration since the contractholder began lifetime withdrawals. As of December 31, 2018 and 2017, the minimum withdrawal rate assumption is 78% and the maximum withdrawal rate assumption may be greater than 100%. The fair value of the liability will generally increase the closer the withdrawal rate is to 100% and decrease as the withdrawal rate moves further away from 100%.

(9)

Range reflects the mortality rate for the vast majority of business with living benefits, with policyholders ranging from 50 to 90 years old. While the majority of living benefits have a minimum age requirement, certain benefits do not have an age restriction. This results in contractholders for certain benefits with mortality rates approaching 0%. Based on historical experience, the Company applies a set of age and duration specific mortality rate adjustments compared to standard industry tables. A mortality improvement assumption is also incorporated into the overall mortality table.

Interrelationships Between Unobservable Inputs – In addition to the sensitivities of fair value measurements to changes in each unobservable input in isolation, as reflected in the table above, interrelationships between these inputs may also exist, such that a change in one unobservable input may give rise to a change in another, or multiple, inputs. Examples of such interrelationships for significant internally-priced Level 3 assets and liabilities are as follows:

Corporate Securities – The rate used to discount future cash flows reflects current risk-free rates plus credit and liquidity spread requirements that market participants would use to value an asset. The discount rate may be influenced by many factors, including market cycles, expectations of default, collateral, term and asset complexity. Each of these factors can influence discount rates, either in isolation, or in response to other factors.

Future Policy Benefits – The Company expects efficient benefit utilization and withdrawal rates to generally be correlated with lapse rates. However, behavior is generally highly dependent on the facts and circumstances surrounding the individual contractholder, such as their liquidity needs or tax situation, which could drive lapse behavior independent of other contractholder behavior assumptions. To the extent more efficient contractholder behavior results in greater in-the-moneyness at the contract level, lapse rates may decline for those contracts. Similarly, to the extent that increases in equity volatility are correlated with overall declines in the capital markets, lapse rates may decline as contracts become more in-the-money.

Changes in Level 3 Assets and Liabilities – The following tables describe changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods. When a determination is made to classify assets and liabilities within Level 3, the determination is based on significance of the unobservable inputs in the overall fair value measurement. All transfers are based on changes in the observability of the valuation inputs, including the availability of pricing service information that the Company can validate. Transfers into Level 3 are generally the result of unobservable inputs utilized within valuation methodologies and the use of indicative broker quotes for assets that were previously valued using observable inputs. Transfers out of Level 3 are generally due to the use of observable inputs in valuation methodologies as well as the availability of pricing service information for certain assets that the Company can validate. During the second quarter of 2018, $213 million of investments in collateralized loan obligations (“CLOs”) reported as “Asset-backed securities” were transferred from Level 3 to Level 2 as market activity, liquidity and overall observability of valuation inputs of CLOs have increased.



	Year Ended December 31, 2018
	Fair Value, beginning of period			Total realized and unrealized gains (losses)(1)			Purchases		Sales			Issuances			Settlements			Other(2)			Transfers into Level 3		Transfers out of Level 3			Fair Value, end of period			Unrealized gains (losses) for assets still held(3)
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Government	$	5,237		$	0		$	2,895	$	0		$	0		$	0		$	0		$	0	$	0		$	8,132		$	0
Foreign Government	0			0			0		0			0			0			0			0		0			0			0
Corporate Securities(4)	95,206			(10,922		)	15,268		(275		)	0			(22,332		)	24			9,969		(1,486		)	85,452			(6,627		)
Structured Securities(5)	185,358			(724		)	84,810		(14,236		)	0			(37,672		)	0			51,979		(260,179		)	9,336			0
Other assets:
Equity securities	9,758			(591		)	0		(3,609		)	0			0			147			0		0			5,705			(1,208		)
Other invested assets	147			0			0		0			0			0			(147		)	0		0			0			0
Short-term investments	87			(20		)	0		0			0			(43		)	(24		)	0		0			0			(55		)
Cash equivalents	0			13			0		0			0			(13		)	0			0		0			0			0
Reinsurance recoverables	244,006			(28,757		)	19,061		0			0			0			5,601			0		0			239,911			(19,962		)
Receivables from parent and affiliates	0			0			0		0			0			0			0			0		0			0			0
Liabilities:
Future policy benefits	(8,151,902		)	843,914			0		0			(1,024,486		)	0			0			0		0			(8,332,474		)	529,804
Policyholders' account balances	0			6,051			0		0			(48,401		)	0			0			0		0			(42,350		)	6,051



	Year Ended December 31, 2018
	Total realized and unrealized gains (losses)											Unrealized gains (losses) for assets still held(3)
	Realized investment gains (losses), net(1)			Asset administration fees and other income			Included in other comprehensive income (losses)			Net investment income		Realized investment gains (losses), net			Asset administration fees and other income
	(in thousands)
Fixed maturities, available-for-sale	$	(6,693	)	$	0		$	(5,194	)	$	241	$	(6,627	)	$	0
Other assets:
Equity securities	0			(591		)	0			0		0			(1,208		)
Other invested assets	0			0			0			0		0			0
Short-term investments	(20		)	0			0			0		(55		)	0
Cash equivalents	13			0			0			0		0			0
Reinsurance recoverables	(28,757		)	0			0			0		(19,962		)	0
Receivables from parent and affiliates	0			0			0			0		0			0
Liabilities:
Future policy benefits	843,914			0			0			0		529,804			0
Policyholders' account balances	6,051			0			0			0		6,051			0



	Year Ended December 31, 2017(7)
	Fair Value, beginning of period			Total realized and unrealized gains (losses)(1)			Purchases		Sales			Issuances			Settlements			Other(2)			Transfers into Level 3		Transfers out of Level 3			Fair Value, end of period			Unrealized gains (losses) for assets still held(3)
	(in thousands)
Fixed maturities, available-for-sale:
U.S. Government	$	0		$	0		$	4,264	$	0		$	0		$	0		$	973		$	0	$	0		$	5,237		$	0
Foreign Government	87			0			0		0			0			0			0			0		(87		)	0			0
Corporate Securities(4)	151,989			(2,630		)	17,920		(15,283		)	0			(111,675		)	(4,157		)	64,412		(5,370		)	95,206			(6,498		)
Structured Securities(5)	31,735			976			237,469		(5,613		)	0			(55,184		)	0			106,034		(130,059		)	185,358			(8		)
Other assets:
Equity securities(6)	4,864			1,040			0		0			0			0			3,854			0		0			9,758			338
Other invested assets(6)	0			(7		)	0		0			0			0			154			0		0			147			(7		)
Short-term investments	450			0			94		(5		)	0			(2		)	(450		)	0		0			87			0
Cash equivalents	375			0			0		0			0			0			(375		)	0		0			0			0
Reinsurance recoverables	240,091			(18,240		)	19,416		0			0			0			2,739			0		0			244,006			(10,303		)
Receivables from parent and affiliates	33,962			0			0		0			0			0			0			0		(33,962		)	0			0
Liabilities:
Future policy benefits	(7,707,333		)	552,047			0		0			(996,616		)	0			0			0		0			(8,151,902		)	307,529
Policyholders' account balances	0			0			0		0			0			0			0			0		0			0			0



	Year Ended December 31, 2017(7)
	Total realized and unrealized gains (losses)										Unrealized gains (losses) for assets still held(3)
	Realized investment gains (losses), net(1)			Asset administration fees and other income		Included in other comprehensive income (losses)			Net investment income		Realized investment gains (losses), net			Asset administration fees and other income
	(in thousands)
Fixed maturities, available-for-sale	$	(6,301	)	$	0	$	(3,410	)	$	8,057	$	(6,506	)	$	0
Other assets:
Equity securities(6)	0			689		351			0		0			338
Other invested assets(6)	(7		)	0		0			0		(7		)	0
Short-term investments	0			0		0			0		0			0
Cash equivalents	0			0		0			0		0			0
Reinsurance recoverables	(18,240		)	0		0			0		(10,303		)	0
Receivables from parent and affiliates	0			0		0			0		0			0
Liabilities:
Future policy benefits	552,047			0		0			0		307,529			0
Policyholders' account balances	0			0		0			0		0			0

The following tables summarize the portion of changes in fair values of Level 3 assets and liabilities included in earnings and OCI for the year ended December 31, 2016, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held as of December 31, 2016.



	Year Ended December 31, 2016(7)
	Total realized and unrealized gains (losses)											Unrealized gains (losses) for assets still held(3)
	Realized investment gains (losses), net(1)			Asset administration fees and other income			Included in other comprehensive income (losses)			Net investment income		Realized investment gains (losses), net			Asset administration fees and other income
	(in thousands)
Fixed maturities, available-for-sale	$	(4,014	)	$	(161	)	$	2,466		$	5,974	$	(4,943	)	$	0
Other assets:
Equity securities(6)	0			(123		)	(351		)	0		0			(123		)
Other invested assets(6)	0			0			0			0		0			0
Short-term investments	0			0			0			0		0			0
Cash equivalents	0			0			0			0		0			0
Reinsurance recoverables	(2,852,588		)	0			0			0		59,501			0
Receivables from parent and affiliates	(13		)	0			50			0		0			0
Liabilities:
Future policy benefits	(3,791,759		)	0			0			0		(3,740,535		)	0
Policyholders' account balances	0			0			0			0		0			0


(1)	Realized investment gains (losses) on future policy benefits and reinsurance recoverables primarily represent the change in the fair value of the Company's living benefit guarantees on certain of its variable annuity contracts.


(2)	Other, primarily represents reclassifications of certain assets and liabilities between reporting categories.


(3)	Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts.


(4)	Includes U.S. corporate public, U.S. corporate private, foreign corporate public and foreign corporate private securities. Prior period amounts were aggregated to conform to current period presentation.


(5)	Includes asset-backed, commercial mortgage-backed and residential mortgage-backed securities. Prior period amounts were aggregated to conform to current period presentation.


(6)	Prior period amounts have been reclassified to conform to current period presentation. See Note 2 for details.


(7)	Prior period amounts have been updated to conform to current period presentation.

Fair Value of Financial Instruments

The table below presents the carrying amount and fair value by fair value hierarchy level of certain financial instruments that are not reported at fair value. The financial instruments presented below are reported at carrying value on the Company’s Statements of Financial Position. In some cases, as described below, the carrying amount equals or approximates fair value.



	December 31, 2018(1)
	Fair Value								Carrying Amount(2)
	Level 1		Level 2		Level 3		Total		Total

	(in thousands)
Assets:
Commercial mortgage and other loans	$	0	$	0	$	1,339,707	$	1,339,707	$	1,353,478
Policy loans	0		0		12,805		12,805		12,805
Short-term investments	7,750		0		0		7,750		7,750
Cash and cash equivalents	136,175		675,000		0		811,175		811,175
Accrued investment income	0		90,895		0		90,895		90,895
Reinsurance recoverables	0		0		55,236		55,236		55,236
Receivables from parent and affiliates	0		9,188		0		9,188		9,188
Other assets	0		3,735		0		3,735		3,735
Total assets	$	143,925	$	778,818	$	1,407,748	$	2,330,491	$	2,344,262
Liabilities:
Policyholders’ account balances - investment contracts	$	0	$	0	$	560,548	$	560,548	$	565,903
Cash collateral for loaned securities	0		384		0		384		384
Short-term debt	0		139,843		0		139,843		140,569
Long-term debt	0		791,670		0		791,670		787,596
Reinsurance Payables	0		0		55,236		55,236		55,236
Payables to parent and affiliates	0		30,846		0		30,846		30,846
Other liabilities	0		554,162		0		554,162		554,162
Separate account liabilities - investment contracts	0		71		0		71		71
Total liabilities	$	0	$	1,516,976	$	615,784	$	2,132,760	$	2,134,767



	December 31, 2017(1)
	Fair Value								Carrying Amount(2)
	Level 1		Level 2		Level 3		Total		Total

	(in thousands)
Assets:
Commercial mortgage and other loans	$	0	$	0	$	1,396,167	$	1,396,167	$	1,387,012
Policy loans	0		0		12,558		12,558		12,558
Short-term investments	0		0		0		0		0
Cash and cash equivalents	493,473		0		0		493,473		493,473
Accrued investment income	0		88,331		0		88,331		88,331
Reinsurance recoverables	0		0		59,588		59,588		59,588
Receivables from parent and affiliates	0		11,206		0		11,206		11,206
Other assets	0		13,802		0		13,802		13,802
Total assets	$	493,473	$	113,339	$	1,468,313	$	2,075,125	$	2,065,970
Liabilities:
Policyholders’ account balances - investment contracts	$	0	$	0	$	281,582	$	281,582	$	281,051
Cash collateral for loaned securities	0		17,383		0		17,383		17,383
Short-term debt	0		43,734		0		43,734		43,734
Long-term debt	0		1,003,251		0		1,003,251		928,165
Reinsurance payables	0		0		59,588		59,588		59,588
Payables to parent and affiliates	0		36,026		0		36,026		36,026
Other liabilities	0		135,556		0		135,556		135,556
Separate account liabilities - investment contracts	0		102		0		102		102
Total liabilities	$	0	$	1,236,052	$	341,170	$	1,577,222	$	1,501,605

(1)

The information presented as of December 31, 2017, excludes certain hedge funds, private equity funds and other funds that were accounted for using the cost method and for which the fair value was measured at NAV per share (or its equivalent) as a practical expedient. The fair value and the carrying value of these cost method investments were $6.4 million and $6.0 million, respectively. Due to the adoption of ASU 2016-01 effective January 1, 2018, these assets are carried at fair value at each reporting date with changes in fair value reported in “Asset administration fees and other income.” Therefore, as of December 31, 2018, these assets are excluded from this table but are reported in the fair value recurring measurement table.


(2)	Carrying values presented herein differ from those in the Company’s Statements of Financial Position because certain items within the respective financial statement captions are not considered financial instruments or are out of scope under authoritative guidance relating to disclosures of the fair value of financial instruments.

The fair values presented above have been determined by using available market information and by applying market valuation methodologies, as described in more detail below.

Commercial Mortgage and Other Loans

The fair value of most commercial mortgage loans is based upon the present value of the expected future cash flows discounted at the appropriate U.S. Treasury rate or foreign government bond rate (for non-U.S. dollar-denominated loans) plus an appropriate credit spread for loans of similar quality, average life and currency. The quality ratings for these loans, a primary determinant of the credit spreads and a significant component of the pricing process, are based on an internally-developed methodology. Certain commercial mortgage loans are valued incorporating other factors, including the terms of the loans, the principal exit strategies for the loans, prevailing interest rates and credit risk.

Policy Loans

Policy loans carrying value approximates fair value.

Short-Term Investments, Cash and Cash Equivalents, Accrued Investment Income, Receivables from Parent and Affiliates, and Other Assets

The Company believes that due to the short-term nature of certain assets, the carrying value approximates fair value. These assets include: certain short-term investments which are not securities, are recorded at amortized cost; cash and cash equivalent instruments; accrued investment income; and other assets that meet the definition of financial instruments, including receivables such as unsettled trades and accounts receivable.

Reinsurance Recoverables and Reinsurance Payables

Reinsurance recoverables and reinsurance payables include corresponding receivables and payables associated with reinsurance arrangements between the Company and related parties. See Note 10 for additional information about the Company's reinsurance arrangements.

Policyholders’ Account Balances - Investment Contracts

Only the portion of policyholders’ account balances related to products that are investment contracts (those without significant mortality or morbidity risk) are reflected in the table above. For fixed deferred annuities, payout annuities and other similar contracts without life contingencies, fair values are generally derived using discounted projected cash flows based on interest rates that are representative of the Company’s financial strength ratings, and hence reflect the Company’s own NPR. For those balances that can be withdrawn by the customer at any time without prior notice or penalty, the fair value is the amount estimated to be payable to the customer as of the reporting date, which is generally the carrying value.

Cash Collateral for Loaned Securities

Cash collateral for loaned securities represents the collateral received or paid in connection with loaning or borrowing securities. Due to the short-term nature of these transactions, the carrying value approximates fair value.

Debt

The fair value of short-term and long-term debt is generally determined by either prices obtained from independent pricing services, which are validated by the Company, or discounted cash flow models. Discounted cash flow models predominately use market observable inputs such as the borrowing rates currently available to the Company for debt and financial instruments with similar terms and remaining maturities. For debt with a maturity of less than 90 days, the carrying value approximates fair value.

Other Liabilities and Payables to Parent and Affiliates

Other liabilities and payables to parent and affiliates are primarily payables, such as unsettled trades, drafts, escrow deposits and accrued expense payables. Due to the short-term until settlement of most of these liabilities, the Company believes that carrying value approximates fair value.

Separate Account Liabilities - Investment Contracts

Only the portion of separate account liabilities related to products that are investment contracts are reflected in the table above. Separate account liabilities are recorded at the amount credited to the contractholder, which reflects the change in fair value of the corresponding separate account assets including contractholder deposits less withdrawals and fees; therefore, carrying value approximates fair value.