Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2015

Schedule of assets and liabilities that are measured at fair value on a recurring and non-recurring basis

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of September 30, 2015.



($ in millions)	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Counterparty and cash collateral netting			Balance as of September 30, 2015
Assets
Fixed income securities:
U.S. government and agencies	$	2,851		$	904		$	5					$	3,760
Municipal	—			7,305			189						7,494
Corporate	—			41,029			600						41,629
Foreign government	—			1,085			—						1,085
ABS	—			2,529			182						2,711
RMBS	—			1,010			1						1,011
CMBS	—			523			19						542
Redeemable preferred stock	—			25			—						25
Total fixed income securities	2,851			54,410			996						58,257
Equity securities	3,925			170			141						4,236
Short-term investments	351			2,645			40						3,036
Other investments: Free-standing derivatives	—			42			1			$	(14	)	29
Separate account assets	3,677			—			—						3,677
Other assets	2			—			1						3
Total recurring basis assets	10,806			57,267			1,179			(14		)	69,238
Non-recurring basis ⁽¹⁾	—			—			25						25
Total assets at fair value	$	10,806		$	57,267		$	1,204		$	(14	)	$	69,263
% of total assets at fair value	15.6		%	82.7		%	1.7		%	—		%	100		%

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(295	)				$	(295	)
Other liabilities: Free-standing derivatives	(5		)	(14		)	(9		)	$	5		(23		)
Total liabilities at fair value	$	(5	)	$	(14	)	$	(304	)	$	5		$	(318	)
% of total liabilities at fair value	1.6		%	4.4		%	95.6		%	(1.6		)%	100		%

_______________


⁽¹⁾	Includes $8 million of limited partnership interests and $17 million of other investments written-down to fair value in connection with recognizing other-than-temporary impairments.

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2014.



($ in millions)	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Counterparty and cash collateral netting			Balance as of December 31, 2014
Assets
Fixed income securities:
U.S. government and agencies	$	3,240		$	1,082		$	6					$	4,328
Municipal	—			8,227			270						8,497
Corporate	—			41,253			891						42,144
Foreign government	—			1,645			—						1,645
ABS	—			3,782			196						3,978
RMBS	—			1,206			1						1,207
CMBS	—			592			23						615
Redeemable preferred stock	—			26			—						26
Total fixed income securities	3,240			57,813			1,387						62,440
Equity securities	3,787			234			83						4,104
Short-term investments	692			1,843			5						2,540
Other investments: Free-standing derivatives	—			95			2			$	(5	)	92
Separate account assets	4,396			—			—						4,396
Other assets	2			—			1						3
Total recurring basis assets	12,117			59,985			1,478			(5		)	73,575
Non-recurring basis ⁽¹⁾	—			—			9						9
Total assets at fair value	$	12,117		$	59,985		$	1,487		$	(5	)	$	73,584
% of total assets at fair value	16.5		%	81.5		%	2.0		%	—		%	100		%

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(323	)				$	(323	)
Other liabilities: Free-standing derivatives	(1		)	(50		)	(9		)	$	22		(38		)
Total liabilities at fair value	$	(1	)	$	(50	)	$	(332	)	$	22		$	(361	)
% of total liabilities at fair value	0.3		%	13.8		%	92.0		%	(6.1		)%	100		%

_______________


⁽¹⁾	Includes $6 million of mortgage loans and $3 million of limited partnership interests written-down to fair value in connection with recognizing other-than-temporary impairments.

Summary of quantitative information about the significant unobservable inputs

The following table summarizes quantitative information about the significant unobservable inputs used in Level 3 fair value measurements.



($ in millions)	Fair value			Valuation technique	Unobservable input	Range	Weighted average
September 30, 2015
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(242	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.76%
December 31, 2014
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(278	)	Stochastic cash flow model	Projected option cost	1.0 - 2.0%	1.76%

Schedule of the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the three months ended September 30, 2015.



($ in millions)				Total gains (losses) included in:
	Balance as of June 30, 2015			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	5		$	—		$	—		$	—		$	—
Municipal	215			3			—			3			—
Corporate	626			11			(10		)	—			(24		)
ABS	120			—			(1		)	31			—
RMBS	1			—			—			—			—
CMBS	28			—			—			—			—
Total fixed income securities	995			14			(11		)	34			(24		)
Equity securities	108			(2		)	(3		)	—			—
Short-term investments	35			—			—			—			—
Free-standing derivatives, net	(7		)	(1		)	—			—			—
Other assets	1			—			—			—			—
Total recurring Level 3 assets	$	1,132		$	11		$	(14	)	$	34		$	(24	)

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(315	)	$	19		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(315	)	$	19		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2015
Assets
Fixed income securities:
U.S. government and agencies	$	—		$	—		$	—		$	—		$	5
Municipal	—			(32		)	—			—			189
Corporate	10			(11		)	—			(2		)	600
ABS	60			—			—			(28		)	182
RMBS	—			—			—			—			1
CMBS	4			—			—			(13		)	19
Total fixed income securities	74			(43		)	—			(43		)	996
Equity securities	38			—			—			—			141
Short-term investments	5			—			—			—			40
Free-standing derivatives, net	—			—			—			—			(8		)	⁽²⁾
Other assets	—			—			—			—			1
Total recurring Level 3 assets	$	117		$	(43	)	$	—		$	(43	)	$	1,170

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	—		$	1		$	(295	)
Total recurring Level 3 liabilities	$	—		$	—		$	—		$	1		$	(295	)

_____________


⁽¹⁾	The effect to net income totals $30 million and is reported in the Condensed Consolidated Statements of Operations as follows: $8 million in realized capital gains and losses, $3 million in net investment income, $27 million in interest credited to contractholder funds and $(8) million in life and annuity contract benefits.


⁽²⁾	Comprises $1 million of assets and $9 million of liabilities.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the nine months ended September 30, 2015.



($ in millions)				Total gains (losses) included in:
	Balance as of December 31, 2014			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	6		$	—		$	—		$	—		$	—
Municipal	270			5			(4		)	3			(2		)
Corporate	891			11			(16		)	5			(232		)
ABS	196			(2		)	1			43			(84		)
RMBS	1			—			—			—			—
CMBS	23			—			—			—			—
Total fixed income securities	1,387			14			(19		)	51			(318		)
Equity securities	83			(1		)	1			—			—
Short-term investments	5			—			—			—			—
Free-standing derivatives, net	(7		)	—			—			—			—
Other assets	1			—			—			—			—
Total recurring Level 3 assets	$	1,469		$	13		$	(18	)	$	51		$	(318	)

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(323	)	$	24		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(323	)	$	24		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2015
Assets
Fixed income securities:
U.S. government and agencies	$	—		$	—		$	—		$	(1	)	$	5
Municipal	—			(81		)	—			(2		)	189
Corporate	70			(57		)	—			(72		)	600
ABS	70			(5		)	—			(37		)	182
RMBS	—			—			—			—			1
CMBS	9			—			—			(13		)	19
Total fixed income securities	149			(143		)	—			(125		)	996
Equity securities	58			—			—			—			141
Short-term investments	35			—			—			—			40
Free-standing derivatives, net	—			—			—			(1		)	(8		)	⁽²⁾
Other assets	—			—			—			—			1
Total recurring Level 3 assets	$	242		$	(143	)	$	—		$	(126	)	$	1,170

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(1	)	$	5		$	(295	)
Total recurring Level 3 liabilities	$	—		$	—		$	(1	)	$	5		$	(295	)

_____________


⁽¹⁾	The effect to net income totals $37 million and is reported in the Condensed Consolidated Statements of Operations as follows: $4 million in realized capital gains and losses, $9 million in net investment income, $32 million in interest credited to contractholder funds and $(8) million in life and annuity contract benefits.


⁽²⁾	Comprises $1 million of assets and $9 million of liabilities.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the three months ended September 30, 2014.



($ in millions)				Total gains (losses) included in:
	Balance as of June 30, 2014			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	6		$	—		$	—		$	—		$	—
Municipal	302			—			(7		)	—			—
Corporate	965			4			(14		)	23			—
ABS	142			1			1			—			(20		)
RMBS	1			—			—			—			—
CMBS	55			(1		)	—			—			—
Total fixed income securities	1,471			4			(20		)	23			(20		)
Equity securities	19			—			—			—			—
Free-standing derivatives, net	(5		)	—			—			—			—
Other assets	1			—			—			—			—
Total recurring Level 3 assets	$	1,486		$	4		$	(20	)	$	23		$	(20	)

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(331	)	$	9		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(331	)	$	9		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2014
Assets
Fixed income securities:
U.S. government and agencies	$	—		$	—		$	—		$	—		$	6
Municipal	5			(15		)	—			5			290
Corporate	24			(12		)	—			(54		)	936
ABS	55			—			—			(5		)	174
RMBS	—			—			—			—			1
CMBS	3			—			—			(3		)	54
Total fixed income securities	87			(27		)	—			(57		)	1,461
Equity securities	64			—			—			—			83
Free-standing derivatives, net	—			—			—			(1		)	(6		)	⁽²⁾
Other assets	—			—			—			—			1
Total recurring Level 3 assets	$	151		$	(27	)	$	—		$	(58	)	$	1,539

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	—		$	1		$	(321	)
Total recurring Level 3 liabilities	$	—		$	—		$	—		$	1		$	(321	)

_____________________


⁽¹⁾	The effect to net income totals $13 million and is reported in the Condensed Consolidated Statements of Operations as follows: $4 million in net investment income, $5 million in interest credited to contractholder funds and $4 million in life and annuity contract benefits.


⁽²⁾	Comprises $3 million of assets and $9 million of liabilities.

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis during the nine months ended September 30, 2014.



($ in millions)				Total gains (losses) included in:
	Balance as of December 31, 2013			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	7		$	—		$	—		$	—		$	—
Municipal	343			(4		)	4			—			(17		)
Corporate	1,109			17			(4		)	23			(37		)
ABS	192			1			1			—			(121		)
RMBS	2			—			—			—			—
CMBS	43			(1		)	—			5			—
Redeemable preferred stock	1			—			—			—			—
Total fixed income securities	1,697			13			1			28			(175		)
Equity securities	132			22			(15		)	—			—
Short-term investments	—			—			—			—			—
Free-standing derivatives, net	(5		)	1			—			—			—
Other assets	—			1			—			—			—
Assets held for sale	362			(1		)	2			4			(2		)
Total recurring Level 3 assets	$	2,186		$	36		$	(12	)	$	32		$	(177	)

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(307	)	$	(5	)	$	—		$	—		$	—
Liabilities held for sale	(246		)	17			—			—			—
Total recurring Level 3 liabilities	$	(553	)	$	12		$	—		$	—		$	—

	Sold in LBL disposition⁽³⁾			Purchases/ Issues⁽⁴⁾			Sales			Settlements			Balance as of September 30, 2014
Assets
Fixed income securities:
U.S. government and agencies	$	—		$	—		$	—		$	(1	)	$	6
Municipal	—			6			(41		)	(1		)	290
Corporate	—			56			(123		)	(105		)	936
ABS	—			119			—			(18		)	174
RMBS	—			—			—			(1		)	1
CMBS	4			8			(1		)	(4		)	54
Redeemable preferred stock	—			—			(1		)	—			—
Total fixed income securities	4			189			(166		)	(130		)	1,461
Equity securities	—			67			(123		)	—			83
Short-term investments	—			40			(40		)	—			—
Free-standing derivatives, net	—			2			—			(4		)	(6		)	⁽²⁾
Other assets	—			—			—			—			1
Assets held for sale	(351		)	—			(8		)	(6		)	—
Total recurring Level 3 assets	$	(347	)	$	298		$	(337	)	$	(140	)	$	1,539

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	(13	)	$	—		$	4		$	(321	)
Liabilities held for sale	230			(4		)	—			3			—
Total recurring Level 3 liabilities	$	230		$	(17	)	$	—		$	7		$	(321	)

_____________________


⁽¹⁾	The effect to net income totals $48 million and is reported in the Condensed Consolidated Statements of Operations as follows: $29 million in realized capital gains and losses, $10 million in net investment income, $5 million in interest credited to contractholder funds, $8 million in life and annuity contract benefits and $(4) million in loss on disposition of operations.


⁽²⁾	Comprises $3 million of assets and $9 million of liabilities.


⁽³⁾	Includes transfers from held for sale that took place in first quarter 2014 of $4 million for CMBS and $(4) million for Assets held for sale.


⁽⁴⁾	Represents purchases for assets and issues for liabilities.

Schedule of gains and losses included in net income for Level 3 assets and liabilities still held at the balance sheet date

The following table provides the change in unrealized gains and losses included in net income for Level 3 assets and liabilities held as of September 30.



($ in millions)	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Assets
Fixed income securities:
Municipal	$	—		$	(3	)	$	(1	)	$	(8	)
Corporate	3			3			7			8
ABS	(1		)	—			3			—
RMBS	—			—			—			(1		)
CMBS	—			(1		)	—			(1		)
Total fixed income securities	2			(1		)	9			(2		)
Equity securities	(2		)	—			(2		)	—
Free-standing derivatives, net	(1		)	—			—			6
Other assets	—			—			—			1
Assets held for sale	—			—			—			(1		)
Total recurring Level 3 assets	$	(1	)	$	(1	)	$	7		$	4
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	19		$	9		$	24		$	(5	)
Liabilities held for sale	—			—			—			17
Total recurring Level 3 liabilities	$	19		$	9		$	24		$	12

Schedule of carrying values and fair value estimates of financial instruments not carried at fair value

Presented below are the carrying values and fair value estimates of financial instruments not carried at fair value.

Financial assets



($ in millions)	September 30, 2015				December 31, 2014
	Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	$	4,402	$	4,615	$	4,188	$	4,446
Cost method limited partnerships	1,148		1,506		1,122		1,488
Bank loans	1,839		1,820		1,663		1,638
Agent loans	416		406		368		361



($ in millions)	September 30, 2015				December 31, 2014
	Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	$	12,718	$	13,225	$	13,734	$	14,390
Long-term debt	5,175		5,695		5,194		5,835
Liability for collateral	783		783		782		782