Fair Value of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2018

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



Assets and liabilities measured at fair value
	As of March 31, 2018
($ 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			Total
Assets
Fixed income securities:
U.S. government and agencies	$	2,845		$	561		$	—					$	3,406
Municipal	—			8,473			96						8,569
Corporate - public	—			30,535			77						30,612
Corporate - privately placed	—			11,024			215						11,239
Foreign government	—			979			—						979
ABS - CDO	—			450			10						460
ABS - consumer and other	—			675			62						737
RMBS	—			550			—						550
CMBS	—			72			27						99
Redeemable preferred stock	—			23			—						23
Total fixed income securities	2,845			53,342			487						56,674
Equity securities	6,374			370			242						6,986
Short-term investments	402			3,022			—						3,424
Other investments: Free-standing derivatives	—			117			1			$	(15	)	103
Separate account assets	3,314			—			—						3,314
Total assets at fair value	$	12,935		$	56,851		$	730		$	(15	)	$	70,501
% of total assets at fair value	18.4		%	80.6		%	1.0		%	—		%	100		%

Investments reported at NAV													1,663
Total													$	72,164

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(262	)				$	(262	)
Other liabilities: Free-standing derivatives	—			(75		)	—			$	26		(49		)
Total liabilities at fair value	$	—		$	(75	)	$	(262	)	$	26		$	(311	)
% of total liabilities at fair value	—		%	24.1		%	84.3		%	(8.4		)%	100		%



Assets and liabilities measured at fair value
	As of December 31, 2017
($ 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			Total
Assets
Fixed income securities:
U.S. government and agencies	$	3,079		$	537		$	—					$	3,616
Municipal	—			8,227			101						8,328
Corporate - public	—			31,963			108						32,071
Corporate - privately placed	—			11,731			224						11,955
Foreign government	—			1,021			—						1,021
ABS - CDO	—			480			99						579
ABS - consumer and other	—			645			48						693
RMBS	—			578			—						578
CMBS	—			102			26						128
Redeemable preferred stock	—			23			—						23
Total fixed income securities	3,079			55,307			606						58,992
Equity securities	6,032			379			210						6,621
Short-term investments	264			1,660			20						1,944
Other investments: Free-standing derivatives	—			132			1			$	(6	)	127
Separate account assets	3,444			—			—						3,444
Other assets	—			—			—						—
Total recurring basis assets	12,819			57,478			837			(6		)	71,128
Non-recurring basis ⁽¹⁾	—			—			3						3
Total assets at fair value	$	12,819		$	57,478		$	840		$	(6	)	$	71,131
% of total assets at fair value	18.0		%	80.8		%	1.2		%	—		%	100		%

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(286	)				$	(286	)
Other liabilities: Free-standing derivatives	(1		)	(83		)	—			$	14		(70		)
Total liabilities at fair value	$	(1	)	$	(83	)	$	(286	)	$	14		$	(356	)
% of total liabilities at fair value	0.3		%	23.3		%	80.3		%	(3.9		)%	100		%


⁽¹⁾	Includes $3 million of limited partnership interests written-down to fair value in connection with recognizing OTTI losses.

Summary of quantitative information about the significant unobservable inputs



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
March 31, 2018
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(232	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.74%
December 31, 2017
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(252	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.74%

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



Rollforward of level 3 assets and liabilities held at fair value on a recurring basis during the period
				March 31, 2018
	Balance as of December 31, 2017			Total gains (losses) included in:						Transfers into Level 3			Transfers out of Level 3
($ in millions)	Balance as of December 31, 2017			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	101		$	1		$	(1	)	$	—		$	(2	)
Corporate - public	108			—			(1		)	4			(5		)
Corporate - privately placed	224			—			(1		)	—			(19		)
ABS - CDO	99			—			—			—			(89		)
ABS - consumer and other	48			—			1			5			—
CMBS	26			—			—			—			—
Total fixed income securities	606			1			(2		)	9			(115		)
Equity securities	210			3			—			—			—
Short-term investments	20			—			—			—			—
Free-standing derivatives, net	1			—			—			—			—
Total recurring Level 3 assets	$	837		$	4		$	(2	)	$	9		$	(115	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(286	)	$	23		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(286	)	$	23		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of March 31, 2018
Assets
Fixed income securities:
Municipal	$	—		$	(2	)	$	—		$	(1	)	$	96
Corporate - public	—			(26		)	—			(3		)	77
Corporate - privately placed	13			—			—			(2		)	215
ABS - CDO	—			—			—			—			10
ABS - consumer and other	45			(35		)	—			(2		)	62
CMBS	1			—			—			—			27
Total fixed income securities	59			(63		)	—			(8		)	487
Equity securities	30			(1		)	—			—			242
Short-term investments	25			(45		)	—			—			—
Free-standing derivatives, net	—			—			—			—			1			⁽²⁾
Total recurring Level 3 assets	$	114		$	(109	)	$	—		$	(8	)	$	730
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(1	)	$	2		$	(262	)
Total recurring Level 3 liabilities	$	—		$	—		$	(1	)	$	2		$	(262	)


⁽¹⁾	The effect to net income totals $27 million and is reported in the Condensed Consolidated Statements of Operations as follows: $4 million in realized capital gains and losses, $19 million in interest credited to contractholder funds and $4 million in life contract benefits.


⁽²⁾	Comprises $1 million of assets.



Rollforward of level 3 assets and liabilities held at fair value on a recurring basis during the period
				March 31, 2017
	Balance as of December 31, 2016			Total gains (losses) included in:						Transfers into Level 3			Transfers out of Level 3
($ in millions)	Balance as of December 31, 2016			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	125		$	1		$	1		$	—		$	(1	)
Corporate - public	78			—			—			—			(16		)
Corporate - privately placed	263			—			5			—			—
ABS - CDO	27			—			2			27			—
ABS - consumer and other	42			—			—			—			(2		)
RMBS	1			—			—			—			—
CMBS	22			—			—			—			—
Total fixed income securities	558			1			8			27			(19		)
Equity securities	163			10			—			—			(3		)
Short-term investments	15			—			—			—			—
Free-standing derivatives, net	(2		)	1			—			—			—
Other assets	1			(1		)	—			—			—
Total recurring Level 3 assets	$	735		$	11		$	8		$	27		$	(22	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(290	)	$	3		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(290	)	$	3		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of March 31, 2017
Assets
Fixed income securities:
Municipal	$	—		$	(2	)	$	—		$	—		$	124
Corporate - public	—			—			—			(2		)	60
Corporate - privately placed	—			—			—			(5		)	263
ABS - CDO	95			—			—			(4		)	147
ABS - consumer and other	41			—			—			(1		)	80
RMBS	—			—			—			(1		)	—
CMBS	3			—			—			—			25
Total fixed income securities	139			(2		)	—			(13		)	699
Equity securities	1			(1		)	—			—			170
Short-term investments	20			—			—			—			35
Free-standing derivatives, net	—			—			—			—			(1		)	⁽²⁾
Other assets	—			—			—			—			—
Total recurring Level 3 assets	$	160		$	(3	)	$	—		$	(13	)	$	903
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(1	)	$	2		$	(286	)
Total recurring Level 3 liabilities	$	—		$	—		$	(1	)	$	2		$	(286	)


⁽¹⁾	The effect to net income totals $14 million and is reported in the Condensed Consolidated Statements of Operations as follows: $2 million in realized capital gains and losses, $10 million in net investment income, $(5) million in interest credited to contractholder funds and $7 million in life contract benefits.


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

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



Valuation changes included in net income for level 3 assets and liabilities held as of
($ in millions)	March 31,
($ in millions)	2018		2017
Assets
Equity securities	$	2	$	10
Free-standing derivatives, net	—		1
Other assets	—		(1		)
Total recurring Level 3 assets	$	2	$	10
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	23	$	3
Total recurring Level 3 liabilities	$	23	$	3

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

Financial liabilities



Carrying values and fair value estimates of financial instruments not carried at fair value as of
($ in millions)	March 31, 2018				December 31, 2017
($ in millions)	Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	$	10,088	$	10,597	$	10,367	$	11,071
Long-term debt	6,847		7,425		6,350		7,199
Liability for collateral	1,037		1,037		1,124		1,124

Financial assets



Carrying values and fair value estimates of financial instruments not carried at fair value as of
($ in millions)	March 31, 2018				December 31, 2017
($ in millions)	Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	$	4,679	$	4,784	$	4,534	$	4,732
Bank loans	1,681		1,688		1,702		1,704
Agent loans	562		553		538		536

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details