Fair value is defined as 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 hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on the Consolidated Statements of Financial Position at fair value are categorized in the fair value hierarchy based on the observability of inputs to the valuation techniques as follows:

Level 1: Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company can access.

Level 2: Assets and liabilities whose values are based on the following:

(a)Quoted prices for similar assets or liabilities in active markets;

(b)Quoted prices for identical or similar assets or liabilities in markets that are not active; or

(c)Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect the Company’s estimates of the assumptions that market participants would use in valuing the assets and liabilities.

The availability of observable inputs varies by instrument. In situations where fair value is based on internally developed pricing models or inputs that are unobservable in the market, the determination of fair value requires more judgment. The degree of judgment exercised by the Company in determining fair value is typically greatest for instruments categorized in Level 3. In many instances, valuation inputs used to measure fair value fall into different levels of the fair value hierarchy. The category level in the fair value hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company uses prices and inputs that are current as of the measurement date, including during periods of market disruption. In

periods of market disruption, the ability to observe prices and inputs may be reduced for many instruments.

The Company is responsible for the determination of fair value and the supporting assumptions and methodologies. The Company gains assurance that assets and liabilities are appropriately valued through the execution of various processes and controls designed to ensure the overall reasonableness and consistent application of valuation methodologies, including inputs and assumptions, and compliance with accounting standards. For fair values received from third parties or internally estimated, the Company’s processes and controls are designed to ensure that the valuation methodologies are appropriate and consistently applied, the inputs and assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded. For example, on a continuing basis, the Company assesses the reasonableness of individual fair values that have stale security prices or that exceed certain thresholds as compared to previous fair values received from valuation service providers or brokers or derived from internal models. The Company performs procedures to understand and assess the methodologies, processes and controls of valuation service providers. In addition, the Company may validate the reasonableness of fair values by comparing information obtained from valuation service providers or brokers to other third-party valuation sources for selected securities. The Company performs ongoing price validation procedures such as back-testing of actual sales, which corroborate the various inputs used in internal models to market observable data. When fair value determinations are expected to be more variable, the Company validates them through reviews by members of management who have relevant expertise and who are independent of those charged with executing investment transactions.

The Company has two types of situations where investments are classified as Level 3 in the fair value hierarchy:

(1)Specific inputs significant to the fair value estimation models are not market observable. This primarily occurs in the Company’s use of broker quotes to value certain securities where the inputs have not been corroborated to be market observable, and the use of valuation models that use significant non-market observable inputs.

(2)Quotes continue to be received from independent third-party valuation service providers and all significant inputs are market observable; however, there has been a significant decrease in the volume and level of activity for the asset when compared to normal market activity such that the degree of market observability has declined to a point where categorization as a Level 3 measurement is considered appropriate. The indicators considered in determining whether a significant decrease in the volume and level of activity for a specific asset has occurred include

the level of new issuances in the primary market, trading volume in the secondary market, the level of credit spreads over historical levels, applicable bid-ask spreads, and price consensus among market participants and other pricing sources.

Certain assets are not carried at fair value on a recurring basis, including mortgage loans, bank loans, agent loans and policy loans and are only included in the fair value hierarchy disclosure when the individual investment is reported at fair value.

In determining fair value, the Company principally uses the market approach which generally utilizes market transaction data for the same or similar instruments. To a lesser extent, the Company uses the income approach which involves determining fair values from discounted cash flow methodologies. For the majority of Level 2 and Level 3 valuations, a combination of the market and income approaches is used.

Summary of significant inputs and valuation techniques for Level 2 and Level 3 assets and liabilities measured at fair value on a recurring basis

Level 2 measurements

•Fixed income securities:

U.S. government and agencies, municipal, corporate - public and foreign government: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields and credit spreads.

Corporate - privately placed: Privately placed are valued using a discounted cash flow model that is widely accepted in the financial services industry and uses market observable inputs and inputs derived principally from, or corroborated by, observable market data. The primary inputs to the discounted cash flow model include an interest rate yield curve, as well as published credit spreads for similar assets in markets that are not active that incorporate the credit quality and industry sector of the issuer.

Corporate - privately placed also includes redeemable preferred stock that are valued using quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, underlying stock prices and credit spreads.

ABS and MBS: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, collateral performance, and credit spreads. Certain ABS are valued based on non-binding broker quotes whose inputs have been corroborated to be market observable. Residential MBS include prepayment speeds as a primary input for valuation.

•Equity securities: The primary inputs to the valuation include quoted prices or quoted net

asset values for identical or similar assets in markets that are not active.

•Short-term: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields and credit spreads.

•Other investments: Free-standing exchange listed derivatives that are not actively traded are valued based on quoted prices for identical instruments in markets that are not active.

Over-the-counter (“OTC”) derivatives, including interest rate swaps, foreign currency swaps, total return swaps, foreign exchange forward contracts, certain options and certain credit default swaps, are valued using models that rely on inputs such as interest rate yield curves, implied volatilities, index price levels, currency rates, and credit spreads that are observable for substantially the full term of the contract. The valuation techniques underlying the models are widely accepted in the financial services industry and do not involve significant judgment.

Level 3 measurements

•Fixed income securities:

Municipal: Comprise municipal bonds that are not rated by third-party credit rating agencies. The primary inputs to the valuation of these municipal bonds include quoted prices for identical or similar assets in markets that exhibit less liquidity relative to those markets supporting Level 2 fair value measurements, contractual cash flows, benchmark yields and credit spreads. Also included are municipal bonds valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable and municipal bonds in default valued based on the present value of expected cash flows.

Corporate - public and privately placed, ABS and MBS: Primarily valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable. Other inputs for corporate fixed income securities include an interest rate yield curve, as well as published credit spreads for similar assets that incorporate the credit quality and industry sector of the issuer.

•Equity securities: The primary inputs to the valuation include quoted prices or quoted net asset values for identical or similar assets in markets that exhibit less liquidity relative to those markets supporting Level 2 fair value measurements.

•Short-term: For certain short-term investments, amortized cost is used as the best estimate of fair value.

•Other investments: Certain OTC derivatives, such as interest rate caps, certain credit default swaps and certain options (including swaptions), are valued using models that are widely accepted in the financial services industry. These are categorized as Level 3 as a result of the significance of non-market observable inputs such as volatility. Other primary inputs include interest rate yield curves and credit spreads.

•Contractholder funds: Derivatives embedded in certain life and annuity contracts are valued internally using models widely accepted in the financial services industry that determine a single best estimate of fair value for the embedded derivatives within a block of contractholder liabilities. The models primarily use stochastically determined cash flows based on the contractual elements of embedded derivatives, projected option cost and applicable market data, such as interest rate yield curves and equity index volatility assumptions. These are categorized as Level 3 as a result of the significance of non-market observable inputs.

Investments excluded from the fair value hierarchy

Limited partnerships carried at fair value, which do not have readily determinable fair values, use NAV provided by the investees and are excluded from the fair value hierarchy. These investments are generally not redeemable by the investees and generally cannot be sold without approval of the general partner. The Company receives distributions of income and proceeds from the liquidation of the underlying assets of the investees, which usually takes place in years 4-9 of the typical contractual life of 10-12 years. As of December 31, 2020, the Company has commitments to invest $395 million in these limited partnership interests.


Assets and liabilities measured at fair value
	As of December 31, 2020
($ 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	$	2,863		$	359		$	—					$	3,222
Municipal	—			9,520			67						9,587
Corporate - public	—			36,346			98						36,444
Corporate - privately placed	—			14,568			130						14,698
Foreign government	—			1,055			—						1,055
ABS	—			1,213			57						1,270
MBS	—			51			27						78



Total fixed income securities	2,863			63,112			379						66,354
Equity securities	3,882			410			418						4,710
Short-term investments	7,477			288			35						7,800
Other investments: Free-standing derivatives	—			219			—			$	(15)		204
Separate account assets	3,344			—			—						3,344
Other assets	1			—			—						1


Total recurring basis assets	17,567			64,029			832			(15)			82,413
Total assets at fair value	$	17,567		$	64,029		$	832		$	(15)		$	82,413
% of total assets at fair value	21.3		%	77.7		%	1.0		%	—		%	100.0		%

Investments reported at NAV													1,824
Total													$	84,237

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(516)					$	(516)
Other liabilities: Free-standing derivatives	—			(153)			—			$	27		(126)
Total recurring basis liabilities	$	—		$	(153)		$	(516)		$	27		$	(642)
% of total liabilities at fair value	—		%	23.8		%	80.4		%	(4.2)		%	100.0		%


Assets and liabilities measured at fair value
	As of December 31, 2019
($ 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	$	4,689		$	397		$	—					$	5,086
Municipal	—			8,558			62						8,620
Corporate - public	—			30,819			61						30,880
Corporate - privately placed	—			12,084			114						12,198
Foreign government	—			979			—						979
ABS	—			797			65						862
MBS	—			379			40						419



Total fixed income securities	4,689			54,013			342						59,044
Equity securities	7,407			384			371						8,162
Short-term investments	1,940			2,291			25						4,256
Other investments: Free-standing derivatives	—			180			—			$	(40)		140
Separate account assets	3,044			—			—						3,044
Other assets	1			—			—						1

Total recurring basis assets	17,081			56,868			738			(40)			74,647

Total assets at fair value	$	17,081		$	56,868		$	738		$	(40)		$	74,647
% of total assets at fair value	22.9		%	76.2		%	1.0		%	(0.1)		%	100.0		%

Investments reported at NAV													1,814
Total													$	76,461
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(462)					$	(462)
Other liabilities: Free-standing derivatives	—			(84)			—			$	12		(72)



Total recurring basis liabilities	$	—		$	(84)		$	(462)		$	12		$	(534)
% of total liabilities at fair value	—		%	15.7		%	86.5		%	(2.2)		%	100.0		%

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

December 31, 2020

Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options

(483)

Stochastic cash flow model

Projected option cost

1.0% - 4.2%

2.80%

December 31, 2019

Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options

(430)

Stochastic cash flow model

Projected option cost

1.0% - 4.2%

2.67%

The embedded derivatives are equity-indexed and forward starting options in certain life and annuity products that provide customers with interest crediting rates based on the performance of the S&P 500. If the projected option cost increased (decreased), it would result in a higher (lower) liability fair value.

As of December 31, 2020 and 2019, Level 3 fair value measurements of fixed income securities total $379 million and $342 million, respectively, and include $93 million and $50 million, respectively, of securities valued based on non-binding broker quotes where the inputs have not been corroborated to be market

observable and $35 million and $36 million, respectively, of municipal fixed income securities that are not rated by third-party credit rating agencies. As the Company does not develop the Level 3 fair value unobservable inputs for these fixed income securities, they are not included in the table above. However, an increase (decrease) in credit spreads for fixed income securities valued based on non-binding broker quotes would result in a lower (higher) fair value, and an increase (decrease) in the credit rating of municipal bonds that are not rated by third-party credit rating agencies would result in a higher (lower) fair value.


Rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2020
	Balance as of December 31, 2019		Total gains (losses) included in:				Transfers												Balance as of December 31, 2020
($ in millions)			Net income		OCI		Into Level 3		Out of Level 3		Purchases		Sales		Issues		Settlements
Assets
Fixed income securities:
Municipal	$	62	$	1	$	2	$	20	$	(11)	$	—	$	(4)	$	—	$	(3)	$	67
Corporate - public	61		(1)		1		2		—		55		(19)		—		(1)		98
Corporate - privately placed	114		2		(12)		52		(31)		25		(17)		—		(3)		130
ABS	65		—		(1)		54		(49)		48		(32)		—		(28)		57
MBS	40		1		(2)		—		—		11		(7)		—		(16)		27
Total fixed income securities	342		3		(12)		128		(91)		139		(79)		—		(51)		379
Equity securities	371		(3)		—		—		—		66		(16)		—		—		418
Short-term investments	25		—		—		—		(25)		35		—		—		—		35


Total recurring Level 3 assets	738		—		(12)		128		(116)		240		(95)		—		(51)		832
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	(462)		(43)		—		—		—		—		—		(34)		23		(516)
Total recurring Level 3 liabilities	$	(462)	$	(43)	$	—	$	—	$	—	$	—	$	—	$	(34)	$	23	$	(516)


Total Level 3 gains (losses) included in net income for the year ended December 31, 2020
($ in millions)	Net investment income		Realized capital gains (losses)		Life contract benefits		Interest credited to contractholder funds		Total
Components of net income	$	(23)	$	23	$	(1)	$	(42)	$	(43)


Rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2019
	Balance as of December 31, 2018		Total gains (losses) included in:				Transfers												Balance as of December 31, 2019
($ in millions)			Net income		OCI		Into Level 3		Out of Level 3		Purchases		Sales		Issues		Settlements
Assets
Fixed income securities:

Municipal	$	70	$	1	$	4	$	—	$	(5)	$	—	$	(5)	$	—	$	(3)	$	62
Corporate - public	70		—		3		30		(113)		86		(11)		—		(4)		61
Corporate - privately placed	90		(1)		2		43		(2)		4		(13)		—		(9)		114
ABS	69		1		(1)		76		(210)		159		(22)		—		(7)		65
MBS	26		—		(2)		9		—		9		—		—		(2)		40



Total fixed income securities	325		1		6		158		(330)		258		(51)		—		(25)		342
Equity securities	341		30		—		—		—		82		(82)		—		—		371
Short-term investments	30		—		—		—		—		35		(40)		—		—		25
Free-standing derivatives, net	1		(1)		—		—		—		—		—		—		—		—

Total recurring Level 3 assets	697		30		6		158		(330)		375		(173)		—		(25)		738
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	(224)		(61)		—		(175)		—		—		—		(16)		14		(462)
Total recurring Level 3 liabilities	$	(224)	$	(61)	$	—	$	(175)	$	—	$	—	$	—	$	(16)	$	14	$	(462)


Total Level 3 gains (losses) included in net income for the year ended December 31, 2019
($ in millions)	Net investment income		Realized capital gains (losses)		Life contract benefits		Interest credited to contractholder funds		Total
Components of net income	$	(2)	$	32	$	7	$	(68)	$	(31)


Rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2018
	Balance as of December 31, 2017		Total gains (losses) included in:				Transfers												Balance as of December 31, 2018
($ in millions)			Net income		OCI		Into Level 3		Out of Level 3		Purchases		Sales		Issues		Settlements
Assets
Fixed income securities:
Municipal	$	101	$	1	$	(2)	$	—	$	(26)	$	10	$	(8)	$	—	$	(6)	$	70
Corporate - public	108		—		(3)		17		(21)		10		(38)		—		(3)		70
Corporate - privately placed	224		(1)		(3)		20		(119)		22		(5)		—		(48)		90
ABS	147		—		2		42		(159)		160		(97)		—		(26)		69
MBS	26		—		—		—		—		1		—		—		(1)		26
Total fixed income securities	606		—		(6)		79		(325)		203		(148)		—		(84)		325
Equity securities	210		37		—		—		—		109		(15)		—		—		341
Short-term investments	20		—		—		—		—		55		(45)		—		—		30
Free-standing derivatives, net	1		—		—		—		—		—		—		—		—		1

Total recurring Level 3 assets	837		37		(6)		79		(325)		367		(208)		—		(84)		697
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	(286)		58		—		—		—		—		—		(2)		6		(224)
Total recurring Level 3 liabilities	$	(286)	$	58	$	—	$	—	$	—	$	—	$	—	$	(2)	$	6	$	(224)


Total Level 3 gains (losses) included in net income for the year ended December 31, 2018
($ in millions)	Net investment income		Realized capital gains (losses)		Life contract benefits		Interest credited to contractholder funds		Total
Components of net income	$	—	$	37	$	(5)	$	63	$	95

Transfers into Level 3 during 2020, 2019 and 2018 included situations where a quote was not provided by the Company’s independent third-party valuation service provider and as a result the price was stale or had been replaced with a broker quote where the inputs had not been corroborated to be market observable resulting in the security being classified as Level 3. Transfers into Level 3 during 2019 also included derivatives embedded in equity-indexed universal life contracts due to refinements in the valuation modeling resulting in an increase in significance of non-market observable inputs.

Transfers out of Level 3 during 2020, 2019 and 2018 included situations where a broker quote was used in the prior period and a quote became available from the Company’s independent third-party valuation service provider in the current period. A quote utilizing the new pricing source was not available as of the prior period, and any gains or losses related to the change in valuation source for individual securities were not significant.


Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of December 31,
($ in millions)	2020		2019		2018
Assets
Fixed income securities:
Municipal	$	1	$	1	$	—
Corporate - public	(2)		—		—
Corporate - privately placed	2		—		—



Total fixed income securities	1		1		—
Equity securities	(3)		6		36
Free-standing derivatives, net	—		(1)		—


Total recurring Level 3 assets	$	(2)	$	6	$	36
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(43)	$	(61)	$	58

Total recurring Level 3 liabilities	(43)		(61)		58
Total included in net income	$	(45)	$	(55)	$	94

Components of net income
Net investment income	$	(24)	$	(2)	$	—
Realized capital gains (losses)	22		8		36
Life contract benefits	(1)		7		(5)
Interest credited to contractholder funds	(42)		(68)		63
Total included in net income	$	(45)	$	(55)	$	94

Assets
Municipal	$	2
Corporate - public	1
Corporate - privately placed	(11)
ABS	(1)
Changes in unrealized net capital gains and losses reported in OCI (1)	$	(9)

(1)Effective January 1, 2020, the Company adopted the fair value accounting standard that prospectively requires the disclosure of valuation changes reported in OCI.


Financial instruments not carried at fair value
($ in millions)		December 31, 2020				December 31, 2019
Financial assets	Fair value level	Amortized cost, net		Fair value		Amortized cost, net		Fair value

Mortgage loans	Level 3	$	4,075	$	4,348	$	4,817	$	5,012
Bank loans	Level 3	1,018		1,053		1,204		1,185
Agent loans	Level 3	631		634		666		664


Financial liabilities	Fair value level	Carrying value (1)		Fair value		Carrying value (1)		Fair value
Contractholder funds on investment contracts	Level 3	$	7,795	$	9,089	$	8,438	$	9,158
Long-term debt	Level 2	7,825		9,489		6,631		7,738
Liability for collateral	Level 2	1,249		1,249		1,829		1,829

(1)Represents the amounts reported on the Consolidated Statements of Financial Position.