Fair Value of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 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 September 30, 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	$	2,693		$	458		$	—					$	3,151
Municipal	—			9,326			89						9,415
Corporate - public	—			30,758			92						30,850
Corporate - privately placed	—			11,645			167						11,812
Foreign government	—			854			—						854
ABS - CDO	—			310			29						339
ABS - consumer and other	—			588			52						640
RMBS	—			500			—						500
CMBS	—			54			26						80
Redeemable preferred stock	—			22			—						22
Total fixed income securities	2,693			54,515			455						57,663
Equity securities	6,286			359			320						6,965
Short-term investments	1,228			1,823			20						3,071
Other investments: Free-standing derivatives	—			120			1			$	(13	)	108
Separate account assets	3,307			—			—						3,307
Total recurring assets at fair value	$	13,514		$	56,817		$	796		$	(13	)	$	71,114
% of total assets at fair value	19.0		%	79.9		%	1.1		%	—		%	100		%

Investments reported at NAV													1,709
Total													$	72,823

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(266	)				$	(266	)
Other liabilities: Free-standing derivatives	—			(47		)	—			$	6		(41		)
Total recurring liabilities at fair value	$	—		$	(47	)	$	(266	)	$	6		$	(307	)
% of total liabilities at fair value	—		%	15.3		%	86.7		%	(2.0		)%	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
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
September 30, 2018
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(239	)	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 during the three months period ended September 30, 2018
	Balance as of June 30, 2018			Total gains (losses) included in:						Transfers into Level 3			Transfers out of Level 3
($ in millions)	Balance as of June 30, 2018			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	106		$	—		$	(1	)	$	—		$	(9	)
Corporate - public	76			—			(1		)	12			(4		)
Corporate - privately placed	195			1			(1		)	—			(20		)
ABS - CDO	9			—			1			20			—
ABS - consumer and other	73			—			—			12			(29		)
CMBS	26			—			—			—			—
Total fixed income securities	485			1			(2		)	44			(62		)
Equity securities	291			8			—			—			—
Short-term investments	—			—			—			—			—
Free-standing derivatives, net	1			—			—			—			—
Total recurring Level 3 assets	$	777		$	9		$	(2	)	$	44		$	(62	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(260	)	$	(7	)	$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(260	)	$	(7	)	$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2018
Assets
Fixed income securities:
Municipal	$	—		$	(6	)	$	—		$	(1	)	$	89
Corporate - public	10			(1		)	—			—			92
Corporate - privately placed	6			(2		)	—			(12		)	167
ABS - CDO	—			—			—			(1		)	29
ABS - consumer and other	33			(20		)	—			(17		)	52
CMBS	—			—			—			—			26
Total fixed income securities	49			(29		)	—			(31		)	455
Equity securities	21			—			—			—			320
Short-term investments	20			—			—			—			20
Free-standing derivatives, net	—			—			—			—			1			⁽²⁾
Total recurring Level 3 assets	$	90		$	(29	)	$	—		$	(31	)	$	796
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	—		$	1		$	(266	)
Total recurring Level 3 liabilities	$	—		$	—		$	—		$	1		$	(266	)


⁽¹⁾	The effect to net income totals $2 million and is reported in the Condensed Consolidated Statements of Operations as follows: $9 million in realized capital gains and losses, $(9) million in interest credited to contractholder funds and $2 million in life contract benefits.


⁽²⁾	Comprises $1 million of assets.



Rollforward of Level 3 assets and liabilities held at fair value during the nine months period ended September 30, 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		$	(2	)	$	—		$	(11	)
Corporate - public	108			—			(3		)	16			(9		)
Corporate - privately placed	224			(1		)	(2		)	20			(49		)
ABS - CDO	99			—			1			20			(89		)
ABS - consumer and other	48			—			1			22			(45		)
CMBS	26			—			—			—			—
Total fixed income securities	606			—			(5		)	78			(203		)
Equity securities	210			24			—			—			—
Short-term investments	20			—			—			—			—
Free-standing derivatives, net	1			—			—			—			—
Total recurring Level 3 assets	$	837		$	24		$	(5	)	$	78		$	(203	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(286	)	$	17		$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(286	)	$	17		$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2018
Assets
Fixed income securities:
Municipal	$	10		$	(8	)	$	—		$	(2	)	$	89
Corporate - public	10			(27		)	—			(3		)	92
Corporate - privately placed	21			(5		)	—			(41		)	167
ABS - CDO	—			—			—			(2		)	29
ABS - consumer and other	108			(62		)	—			(20		)	52
CMBS	1			—			—			(1		)	26
Total fixed income securities	150			(102		)	—			(69		)	455
Equity securities	100			(14		)	—			—			320
Short-term investments	45			(45		)	—			—			20
Free-standing derivatives, net	—			—			—			—			1			⁽²⁾
Total recurring Level 3 assets	$	295		$	(161	)	$	—		$	(69	)	$	796
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(1	)	$	4		$	(266	)
Total recurring Level 3 liabilities	$	—		$	—		$	(1	)	$	4		$	(266	)


⁽¹⁾	The effect to net income totals $41 million and is reported in the Condensed Consolidated Statements of Operations as follows: $24 million in realized capital gains and losses, $10 million in interest credited to contractholder funds and $7 million in life contract benefits.


⁽²⁾	Comprises $1 million of assets.



Rollforward of Level 3 assets and liabilities held at fair value during the three months period ended September 30, 2017
	Balance as of June 30, 2017			Total gains (losses) included in:					Transfers into Level 3			Transfers out of Level 3
($ in millions)	Balance as of June 30, 2017			Net income ⁽¹⁾			OCI		Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	114		$	—		$	—	$	—		$	(4	)
Corporate - public	60			—			—		—			(4		)
Corporate - privately placed	266			1			2		—			(34		)
ABS - CDO	91			—			1		—			(68		)
ABS - consumer and other	120			—			—		—			(62		)
CMBS	24			—			—		—			—
Total fixed income securities	675			1			3		—			(172		)
Equity securities	166			2			1		—			(1		)
Free-standing derivatives, net	1			—			—		—			—
Total recurring Level 3 assets	$	842		$	3		$	4	$	—		$	(173	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(285	)	$	(9	)	$	—	$	—		$	—
Total recurring Level 3 liabilities	$	(285	)	$	(9	)	$	—	$	—		$	—

	Purchases			Sales			Issues		Settlements			Balance as of September 30, 2017
Assets
Fixed income securities:
Municipal	$	1		$	(3	)	$	—	$	(1	)	$	107
Corporate - public	51			(1		)	—		(2		)	104
Corporate - privately placed	18			(1		)	—		(2		)	250
ABS - CDO	—			—			—		(5		)	19
ABS - consumer and other	10			—			—		(2		)	66
CMBS	3			—			—		(1		)	26
Total fixed income securities	83			(5		)	—		(13		)	572
Equity securities	—			—			—		—			168
Free-standing derivatives, net	—			—			—		—			1			⁽²⁾
Total recurring Level 3 assets	$	83		$	(5	)	$	—	$	(13	)	$	741
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	—	$	2		$	(292	)
Total recurring Level 3 liabilities	$	—		$	—		$	—	$	2		$	(292	)


⁽¹⁾	The effect to net income totals $(6) million and is reported in the Condensed Consolidated Statements of Operations as follows: $3 million in net investment income, $(5) 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 during the nine months period ended September 30, 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	)	$	6		$	—		$	(5	)
Corporate - public	78			—			—			—			(20		)
Corporate - privately placed	263			7			—			30			(34		)
ABS - CDO	27			—			3			30			(190		)
ABS - consumer and other	42			—			—			—			(69		)
RMBS	1			—			—			—			—
CMBS	22			—			—			—			—
Total fixed income securities	558			6			9			60			(318		)
Equity securities	163			15			4			—			(4		)
Short-term investments	15			—			—			—			—
Free-standing derivatives, net	(2		)	3			—			—			—
Other assets	1			(1		)	—			—			—
Total recurring Level 3 assets	$	735		$	23		$	13		$	60		$	(322	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(290	)	$	(6	)	$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(290	)	$	(6	)	$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2017
Assets
Fixed income securities:
Municipal	$	6		$	(23	)	$	—		$	(1	)	$	107
Corporate - public	50			—			—			(4		)	104
Corporate - privately placed	22			(30		)	—			(8		)	250
ABS - CDO	160			—			—			(11		)	19
ABS - consumer and other	99			—			—			(6		)	66
RMBS	—			—			—			(1		)	—
CMBS	6			—			—			(2		)	26
Total fixed income securities	343			(53		)	—			(33		)	572
Equity securities	3			(13		)	—			—			168
Short-term investments	25			(40		)	—			—			—
Free-standing derivatives, net	—			—			—			—			1			⁽²⁾
Other assets	—			—			—			—			—
Total recurring Level 3 assets	$	371		$	(106	)	$	—		$	(33	)	$	741
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(1	)	$	5		$	(292	)
Total recurring Level 3 liabilities	$	—		$	—		$	(1	)	$	5		$	(292	)


⁽¹⁾	The effect to net income totals $17 million and is reported in the Condensed Consolidated Statements of Operations as follows: $7 million in realized capital gains and losses, $17 million in net investment income, $(11) million in interest credited to contractholder funds and $4 million in life contract benefits.


⁽²⁾	Comprises $1 million of assets.

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)	Three months ended September 30,						Nine months ended September 30,
($ in millions)	2018			2017			2018		2017
Assets
Fixed income securities:
Municipal	$	—		$	—		$	—	$	(3	)
Corporate	—			1			—		1
Total fixed income securities	—			1			—		(2		)
Equity securities	8			2			23		16
Free-standing derivatives, net	—			(3		)	—		—
Other assets	—			—			—		(1		)
Total recurring Level 3 assets	$	8		$	—		$	23	$	13
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(7	)	$	(9	)	$	17	$	(6	)
Total recurring Level 3 liabilities	$	(7	)	$	(9	)	$	17	$	(6	)

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

Financial assets



Carrying values and fair value estimates of financial instruments not carried at fair value as of
($ in millions)	September 30, 2018				December 31, 2017
($ in millions)	Carrying value		Fair value		Carrying value		Fair value
Mortgage loans	$	4,592	$	4,607	$	4,534	$	4,732
Bank loans	1,608		1,614		1,702		1,704
Agent loans	597		586		538		536

Financial liabilities



Carrying values and fair value estimates of financial instruments not carried at fair value as of
($ in millions)	September 30, 2018				December 31, 2017
($ in millions)	Carrying value		Fair value		Carrying value		Fair value
Contractholder funds on investment contracts	$	9,546	$	9,951	$	10,367	$	11,071
Long-term debt	6,450		6,833		6,350		7,199
Liability for collateral	1,403		1,403		1,124		1,124

- 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