v3.8.0.1

Employee Benefit Plans | 12 Months Ended
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Dec. 31, 2017
Retirement Benefits [Abstract] |
Employee Benefit Plans | EMPLOYEE BENEFIT PLANS Pension and Other Postretirement Plans The Company has funded and non-funded non-contributory defined benefit pension plans (“Pension Benefits”), which cover substantially all of its employees. For some employees, benefits are based on final average earnings and length of service, while benefits for other employees are based on an account balance that takes into consideration age, service and earnings during their career. The Company provides certain health care and life insurance benefits for its retired employees, their beneficiaries and covered dependents (“Other Postretirement Benefits”). The health care plan is contributory; the life insurance plan is non-contributory. Substantially all of the Company’s U.S. employees may become eligible to receive other postretirement benefits if they retire after age 55 with at least 10 years of service or under certain circumstances after age 50 with at least 20 years of continuous service. Prepaid benefits costs and accrued benefit liabilities are included in “Other assets” and “Other liabilities,” respectively, in the Company’s Consolidated Statements of Financial Position. The status of these plans as of December 31, 2017 and 2016 is summarized below:
|  | Pension Benefits |  | Other Postretirement Benefits
|  | 2017 |  | 2016 |  | 2017 |  | 2016
|  | (in millions)
Change in benefit obligation |  |  |  |  |  |  |  |
Benefit obligation at the beginning of period |  | $ | (12,917 | ) |  | $ | (12,221 | ) |  | $ | (2,084 | ) |  | $ | (2,159 | )
Service cost |  | (284 | ) |  | (253 | ) |  | (20 | ) |  | (19 | )
Interest cost |  | (476 | ) |  | (498 | ) |  | (82 | ) |  | (91 | )
Plan participants’ contributions |  | 0 |  |  | 0 |  |  | (30 | ) |  | (31 | )
Medicare Part D subsidy receipts |  | 0 |  |  | 0 |  |  | (9 | ) |  | (10 | )
Amendments |  | 0 |  |  | (3 | ) |  | (9 | ) |  | 0 |
Actuarial gains (losses), net |  | (871 | ) |  | (602 | ) |  | 69 |  |  | 46 |
Settlements |  | 57 |  |  | 24 |  |  | 0 |  |  | 0 |
Special termination benefits |  | (4 | ) |  | (2 | ) |  | 0 |  |  | 0 |
Benefits paid |  | 723 |  |  | 681 |  |  | 172 |  |  | 181 |
Foreign currency changes and other |  | (66 | ) |  | (43 | ) |  | (3 | ) |  | (1 | )
Benefit obligation at end of period |  | $ | (13,838 | ) |  | $ | (12,917 | ) |  | $ | (1,996 | ) |  | $ | (2,084 | )
Change in plan assets |  |  |  |  |  |  |  |
Fair value of plan assets at beginning of period |  | $ | 12,861 |  |  | $ | 12,541 |  |  | $ | 1,531 |  |  | $ | 1,584 |
Actual return on plan assets |  | 1,329 |  |  | 883 |  |  | 212 |  |  | 82 |
Employer contributions |  | 202 |  |  | 187 |  |  | 14 |  |  | 15 |
Plan participants’ contributions |  | 0 |  |  | 0 |  |  | 30 |  |  | 31 |
Disbursement for settlements |  | (57 | ) |  | (24 | ) |  | 0 |  |  | 0 |
Benefits paid |  | (723 | ) |  | (681 | ) |  | (172 | ) |  | (181 | )
Foreign currency changes and other |  | 43 |  |  | (45 | ) |  | 0 |  |  | 0 |
Fair value of plan assets at end of period |  | $ | 13,655 |  |  | $ | 12,861 |  |  | $ | 1,615 |  |  | $ | 1,531 |
Funded status at end of period |  | $ | (183 | ) |  | $ | (56 | ) |  | $ | (381 | ) |  | $ | (553 | )
Amounts recognized in the Statements of Financial Position |  |  |  |  |  |  |  |
Prepaid benefit cost |  | $ | 2,645 |  |  | $ | 2,538 |  |  | $ | 0 |  |  | $ | 0 |
Accrued benefit liability |  | (2,828 | ) |  | (2,594 | ) |  | (381 | ) |  | (553 | )
Net amount recognized |  | $ | (183 | ) |  | $ | (56 | ) |  | $ | (381 | ) |  | $ | (553 | )
Items recorded in “Accumulated other comprehensive income (loss)” not yet recognized as a component of net periodic (benefit) cost: |  |  |  |  |  |  |  |
Transition obligation |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Prior service cost |  | (22 | ) |  | (25 | ) |  | 10 |  |  | 1 |
Net actuarial loss |  | 3,611 |  |  | 3,481 |  |  | 344 |  |  | 557 |
Net amount not recognized |  | $ | 3,589 |  |  | $ | 3,456 |  |  | $ | 354 |  |  | $ | 558 |
Accumulated benefit obligation |  | $ | (13,190 | ) |  | $ | (12,300 | ) |  | $ | (1,995 | ) |  | $ | (2,084 | )
In addition to the plan assets above, the Company in 2007 established an irrevocable trust, commonly referred to as a “rabbi trust,” for the purpose of holding assets of the Company to be used to satisfy its obligations with respect to certain non-qualified retirement plans ($1,283 million and $1,227 million benefit obligation at December 31, 2017 and 2016, respectively). Assets held in the rabbi trust are available to the general creditors of the Company in the event of insolvency or bankruptcy. The Company may from time to time in its discretion make contributions to the trust to fund accrued benefits payable to participants in one or more of the plans, and, in the case of a change in control of the Company, as defined in the trust agreement, the Company will be required to make contributions to the trust to fund the accrued benefits, vested and unvested, payable on a pre-tax basis to participants in the plans. The Company did not make any discretionary payments to the trust in 2017 and 2016. As of December 31, 2017 and 2016, the assets in the trust had a carrying value of $881 million and $829 million, respectively. The Company also maintains a separate rabbi trust for the purpose of holding assets of the Company to be used to satisfy its obligations with respect to certain other non-qualified retirement plans ($81 million benefit obligation at December 31, 2017 and 2016, respectively), as well as certain cash-based deferred compensation arrangements. As of December 31, 2017 and 2016, the assets in the trust had a carrying value of $120 million and $115 million, respectively. Pension benefits for foreign plans comprised 14% of the ending benefit obligation for both 2017 and 2016. Foreign pension plans comprised 5% of the ending fair value of plan assets for both 2017 and 2016. There are no material foreign postretirement plans. Information for pension plans with a projected benefit obligation in excess of plan assets
|  | 2017 |  | 2016
|  | (in millions)
Projected benefit obligation |  | $ | 2,875 |  |  | $ | 2,638 |
Fair value of plan assets |  | $ | 47 |  |  | $ | 44 |
Information for pension plans with an accumulated benefit obligation in excess of plan assets
|  | 2017 |  | 2016
|  | (in millions)
Accumulated benefit obligation |  | $ | 2,655 |  |  | $ | 2,426 |
Fair value of plan assets |  | $ | 0 |  |  | $ | 4 |
There were no purchases of annuity contracts in 2017 and 2016 from Prudential Insurance. The approximate future annual benefit payment payable by Prudential Insurance for all annuity contracts was $21 million and $19 million as of December 31, 2017 and 2016, respectively. Components of Net Periodic Benefit Cost The Company uses market related value to determine components of net periodic (benefit) cost. Market related value recognizes certain changes in fair value of plan assets over a period of five years. Changes in the fair value of U.S. equities, international equities, real estate and other assets are recognized over a five year period. However, changes in the fair value for fixed maturity assets (including short-term investments) are recognized immediately for the purposes of market related value. Net periodic (benefit) cost included in “General and administrative expenses” in the Company’s Consolidated Statements of Operations for the years ended December 31, includes the following components:
|  | Pension Benefits |  | Other Postretirement Benefits
|  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015
|  | (in millions)
Service cost |  | $ | 284 |  |  | $ | 253 |  |  | $ | 244 |  |  | $ | 20 |  |  | $ | 19 |  |  | $ | 20 |
Interest cost |  | 476 |  |  | 498 |  |  | 469 |  |  | 82 |  |  | 91 |  |  | 86 |
Expected return on plan assets |  | (781 | ) |  | (754 | ) |  | (775 | ) |  | (102 | ) |  | (105 | ) |  | (115 | )
Amortization of transition obligation |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Amortization of prior service cost |  | (3 | ) |  | (6 | ) |  | (8 | ) |  | 0 |  |  | (2 | ) |  | (5 | )
Amortization of actuarial (gain) loss, net |  | 191 |  |  | 181 |  |  | 168 |  |  | 36 |  |  | 41 |  |  | 38 |
Settlements |  | 13 |  |  | 7 |  |  | 5 |  |  | 0 |  |  | 0 |  |  | 0 |
Special termination benefits(1) |  | 4 |  |  | 2 |  |  | 4 |  |  | 0 |  |  | 0 |  |  | 0 |
Net periodic (benefit) cost |  | $ | 184 |  |  | $ | 181 |  |  | $ | 107 |  |  | $ | 36 |  |  | $ | 44 |  |  | $ | 24 |
__________
(1) | Certain employees were provided special termination benefits under non-qualified plans in the form of unreduced early retirement benefits as a result of their involuntary termination.
Changes in Accumulated Other Comprehensive Income The benefit obligation is based upon actuarial assumptions such as discount, termination, retirement, mortality and salary growth rates. Changes at year-end in these actuarial assumptions, along with experience changes based on updated participant census data are deferred in AOCI. Plan assets generate actuarial gains and losses when actual returns on plan assets differ from expected returns on plan assets, and these differences are also deferred in AOCI. The cumulative deferred gain (loss) within AOCI is amortized into earnings if it exceeds 10% of the greater of the benefit obligation or plan assets at the beginning of the year, and the amortization period is based upon the actuarially calculated expected future years of service for a given plan. The amounts recorded in AOCI as of the end of the period, which have not yet been recognized as a component of net periodic (benefit) cost, and the related changes in these items during the period that are recognized in “Other comprehensive income (loss)” are as follows:
|  | Pension Benefits |  | Other Postretirement Benefits
|  | Transition Obligation |  | Prior Service Cost |  | Net Actuarial (Gain) Loss |  | Transition Obligation |  | Prior Service Cost |  | Net Actuarial (Gain) Loss
|  | (in millions)
Balance, December 31, 2014 |  | $ | 0 |  |  | $ | (42 | ) |  | $ | 2,946 |  |  | $ | 0 |  |  | $ | (8 | ) |  | $ | 600 |
Amortization for the period |  | 0 |  |  | 8 |  |  | (168 | ) |  | 0 |  |  | 5 |  |  | (38 | )
Deferrals for the period |  | 0 |  |  | 0 |  |  | 405 |  |  | 0 |  |  | 2 |  |  | 63 |
Impact of foreign currency changes and other |  | 0 |  |  | 1 |  |  | (10 | ) |  | 0 |  |  | 0 |  |  | (4 | )
Balance, December 31, 2015 |  | 0 |  |  | (33 | ) |  | 3,173 |  |  | 0 |  |  | (1 | ) |  | 621 |
Amortization for the period |  | 0 |  |  | 6 |  |  | (181 | ) |  | 0 |  |  | 2 |  |  | (41 | )
Deferrals for the period |  | 0 |  |  | 3 |  |  | 473 |  |  | 0 |  |  | 0 |  |  | (23 | )
Impact of foreign currency changes and other |  | 0 |  |  | (1 | ) |  | 16 |  |  | 0 |  |  | 0 |  |  | 0 |
Balance, December 31, 2016 |  | 0 |  |  | (25 | ) |  | 3,481 |  |  | 0 |  |  | 1 |  |  | 557 |
Amortization for the period |  | 0 |  |  | 3 |  |  | (191 | ) |  | 0 |  |  | 0 |  |  | (36 | )
Deferrals for the period |  | 0 |  |  | 0 |  |  | 323 |  |  | 0 |  |  | 9 |  |  | (179 | )
Impact of foreign currency changes and other |  | 0 |  |  | 0 |  |  | (2 | ) |  | 0 |  |  | 0 |  |  | 2 |
Balance, December 31, 2017 |  | $ | 0 |  |  | $ | (22 | ) |  | $ | 3,611 |  |  | $ | 0 |  |  | $ | 10 |  |  | $ | 344 |
The amounts included in AOCI expected to be recognized as components of net periodic (benefit) cost in 2018 are as follows:
|  | Pension Benefits |  | Other Postretirement Benefits
|  | (in millions)
Amortization of prior service cost |  | $ | (4 | ) |  | $ | 1 |
Amortization of actuarial (gain) loss, net |  | 214 |  |  | 17 |
Total |  | $ | 210 |  |  | $ | 18 |
The Company’s assumptions related to the calculation of the domestic benefit obligation (end of period) and the determination of net periodic (benefit) cost (beginning of period) are presented in the table below:
|  | Pension Benefits |  | Other Postretirement Benefits
|  | 2017 |  | 2016 |  | 2015 |  | 2017 |  | 2016 |  | 2015
Weighted average assumptions |  |  |  |  |  |  |  |  |  |  |  |
Discount rate (beginning of period) |  | 4.15 | % |  | 4.50 | % |  | 4.10 | % |  | 4.05 | % |  | 4.35 | % |  | 3.95 | %
Discount rate (end of period) |  | 3.65 | % |  | 4.15 | % |  | 4.50 | % |  | 3.60 | % |  | 4.05 | % |  | 4.35 | %
Rate of increase in compensation levels (beginning of period) |  | 4.50 | % |  | 4.50 | % |  | 4.50 | % |  | N/A |  |  | N/A |  |  | N/A |
Rate of increase in compensation levels (end of period) |  | 4.50 | % |  | 4.50 | % |  | 4.50 | % |  | N/A |  |  | N/A |  |  | N/A |
Expected return on plan assets (beginning of period) |  | 6.25 | % |  | 6.25 | % |  | 6.25 | % |  | 7.00 | % |  | 7.00 | % |  | 7.00 | %
Health care cost trend rates (beginning of period) |  | N/A |  |  | N/A |  |  | N/A |  |  | 6.60 | % |  | 7.00 | % |  | 6.66 | %
Health care cost trend rates (end of period) |  | N/A |  |  | N/A |  |  | N/A |  |  | 6.20 | % |  | 6.60 | % |  | 7.00 | %
For 2017, 2016 and 2015, the ultimate health care cost trend rate after gradual decrease until: 2021, 2021, 2019, (beginning of period) |  | N/A |  |  | N/A |  |  | N/A |  |  | 5.00 | % |  | 5.00 | % |  | 5.00 | %
For 2017, 2016 and 2015, the ultimate health care cost trend rate after gradual decrease until: 2024, 2021, 2021 (end of period) |  | N/A |  |  | N/A |  |  | N/A |  |  | 5.00 | % |  | 5.00 | % |  | 5.00 | %
The domestic discount rate used to value the pension and postretirement obligations at December 31, 2017 and December 31, 2016 is based upon the value of a portfolio of Aa-rated investments whose cash flows would be available to pay the benefit obligation’s cash flows when due. The December 31, 2017 portfolio is selected from a compilation of approximately 650 Aa-rated bonds across the full range of maturities. Since yields can vary widely at each maturity point, the Company generally avoids using the highest and lowest yielding bonds at the maturity points, so as to avoid relying on bonds that might be mispriced or misrated. This refinement process generally results in having a distribution from the 10th to 90th percentile. The Aa-rated portfolio is then selected and, accordingly, its value is a measure of the benefit obligation. A single equivalent discount rate is calculated to equate the value of the Aa-rated portfolio to the cash flows for the benefit obligation. The result is rounded to the nearest 5 basis points and the benefit obligation is recalculated using the rounded discount rate. The pension and postretirement expected long-term rates of return on plan assets for 2017 were determined based upon an approach that considered the allocation of plan assets as of December 31, 2016. Expected returns are estimated by asset class as noted in the discussion of investment policies and strategies below. Expected returns on asset classes are developed using a building-block approach that is forward looking and are not strictly based upon historical returns. The building blocks for equity returns include inflation, real return, a term premium, an equity risk premium, capital appreciation, expenses, the effect of active management and the effect of rebalancing. The building blocks for fixed maturity returns include inflation, real return, a term premium, credit spread, capital appreciation, effect of active management, expenses and the effect of rebalancing. The Company applied the same approach to the determination of the expected rate of return on plan assets in 2018. The expected rate of return for 2018 is 6.25% and 7.00% for pension and postretirement, respectively. The assumptions for foreign pension plans are based on local markets. There are no material foreign postretirement plans. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage point increase and decrease in assumed health care cost trend rates would have the following effects:
|  | Other Postretirement Benefits
|  | (in millions)
One percentage point increase |  |
Increase in total service and interest costs |  | $ | 7 |
Increase in postretirement benefit obligation |  | 130 |
One percentage point decrease |  |
Decrease in total service and interest costs |  | $ | 5 |
Decrease in postretirement benefit obligation |  | 98 |
Plan Assets The investment goal of the domestic pension plan assets is to generate an above benchmark return on a diversified portfolio of stocks, bonds and other investments. The cash requirements of the pension obligation, which include a traditional formula principally representing payments to annuitants and a cash balance formula that allows lump sum payments and annuity payments, are designed to be met by the bonds and short-term investments in the portfolio. The pension plan risk management practices include guidelines for asset concentration, credit rating and liquidity. The pension plan does not invest in leveraged derivatives. Derivatives such as futures contracts are used to reduce transaction costs and change asset concentration, while interest rate swaps and futures are used to adjust duration. The investment goal of the domestic postretirement plan assets is to generate an above benchmark return on a diversified portfolio of stocks, bonds, and other investments, while meeting the cash requirements for the postretirement obligation that includes a medical benefit including prescription drugs, a dental benefit and a life benefit. The postretirement plan risk management practices include guidelines for asset concentration, credit rating, liquidity and tax efficiency. The postretirement plan does not invest in leveraged derivatives. Derivatives such as futures contracts are used to reduce transaction costs and change asset concentration, while interest rate swaps and futures are used to adjust duration. The plan fiduciaries for the Company’s pension and postretirement plans have developed guidelines for asset allocations reflecting a percentage of total assets by asset class, which are reviewed on an annual basis. Asset allocation targets as of December 31, 2017 are as follows:
|  | Pension |  | Postretirement
|  | Minimum |  | Maximum |  | Minimum |  | Maximum
Asset Category |  |  |  |  |  |  |  |
U.S. Equities |  | 2 | % |  | 16 | % |  | 29 | % |  | 66 | %
International Equities |  | 2 | % |  | 17 | % |  | 2 | % |  | 24 | %
Fixed Maturities |  | 48 | % |  | 67 | % |  | 4 | % |  | 51 | %
Short-term Investments |  | 0 | % |  | 15 | % |  | 0 | % |  | 39 | %
Real Estate |  | 2 | % |  | 16 | % |  | 0 | % |  | 0 | %
Other |  | 0 | % |  | 17 | % |  | 0 | % |  | 0 | %
To implement the investment strategy, plan assets are invested in funds that primarily invest in securities that correspond to one of the asset categories under the investment guidelines. However, at any point in time, some of the assets in a fund may be of a different nature than the specified asset category. Assets held with Prudential Insurance are in either pooled separate accounts or single client separate accounts. Pooled separate accounts hold assets for multiple investors. Each investor owns a “unit of account.” Single client separate accounts hold assets for only one investor, the domestic qualified pension plan, and each security in the fund is treated as individually owned. Assets held with a bank are either in common/collective trusts or single client trusts. Common or collective trusts hold assets for more than one investor. Each investor owns a “unit of account.” Single client trusts hold assets for only one investor, the domestic qualified pension plan, and each security in the fund is treated as individually owned. There were no investments in Prudential Financial Common Stock as of December 31, 2017 and December 31, 2016 for either the pension or postretirement plans. The authoritative guidance around fair value established a framework for measuring fair value. Fair value is disclosed using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, as described in Note 20. The following describes the valuation methodologies used for pension and postretirement plans assets measured at fair value. Insurance Company Pooled Separate Accounts, Common or Collective Trusts, and United Kingdom Insurance Pooled Funds—Insurance company pooled separate accounts are invested via group annuity contracts issued by Prudential Insurance. Assets are represented by a “unit of account.” The redemption value of those units is based on a per unit value whose value is the result of the accumulated values of underlying investments. The underlying investments are valued in accordance with the corresponding valuation method for the investments held. Equities—See Note 20 for a discussion of the valuation methodologies for equity securities. U.S. Government Securities (both Federal and State & Other), Non–U.S. Government Securities, and Corporate Debt—See Note 20 for a discussion of the valuation methodologies for fixed maturity securities. Interest Rate Swaps—See Note 20 for a discussion of the valuation methodologies for derivative instruments. Guaranteed Investment Contracts—The value is based on contract cash flows and available market rates for similar investments. Registered Investment Companies (Mutual Funds)—Securities are priced at the net asset value (“NAV”) of shares. Unrealized Gain (Loss) on Investment of Securities Lending Collateral—This value is the contractual position relative to the investment of securities lending collateral. Real Estate—The values are determined through an independent appraisal process. The estimate of fair value is based on three approaches; (1) current cost of reproducing the property less deterioration and functional/economic obsolescence; (2) discounting a series of income streams and reversion at a specific yield or by directly capitalizing a single year income estimate by an appropriate factor; and (3) value indicated by recent sales of comparable properties in the market. Each approach requires the exercise of subjective judgment. Short-term Investments—Securities are valued initially at cost and thereafter adjusted for amortization of any discount or premium (i.e., amortized cost). Amortized cost approximates fair value. Partnerships—The value of interests owned in partnerships is based on valuations of the underlying investments that include private placements, structured debt, real estate, equities, fixed maturities, commodities and other investments. Private equity and real estate partnerships do not provide redemption rights to their investors, and there is not a public market for these investments. The Plan’s ability to redeem its investments at the end of the partnership term will depend on the ability of the fund manager to liquidate the illiquid private equity or real estate holdings. These funds are established with expected terms ranging from seven to fifteen years, with an option to extend the liquidation period for additional terms of up to two years. Hedge Funds—The value of interests in hedge funds is based on the underlying investments that include equities, debt and other investments. Hedge fund investments are structured as fund-of-funds vehicles or as direct investments in various hedge funds. The fund-of-funds vehicles are used for the purpose of making investments in a diverse portfolio of smaller hedge funds, while the direct investments allow for larger targeted investments without the additional fees inherent in a fund-of-funds structure. The hedge fund investments may be subject to initial period lock-up restrictions, under which capital must remain invested for a minimum period, ranging from one to two years. At December 31, 2017 and 2016, substantially none of the funds were in their initial lock-up period. Following the expiration of a fund’s lock-up period, redemptions are permitted quarterly, semi-annually or annually, with advance written notice from 65 to 185 days, depending on the fund. However, redemptions from hedge funds and fund-of-funds may also be restricted by a maximum redemption limitation on any redemption payment date, generally stated as a percentage of the total fund assets or total investment by the redeeming investor; payments of redemptions in excess of that “gate” amount are deferred. The Plan’s hedge fund investments include “gate” limits of 20% to 25% of the hedge fund’s net assets, depending on the fund. Variable Life Insurance Policies—These assets are held in group and individual variable life insurance policies issued by Prudential Insurance. Group policies are invested in Insurance Company Pooled Separate Accounts. Individual policies are invested in Registered Investment Companies (Mutual Funds). The value of interest in these policies is the cash surrender value of the policies based on the underlying investments. Pension plan asset allocations in accordance with the investment guidelines are as follows:
|  | As of December 31, 2017
|  | Level 1 |  | Level 2 |  | Level 3 |  | NAV Practical Expedient |  | Total
|  | (in millions)
U.S. Equities: |  |  |  |  |  |  |  |  |  |
Pooled separate accounts(1) |  | $ | 0 |  |  | $ | 552 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 552 |
Common/collective trusts(1) |  | 0 |  |  | 79 |  |  | 0 |  |  | 0 |  |  | 79 |
Subtotal |  |  |  |  |  |  |  |  |  | 631 |
International Equities: |  |  |  |  |  |  |  |  |  |
Pooled separate accounts(2) |  | 0 |  |  | 365 |  |  | 0 |  |  | 0 |  |  | 365 |
Common/collective trusts(3) |  | 0 |  |  | 315 |  |  | 0 |  |  | 0 |  |  | 315 |
United Kingdom insurance pooled funds(4) |  | 0 |  |  | 56 |  |  | 0 |  |  | 0 |  |  | 56 |
Subtotal |  |  |  |  |  |  |  |  |  | 736 |
Fixed Maturities: |  |  |  |  |  |  |  |  |  |
Pooled separate accounts(5) |  | 0 |  |  | 1,319 |  |  | 38 |  |  | 0 |  |  | 1,357 |
Common/collective trusts(6) |  | 0 |  |  | 509 |  |  | 0 |  |  | 0 |  |  | 509 |
U.S. government securities (federal): |  |  |  |  |  |  |  |  |  |
Mortgage-backed |  | 0 |  |  | 1 |  |  | 0 |  |  | 0 |  |  | 1 |
Other U.S. government securities |  | 0 |  |  | 1,402 |  |  | 0 |  |  | 0 |  |  | 1,402 |
U.S. government securities (state & other) |  | 0 |  |  | 556 |  |  | 0 |  |  | 0 |  |  | 556 |
Non-U.S. government securities |  | 0 |  |  | 10 |  |  | 0 |  |  | 0 |  |  | 10 |
United Kingdom insurance pooled funds(7) |  | 0 |  |  | 324 |  |  | 0 |  |  | 0 |  |  | 324 |
Corporate Debt: |  |  |  |  |  |  |  |  |  |
Corporate bonds(8) |  | 0 |  |  | 3,621 |  |  | 1 |  |  | 0 |  |  | 3,622 |
Asset-backed |  | 0 |  |  | 5 |  |  | 0 |  |  | 0 |  |  | 5 |
Collateralized Mortgage Obligations(9) |  | 0 |  |  | 492 |  |  | 0 |  |  | 0 |  |  | 492 |
Interest rate swaps (Notional amount: $1,498) |  | 0 |  |  | 12 |  |  | 0 |  |  | 0 |  |  | 12 |
Guaranteed investment contract |  | 0 |  |  | 47 |  |  | 0 |  |  | 0 |  |  | 47 |
Other(10) |  | 578 |  |  | 1 |  |  | 39 |  |  | 0 |  |  | 618 |
Unrealized gain (loss) on investment of securities |  |  |  |  |  |  |  |  |  |
lending collateral(11) |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Subtotal |  |  |  |  |  |  |  |  |  | 8,955 |
Short-term Investments: |  |  |  |  |  |  |  |  |  |
Pooled separate accounts |  | 0 |  |  | 56 |  |  | 0 |  |  | 0 |  |  | 56 |
United Kingdom insurance pooled funds |  | 0 |  |  | 1 |  |  | 0 |  |  | 0 |  |  | 1 |
Subtotal |  |  |  |  |  |  |  |  |  | 57 |
Real Estate: |  |  |  |  |  |  |  |  |  |
Pooled separate accounts(12) |  | 0 |  |  | 0 |  |  | 714 |  |  | 0 |  |  | 714 |
Partnerships |  | 0 |  |  | 0 |  |  | 0 |  |  | 435 |  |  | 435 |
Subtotal |  |  |  |  |  |  |  |  |  | 1,149 |
Other: |  |  |  |  |  |  |  |  |  |
Partnerships |  | 0 |  |  | 0 |  |  | 0 |  |  | 706 |  |  | 706 |
Hedge funds |  | 0 |  |  | 0 |  |  | 0 |  |  | 1,421 |  |  | 1,421 |
Subtotal |  |  |  |  |  |  |  |  |  | 2,127 |
Total |  | $ | 578 |  |  | $ | 9,723 |  |  | $ | 792 |  |  | $ | 2,562 |  |  | $ | 13,655 |
|  | As of December 31, 2016
|  | Level 1 |  | Level 2 |  | Level 3 |  | NAV Practical Expedient |  | Total
|  | (in millions)
U.S. Equities: |  |  |  |  |  |  |  |  |  |
Pooled separate accounts(1) |  | $ | 0 |  |  | $ | 472 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 472 |
Common/collective trusts(1) |  | 0 |  |  | 66 |  |  | 0 |  |  | 0 |  |  | 66 |
Subtotal |  |  |  |  |  |  |  |  |  | 538 |
International Equities: |  |  |  |  |  |  |  |  |  |
Pooled separate accounts(2) |  | 0 |  |  | 269 |  |  | 0 |  |  | 0 |  |  | 269 |
Common/collective trusts(3) |  | 0 |  |  | 219 |  |  | 0 |  |  | 0 |  |  | 219 |
United Kingdom insurance pooled funds(4) |  | 0 |  |  | 49 |  |  | 0 |  |  | 0 |  |  | 49 |
Subtotal |  |  |  |  |  |  |  |  |  | 537 |
Fixed Maturities: |  |  |  |  |  |  |  |  |  |
Pooled separate accounts(5) |  | 0 |  |  | 1,247 |  |  | 36 |  |  | 0 |  |  | 1,283 |
Common/collective trusts(6) |  | 0 |  |  | 441 |  |  | 0 |  |  | 0 |  |  | 441 |
U.S. government securities (federal): |  |  |  |  |  |  |  |  |  |
Mortgage-backed |  | 0 |  |  | 1 |  |  | 0 |  |  | 0 |  |  | 1 |
Other U.S. government securities |  | 0 |  |  | 993 |  |  | 0 |  |  | 0 |  |  | 993 |
U.S. government securities (state & other) |  | 0 |  |  | 521 |  |  | 0 |  |  | 0 |  |  | 521 |
Non-U.S. government securities |  | 0 |  |  | 14 |  |  | 0 |  |  | 0 |  |  | 14 |
United Kingdom insurance pooled funds(7) |  | 0 |  |  | 305 |  |  | 0 |  |  | 0 |  |  | 305 |
Corporate Debt: |  |  |  |  |  |  |  |  |  |
Corporate bonds(8) |  | 0 |  |  | 4,039 |  |  | 0 |  |  | 0 |  |  | 4,039 |
Asset-backed |  | 0 |  |  | 7 |  |  | 0 |  |  | 0 |  |  | 7 |
Collateralized Mortgage Obligations(9) |  | 0 |  |  | 506 |  |  | 0 |  |  | 0 |  |  | 506 |
Interest rate swaps (Notional amount: $2,595) |  | 0 |  |  | 9 |  |  | 0 |  |  | 0 |  |  | 9 |
Guaranteed investment contract |  | 0 |  |  | 39 |  |  | 0 |  |  | 0 |  |  | 39 |
Other(10) |  | 533 |  |  | 7 |  |  | 49 |  |  | 0 |  |  | 589 |
Unrealized gain (loss) on investment of securities |  |  |  |  |  |  |  |  |  |
lending collateral(11) |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Subtotal |  |  |  |  |  |  |  |  |  | 8,747 |
Short-term Investments: |  |  |  |  |  |  |  |  |  |
Pooled separate accounts |  | 0 |  |  | 55 |  |  | 0 |  |  | 0 |  |  | 55 |
United Kingdom insurance pooled funds |  | 0 |  |  | 1 |  |  | 0 |  |  | 0 |  |  | 1 |
Subtotal |  |  |  |  |  |  |  |  |  | 56 |
Real Estate: |  |  |  |  |  |  |  |  |  |
Pooled separate accounts(12) |  | 0 |  |  | 0 |  |  | 666 |  |  | 0 |  |  | 666 |
Partnerships |  | 0 |  |  | 0 |  |  | 0 |  |  | 371 |  |  | 371 |
Subtotal |  |  |  |  |  |  |  |  |  | 1,037 |
Other: |  |  |  |  |  |  |  |  |  |
Partnerships |  | 0 |  |  | 0 |  |  | 0 |  |  | 551 |  |  | 551 |
Hedge funds |  | 0 |  |  | 0 |  |  | 0 |  |  | 1,395 |  |  | 1,395 |
Subtotal |  |  |  |  |  |  |  |  |  | 1,946 |
Total |  | $ | 533 |  |  | $ | 9,260 |  |  | $ | 751 |  |  | $ | 2,317 |  |  | $ | 12,861 |
__________
(1) | These categories invest in U.S. equity funds whose objective is to track or outperform various indexes.
(2) | This category invests in a large cap international equity funds whose objective is to track an index.
(3) | This category invests in international equity funds, primarily large cap, whose objective is to outperform various indexes. This category also includes a global equity fund, primarily focused on new market leaders with sustainable competitive advantage.
(4) | This category invests in an international equity fund whose objective is to track an index.
(5) | This category invests in bond funds, primarily highly rated private placement securities.
(6) | This category invests in bond funds, primarily highly rated public securities whose objective is to outperform an index.
(7) | This category invests in bond funds, primarily highly rated corporate securities.
(8) | This category invests in highly rated corporate securities.
(9) | This category invests in highly rated Collateralized Mortgage Obligations.
(10) | Primarily cash and cash equivalents, short-term investments, payables and receivables, and open future contract positions (including fixed income collateral).
(11) | The contractual net value of the investment of securities lending collateral invested primarily in short-term bond funds is $411 million and $627 million and the liability for securities lending collateral is $411 million and $627 million for the years ended December 31, 2017 and 2016, respectively.
(12) | This category invests in commercial real estate and real estate securities funds, whose objective is to outperform an index.
Changes in Fair Value of Level 3 Pension Assets
|  | Year Ended December 31, 2017
|  | Fixed Maturities– Pooled Separate Accounts |  | Fixed Maturities– Corporate Debt– Corporate Bonds |  | Fixed Maturities– Other |  | Real Estate– Pooled Separate Accounts
|  | (in millions)
Fair Value, beginning of period |  | $ | 36 |  |  | $ | 0 |  |  | $ | 49 |  |  | $ | 666 |
Actual Return on Assets: |  |  |  |  |  |  |  |
Relating to assets still held at the reporting date |  | 2 |  |  | 0 |  |  | 0 |  |  | 50 |
Relating to assets sold during the period |  | 0 |  |  | 0 |  |  | 0 |  |  | 6 |
Purchases, sales and settlements |  | 0 |  |  | 0 |  |  | (10 | ) |  | (8 | )
Transfers in and/or out of Level 3 |  | 0 |  |  | 1 |  |  | 0 |  |  | 0 |
Fair Value, end of period |  | $ | 38 |  |  | $ | 1 |  |  | $ | 39 |  |  | $ | 714 |
|  | Year Ended December 31, 2016
|  | Fixed Maturities– Pooled Separate Accounts |  | Fixed Maturities– Other |  | Real Estate– Pooled Separate Accounts
|  | (in millions)
Fair Value, beginning of period |  | $ | 35 |  |  | $ | 93 |  |  | $ | 607 |
Actual Return on Assets: |  |  |  |  |  |
Relating to assets still held at the reporting date |  | 1 |  |  | 0 |  |  | 61 |
Relating to assets sold during the period |  | 0 |  |  | 0 |  |  | 6 |
Purchases, sales and settlements |  | 0 |  |  | (44 | ) |  | (8 | )
Transfers in and/or out of Level 3 |  | 0 |  |  | 0 |  |  | 0 |
Fair Value, end of period |  | $ | 36 |  |  | $ | 49 |  |  | $ | 666 |
Postretirement plan asset allocations in accordance with the investment guidelines are as follows:
|  | As of December 31, 2017
|  | Level 1 |  | Level 2 |  | Level 3 |  | NAV Practical Expedient |  | Total
|  | (in millions)
U.S. Equities: |  |  |  |  |  |  |  |  |  |
Variable Life Insurance Policies(1) |  | $ | 0 |  |  | $ | 605 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 605 |
Common trusts(2) |  | 0 |  |  | 182 |  |  | 0 |  |  | 0 |  |  | 182 |
Equities |  | 0 |  |  | 2 |  |  | 0 |  |  | 0 |  |  | 2 |
Subtotal |  |  |  |  |  |  |  |  |  | 789 |
International Equities: |  |  |  |  |  |  |  |  |  |
Variable Life Insurance Policies(3) |  | 0 |  |  | 106 |  |  | 0 |  |  | 0 |  |  | 106 |
Common trusts(4) |  | 0 |  |  | 110 |  |  | 0 |  |  | 0 |  |  | 110 |
Subtotal |  |  |  |  |  |  |  |  |  | 216 |
Fixed Maturities: |  |  |  |  |  |  |  |  |  |
Variable Life Insurance Policies(5) |  | 0 |  |  | 163 |  |  | 0 |  |  | 0 |  |  | 163 |
Common trusts(5) |  | 0 |  |  | 52 |  |  | 0 |  |  | 0 |  |  | 52 |
U.S. government securities (federal): |  |  |  |  |  |  |  |  |  |
Other U.S. government securities |  | 0 |  |  | 87 |  |  | 0 |  |  | 0 |  |  | 87 |
Non-U.S. government securities |  | 0 |  |  | 2 |  |  | 0 |  |  | 0 |  |  | 2 |
Corporate Debt: |  |  |  |  |  |  |  |  |  |
Corporate bonds(6) |  | 0 |  |  | 151 |  |  | 0 |  |  | 0 |  |  | 151 |
Asset-backed |  | 0 |  |  | 28 |  |  | 0 |  |  | 0 |  |  | 28 |
Collateralized Mortgage Obligations(7) |  | 0 |  |  | 27 |  |  | 2 |  |  | 0 |  |  | 29 |
Collateralized Loan Obligations(8) |  | 0 |  |  | 28 |  |  | 2 |  |  | 0 |  |  | 30 |
Other(9) |  | 6 |  |  | 0 |  |  | 5 |  |  | 0 |  |  | 11 |
Subtotal |  |  |  |  |  |  |  |  |  | 553 |
Short-term Investments: |  |  |  |  |  |  |  |  |  |
Registered investment companies |  | 57 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 57 |
Subtotal |  |  |  |  |  |  |  |  |  | 57 |
Total |  | $ | 63 |  |  | $ | 1,543 |  |  | $ | 9 |  |  | $ | 0 |  |  | $ | 1,615 |
|  | As of December 31, 2016
|  | Level 1 |  | Level 2 |  | Level 3 |  | NAV Practical Expedient |  | Total
|  | (in millions)
U.S. Equities: |  |  |  |  |  |  |  |  |  |
Variable Life Insurance Policies(1) |  | $ | 0 |  |  | $ | 506 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 506 |
Common trusts(2) |  | 0 |  |  | 170 |  |  | 0 |  |  | 0 |  |  | 170 |
Subtotal |  |  |  |  |  |  |  |  |  | 676 |
International Equities: |  |  |  |  |  |  |  |  |  |
Variable Life Insurance Policies(3) |  | 0 |  |  | 90 |  |  | 0 |  |  | 0 |  |  | 90 |
Common trusts(4) |  | 0 |  |  | 96 |  |  | 0 |  |  | 0 |  |  | 96 |
Subtotal |  |  |  |  |  |  |  |  |  | 186 |
Fixed Maturities: |  |  |  |  |  |  |  |  |  |
Variable Life Insurance Policies(5) |  | 0 |  |  | 157 |  |  | 0 |  |  | 0 |  |  | 157 |
Common trusts(5) |  | 0 |  |  | 59 |  |  | 0 |  |  | 0 |  |  | 59 |
U.S. government securities (federal): |  |  |  |  |  |  |  |  |  |
Other U.S. government securities |  | 0 |  |  | 78 |  |  | 0 |  |  | 0 |  |  | 78 |
Non-U.S. government securities |  | 0 |  |  | 2 |  |  | 0 |  |  | 0 |  |  | 2 |
Corporate Debt: |  |  |  |  |  |  |  |  |  |
Corporate bonds(6) |  | 0 |  |  | 176 |  |  | 0 |  |  | 0 |  |  | 176 |
Asset-backed |  | 0 |  |  | 48 |  |  | 1 |  |  | 0 |  |  | 49 |
Collateralized Mortgage Obligations(7) |  | 0 |  |  | 22 |  |  | 5 |  |  | 0 |  |  | 27 |
Interest rate swaps (Notional amount: $271) |  | 0 |  |  | 1 |  |  | 0 |  |  | 0 |  |  | 1 |
Other(9) |  | 1 |  |  | 0 |  |  | 5 |  |  | 0 |  |  | 6 |
Subtotal |  |  |  |  |  |  |  |  |  | 555 |
Short-term Investments: |  |  |  |  |  |  |  |  |  |
Registered investment companies |  | 114 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 114 |
Subtotal |  |  |  |  |  |  |  |  |  | 114 |
Total |  | $ | 115 |  |  | $ | 1,405 |  |  | $ | 11 |  |  | $ | 0 |  |  | $ | 1,531 |
__________
(1) | This category invests in U.S. equity funds, primarily large cap equities whose objective is to track an index via pooled separate accounts and registered investment companies.
(2) | This category invests in U.S. equity funds, primarily large cap equities.
(3) | This category invests in international equity funds, primarily large cap international equities whose objective is to track an index.
(4) | This category fund invests in large cap international equity fund whose objective is to outperform an index.
(5) | This category invests in U.S. government and corporate bond funds.
(6) | This category invests in highly rated corporate bonds.
(7) | This category invests in highly rated Collateralized Mortgage Obligations.
(8) | This category invests in highly rated Collateralized Loan Obligations.
(9) | Cash and cash equivalents, short-term investments, payables and receivables and open future contract positions (including fixed income collateral).
Changes in Fair Value of Level 3 Postretirement Assets
|  | Year Ended December 31, 2017
|  | Fixed Maturities– Corporate Debt– Asset-backed |  | Fixed Maturities– Corporate Debt– Collateralized Mortgage Obligations |  | Fixed Maturities– Corporate Debt– Collateralized Loan Obligations |  | Fixed Maturities– Other
|  | (in millions)
Fair Value, beginning of period |  | $ | 1 |  |  | $ | 5 |  |  | $ | 0 |  |  | $ | 5 |
Actual Return on Assets: |  |  |  |  |  |  |  |
Relating to assets still held at the reporting date |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Relating to assets sold during the period |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Purchases, sales and settlements |  | 0 |  |  | (3 | ) |  | 2 |  |  | 0 |
Transfers in and/or out of Level 3(1) |  | (1 | ) |  | 0 |  |  | 0 |  |  | 0 |
Fair Value, end of period |  | $ | 0 |  |  | $ | 2 |  |  | $ | 2 |  |  | $ | 5 |
|  | Year Ended December 31, 2016
|  | Fixed Maturities– Corporate Debt– Asset-backed |  | Fixed Maturities– Corporate Debt– Collateralized Mortgage Obligations |  | Fixed Maturities– Other
|  | (in millions)
Fair Value, beginning of period |  | $ | 0 |  |  | $ | 0 |  |  | $ | 3 |
Actual Return on Assets: |  |  |  |  |  |
Relating to assets still held at the reporting date |  | 0 |  |  | 0 |  |  | 0 |
Relating to assets sold during the period |  | 0 |  |  | 0 |  |  | 0 |
Purchases, sales and settlements |  | 1 |  |  | 5 |  |  | 2 |
Transfers in and/or out of Level 3 |  | 0 |  |  | 0 |  |  | 0 |
Fair Value, end of period |  | $ | 1 |  |  | $ | 5 |  |  | $ | 5 |
__________
(1) | The transfers from level 3 to level 2 are due to the availability of external pricing sources.
A summary of pension and postretirement plan asset allocation as of the year ended December 31, are as follows:
|  | Pension Percentage of Plan Assets |  | Postretirement Percentage of Plan Assets
|  | 2017 |  | 2016 |  | 2017 |  | 2016
Asset Category |  |  |  |  |  |  |  |
U.S. Equities |  | 5 | % |  | 4 | % |  | 49 | % |  | 44 | %
International Equities |  | 5 |  |  | 4 |  |  | 13 |  |  | 12 |
Fixed Maturities |  | 66 |  |  | 68 |  |  | 34 |  |  | 36 |
Short-term Investments |  | 0 |  |  | 0 |  |  | 4 |  |  | 8 |
Real Estate |  | 8 |  |  | 8 |  |  | 0 |  |  | 0 |
Other |  | 16 |  |  | 16 |  |  | 0 |  |  | 0 |
Total |  | 100 | % |  | 100 | % |  | 100 | % |  | 100 | %
The expected benefit payments for the Company’s pension and postretirement plans, as well as the expected Medicare Part D subsidy receipts related to the Company’s postretirement plan, for the years indicated are as follows:
|  | Pension Benefit Payments |  | Other Postretirement Benefit Payments |  | Other Postretirement Benefits– Medicare Part D Subsidy Receipts
|  | (in millions)
2018 |  | $ | 789 |  |  | $ | 149 |  |  | $ | 10 |
2019 |  | 849 |  |  | 152 |  |  | 10 |
2020 |  | 803 |  |  | 154 |  |  | 10 |
2021 |  | 827 |  |  | 155 |  |  | 11 |
2022 |  | 866 |  |  | 155 |  |  | 11 |
2023-2027 |  | 4,534 |  |  | 766 |  |  | 59 |
Total |  | $ | 8,668 |  |  | $ | 1,531 |  |  | $ | 111 |
The Company anticipates that it will make cash contributions in 2018 of approximately $200 million to the pension plans and approximately $10 million to the postretirement plans. Postemployment Benefits The Company accrues postemployment benefits for income continuance and health and life benefits provided to former or inactive employees who are not retirees. The net accumulated liability for these benefits at December 31, 2017 and 2016 was $0 million and $20 million, respectively, and is included in “Other liabilities.” Other Employee Benefits The Company sponsors voluntary savings plans for employees (401(k) plans). The plans provide for salary reduction contributions by employees and matching contributions by the Company of up to 4% of annual salary. The matching contributions by the Company included in “General and administrative expenses” were $74 million, $72 million and $64 million for the years ended December 31, 2017, 2016 and 2015, respectively.

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