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Fair Value (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are presented in the following tables:

September 30, 2016		Level 1				Level 2				Level 3				Total
(In millions)
Fixed maturity securities:
Corporate and other bonds						$	19,555			$	261			$	19,816
States, municipalities and political subdivisions							13,500				1				13,501
Asset-backed:
Residential mortgage-backed							5,286				79				5,365
Commercial mortgage-backed							2,120				24				2,144
Other asset-backed							916				43				959
Total asset-backed							8,322				146				8,468
U.S. Treasury and obligations of government-sponsored enterprises		$	76												76
Foreign government							438								438
Redeemable preferred stock			20												20
Fixed maturities available-for-sale			96				41,815				408				42,319
Fixed maturities trading							569				6				575
Total fixed maturities		$	96			$	42,384			$	414			$	42,894
Equity securities available-for-sale		$	97							$	19			$	116
Equity securities trading			469								1				470
Total equity securities		$	566			$	-			$	20			$	586
Short term investments		$	3,902			$	911							$	4,813
Other invested assets			54				5								59
Life settlement contracts										$	67				67
Payable to brokers			(215	)											(215)

December 31, 2015		Level 1				Level 2				Level 3				Total
(In millions)
Fixed maturity securities:
Corporate and other bonds						$	17,601			$	168			$	17,769
States, municipalities and political subdivisions							13,172				2				13,174
Asset-backed:
Residential mortgage-backed							4,938				134				5,072
Commercial mortgage-backed							2,175				22				2,197
Other asset-backed							868				53				921
Total asset-backed							7,981				209				8,190
U.S. Treasury and obligations of government-sponsored enterprises		$	66				1								67
Foreign government							346								346
Redeemable preferred stock			35												35
Fixed maturities available-for-sale			101				39,101				379				39,581
Fixed maturities trading							35				85				120
Total fixed maturities		$	101			$	39,136			$	464			$	39,701
Equity securities available-for-sale		$	177							$	20			$	197
Equity securities trading			554								1				555
Total equity securities		$	731			$	-			$	21			$	752
Short term investments		$	3,600			$	1,134							$	4,734
Other invested assets			102				44								146
Receivables							9			$	3				12
Life settlement contracts											74				74
Payable to brokers			(196	)											(196)

Reconciliations of Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs

The following tables present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2016 and 2015:

																																						Unrealized
																																						Gains
																																						(Losses)
																																						Recognized in
						Net Realized Gains																																Net Income
						(Losses) and Net Change																																on Level
						in Unrealized Gains																																3 Assets and
						(Losses)																				Transfers				Transfers								Liabilities
		Balance,				Included in				Included in																into				out of				Balance,				Held at
2016		July 1				Net Income				OCI				Purchases				Sales				Settlements				Level 3				Level 3				September 30				September 30
(In millions)
Fixed maturity securities:
Corporate and other bonds		$	242			$	1			$	7			$	16							$	(5)											$	261
States, municipalities and political subdivisions			2																				(1)												1
Asset-backed:
Residential mortgage-backed			134								(1	)			5								(1)							$	(58	)			79
Commercial mortgage- backed			11												23								(8)								(2	)			24
Other asset-backed			45												34																(36	)			43
Total asset-backed			190				-				(1	)			62			$	-				(9)			$	-				(96	)			146			$	-
Fixed maturities available-for-sale			434				1				6				78								(15)								(96	)			408
Fixed maturities trading			6																																6				(1)
Total fixed maturities		$	440			$	1			$	6			$	78			$	-			$	(15)			$	-			$	(96	)		$	414			$	(1)
Equity securities available-for-sale		$	19			$	(1	)		$	1																							$	19			$	(2)
Equity securities trading			2											$	(1)																				1				(1)
Total equity securities		$	21			$	(1	)		$	1			$	(1)			$	-			$	-			$	-			$	-			$	20			$	(3)
Life settlement contracts		$	67																															$	67
Derivative financial instruments, net			1			$	(1	)																											-

						Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)																				Transfers into Level 3				Transfers out of Level 3				Balance, September 30				Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
2015		Balance, July 1				Included in Net Income				Included in OCI				Purchases				Sales				Settlements																Held at September 30
(In millions)
Fixed maturity securities:
Corporate and other bonds		$	141											$	27			$	(1	)		$	(11	)						$	(3	)		$	153
States, municipalities and political subdivisions			85																												(24	)			61
Asset-backed:
Residential mortgage-backed			207			$	2			$	(2	)			4								(7	)											204
Commercial mortgage-backed			87				5				(4	)			8								(15	)							(10	)			71
Other asset-backed			490								(6	)			43				(20	)			(32	)							(4	)			471
Total asset-backed			784				7				(12	)			55				(20	)			(54	)		$	-				(14	)			746			$	-
Fixed maturities available-for-sale			1,010				7				(12	)			82				(21	)			(65	)							(41	)			960
Fixed maturities trading			89				(2	)											(1	)															86			$	(2)
Total fixed maturities		$	1,099			$	5			$	(12	)		$	82			$	(22	)		$	(65	)		$	-			$	(41	)		$	1,046			$	(2)
Equity securities available-for-sale		$	16							$	(1	)																						$	15
Equity securities trading			1			$	1											$	(2	)															-			$	1
Total equity securities		$	17			$	1			$	(1	)		$	-			$	(2	)		$	-			$	-			$	-			$	15			$	1
Life settlement contracts		$	75			$	5															$	(6	)										$	74			$	2

																																						Unrealized
																																						Gains
																																						(Losses)
																																						Recognized in
						Net Realized Gains																																Net Income
						(Losses) and Net Change																																on Level
						in Unrealized Gains																																3 Assets and
						(Losses)																				Transfers				Transfers								Liabilities
		Balance,				Included in				Included in																into				out of				Balance,				Held at
2016		January 1				Net Income				OCI				Purchases				Sales				Settlements				Level 3				Level 3				September 30				September 30
(In millions)
Fixed maturity securities:
Corporate and other bonds		$	168			$	1			$	14			$	163			$	(36	)		$	(15)							$	(34)			$	261
States, municipalities and political subdivisions			2																				(1)												1
Asset-backed:
Residential mortgage-backed			134				2				(2)				15								(10)								(60)				79
Commercial mortgage-backed			22												32								(17)			$	3				(16)				24
Other asset-backed			53								2				69				(25	)			(1)				2				(57)				43
Total asset-backed			209				2				-				116				(25	)			(28)				5				(133)				146			$	-
Fixed maturities available-for-sale			379				3				14				279				(61	)			(44)				5				(167)				408
Fixed maturities trading			85				5								2				(86	)															6				3
Total fixed maturities		$	464			$	8			$	14			$	281			$	(147	)		$	(44)			$	5			$	(167)			$	414			$	3
Equity securities available-for-sale		$	20			$	(1	)																										$	19			$	(2)
Equity securities trading			1				1											$	(1	)															1
Total equity securities		$	21			$	-			$	-			$	-			$	(1	)		$	-			$	-			$	-			$	20			$	(2)
Life settlement contracts		$	74			$	10															$	(17)											$	67			$	2
Derivative financial instruments, net			3				(4	)										$	(2	)						$	3								-				(3)

																																						Unrealized
																																						Gains
																																						(Losses)
																																						Recognized in
						Net Realized Gains																																Net Income
						(Losses) and Net Change																																on Level
						in Unrealized Gains																																3 Assets and
						(Losses)																				Transfers				Transfers								Liabilities
		Balance,				Included in				Included in																into				out of				Balance,				Held at
2015		January 1				Net Income				OCI				Purchases				Sales				Settlements				Level 3				Level 3				September 30				September 30
(In millions)
Fixed maturity securities:
Corporate and other bonds		$	162			$	(1	)		$	(1	)		$	39			$	(13	)		$	(32)			$	37			$	(38	)		$	153
States, municipalities and political subdivisions			94				1																(10)								(24	)			61
Asset-backed:
Residential mortgage-backed			189				4				(4	)			76								(28)								(33	)			204
Commercial mortgage-backed			83				7				(4	)			23								(17)				17				(38	)			71
Other asset-backed			655				3				4				125				(254	)			(52)								(10	)			471			$	(1)
Total asset-backed			927				14				(4	)			224				(254	)			(97)				17				(81	)			746				(1)
Fixed maturities available-for-sale			1,183				14				(5	)			263				(267	)			(139)				54				(143	)			960				(1)
Fixed maturities trading			90				(2	)											(2	)															86				(2)
Total fixed maturities		$	1,273			$	12			$	(5	)		$	263			$	(269	)		$	(139)			$	54			$	(143	)		$	1,046			$	(3)
Equity securities available-for-sale		$	16							$	(1	)																						$	15
Equity securities trading			1			$	1											$	(2	)															-			$	1
Total equity securities		$	17			$	1			$	(1	)		$	-			$	(2	)		$	-			$	-			$	-			$	15			$	1
Life settlement contracts		$	82			$	22															$	(30)											$	74			$	1

Quantitative Information about Significant Unobservable Inputs Utilized by Company in Fair Value Measurements of Level 3 Assets

he following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurement of Level 3 assets. Valuations for assets and liabilities not presented in the tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of unobservable inputs from these broker quotes is neither provided nor reasonably available to the Company.

September 30, 2016

Estimated Fair Value

Valuation Techniques

Unobservable Inputs

Range (Weighted Average)

(In millions)

Fixed maturity securities

$

211

Discounted cash flow

Credit spread

2% – 40% (6%)

Life settlement contracts

67

Discounted cash flow

Discount rate risk premium

9%

Mortality assumption

55% – 1,676% (162%)

December 31, 2015

Fixed maturity securities

$

138

Discounted cash flow

Credit spread

3% – 184% (6%)

Life settlement contracts

74

Discounted cash flow

Discount rate risk premium

9%

Mortality assumption

55% – 1,676% (164%)

Carrying Amount, Estimated Fair Value and Level of Fair Value Hierarchy of Company's Financial Assets and Liabilities

The carrying amount, estimated fair value and the level of the fair value hierarchy of the Company’s financial assets and liabilities which are not measured at fair value on the Consolidated Condensed Balance Sheets are presented in the following tables. The carrying amounts and estimated fair values of short term debt and long term debt exclude capital lease obligations. The carrying amounts reported on the Consolidated Condensed Balance Sheets for cash and short term investments not carried at fair value and certain other assets and liabilities approximate fair value due to the short term nature of these items.

		Carrying				Estimated Fair Value
September 30, 2016		Amount				Level 1				Level 2				Level 3				Total
(In millions)
Assets:
Other invested assets, primarily mortgage loans		$	629											$	654			$	654
Liabilities:
Short term debt			185							$	182				3				185
Long term debt			10,722								10,428				646				11,074
December 31, 2015
Assets:
Other invested assets, primarily mortgage loans		$	678											$	688			$	688
Liabilities:
Short term debt			1,038							$	1,050				2				1,052
Long term debt			9,507								8,538				595				9,133

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- Definition

Tabular disclosure of the inputs and valuation techniques used to measure fair value, and a discussion of changes in valuation techniques and related inputs, if any, applied during the period to each separate class of assets, liabilities, and financial instruments classified in shareholders' equity that are measured on a recurring and/or nonrecurring basis.

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Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

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