XML 23 R12.htm IDEA: XBRL DOCUMENT
v3.22.1

Fair Value of Financial Instruments | 3 Months Ended
--- | ---
Mar. 31, 2022
Fair Value Disclosures [Abstract] |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Our measurement of fair value is based on assumptions used by market participants in pricing the asset or liability, which may include inherent risk, restrictions on the sale or use of an asset, or non-performance risk, which may include our own credit risk. We estimate an exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability (“exit price”) in the principal market, or the most advantageous market for that asset or liability in the absence of a principal market as opposed to the price that would be paid to acquire the asset or assume a liability (“entry price”). We categorize financial instruments carried at fair value into a three-level fair value hierarchy, based on the priority of inputs to the respective valuation technique. The three-level hierarchy for fair value measurement is defined as follows: Level 1 - Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads, and yield curves. Level 3 - Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date based on the best information available in the circumstances. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. When a determination is made to classify an asset or liability within Level 3 of the fair value hierarchy, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. Because certain securities trade in less liquid or illiquid markets with limited or no pricing information, the determination of fair value for these securities is inherently more difficult. In addition to the unobservable inputs, Level 3 fair value investments may include observable components, which are components that are actively quoted or can be validated to market-based sources. The carrying amounts and estimated fair values of our financial instruments for which the disclosure of fair values is required, including financial assets and liabilities measured and carried at fair value on a recurring basis, with the exception of investment contracts, portions of other long-term investments and debt which are disclosed later within this footnote, was summarized according to the hierarchy previously described, as follows (in millions):
| March 31, 2022
| Level 1 |  | Level 2 |  | Level 3 |  | Fair Value |  | Carrying Amount
Assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 2,793 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,793 |  |  | $ | 2,793 |
Fixed maturity securities, available-for-sale: |  |  |  |  |  |  |  |  |
Asset-backed securities | — |  |  | 4,897 |  |  | 4,161 |  |  | 9,058 |  |  | 9,058 |
Commercial mortgage-backed securities | — |  |  | 3,012 |  |  | 40 |  |  | 3,052 |  |  | 3,052 |
Corporates | 35 |  |  | 14,365 |  |  | 1,141 |  |  | 15,541 |  |  | 15,541 |
Hybrids | 126 |  |  | 723 |  |  | — |  |  | 849 |  |  | 849 |
Municipals | — |  |  | 1,335 |  |  | 37 |  |  | 1,372 |  |  | 1,372 |
Residential mortgage-backed securities | — |  |  | 761 |  |  | — |  |  | 761 |  |  | 761 |
U.S. Government | 587 |  |  | — |  |  | — |  |  | 587 |  |  | 587 |
Foreign Governments | — |  |  | 241 |  |  | 17 |  |  | 258 |  |  | 258 |
Short term investments | 1,403 |  |  | 324 |  |  | 19 |  |  | 1,746 |  |  | 1,746 |
Preferred securities | 449 |  |  | 833 |  |  | 1 |  |  | 1,283 |  |  | 1,283 |
Equity securities | 1,004 |  |  | — |  |  | 10 |  |  | 1,014 |  |  | 1,014 |
Derivative investments | — |  |  | 487 |  |  | — |  |  | 487 |  |  | 487 |
Reinsurance related embedded derivative, included in other assets | — |  |  | 50 |  |  | — |  |  | 50 |  |  | 50 |
Other long-term investments | — |  |  | — |  |  | 70 |  |  | 70 |  |  | 70 |
Total financial assets at fair value | $ | 6,397 |  |  | $ | 27,028 |  |  | $ | 5,496 |  |  | $ | 38,921 |  |  | $ | 38,921 |
Liabilities |  |  |  |  |  |  |  |  |
Derivatives: |  |  |  |  |  |  |  |  |
FIA/ IUL embedded derivatives, included in contractholder funds | — |  |  | — |  |  | 3,395 |  |  | 3,395 |  |  | 3,395 |
Reinsurance related embedded derivatives, included in accounts payable and accrued liabilities | — |  |  | 1 |  |  | — |  |  | 1 |  |  | 1 |
Total financial liabilities at fair value | $ | — |  |  | $ | 1 |  |  | $ | 3,395 |  |  | $ | 3,396 |  |  | $ | 3,396 |
| December 31, 2021
| Level 1 |  | Level 2 |  | Level 3 |  | Fair Value |  | Carrying Amount
Assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 4,360 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,360 |  |  | $ | 4,360 |
Fixed maturity securities, available-for-sale: |  |  |  |  |  |  |  |  |
Asset-backed securities | — |  |  | 4,736 |  |  | 3,959 |  |  | 8,695 |  |  | 8,695 |
Commercial mortgage-backed securities | — |  |  | 2,944 |  |  | 35 |  |  | 2,979 |  |  | 2,979 |
Corporates | 37 |  |  | 15,322 |  |  | 1,135 |  |  | 16,494 |  |  | 16,494 |
Hybrids | 132 |  |  | 780 |  |  | — |  |  | 912 |  |  | 912 |
Municipals | — |  |  | 1,458 |  |  | 43 |  |  | 1,501 |  |  | 1,501 |
Residential mortgage-backed securities | — |  |  | 731 |  |  | — |  |  | 731 |  |  | 731 |
U.S. Government | 394 |  |  | — |  |  | — |  |  | 394 |  |  | 394 |
Foreign Governments | — |  |  | 266 |  |  | 18 |  |  | 284 |  |  | 284 |
Short term investments | 168 |  |  | 2 |  |  | 321 |  |  | 491 |  |  | 491 |
Preferred securities | 506 |  |  | 893 |  |  | 2 |  |  | 1,401 |  |  | 1,401 |
Equity securities | 1,206 |  |  | — |  |  | 9 |  |  | 1,215 |  |  | 1,215 |
Derivative investments | — |  |  | 816 |  |  | — |  |  | 816 |  |  | 816 |
Other long-term investments | — |  |  | — |  |  | 78 |  |  | 78 |  |  | 78 |
Total financial assets at fair value | $ | 6,803 |  |  | $ | 27,948 |  |  | $ | 5,600 |  |  | $ | 40,351 |  |  | $ | 40,351 |
Liabilities |  |  |  |  |  |  |  |  |
Derivatives: |  |  |  |  |  |  |  |  |
FIA/ IUL embedded derivatives, included in contractholder funds | — |  |  | — |  |  | 3,883 |  |  | 3,883 |  |  | 3,883 |
Reinsurance related embedded derivatives, included in accounts payable and accrued liabilities | — |  |  | 73 |  |  | — |  |  | 73 |  |  | 73 |
Total financial liabilities at fair value | $ | — |  |  | $ | 73 |  |  | $ | 3,883 |  |  | $ | 3,956 |  |  | $ | 3,956 |
Valuation Methodologies Fixed Maturity Preferred and Equity Securities We measure the fair value of our securities based on assumptions used by market participants in pricing the security. The most appropriate valuation methodology is selected based on the specific characteristics of the fixed maturity or equity security, and we will then consistently apply the valuation methodology to measure the security’s fair value. Our fair value measurement is based on a market approach, which utilizes prices and other relevant information generated by market transactions involving identical or comparable securities. Sources of inputs to the market approach include third-party pricing services, independent broker quotations, or pricing matrices. We use observable and unobservable inputs in our valuation methodologies. Observable inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. In addition, market indicators and industry and economic events are monitored and further market data will be acquired when certain thresholds are met. For certain security types, additional inputs may be used, or some of the inputs described above may not be applicable. The significant input used in the fair value measurement of equity securities for which the market approach valuation technique is employed is yield for comparable securities. Increases or decreases in the yields would result in lower or higher, respectively, fair value measurements. For broker-quoted only securities, quotes from market makers or broker-dealers are obtained from sources recognized to be market participants. We believe the broker quotes are prices at which trades could be executed based on historical trades executed at broker-quoted or slightly higher prices. We analyze the third-party valuation methodologies and related inputs to perform assessments to determine the appropriate level within the fair value hierarchy. However, we did not adjust prices received from third parties as of March 31, 2022 or December 31, 2021. Derivative Financial Instruments The fair value of call options is based upon valuation pricing models, which represents what we would expect to receive or pay at the balance sheet date if we canceled the options, entered into offsetting positions, or exercised the options. Fair values for these instruments are determined internally, based on industry accepted valuation pricing models which use market-observable inputs, including interest rates, yield curve volatilities, and other factors. The fair value of futures contracts (specifically for FIA contracts) represents the cumulative unsettled variation margin (open trade equity, net of cash settlements), which represents what we would expect to receive or pay at the balance sheet date if we canceled the contracts or entered into offsetting positions. These contracts are classified as Level 1. The fair value measurement of the FIA/IUL embedded derivatives included in contractholder funds is determined through a combination of market observable information and significant unobservable inputs using the option budget method. The market observable inputs are the market value of option and treasury rates. The significant unobservable inputs are the budgeted option cost (i.e., the expected cost to purchase call options in future periods to fund the equity indexed linked feature), surrender rates, mortality multiplier and non-performance spread. The mortality multiplier at March 31, 2022 was applied to the 2012 Individual Annuity mortality tables. Increases or decreases in the market value of an option in isolation would result in a higher or lower, respectively, fair value measurement. Increases or decreases in treasury rates, mortality multiplier, surrender rates, or non-performance spread in isolation would result in a lower or higher fair value measurement, respectively. Generally, a change in any one unobservable input would not directly result in a change in any other unobservable input. The fair value of the reinsurance-related embedded derivatives in the funds withheld reinsurance agreements with Kubera Insurance (SAC) Ltd. ("Kubera") (effective October 31, 2021, this agreement was novated from Kubera to Somerset Reinsurance Ltd. ("Somerset"), a certified third party reinsurer) and ASPIDA Life Re Ltd ("Aspida Re") are estimated based upon the fair value of the assets supporting the funds withheld from reinsurance liabilities. The fair value of the assets is based on a quoted market price of similar assets (Level 2), and therefore the fair value of the embedded derivative is based on market-observable inputs and classified as Level 2. See Note L F&G Reinsurance for further discussion on F&G reinsurance agreements. Other long-term investments We hold a fund-linked note which provides for an additional payment at maturity based on the value of an embedded derivative based on the actual return of a dedicated return fund. Fair value of the embedded derivative is based on an unobservable input, the net asset value of the fund at the balance sheet date. The embedded derivative is similar to a call option on the net asset value of the fund with a strike price of zero since F&G will not be required to make any additional payments at maturity of the fund-linked note in order to receive the net asset value of the fund on the maturity date. A Black-Scholes model determines the net asset value of the fund as the fair value of the call option regardless of the values used for the other inputs to the option pricing model. The net asset value of the fund is provided by the fund manager at the end of each calendar month and represents the value an investor would receive if it withdrew its investment on the balance sheet date. Therefore, the key unobservable input used in the Black-Scholes model is the value of the fund. As the value of the fund increases or decreases, the fair value of the embedded derivative will increase or decrease. See further discussion on the available-for-sale embedded derivative in Note E Derivative Financial Instruments. The fair value of the credit-linked note is based on a weighted average of a broker quote and a discounted cash flow analysis. The discounted cash flow approach is based on the expected portfolio cash flows and amortization schedule reflecting investment expectations, adjusted for assumptions on the portfolio's default and recovery rates, and the note's discount rate. The fair value of the note is provided by the fund manager at the end of each quarter. Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of March 31, 2022 and December 31, 2021 are as follows:
| Fair Value at |  | Valuation Technique |  | Unobservable Input(s) |  | Range (Weighted average)
| March 31, 2022 |  |  |
| (in millions) |  |  |  | March 31, 2022
Assets |  |  |  |  |  |  |
Asset-backed securities | $ | 4,064 |  |  | Broker-quoted |  | Offered quotes |  | 44.79% - 728.00% (94.48%)
Asset-backed securities | 97 |  |  | Third-Party Valuation |  | Offered quotes |  | 86.52% - 103.47% (101.78%)
Commercial mortgage-backed securities | 23 |  |  | Broker-quoted |  | Offered quotes |  | 120.24% - 120.24% (120.24%)
Commercial mortgage-backed securities | 17 |  |  | Third Party Valuation |  | Offered quotes |  | 77.78% - 92.37% (86.30%)
Corporates | 456 |  |  | Broker-quoted |  | Offered quotes |  | 0.00% - 124.44% (94.94%)
Corporates | 14 |  |  | Discounted Cash Flow |  | Discount Rate |  | 44.00% - 100.00% (77.00%)
Corporates | 671 |  |  | Third-Party Valuation |  | Offered quotes |  | 81.09% - 113.62% (99.17%)
Municipals | 37 |  |  | Third-Party Valuation |  | Offered quotes |  | 118.69% - 118.69% (118.69%)
Foreign Governments | 17 |  |  | Third-Party Valuation |  | Offered quotes |  | 104.86% - 113.31% (107.50%)
Short term investments | 19 |  |  | Third-Party Valuation |  | Offered quotes |  | 94.33% - 95.49% (94.91%)
Preferred securities | 1 |  |  | Income-Approach |  | Yield |  | 2.43%
Equity securities | 2 |  |  | Black Scholes model |  | Risk Free Rate |  | 1.00% - 1.00% (1.00%)
|  |  |  |  | Strike Price |  | $1.50 - $1.50 ($1.50)
|  |  |  |  | Volatility |  | 81.00% - 81.00% (81.00%)
|  |  |  |  | Dividend Yield |  | 0.00% - 0.00% (0.00%)
Equity securities | 4 |  |  | Broker Quoted |  | Offered quotes |  | $50.00 - $55.00 ($52.50)
Equity securities | 4 |  |  | Discounted Cash Flow |  | Discount rate |  | 11.10% - 11.10% (11.10%)
|  |  | Market Comparable Company Analysis |  | EBITDA multiple |  | 4.8x - 4.8x (4.8x)
Other long-term investments: |  |  |  |  |  |  |
Available-for-sale embedded derivative | 30 |  |  | Black Scholes model |  | Market value of fund |  | 100.00%
Credit Linked Note | 19 |  |  | Broker-quoted |  | Offered quotes |  | 100.00%
Investment in affiliate | 21 |  |  | Market Comparable Company Analysis |  | EBITDA multiple |  | 8x-8x
Total financial assets at fair value | $ | 5,496 |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |
Derivative investments: |  |  |  |  |  |  |
FIA/ IUL embedded derivatives, included in contractholder funds | $ | 3,395 |  |  | Discounted cash flow |  | Market value of option |  | 0.00% - 26.75% (1.74%)
|  |  |  |  | Swap rates |  | 0.17% - 2.59% (1.38%)
|  |  |  |  | Mortality multiplier |  | 100.00% - 100.00% (100.00%)
|  |  |  |  | Surrender rates |  | 0.25% - 70.00% (6.24%)
|  |  |  |  | Partial withdrawals |  | 2.00% - 23.26% (2.73%)
|  |  |  |  | Non-performance spread |  | 0.49% - 1.23% (1.01%)
|  |  |  |  | Option cost |  | 0.00% - 4.97% (1.82%)
Total financial liabilities at fair value | $ | 3,395 |  |  |  |  |  |  |
| Fair Value at |  | Valuation Technique |  | Unobservable Input(s) |  | Range (Weighted average)
| December 31, 2021 |  |  |
| (in millions) |  |  |  | December 31, 2021
Assets |  |  |  |  |  |  |
Asset-backed securities | $ | 3,844 |  |  | Broker-quoted |  | Offered quotes |  | 52.56% - 260.70% (97.06%)
Asset-backed securities | 115 |  |  | Third-Party Valuation |  | Offered quotes |  | 93.02% - 108.45% (104.95%)
Commercial mortgage-backed securities | 24 |  |  | Broker-quoted |  | Offered quotes |  | 126.70% - 126.70% (126.70%)
Commercial mortgage-backed securities | 11 |  |  | Third Party Valuation |  | Offered quotes |  | 97.91% - 97.91% (97.91%)
Corporates | 380 |  |  | Broker-quoted |  | Offered quotes |  | 0.00% - 109.69% (100.91%)
Corporates | 741 |  |  | Third-Party Valuation |  | Offered quotes |  | 85.71% - 119.57% (107.72%)
Corporates | 14 |  |  | Discounted Cash Flow |  | Discount Rate |  | 44.00% - 100.00% (62.00%)
Municipals | 43 |  |  | Third-Party Valuation |  | Offered quotes |  | 135.09% - 135.09% (135.09%)
Foreign Governments | 18 |  | Third-Party Valuation |  | Offered quotes |  | 107.23% - 116.44% (110.11%)
Short term investments | 321 |  | Broker-quoted |  | Offered quotes |  | 100.00% - 100.00% (100.00%)
Preferred securities | 2 |  | Income-Approach |  | Yield |  | 2.43%
Equity securities | 3 |  | Broker Quoted |  | Offered quotes |  | $6.23 - $6.23 ($6.23)
Equity securities | 2 |  | Black Scholes model |  | Risk Free Rate |  | 1.00% -1.00% (1.00%)
|  |  |  |  | Strike Price |  | $1.50 - $1.50 ($1.50)
|  |  |  |  | Volatility |  | 81.00% - 81.00% (81.00%)
|  |  |  |  | Dividend Yield |  | 0.00% - 0.00% (0.00%)
Equity securities | 4 |  |  | Discounted Cash Flow |  | Discount rate |  | 12.70% - 12.70% (12.70%)
|  |  | Market Comparable Company Analysis |  | EBITDA multiple |  | 5.9x - 5.9x (5.9x)
Other long-term investments: |  |  |  |  |  |  |
Available-for-sale embedded derivative | 34 |  |  | Black Scholes model |  | Market value of fund |  | 100.00%
Credit Linked Note | 23 |  |  | Broker-quoted |  | Offered quotes |  | 100.00%
Investment in affiliate | 21 |  |  | Market Comparable Company Analysis |  | EBITDA multiple |  | 8x-8x
Total financial assets at fair value | $ | 5,600 |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |
Future policy benefits | — |  |  | Discounted cash flow |  | Non-performance spread |  | 0.50%
Derivative investments: |  |  |  |  |  |  |
FIA/ IUL embedded derivatives, included in contractholder funds | 3,883 |  |  | Discounted cash flow |  | Market value of option |  | 0.00% - 38.72% (3.16%)
|  |  |  |  | Swap rates |  | 0.05% - 1.94% (1.00%)
|  |  |  |  | Mortality multiplier |  | 100.00% - 100.00% (100.00%)
|  |  |  |  | Surrender rates |  | 0.25% - 70.00% (6.26%)
|  |  |  |  | Partial withdrawals |  | 2.00% - 23.26% (2.72%)
|  |  |  |  | Non-performance spread |  | 0.43% - 1.01% (0.68%)
|  |  |  |  | Option cost |  | 0.07% - 4.97% (1.83%)
Total financial liabilities at fair value | $ | 3,883 |  |  |  |  |  |  |
The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three months ended March 31, 2022 and 2021. This summary excludes any impact of amortization of value of business acquired (“VOBA”), deferred acquisition cost (“DAC”), and deferred sales inducements (“DSI”). The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.
| Three months ended March 31, 2022 |  |
| (in millions) |  |
| Balance at Beginning of Period |  |  |  | Total Gains (Losses) |  | Purchases |  | Sales |  | Settlements |  | Net transfer In (Out) of Level 3 (a) |  | Balance at End of Period |  | Change in Unrealized Gains (Losses) Incl in OCI
|  |  | Included in Earnings |  | Included in AOCI |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset-backed securities | $ | 3,959 |  |  |  |  | $ | — |  |  | $ | (130) |  |  | $ | 400 |  |  | $ | — |  |  | $ | (152) |  |  | $ | 84 |  |  | $ | 4,161 |  |  | $ | (138) |
Commercial mortgage-backed securities | 35 |  |  |  |  | — |  |  | (2) |  |  | — |  |  | — |  |  | — |  |  | 7 |  |  | 40 |  |  | (2) |
Corporates | 1,135 |  |  |  |  | — |  |  | (74) |  |  | 80 |  |  | — |  |  | (26) |  |  | 26 |  |  | 1,141 |  |  | (73) |
Municipals | 43 |  |  |  |  | — |  |  | (6) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 37 |  |  | (5) |
Residential mortgage-backed securities | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Foreign Governments | 18 |  |  |  |  | — |  |  | (1) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 17 |  |  | (1) |
Short term investments | 321 |  |  |  |  | — |  |  | (1) |  |  | 20 |  |  | — |  |  | — |  |  | (321) |  |  | 19 |  |  | (1) |
Preferred securities | 2 |  |  |  |  | — |  |  | (1) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |  | (1) |
Equity securities | 9 |  |  |  |  | — |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | 10 |  |  | — |
Other long-term investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale embedded derivative | 34 |  |  |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 30 |  |  | — |
Investment in affiliate | 21 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 21 |  |  | — |
Credit linked note | 23 |  |  |  |  | — |  |  | (3) |  |  | — |  |  | — |  |  | (1) |  |  | — |  |  | 19 |  |  | — |
Total Level 3 assets at fair value | $ | 5,600 |  |  |  |  | $ | (4) |  |  | $ | (218) |  |  | $ | 501 |  |  | $ | — |  |  | $ | (179) |  |  | $ | (204) |  |  | $ | 5,496 |  |  | $ | (221) |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FIA/ IUL embedded derivatives, included in contractholder funds | 3,883 |  |  |  |  | (488) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,395 |  |  | — |
Total Level 3 liabilities at fair value | $ | 3,883 |  |  |  |  | $ | (488) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,395 |  |  | $ | — |
(a) The net transfers out of Level 3 during the three months ended March 31, 2022 were exclusively to Level 2.
| Three months ended March 31, 2021 |  |
| (in millions) |  |
| Balance at Beginning of Period |  |  |  | Total Gains (Losses) |  | Purchases |  | Sales |  | Settlements |  | Net transfer In (Out) of Level 3 (a) |  | Balance at End of Period |  | Change in Unrealized Gains (Losses) Incl in OCI
|  |  | Included in Earnings |  | Included in AOCI |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset-backed securities | $ | 1,350 |  |  |  |  | $ | — |  |  | $ | (23) |  |  | $ | 358 |  |  | $ | — |  |  | $ | (92) |  |  | $ | — |  |  | $ | 1,593 |  |  | $ | (4) |
Commercial mortgage-backed securities | 26 |  |  |  |  | — |  |  | (1) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 25 |  |  | 1 |
Corporates | 1,289 |  |  |  |  | 6 |  |  | (39) |  |  | 40 |  |  | (5) |  |  | (31) |  |  | (14) |  |  | 1,246 |  |  | 19 |
Hybrids | 4 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4) |  |  | — |  |  | — |  |  | — |
Municipals | 43 |  |  |  |  | — |  |  | (2) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 41 |  |  | 4 |
Residential mortgage-backed securities | 483 |  |  |  |  | — |  |  | 12 |  |  | 5 |  |  | — |  |  | (13) |  |  | — |  |  | 487 |  |  | 27 |
Foreign Governments | 17 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 17 |  |  | 2 |
Equity securities | 5 |  |  |  |  | 1 |  |  | — |  |  | 3 |  |  | — |  |  | — |  |  | — |  |  | 9 |  |  | — |
Other long-term investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale embedded derivative | 27 |  |  |  |  | 2 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 29 |  |  | — |
Credit linked note | 23 |  |  |  |  | — |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 19 |  |  | — |
Total Level 3 assets at fair value | $ | 3,267 |  |  |  |  | $ | 9 |  |  | $ | (57) |  |  | $ | 406 |  |  | $ | (5) |  |  | $ | (140) |  |  | $ | (14) |  |  | $ | 3,466 |  |  | $ | 49 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Future policy benefits | $ | 5 |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (1) |  |  | $ | — |  |  | $ | 4 |  |  | $ | — |
FIA/IUL embedded derivatives, included in contractholder funds | 3,404 |  |  |  |  | (111) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,293 |  |  | — |
Total Level 3 liabilities at fair value | $ | 3,409 |  |  |  |  | $ | (111) |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (1) |  |  | $ | — |  |  | $ | 3,297 |  |  | $ | — |
(a) The net transfers out of Level 3 during the three months ended March 31, 2021 were exclusively to Level 2. Valuation Methodologies and Associated Inputs for Financial Instruments Not Carried at Fair Value The following discussion outlines the methodologies and assumptions used to determine the fair value of our financial instruments not carried at fair value. Considerable judgment is required to develop these assumptions used to measure fair value. Accordingly, the estimates shown are not necessarily indicative of the amounts that would be realized in a one-time, current market exchange of all of our financial instruments. Mortgage Loans The fair value of mortgage loans is established using a discounted cash flow method based on internal credit rating, maturity and future income. This yield-based approach is sourced from our third-party vendor. The internal ratings for mortgages in good standing are based on property type, location, market conditions, occupancy, debt service coverage, loan-to-value, quality of tenancy, borrower, and payment record. The inputs used to measure the fair value of our mortgage loans are classified as Level 3 within the fair value hierarchy. Policy Loans (included within Other long-term investments) Fair values for policy loans are estimated from a discounted cash flow analysis, using interest rates currently being offered for loans with similar credit risk. Loans with similar characteristics are aggregated for purposes of the calculations. Company Owned Life Insurance Company owned life insurance ("COLI") is a life insurance program used to finance certain employee benefit expenses. The fair value of COLI is based on net realizable value, which is generally cash surrender value. COLI is classified as Level 3 within the fair value hierarchy. Other Invested Assets (included within Other long-term investments) The fair value of the bank loan is estimated using a discounted cash flow method with the discount rate based on weighted average cost of capital ("WACC"). This yield-based approach is sourced from a third-party vendor and the WACC establishes a market participant discount rate by determining the hypothetical capital structure for the asset should it be underwritten as of each period end. Other invested assets are classified as Level 3 within the fair value hierarchy. Investment Contracts Investment contracts include deferred annuities (FIAs and fixed rate annuities), indexed universal life policies ("IULs"), funding agreements and PRT and immediate annuity contracts without life contingencies. The FIA/ IUL embedded derivatives, included in contractholder funds, are excluded as they are carried at fair value. The fair value of the FIA, fixed rate annuity and IUL contracts is based on their cash surrender value (i.e. the cost the Company would incur to extinguish the liability) as these contracts are generally issued without an annuitization date. The fair value of funding agreements and PRT and immediate annuities contracts without life contingencies is derived by calculating a new fair value interest rate using the updated yield curve and treasury spreads as of the respective reporting date. The Company is not required to, and has not, estimated the fair value of the liabilities under contracts that involve significant mortality or morbidity risks, as these liabilities fall within the definition of insurance contracts that are exceptions from financial instruments that require disclosures of fair value. Other Federal Home Loan Bank of Atlanta ("FHLB") common stock, Accounts receivable and Notes receivable are carried at cost, which approximates fair value. FHLB common stock is classified as Level 2 within the fair value hierarchy. Accounts receivable and Notes receivable are classified as Level 3 within the fair value hierarchy. Debt The fair value of debt is based on quoted market prices. The inputs used to measure the fair value of our outstanding debt are classified as Level 2 within the fair value hierarchy. The following tables provide the carrying value and estimated fair value of our financial instruments that are carried on the unaudited Condensed Consolidated Balance Sheets at amounts other than fair value, summarized according to the fair value hierarchy previously described.
| March 31, 2022
| (in millions)
| Level 1 |  | Level 2 |  | Level 3 |  | Total Estimated Fair Value |  | Carrying Amount
Assets |  |  |  |  |  |  |  |  |
FHLB common stock | $ | — |  |  | $ | 79 |  |  | $ | — |  |  | $ | 79 |  |  | $ | 79 |
Commercial mortgage loans | — |  |  | — |  |  | 2,147 |  |  | 2,147 |  |  | 2,231 |
Residential mortgage loans | — |  |  | — |  |  | 1,904 |  |  | 1,904 |  |  | 1,986 |
Policy loans | — |  |  | — |  |  | 40 |  |  | 40 |  |  | 40 |
Other invested assets | — |  |  | — |  |  | 67 |  |  | 67 |  |  | 67 |
Company-owned life insurance | — |  |  | — |  |  | 350 |  |  | 350 |  |  | 350 |
Trade and notes receivables, net of allowance | — |  |  | — |  |  | 529 |  |  | 529 |  |  | 529 |
Total | $ | — |  |  | $ | 79 |  |  | $ | 5,037 |  |  | $ | 5,116 |  |  | $ | 5,282 |
Liabilities |  |  |  |  |  |  |  |  |
Investment contracts, included in contractholder funds | $ | — |  |  | $ | — |  |  | $ | 29,031 |  |  | $ | 29,031 |  |  | $ | 32,903 |
Debt | — |  |  | 2,929 |  |  | — |  |  | 2,929 |  |  | 3,095 |
Total | $ | — |  |  | $ | 2,929 |  |  | $ | 29,031 |  |  | $ | 31,960 |  |  | $ | 35,998 |
| December 31, 2021
| (in millions)
| Level 1 |  | Level 2 |  | Level 3 |  | Total Estimated Fair Value |  | Carrying Amount
Assets |  |  |  |  |  |  |  |  |
FHLB common stock | $ | — |  |  | $ | 72 |  |  | $ | — |  |  | $ | 72 |  |  | $ | 72 |
Commercial mortgage loans | — |  |  | — |  |  | 2,265 |  |  | 2,265 |  |  | 2,168 |
Residential mortgage loans | — |  |  | — |  |  | 1,549 |  |  | 1,549 |  |  | 1,581 |
Policy loans | — |  |  | — |  |  | 39 |  |  | 39 |  |  | 39 |
Other invested assets | — |  |  | — |  |  | 57 |  |  | 57 |  |  | 57 |
Company-owned life insurance | — |  |  | — |  |  | 333 |  |  | 333 |  |  | 333 |
Trade and notes receivables, net of allowance | — |  |  | — |  |  | 557 |  |  | 557 |  |  | 557 |
Total | $ | — |  |  | $ | 72 |  |  | $ | 4,800 |  |  | $ | 4,872 |  |  | $ | 4,807 |
Liabilities |  |  |  |  |  |  |  |  |
Investment contracts, included in contractholder funds | $ | — |  |  | $ | — |  |  | $ | 27,448 |  |  | $ | 27,448 |  |  | $ | 31,529 |
Debt | — |  |  | 3,218 |  |  | — |  |  | 3,218 |  |  | 3,096 |
Total | $ | — |  |  | $ | 3,218 |  |  | $ | 27,448 |  |  | $ | 30,666 |  |  | $ | 34,625 |
The following table includes assets that have not been classified in the fair value hierarchy as the value of these investments are measured using the equity method of accounting or net asset value ("NAV") is used as a practical expedient in determining fair value:
|  | Carrying Amount (in millions)
|  | March 31, 2022 |  | December 31, 2021
Investments in unconsolidated affiliates |  | $ | 153 |  |  | $ | 136 |
Equity securities (NAV) |  | 47 |  |  | 48 |
Investments in unconsolidated affiliates (a) |  | 2,696 |  |  | 2,350 |
|  | $ | 2,896 |  |  | $ | 2,534 |
(a) The fair value of these investments using the NAV practical expedient and their carrying amount are generally equal.
For investments for which NAV is used as a practical expedient for fair value, we do not have any significant restrictions in our ability to liquidate our positions in these investments, other than obtaining general partner approval, nor do we believe it is probable a price less than NAV would be received in the event of a liquidation. We account for our investment in unconsolidated affiliates using the equity method of accounting. Equity method investments are reported on a lag of up to three months for investee information not received timely. We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur. The transfers into and out of Level 3 were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration