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Fair Value
 9 Months Ended
Sep. 30, 2022
Fair Value [Abstract]  
Fair Value
5.
 
FAIR VALUE
 
GAAP guidance
 
regarding
 
fair
 
value
 
measurements
 
addresses
 
how
 
companies
 
should
 
measure
 
fair
 
value
 
when
they are
 
required to
 
use fair
 
value measures
 
for recognition
 
or disclosure
 
purposes under
 
GAAP and
 
provides
 
a
common
 
definition
 
of fair
 
value
 
to
 
be used
 
throughout
 
GAAP.
 
It
 
defines
 
fair
 
value
 
as
 
the
 
price that
 
would
 
be
received
 
to
 
sell an
 
asset
 
or paid
 
to
 
transfer
 
a liability
 
in an
 
orderly
 
fashion
 
between market
 
participants
 
at the
measurement
 
date.
 
In
 
addition,
 
it
 
establishes
 
a
 
three-level
 
valuation
 
hierarchy
 
for
 
the
 
disclosure
 
of fair
 
value
measurements.
 
The valuation
 
hierarchy
 
is based
 
on the
 
transparency
 
of inputs
 
to
 
the valuation
 
of an
 
asset or
liability.
 
The level in the
 
hierarchy within
 
which a given fair
 
value measurement
 
falls is determined
 
based on the
lowest
 
level
 
input
 
that
 
is
 
significant
 
to
 
the
 
measurement,
 
with
 
Level
 
1
 
being
 
the
 
highest
 
priority
 
and
 
Level
 
3
being the lowest priority.
 
The levels in the hierarchy
 
are defined as follows:
Level 1:
 
Inputs
 
to
 
the valuation
 
methodology
 
are
 
observable
 
inputs that
 
reflect unadjusted
 
quoted
 
prices for
identical assets or liabilities in an active market;
Level 2:
 
Inputs
 
to
 
the
 
valuation
 
methodology
 
include
 
quoted
 
prices
 
for
 
similar
 
assets
 
and
 
liabilities
 
in
 
active
markets,
 
and
 
inputs
 
that
 
are
 
observable
 
for
 
the
 
asset
 
or
 
liability,
 
either
 
directly
 
or
 
indirectly,
 
for
substantially the full term of the financial instrument;
Level 3:
 
Inputs to the valuation methodology are
 
unobservable and significant to the fair
 
value measurement.
The
 
Company’s
 
fixed
 
maturity
 
and
 
equity
 
securities
 
are
 
primarily
 
managed
 
by
 
third
 
party
 
investment
 
asset
managers.
 
The
 
investment
 
asset
 
managers
 
managing
 
publicly
 
traded
 
securities
 
obtain
 
prices
 
from
 
nationally
recognized
 
pricing
 
services.
 
These
 
services
 
seek
 
to
 
utilize
 
market
 
data
 
and
 
observations
 
in
 
their
 
evaluation
process.
 
They use pricing
 
applications that
 
vary by asset
 
class and incorporate
 
available market
 
information and
when fixed
 
maturity securities
 
do not trade
 
on a daily
 
basis the services
 
will apply available
 
information through
processes
 
such
 
as
 
benchmark
 
curves,
 
benchmarking
 
of
 
like
 
securities,
 
sector
 
groupings
 
and
 
matrix
 
pricing.
 
In
addition,
 
they
 
use
 
model
 
processes,
 
such
 
as
 
the
 
Option
 
Adjusted
 
Spread
 
model
 
to
 
develop
 
prepayment
 
and
interest rate scenarios
 
for securities that have
 
prepayment features.
 
The investment
 
asset managers
 
do not
 
make any
 
changes to
 
prices received
 
from either
 
the pricing
 
services or
the
 
investment
 
brokers.
 
In
 
addition,
 
the
 
investment
 
asset
 
managers
 
have
 
procedures
 
in
 
place
 
to
 
review
 
the
reasonableness
 
of
 
the
 
prices
 
from
 
the
 
service
 
providers
 
and
 
may
 
request
 
verification
 
of
 
the
 
prices.
 
The
Company
 
also
 
continually
 
performs
 
quantitative
 
and
 
qualitative
 
analysis
 
of prices,
 
including
 
but
 
not
 
limited
 
to
initial
 
and
 
ongoing
 
review
 
of
 
pricing
 
methodologies,
 
review
 
of
 
prices
 
obtained
 
from
 
pricing
 
services
 
and
 
third
party
 
investment
 
asset
 
managers,
 
review
 
of
 
pricing
 
statistics
 
and
 
trends,
 
and
 
comparison
 
of
 
prices
 
for
 
certain
securities
 
with
 
a
 
secondary
 
price
 
source
 
for
 
reasonableness.
 
No
 
material
 
variances
 
were
 
noted
 
during
 
these
price validation
 
procedures.
 
In limited
 
situations,
 
where financial
 
markets
 
are inactive
 
or illiquid,
 
the Company
may use
 
its own
 
assumptions
 
about future
 
cash flows
 
and risk-adjusted
 
discount
 
rates
 
to determine
 
fair value.
 
At September
 
30, 2022, $
1.6
 
billion of fixed
 
maturities were
 
fair valued
 
using unobservable inputs.
 
The majority
of
 
these
 
fixed
 
maturities
 
were
 
valued
 
by
 
investment
 
managers’
 
valuation
 
committees
 
and
 
many
 
of
 
these
 
fair
values were
 
substantiated
 
by valuations
 
from independent
 
third parties.
 
The Company
 
has procedures
 
in place
to
 
evaluate
 
these
 
independent
 
third
 
party
 
valuations.
 
At
 
December
 
31,
 
2021,
 
$
2.1
 
billion
 
of
 
fixed
 
maturities
were fair valued using unobservable
 
inputs.
 
The
 
Company
 
internally
 
manages
 
a
 
public
 
equity
 
portfolio
 
which
 
had
 
a
 
fair
 
value
 
at
 
September
 
30,
 
2022
 
and
December 31, 2021 of $
1.2
 
billion and $
1.3
 
billion, respectively.
 
During the fourth quarter of 2021,
 
the Company
began
 
to
 
internally
 
manage
 
a
 
portfolio
 
of
 
collateralized
 
loan
 
obligations
 
included
 
in
 
asset-backed
 
securities,
available for sale,
 
which had a fair value
 
of $
2.4
 
billion and $
2.0
 
billion at September
 
30, 2022 and December
 
31,
2021,
 
respectively.
 
All
 
prices
 
for
 
these
 
securities
 
were
 
obtained
 
from
 
publicly
 
published
 
sources
 
or
 
nationally
recognized pricing vendors.
 
Equity
 
securities
 
denominated
 
in
 
U.S.
 
currency
 
with
 
quoted
 
prices
 
in
 
active
 
markets
 
for
 
identical
 
assets
 
are
categorized
 
as
 
Level
 
1
 
since
 
the
 
quoted
 
prices
 
are
 
directly
 
observable.
 
Equity
 
securities
 
traded
 
on
 
foreign
exchanges are
 
categorized as
 
Level 2 due
 
to the added input
 
of a foreign
 
exchange conversion
 
rate to determine
fair value.
 
The Company uses foreign currency exchange
 
rates published by nationally
 
recognized sources.
 
Fixed maturity
 
securities listed in
 
the tables have
 
been categorized
 
as Level 2, since
 
a particular security may
 
not
have
 
traded
 
but
 
the
 
pricing
 
services
 
are
 
able
 
to
 
use
 
valuation
 
models
 
with
 
observable
 
market
 
inputs
 
such
 
as
interest rate yield
 
curves and prices for similar fixed
 
maturity securities in terms of issuer,
 
maturity and seniority.
 
For
 
foreign
 
government
 
securities
 
and
 
foreign
 
corporate
 
securities,
 
the
 
fair
 
values
 
provided
 
by
 
the
 
third
 
party
pricing services
 
in local
 
currencies, and
 
where applicable,
 
are converted
 
to U.S.
 
dollars using
 
currency exchange
rates from nationally recognized
 
sources.
 
In
 
addition
 
to
 
the
 
valuations
 
from
 
investment
 
managers,
 
some
 
of
 
the
 
fixed
 
maturities
 
with
 
fair
 
values
categorized
 
as
 
Level
 
3 result
 
when
 
prices
 
are
 
not
 
available
 
from
 
the
 
nationally
 
recognized
 
pricing
 
services
 
and
are
 
derived
 
using
 
unobservable
 
inputs.
 
The
 
Company
 
will
 
value
 
the
 
securities
 
with
 
unobservable
 
inputs
 
using
comparable
 
market
 
information
 
or
 
receive
 
fair
 
values
 
from
 
investment
 
managers.
 
The
 
investment
 
managers
may obtain
 
non-binding price
 
quotes for
 
the securities
 
from brokers.
 
The single
 
broker
 
quotes are
 
provided by
market
 
makers
 
or
 
broker-dealers
 
who
 
are
 
recognized
 
as
 
market
 
participants
 
in
 
the
 
markets
 
in
 
which
 
they
 
are
providing the quotes.
 
The prices received from
 
brokers are
 
reviewed for
 
reasonableness by the
 
third party asset
managers
 
and
 
the
 
Company.
 
If
 
the
 
broker
 
quotes
 
are
 
for
 
foreign
 
denominated
 
securities,
 
the
 
quotes
 
are
converted to U.S. dollars
 
using currency exchange rates
 
from nationally recognized
 
sources.
 
The composition
 
and
 
valuation
 
inputs
 
for
 
the
 
presented
 
fixed
 
maturities
 
categories
 
Level
 
1 and
 
Level
 
2
 
are
 
as
follows:
•
U.S.
 
Treasury
 
securities
 
and
 
obligations
 
of
 
U.S.
 
government
 
agencies
 
and
 
corporations
 
are
 
primarily
comprised
 
of U.S.
 
Treasury
 
bonds
 
and the
 
fair
 
value
 
is based
 
on observable
 
market
 
inputs
 
such as
 
quoted
prices, reported trades, quoted
 
prices for similar issuances or benchmark yields;
•
 
Obligations of U.S.
 
states and political
 
subdivisions are comprised
 
of state and municipal
 
bond issuances and
the
 
fair
 
values
 
are
 
based
 
on
 
observable
 
market
 
inputs
 
such
 
as
 
quoted
 
market
 
prices,
 
quoted
 
prices
 
for
similar securities, benchmark yields and credit spreads;
•
Corporate securities
 
are primarily
 
comprised of U.S.
 
corporate
 
and public
 
utility bond issuances
 
and the fair
values
 
are
 
based
 
on
 
observable
 
market
 
inputs
 
such
 
as
 
quoted
 
market
 
prices,
 
quoted
 
prices
 
for
 
similar
securities, benchmark yields and credit spreads;
 
•
Asset-backed
 
and
 
mortgage-backed
 
securities
 
fair
 
values
 
are
 
based
 
on
 
observable
 
inputs
 
such
 
as
 
quoted
prices, reported
 
trades, quoted
 
prices for
 
similar issuances
 
or benchmark yields
 
and cash flow
 
models using
observable inputs such as prepayment speeds,
 
collateral performance and default
 
spreads;
•
Foreign
 
government
 
securities
 
are
 
comprised
 
of
 
global
 
non-U.S.
 
sovereign
 
bond
 
issuances
 
and
 
the
 
fair
values
 
are
 
based
 
on
 
observable
 
market
 
inputs
 
such
 
as
 
quoted
 
market
 
prices,
 
quoted
 
prices
 
for
 
similar
securities and
 
models with observable
 
inputs such
 
as benchmark
 
yields and
 
credit spreads
 
and then,
 
where
applicable, converted to U.S.
 
dollars using an exchange rate
 
from a nationally recognized
 
source;
•
Foreign corporate
 
securities are
 
comprised of
 
global non-U.S.
 
corporate
 
bond issuances
 
and the
 
fair values
are
 
based
 
on
 
observable
 
market
 
inputs
 
such
 
as
 
quoted
 
market
 
prices,
 
quoted
 
prices
 
for
 
similar
 
securities
and models with observable inputs
 
such as benchmark yields and credit
 
spreads and then, where applicable,
converted to U.S. dollars
 
using an exchange rate
 
from a nationally recognized
 
source.
The following
 
tables present
 
the fair
 
value measurement
 
levels for
 
all assets
 
and liabilities,
 
which the
 
Company
has recorded at fair value
 
as of the periods indicated:
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(Dollars in millions)
September 30, 2022
(Level 1)
(Level 2)
(Level 3)
Assets:
Fixed maturities, available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
1,308
$
-
$
1,308
$
-
Obligations of U.S. States and political subdivisions
481
-
481
-
Corporate securities
6,397
-
5,678
719
Asset-backed securities
3,772
-
2,880
893
Mortgage-backed securities
Commercial
908
-
908
-
Agency residential
2,723
-
2,723
-
Non-agency residential
5
-
5
-
Foreign government securities
1,335
-
1,335
-
Foreign corporate securities
4,080
-
4,064
16
Total fixed maturities, available for sale
21,009
-
19,381
1,628
Equity securities, fair value
1,301
1,212
89
-
(Some amounts may not reconcile due to rounding.)
Fair Value Measurement Using:
Quoted Prices
in Active
Significant
Markets for
Other
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
(Dollars in millions)
December 31, 2021
(Level 1)
(Level 2)
(Level 3)
Assets:
Fixed maturities, available for sale
U.S. Treasury securities and obligations of
U.S. government agencies and corporations
$
1,421
$
-
$
1,421
$
-
Obligations of U.S. States and political subdivisions
587
-
587
-
Corporate securities
7,557
-
6,756
801
Asset-backed securities
3,582
-
2,330
1,251
Mortgage-backed securities
Commercial
1,064
-
1,064
-
Agency residential
2,375
-
2,375
-
Non-agency residential
7
-
7
-
Foreign government securities
1,438
-
1,438
-
Foreign corporate securities
4,279
-
4,262
16
Total fixed maturities, available for sale
22,308
-
20,240
2,068
Equity securities, fair value
1,826
1,742
84
-
(Some amounts may not reconcile due to rounding.)
In
 
addition,
 
$
309
 
million
 
and
 
$
287
 
million
 
of
 
investments
 
within
 
other
 
invested
 
assets
 
on
 
the
 
consolidated
balance sheets
 
as of
 
September 30,
 
2022 and
 
December 31,
 
2021, respectively,
 
are not
 
included within
 
the fair
value hierarchy tables
 
as the assets are measured at NAV
 
as a practical expedient to determine fair
 
value.
 
The following
 
table presents
 
the activity
 
under Level
 
3, fair
 
value measurements
 
using significant
 
unobservable
inputs for fixed maturities available
 
for sale, for the periods indicated:
Total Fixed Maturities,
 
Available for Sale
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
Corporate
Asset-Backed
Foreign
Corporate
Asset-Backed
Foreign
(Dollars in millions)
Securities
Securities
CMBS
Corporate
Total
Securities
Securities
CMBS
Corporate
Total
Beginning balance fixed maturities
$
863
$
1,255
$
6
$
40
$
2,164
$
801
$
1,251
$
-
$
16
$
2,068
Total gains or (losses) (realized/unrealized)
Included in earnings
(2)
-
-
-
(2)
9
-
-
-
9
Included in other comprehensive income (loss)
(6)
65
-
-
59
(13)
(11)
-
(4)
(28)
Purchases, issuances and settlements
27
159
-
-
186
(43)
387
6
8
358
Transfers in/(out) of Level
 
3 and reclassification of
securities in/(out) of investment categories
(163)
(587)
(6)
(24)
(779)
(35)
(735)
(6)
(4)
(779)
Ending balance
$
719
$
893
$
-
$
16
$
1628
$
719
$
893
$
-
$
16
$
1628
The amount of total gains or losses for the period
included in earnings (or changes in net assets)
attributable to the change in unrealized gains
 
or losses relating to assets still held
 
at the reporting date
$
(3)
$
-
$
-
$
-
$
(3)
$
(8)
$
8
$
-
$
-
$
-
(Some amounts may not reconcile due to rounding.)
Total Fixed Maturities,
 
Available for Sale
Three Months Ended September 30, 2021
Nine Months Ended September 30, 2021
Corporate
Asset-Backed
Foreign
Corporate
Asset-Backed
Foreign
(Dollars in millions)
Securities
Securities
Corporate
Total
Securities
Securities
Corporate
Total
Beginning balance fixed maturities
$
706
$
815
$
5
$
1,526
$
701
$
623
$
6
$
1,330
Total gains or (losses) (realized/unrealized)
Included in earnings
3
(3)
-
-
(12)
(7)
-
(19)
Included in other comprehensive income (loss)
(1)
-
-
(2)
6
4
-
10
Purchases, issuances and settlements
87
192
-
279
99
384
(1)
482
Transfers in/(out) of Level
 
3 and reclassification of
securities in/(out) of investment categories
-
-
-
-
-
-
-
-
Ending balance
$
794
$
1,004
$
5
$
1,803
$
794
$
1,004
$
5
$
1,803
The amount of total gains or losses for the period
included in earnings (or changes in net assets)
attributable to the change in unrealized gains
 
or losses relating to assets still held
 
at the reporting date
$
1
$
(3)
$
-
$
(2)
$
(16)
$
(8)
$
-
$
(24)
(Some amounts may not reconcile due to rounding.)
The $
779
 
million
 
shown
 
as transfers
 
in/(out)
 
of Level
 
3 and
 
reclassification
 
of securities
 
in/(out)
 
of investment
categories
 
for
 
the
 
three
 
and
 
nine
 
months
 
ended
 
September
 
30,
 
2022
 
relate
 
mainly
 
to
 
previously
 
designated
Level
 
3
 
securities
 
that
 
the
 
Company
 
has
 
reclassified
 
from
 
“fixed
 
maturities
 
–
 
available
 
for
 
sale”
 
to
 
“fixed
maturities
 
–
 
held
 
to
 
maturity”
 
during
 
the
 
third
 
quarter
 
of
 
2022.
 
As
 
“fixed
 
maturities
 
–
 
held
 
to
 
maturity"
 
are
carried at
 
amortized
 
cost,
 
net
 
of credit
 
allowances
 
rather
 
than
 
at
 
fair
 
value
 
as “fixed
 
maturities
 
– available
 
for
sale”,
 
these securities are
 
no longer included
 
within the fair
 
value hierarchy
 
table or in
 
the rollforward
 
of Level 3
securities.
 
The
 
fair
 
values
 
of
 
these
 
securities
 
are
 
determined
 
in
 
a
 
similar
 
manner
 
as
 
the
 
Company’s
 
fixed
maturity securities available for
 
sale as described above. The fair values of these
 
securities incorporate the use of
significant
 
unobservable
 
inputs
 
and
 
therefore
 
are
 
classified
 
as
 
Level
 
3
 
within
 
the
 
fair
 
value
 
hierarchy
 
as
 
of
September 30, 2022.