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Fair Value of Assets and Liabilities | 12 Months Ended
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Dec. 31, 2023
Fair Value Disclosures [Abstract] |
Fair Value of Assets and Liabilities | FAIR VALUE OF ASSETS AND LIABILITIES Fair Value Measurement General accounting principles for Fair Value Measurements and Disclosures define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. These principles also establish a three-level fair value hierarchy that requires an entity to maximize the use of observable inputs and to minimize the use of unobservable inputs when measuring fair value: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. Active markets are defined through various characteristics for the measured asset/liability, such as having many transactions and narrow bid/ask spreads. Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or market standard valuation techniques and assumptions that use significant inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the related assets or liabilities and include those whose value is determined using market standard valuation techniques described above. Prices are determined using valuation methodologies such as discounted cash flow models and other similar techniques that require management’s judgment or estimation in developing inputs that are consistent with those other market participants would use when pricing similar assets and liabilities. See Note 8 – “Market Risk Benefits” for information about fair value measurement of market risk benefits. Assets and Liabilities by Hierarchy Level Assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022 are summarized below (dollars in millions):
December 31, 2023: |  |  |  | Fair Value Measurements Using:
|  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: (1) |  |  |  |  |  |  |  |
Fixed maturity securities – available-for-sale: |  |  |  |  |  |  |  |
Corporate |  | $ | 38,755 |  |  | $ | — |  |  | $ | 33,822 |  |  | $ | 4,933 |
Canadian government |  | 3,917 |  |  | — |  |  | 3,917 |  |  | — |
Japanese government |  | 3,131 |  |  | — |  |  | 3,131 |  |  | — |
ABS |  | 4,429 |  |  | — |  |  | 3,064 |  |  | 1,365 |
CMBS |  | 1,773 |  |  | — |  |  | 1,714 |  |  | 59 |
RMBS |  | 1,079 |  |  | — |  |  | 1,078 |  |  | 1 |
U.S. government |  | 2,520 |  |  | 2,426 |  |  | 87 |  |  | 7 |
State and political subdivisions |  | 1,114 |  |  | — |  |  | 1,095 |  |  | 19 |
Other foreign government |  | 3,749 |  |  | — |  |  | 3,714 |  |  | 35 |
Total fixed maturity securities – available-for-sale |  | 60,467 |  |  | 2,426 |  |  | 51,622 |  |  | 6,419 |
Equity securities |  | 139 |  |  | 69 |  |  | — |  |  | 70 |
Funds withheld at interest – embedded derivatives |  | (377) |  |  | — |  |  | — |  |  | (377) |
Funds withheld at interest |  | 54 |  |  | — |  |  | — |  |  | 54 |
Cash equivalents |  | 1,335 |  |  | 1,322 |  |  | 13 |  |  | — |
Short-term investments |  | 187 |  |  | 90 |  |  | 95 |  |  | 2 |
Other invested assets: |  |  |  |  |  |  |  |
Derivatives |  | 97 |  |  | — |  |  | 97 |  |  | — |
Other |  | 22 |  |  | — |  |  | 22 |  |  | — |
Total other invested assets |  | 119 |  |  | — |  |  | 119 |  |  | — |
Total |  | $ | 61,924 |  |  | $ | 3,907 |  |  | $ | 51,849 |  |  | $ | 6,168 |
Liabilities: |  |  |  |  |  |  |  |
Interest-sensitive contract liabilities – embedded derivatives |  | $ | 415 |  |  | $ | — |  |  | $ | — |  |  | $ | 415 |
Funds withheld at interest – embedded derivatives |  | (206) |  |  | — |  |  | — |  |  | (206) |
Derivatives – other liabilities |  | 197 |  |  | — |  |  | 197 |  |  | — |
Total |  | $ | 406 |  |  | $ | — |  |  | $ | 197 |  |  | $ | 209 |
(1)Excludes limited partnerships that are measured at estimated fair value using the NAV per share (or its equivalent) as a practical expedient. As of December 31, 2023, the fair value of such investments was $856 million.
December 31, 2022: |  |  |  | Fair Value Measurements Using:
|  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets: (1) |  |  |  |  |  |  |  |
Fixed maturity securities – available-for-sale: |  |  |  |  |  |  |  |
Corporate |  | $ | 33,969 |  |  | $ | — |  |  | $ | 29,670 |  |  | $ | 4,299 |
Canadian government |  | 3,626 |  |  | — |  |  | 3,626 |  |  | — |
Japanese government |  | 2,559 |  |  | — |  |  | 2,559 |  |  | — |
ABS |  | 3,878 |  |  | — |  |  | 2,603 |  |  | 1,275 |
CMBS |  | 1,623 |  |  | — |  |  | 1,555 |  |  | 68 |
RMBS |  | 941 |  |  | — |  |  | 931 |  |  | 10 |
U.S. government |  | 1,482 |  |  | 1,388 |  |  | 85 |  |  | 9 |
State and political subdivisions |  | 1,119 |  |  | — |  |  | 1,093 |  |  | 26 |
Other foreign government |  | 3,704 |  |  | — |  |  | 3,669 |  |  | 35 |
Total fixed maturity securities – available-for-sale |  | 52,901 |  |  | 1,388 |  |  | 45,791 |  |  | 5,722 |
Equity securities |  | 134 |  |  | 68 |  |  | — |  |  | 66 |
Funds withheld at interest – embedded derivatives |  | (371) |  |  | — |  |  | — |  |  | (371) |
Funds withheld at interest |  | 54 |  |  | — |  |  | — |  |  | 54 |
Cash equivalents |  | 1,535 |  |  | 1,535 |  |  | — |  |  | — |
Short-term investments |  | 121 |  |  | 54 |  |  | 54 |  |  | 13 |
Other invested assets: |  |  |  |  |  |  |  |
Derivatives |  | 170 |  |  | — |  |  | 170 |  |  | — |
Other |  | 23 |  |  | — |  |  | 23 |  |  | — |
Total other invested assets |  | 193 |  |  | — |  |  | 193 |  |  | — |
Total |  | $ | 54,567 |  |  | $ | 3,045 |  |  | $ | 46,038 |  |  | $ | 5,484 |
Liabilities: |  |  |  |  |  |  |  |
Interest-sensitive contract liabilities – embedded derivatives |  | $ | 530 |  |  | $ | — |  |  | $ | — |  |  | $ | 530 |
Funds withheld at interest – embedded derivatives |  | (363) |  |  | — |  |  | — |  |  | (363) |
Derivatives – other liabilities |  | 183 |  |  | — |  |  | 183 |  |  | — |
Total |  | $ | 350 |  |  | $ | — |  |  | $ | 183 |  |  | $ | 167 |
(1)Excludes limited partnerships that are measured at estimated fair value using the NAV per share (or its equivalent) as a practical expedient. As of December 31, 2022, the fair value of such investments was $683 million. The Company may utilize information from third parties, such as pricing services and brokers, to assist in determining the fair value for certain assets and liabilities; however, management is ultimately responsible for all fair values presented in the Company’s financial statements. This includes responsibility for monitoring the fair value process, ensuring objective and reliable valuation practices and pricing of assets and liabilities, and approving changes to valuation methodologies and pricing sources. The selection of the valuation technique(s) to apply considers the definition of an exit price and the nature of the asset or liability being valued and significant expertise and judgment is required. The Company performs initial and ongoing analysis and review of the various techniques utilized in determining fair value to ensure that they are appropriate and consistently applied, and that the various assumptions are reasonable. The Company analyzes and reviews the information and prices received from third parties to ensure that the prices represent a reasonable estimate of the fair value and to monitor controls around pricing, which includes quantitative and qualitative analysis and is overseen by the Company’s investment and accounting personnel. Examples of procedures performed include, but are not limited to, review of pricing trends, comparison of a sample of executed prices of securities sold to the fair value estimates, comparison of fair value estimates to management’s knowledge of the current market, and ongoing confirmation that third party pricing services use, wherever possible, market-based parameters for valuation. In addition, the Company utilizes both internal and external cash flow models to analyze the reasonableness of fair values utilizing credit spread and other market assumptions, where appropriate. As a result of the analysis, if the Company determines there is a more appropriate fair value based upon the available market data, the price received from the third party is adjusted accordingly. The Company also determines if the inputs used in estimated fair values received from pricing services are observable by assessing whether these inputs can be corroborated by observable market data. For assets and liabilities reported at fair value, the Company utilizes, when available, fair values based on quoted prices in active markets that are regularly and readily obtainable. Generally, these are very liquid investments, and the valuation does not require management judgment. When quoted prices in active markets are not available, fair value is based on market valuation techniques, market comparable pricing and the income approach. The use of different techniques, assumptions and inputs may have a material effect on the estimated fair values of the Company’s securities holdings. For the periods presented, the application of market standard valuation techniques applied to similar assets and liabilities has been consistent. The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below. Fixed Maturity Securities – The fair values of the Company’s publicly-traded fixed maturity securities are generally based on prices obtained from independent pricing services. Prices from pricing services are sourced from multiple vendors, and a vendor hierarchy is maintained by asset type based on historical pricing experience and vendor expertise. The Company generally receives prices from multiple pricing services for each security, but ultimately uses the price from the vendor that is highest in the hierarchy for the respective asset type. To validate reasonableness, prices are periodically reviewed as explained above. Consistent with the fair value hierarchy described above, securities with quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. If the pricing information received from third party pricing services is not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process with the pricing service. If the Company ultimately concludes that pricing information received from the independent pricing service is not reflective of fair value, non-binding broker quotes are used, if available. If the Company concludes that the values from both pricing services and brokers are not reflective of fair value, an internally developed valuation may be prepared; however, this occurs infrequently. Internally developed valuations or non-binding broker quotes are also used to determine fair value in circumstances where vendor pricing is not available. These valuations may use significant unobservable inputs, which reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset. Observable market data may not be available in certain circumstances such as market illiquidity and credit events related to the security. Internally developed valuations and non-binding broker quotes are generally based on significant unobservable inputs and are reflected as Level 3 in the valuation hierarchy. The inputs used in the valuation of corporate and government securities include, but are not limited to standard market observable inputs that are derived from, or corroborated by, market observable data including market yield curve, duration, call provisions, observable prices and spreads for similar publicly traded or privately placed issues that incorporate the credit quality and industry sector of the issuer. For internal pricing of private placements and structured securities, valuation is based primarily on matrix pricing or other similar techniques using standard market inputs including spreads for actively traded securities, spreads off benchmark yields, expected prepayment speeds and volumes, current and forecasted loss severity, rating, weighted average coupon, weighted average maturity, average delinquency rates, geographic region, debt service coverage ratios and issuance-specific information including, but not limited to: collateral type, payment terms of the underlying assets, payment priority within the tranche, structure of the security, transaction performance and vintage of loans. When observable inputs are not available, the market standard valuation techniques for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data, such as market illiquidity. Other significant unobservable inputs used in the fair value measurement of the Company’s private debt investments include a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”). These unobservable inputs can be based in large part on management judgment or estimation and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and are believed to be consistent with what other market participants would use when pricing such securities. Equity Securities – Equity securities consist principally of common and preferred stock of publicly and privately traded companies. The fair values of publicly traded equity securities are primarily based on quoted market prices in active markets and are classified within Level 1 in the fair value hierarchy. Non-binding broker quotes and internally developed evaluations for equity securities are generally based on significant unobservable inputs and are reflected as Level 3 in the fair value hierarchy. Embedded Derivatives – The fair value of embedded derivative liabilities, including those calculated by third parties, are monitored through the use of attribution reports to quantify the effect of underlying sources of fair value change, including capital market inputs based on policyholder account values, interest rates and short-term and long-term implied volatilities, from period to period. Actuarial assumptions are based on experience studies performed internally in combination with available industry information and are reviewed on a periodic basis, at least annually. For embedded derivative liabilities associated with the underlying products in reinsurance treaties, primarily equity-indexed and variable annuity treaties, the Company utilizes a discounted cash flow model, which includes an estimate of future equity option purchases and an adjustment for a CVA. The variable annuity embedded derivative calculations are performed by third parties based on methodology and input assumptions provided by the Company. To validate the reasonableness of the resulting fair value, the Company’s internal actuaries perform reviews and analytical procedures on the results. The capital market inputs to the model, such as equity indexes, short-term equity volatility and interest rates, are generally observable. The valuation also requires certain significant inputs, which are generally not observable and accordingly, the valuation is considered Level 3 in the fair value hierarchy, The fair value of embedded derivatives associated with funds withheld reinsurance treaties is determined based upon a total return swap technique with reference to the fair value of the investments held by the ceding company that support the Company’s funds withheld at interest asset with an adjustment for a CVA. The fair value of the underlying assets is generally based on a variety of sources and pricing methodologies chosen by the ceding company, which are not transparent to the Company and may include significant unobservable inputs. Additionally, some of the valuations also require certain significant inputs, which are generally not observable. Therefore, the valuation of the embedded derivative assets and liabilities associated with these funds withheld reinsurance treaties are considered Level 3 in the fair value hierarchy. Where those funds withheld reinsurance agreements are ceded by the Company, the same approach is taken to valuing the embedded derivatives associated with the funds withheld at interest liability. Credit Valuation Adjustment – The Company bases its CVA on corporate Option-adjusted spread (“OAS”) indexes and market conditions adjusted for the Company’s specific factors. The input assumptions are a combination of externally derived and publicly available information, corporate OAS indexes, market inputs, and internally developed data based on Company specific investments by rating category. Funds Withheld at Interest – Funds withheld at interest, elected at fair value on a limited basis, include assets where inputs are not observable in the market and are considered Level 3 in the fair value hierarchy. Cash Equivalents and Short-Term Investments – Cash equivalents and short-term investments include money market instruments and other highly liquid debt instruments which are generally valued using unadjusted quoted prices in active markets that are accessible for identical assets and are primarily classified as Level 1. The fair value of certain other cash equivalents and short-term investments, such as bonds with original maturities twelve months or less, are based upon other market observable data and are typically classified as Level 2. However, certain short-term investments may incorporate significant unobservable inputs resulting in a Level 3 classification. Various time deposits, certificates of deposit and sweeps carried as cash equivalents or short-term investments are not measured at estimated fair value and therefore are excluded from the tables presented. Other – FVO contractholder-directed investments supporting unit-linked variable annuity type liabilities consist of fixed maturity securities. The fair value of the fixed maturity contractholder-directed securities is determined on a basis consistent with the methodologies described above for fixed maturity securities and are classified within Level 2 of the hierarchy. Derivative Assets and Derivative Liabilities – All of the derivative instruments utilized by the Company are classified within Level 2 on the fair value hierarchy. These derivatives are principally valued using an income approach. Valuations of interest rate contracts are based on present value techniques, which utilize significant inputs that may include the swap yield curve, Secured Overnight Financing Rate (“SOFR”) basis curves, Overnight Index Swaps curves, and repurchase rates. Valuations of foreign currency contracts are based on present value techniques, which utilize significant inputs that may include the swap yield curve, currency spot rates, and cross currency basis curves. Valuations of credit contracts are based on present value techniques, which utilize significant inputs that may include the swap yield curve, credit curves, and recovery rates. Valuations of equity market contracts are based on present value techniques, which utilize significant inputs that may include the swap yield curve, spot equity index levels, and dividend yield curves. Valuations of equity market contracts, option-based, are based on option pricing models, which utilize significant inputs that may include the swap yield curve, spot equity index levels, dividend yield curves, and equity volatility. Quantitative Information Regarding Internally-Priced Assets and Liabilities The following table presents quantitative information about significant unobservable inputs used in Level 3 fair value measurements that are developed internally by the Company as of December 31, 2023 and 2022 (dollars in millions):
|  | Estimated Fair Value |  | Valuation |  | Unobservable |  | Range (Weighted Average)
|  | 2023 |  | 2022 |  | Technique |  | Input |  | 2023 |  | 2022
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | 91 |  |  | $ | 25 |  |  | Market comparable securities |  | Liquidity premium |  | 0-2% (1%) |  | 1%
|  |  |  |  |  |  |  | EBITDA Multiple |  | 6.0x-8.5x (7.1x) |  | 5.3x
ABS |  | 268 |  |  | 274 |  |  | Market comparable securities |  | Liquidity premium |  | 0-18% (2%) |  | 0-18% (2%)
U.S. government |  | 7 |  |  | 9 |  |  | Market comparable securities |  | Liquidity premium |  | 0-1% (1%) |  | 0-1% (1%)
Equity securities |  | 31 |  |  | 9 |  |  | Market comparable securities |  | Liquidity premium |  | 4% |  | — |
|  |  |  |  |  |  |  | EBITDA Multiple |  | 8.4x-12.3x (10.1x) |  | 8.4x-11.2x (9.6x)
Funds withheld at interest – embedded derivatives |  | (50) |  |  | (34) |  |  | Total return swap |  | Mortality |  | 0-100% (3%) |  | 0-100% (3%)
|  |  |  |  |  |  |  | Lapse |  | 0-35% (18%) |  | 0-35% (17%)
|  |  |  |  |  |  |  | Withdrawal |  | 0-5% (4%) |  | 0-5% (4%)
|  |  |  |  |  |  |  | CVA |  | 0-5% (0%) |  | 0-5% (0%)
|  |  |  |  |  |  |  | Crediting rate |  | 1-4% (2%) |  | 1-4% (2%)
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Interest-sensitive contract liabilities – embedded derivatives – indexed annuities |  | 415 |  |  | 530 |  |  | Discounted cash flow |  | Mortality |  | 0-100% (3%) |  | 0-100% (3%)
|  |  |  |  |  |  |  | Lapse |  | 0-35% (17%) |  | 0-35% (16%)
|  |  |  |  |  |  |  | Withdrawal |  | 0-5% (4%) |  | 0-5% (3%)
|  |  |  |  |  |  |  | Option budget projection |  | 1-4% (2%) |  | 1-4% (2%)
Changes in Level 3 Assets and Liabilities Assets and liabilities transferred into Level 3 are due to a lack of observable market transactions and price information. Transfers out of Level 3 are primarily the result of the Company obtaining observable pricing information or a third party pricing quotation that appropriately reflects the fair value of those assets and liabilities. The reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows (dollars in millions):
For the year ended December 31, 2023: |  | Fixed maturity securities – available-for-sale |  |  |  |  |  |  |  | Funds withheld at interest –embedded derivatives, net (1) |  | Funds withheld at interest |  | Interest-sensitive contract liabilities – embedded derivatives
|  | Corporate |  | Foreign govt |  | Structured securities |  | U.S. and local govt |  | Equity securities |  | Cash equivalents |  | Short-term investments |  |  |
Fair value, beginning of period |  | $ | 4,299 |  |  | $ | 35 |  |  | $ | 1,353 |  |  | $ | 35 |  |  | $ | 66 |  |  | $ | — |  |  | $ | 13 |  |  | $ | (8) |  |  | $ | 54 |  |  | $ | (530) |
Total gains/losses (realized/unrealized) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Included in earnings, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment income |  | 3 |  |  | — |  |  | 6 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2) |  |  | — |
Investment related gains (losses), net |  | (15) |  |  | — |  |  | (2) |  |  | — |  |  | (1) |  |  | — |  |  | (1) |  |  | (163) |  |  | — |  |  | — |
Interest credited |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 17 |
Included in other comprehensive income (loss) |  | 34 |  |  | — |  |  | 90 |  |  | (2) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3 |  |  | — |
Purchases (2) |  | 1,021 |  |  | — |  |  | 253 |  |  | — |  |  | 9 |  |  | 1 |  |  | 14 |  |  | — |  |  | 2 |  |  | 17 |
Sales (2) |  | (94) |  |  | — |  |  | (24) |  |  | — |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements (2) |  | (380) |  |  | — |  |  | (260) |  |  | (2) |  |  | — |  |  | — |  |  | (1) |  |  | — |  |  | (3) |  |  | 81 |
Transfers into Level 3 |  | 71 |  |  | — |  |  | 64 |  |  | — |  |  | — |  |  | — |  |  | 6 |  |  | — |  |  | — |  |  | — |
Transfers out of Level 3 |  | (6) |  |  | — |  |  | (55) |  |  | (5) |  |  | — |  |  | (1) |  |  | (29) |  |  | — |  |  | — |  |  | — |
Fair value, end of period |  | $ | 4,933 |  |  | $ | 35 |  |  | $ | 1,425 |  |  | $ | 26 |  |  | $ | 70 |  |  | $ | — |  |  | $ | 2 |  |  | $ | (171) |  |  | $ | 54 |  |  | $ | (415) |
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment income |  | $ | 3 |  |  | $ | — |  |  | $ | 6 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (2) |  |  | $ | — |
Investment related gains (losses), net |  | (23) |  |  | — |  |  | (3) |  |  | — |  |  | (1) |  |  | — |  |  | (1) |  |  | (163) |  |  | — |  |  | — |
Interest credited |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (62) |
Included in other comprehensive income (loss) |  | 35 |  |  | — |  |  | 86 |  |  | (2) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3 |  |  | — |
(1)Funds withheld at interest – embedded derivative assets and liabilities are presented net for purposes of the rollforward. (2)The amount reported within purchases, sales and settlements is the purchase price (for purchases) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased or sold/settled. Items purchased and sold/settled in the same period are excluded from the rollforward. The Company had no issuances during the period.
For the year ended December 31, 2022: |  | Fixed maturity securities – available-for-sale |  |  |  |  |  |  |  | Funds withheld at interest –embedded derivatives, net (1) |  | Funds withheld at interest |  | Interest-sensitive contract liabilities – embedded derivatives
|  | Corporate |  | Foreign govt |  | Structured securities |  | U.S. and local govt |  | Equity securities |  | Cash equivalents |  | Short-term investments |  |  |
Fair value, beginning of period |  | $ | 3,888 |  |  | $ | 33 |  |  | $ | 1,179 |  |  | $ | 45 |  |  | $ | 50 |  |  | $ | — |  |  | $ | 28 |  |  | $ | 165 |  |  | $ | 83 |  |  | $ | (693) |
Total gains/losses (realized/unrealized) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Included in earnings, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment income |  | 6 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (14) |  |  | — |
Investment related gains (losses), net |  | (8) |  |  | — |  |  | (11) |  |  | (1) |  |  | 6 |  |  | — |  |  | 1 |  |  | (173) |  |  | — |  |  | — |
Interest credited |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 98 |
Included in other comprehensive income (loss) |  | (474) |  |  | (11) |  |  | (194) |  |  | (4) |  |  | — |  |  | — |  |  | (1) |  |  | — |  |  | (8) |  |  | — |
Purchases (2) |  | 1,669 |  |  | — |  |  | 521 |  |  | — |  |  | 14 |  |  | — |  |  | 33 |  |  | — |  |  | 3 |  |  | 1 |
Sales (2) |  | (182) |  |  | — |  |  | (58) |  |  | (6) |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements (2) |  | (577) |  |  | — |  |  | (140) |  |  | (5) |  |  | — |  |  | — |  |  | (28) |  |  | — |  |  | (10) |  |  | 64 |
Transfers into Level 3 |  | 88 |  |  | 13 |  |  | 130 |  |  | 10 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Transfers out of Level 3 |  | (111) |  |  | — |  |  | (74) |  |  | (4) |  |  | — |  |  | — |  |  | (20) |  |  | — |  |  | — |  |  | — |
Fair value, end of period |  | $ | 4,299 |  |  | $ | 35 |  |  | $ | 1,353 |  |  | $ | 35 |  |  | $ | 66 |  |  | $ | — |  |  | $ | 13 |  |  | $ | (8) |  |  | $ | 54 |  |  | $ | (530) |
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment income |  | $ | 4 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (14) |  |  | $ | — |
Investment related gains (losses), net |  | (18) |  |  | — |  |  | (10) |  |  | — |  |  | 4 |  |  | — |  |  | — |  |  | (173) |  |  | — |  |  | — |
Interest credited |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 33 |
Included in other comprehensive income (loss) |  | (467) |  |  | (11) |  |  | (195) |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (8) |  |  | — |
(1)Funds withheld at interest – embedded derivative assets and liabilities are presented net for purposes of the rollforward. (2)The amount reported within purchases, sales and settlements is the purchase price (for purchases) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased or sold/settled. Items purchased and sold/settled in the same period are excluded from the rollforward. The Company had no issuances during the period.
For the year ended December 31, 2021: |  | Fixed maturity securities – available-for-sale |  |  |  |  |  |  |  | Funds withheld at interest –embedded derivatives, net (1) |  | Funds withheld at interest |  | Interest-sensitive contract liabilities – embedded derivatives
|  | Corporate |  | Foreign govt |  | Structured securities |  | U.S. and local govt |  | Equity securities |  | Cash equivalents |  | Short-term investments |  |  |
Fair value, beginning of period |  | $ | 3,029 |  |  | $ | 17 |  |  | $ | 254 |  |  | $ | 23 |  |  | $ | 53 |  |  | $ | — |  |  | $ | 15 |  |  | $ | 58 |  |  | $ | 56 |  |  | $ | (752) |
Total gains/losses (realized/unrealized) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Included in earnings, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment income |  | 5 |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4) |  |  | — |
Investment related gains (losses), net |  | (5) |  |  | — |  |  | — |  |  | — |  |  | 13 |  |  | — |  |  | — |  |  | 107 |  |  | — |  |  | — |
Interest credited |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 10 |
Included in other comprehensive income (loss) |  | (28) |  |  | (4) |  |  | (6) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1) |  |  | — |
Purchases (2) |  | 1,506 |  |  | 25 |  |  | 1,038 |  |  | — |  |  | 9 |  |  | — |  |  | 31 |  |  | — |  |  | 36 |  |  | (34) |
Sales (2) |  | (53) |  |  | — |  |  | (6) |  |  | — |  |  | (25) |  |  | — |  |  | (3) |  |  | — |  |  | — |  |  | — |
Settlements (2) |  | (587) |  |  | (5) |  |  | (186) |  |  | (3) |  |  | — |  |  | — |  |  | (10) |  |  | — |  |  | (4) |  |  | 83 |
Transfers into Level 3 |  | 29 |  |  | — |  |  | 84 |  |  | 25 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Transfers out of Level 3 |  | (8) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (5) |  |  | — |  |  | — |  |  | — |
Fair value, end of period |  | $ | 3,888 |  |  | $ | 33 |  |  | $ | 1,179 |  |  | $ | 45 |  |  | $ | 50 |  |  | $ | — |  |  | $ | 28 |  |  | $ | 165 |  |  | $ | 83 |  |  | $ | (693) |
Total gains/losses (realized/unrealized) recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period
Included in earnings, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment income |  | $ | 4 |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (4) |  |  | $ | — |
Investment related gains (losses), net |  | (7) |  |  | — |  |  | — |  |  | — |  |  | 7 |  |  | — |  |  | — |  |  | 107 |  |  | — |  |  | — |
Interest credited |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (72) |
Included in other comprehensive income (loss) |  | (24) |  |  | (4) |  |  | (6) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1) |  |  | — |
(1)Funds withheld at interest – embedded derivative assets and liabilities are presented net for purposes of the rollforward. (2)The amount reported within purchases, sales and settlements is the purchase price (for purchases) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased or sold/settled. Items purchased and sold/settled in the same period are excluded from the rollforward. The Company had no issuances during the period. Nonrecurring Fair Value Measurements The Company has certain assets subject to measurement at fair value on a nonrecurring basis, in periods subsequent to their initial recognition if they are determined to be impaired. For the years ended December 31, 2023 and 2022, the Company did not have any material assets that were measured at fair value due to impairment. Fair Value of Financial Instruments Carried at Other Than Fair Value The following table presents the carrying values and estimated fair values of the Company’s financial instruments, which were not measured at fair value on a recurring basis, as of December 31, 2023 and 2022 (dollars in millions). This table excludes any payables or receivables for collateral under repurchase/reverse repurchase agreements and other transactions. The estimated fair value of the excluded amount approximates carrying value as they equal the amount of cash collateral received/paid.
|  |  |  | Estimated |  | Fair Value Measurement Using:
December 31, 2023: |  | Carrying Value (1) |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Assets: |  |  |  |  |  |  |  |  |  |
Mortgage loans |  | $ | 7,377 |  |  | $ | 6,975 |  |  | $ | — |  |  | $ | — |  |  | $ | 6,975 |
Policy loans |  | 1,206 |  |  | 1,206 |  |  | — |  |  | 1,206 |  |  | — |
Funds withheld at interest |  | 6,005 |  |  | 5,547 |  |  | — |  |  | — |  |  | 5,547 |
Limited partnerships – cost method |  | 71 |  |  | 73 |  |  | — |  |  | — |  |  | 73 |
Cash and cash equivalents |  | 1,635 |  |  | 1,635 |  |  | 1,635 |  |  | — |  |  | — |
Short-term investments |  | 35 |  |  | 35 |  |  | 35 |  |  | — |  |  | — |
Other invested assets |  | 1,019 |  |  | 841 |  |  | 4 |  |  | 63 |  |  | 774 |
Accrued investment income |  | 759 |  |  | 759 |  |  | — |  |  | 759 |  |  | — |
Liabilities: |  |  |  |  |  |  |  |  |  |
Interest-sensitive contract liabilities |  | $ | 21,797 |  |  | $ | 21,665 |  |  | $ | — |  |  | $ | — |  |  | $ | 21,665 |
Funds withheld at interest |  | 4,689 |  |  | 4,400 |  |  | — |  |  | — |  |  | 4,400 |
Long-term debt |  | 4,427 |  |  | 4,243 |  |  | — |  |  | — |  |  | 4,243 |
December 31, 2022: |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Mortgage loans |  | $ | 6,590 |  |  | $ | 6,109 |  |  | $ | — |  |  | $ | — |  |  | $ | 6,109 |
Policy loans |  | 1,231 |  |  | 1,231 |  |  | — |  |  | 1,231 |  |  | — |
Funds withheld at interest |  | 6,319 |  |  | 5,884 |  |  | — |  |  | — |  |  | 5,884 |
Limited partnerships – cost method |  | 49 |  |  | 52 |  |  | — |  |  | — |  |  | 52 |
Cash and cash equivalents |  | 1,392 |  |  | 1,392 |  |  | 1,392 |  |  | — |  |  | — |
Short-term investments |  | 33 |  |  | 33 |  |  | 33 |  |  | — |  |  | — |
Other invested assets |  | 947 |  |  | 758 |  |  | 4 |  |  | 65 |  |  | 689 |
Accrued investment income |  | 630 |  |  | 630 |  |  | — |  |  | 630 |  |  | — |
Liabilities: |  |  |  |  |  |  |  |  |  |
Interest-sensitive contract liabilities |  | $ | 23,493 |  |  | $ | 23,065 |  |  | $ | — |  |  | $ | — |  |  | $ | 23,065 |
Funds withheld at interest |  | 1,848 |  |  | 1,572 |  |  | — |  |  | — |  |  | 1,572 |
Long-term debt |  | 3,961 |  |  | 3,670 |  |  | — |  |  | — |  |  | 3,670 |
(1)Carrying values presented herein may differ from those in the Company’s consolidated balance sheets because certain items within the respective financial statement captions may be measured at fair value on a recurring basis. Mortgage Loans – The fair value of mortgage loans is estimated by discounting cash flows, both principal and interest, using current interest rates for mortgage loans with similar credit ratings and similar remaining maturities. As such, inputs include current treasury yields and spreads, which are based on the credit rating and average life of the loan, corresponding to the market spreads. The valuation of mortgage loans is considered Level 3 in the fair value hierarchy. Policy Loans – Policy loans typically carry an interest rate that is adjusted annually based on an observable market index and therefore carrying value approximates fair value. The valuation of policy loans is considered Level 2 in the fair value hierarchy. Funds Withheld at Interest – The carrying value of funds withheld at interest approximates fair value except where the funds withheld are specifically identified in the agreement. When funds withheld are specifically identified in the agreement, the fair value is based on the fair value of the underlying assets that are held by the ceding company. A variety of sources and pricing methodologies, which are not transparent to the Company and may include significant unobservable inputs, are used to value the securities that are held in distinct portfolios, therefore the valuation of these funds withheld assets and liabilities are considered Level 3 in the fair value hierarchy. Limited Partnerships – The fair value of limited partnerships accounted for using the cost method, considered Level 3 in the fair value hierarchy, is estimated by internally developed valuation techniques. Cash and Cash Equivalents and Short-term Investments – The carrying values of cash and cash equivalents and short-term investments approximate fair values due to the short-term maturities of these instruments and are considered Level 1 in the fair value hierarchy. Other Invested Assets – This primarily includes lifetime mortgages, FHLB common stock, and cash collateral. The fair value of the Company’s lifetime mortgage loan portfolio, considered Level 3 in the fair value hierarchy, is estimated by discounting cash flows, both principal and interest, using a risk-free rate plus an illiquidity premium. The cash flow analysis considers future expenses, changes in property prices, and actuarial analysis of borrower behavior, mortality and morbidity. The fair value of the Company’s common stock investment in the FHLB is considered to be the carrying value and it is considered Level 2 in the fair value hierarchy. The fair value of the Company’s cash collateral is considered to be the carrying value and considered to be Level 1 in the fair value hierarchy. Accrued Investment Income – The carrying value for accrued investment income approximates fair value as there are no adjustments made to the carrying value. This is considered Level 2 in the fair value hierarchy. Interest-Sensitive Contract Liabilities – The carrying and fair values of interest-sensitive contract liabilities reflected in the table above exclude contracts with significant mortality risk. The fair value of the Company’s interest-sensitive contract liabilities utilizes a market standard technique with both capital market inputs and policyholder behavior assumptions, as well as cash values adjusted for recapture fees. The capital market inputs to the model, such as interest rates, are generally observable. Policyholder behavior assumptions are generally not observable and may require use of significant management judgment. The valuation of interest-sensitive contract liabilities is considered Level 3 in the fair value hierarchy. Long-term Debt – The fair value of the Company’s long-term debt, and collateral finance and securitization notes is generally estimated by discounting future cash flows using market rates currently available for debt with similar remaining maturities and reflecting the credit risk of the Company, including inputs when available, from actively traded debt of the Company or other companies with similar credit quality. The valuation of long-term debt, and collateral finance and securitization notes is generally obtained from brokers and is considered Level 3 in the fair value hierarchy.

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- 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 -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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