XML 46 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
Fair Value Measurements (Tables)
 12 Months Ended
Dec. 31, 2017
Fair Value Disclosures [Abstract]  
Assets and liabilities measured at fair value
Assets and liabilities measured and carried at fair value in the financial statements are summarized below (in millions):
 
Level 1
 
Level 2
 
Level 3
 
Total
December 31, 2017
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Available for sale (“AFS”) fixed maturities:
 
 
 
 
 
 
 
U.S. Government and government agencies
$
122

 
$
112

 
$
8

 
$
242

States, municipalities and political subdivisions
—

 
6,975

 
148

 
7,123

Foreign government
—

 
127

 
—

 
127

Residential MBS
—

 
3,105

 
122

 
3,227

Commercial MBS
—

 
926

 
36

 
962

Asset-backed securities (“ABS”)
—

 
7,218

 
744

 
7,962

Corporate and other
30

 
17,662

 
1,044

 
18,736

Total AFS fixed maturities
152

 
36,125

 
2,102

 
38,379

Trading fixed maturities
44

 
304

 
—

 
348

Equity securities — AFS and trading
1,411

 
86

 
165

 
1,662

Assets of managed investment entities (“MIE”)
307

 
4,572

 
23

 
4,902

Variable annuity assets (separate accounts) (*)
—

 
644

 
—

 
644

Equity index call options
—

 
701

 
—

 
701

Other assets — derivatives
—

 
—

 
—

 
—

Total assets accounted for at fair value
$
1,914

 
$
42,432

 
$
2,290

 
$
46,636

Liabilities:
 
 
 
 
 
 
 
Liabilities of managed investment entities
$
293

 
$
4,372

 
$
22

 
$
4,687

Derivatives in annuity benefits accumulated
—

 
—

 
2,542

 
2,542

Other liabilities — derivatives
—

 
35

 
—

 
35

Total liabilities accounted for at fair value
$
293

 
$
4,407

 
$
2,564

 
$
7,264

 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Available for sale fixed maturities:
 
 
 
 
 
 
 
U.S. Government and government agencies
$
133

 
$
174

 
$
8

 
$
315

States, municipalities and political subdivisions
—

 
6,641

 
140

 
6,781

Foreign government
—

 
136

 
—

 
136

Residential MBS
—

 
3,445

 
190

 
3,635

Commercial MBS
—

 
1,468

 
25

 
1,493

Asset-backed securities
—

 
5,475

 
484

 
5,959

Corporate and other
29

 
15,484

 
712

 
16,225

Total AFS fixed maturities
162

 
32,823

 
1,559

 
34,544

Trading fixed maturities
30

 
329

 
—

 
359

Equity securities — AFS and trading
1,305

 
79

 
174

 
1,558

Assets of managed investment entities
380

 
4,356

 
29

 
4,765

Variable annuity assets (separate accounts) (*)
—

 
600

 
—

 
600

Equity index call options
—

 
492

 
—

 
492

Other assets — derivatives
—

 
1

 
—

 
1

Total assets accounted for at fair value
$
1,877

 
$
38,680

 
$
1,762

 
$
42,319

Liabilities:
 
 
 
 
 
 
 
Liabilities of managed investment entities
$
363

 
$
4,158

 
$
28

 
$
4,549

Derivatives in annuity benefits accumulated
—

 
—

 
1,759

 
1,759

Derivatives in long-term debt
—

 
(1
)
 
—

 
(1
)
Other liabilities — derivatives
—

 
30

 
—

 
30

Total liabilities accounted for at fair value
$
363

 
$
4,187

 
$
1,787

 
$
6,337

 (*)   Variable annuity liabilities equal the fair value of variable annuity assets.
Fair value measurements, Levels 1 and 2 transfers
The transfers between Level 1 and Level 2 for the years ended December 31, 2017, 2016 and 2015 are reflected in the table below at fair value as of the end of the reporting period (dollars in millions):
 
Level 2 To Level 1 Transfers
 
Level 1 To Level 2 Transfers
 
# of Transfers
 
Fair Value
 
# of Transfers
 
Fair Value
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Perpetual preferred stocks
4

 
6

 
5

 
$
23

 
$
35

 
$
19

 
2

 
7

 
7

 
$
11

 
$
28

 
$
31

Common stocks
—

 
3

 
7

 
—

 
—

 
80

 
1

 
2

 
—

 
—

 
—

 
—

Redeemable preferred stocks
—

 
—

 
2

 
—

 
—

 
11

 
—

 
—

 
—

 
—

 
—

 
—
Unobservable inputs used by management in determining fair value of embedded derivatives
The following table presents information about the unobservable inputs used by management in determining fair value of these embedded derivatives. See Note F — “Derivatives.”

 
Unobservable Input
 
Range
 
 
Adjustment for insurance subsidiary’s credit risk
 
0.2% – 2.0% over the risk free rate
 
 
Risk margin for uncertainty in cash flows
 
0.70% reduction in the discount rate
 
 
Surrenders
 
3% – 23% of indexed account value
 
 
Partial surrenders
 
2% – 10% of indexed account value
 
 
Annuitizations
 
0.1% – 1% of indexed account value
 
 
Deaths
 
1.6% – 8.0% of indexed account value
 
 
Budgeted option costs
 
2.4% – 3.6% of indexed account value
 
Changes in asset balances of Level 3 financial assets
Changes in balances of Level 3 financial assets and liabilities carried at fair value during 2017, 2016 and 2015 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2017
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8

State and municipal
140

 
—

 
2

 
—

 
(2
)
 
10

 
(2
)
 
148

Residential MBS
190

 
(4
)
 
2

 
1

 
(40
)
 
44

 
(71
)
 
122

Commercial MBS
25

 
2

 
—

 
15

 
(10
)
 
4

 
—

 
36

Asset-backed securities
484

 
—

 
1

 
410

 
(132
)
 
202

 
(221
)
 
744

Corporate and other
712

 
(5
)
 
2

 
606

 
(237
)
 
29

 
(63
)
 
1,044

Total AFS fixed maturities
1,559

 
(7
)
 
7

 
1,032

 
(421
)
 
289

 
(357
)
 
2,102

Equity securities
174

 
(21
)
 
10

 
38

 
(16
)
 
—

 
(20
)
 
165

Assets of MIE
29

 
(11
)
 
—

 
9

 
—

 
—

 
(4
)
 
23

Total Level 3 assets
$
1,762

 
$
(39
)
 
$
17

 
$
1,079

 
$
(437
)
 
$
289

 
$
(381
)
 
$
2,290

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)
Total Level 3 liabilities (b)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $25 million in 2017.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2016
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
15

 
$
(8
)
 
$
1

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8

State and municipal
89

 
—

 
(4
)
 
57

 
(2
)
 
—

 
—

 
140

Residential MBS
224

 
(4
)
 
(2
)
 
8

 
(28
)
 
34

 
(42
)
 
190

Commercial MBS
39

 
(1
)
 
—

 
—

 
(7
)
 
—

 
(6
)
 
25

Asset-backed securities
470

 
(1
)
 
1

 
50

 
(52
)
 
60

 
(44
)
 
484

Corporate and other
633

 
—

 
(10
)
 
176

 
(100
)
 
30

 
(17
)
 
712

Total AFS fixed maturities
1,470

 
(14
)
 
(14
)
 
291

 
(189
)
 
124

 
(109
)
 
1,559

Equity securities
140

 
(12
)
 
35

 
44

 
(28
)
 
15

 
(20
)
 
174

Assets of MIE
26

 
(9
)
 
—

 
12

 
—

 
—

 
—

 
29

Total Level 3 assets
$
1,636

 
$
(35
)
 
$
21

 
$
347

 
$
(217
)
 
$
139

 
$
(129
)
 
$
1,762

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(1,369
)
 
$
(211
)
 
$
—

 
$
(277
)
 
$
98

 
$
—

 
$
—

 
$
(1,759
)
Total Level 3 liabilities (b)
$
(1,369
)
 
$
(211
)
 
$
—

 
$
(277
)
 
$
98

 
$
—

 
$
—

 
$
(1,759
)
(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $17 million in 2016.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
 
 
Bal. at
Dec. 31,
2014
 
Impact of
accounting
change (b)
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Sale of subsidiaries
 
Bal. at
Dec. 31,
2015
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
15

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
15

State and municipal
100

 
—

 
—

 
(1
)
 
34

 
(1
)
 
2

 
(39
)
 
(6
)
 
89

Residential MBS
300

 
—

 
(11
)
 
(1
)
 
—

 
(34
)
 
86

 
(88
)
 
(28
)
 
224

Commercial MBS
44

 
—

 
(1
)
 
(1
)
 
—

 
(2
)
 
4

 
(1
)
 
(4
)
 
39

Asset-backed securities
226

 
—

 
1

 
(7
)
 
265

 
(56
)
 
53

 
(10
)
 
(2
)
 
470

Corporate and other
546

 
—

 
(5
)
 
(9
)
 
161

 
(90
)
 
41

 
(5
)
 
(6
)
 
633

Total AFS fixed maturities
1,231

 
—

 
(16
)
 
(19
)
 
460

 
(183
)
 
186

 
(143
)
 
(46
)
 
1,470

Equity securities
93

 
—

 
(4
)
 
(9
)
 
77

 
—

 
—

 
(17
)
 
—

 
140

Assets of MIE
31

 
—

 
(11
)
 
—

 
6

 
—

 
—

 
—

 
—

 
26

Total Level 3 assets
$
1,355

 
$
—

 
$
(31
)
 
$
(28
)
 
$
543

 
$
(183
)
 
$
186

 
$
(160
)
 
$
(46
)
 
$
1,636

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities of MIE
$
(2,701
)
 
$
2,701

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Embedded derivatives (a)
(1,160
)
 
—

 
(17
)
 
—

 
(257
)
 
65

 
—

 
—

 
—

 
(1,369
)
Total Level 3 liabilities
$
(3,861
)
 
$
2,701

 
$
(17
)
 
$
—

 
$
(257
)
 
$
65

 
$
—

 
$
—

 
$
—

 
$
(1,369
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $28 million in 2015.
(b)
The impact of implementing new guidance adopted in 2015, as discussed in Note A — “Accounting Policies — Managed Investment Entities.”
Changes in liability balances of Level 3 financial liabilities
Changes in balances of Level 3 financial assets and liabilities carried at fair value during 2017, 2016 and 2015 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2017
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
8

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8

State and municipal
140

 
—

 
2

 
—

 
(2
)
 
10

 
(2
)
 
148

Residential MBS
190

 
(4
)
 
2

 
1

 
(40
)
 
44

 
(71
)
 
122

Commercial MBS
25

 
2

 
—

 
15

 
(10
)
 
4

 
—

 
36

Asset-backed securities
484

 
—

 
1

 
410

 
(132
)
 
202

 
(221
)
 
744

Corporate and other
712

 
(5
)
 
2

 
606

 
(237
)
 
29

 
(63
)
 
1,044

Total AFS fixed maturities
1,559

 
(7
)
 
7

 
1,032

 
(421
)
 
289

 
(357
)
 
2,102

Equity securities
174

 
(21
)
 
10

 
38

 
(16
)
 
—

 
(20
)
 
165

Assets of MIE
29

 
(11
)
 
—

 
9

 
—

 
—

 
(4
)
 
23

Total Level 3 assets
$
1,762

 
$
(39
)
 
$
17

 
$
1,079

 
$
(437
)
 
$
289

 
$
(381
)
 
$
2,290

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)
Total Level 3 liabilities (b)
$
(1,759
)
 
$
(589
)
 
$
—

 
$
(300
)
 
$
106

 
$
—

 
$
—

 
$
(2,542
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $25 million in 2017.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Balance at December 31, 2016
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
15

 
$
(8
)
 
$
1

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8

State and municipal
89

 
—

 
(4
)
 
57

 
(2
)
 
—

 
—

 
140

Residential MBS
224

 
(4
)
 
(2
)
 
8

 
(28
)
 
34

 
(42
)
 
190

Commercial MBS
39

 
(1
)
 
—

 
—

 
(7
)
 
—

 
(6
)
 
25

Asset-backed securities
470

 
(1
)
 
1

 
50

 
(52
)
 
60

 
(44
)
 
484

Corporate and other
633

 
—

 
(10
)
 
176

 
(100
)
 
30

 
(17
)
 
712

Total AFS fixed maturities
1,470

 
(14
)
 
(14
)
 
291

 
(189
)
 
124

 
(109
)
 
1,559

Equity securities
140

 
(12
)
 
35

 
44

 
(28
)
 
15

 
(20
)
 
174

Assets of MIE
26

 
(9
)
 
—

 
12

 
—

 
—

 
—

 
29

Total Level 3 assets
$
1,636

 
$
(35
)
 
$
21

 
$
347

 
$
(217
)
 
$
139

 
$
(129
)
 
$
1,762

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives (a)
$
(1,369
)
 
$
(211
)
 
$
—

 
$
(277
)
 
$
98

 
$
—

 
$
—

 
$
(1,759
)
Total Level 3 liabilities (b)
$
(1,369
)
 
$
(211
)
 
$
—

 
$
(277
)
 
$
98

 
$
—

 
$
—

 
$
(1,759
)
(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $17 million in 2016.
(b)
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
 
 
 
 
 
Total realized/unrealized
gains (losses) included in
 
 
 
 
 
 
 
 
 
 
 
 
Bal. at
Dec. 31,
2014
 
Impact of
accounting
change (b)
 
Net
earnings
 
Other
comprehensive
income (loss)
 
Purchases
and
issuances
 
Sales and
settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Sale of subsidiaries
 
Bal. at
Dec. 31,
2015
AFS fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency
$
15

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
15

State and municipal
100

 
—

 
—

 
(1
)
 
34

 
(1
)
 
2

 
(39
)
 
(6
)
 
89

Residential MBS
300

 
—

 
(11
)
 
(1
)
 
—

 
(34
)
 
86

 
(88
)
 
(28
)
 
224

Commercial MBS
44

 
—

 
(1
)
 
(1
)
 
—

 
(2
)
 
4

 
(1
)
 
(4
)
 
39

Asset-backed securities
226

 
—

 
1

 
(7
)
 
265

 
(56
)
 
53

 
(10
)
 
(2
)
 
470

Corporate and other
546

 
—

 
(5
)
 
(9
)
 
161

 
(90
)
 
41

 
(5
)
 
(6
)
 
633

Total AFS fixed maturities
1,231

 
—

 
(16
)
 
(19
)
 
460

 
(183
)
 
186

 
(143
)
 
(46
)
 
1,470

Equity securities
93

 
—

 
(4
)
 
(9
)
 
77

 
—

 
—

 
(17
)
 
—

 
140

Assets of MIE
31

 
—

 
(11
)
 
—

 
6

 
—

 
—

 
—

 
—

 
26

Total Level 3 assets
$
1,355

 
$
—

 
$
(31
)
 
$
(28
)
 
$
543

 
$
(183
)
 
$
186

 
$
(160
)
 
$
(46
)
 
$
1,636

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities of MIE
$
(2,701
)
 
$
2,701

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Embedded derivatives (a)
(1,160
)
 
—

 
(17
)
 
—

 
(257
)
 
65

 
—

 
—

 
—

 
(1,369
)
Total Level 3 liabilities
$
(3,861
)
 
$
2,701

 
$
(17
)
 
$
—

 
$
(257
)
 
$
65

 
$
—

 
$
—

 
$
—

 
$
(1,369
)

(a)
Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects losses related to the unlocking of actuarial assumptions of $28 million in 2015.
(b)
The impact of implementing new guidance adopted in 2015, as discussed in Note A — “Accounting Policies — Managed Investment Entities.”
Fair value of financial instruments
The carrying value and fair value of financial instruments that are not carried at fair value in the financial statements at December 31 are summarized below (in millions):
 
Carrying
 
Fair Value
 
Value
 
Total
 
Level 1
 
Level 2
 
Level 3
2017
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
2,338

 
$
2,338

 
$
2,338

 
$
—

 
$
—

Mortgage loans
1,125

 
1,119

 
—

 
—

 
1,119

Policy loans
184

 
184

 
—

 
—

 
184

Total financial assets not accounted for at fair value
$
3,647

 
$
3,641

 
$
2,338

 
$
—

 
$
1,303

Financial liabilities:
 
 
 
 
 
 
 
 
 
Annuity benefits accumulated (*)
$
33,110

 
$
32,461

 
$
—

 
$
—

 
$
32,461

Long-term debt
1,301

 
1,354

 
—

 
1,351

 
3

Total financial liabilities not accounted for at fair value
$
34,411

 
$
33,815

 
$
—

 
$
1,351

 
$
32,464

 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
2,107

 
$
2,107

 
$
2,107

 
$
—

 
$
—

Mortgage loans
1,147

 
1,146

 
—

 
—

 
1,146

Policy loans
192

 
192

 
—

 
—

 
192

Total financial assets not accounted for at fair value
$
3,446

 
$
3,445

 
$
2,107

 
$
—

 
$
1,338

Financial liabilities:
 
 
 
 
 
 
 
 
 
Annuity benefits accumulated (*)
$
29,703

 
$
28,932

 
$
—

 
$
—

 
$
28,932

Long-term debt
1,284

 
1,356

 
—

 
1,353

 
3

Total financial liabilities not accounted for at fair value
$
30,987

 
$
30,288

 
$
—

 
$
1,353

 
$
28,935

(*)
Excludes $206 million and $204 million of life contingent annuities in the payout phase at December 31, 2017 and 2016, respectively.