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Fair Value of Financial Instruments | 9 Months Ended
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Sep. 30, 2021
Fair Value of Financial Instruments [Abstract] |
Fair Value of Financial Instruments | ‎ 14. Fair Value of Financial Instruments The carrying values and estimated fair values of our financial instruments (in millions) were as follows: As of September 30, 2021 As of December 31, 2020 Carrying Fair Carrying Fair Value Value Value Value Assets Fixed maturity AFS securities$ 122,085 $ 122,085 $ 123,044 $ 123,044 Trading securities 4,191 4,191 4,501 4,501 Equity securities 243 243 129 129 Mortgage loans on real estate 17,730 18,612 16,763 18,219 Derivative investments (1) 4,828 4,828 3,109 3,109 Other investments 4,059 4,059 3,974 3,974 Cash and invested cash 2,614 2,614 1,708 1,708 Other assets: GLB direct embedded derivatives 1,698 1,698 450 450 GLB ceded embedded derivatives 55 55 82 82 Indexed annuity ceded embedded derivatives 495 495 550 550 Separate account assets 175,667 175,667 167,965 167,965 Liabilities Future contract benefits – indexed annuity and IUL contracts embedded derivatives (4,804) (4,804) (3,594) (3,594)Other contract holder funds: Remaining guaranteed interest and similar contracts (1,813) (1,813) (1,854) (1,854)Account values of certain investment contracts (40,587) (46,418) (40,947) (49,745)Short-term debt (300) (305) - - Long-term debt (6,323) (6,734) (6,682) (7,067)Reinsurance related embedded derivatives (304) (304) (392) (392)Other liabilities: Derivative liabilities (1) (593) (593) (906) (906)GLB ceded embedded derivatives (146) (146) - - (1)We have master netting agreements with each of our derivative counterparties, which allow for the netting of our derivative asset and liability positions by counterparty. 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 on our Consolidated Balance Sheets. 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 on Real Estate The fair value of mortgage loans on real estate, excluding mortgage loans accounted for using the fair value option, is established using a discounted cash flow method based on credit rating, maturity and future income. The 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 fair value for impaired mortgage loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price or the fair value of the collateral if the loan is collateral dependent. The inputs used to measure the fair value of our mortgage loans on real estate, excluding mortgage loans accounted for using the fair value option, are classified as Level 2 within the fair value hierarchy. Other Investments The carrying value of our assets classified as other investments, excluding short-term investments, approximates fair value. Other investments includes primarily LPs and other privately held investments that are accounted for using the equity method of accounting and the carrying value is based on our proportional share of the net assets of the LPs. Other investments also includes Federal Home Loan Bank (“FHLB”) stock carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. The inputs used to measure the fair value of our LPs, other privately held investments and FHLB stock are classified as Level 3 within the fair value hierarchy. The remaining assets in other investments include cash collateral receivables and securities that are not LPs or other privately held investments. The inputs used to measure the fair value of these assets are classified as Level 2 within the fair value hierarchy. Separate Account Assets Separate account assets are primarily carried at fair value. A portion of our separate account assets includes LPs, which are accounted for using the equity method of accounting. The carrying value is based on our proportional share of the net assets of the LPs and approximates fair value. The inputs used to measure the fair value of the separate account asset LPs are classified as Level 3 within the fair value hierarchy. Other Contract Holder Funds Other contract holder funds include remaining guaranteed interest and similar contracts and account values of certain investment contracts. The fair value for the remaining guaranteed interest and similar contracts is estimated using discounted cash flow calculations as of the balance sheet date. These calculations are based on interest rates currently offered on similar contracts with maturities that are consistent with those remaining for the contracts being valued. As of September 30, 2021, and December 31, 2020, the remaining guaranteed interest and similar contracts carrying value approximated fair value. The fair value of the account values of certain investment contracts is based on their approximate surrender value as of the balance sheet date. The inputs used to measure the fair value of our other contract holder funds are classified as Level 3 within the fair value hierarchy. Short-Term and Long-Term Debt The fair value of short-term and long-term debt is based on quoted market prices. The inputs used to measure the fair value of our short-term and long-term debt are classified as Level 2 within the fair value hierarchy. Fair Value Option Mortgage loans on real estate, net of allowance for credit losses, as reported on our Consolidated Balance Sheets, includes mortgage loans on real estate for which the fair value option was elected. The fair value option allows us to elect fair value as an alternative measurement for mortgage loans not otherwise reported at fair value. We have made these elections for certain mortgage loans associated with Modco agreements to help mitigate the inconsistency in earnings that would otherwise result from the use of embedded derivatives included with these loans. Changes in fair value are reflected in realized gain (loss) on our Consolidated Statement of Comprehensive Income (Loss). Changes in fair value due to instrument-specific credit risk are estimated using changes in credit spreads and quality ratings for the period reported. Mortgage loans on real estate for which the fair value option was elected are valued using third-party pricing services. We have procedures in place to review the valuations each quarter to ensure they are reasonable, including utilizing a separate third party to reperform the valuation for a selection of mortgage loans on an annual basis. Due to lack of observable inputs as a result of a change to a third-party pricing source during 2020, mortgage loans electing the fair value option were categorized as Level 3 as of September 30, 2021, and December 31, 2020. The fair value and aggregate contractual principal for mortgage loans on real estate where the fair value option was elected (in millions) were as follows: As of As of September 30, December 31, 2021 2020 Fair value $ 792 $ 832 Aggregate contractual principal 795 839 As of September 30, 2021, and December 31, 2020, no loans for which the fair value option was elected were in non-accrual status, and none were more than 90 days past due and still accruing interest. Financial Instruments Carried at Fair Value Short-Term Investments Short-term investments consist of securities with original maturities of one year or less, but greater than three months, and are included in other investments on our Consolidated Balance Sheets. Securities included in short-term investments are carried at fair value, with valuation methods and inputs consistent with those applied to fixed maturity AFS securities. We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of September 30, 2021, or December 31, 2020.‎ The following summarizes our financial instruments carried at fair value (in millions) on a recurring basis by the fair value hierarchy levels: As of September 30, 2021 Quoted Prices in Active Markets forSignificantSignificant Identical ObservableUnobservable Total Assets Inputs Inputs Fair (Level 1) (Level 2) (Level 3) Value Assets Investments: Fixed maturity AFS securities: Corporate bonds $ - $ 95,490 $ 5,372 $ 100,862 U.S. government bonds 438 5 - 443 State and municipal bonds - 6,901 - 6,901 Foreign government bonds - 406 106 512 RMBS - 2,934 1 2,935 CMBS - 1,593 1 1,594 ABS - 7,569 734 8,303 Hybrid and redeemable preferred securities 56 398 81 535 Trading securities 32 3,559 600 4,191 Equity securities 11 145 87 243 Mortgage loans on real estate - - 792 792 Derivative investments (1) - 6,577 169 6,746 Other investments - short term investments - 108 - 108 Cash and invested cash - 2,614 - 2,614 Other assets: GLB direct embedded derivatives - - 1,698 1,698 GLB ceded embedded derivatives - - 55 55 Indexed annuity ceded embedded derivatives - - 495 495 Separate account assets 561 175,098 - 175,659 Total assets $ 1,098 $ 303,397 $ 10,191 $ 314,686 Liabilities Future contract benefits – indexed annuity and IUL contracts embedded derivatives $ - $ - $ (4,804) $ (4,804)Reinsurance related embedded derivatives - (304) - (304)Other liabilities: Derivative liabilities (1) - (2,343) (168) (2,511)GLB ceded embedded derivatives - - (146) (146)Total liabilities $ - $ (2,647) $ (5,118) $ (7,765) ‎ As of December 31, 2020 Quoted Prices in Active Markets forSignificantSignificant Identical ObservableUnobservable Total Assets Inputs Inputs Fair (Level 1) (Level 2) (Level 3) Value Assets Investments: Fixed maturity AFS securities: Corporate bonds $ - $ 97,668 $ 5,121 $ 102,789 U.S. government bonds 473 6 5 484 State and municipal bonds - 6,921 - 6,921 Foreign government bonds - 396 74 470 RMBS - 3,074 2 3,076 CMBS - 1,505 - 1,505 ABS - 6,614 570 7,184 Hybrid and redeemable preferred securities 54 457 104 615 Trading securities 5 3,852 644 4,501 Equity securities 22 48 59 129 Mortgage loans on real estate - - 832 832 Derivative investments (1) - 1,733 3,575 5,308 Cash and invested cash - 1,708 - 1,708 Other assets: GLB direct embedded derivatives - - 450 450 GLB ceded embedded derivatives - - 82 82 Indexed annuity ceded embedded derivatives - - 550 550 Separate account assets 606 167,351 - 167,957 Total assets $ 1,160 $ 291,333 $ 12,068 $ 304,561 Liabilities Future contract benefits – indexed annuity and IUL contracts embedded derivatives $ - $ - $ (3,594) $ (3,594)Reinsurance related embedded derivatives - (392) - (392)Other liabilities – derivative liabilities (1) - (1,072) (2,033) (3,105)Total liabilities $ - $ (1,464) $ (5,627) $ (7,091) (1)Derivative investment assets and liabilities are presented within the fair value hierarchy on a gross basis by derivative type and not on a master netting basis by counterparty.‎ The following summarizes changes to our financial instruments carried at fair value (in millions) and classified within Level 3 of the fair value hierarchy. This summary excludes any effect of amortization of DAC, VOBA, DSI and DFEL. 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. For the Three Months Ended September 30, 2021 GainsIssuances,Transfers Items (Losses) Sales, Into or Included inMaturities,Out Beginning in OCISettlements,of Ending Fair Net and Calls, Level 3, Fair Value Income Other (1) Net Net Value Investments: (2) Fixed maturity AFS securities: Corporate bonds$ 5,429 $ 1 $ (88)$ 55 $ (25)$ 5,372 Foreign government bonds 43 - (3) 66 - 106 RMBS 1 - - - - 1 CMBS 9 - - - (8) 1 ABS 630 - (2) 144 (38) 734 Hybrid and redeemable preferred securities 102 - 6 (27) - 81 Trading securities 630 3 - (33) - 600 Equity securities 82 5 - - - 87 Mortgage loans on real estate 818 4 3 (33) - 792 Derivative investments 1 - - - - 1 Other assets: (3) GLB direct embedded derivatives 1,767 (69) - - - 1,698 GLB ceded embedded derivatives 53 2 - - - 55 Indexed annuity ceded embedded derivatives - (14) - (6) 515 495 Future contract benefits – indexed annuity and IUL contracts embedded derivatives (3) - 47 - 86 (4,937) (4,804)Other liabilities – GLB ceded embedded derivatives (3) (152) 6 - - - (146)Total, net$ 9,413 $ (15)$ (84)$ 252 $ (4,493)$ 5,073 ‎ For the Three Months Ended September 30, 2020 GainsIssuances,Transfers Items (Losses) Sales, Into or Included inMaturities,Out Beginning in OCISettlements,of Ending Fair Net and Calls, Level 3, Fair Value Income Other (1) Net Net Value Investments: (2) Fixed maturity AFS securities: Corporate bonds$ 4,344 $ (7)$ 197 $ 30 $ (12)$ 4,552 U.S. government bonds 5 - - - (5) - Foreign government bonds 86 - - (20) - 66 RMBS 2 - - - - 2 CMBS 1 - - - - 1 ABS 424 - 2 60 (73) 413 Hybrid and redeemable preferred securities 90 - 1 14 - 105 Trading securities 673 3 - (120) (21) 535 Equity securities 29 2 - 20 - 51 Derivative investments 595 958 - (189) (216) 1,148 Other assets: (3) GLB ceded embedded derivatives 571 (290) - - - 281 Indexed annuity ceded embedded derivatives 664 295 - (423) - 536 Future contract benefits – indexed annuity and IUL contracts embedded derivatives (3) (2,272) (400) - (16) - (2,688)Other liabilities – GLB direct embedded derivatives (3) (3,086) 1,980 - - - (1,106)Total, net$ 2,126 $ 2,541 $ 200 $ (644)$ (327)$ 3,896 ‎ For the Nine Months Ended September 30, 2021 GainsIssuances,Transfers Items (Losses)Sales,Into or Included inMaturities,Out Beginning in OCISettlements,of Ending Fair Net and Calls, Level 3, Fair Value Income Other (1) Net Net Value Investments: (2) Fixed maturity AFS securities: Corporate bonds$ 5,121 $ 4 $ (139)$ 440 $ (54)$ 5,372 U.S. government bonds 5 - - (5) - - Foreign government bonds 74 - (11) 80 (37) 106 RMBS 2 (1) - - - 1 CMBS - 1 - 8 (8) 1 ABS 570 1 (5) 426 (258) 734 Hybrid and redeemable preferred securities 104 - 18 (41) - 81 Trading securities 644 2 - (31) (15) 600 Equity securities 59 31 - (3) - 87 Mortgage loans on real estate 832 11 6 (57) - 792 Derivative investments 1,542 1,249 - (132) (2,658) 1 Other assets: (3) GLB direct embedded derivatives 450 1,248 - - - 1,698 GLB ceded embedded derivatives 82 (27) - - - 55 Indexed annuity ceded embedded derivatives 550 17 - (60) (12) 495 Future contract benefits – indexed annuity and IUL contracts embedded derivatives (3) (3,594) (579) - 136 (767) (4,804)Other liabilities – GLB ceded embedded derivatives (3) - (146) - - - (146)Total, net$ 6,441 $ 1,811 $ (131)$ 761 $ (3,809)$ 5,073 ‎ For the Nine Months Ended September 30, 2020 GainsIssuances,Transfers Items (Losses)Sales,Into or Included inMaturities,Out Beginning in OCISettlements,of Ending Fair Net and Calls, Level 3, Fair Value Income Other (1) Net Net Value Investments: (2) Fixed maturity AFS securities: Corporate bonds$ 4,281 $ (7)$ 17 $ 181 $ 80 $ 4,552 U.S. government bonds 5 - - - (5) - Foreign government bonds 90 - (4) (20) - 66 RMBS 11 - - - (9) 2 CMBS 1 - - - - 1 ABS 268 - 3 318 (176) 413 Hybrid and redeemable preferred securities 78 - (1) 10 18 105 Trading securities 666 (1) - (140) 10 535 Equity securities 30 1 - 20 - 51 Derivative investments 868 555 267 (326) (216) 1,148 Other assets: (3) GLB direct embedded derivatives 450 (450) - - - - GLB ceded embedded derivatives 60 221 - - - 281 Indexed annuity ceded embedded derivatives 927 484 - (875) - 536 Future contract benefits – indexed annuity and IUL contracts embedded derivatives (3) (2,585) (88) - (15) - (2,688)Other liabilities: (3) GLB direct embedded derivatives - (1,106) - - - (1,106)GLB ceded embedded derivatives (9) 9 - - - - Total, net$ 5,141 $ (382)$ 282 $ (847)$ (298)$ 3,896 (1)The changes in fair value of the interest rate swaps are offset by an adjustment to derivative investments (see Note 5).(2)Amortization and accretion of premiums and discounts are included in net investment income on our Consolidated Statements of Comprehensive Income (Loss). Gains (losses) from sales, maturities, settlements and calls and credit loss expense are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss).(3)Gains (losses) from the changes in fair value are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). ‎ The following provides the components of the items included in issuances, sales, maturities, settlements and calls, net, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, (in millions) as reported above: For the Three Months Ended September 30, 2021 Issuances Sales MaturitiesSettlementsCalls Total Investments: Fixed maturity AFS securities: Corporate bonds$ 219 $ (12)$ (82)$ (70)$ - $ 55 Foreign government bonds 66 - - - - 66 ABS 195 - - (51) - 144 Hybrid and redeemable preferred securities 3 - - - (30) (27)Trading securities 3 (15) - (21) - (33)Mortgage loans on real estate 8 - (22) (19) - (33)Other assets – indexed annuity ceded embedded derivatives 19 - - (25) - (6)Future contract benefits – indexed annuity and IUL contracts embedded derivatives (47) - - 133 - 86 Total, net$ 466 $ (27)$ (104)$ (53)$ (30)$ 252 For the Three Months Ended September 30, 2020 Issuances Sales MaturitiesSettlementsCalls Total Investments: Fixed maturity AFS securities: Corporate bonds$ 154 $ (58)$ (3)$ (18)$ (45)$ 30 Foreign government bonds - - (20) - - (20)ABS 74 - - (14) - 60 Hybrid and redeemable preferred securities 14 - - - - 14 Trading securities 15 - (20) (115) - (120)Equity securities 20 - - - - 20 Derivative investments 126 (177) (138) - - (189)Other assets – indexed annuity ceded embedded derivatives 4 - - (427) - (423)Future contract benefits – indexed annuity and IUL contracts embedded derivatives (88) - - 72 - (16)Total, net$ 319 $ (235)$ (181)$ (502)$ (45)$ (644) For the Nine Months Ended September 30, 2021 Issuances Sales MaturitiesSettlementsCalls Total Investments: Fixed maturity AFS securities: Corporate bonds$ 926 $ (29)$ (103)$ (337)$ (17)$ 440 U.S. government bonds - - (5) - - (5)Foreign government bonds 80 - - - - 80 CMBS 8 - - - - 8 ABS 563 - - (137) - 426 Hybrid and redeemable preferred securities 9 (20) - - (30) (41)Trading securities 127 (23) - (135) - (31)Equity securities 6 (9) - - - (3)Mortgage loans on real estate 89 (101) (26) (19) - (57)Derivative investments 174 (124) (182) - - (132)Other assets – indexed annuity ceded embedded derivatives 22 - - (82) - (60)Future contract benefits – indexed annuity - and IUL contracts embedded derivatives (155) - - 291 - 136 Total, net$ 1,849 $ (306)$ (316)$ (419)$ (47)$ 761 For the Nine Months Ended September 30, 2020 Issuances Sales MaturitiesSettlementsCalls Total Investments: Fixed maturity AFS securities: Corporate bonds$ 683 $ (230)$ (37)$ (112)$ (123)$ 181 Foreign government bonds - - (20) - - (20)ABS 353 - - (35) - 318 Hybrid and redeemable preferred securities 14 (4) - - - 10 Trading securities 53 (25) (20) (148) - (140)Equity securities 21 (1) - - - 20 Derivative investments 374 (395) (305) - - (326)Other assets – indexed annuity ceded embedded derivatives 21 - - (896) - (875)Future contract benefits – indexed annuity and IUL contracts embedded derivatives (170) - - 155 - (15)Total, net$ 1,349 $ (655)$ (382)$ (1,036)$ (123)$ (847) The following summarizes changes in unrealized gains (losses) included in net income, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, related to financial instruments carried at fair value classified within Level 3 that we still held (in millions): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2021 2020 2021 2020 Trading securities$ 3 $ - $ 3 $ - Equity securities 5 - 35 - Mortgage loans on real estate 4 - 12 - GLB embedded derivatives 140 2,143 1,854 (1,062) Derivative investments - 731 - 265 Embedded derivatives – indexed annuity and IUL contracts (36) 340 22 582 Total, net (1)$ 116 $ 3,214 $ 1,926 $ (215) (1)Included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). The following summarizes changes in unrealized gains (losses) included in OCI, net of tax, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, related to financial instruments carried at fair value classified within Level 3 that we still held (in millions): For the Three For the Nine Months Ended Months Ended September 30, September 30, 2021 2020 2021 2020 Fixed maturity AFS securities: Corporate bonds$ (82)$ 181 $ (139)$ (26) Foreign government bonds (3) - (11) (3) ABS (1) 4 (5) 4 Hybrid and redeemable preferred securities 6 1 19 (1) Mortgage loans on real estate 3 - 5 - Total, net $ (77)$ 186 $ (131)$ (26) The following provides the components of the transfers into and out of Level 3 (in millions) as reported above: For the Three For the Three Months Ended Months Ended September 30, 2021 September 30, 2020 Transfers Transfers Transfers Transfers Into Out of Into Out of Level 3 Level 3 Total Level 3 Level 3 Total Investments: Fixed maturity AFS securities: Corporate bonds$ - $ (25)$ (25)$ 42 $ (54)$ (12)U.S. government bonds - - - - (5) (5)CMBS - (8) (8) - - - ABS 8 (46) (38) - (73) (73)Trading securities - - - - (21) (21)Derivative investments - - - - (216) (216)Other assets – indexed annuity ceded embedded derivatives 515 - 515 - - - Future contract benefits – indexed annuity and IUL contracts embedded derivatives (4,937) - (4,937) - - - Total, net $ (4,414)$ (79)$ (4,493)$ 42 $ (369)$ (327) For the Nine For the Nine Months Ended Months Ended September 30, 2021 September 30, 2020 Transfers Transfers Transfers Transfers Into Out of Into Out of Level 3 Level 3 Total Level 3 Level 3 Total Investments: Fixed maturity AFS securities: Corporate bonds$ 10 $ (64)$ (54)$ 296 $ (216)$ 80 U.S. government bonds - - - - (5) (5)Foreign government bonds - (37) (37) - - - RMBS - - - 1 (10) (9)CMBS - (8) (8) - - - ABS 8 (266) (258) 20 (196) (176)Hybrid and redeemable preferred securities - - - 18 - 18 Trading securities 14 (29) (15) 33 (23) 10 Derivative investments - (2,658) (2,658) - (216) (216)Other assets – indexed annuity ceded embedded derivatives 515 (527) (12) - - - Future contract benefits – indexed annuity and IUL contracts embedded derivatives (4,937) 4,170 (767) - - - Total, net $ (4,390)$ 581 $ (3,809)$ 368 $ (666)$ (298) Transfers into and out of Level 3 are generally the result of observable market information on financial instruments no longer being available or becoming available to our pricing vendors. For the three and nine months ended September 30, 2021 and 2020, transfers in and out of Level 3 were attributable primarily to the financial instruments’ observable market information no longer being available or becoming available. During the second and third quarters of 2021, transfers into and out of Level 3 included free-standing and embedded derivative instruments for which we changed valuation techniques. This change in valuation technique was primarily from unobservable inputs in counterparty models to a mathematical model provided by a third party. The updated valuation technique is considered industry standard and provides us with greater visibility into the economic valuation inputs.‎ The following summarizes the fair value (in millions), valuation techniques and significant unobservable inputs of the Level 3 fair value measurements as of September 30, 2021: Weighted Average Fair Valuation Significant Assumption or Input Value Technique Unobservable Inputs Input Ranges Range (1)Assets Investments: Fixed maturity AFS and trading securities: Corporate bonds$ 3,594 Discounted cash flow Liquidity/duration adjustment (2) 0.0% -6.8% 1.4% Foreign government bonds 106 Discounted cash flow Liquidity/duration adjustment (2) 1.0% -8.8% 3.5% ABS 19 Discounted cash flow Liquidity/duration adjustment (2) 2.2% -2.2% 2.2% Hybrid and redeemable preferred securities 7 Discounted cash flow Liquidity/duration adjustment (2) 1.7% -1.7% 1.7% Equity securities 21 Discounted cash flow Liquidity/duration adjustment (2) 4.5% -6.6% 6.1% Other assets: GLB direct and ceded 1,753 Discounted cash flow Long-term lapse rate (3) 1% -30% (10) embedded derivatives Utilization of guaranteed withdrawals (4)85% -100% 94% Claims utilization factor (5) 60% -100% (10) Premiums utilization factor (5) 80% -115% (10) NPR (6) 0.08% -1.37% 0.93% Mortality rate (7) (9) (10) Volatility (8) 1% -28% 14.55% Indexed annuity ceded embedded derivatives 495 Discounted cash flow Lapse rate (3) 0% -9% (10) Mortality rate (7) (9) (10) Liabilities Future contract benefits – indexed annuity contracts embedded derivatives$ (4,758)Discounted cash flow Lapse rate (3) 0% -9% (10) Mortality rate (7) (9) (10) Other liabilities – GLB ceded embedded derivatives (146)Discounted cash flow Long-term lapse rate (3) 1% -30% (10) Utilization of guaranteed withdrawals (4)85% -100% 94% Claims utilization factor (5) 60% -100% (10) Premiums utilization factor (5) 80% -115% (10) NPR (6) 0.08% -1.37% 0.93% Mortality rate (7) (9) (10) Volatility (8) 1% -28% 14.55% (1)Unobservable inputs were weighted by the relative fair value of the instruments, unless otherwise noted.(2)The liquidity/duration adjustment input represents an estimated market participant composite of adjustments attributable to liquidity premiums, expected durations, structures and credit quality that would be applied to the market observable information of an investment.(3)The lapse rate input represents the estimated probability of a contract surrendering during a year, and thereby forgoing any future benefits. The range for indexed annuity contracts represents the lapse rates during the surrender charge period.(4)The utilization of guaranteed withdrawals input represents the estimated percentage of contract holders that utilize the guaranteed withdrawal feature.(5)The utilization factors are applied to the present value of claims or premiums, as appropriate, in the GLB reserve calculation to estimate the impact of inefficient withdrawal behavior, including taking less than or more than the maximum guaranteed withdrawal.(6)The NPR input represents the estimated additional credit spread that market participants would apply to the market observable discount rate when pricing a contract. The NPR input was weighted by the absolute value of the sensitivity of the reserve to the NPR assumption. (7)The mortality rate input represents the estimated probability of when an individual belonging to a particular group, categorized according to age or some other factor such as gender, will die.(8)The volatility input represents overall volatilities assumed for the underlying variable annuity funds, which include a mixture of equity and fixed-income assets. Fair value of the variable annuity GLB embedded derivatives would increase if higher volatilities were used for valuation. Volatility assumptions vary by fund due to the benchmarking of different indices. The volatility input was weighted by the relative account value assigned to each index.(9)The mortality rate is based on a combination of company and industry experience, adjusted for improvement factors.(10)A weighted average input range is not a meaningful measurement for lapse rate, utilization factors or mortality rate. From the table above, we have excluded Level 3 fair value measurements obtained from independent, third-party pricing sources. We do not develop the significant inputs used to measure the fair value of these assets and liabilities, and the information regarding the significant inputs is not readily available to us. Independent broker-quoted fair values are non-binding quotes developed by market makers or broker-dealers obtained from third-party sources recognized as market participants. The fair value of a broker-quoted asset or liability is based solely on the receipt of an updated quote from a single market maker or a broker-dealer recognized as a market participant as we do not adjust broker quotes when used as the fair value measurement for an asset or liability. Significant increases or decreases in any of the quotes received from a third-party broker-dealer may result in a significantly higher or lower fair value measurement. Changes in any of the significant inputs presented in the table above would have resulted in a significant change in the fair value measurement of the asset or liability as follows: Investments – An increase in the liquidity/duration adjustment input would have resulted in a decrease in the fair value measurement.Indexed annuity contracts embedded derivatives – For direct embedded derivatives, an increase in the lapse rate or mortality rate inputs would have resulted in a decrease in the fair value measurement.GLB embedded derivatives – Assuming our GLB direct embedded derivatives are in a liability position: an increase in our lapse rate, NPR or mortality rate inputs would have resulted in a decrease in the fair value measurement; and an increase in the utilization of guaranteed withdrawal or volatility inputs would have resulted in an increase in the fair value measurement. For each category discussed above, the unobservable inputs are not inter-related; therefore, a directional change in one input would not have affected the other inputs. As part of our ongoing valuation process, we assess the reasonableness of our valuation techniques or models and make adjustments as necessary.

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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 -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
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