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Fair Value
 6 Months Ended
Jun. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value
7. Fair Value

Fair value is the price we would receive to sell an asset or pay to transfer a liability (exit price) in an orderly transaction between market participants. We determine fair value based on the following fair value hierarchy:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in an active market.

Level 2 – Quoted prices for inactive markets or valuation techniques that require observable direct or indirect inputs for substantially the full term of the asset or liability. Level 2 inputs include the following:

•Quoted prices for similar assets or liabilities in active markets,
•Observable inputs other than quoted market prices, and
•Observable inputs derived principally from market data through correlation or other means.

Level 3 – Prices or valuation techniques with unobservable inputs significant to the overall fair value estimate. These valuations use critical assumptions not readily available to market participants. Level 3 valuations are based on market standard valuation methodologies, including discounted cash flows, matrix pricing or other similar techniques.

Net Asset Value (NAV) – Investment funds are typically measured using NAV as a practical expedient in determining fair value and are not classified in the fair value hierarchy. Our carrying value reflects our pro rata ownership percentage as indicated by NAV in the investment fund financial statements, which we may adjust if we determine NAV is not calculated consistent with investment company fair value principles. The underlying investments of the investment funds may have significant unobservable inputs, which may include but are not limited to, comparable multiples and weighted average cost of capital rates applied in valuation models or a discounted cash flow model.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the instrument’s fair value measurement.

We use a number of valuation sources to determine fair values. Valuation sources can include quoted market prices; third-party commercial pricing services; third-party brokers; industry-standard, vendor modeling software that uses market observable inputs; and other internal modeling techniques based on projected cash flows. We periodically review the assumptions and inputs of third-party commercial pricing services through internal valuation price variance reviews, comparisons to internal pricing models, back testing to recent trades, or monitoring trading volumes.
The following represents the hierarchy for our assets and liabilities measured at fair value on a recurring basis:
June 30, 2023
(In millions)TotalNAVLevel 1Level 2Level 3
Assets
AFS securities
US government and agencies$4,821 $— $4,814 $7 $— 
US state, municipal and political subdivisions
1,054 — — 1,054 — 
Foreign governments1,008 — — 960 48 
Corporate67,410 — 10 64,940 2,460 
CLO18,521 — — 18,521 — 
ABS11,350 — — 6,045 5,305 
CMBS4,500 — — 4,488 12 
RMBS6,488 — — 6,482 6 
Total AFS securities115,152 — 4,824 102,497 7,831 
Trading securities1,628 — 24 1,566 38 
Equity securities896 — 194 635 67 
Mortgage loans34,668 — — — 34,668 
Funds withheld at interest – embedded derivative(4,356)— — — (4,356)
Derivative assets5,114 — 111 5,003 — 
Short-term investments650 — — 620 30 
Other investments547 — — 210 337 
Cash and cash equivalents10,601 — 10,601 — — 
Restricted cash2,203 — 2,203 — — 
Investments in related parties
AFS securities
Corporate1,343 — — 172 1,171 
CLO3,806 — — 3,311 495 
ABS8,258 — — 516 7,742 
Total AFS securities – related parties13,407 — — 3,999 9,408 
Trading securities867 — — — 867 
Equity securities313 — 61 — 252 
Mortgage loans1,296 — — — 1,296 
Investment funds1,061 — — — 1,061 
Funds withheld at interest – embedded derivative(1,297)— — — (1,297)
Other investments343 — — — 343 
Reinsurance recoverable1,436 — — — 1,436 
Other assets433 — — — 433 
Assets of consolidated VIEs
Trading securities1,720 — — 295 1,425 
Mortgage loans2,113 — — — 2,113 
Investment funds14,109 12,758 — — 1,351 
Other investments100 — — 1 99 
Cash and cash equivalents122 — 122 — — 
Total assets measured at fair value$203,126 $12,758 $18,140 $114,826 $57,402 
Liabilities
Interest sensitive contract liabilities
Embedded derivative$8,198 $— $— $— $8,198 
Universal life benefits854 — — — 854 
Future policy benefits
AmerUs Life Insurance Company (AmerUs) Closed Block1,159 — — — 1,159 
Indianapolis Life Insurance Company (ILICO) Closed Block and life benefits571 — — — 571 
Market risk benefits3,195 — — — 3,195 
Derivative liabilities1,753 — 35 1,717 1 
Other liabilities181 — — (28)209 
Total liabilities measured at fair value$15,911 $— $35 $1,689 $14,187 
December 31, 2022
(In millions)TotalNAVLevel 1Level 2Level 3
Assets
AFS securities
US government and agencies$2,577 $— $2,570 $7 $— 
US state, municipal and political subdivisions
927 — — 927 — 
Foreign governments907 — — 906 1 
Corporate60,901 — — 59,236 1,665 
CLO16,493 — — 16,493 — 
ABS10,527 — — 5,660 4,867 
CMBS4,158 — — 4,158 — 
RMBS5,914 — — 5,682 232 
Total AFS securities102,404 — 2,570 93,069 6,765 
Trading securities1,595 — 23 1,519 53 
Equity securities1,087 — 150 845 92 
Mortgage loans27,454 — — — 27,454 
Funds withheld at interest – embedded derivative(4,847)— — — (4,847)
Derivative assets3,309 — 42 3,267 — 
Short-term investments520 — 29 455 36 
Other investments611 — — 170 441 
Cash and cash equivalents7,779 — 7,779 — — 
Restricted cash628 — 628 — — 
Investments in related parties
AFS securities
Corporate982 — — 170 812 
CLO3,079 — — 2,776 303 
ABS5,760 — — 218 5,542 
Total AFS securities – related parties9,821 — — 3,164 6,657 
Trading securities878 — — — 878 
Equity securities279 — — — 279 
Mortgage loans1,302 — — — 1,302 
Investment funds959 — — — 959 
Funds withheld at interest – embedded derivative(1,425)— — — (1,425)
Other investments303 — — — 303 
Reinsurance recoverable1,388 — — — 1,388 
Other assets481 — — — 481 
Assets of consolidated VIEs
Trading securities1,063 — 5 436 622 
Mortgage loans2,055 — — — 2,055 
Investment funds12,480 10,009 — — 2,471 
Other investments101 — — 2 99 
Cash and cash equivalents362 — 362 — — 
Total assets measured at fair value$170,587 $10,009 $11,588 $102,927 $46,063 
Liabilities
Interest sensitive contract liabilities
Embedded derivative$5,841 $— $— $— $5,841 
Universal life benefits829 — — — 829 
Future policy benefits
AmerUs Closed Block
1,164 — — — 1,164 
ILICO Closed Block and life benefits
548 — — — 548 
Market risk benefits2,970 — — — 2,970 
Derivative liabilities1,646 — 38 1,607 1 
Other liabilities65 — — (77)142 
Total liabilities measured at fair value$13,063 $— $38 $1,530 $11,495 
Fair Value Valuation Methods—We used the following valuation methods and assumptions to estimate fair value:

AFS and trading securities – We obtain the fair value for most marketable securities without an active market from several commercial pricing services. These are classified as Level 2 assets. The pricing services incorporate a variety of market observable information in their valuation techniques, including benchmark yields, trading activity, credit quality, issuer spreads, bids, offers and other reference data. This category typically includes US and non-US corporate bonds, US agency and government guaranteed securities, CLO, ABS, CMBS and RMBS.

We also have fixed maturity securities priced based on indicative broker quotes or by employing market accepted valuation models. For certain fixed maturity securities, the valuation model uses significant unobservable inputs and are included in Level 3 in our fair value hierarchy. Significant unobservable inputs used include: discount rates, issue-specific credit adjustments, material non-public financial information, estimation of future earnings and cash flows, default rate assumptions, liquidity assumptions and indicative quotes from market makers. These inputs are usually considered unobservable, as not all market participants have access to this data.

We value privately placed fixed maturity securities based on the credit quality and duration of comparable marketable securities, which may be securities of another issuer with similar characteristics. In some instances, we use a matrix-based pricing model. These models consider the current level of risk-free interest rates, corporate spreads, credit quality of the issuer and cash flow characteristics of the security. We also consider additional factors such as net worth of the borrower, value of collateral, capital structure of the borrower, presence of guarantees and our evaluation of the borrower’s ability to compete in its relevant market. Privately placed fixed maturity securities are classified as Level 2 or 3.

Equity securities – Fair values of publicly traded equity securities are based on quoted market prices and classified as Level 1. Other equity securities, typically private equities or equity securities not traded on an exchange, we value based on other sources, such as commercial pricing services or brokers, and are classified as Level 2 or 3.

Mortgage loans – We estimate fair value on a monthly basis using discounted cash flow analysis and rates being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. The discounted cash flow model uses unobservable inputs, including estimates of discount rates and loan prepayments. Mortgage loans are classified as Level 3.

Investment funds – Certain investment funds for which we elected the fair value option are included in Level 3 and are priced based on market accepted valuation models. The valuation models use significant unobservable inputs, which include material non-public financial information, estimation of future distributable earnings and demographic assumptions. These inputs are usually considered unobservable, as not all market participants have access to this data.

Other investments – The fair value of other investments are determined using a discounted cash flow model using discount rates for similar investments.

Funds withheld at interest embedded derivative – We estimate the fair value of the embedded derivative based on the change in the fair value of the assets supporting the funds withheld payable under modco and funds withheld reinsurance agreements. As a result, the fair value of the embedded derivative is classified as Level 2 or 3 based on the valuation methods used for the assets held supporting the reinsurance agreements.

Derivatives – Derivative contracts can be exchange traded or over-the-counter. Exchange-traded derivatives typically fall within Level 1 of the fair value hierarchy depending on trading activity. Over-the-counter derivatives are valued using valuation models or an income approach using third-party broker valuations. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates and correlation of the inputs. We consider and incorporate counterparty credit risk in the valuation process through counterparty credit rating requirements and monitoring of overall exposure. We also evaluate and include our own nonperformance risk in valuing derivatives. The majority of our derivatives trade in liquid markets; therefore, we can verify model inputs and model selection does not involve significant management judgment. These are typically classified within Level 2 of the fair value hierarchy.

Cash and cash equivalents, including restricted cash – The carrying amount for cash equals fair value. We estimate the fair value for cash equivalents based on quoted market prices. These assets are classified as Level 1.

Other assets and market risk benefits – Other assets at fair value consists of market risk benefit assets. See Note 9 – Long-duration Contracts for additional information on market risk benefits valuation methodology and additional fair value disclosures. The estimates are classified as Level 3.

Interest sensitive contract liabilities embedded derivative – Embedded derivatives related to interest sensitive contract liabilities with fixed indexed annuity products are classified as Level 3. The valuations include significant unobservable inputs associated with economic assumptions and actuarial assumptions for policyholder behavior.

AmerUs Closed Block – We elected the fair value option for the future policy benefits liability in the AmerUs Closed Block. Our valuation technique is to set the fair value of policyholder liabilities equal to the fair value of assets. There is an additional component which captures the fair value of the open block’s obligations to the closed block business. This component is the present value of the projected release of required capital and future earnings before income taxes on required capital supporting the AmerUs Closed Block, discounted at a rate which represents a market participant’s required rate of return, less the initial required capital. Unobservable inputs include estimates for these items. The AmerUs Closed Block policyholder liabilities and any corresponding reinsurance recoverable are classified as Level 3.
ILICO Closed Block – We elected the fair value option for the ILICO Closed Block. Our valuation technique is to set the fair value of policyholder liabilities equal to the fair value of assets. There is an additional component which captures the fair value of the open block’s obligations to the closed block business. This component uses the present value of future cash flows which include commissions, administrative expenses, reinsurance premiums and benefits, and an explicit cost of capital. The discount rate includes a margin to reflect the business and nonperformance risk. Unobservable inputs include estimates for these items. The ILICO Closed Block policyholder liabilities and corresponding reinsurance recoverable are classified as Level 3.

Universal life liabilities and other life benefits – We elected the fair value option for certain blocks of universal and other life business ceded to Global Atlantic. We use a present value of liability cash flows. Unobservable inputs include estimates of mortality, persistency, expenses, premium payments and a risk margin used in the discount rates that reflects the riskiness of the business. These universal life policyholder liabilities and corresponding reinsurance recoverable are classified as Level 3.

Other liabilities – Other liabilities includes funds withheld liability, as described above in funds withheld at interest embedded derivative, and a ceded modco agreement of certain inforce funding agreement contracts for which we elected the fair value option. We estimate the fair value of the ceded modco agreement by discounting projected cash flows for net settlements and certain periodic and non-periodic payments. Unobservable inputs include estimates for asset portfolio returns and economic inputs used in the discount rate, including risk margin. Depending on the projected cash flows and other assumptions, the contract may be recorded as an asset or liability. The estimate is classified as Level 3.

Fair Value Option—The following represents the gains (losses) recorded for instruments for which we have elected the fair value option, including related parties and consolidated VIEs:
Three months ended June 30,Six months ended June 30,
(In millions)2023202220232022
Trading securities$(32)$(161)$32 $(368)
Mortgage loans(221)(1,149)75 (2,065)
Investment funds27 36 91 56 
Future policy benefits31 131 5 273 
Other liabilities(20)— (67)— 
Total gains (losses)$(215)$(1,143)$136 $(2,104)

Gains and losses on trading securities and other liabilities are recorded in investment related gains (losses) on the condensed consolidated statements of income (loss). For fair value option mortgage loans, we record interest income in net investment income and subsequent changes in fair value in investment related gains (losses) on the condensed consolidated statements of income (loss). Gains and losses related to investment funds, including related party investment funds, are recorded in net investment income on the condensed consolidated statements of income (loss). We record the change in fair value of future policy benefits to future policy and other policy benefits on the condensed consolidated statements of income (loss).

The following summarizes information for fair value option mortgage loans, including related parties and consolidated VIEs:
(In millions)June 30, 2023December 31, 2022
Unpaid principal balance$41,122 $33,653 
Mark to fair value(3,045)(2,842)
Fair value$38,077 $30,811 

The following represents our commercial mortgage loan portfolio 90 days or more past due and/or in non-accrual status:
(In millions)June 30, 2023December 31, 2022
Unpaid principal balance of commercial mortgage loans 90 days or more past due and/or in non-accrual status$208 $74 
Mark to fair value of commercial mortgage loans 90 days or more past due and/or in non-accrual status(62)(55)
Fair value of commercial mortgage loans 90 days or more past due and/or in non-accrual status$146 $19 
Fair value of commercial mortgage loans 90 days or more past due$21 $2 
Fair value of commercial mortgage loans in non-accrual status125 19 
The following represents our residential loan portfolio 90 days or more past due and/or in non-accrual status:
(In millions)June 30, 2023December 31, 2022
Unpaid principal balance of residential mortgage loans 90 days or more past due and/or in non-accrual status$439 $522 
Mark to fair value of residential mortgage loans 90 days or more past due and/or in non-accrual status(40)(50)
Fair value of residential mortgage loans 90 days or more past due and/or in non-accrual status$399 $472 
Fair value of residential mortgage loans 90 days or more past due1
$399 $472 
Fair value of residential mortgage loans in non-accrual status239 360 
1 As of June 30, 2023 and December 31, 2022 includes $160 million and $221 million, respectively, of residential mortgage loans that are guaranteed by US government-sponsored agencies.

The following is the estimated amount of gains (losses) included in earnings during the period attributable to changes in instrument-specific credit risk on our mortgage loan portfolio:
Three months ended June 30,Six months ended June 30,
(In millions)2023202220232022
Mortgage loans$(8)$(34)$(11)$(52)

We estimated the portion of gains and losses attributable to changes in instrument-specific credit risk by identifying commercial loans with loan-to-value ratios meeting credit quality criteria, and residential mortgage loans with delinquency status meeting credit quality criteria.
Level 3 Financial Instruments—The following are reconciliations for Level 3 assets and liabilities measured at fair value on a recurring basis. Transfers in and out of Level 3 are primarily based on changes in the availability of pricing sources, as described in the valuation methods above.

Three months ended June 30, 2023
Total realized and unrealized gains (losses)
(In millions)Beginning balanceIncluded in incomeIncluded in OCINet purchases, issuances, sales and settlementsNet transfers in (out)Ending balance
Total gains (losses) included in earnings1
Total gains (losses) included in OCI1
Assets
AFS securities
Foreign governments$1 $— $— $47 — $48 $— $— 
Corporate1,622 — 12 1,070 (244)2,460 — 12 
ABS4,942 — (31)894 (500)5,305 — (30)
CMBS— — — — 12 12 — — 
RMBS238 3 (1)(3)(231)6 — — 
Trading securities42 1 — (3)(2)38 — — 
Equity securities71 (4)— — — 67 (4)— 
Mortgage loans29,949 (195)— 4,914 — 34,668 (195)— 
Funds withheld at interest – embedded derivative(4,291)(65)— — — (4,356)— — 
Short-term investments30 — — — — 30 — — 
Other investments286 (1)— 52 — 337 (1)— 
Investments in related parties
AFS securities
Corporate959 — (1)(2)215 1,171 — (1)
CLO498 — (3)— — 495 — (3)
ABS7,005 5 5 443 284 7,742 1 2 
Trading securities885 (4)— (14)— 867 (4)— 
Equity securities251 1 — — — 252 1 — 
Mortgage loans1,324 (9)— (19)— 1,296 (9)— 
Investment funds1,034 27 — — — 1,061 27 — 
Funds withheld at interest – embedded derivative(1,266)(31)— — — (1,297)— — 
Other investments338 5 — — — 343 5 — 
Reinsurance recoverable1,470 (34)— — — 1,436 — — 
Assets of consolidated VIEs
Trading securities648 (4)— (8)789 1,425 (4)— 
Mortgage loans2,119 (17)— 11 — 2,113 (17)— 
Investment funds2,581 5 — — (1,235)1,351 6 — 
Other investments97 2 — — — 99 2 — 
Total Level 3 assets$50,833 $(315)$(19)$7,382 $(912)$56,969 $(192)$(20)
Liabilities
Interest sensitive contract liabilities
Embedded derivative$(6,747)$(1,055)$— $(396)$— $(8,198)$— $— 
Universal life benefits(879)25 — — — (854)— — 
Future policy benefits
AmerUs Closed Block(1,190)31 — — — (1,159)— — 
ILICO Closed Block and life benefits(579)8 — — — (571)— — 
Derivative liabilities(1)— — — — (1)— — 
Other liabilities(189)(20)— — — (209)— — 
Total Level 3 liabilities$(9,585)$(1,011)$— $(396)$— $(10,992)$— $— 
1 Related to instruments held at end of period.
Three months ended June 30, 2022
Total realized and unrealized gains (losses)
(In millions)Beginning balanceIncluded in incomeIncluded in OCINet purchases, issuances, sales and settlementsNet transfers in (out)Ending balance
Total gains (losses) included in earnings1
Total gains (losses) included in OCI1
Assets
AFS securities
Foreign governments
$2 $— $— $— $— $2 $— $— 
Corporate1,499 — (58)40 107 1,588 — (58)
CLO
5 — (3)(2)— — — — 
ABS
3,783 2 (65)148 (274)3,594 — (66)
CMBS
10 — — — (10)— — — 
RMBS
— — — 68 — 68 — — 
Trading securities
90 (1)— 2 (33)58 — — 
Equity securities
438 8 — (3)(381)62 8 — 
Mortgage loans23,696 (1,027)— 2,549 — 25,218 (1,025)— 
Investment funds19 — — — — 19 — — 
Funds withheld at interest – embedded derivative
(1,882)(2,076)— — — (3,958)— — 
Short-term investments59 — (1)— — 58 — — 
Investments in related parties
AFS securities
Corporate761 — (7)42 53 849 — (7)
CLO
332 — (7)— — 325 — (7)
ABS4,409 16 (125)(1,096)1,822 5,026 — (126)
Trading securities252 4 — (808)1,443 891 — — 
Equity securities166 (9)— (119)125 163 — — 
Mortgage loans1,456 (72)— 32 — 1,416 (73)— 
Investment funds814 4 — — — 818 28 — 
Funds withheld at interest – embedded derivative
(570)(559)— — — (1,129)— — 
Short-term investments
53 — — — (53)— — — 
Reinsurance recoverable1,814 (234)— — — 1,580 — — 
Assets of consolidated VIEs
Trading securities— — — — 330 330 — — 
Mortgage loans1,880 (50)— (2)(202)1,626 (50)— 
Investment funds10,577 33 — (77)(9,480)1,053 27 — 
Other investments1,902 — — 31 (1,902)31 — — 
Total Level 3 assets
$51,565 $(3,961)$(266)$805 $(8,455)$39,688 $(1,085)$(264)
Liabilities
Interest sensitive contract liabilities
Embedded derivative
$(6,485)$1,519 $— $(210)$— $(5,176)$— $— 
Universal life benefits
(1,096)153 — — — (943)— — 
Future policy benefits
AmerUs Closed Block
(1,378)131 — — — (1,247)— — 
ILICO Closed Block and life benefits
(704)81 — — — (623)— — 
Derivative liabilities(3)2 — — — (1)— — 
Total Level 3 liabilities
$(9,666)$1,886 $— $(210)$— $(7,990)$— $— 
1 Related to instruments held at end of period.
Six months ended June 30, 2023
Total realized and unrealized gains (losses)
(In millions)Beginning balanceIncluded in incomeIncluded in OCINet purchases, issuances, sales and settlementsNet transfers in (out)Ending balance
Total gains (losses) included in earnings1
Total gains (losses) included in OCI1
Assets
AFS securities
Foreign governments$1 $— $— $47 $— $48 $— $— 
Corporate1,665 (1)24 1,196 (424)2,460 — 17 
ABS4,867 — (50)1,049 (561)5,305 — (46)
CMBS— — — — 12 12 — (1)
RMBS232 6 2 (3)(231)6 — — 
Trading securities53 3 — (7)(11)38 1 — 
Equity securities92 (12)— — (13)67 (12)— 
Mortgage loans27,454 56 — 7,158 — 34,668 57 — 
Funds withheld at interest – embedded derivative(4,847)491 — — — (4,356)— — 
Short-term investments36 — (2)(30)26 30 — — 
Other investments441 — — (104)— 337 (1)— 
Investments in related parties
AFS securities
Corporate812 1 (8)151 215 1,171 — (8)
CLO303 — 7 185 — 495 — 7 
ABS5,542 9 49 1,858 284 7,742 4 46 
Trading securities878 2 — (13)— 867 (1)— 
Equity securities279 5 — (32)— 252 5 — 
Mortgage loans1,302 17 — (23)— 1,296 17 — 
Investment funds959 70 — 32 — 1,061 70 — 
Funds withheld at interest – embedded derivative(1,425)128 — — — (1,297)— — 
Other investments303 (2)— 42 — 343 (2)— 
Reinsurance recoverable1,388 48 — — — 1,436 — — 
Assets of consolidated VIEs
Trading securities622 8 — (10)805 1,425 8 — 
Mortgage loans2,055 2 — 56 — 2,113 2 — 
Investment funds2,471 23 — (8)(1,135)1,351 23 — 
Other investments99 2 — (2)— 99 2 — 
Total Level 3 assets$45,582 $856 $22 $11,542 $(1,033)$56,969 $173 $15 
Liabilities
Interest sensitive contract liabilities
Embedded derivative$(5,841)$(1,528)$— $(829)$— $(8,198)$— $— 
Universal life benefits(829)(25)— — — (854)— — 
Future policy benefits
AmerUs Closed Block(1,164)5 — — — (1,159)— — 
ILICO Closed Block and life benefits(548)(23)— — — (571)— — 
Derivative liabilities(1)— — — — (1)— — 
Other liabilities(142)(67)— — — (209)— — 
Total Level 3 liabilities$(8,525)$(1,638)$— $(829)$— $(10,992)$— $— 
1 Related to instruments held at end of period.
Six months ended June 30, 2022
Total realized and unrealized gains (losses)
(In millions)January 1, 2022Included in incomeIncluded in OCINet purchases, issuances, sales and settlementsNet transfers in (out)Ending balance
Total gains (losses) included in earnings1
Total gains (losses) included in OCI1
Assets
AFS securities
Foreign governments
$2 $— $— $— $— $2 $— $— 
Corporate1,339 (3)(77)180 149 1,588 — (76)
CLO
14 (2)— (12)— — — — 
ABS
3,619 7 (95)— 63 3,594 — (89)
CMBS
43 — (17)— (26)— — 1 
RMBS
— — — 68 — 68 — — 
Trading securities
69 (6)— 8 (13)58 — — 
Equity securities
429 17 — (3)(381)62 16 — 
Mortgage loans21,154 (1,771)— 5,835 — 25,218 (1,767)— 
Investment funds18 1 — — — 19 1 — 
Funds withheld at interest – embedded derivative— (3,958)— — — (3,958)— — 
Short-term investments29 — (1)30 — 58 — — 
Investments in related parties
AFS securities
Corporate670 (4)(6)136 53 849 — (6)
CLO
202 — (7)130 — 325 — (7)
ABS6,445 (1)(135)(1,241)(42)5,026 — (138)
Trading securities1,771 (1)— (1,062)183 891 — — 
Equity securities284 (14)— (119)12 163 — — 
Mortgage loans1,369 (124)— 171 — 1,416 (124)— 
Investment funds2,855 28 — (34)(2,031)818 28 — 
Funds withheld at interest – embedded derivative
— (1,129)— — — (1,129)— — 
Short-term investments
— — — 53 (53)— — — 
Reinsurance recoverable1,991 (411)— — — 1,580 — — 
Assets of consolidated VIEs
Trading securities— — — — 330 330 — — 
Mortgage loans2,152 (170)— (154)(202)1,626 (170)— 
Investment funds1,297 28 — 161 (433)1,053 28 — 
Other investments— — — 31 — 31 — — 
Total Level 3 assets
$45,752 $(7,513)$(338)$4,178 $(2,391)$39,688 $(1,988)$(315)
Liabilities
Interest sensitive contract liabilities
Embedded derivative
$(7,408)$2,553 $— $(321)$— $(5,176)$— $— 
Universal life benefits
(1,235)292 — — — (943)— — 
Future policy benefits
AmerUs Closed Block
(1,520)273 — — — (1,247)— — 
ILICO Closed Block and life benefits
(742)119 — — — (623)— — 
Derivative liabilities(3)2 — — — (1)— — 
Total Level 3 liabilities
$(10,908)$3,239 $— $(321)$— $(7,990)$— $— 
1 Related to instruments held at end of period.
The following represents the gross components of purchases, issuances, sales and settlements, net, and net transfers in (out) shown above:

Three months ended June 30, 2023
(In millions)PurchasesIssuancesSalesSettlementsNet purchases, issuances, sales and settlementsTransfers inTransfers outNet transfers in (out)
Assets
AFS securities
Foreign governments
$53 $— $— $(6)$47 $— $— $— 
Corporate1,104 — — (34)1,070 — (244)(244)
ABS
1,033 — (20)(119)894 123 (623)(500)
CMBS
— — — — — 12 — 12 
RMBS
— — — (3)(3)5 (236)(231)
Trading securities
8 — — (11)(3)— (2)(2)
Mortgage loans5,783 — (31)(838)4,914 — — — 
Other investments325 — — (273)52 — — — 
Investments in related parties
AFS securities
Corporate1 — — (3)(2)215 — 215 
ABS1,072 — (162)(467)443 284 — 284 
Trading securities
25 — (37)(2)(14)— — — 
Mortgage loans— — — (19)(19)— — — 
Assets of consolidated VIEs
Trading securities10 — (18)— (8)817 (28)789 
Mortgage loans13 — — (2)11 — — — 
Investment funds— — — — — 327 (1,562)(1,235)
Total Level 3 assets
$9,427 $— $(268)$(1,777)$7,382 $1,783 $(2,695)$(912)
Liabilities
Interest sensitive contract liabilities – embedded derivative
$— $(558)$— $162 $(396)$— $— $— 
Total Level 3 liabilities
$— $(558)$— $162 $(396)$— $— $— 
Three months ended June 30, 2022
(In millions)PurchasesIssuancesSalesSettlementsNet purchases, issuances, sales and settlements
Transfers in1
Transfers out2
Net transfers in (out)
Assets
AFS securities
Corporate$129 $— $(2)$(87)$40 $150 $(43)$107 
CLO
— — — (2)(2)— — — 
ABS
746 — (341)(257)148 30 (304)(274)
CMBS
— — — — — — (10)(10)
RMBS
68 — — — 68 — — — 
Trading securities
2 — — — 2 9 (42)(33)
Equity securities— — (3)— (3)19 (400)(381)
Mortgage loans3,386 — (48)(789)2,549 — — — 
Short-term investments
29 — — (29)— — — — 
Investments in related parties
AFS securities
Corporate52 — — (10)42 53 — 53 
ABS899 — (6)(1,989)(1,096)1,822 — 1,822 
Trading securities
7 — (787)(28)(808)1,443 — 1,443 
Equity securities
— — (119)— (119)125 — 125 
Mortgage loans36 — — (4)32 — — — 
Short-term investments
— — — — — — (53)(53)
Assets of consolidated VIEs
Trading securities— — — — — 330 — 330 
Mortgage loans— — — (2)(2)21 (223)(202)
Investment funds33 — (110)— (77)1,006 (10,486)(9,480)
Other investments31 — — — 31 — (1,902)(1,902)
Total Level 3 assets
$5,418 $— $(1,416)$(3,197)$805 $5,008 $(13,463)$(8,455)
Liabilities
Interest sensitive contract liabilities – embedded derivative
$— $(337)$— $127 $(210)$— $— $— 
Total Level 3 liabilities
$— $(337)$— $127 $(210)$— $— $— 
1 Transfers in are primarily assets of VIEs that we consolidated effective in the second quarter of 2022.
2 Transfers out are primarily the deconsolidation of certain of our VIEs effective in the second quarter of 2022.
Six months ended June 30, 2023
(In millions)PurchasesIssuancesSalesSettlementsNet purchases, issuances, sales and settlementsTransfers inTransfers outNet transfers in (out)
Assets
AFS securities
Foreign governments
$53 $— $— $(6)$47 $— $— $— 
Corporate1,312 — — (116)1,196 29 (453)(424)
ABS
1,331 — (20)(262)1,049 338 (899)(561)
CMBS
— — — — — 12 — 12 
RMBS
1 — — (4)(3)5 (236)(231)
Trading securities
8 — — (15)(7)5 (16)(11)
Equity securities— — — — — — (13)(13)
Mortgage loans8,665 — (63)(1,444)7,158 — — — 
Short-term investments— — — (30)(30)26 — 26 
Other investments327 — — (431)(104)— — — 
Investments in related parties
AFS securities
Corporate157 — — (6)151 215 — 215 
CLO
185 — — — 185 — — — 
ABS2,706 — (162)(686)1,858 284 — 284 
Trading securities
27 — (37)(3)(13)— — — 
Equity securities
— — — (32)(32)— — — 
Mortgage loans— — — (23)(23)— — — 
Investment funds
32 — — — 32 — — — 
Other investments42 — — — 42 — — — 
Assets of consolidated VIEs
Trading securities20 — (30)— (10)836 (31)805 
Mortgage loans59 — — (3)56 — — — 
Investment funds— — (8)— (8)475 (1,610)(1,135)
Other investments 5 — (7)— (2)— — — 
Total Level 3 assets
$14,930 $— $(327)$(3,061)$11,542 $2,225 $(3,258)$(1,033)
Liabilities
Interest sensitive contract liabilities – embedded derivative
$— $(1,135)$— $306 $(829)$— $— $— 
Total Level 3 liabilities
$— $(1,135)$— $306 $(829)$— $— $— 
Six months ended June 30, 2022
(In millions)PurchasesIssuancesSalesSettlementsNet purchases, issuances, sales and settlements
Transfers in1
Transfers out2
Net transfers in (out)
Assets
AFS securities
Corporate$453 $— $(170)$(103)$180 $193 $(44)$149 
CLO
— — — (12)(12)— — — 
ABS
2,235 — (1,791)(444)— 368 (305)63 
CMBS
— — — — — — (26)(26)
RMBS
68 — — — 68 — — — 
Trading securities
8 — — — 8 39 (52)(13)
Equity securities— — (3)— (3)19 (400)(381)
Mortgage loans7,477 — (130)(1,512)5,835 — — — 
Short-term investments
59 — — (29)30 — — — 
Investments in related parties
AFS securities
Corporate367 — (217)(14)136 53 — 53 
CLO130 — — — 130 — — — 
ABS1,273 — (93)(2,421)(1,241)1,822 (1,864)(42)
Trading securities
36 — (1,052)(46)(1,062)1,443 (1,260)183 
Equity securities
— — (119)— (119)125 (113)12 
Mortgage securities182 — — (11)171 — — — 
Investment funds
— — (34)— (34)— (2,031)(2,031)
Short-term investments
53 — — — 53 — (53)(53)
Assets of consolidated VIEs
Trading securities— — — — — 330 — 330 
Mortgage loans— — — (154)(154)21 (223)(202)
Investment funds286 — (125)— 161 11,087 (11,520)(433)
Other investments31 — — — 31 1,902 (1,902)— 
Total Level 3 assets
$12,658 $— $(3,734)$(4,746)$4,178 $17,402 $(19,793)$(2,391)
Liabilities
Interest sensitive contract liabilities – embedded derivative
$— $(597)$— $276 $(321)$— $— $— 
Total Level 3 liabilities
$— $(597)$— $276 $(321)$— $— $— 
1 Transfers in are primarily assets of VIEs that we consolidated in 2022.
2 Transfers out are primarily assets of VIEs that changed consolidation status in 2022.

Significant Unobservable Inputs—Significant unobservable inputs occur when we could not obtain or corroborate the quantitative detail of the inputs. This applies to fixed maturity securities, equity securities, mortgage loans and certain investment funds, as well as embedded derivatives in liabilities. Additional significant unobservable inputs are described below.

AFS, trading and equity securities – We use discounted cash flow models to calculate the fair value for certain fixed maturity and equity securities. The discount rate is a significant unobservable input because the credit spread includes adjustments made to the base rate. The base rate represents a market comparable rate for securities with similar characteristics. This excludes assets for which fair value is provided by independent broker quotes, but includes assets for which fair value is provided by affiliated quotes.

Mortgage loans – We use discounted cash flow models from independent commercial pricing services to calculate the fair value of our mortgage loan portfolio. The discount rate is a significant unobservable input. This approach uses market transaction information and client portfolio-oriented information, such as prepayments or defaults, to support the valuations.

Investment funds – We use various methods of valuing of our investment funds from both independent pricing services and affiliated modeling.
Interest sensitive contract liabilities – embedded derivative – Significant unobservable inputs we use in the fixed indexed annuities embedded derivative of the interest sensitive contract liabilities valuation include:

1.Nonperformance risk – For contracts we issue, we use the credit spread, relative to the US Department of the Treasury (US Treasury) curve based on our public credit rating as of the valuation date. This represents our credit risk for use in the estimate of the fair value of embedded derivatives.
2.Option budget – We assume future hedge costs in the derivative’s fair value estimate. The level of option budgets determines the future costs of the options and impacts future policyholder account value growth.
3.Policyholder behavior – We regularly review the full withdrawal (surrender rate) assumptions. These are based on our initial pricing assumptions updated for actual experience. Actual experience may be limited for recently issued products.

The following summarizes the unobservable inputs for AFS, trading and equity securities, mortgage loans, investment funds and the embedded derivatives of fixed indexed annuities, including those of consolidated VIEs:
June 30, 2023
(In millions, except for percentages and multiples)Fair valueValuation techniqueUnobservable inputsMinimumMaximumWeighted averageImpact of an increase in the input on fair value
AFS, trading and equity securities
$13,800 Discounted cash flowDiscount rate2.2 %18.7 %6.9 %
1
Decrease
Mortgage loans38,077 Discounted cash flowDiscount rate2.0 %24.2 %6.5 %
1
Decrease
Investment funds502 Discounted cash flowDiscount rate6.4 %6.4 %6.4 %Decrease
512 Net tangible asset valuesImplied multiple
1.20x
1.20x
1.20x
Increase
337 Reported net asset valueReported net asset valueN/AN/AN/AN/A
Interest sensitive contract liabilities – fixed indexed annuities embedded derivatives8,198 Discounted cash flowNonperformance risk0.4 %1.8 %1.2 %
2
Decrease
Option budget0.5 %5.7 %2.2 %
3
Increase
Surrender rate5.4 %12.0 %8.1 %
3
Decrease
December 31, 2022
(In millions, except for percentages and multiples)
Fair value
Valuation techniqueUnobservable inputsMinimumMaximumWeighted averageImpact of an increase in the input on fair value
AFS, trading and equity securities
$10,671 Discounted cash flowDiscount rate2.2 %18.8 %6.8 %
1
Decrease
Mortgage loans30,811 Discounted cash flowDiscount rate1.5 %22.1 %6.3 %
1
Decrease
Investment funds506 Discounted cash flowDiscount rate6.4 %6.4 %6.4 %Decrease
873 Discounted cash flow /
Guideline public equity		Discount rate /
P/E
16.5% / 9x
16.5% / 9x
16.5% / 9x
Decrease/Increase
529 Net tangible asset valuesImplied multiple
1.26x
1.26x
1.26x
Increase
563 Reported net asset valueReported net asset valueN/AN/AN/AN/A
Interest sensitive contract liabilities – fixed indexed annuities embedded derivatives5,841 Discounted cash flowNonperformance risk0.1 %1.7 %1.0 %
2
Decrease
Option budget0.5 %5.3 %1.9 %
3
Increase
Surrender rate5.1 %11.5 %8.1 %
3
Decrease
1 The discount rate weighted average is calculated based on the relative fair values of the securities or loans.
2 The nonperformance risk weighted average is based on the projected cash flows attributable to the embedded derivative.
3 The option budget and surrender rate weighted averages are calculated based on projected account values.
Financial Instruments Without Readily Determinable Fair Values—We have elected the measurement alternative for certain equity securities that do not have a readily determinable fair value. As of June 30, 2023 and December 31, 2022, the carrying amount of the equity securities was $400 million and $400 million, respectively, with no cumulative recorded impairment.

Fair Value of Financial Instruments Not Carried at Fair Value—The following represents our financial instruments not carried at fair value on the condensed consolidated balance sheets:
June 30, 2023
(In millions)Carrying ValueFair ValueNAVLevel 1Level 2Level 3
Financial assets
Investment funds$123 $123 $123 $— $— $— 
Policy loans336 336 — — 336 — 
Funds withheld at interest32,200 32,200 — — — 32,200 
Other investments194 195 — — — 195 
Investments in related parties
Investment funds575 575 575 — — — 
Funds withheld at interest10,314 10,314 — — — 10,314 
Short-term investments891 891 — — 891 — 
Total financial assets not carried at fair value$44,633 $44,634 $698 $— $1,227 $42,709 
Financial liabilities
Interest sensitive contract liabilities$134,154 $121,326 $— $— $— $121,326 
Debt3,642 2,873 — — 2,873 — 
Securities to repurchase6,261 6,261 — — 6,261 — 
Funds withheld liability305 305 — — 305 — 
Total financial liabilities not carried at fair value$144,362 $130,765 $— $— $9,439 $121,326 

December 31, 2022
(In millions)Carrying ValueFair ValueNAVLevel 1Level 2Level 3
Financial assets
Investment funds$79 $79 $79 $— $— $— 
Policy loans347 347 — — 347 — 
Funds withheld at interest37,727 37,727 — — — 37,727 
Short-term investments1,640 1,640 — — 1,614 26 
Other investments162 162 — — — 162 
Investments in related parties
Investment funds610 610 610 — — — 
Funds withheld at interest11,233 11,233 — — — 11,233 
Total financial assets not carried at fair value$51,798 $51,798 $689 $— $1,961 $49,148 
Financial liabilities
Interest sensitive contract liabilities$125,101 $111,608 $— $— $— $111,608 
Debt3,658 2,893 — — 2,893 — 
Securities to repurchase4,743 4,743 — — 4,743 — 
Funds withheld liability360 360 — — 360 — 
Total financial liabilities not carried at fair value
$133,862 $119,604 $— $— $7,996 $111,608 

We estimate the fair value for financial instruments not carried at fair value using the same methods and assumptions as those we carry at fair value. The financial instruments presented above are reported at carrying value on the condensed consolidated balance sheets; however, in the case of policy loans, funds withheld at interest and liability, short-term investments and securities to repurchase, the carrying amount approximates fair value.

Interest sensitive contract liabilities – The carrying and fair value of interest sensitive contract liabilities above includes fixed indexed and traditional fixed annuities without mortality or morbidity risks, funding agreements and payout annuities without life contingencies. The embedded derivatives within fixed indexed annuities without mortality or morbidity risks are excluded, as they are carried at fair value. The valuation of these investment contracts is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates, adding a spread to reflect our nonperformance risk and subtracting a risk margin to reflect uncertainty inherent in the projected cash flows.
Debt – We obtain the fair value of debt from commercial pricing services. These are classified as Level 2. The pricing services incorporate a variety of market observable information in their valuation techniques including benchmark yields, trading activity, credit quality, issuer spreads, bids, offers and other reference data.