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Fair Value of Financial Instruments | 6 Months Ended
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Jun. 30, 2025
Fair Value Disclosures [Abstract] |
Fair Value of Financial Instruments | 11. Fair Value of Financial Instruments The carrying amount and fair value of financial instruments are shown below:
| June 30, 2025 |  | December 31, 2024
| Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
| (Dollars in millions)
Financial assets: |  |  |  |  |  |  |
Available-for-sale fixed maturity securities | $ | 48,931 |  |  | $ | 48,931 |  |  | $ | 47,292 |  |  | $ | 47,292 |
Equity securities | 1,238 |  |  | 1,238 |  |  | 1,142 |  |  | 1,142 |
Mortgage loans on real estate, net of allowance | 11,254 |  |  | 11,187 |  |  | 12,117 |  |  | 11,928 |
Private loans, net of allowance | 8,120 |  |  | 8,146 |  |  | 5,732 |  |  | 5,790 |
Real estate partnerships (1) | 1,712 |  |  | 1,712 |  |  | 932 |  |  | 932 |
Investment funds (2) | 141 |  |  | 141 |  |  | 124 |  |  | 124 |
Policy loans | 257 |  |  | 257 |  |  | 274 |  |  | 274 |
Short-term investments (3) | 4,067 |  |  | 4,067 |  |  | 4,177 |  |  | 4,177 |
Other invested assets: |  |  |  |  |  |  |
Derivative assets | 1,101 |  |  | 1,101 |  |  | 1,341 |  |  | 1,341 |
Collaterals received on derivatives (excluding excess collateral) | (1,008) |  |  | (1,008) |  |  | (1,298) |  |  | (1,298) |
Separately managed accounts | 61 |  |  | 61 |  |  | 71 |  |  | 71 |
Other (4) | 864 |  |  | 865 |  |  | 941 |  |  | 943 |
Cash and cash equivalents | 12,104 |  |  | 12,104 |  |  | 11,330 |  |  | 11,330 |
Other assets - market risk benefits | 1,035 |  |  | 1,035 |  |  | 857 |  |  | 857 |
Separate account assets (5) | 1,322 |  |  | 1,322 |  |  | 1,343 |  |  | 1,343 |
Total financial assets | $ | 91,199 |  |  | $ | 91,159 |  |  | $ | 86,375 |  |  | $ | 86,245 |
Financial liabilities: |  |  |  |  |  |  |
Policyholders’ account balances – embedded derivative | $ | 6,257 |  |  | $ | 6,257 |  |  | $ | 1,123 |  |  | $ | 1,123 |
Market risk benefits | 4,227 |  |  | 4,227 |  |  | 3,655 |  |  | 3,655 |
Other liabilities: |  |  |  |  |  |  |
Derivative liabilities | 101 |  |  | 101 |  |  | — |  |  | — |
Funds withheld for reinsurance liabilities | 63 |  |  | 63 |  |  | 37 |  |  | 37 |
Notes payable | 200 |  |  | 200 |  |  | 189 |  |  | 189 |
Long term borrowings | 2,953 |  |  | 3,017 |  |  | 2,957 |  |  | 2,977 |
Separate account liabilities (5) | 1,322 |  |  | 1,322 |  |  | 1,343 |  |  | 1,343 |
Total financial liabilities | $ | 15,123 |  |  | $ | 15,187 |  |  | $ | 9,304 |  |  | $ | 9,324 |
(1)Balances represent real estate partnerships in which the Company has elected the fair value option under ASC 825. Real estate partnerships accounted for as equity method investments are $1.8 billion and directly held real estate is $2.4 billion as of June 30, 2025. Real estate partnerships accounted for as equity method investments are $1.8 billion and directly held real estate is $2.2 billion as of December 31, 2024. (2)Balances represent financial assets that are fair valued as a result of consolidation of investment company VIEs in accordance with ASC 946. Investment funds accounted for as equity method investments are $2.5 billion and investment funds measured using NAV as a practical expedient are $351 million as of June 30, 2025. Investment funds accounted for as equity method investments are $2.5 billion and investment funds measured using NAV as a practical expedient are $353 million as of December 31, 2024. (3)Balance as of June 30, 2025 includes $400 million of amounts loaned under reverse repurchase agreements. The fair value of the collateral received under these agreements was $1.0 billion as of June 30, 2025. Balance as of December 31, 2024 includes $400 million of amounts loaned under reverse repurchase agreements. The fair value of the collateral received under these agreements was $783 million as of December 31, 2024. (4)Other invested assets accounted for as equity method investments, and therefore excluded from the table, are $994 million and $959 million as of June 30, 2025 and December 31, 2024. (5)Balance includes $30 million and $31 million of assets, and corresponding liabilities, that are not subject to the fair value hierarchy as of June 30, 2025 and December 31, 2024, respectively. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability. A fair value hierarchy is used to determine fair value based on a hypothetical transaction as of the measurement date from the perspective of a market participant. The Company has evaluated the types of securities in its investment portfolio to determine an appropriate hierarchy level based upon trading activity and the observability of market inputs. The classification of assets or liabilities within the fair value hierarchy is based on the lowest level of significant input to its valuation. The input levels are defined as follows: Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities Level 2 - Quoted prices in markets that are not active or inputs that are observable directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or 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 are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models and third-party evaluation, as well as instruments for which the determination of fair value requires significant management judgment or estimation Valuation Techniques for Financial Instruments Recorded at Fair Value Available-for-sale Fixed Maturity Securities — The Company utilizes pricing services to estimate fair value measurements. The fair value for available-for-sale fixed maturity securities that are disclosed as Level 1 measurements are based on unadjusted quoted market prices for identical assets that are readily available in an active market. The estimates of fair value for most available-for-sale fixed maturity securities, including municipal bonds, provided by the pricing service are disclosed as Level 2 measurements as the estimates are based on observable market information rather than market quotes. The pricing service utilizes market quotations for available-for-sale fixed maturity securities that have quoted prices in active markets. Since available-for-sale fixed maturity securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Additionally, an option adjusted spread model is used to develop prepayment and interest rate scenarios. The pricing service evaluates each asset class based on relevant market information, credit information, perceived market movements and sector news. The market inputs utilized in the pricing evaluation, listed in the approximate order of priority, include: benchmark yields, reported trades, pricing source quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and economic events. The extent of the use of each market input depends on asset class and the market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant. For some securities, additional inputs may be necessary. The Company has reviewed the inputs and methodology used and the techniques applied by the pricing service to produce quotes that represent the fair value of a specific security. The review confirms that the pricing service is utilizing information from observable transactions or a technique that represents a market participant’s assumptions. The Company does not adjust quotes received from the pricing service. The pricing service utilized by the Company has indicated that they will only produce an estimate of fair value if there is objectively verifiable information available. The Company holds a small amount of private placement debt and available-for-sale fixed maturity securities that have characteristics that make them unsuitable for matrix pricing. For these securities, a quote from an independent pricing source (typically a market maker) is obtained. Due to the disclaimers on the quotes that indicate the price is indicative only, the Company includes these fair value estimates in Level 3. For securities priced using a quote from an independent pricing source, such as certain available-for-sale fixed maturity securities, the Company uses a market-based fair value analysis to validate the reasonableness of prices received. Price variances above a certain threshold are analyzed further to determine if any pricing issue exists. This analysis is performed quarterly. Equity Securities — For publicly-traded equity securities, prices are received from a nationally recognized pricing service that are based on observable market transactions, and these securities are classified as Level 1 measurements. For certain preferred stock, current market quotes in active markets are unavailable. In these instances, an estimated fair value is received from the pricing service. The service utilizes similar methodologies to price preferred stocks as it does for available-for-sale fixed maturity securities. If applicable, these estimates would be disclosed as Level 2 or Level 3 measurements, depending on the use of at least one significant unobservable input. The Company tests the accuracy of the information provided by reference to other services annually. Short-term Investments — Short-term investments include fixed maturity securities with original maturities of over 90 days and less than one year at the date of acquisition, some of which are disclosed as Level 1 measurements as their fair values are based on unadjusted quoted market prices for identical assets that are readily available in an active market. Short-term investments also include commercial paper rated A2 or P2 or better by Standard & Poor’s and Moody’s, respectively, as well as certain private loans with original maturities of less than one year at the date of acquisition and amounts loaned under reverse repurchase agreements. Commercial paper, short-term private loans and amounts loaned under reverse repurchase agreements are carried at amortized cost which approximates fair value. These investments are classified as Level 2 or Level 3 measurements, depending on the use of at least one significant unobservable input. Real Estate and Real Estate Partnerships — The fair values of residential real estate investments held through consolidation of investment company VIEs are initially recorded based on the cost to purchase the properties and subsequently recorded at fair value on a recurring basis and falls within Level 3 of the fair value hierarchy. The fair value of the residential real estate properties was determined using broker price opinions (“BPO”). A BPO is an appraisal methodology commonly used in the industry to estimate net proceeds from the sale of a home. The significant inputs into the valuation include market comparable home sales, age and size of the home, location and property conditions. For certain of the Company’s interest in consolidated VIEs, the Company elected the fair value option in accordance with ASC 825. The fair value of such interest is derived using discounted cash flow methodology and falls within Level 3 of the fair value hierarchy. Certain of the Company’s consolidated VIEs that are fair valued on a recurring basis invest in LLCs that invest in operating entities which hold multi-family real estate properties. The fair value of the LLCs is obtained from a third party and is based on the fair value of the underlying real estate held by the various operating entities. The real estate is initially calculated based on the cost to purchase the properties and subsequently calculated based on a discounted cash flow methodology. Such investments are classified as Level 3 measurements. Investment Funds — The Company owns certain investments in infrastructure LLCs through a consolidated VIE that is measured at fair value on a recurring basis. We initially recorded the investment at the cost to purchase the investment and subsequently recorded based on a discounted cash flow methodology. Other Invested Asset s – The Company holds interest in an investment company limited partnership, which invests in residual tranche investments, and is a consolidated VIE. We also hold residual tranche investments to which we applied the fair value option in accordance with ASC 825. These investments were initially recorded at cost and are subsequently recorded at fair value using discounted cash flow methodology and fall within Level 3 of the fair value hierarchy. Separate Account Assets and Liabilities — The separate account assets included on the quantitative disclosures fair value hierarchy table are comprised of short-term investments, equity securities, and available-for-sale fixed maturity securities. Equity securities are classified as Level 1 measurements. Short-term investments and available-for-sale fixed maturity securities are classified as Level 2 measurements. These classifications for separate account assets reflect the same fair value level methodologies as listed above as they are derived from the same vendors and follow the same process. The separate account assets also include cash and cash equivalents, investment funds, accrued investment income, and receivables for securities. These are not included in the quantitative disclosures of fair value hierarchy table. Market Risk Benefits — MRBs are valued using stochastic models that incorporate a spread reflecting our non-performance risk. The key assumptions for calculating the fair value of the MRBs are market assumptions such as equity market returns, interest rate levels, market volatility and correlations and policyholder behavior assumptions such as lapse, mortality, utilization and withdrawal patterns. Risk margins are included in the policyholder behavior assumptions. The assumptions are based on a combination of historical data and actuarial judgment. MRBs are classified as Level 3 fair value measurements as the fair value is based on unobservable inputs. The following significant unobservable inputs are used for measuring the fair value: •Utilization – The utilization assumption represents the percentage of policyholders who will elect to receive lifetime income benefit payments in a given year. The range and weighted average of this assumption can vary from year to year depending on the characteristics of policies in a given cohort within the rate. •Option budget – The option budget assumption represents the expected cost of annual call options we will purchase in the future. •Nonperformance risk – The nonperformance risk assumption impacts the discount rate used in the discounted future cash flow valuation and includes the Company’s own credit risk based on the current market credit spreads for debt-like instruments the Company has issued and are available in the market. Additionally, the nonperformance risk assumption includes the counterparty credit risk used in the fair value measurement of ceded market risk benefits which is determined using the current market credit spreads based on the counterparty credit rating. •Mortality rates – The mortality rate assumptions are set based on a combination of company and industry experience, adjusted for improvement factors. Mortality rates vary by age and by demographic characteristics such as gender. •Lapse rates – The lapse rate assumptions represent the expected rate of full surrenders which are set based on product type or feature and whether a policy is subject to surrender charges. Derivative Assets/Derivative Liabilities — Equity-index options — Equity index options are valued using industry accepted valuation models and are adjusted for the nonperformance risk of each counterparty net of any collateral held. Inputs include market volatility and risk-free interest rates and are used in income valuation techniques in arriving at a fair value for each option contract. The nonperformance risk for each counterparty is based upon its credit default swap rate. The Company has no performance obligations related to the equity-index options purchased to fund its fixed index annuity and equity-indexed universal life policy liabilities. Certain equity-index options are valued based on vendor sourced prices and are classified as Level 3 measurements due to the use of significant unobservable inputs used by the vendor. Foreign exchange forwards — Foreign exchange forwards are valued using observable market inputs, including forward currency exchange rates. These are classified as Level 2 measurements. Policyholders’ Account Balances – Embedded Derivatives —The fair value of the embedded derivative component of the Company’s fixed index annuity and equity-indexed universal life policyholders’ account balances is estimated at each valuation date by (i) projecting policy contract values and minimum guaranteed contract values over the expected lives of the contracts and (ii) discounting the excess of the projected contract value amounts at the applicable risk free interest rates adjusted for the Company’s nonperformance risk related to those liabilities. The following significant unobservable inputs are used for measuring the fair value: (i) option budget; (ii) lapse rates; and (iii) nonperformance risk. For the details of these significant unobservable inputs, refer to significant unobservable inputs for “Market risk benefits”. Funds Withheld for Reinsurance Liabilities – Embedded Derivatives — The fair value of the embedded derivative is estimated based on the fair value of the assets supporting the funds withheld payable under modified coinsurance and funds withheld coinsurance reinsurance agreements. The fair value of the embedded derivative is classified as Level 3 based on valuation methods used for the assets held supporting the reinsurance agreements. Separately Managed Accounts — The separately managed account manager uses the mid-point of a range from a third-party to price these securities. Discounted cash flows (yield analysis) and market transactions approach are used in the valuation. They use discount rates which is considered an unobservable input. The fair value hierarchy measurements for assets and liabilities measured at fair value on a recurring basis are shown below:
| Total Fair Value |  | Level 1 |  | Level 2 |  | Level 3
| (Dollars in millions)
June 30, 2025 |  |  |  |  |  |  |
Financial assets |  |  |  |  |  |  |
Available-for-sale fixed maturity securities: |  |  |  |  |  |  |
U.S. treasury and government | $ | 93 |  |  | $ | 79 |  |  | $ | 14 |  |  | $ | — |
U.S. state and municipal | 3,121 |  |  | — |  |  | 3,066 |  |  | 55 |
Foreign governments | 1,318 |  |  | — |  |  | 1,318 |  |  | — |
Corporate debt securities | 34,888 |  |  | — |  |  | 34,124 |  |  | 764 |
Residential mortgage-backed securities | 999 |  |  | — |  |  | 980 |  |  | 19 |
Commercial mortgage-backed securities | 3,259 |  |  | — |  |  | 3,222 |  |  | 37 |
Collateralized debt securities | 5,253 |  |  | — |  |  | 2,550 |  |  | 2,703 |
Total available-for-sale fixed maturity securities | 48,931 |  |  | 79 |  |  | 45,274 |  |  | 3,578 |
Equity securities: |  |  |  |  |  |  |
Common stock | 807 |  |  | 748 |  |  | 2 |  |  | 57 |
Preferred stock | 431 |  |  | 5 |  |  | 23 |  |  | 403 |
Private equity and other | — |  |  | — |  |  | — |  |  | — |
Total equity securities | 1,238 |  |  | 753 |  |  | 25 |  |  | 460 |
Real estate at fair value (1) | 1,271 |  |  | — |  |  | — |  |  | 1,271 |
Real estate partnerships at fair value (1) | 1,712 |  |  | — |  |  | — |  |  | 1,712 |
Investment funds (1)(2) | 141 |  |  | — |  |  | — |  |  | 141 |
Short-term investments | 4,067 |  |  | 2,710 |  |  | 875 |  |  | 482 |
Other invested assets: |  |  |  |  |  |  |
Derivative assets | 1,101 |  |  | — |  |  | 913 |  |  | 188 |
Collaterals received on derivatives (excluding excess collateral) | (1,008) |  |  | (1,008) |  |  | — |  |  | — |
Separately managed accounts | 61 |  |  | — |  |  | — |  |  | 61 |
Other | 216 |  |  | — |  |  | 3 |  |  | 213 |
Cash and cash equivalents | 12,104 |  |  | 12,104 |  |  | — |  |  | — |
Other assets – market risk benefit assets | 1,035 |  |  | — |  |  | — |  |  | 1,035 |
Separate account assets (3) | 1,292 |  |  | 976 |  |  | 316 |  |  | — |
Total financial assets | $ | 72,161 |  |  | $ | 15,614 |  |  | $ | 47,406 |  |  | $ | 9,141 |
Financial liabilities |  |  |  |  |  |  |
Policyholders’ account balances – embedded derivative | $ | 6,257 |  |  | $ | — |  |  | $ | — |  |  | $ | 6,257 |
Market risk benefits | 4,227 |  |  | — |  |  | — |  |  | 4,227 |
Funds withheld for reinsurance liabilities – embedded derivatives | 63 |  |  | — |  |  | — |  |  | 63 |
Other liabilities – derivative liabilities | 101 |  |  | — |  |  | 101 |  |  | — |
Separate account liabilities (3) | 1,292 |  |  | 976 |  |  | 316 |  |  | — |
Total financial liabilities | $ | 11,940 |  |  | $ | 976 |  |  | $ | 417 |  |  | $ | 10,547 |
(1)Balances represent financial assets that are fair valued in accordance with ASC 825 as well as financial assets that are fair valued as a result of consolidation of investment company VIE in accordance with ASC 946. (2)Balance excludes $351 million of investments measured at estimated fair value using NAV as a practical expedient. (3)Balance includes $30 million of assets, and corresponding liabilities, that are not subject to fair value hierarchy.
| Total Fair Value |  | Level 1 |  | Level 2 |  | Level 3
| (Dollars in millions)
December 31, 2024 |  |  |  |  |  |  |
Financial assets |  |  |  |  |  |  |
Available-for-sale fixed maturity securities: |  |  |  |  |  |  |
U.S. treasury and government | $ | 86 |  |  | $ | 76 |  |  | $ | 10 |  |  | $ | — |
U.S. state and municipal | 3,207 |  |  | — |  |  | 3,151 |  |  | 56 |
Foreign governments | 1,541 |  |  | — |  |  | 1,541 |  |  | — |
Corporate debt securities | 32,848 |  |  | — |  |  | 30,192 |  |  | 2,656 |
Residential mortgage-backed securities | 1,106 |  |  | — |  |  | 1,087 |  |  | 19 |
Commercial mortgage-backed securities | 2,796 |  |  | — |  |  | 2,721 |  |  | 75 |
Collateralized debt securities | 5,708 |  |  | — |  |  | 3,077 |  |  | 2,631 |
Total available-for-sale fixed maturity securities | 47,292 |  |  | 76 |  |  | 41,779 |  |  | 5,437 |
Equity securities: |  |  |  |  |  |  |
Common stock | 747 |  |  | 606 |  |  | 25 |  |  | 116 |
Preferred stock | 391 |  |  | 22 |  |  | 12 |  |  | 357 |
Private equity and other | 4 |  |  | — |  |  | — |  |  | 4 |
Total equity securities | 1,142 |  |  | 628 |  |  | 37 |  |  | 477 |
Real estate at fair value (1) | 1,283 |  |  | — |  |  | — |  |  | 1,283 |
Real estate partnerships at fair value (1) | 932 |  |  | — |  |  | — |  |  | 932 |
Investment funds (1)(2) | 124 |  |  | — |  |  | — |  |  | 124 |
Short-term investments | 4,177 |  |  | 3,003 |  |  | 821 |  |  | 353 |
Other invested assets: |  |  |  |  |  |  |
Derivative assets | 1,341 |  |  | — |  |  | 1,118 |  |  | 223 |
Collaterals received on derivatives (excluding excess collateral) | (1,298) |  |  | (1,298) |  |  | — |  |  | — |
Separately managed accounts | 71 |  |  | — |  |  | — |  |  | 71 |
Other | 315 |  |  | — |  |  | 11 |  |  | 304 |
Cash and cash equivalents | 11,330 |  |  | 11,330 |  |  | — |  |  | — |
Other assets – market risk benefit assets | 857 |  |  | — |  |  | — |  |  | 857 |
Separate account assets (3) | 1,312 |  |  | 258 |  |  | 1,054 |  |  | — |
Total financial assets | $ | 68,878 |  |  | $ | 13,997 |  |  | $ | 44,820 |  |  | $ | 10,061 |
Financial liabilities |  |  |  |  |  |  |
Policyholders’ account balances – embedded derivative | $ | 1,123 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,123 |
Market risk benefits | 3,655 |  |  | — |  |  | — |  |  | 3,655 |
Funds withheld for reinsurance liabilities – embedded derivatives | 37 |  |  | — |  |  | — |  |  | 37 |
Separate account liabilities (3) | 1,312 |  |  | 258 |  |  | 1,054 |  |  | — |
Total financial liabilities | $ | 6,127 |  |  | $ | 258 |  |  | $ | 1,054 |  |  | $ | 4,815 |
(1)Balances represent financial assets that are fair valued in accordance with ASC 825 as well as financial assets that are fair valued as a result of consolidation of investment company VIE in accordance with ASC 946. (2)Balance excludes $353 million of investments measured at estimated fair value using NAV as a practical expedient. (3)Balance includes $31 million of assets, and corresponding liabilities, that are not subject to fair value hierarchy. Fair Value Information About Financial Instruments Not Recorded at Fair Value Information about fair value estimates for financial instruments not measured at fair value is discussed below: Mortgage Loans — The fair value of mortgage loans is estimated using discounted cash flow analyses on a loan-by-loan basis by applying a discount rate to expected cash flows from future installment and balloon payments. The discount rate takes into account general market trends and specific credit risk trends for the individual loan. Factors used to arrive at the discount rate include inputs from spreads based on U.S. Treasury notes and the loan’s credit quality, region, property-type, lien priority, payment type and current status. Private Loans — The fair value of private loans is estimated using discounted cash flow analyses on a loan-by-loan basis by applying a discount rate to expected cash flows from future installment and balloon payments. The discount rate takes into account general market trends and specific credit risk trends for the individual loan. Policy Loans — The carrying value of policy loans is the outstanding balance plus any accrued interest. Due to the collateralized nature of policy loans such that they cannot be separated from the policy contracts, the unpredictable timing of repayments and the fact that settlement is at outstanding value, the carrying value of policy loans approximates fair value. Other Invested Assets — The common stock of Federal Home Loan Bank (“FHLB”) is carried at cost which approximates fair value. The fair value of the company owned life insurance (“COLI”) is equal to the cash surrender value of the policies. Long Term Borrowings — Long term borrowings are carried at outstanding principal balance. The carrying value approximates fair value because the carrying value represents the amount owing and payable to the creditor at the reporting date. Fair values for subordinated debentures are estimated using discounted cash flow calculations principally on observable inputs including the Company’s incremental borrowing rates, which reflect its credit rating, for similar types of borrowings with maturities consistent with those remaining for the debt being valued. Notes Payable — Notes payable are carried at outstanding principal balance. For a majority of the notes, the carrying value of the notes payable approximates fair value because the underlying interest rates approximate market rates at the reporting date. Policyholders’ Account Balances - investments contracts, excluding embedded derivative — The fair values of the policyholder account balances’ not involving significant mortality or morbidity risks are stated at the cost we would incur to extinguish the liability (i.e., the cash surrender value) as these contracts are generally issued without an annuitization date. For period-certain annuity benefit contracts, the fair value is determined by discounting the benefits at the interest rates currently in effect for newly issued immediate annuity contracts. All of the fair values presented within these categories fall within Level 3 of the fair value hierarchy as most of the inputs are unobservable market data. The carrying amount and estimated fair value of financial instruments not recorded at fair value on a recurring basis are shown below. The table below excludes accrued investment income, which is recorded at amortized cost in the statements of financial position, as their carrying amounts approximate the fair values due to their short-term nature.
| Carrying Amount |  | Fair Value |  | Fair Value Hierarchy Level
|  |  | Level 1 |  | Level 2 |  | Level 3
| (Dollars in millions)
June 30, 2025 |  |  |  |  |  |  |  |  |
Financial assets |  |  |  |  |  |  |  |  |
Mortgage loans on real estate, net of allowance | $ | 11,254 |  |  | $ | 11,187 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,187 |
Private loans, net of allowance | 8,120 |  |  | 8,146 |  |  | — |  |  | 100 |  |  | 8,046 |
Policy loans | 257 |  |  | 257 |  |  | — |  |  | — |  |  | 257 |
Other invested assets | 648 |  |  | 649 |  |  | — |  |  | 414 |  |  | 235 |
Total financial assets | $ | 20,279 |  |  | $ | 20,239 |  |  |  |  |  |  |
Financial liabilities |  |  |  |  |  |  |  |  |
Policyholders' account balances – investment contracts, excluding embedded derivative | $ | 78,054 |  |  | $ | 78,037 |  |  | $ | — |  |  | $ | — |  |  | $ | 78,037 |
Long term borrowings | 2,953 |  |  | 3,017 |  |  | — |  |  | — |  |  | 3,017 |
Notes payable | 200 |  |  | 200 |  |  | — |  |  | — |  |  | 200 |
Total financial liabilities | $ | 81,207 |  |  | $ | 81,254 |  |  |  |  |  |  |
| Carrying Amount |  | Fair Value |  | Fair Value Hierarchy Level
|  |  | Level 1 |  | Level 2 |  | Level 3
| (Dollars in millions)
December 31, 2024 |  |  |  |  |  |  |  |  |
Financial assets |  |  |  |  |  |  |  |  |
Mortgage loans on real estate, net of allowance | $ | 12,117 |  |  | $ | 11,928 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,928 |
Private loans, net of allowance | 5,732 |  |  | 5,790 |  |  | — |  |  | 145 |  |  | 5,645 |
Policy loans | 274 |  |  | 274 |  |  | — |  |  | — |  |  | 274 |
Other invested assets | 626 |  |  | 628 |  |  | — |  |  | 406 |  |  | 222 |
Total financial assets | $ | 18,749 |  |  | $ | 18,619 |  |  |  |  |  |  |
Financial liabilities |  |  |  |  |  |  |  |  |
Policyholders' account balances – investment contracts, excluding embedded derivative | $ | 79,384 |  |  | $ | 79,384 |  |  | $ | — |  |  | $ | — |  |  | $ | 79,384 |
Long term borrowings | 2,957 |  |  | 2,977 |  |  | — |  |  | — |  |  | 2,977 |
Notes payable | 189 |  |  | 189 |  |  | — |  |  | — |  |  | 189 |
Total financial liabilities | $ | 82,530 |  |  | $ | 82,551 |  |  |  |  |  |  |
For financial assets and financial liabilities measured at fair value on a recurring basis using Level 3 inputs during the periods, reconciliations of the beginning and ending balances are shown below:
| Three Months Ended June 30, 2025
| Assets |  | Liabilities
| Invested Assets (1) |  | Derivative Assets |  |  |  |  |  | Policyholders’ Account Balances – Embedded Derivative |  |  |  | Funds Withheld for Reinsurance Liabilities - Embedded Derivative |  |
| (Dollars in millions)
Balance, beginning of period | $ | 9,743 |  |  | $ | 149 |  |  |  |  |  |  | $ | 948 |  |  |  |  | $ | 55 |  |  |
Fair value changes in net income | 50 |  |  | 66 |  |  |  |  |  |  | 242 |  |  |  |  | 8 |  |  |
Fair value changes in other comprehensive income | (10) |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Purchases | 1,218 |  |  | 34 |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Sales | (1,537) |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Settlements or maturities | (134) |  |  | (61) |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Premiums less benefits | — |  |  | — |  |  |  |  |  |  | 1 |  |  |  |  | — |  |  |
Transfers into Level 3 | 235 |  |  | — |  |  |  |  |  |  | 5,066 |  |  |  |  | — |  |  |
Transfers out of Level 3 | (1,647) |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Balance, end of period | $ | 7,918 |  |  | $ | 188 |  |  |  |  |  |  | $ | 6,257 |  |  |  |  | $ | 63 |  |  |
| Three Months Ended June 30, 2024
| Assets |  |  |  | Liabilities
| Invested Assets (1) |  | Derivative Assets |  |  |  |  |  | Policyholders’ Account Balances – Embedded Derivative |  |  |  | Funds Withheld for Reinsurance Liabilities - Embedded Derivative |  |
| (Dollars in millions)
Balance, beginning of period | $ | 5,199 |  |  | $ | 257 |  |  |  |  |  |  | $ | 904 |  |  |  |  | $ | — |  |  |
Acquisitions from business combination | 4,288 |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Fair value changes in net income | 12 |  |  | 24 |  |  |  |  |  |  | 287 |  |  |  |  | 79 |  |  |
Fair value changes in other comprehensive income | 875 |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Purchases | 1,302 |  |  | 39 |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Sales | (2,048) |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Settlements or maturities | (2) |  |  | (66) |  |  |  |  |  |  | (30) |  |  |  |  | — |  |  |
Premiums less benefits | — |  |  | — |  |  |  |  |  |  | 35 |  |  |  |  | — |  |  |
Transfers into Level 3 | 112 |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Transfers out of Level 3 | (139) |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Balance, end of period | $ | 9,599 |  |  | $ | 254 |  |  |  |  |  |  | $ | 1,196 |  |  |  |  | $ | 79 |  |  |
| Six Months Ended June 30, 2025
| Assets |  | Liabilities
| Invested Assets (1) |  | Derivative Assets |  |  |  |  |  | Policyholders’ Account Balances – Embedded Derivative |  |  |  | Funds Withheld for Reinsurance Liabilities - Embedded Derivative |  |
| (Dollars in millions)
Balance, beginning of year | $ | 8,981 |  |  | $ | 223 |  |  |  |  |  |  | $ | 1,123 |  |  |  |  | $ | 37 |  |  |
Fair value changes in net income | 105 |  |  | 28 |  |  |  |  |  |  | (26) |  |  |  |  | 26 |  |  |
Fair value changes in other comprehensive income | 18 |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Purchases | 1,381 |  |  | 67 |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Sales | (1,582) |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Settlements or maturities | (147) |  |  | (130) |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Premiums less benefits | — |  |  | — |  |  |  |  |  |  | 94 |  |  |  |  | — |  |  |
Transfers into Level 3 | 930 |  |  | — |  |  |  |  |  |  | 5,066 |  |  |  |  | — |  |  |
Transfers out of Level 3 | (1,768) |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Balance, end of period | $ | 7,918 |  |  | $ | 188 |  |  |  |  |  |  | $ | 6,257 |  |  |  |  | $ | 63 |  |  |
| Six Months Ended June 30, 2024
| Assets |  | Liabilities
| Invested Assets (1) |  | Derivative Assets |  |  |  |  |  | Policyholders’ Account Balances – Embedded Derivative |  |  |  | Funds Withheld for Reinsurance Liabilities - Embedded Derivative |  |
| (Dollars in millions)
Balance, beginning of year | $ | 5,585 |  |  | $ | 227 |  |  |  |  |  |  | $ | 873 |  |  |  |  | $ | — |  |  |
Acquisitions from business combination | 4,288 |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Fair value changes in net income | 12 |  |  | 81 |  |  |  |  |  |  | 324 |  |  |  |  | 79 |  |  |
Fair value changes in other comprehensive income | 182 |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Purchases | 3,346 |  |  | 74 |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Sales | (3,785) |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Settlements or maturities | (2) |  |  | (128) |  |  |  |  |  |  | (30) |  |  |  |  | — |  |  |
Premiums less benefits | — |  |  | — |  |  |  |  |  |  | 29 |  |  |  |  | — |  |  |
Transfers into Level 3 | 112 |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Transfers out of Level 3 | (139) |  |  | — |  |  |  |  |  |  | — |  |  |  |  | — |  |  |
Balance, end of period | $ | 9,599 |  |  | $ | 254 |  |  |  |  |  |  | $ | 1,196 |  |  |  |  | $ | 79 |  |  |
(1)Balance includes separately managed accounts and certain consolidated variable interest entities. Transfers into and out of Level 3 during the three and six months ended June 30, 2025 were primarily the result of changes in observable pricing. The Company’s valuation of financial instruments categorized as Level 3 in the fair value hierarchy are based on valuation techniques that use significant inputs that are unobservable or had a decline in market activity that obscured observability. The indicators considered in determining whether a significant decrease in the volume and level of activity for a specific asset has occurred include the level of new issuances in the primary market, trading volume in the secondary market, the level of credit spreads over historical levels, applicable bid-ask spreads, and price consensus among market participants and other pricing sources. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models and discounted cash flow methodology based on spread/yield assumptions.

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