| Fair Value of Financial Instruments |
11. Fair Value of Financial Instruments 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 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, 2026 | | | | | | | | | Assets | | | | | | | | | Available-for-sale fixed maturity securities: | | | | | | | | | U.S. treasury and government | $ | 68 | | | $ | 57 | | | $ | 11 | | | $ | — | | | U.S. state and municipal | 2,886 | | | — | | | 2,886 | | | — | | | Foreign governments | 3,238 | | | — | | | 3,187 | | | 51 | | | Corporate debt securities | 44,143 | | | 1 | | | 42,479 | | | 1,663 | | | Residential mortgage-backed securities | 896 | | | — | | | 878 | | | 18 | | | Commercial mortgage-backed securities | 2,860 | | | — | | | 2,839 | | | 21 | | | Collateralized debt securities | 7,507 | | | — | | | 1,761 | | | 5,746 | | | Total available-for-sale fixed maturity securities | 61,598 | | | 58 | | | 54,041 | | | 7,499 | | | Equity securities: | | | | | | | | | Common stock | 144 | | | 52 | | | 2 | | | 90 | | | Preferred stock | 441 | | | 6 | | | 43 | | | 392 | | | | | | | | | | | Total equity securities | 585 | | | 58 | | | 45 | | | 482 | | | Investment real estate at fair value (1) | 1,245 | | | — | | | — | | | 1,245 | | | Real estate partnerships at fair value (1) | 1,920 | | | — | | | — | | | 1,920 | | | Investment funds (2) | 150 | | | — | | | — | | | 150 | | | Short-term investments (3) | 484 | | | — | | | 484 | | | — | | | Other invested assets: | | | | | | | | | Derivative assets | 1,624 | | | — | | | 1,431 | | | 193 | | | Collaterals received on derivatives (excluding excess collateral) | (1,554) | | | (1,554) | | | — | | | — | | | Separately managed accounts | 49 | | | — | | | — | | | 49 | | | Other (4) | 577 | | | — | | | — | | | 577 | | | Cash and cash equivalents | 8,416 | | | 8,416 | | | — | | | — | | | Reinsurance recoverables and deposit assets – market risk benefits | 604 | | | — | | | — | | | 604 | | | | | | | | | | | | | | | | | | | Other assets – market risk benefit assets | 1,167 | | | — | | | — | | | 1,167 | | | Separate account assets | 874 | | | 857 | | | 17 | | | — | | | Total assets | $ | 77,739 | | | $ | 7,835 | | | $ | 56,018 | | | $ | 13,886 | | | | | | | | | | | Liabilities | | | | | | | | | Policyholders’ account balances - embedded derivative | $ | 6,625 | | | $ | — | | | $ | — | | | $ | 6,625 | | | Market risk benefits | 4,751 | | | — | | | — | | | 4,751 | | | Funds withheld for reinsurance liabilities - embedded derivative | 20 | | | — | | | — | | | 20 | | | Other liabilities - derivative liabilities | 15 | | | — | | | 15 | | | — | | | Separate account liabilities | 874 | | | 857 | | | 17 | | | — | | | Total liabilities | $ | 12,285 | | | $ | 857 | | | $ | 32 | | | $ | 11,396 | |
(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 $1.3 billion and real estate held at amortized cost is $1.8 billion as of June 30, 2026. (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 $3.1 billion and investment funds measured using NAV as a practical expedient are $330 million as of June 30, 2026. (3)There were no amounts loaned under reverse repurchase agreements as of June 30, 2026. (4)Other invested assets accounted for as equity method investments, and therefore excluded from the table, are $660 million as of June 30, 2026. | | | | | | | | | | | | | | | | | | | | | | | | | Total
Fair Value | | Level 1 | | Level 2 | | Level 3 | | (Dollars in millions) | | December 31, 2025 | | | | | | | | | Assets | | | | | | | | | Available-for-sale fixed maturity securities: | | | | | | | | | U.S. treasury and government | $ | 68 | | | $ | 54 | | | $ | 14 | | | $ | — | | | U.S. state and municipal | 2,949 | | | — | | | 2,949 | | | — | | | Foreign governments | 1,169 | | | — | | | 1,147 | | | 22 | | | Corporate debt securities | 43,141 | | | — | | | 41,915 | | | 1,226 | | | Residential mortgage-backed securities | 1,008 | | | — | | | 989 | | | 19 | | | Commercial mortgage-backed securities | 3,121 | | | — | | | 3,012 | | | 109 | | | Collateralized debt securities | 6,536 | | | — | | | 2,247 | | | 4,289 | | | Total available-for-sale fixed maturity securities | 57,992 | | | 54 | | | 52,273 | | | 5,665 | | | Equity securities: | | | | | | | | | Common stock | 757 | | | 670 | | | 2 | | | 85 | | | Preferred stock | 414 | | | 5 | | | 63 | | | 346 | | | | | | | | | | | Total equity securities | 1,171 | | | 675 | | | 65 | | | 431 | | | Investment real estate at fair value (1) | 1,253 | | | — | | | — | | | 1,253 | | | Real estate partnerships at fair value (1) | 1,894 | | | — | | | — | | | 1,894 | | | Investment funds (2) | 152 | | | — | | | — | | | 152 | | | Short-term investments (3) | 600 | | | — | | | 379 | | | 221 | | | Other invested assets: | | | | | | | | | Derivative assets | 1,586 | | | — | | | 1,383 | | | 203 | | | Collaterals received on derivatives (excluding excess collateral) | (1,548) | | | (1,548) | | | — | | | — | | | Separately managed accounts | 54 | | | — | | | — | | | 54 | | | Other (4) | 410 | | | — | | | — | | | 410 | | | Cash and cash equivalents | 11,660 | | | 11,660 | | | — | | | — | | | Reinsurance recoverables and deposit assets – market risk benefits | 605 | | | — | | | — | | | 605 | | | | | | | | | | | Other assets – market risk benefit assets | 1,174 | | | — | | | — | | | 1,174 | | | Separate account assets | 822 | | | 804 | | | 18 | | | — | | | Total assets | $ | 77,825 | | | $ | 11,645 | | | $ | 54,118 | | | $ | 12,062 | | | | | | | | | | | Liabilities | | | | | | | | | Policyholders’ account balances – embedded derivative | $ | 6,414 | | | $ | — | | | $ | — | | | $ | 6,414 | | | Market risk benefits | 4,536 | | | — | | | — | | | 4,536 | | | Funds withheld for reinsurance liabilities – embedded derivatives | 74 | | | — | | | — | | | 74 | | | Other liabilities – derivative liabilities | 14 | | | — | | | 14 | | | — | | | Separate account liabilities | 822 | | | 804 | | | 18 | | | — | | | Total liabilities | $ | 11,860 | | | $ | 804 | | | $ | 32 | | | $ | 11,024 | |
(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 $1.1 billion and directly held real estate is $2.8 billion as of December 31, 2025. (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 $2.4 billion and investment funds measured using NAV as a practical expedient are $640 million as of December 31, 2025. (3)Balance as of December 31, 2025 includes $400 million of amounts loaned under reverse repurchase agreements. The fair value of the collateral received under these agreements was $872 million as of December 31, 2025. (4)Other invested assets accounted for as equity method investments, and therefore excluded from the table, are $215 million as of December 31, 2025. 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 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, 2026 | | | | | | | | | | | Assets | | | | | | | | | | | Mortgage loans on real estate, net of allowance | $ | 11,554 | | | $ | 11,510 | | | $ | — | | | $ | — | | | $ | 11,510 | | | Private loans, net of allowance | 8,949 | | | 9,099 | | | — | | | 41 | | | 9,058 | | | Policy loans | 238 | | | 238 | | | — | | | — | | | 238 | | | Deposit assets, included in reinsurance recoverables and deposit assets (1) | 4,376 | | | 4,326 | | | — | | | — | | | 4,326 | | | Other invested assets | 847 | | | 847 | | | — | | | 427 | | | 420 | | | Total assets | $ | 25,964 | | | $ | 26,020 | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Policyholders' account balances – excluding embedded derivative (1) | $ | 86,295 | | | $ | 86,295 | | | $ | — | | | $ | — | | | $ | 86,295 | | | Long term borrowings | 2,957 | | | 2,979 | | | — | | | — | | | 2,979 | | | Notes payable | 206 | | | 206 | | | — | | | — | | | 206 | | | Funds withheld for reinsurance liabilities - excluding embedded derivative | 2,867 | | | 2,867 | | | — | | | — | | | 2,867 | | | | | | | | | | | | | Total liabilities | $ | 92,325 | | | $ | 92,347 | | | | | | | | | | | | | | | | | | | Carrying Amount | | Fair Value | | Fair Value Hierarchy Level | | | | Level 1 | | Level 2 | | Level 3 | | (Dollars in millions) | | December 31, 2025 | | | | | | | | | | | Assets | | | | | | | | | | | Mortgage loans on real estate, net of allowance | $ | 11,113 | | | $ | 11,211 | | | $ | — | | | $ | — | | | $ | 11,211 | | | Private loans, net of allowance | 8,926 | | | 8,982 | | | — | | | 74 | | | 8,908 | | | Policy loans | 234 | | | 234 | | | — | | | — | | | 234 | | | Deposit assets, included in reinsurance recoverables and deposit assets (1) | 4,835 | | | 4,747 | | | — | | | — | | | 4,747 | | | Other invested assets | 768 | | | 768 | | | — | | | 417 | | | 351 | | | Total assets | $ | 25,876 | | | $ | 25,942 | | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | Policyholders' account balances – excluding embedded derivative (1) | $ | 83,782 | | | $ | 83,782 | | | $ | — | | | $ | — | | | $ | 83,782 | | | | | | | | | | | | | Long term borrowings | 2,951 | | | 3,045 | | | — | | | — | | | 3,045 | | | Notes payable | 205 | | | 205 | | | — | | | — | | | 205 | | | Funds withheld for reinsurance liabilities - excluding embedded derivative | 3,014 | | | 3,014 | | | — | | | — | | | 3,014 | | | | | | | | | | | | | Total liabilities | $ | 89,952 | | | $ | 90,046 | | | | | | | |
(1)Excludes balances associated with contracts that involve significant mortality or morbidity risks, as these fall within the definition of insurance contracts that are exceptions from financial instruments that require disclosures of fair value. For assets and 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, 2026 | | Assets | | | | Liabilities (2) | | Invested
Assets (1) | | Derivative Assets | | | | Policyholders’ Account Balances – Embedded Derivative | | Funds Withheld for Reinsurance Liabilities - Embedded Derivative | | (Dollars in millions) | | Balance, beginning of period | $ | 10,389 | | | $ | 145 | | | | | $ | 6,060 | | | $ | 41 | | | | | | | | | | | | | Fair value changes in net income | 46 | | | 71 | | | | | 167 | | | (21) | | | Fair value changes in other comprehensive income | (110) | | | — | | | | | — | | | — | | | Purchases | 2,010 | | | 43 | | | | | — | | | — | | | Sales | (357) | | | — | | | | | — | | | — | | | Settlements or maturities | (55) | | | (66) | | | | | — | | | — | | | Premiums less benefits | — | | | — | | | | | 398 | | | — | | | Transfers into Level 3 | (1) | | | — | | | | | — | | | — | | | | | | | | | | | | | Balance, end of period | $ | 11,922 | | | $ | 193 | | | | | $ | 6,625 | | | $ | 20 | | | | | | | | | | | | | Three Months Ended June 30, 2025 | | Assets | | | | Liabilities (2) | | Invested
Assets (1) | | Derivative Assets | | | | Policyholders’ Account Balances – Embedded Derivative | | Funds Withheld for Reinsurance Liabilities - Embedded Derivative | | (Dollars in millions) | | Balance, beginning of period | $ | 9,636 | | | $ | 149 | | | | | $ | 948 | | | $ | 55 | | | | | | | | | | | | | Fair value changes in net income | 49 | | | 66 | | | | | 242 | | | 8 | | | Fair value changes in other comprehensive income | (11) | | | — | | | | | — | | | — | | | Purchases | 1,207 | | | 34 | | | | | — | | | — | | | Sales | (1,508) | | | — | | | | | — | | | — | | | Settlements or maturities | (133) | | | (61) | | | | | — | | | — | | | Premiums less benefits | — | | | — | | | | | 1 | | | — | | | Transfers into Level 3 | 235 | | | — | | | | | 5,066 | | | — | | | Transfers out of Level 3 | (1,625) | | | — | | | | | — | | | — | | | Balance, end of period | $ | 7,850 | | | $ | 188 | | | | | $ | 6,257 | | | $ | 63 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Six Months Ended June 30, 2026 | | Assets | | | | Liabilities (2) | | Invested
Assets (1) | | Derivative Assets | | | | Policyholders’ Account Balances – Embedded Derivative | | Funds Withheld for Reinsurance Liabilities - Embedded Derivative | | (Dollars in millions) | | Balance, beginning of year | $ | 10,080 | | | $ | 203 | | | | | $ | 6,414 | | | $ | 74 | | | | | | | | | | | | | Fair value changes in net income | 112 | | | 36 | | | | | (144) | | | (54) | | | Fair value changes in other comprehensive income | (139) | | | — | | | | | — | | | — | | | Purchases | 2,445 | | | 80 | | | | | — | | | — | | | Sales | (428) | | | — | | | | | — | | | — | | | Settlements or maturities | (382) | | | (126) | | | | | — | | | — | | | Premiums less benefits | — | | | — | | | | | 355 | | | — | | | Transfers into Level 3 | 342 | | | — | | | | | — | | | — | | | Transfers out of Level 3 | (108) | | | — | | | | | — | | | — | | | Balance, end of period | $ | 11,922 | | | $ | 193 | | | | | $ | 6,625 | | | $ | 20 | | | | | | | | | | | | | Six Months Ended June 30, 2025 | | Assets | | | | Liabilities (2) | | Invested
Assets (1) | | Derivative Assets | | | | Policyholders’ Account Balances – Embedded Derivative | | Funds Withheld for Reinsurance Liabilities - Embedded Derivative | | (Dollars in millions) | | Balance, beginning of year | $ | 8,880 | | | $ | 223 | | | | | $ | 1,123 | | | $ | 37 | | | | | | | | | | | | | Fair value changes in net income | 103 | | | 28 | | | | | (26) | | | 26 | | | Fair value changes in other comprehensive income | 15 | | | — | | | | | — | | | — | | | Purchases | 1,367 | | | 67 | | | | | — | | | — | | | Sales | (1,553) | | | — | | | | | — | | | — | | | Settlements or maturities | (146) | | | (130) | | | | | — | | | — | | | Premiums less benefits | — | | | — | | | | | 94 | | | — | | | Transfers into Level 3 | 930 | | | — | | | | | 5,066 | | | — | | | Transfers out of Level 3 | (1,746) | | | — | | | | | — | | | — | | | Balance, end of period | $ | 7,850 | | | $ | 188 | | | | | $ | 6,257 | | | $ | 63 | |
(1)Balance includes separately managed accounts. (2)See Note 18 - Market Risk Benefits for the reconciliation of the beginning and ending balances for market risk benefits. Transfers into and out of Level 3 during the three and six months ended June 30, 2026 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 fair values of these assets and liabilities are subject to significant management judgment and estimation, and inherently, the use of different assumptions or valuation methodologies may have a material effect on such value. 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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