Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2018	Apr. 25, 2018
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Trading Symbol	GNW
Entity Registrant Name	GENWORTH FINANCIAL INC
Entity Central Index Key	0001276520
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		500,624,199

Consolidated Balance Sheets - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Assets
Fixed maturity securities available-for-sale, at fair value	$ 61,080	$ 62,525
Equity securities, at fair value	799	820
Commercial mortgage loans	6,336	6,341
Restricted commercial mortgage loans related to securitization entities	99	107
Policy loans	1,789	1,786
Other invested assets	1,674	1,813
Total investments	71,777	73,392
Cash, cash equivalents and restricted cash	2,843	2,875
Accrued investment income	698	644
Deferred acquisition costs	2,699	2,329
Intangible assets and goodwill	339	301
Reinsurance recoverable	17,482	17,569
Other assets	431	453
Deferred tax asset	602	504
Separate account assets	6,902	7,230
Total assets	103,773	105,297
Liabilities and equity
Future policy benefits	37,946	38,472
Policyholder account balances	23,751	24,195
Liability for policy and contract claims	9,651	9,594
Unearned premiums	3,797	3,967
Other liabilities	1,841	1,910
Borrowings related to securitization entities	32	40
Non-recourse funding obligations	310	310
Long-term borrowings	4,654	4,224
Deferred tax liability	27	27
Separate account liabilities	6,902	7,230
Total liabilities	88,911	89,969
Commitments and contingencies
Equity:
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 589 million and 588 million shares issued as of March 31, 2018 and December 31, 2017, respectively; 501 million and 499 million shares outstanding as of March 31, 2018 and December 31, 2017, respectively	1	1
Additional paid-incapital	11,979	11,977
Net unrealized investment gains (losses):
Net unrealized gains (losses) on securities not other-than-temporarily impaired	905	1,075
Net unrealized gains (losses) on other-than-temporarily impaired securities	12	10
Net unrealized investment gains (losses)	917	1,085
Derivatives qualifying as hedges	1,927	2,065
Foreign currency translation and other adjustments	(217)	(123)
Total accumulated other comprehensive income (loss)	2,627	3,027
Retained earnings	1,111	1,113
Treasury stock, at cost (88 million shares as of March 31, 2018 and December 31, 2017)	(2,700)	(2,700)
Total Genworth Financial, Inc.'s stockholders' equity	13,018	13,418
Noncontrolling interests	1,844	1,910
Total equity	14,862	15,328
Total liabilities and equity	$ 103,773	$ 105,297

Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
Class A common stock, par value	$ 0.001	$ 0.001
Class A common stock, shares authorized	1,500,000,000	1,500,000,000
Class A common stock, shares issued	589,000,000	588,000,000
Class A common stock, shares outstanding	501,000,000	499,000,000
Treasury stock, shares	88,000,000	88,000,000

Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenues:
Premiums	$ 1,140	$ 1,136
Net investment income	804	790
Net investment gains (losses)	(31)	34
Policy fees and other income	202	211
Total revenues	2,115	2,171
Benefits and expenses:
Benefits and other changes in policy reserves	1,311	1,246
Interest credited	156	167
Acquisition and operating expenses, net of deferrals	240	270
Amortization of deferred acquisition costs and intangibles	104	94
Interest expense	76	62
Total benefits and expenses	1,887	1,839
Income from continuing operations before income taxes	228	332
Provision for income taxes	63	116
Income from continuing operations	165	216
Loss from discontinued operations, net of taxes	0	0
Net income	165	216
Less: net income attributable to noncontrolling interests	53	61
Net income available to Genworth Financial, Inc.'s common stockholders	$ 112	$ 155
Income from continuing operations available to Genworth Financial, Inc.'s common stockholders per share:
Basic	$ 0.22	$ 0.31
Diluted	0.22	0.31
Net income available to Genworth Financial, Inc.'s common stockholders per share:
Basic	0.22	0.31
Diluted	$ 0.22	$ 0.31
Weighted-average common shares outstanding:
Basic	499.6	498.6
Diluted	502.7	501.0
Supplemental disclosures:
Total other-than-temporary impairments	$ 0	$ (1)
Portion of other-than-temporary impairments included in other comprehensive income (loss)	0	0
Net other-than-temporary impairments	0	(1)
Other investments gains (losses)	(31)	35
Net investment gains (losses)	$ (31)	$ 34

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net income	$ 165	$ 216
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on securities not other-than-temporarily impaired	(341)	(12)
Net unrealized gains (losses) on other-than-temporarily impaired securities	0	1
Derivatives qualifying as hedges	(152)	(49)
Foreign currency translation and other adjustments	(87)	119
Total other comprehensive income (loss)	(580)	59
Total comprehensive income (loss)	(415)	275
Less: comprehensive income attributable to noncontrolling interests	4	118
Total comprehensive income (loss) available to Genworth Financial, Inc.'s common stockholders	$ (419)	$ 157

Consolidated Statements of Changes in Equity - USD ($) $ in Millions	Total	Common stock	Additional paid-in capital	Accumulated other comprehensive income (loss)	Retained earnings	Treasury stock, at cost	Total Genworth Financial, Inc.'s stockholders' equity	Noncontrolling interests
Balances, beginning at Dec. 31, 2016	$ 14,467	$ 1	$ 11,962	$ 3,094	$ 287	$ (2,700)	$ 12,644	$ 1,823
Cumulative effect of change in accounting, net of taxes	9				9		9
Comprehensive income (loss):
Net income	216				155		155	61
Other comprehensive income (loss) net of taxes	59			2			2	57
Total comprehensive income (loss)	275						157	118
Dividends to noncontrolling interests	(39)							(39)
Stock-based compensation expense and exercises and other	4		2				2	2
Balances, ending at Mar. 31, 2017	14,716	1	11,964	3,096	451	(2,700)	12,812	1,904
Balances, beginning at Dec. 31, 2017	15,328	1	11,977	3,027	1,113	(2,700)	13,418	1,910
Cumulative effect of change in accounting, net of taxes	17			131	(114)		17
Repurchase of subsidiary shares	(36)							(36)
Comprehensive income (loss):
Net income	165				112		112	53
Other comprehensive income (loss) net of taxes	(580)			(531)			(531)	(49)
Total comprehensive income (loss)	(415)						(419)	4
Dividends to noncontrolling interests	(36)							(36)
Stock-based compensation expense and exercises and other	4		2				2	2
Balances, ending at Mar. 31, 2018	$ 14,862	$ 1	$ 11,979	$ 2,627	$ 1,111	$ (2,700)	$ 13,018	$ 1,844

Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Net income	$ 165	$ 216
Adjustments to reconcile net income to net cash from operating activities:
Amortization of fixed maturity securities discounts and premiums and limited partnerships	(25)	(33)
Net investment (gains) losses	31	(34)
Charges assessed to policyholders	(178)	(183)
Acquisition costs deferred	(18)	(22)
Amortization of deferred acquisition costs and intangibles	104	94
Deferred income taxes	26	93
Trading securities, held-for-sale investments and derivative instruments	(152)	365
Stock-based compensation expense	7	10
Change in certain assets and liabilities:
Accrued investment income and other assets	(45)	(79)
Insurance reserves	377	377
Current tax liabilities	(39)	(37)
Other liabilities, policy and contract claims and other policy-related balances	(144)	(112)
Net cash from operating activities	109	655
Cash flows used by investing activities:
Fixed maturity securities	934	1,060
Commercial mortgage loans	205	166
Restricted commercial mortgage loans related to securitization entities	8	6
Proceeds from sales of investments:
Fixed maturity and equity securities	792	2,173
Purchases and originations of investments:
Fixed maturity and equity securities	(2,013)	(2,710)
Commercial mortgage loans	(199)	(161)
Other invested assets, net	104	(676)
Policy loans, net	2
Net cash used by investing activities	(167)	(142)
Cash flows from (used by) financing activities:
Deposits to universal life and investment contracts	255	218
Withdrawals from universal life and investment contracts	(591)	(467)
Proceeds from issuance of long-term debt	441
Repayment of borrowings related to securitization entities	(8)	(7)
Repurchase of subsidiary shares	(36)
Dividends paid to noncontrolling interests	(36)	(39)
Other, net	22	(9)
Net cash from (used by) financing activities	47	(304)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(21)	25
Net change in cash, cash equivalents and restricted cash	(32)	234
Cash, cash equivalents and restricted cash at beginning of period	2,875	2,784
Cash, cash equivalents and restricted cash at end of period	$ 2,843	$ 3,018

Formation of Genworth and Basis of Presentation

3 Months Ended

Mar. 31, 2018

Formation of Genworth and Basis of Presentation

(1) Formation of Genworth and Basis of Presentation

Genworth Holdings, Inc. (“Genworth Holdings”) (formerly known as Genworth Financial, Inc.) was incorporated in Delaware in 2003 in preparation for an initial public offering (“IPO”) of Genworth’s common stock, which was completed on May 28, 2004. On April 1, 2013, Genworth Holdings completed a holding company reorganization pursuant to which Genworth Holdings became a direct, 100% owned subsidiary of a new public holding company that it had formed. The new public holding company was incorporated in Delaware on December 5, 2012, in connection with the reorganization, and was renamed Genworth Financial, Inc. (“Genworth Financial”) upon the completion of the reorganization.

On October 21, 2016, Genworth Financial entered into an agreement and plan of merger (the “Merger Agreement”) with Asia Pacific Global Capital Co., Ltd. (“the Parent”), a limited liability company incorporated in the People’s Republic of China, and Asia Pacific Global Capital USA Corporation (“Merger Sub”), a Delaware corporation and an indirect, wholly-owned subsidiary of the Parent. Subject to the terms and conditions of the Merger Agreement, including the satisfaction or waiver of certain conditions, Merger Sub would merge with and into Genworth Financial with Genworth Financial surviving the merger as an indirect, wholly-owned subsidiary of the Parent. The Parent is a newly formed subsidiary of China Oceanwide Holdings Group Co., Ltd. (together with its affiliates, “China Oceanwide”). China Oceanwide has agreed to acquire all of our outstanding common stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. At a special meeting held on March 7, 2017, Genworth’s stockholders voted on and approved a proposal to adopt the Merger Agreement.

The transaction remains subject to closing conditions, including the receipt of required regulatory approvals in the U.S., China, and other international jurisdictions. Both parties are engaging with the relevant regulators regarding the applications and the pending transaction.

The accompanying unaudited condensed financial statements include on a consolidated basis the accounts of Genworth Financial and the affiliate companies in which it holds a majority voting interest or where it is the primary beneficiary of a variable interest entity (“VIE”). All intercompany accounts and transactions have been eliminated in consolidation.

References to “Genworth,” the “Company,” “we” or “our” in the accompanying unaudited condensed consolidated financial statements and these notes thereto are, unless the context otherwise requires, to Genworth Financial on a consolidated basis.

We operate our business through the following five operating segments:

•

U.S. Mortgage Insurance. In the United States, we offer mortgage insurance products predominantly insuring prime-based, individually underwritten residential mortgage loans (“flow mortgage insurance”). We selectively provide mortgage insurance on a bulk basis (“bulk mortgage insurance”) with essentially all of our bulk writings being prime-based.

•

Canada Mortgage Insurance. We offer flow mortgage insurance and also provide bulk mortgage insurance that aids in the sale of mortgages to the capital markets and helps lenders manage capital and risk in Canada.

•

Australia Mortgage Insurance. In Australia, we offer flow mortgage insurance and selectively provide bulk mortgage insurance that aids in the sale of mortgages to the capital markets and helps lenders manage capital and risk.

•

U.S. Life Insurance. We offer long-term care insurance products as well as service traditional life insurance and fixed annuity products in the United States.

•

Runoff. The Runoff segment includes the results of non-strategic products which have not been actively sold but we continue to service our existing blocks of business. Our non-strategic products primarily include our variable annuity, variable life insurance, institutional, corporate-owned life insurance and other accident and health insurance products. Institutional products consist of: funding agreements and funding agreements backing notes.

In addition to our five operating business segments, we also have Corporate and Other activities which include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are managed outside of our operating segments, including certain smaller international mortgage insurance businesses and discontinued operations.

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Preparing financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. These unaudited condensed consolidated financial statements include all adjustments (including normal recurring adjustments) considered necessary by management to present a fair statement of the financial position, results of operations and cash flows for the periods presented. The results reported in these unaudited condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes contained in our 2017 Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation.

Accounting Changes

3 Months Ended

Mar. 31, 2018

Accounting Changes

(2) Accounting Changes

Accounting Pronouncements Recently Adopted

On January 1, 2018, we early adopted new accounting guidance on the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (“TCJA”), or “stranded tax effects.” Under current U.S. GAAP, deferred tax assets and liabilities are adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the period that the changes were enacted. This also includes situations in which the related tax effects were originally recognized in other comprehensive income as opposed to income from continuing operations. The following summarizes the components for the cumulative effect adjustment recorded on January 1, 2018 related to the adoption of this new accounting guidance:


	Accumulated other comprehensive income
(Amounts in millions)	Net unrealized investment gains (losses)			Derivatives qualifying as hedges		Foreign currency translation and other adjustments			Retained earnings			Total stockholders’ equity
Deferred taxes:
Net unrealized gains on investment securities	$	192		$	—	$	—		$	(192	)	$	—
Net unrealized gains on derivatives		—			12		—			(12	)		—
Investment in foreign subsidiaries		(3	)		—		(46	)		49			—
Accrued commission and general expenses		—			—		(1	)		1			—

Cumulative effect of changes in accounting	$	189		$	12	$	(47	)	$	(154	)	$	—

The accounting for the temporary differences related to investment in foreign subsidiaries recorded in accumulated other comprehensive income at adoption of the TCJA, were provisional. Therefore, additional reclassification adjustments may be recorded in future periods as tax effects of the TCJA on related temporary differences are finalized. Other than those effects related to the TCJA, our policy is to release stranded tax effects from other comprehensive income using the portfolio approach for items related to investments and derivatives, and upon disposition of a subsidiary for items related to outside basis differences.

On January 1, 2018, we early adopted new accounting guidance related to the hedge accounting model. The new guidance amends the hedge accounting model to enable entities to better portray the economics of their derivative risk management activities in the financial statements and enhance the transparency and understandability of hedge results. In certain situations, the amendments also simplify the application of hedge accounting and removed the requirements to separately measure and report hedge ineffectiveness. We adopted this new accounting using the modified retrospective method and recognized a gain of $2 million in accumulated other comprehensive income with a corresponding decrease to retained earnings at adoption. This gain was the cumulative amount of hedge ineffectiveness related to active hedges that was previously included in earnings.

On January 1, 2018, we adopted new accounting guidance that clarifies when to account for a change to share-based compensation as a modification. The new guidance requires modification accounting only if there are changes to the fair value, vesting conditions or classification as a liability or equity of the share-based compensation. We adopted this new accounting guidance prospectively and therefore, the guidance did not have any impact at adoption.

On January 1, 2018, we adopted new accounting guidance that clarifies the scope and accounting for gains and losses from the derecognition of nonfinancial assets or an in substance nonfinancial asset that is not a business and accounting for partial sales of nonfinancial assets. The new guidance clarifies when transferring ownership interests in a consolidated subsidiary holding nonfinancial assets is within scope. It also states that the reporting entity should identify each distinct nonfinancial asset and derecognize when a counterparty obtains control. We adopted this new accounting guidance using the modified retrospective method, which had no impact on our consolidated financial statements at adoption.

On January 1, 2018, we early adopted new accounting guidance simplifying the test for goodwill impairment. The new guidance states goodwill impairment is equal to the difference between the carrying value and fair value of the reporting unit up to the amount of recorded goodwill. We adopted this new accounting guidance prospectively and will apply it to our 2018 goodwill impairment test.

On January 1, 2018, we adopted new accounting guidance related to the classification and presentation of changes in restricted cash. The new guidance requires that changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents be shown in the statements of cash flows and requires additional disclosures related to restricted cash and restricted cash equivalents. We adopted this new accounting guidance retrospectively and modified the line item descriptions on our consolidated balance sheets and statements of cash flows in our consolidated financial statements. The other impacts from this new accounting guidance did not have a significant impact on our consolidated financial statements or disclosures.

On January 1, 2018, we adopted new accounting guidance related to the income tax effects of intra-entity transfers of assets other than inventory. The new guidance states that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. We adopted this new accounting guidance using the modified retrospective method, which did not have any significant impact on our consolidated financial statements or disclosures at adoption.

On January 1, 2018, we adopted new accounting guidance related to the classification of certain cash payments and cash receipts on our statement of cash flows. The guidance reduces diversity in practice related to eight specific cash flow issues. We adopted this new accounting guidance retrospectively. We will reclassify a $20 million make-whole premium that was incurred in the first quarter of 2016 previously included in the operating activities section of the statement of cash flows, within the line item “other liabilities, policy and contract claims and other policy-related balances” to the financing activities section within the line item “repayment and repurchase of long-term debt” in our 2018 annual consolidated financial statements filed on Form 10-K. The reclassification will result in an increase in net cash used by financing activities and an increase in net cash from operating activities. The remaining specific cash flow issues did not have a significant impact on our consolidated financial statements.

On January 1, 2018, we adopted new accounting guidance related to the recognition and measurement of financial assets and financial liabilities. Changes to financial instruments accounting primarily affects equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under the new guidance, equity investments with readily determinable fair value, except those accounted for under the equity method of accounting, are measured at fair value with changes in fair value recognized in net income. The new guidance also clarifies that the need for a valuation allowance on a deferred tax asset related to available-for-sale securities should be evaluated in combination with other deferred tax assets. We adopted this new accounting guidance using the modified retrospective method and reclassified, after adjustments for deferred acquisition costs (“DAC”) and other intangible amortization and certain benefit reserves, taxes and noncontrolling interests, $25 million of gains related to equity securities from accumulated other comprehensive income and $17 million of gains related to limited partnerships previously recorded at cost to cumulative effect of change in accounting within retained earnings.

On January 1, 2018, we adopted new accounting guidance related to revenue from contracts with customers. The key principle of the new guidance is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such goods or services. Insurance contracts are specifically excluded from this new guidance. The Financial Accounting Standards Board (“the FASB”) has clarified the scope that all of our insurance contracts, including mortgage insurance and investment contracts are excluded from the scope of this new guidance. We adopted this new accounting guidance using the modified retrospective method, which did not have any significant impact on our consolidated financial statements at adoption.

Accounting Pronouncements Not Yet Adopted

In March 2017, the FASB issued new guidance shortening the amortization period of certain callable debt securities held at a premium. The guidance requires the premium to be amortized to the earliest call date. This change does not apply to securities held at a discount. The guidance is currently effective for us on January 1, 2019 using the modified retrospective method, with early adoption permitted. We are in process of evaluating the impact the guidance may have on our consolidated financial statements.

In June 2016, the FASB issued new guidance related to accounting for credit losses on financial instruments. The guidance requires that entities recognize an allowance equal to its estimate of lifetime expected credit losses and applies to most debt instruments not measured at fair value, which would primarily include our commercial mortgage loans and reinsurance receivables. The new guidance retains most of the existing impairment guidance for available-for-sale debt securities but amends the presentation of credit losses to be presented as an allowance as opposed to a write-down and permits the reversal of credit losses when reassessing changes in the credit losses each reporting period. The new guidance is effective for us on January 1, 2020, with early adoption permitted beginning January 1, 2019. Upon adoption, the modified retrospective method will be used and a cumulative effect adjustment in retained earnings as of the beginning of the year of adoption will be recorded. We are in process of evaluating the impact the guidance may have on our consolidated financial statements.

In February 2016, the FASB issued new accounting guidance related to the accounting for leases. The new guidance generally requires lessees to recognize both a right-to-use asset and a corresponding liability on the balance sheet. The guidance is effective for us on January 1, 2019 using the modified retrospective method, with early adoption permitted. While we are still evaluating the full impact, at this time we do not expect any significant impact from this guidance on our consolidated financial statements.

Earnings Per Share

3 Months Ended

Mar. 31, 2018

Earnings Per Share

(3) Earnings Per Share

Basic and diluted earnings per share are calculated by dividing each income category presented below by the weighted-average basic and diluted common shares outstanding for the periods indicated:


	Three months ended March 31,
(Amounts in millions, except per share amounts)	2018		2017
Weighted-average shares used in basic earnings per share calculations		499.6		498.6
Potentially dilutive securities:
Stock options, restricted stock units and stock appreciation rights		3.1		2.4

Weighted-average shares used in diluted earnings per share calculations		502.7		501.0

Income from continuing operations:
Income from continuing operations	$	165	$	216
Less: income from continuing operations attributable to noncontrolling interests		53		61

Income from continuing operations available to Genworth Financial, Inc.’s common stockholders	$	112	$	155

Basic per share	$	0.22	$	0.31

Diluted per share	$	0.22	$	0.31

Loss from discontinued operations:
Loss from discontinued operations, net of taxes	$	—	$	—
Less: income from discontinued operations, net of taxes, attributable to noncontrolling interests		—		—

Loss from discontinued operations, net of taxes, available to Genworth Financial, Inc.’s common stockholders	$	—	$	—

Basic per share	$	—	$	—

Diluted per share	$	—	$	—

Net income:
Income from continuing operations	$	165	$	216

Net income		165		216
Less: net income attributable to noncontrolling interests		53		61

Net income available to Genworth Financial, Inc.’s common stockholders	$	112	$	155

Basic per share	$	0.22	$	0.31

Diluted per share	$	0.22	$	0.31

Investments

3 Months Ended

Mar. 31, 2018

Investments

(4) Investments

(a) Net Investment Income

Sources of net investment income were as follows for the periods indicated:


	Three months ended March 31,
(Amounts in millions)	2018			2017
Fixed maturity securities—taxable	$	635		$	641
Fixed maturity securities—non-taxable		3			3
Equity securities		10			8
Commercial mortgage loans		82			77
Restricted commercial mortgage loans related to securitization entities		2			2
Policy loans		43			42
Other invested assets		39			32
Cash, cash equivalents and short-term investments		12			6

Gross investment income before expenses and fees		826			811
Expenses and fees		(22	)		(21	)

Net investment income	$	804		$	790

(b) Net Investment Gains (Losses)

The following table sets forth net investment gains (losses) for the periods indicated:


	Three months ended March 31,
(Amounts in millions)	2018			2017
Available-for-sale securities:
Realized gains	$	7		$	63
Realized losses		(16	)		(34	)

Net realized gains (losses) on available-for-sale securities		(9	)		29

Impairments:
Total other-than-temporary impairments		—			(1	)
Portion of other-than-temporary impairments included in other comprehensive income		—			—

Net other-than-temporary impairments		—			(1	)

Net realized gains (losses) on equity securities sold		2			—
Net unrealized gains (losses) on equity securities still held		(18	)		—
Limited partnerships		7			—
Commercial mortgage loans		—			1
Net gains (losses) related to securitization entities		—			2
Derivative instruments ⁽¹⁾		(13	)		3

Net investment gains (losses)	$	(31	)	$	34

⁽¹⁾	See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses).

We generally intend to hold securities in unrealized loss positions until they recover. However, from time to time, our intent on an individual security may change, based upon market or other unforeseen developments. In such instances, we sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield and liquidity requirements. If a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we determined that we have the intent to sell the securities or it is more likely than not that we will be required to sell the securities prior to recovery. The aggregate fair value of securities sold at a loss during the three months ended March 31, 2018 and 2017 was $619 million and $876 million, respectively, which was approximately 98% and 96%, respectively, of book value.

The following represents the activity for credit losses recognized in net income on debt securities where an other-than-temporary impairment was identified and a portion of other-than-temporary impairments was included in other comprehensive income (“OCI”) as of and for the three months ended March 31:


(Amounts in millions)	2018			2017
Beginning balance	$	32		$	42
Reductions:
Securities sold, paid down or disposed		(4	)		(1	)

Ending balance	$	28		$	41

(c) Unrealized Investment Gains and Losses

Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of the dates indicated:


(Amounts in millions)	March 31, 2018			December 31, 2017
Net unrealized gains (losses) on investment securities:
Fixed maturity securities	$	3,452		$	5,125
Equity securities		—			69

Subtotal ⁽¹⁾		3,452			5,194
Adjustments to deferred acquisition costs, present value of future profits, sales
inducements and benefit reserves		(2,207	)		(3,451	)
Income taxes, net		(282	)		(583	)

Net unrealized investment gains (losses)		963			1,160
Less: net unrealized investment gains (losses) attributable to noncontrolling interests		46			75

Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.	$	917		$	1,085

⁽¹⁾	Excludes foreign exchange.

The change in net unrealized gains (losses) on available-for-sale investment securities reported in accumulated other comprehensive income was as follows as of and for the three months ended March 31:


(Amounts in millions)	2018			2017
Beginning balance	$	1,085		$	1,262
Cumulative effect of changes in accounting:
Stranded tax effects		189			—
Recognition and measurement of financial assets and liabilities, net of taxes of $18 and $—		(25	)		—

Total cumulative effect of changes in accounting		164			—

Unrealized gains (losses) arising during the period:
Unrealized gains (losses) on investment securities		(1,681	)		392
Adjustment to deferred acquisition costs		442			(305	)
Adjustment to present value of future profits		36			(5	)
Adjustment to sales inducements		20			(5	)
Adjustment to benefit reserves		740			(68	)
Provision for income taxes		95			(2	)

Change in unrealized gains (losses) on investment securities		(348	)		7
Reclassification adjustments to net investment (gains) losses, net of taxes of $(1) and $10		7			(18	)

Change in net unrealized investment gains (losses)		(341	)		(11	)
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests		(9	)		8

Ending balance	$	917		$	1,243

(d) Fixed Maturity and Equity Securities

As of March 31, 2018, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity securities classified as available-for-sale were as follows:


			Gross unrealized gains				Gross unrealized losses
(Amounts in millions)	Amortized cost or cost		Not other-than- temporarily impaired		Other-than- temporarily impaired		Not other-than- temporarily impaired			Other-than- temporarily impaired		Fair value
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	4,735	$	674	$	—	$	(11	)	$	—	$	5,398
State and political subdivisions		2,692		217		—		(33	)		—		2,876
Non-U.S. government		2,239		85		—		(25	)		—		2,299
U.S. corporate:
Utilities		4,444		472		—		(42	)		—		4,874
Energy		2,232		174		—		(23	)		—		2,383
Finance and insurance		6,119		395		—		(67	)		—		6,447
Consumer—non-cyclical		4,331		385		—		(46	)		—		4,670
Technology and communications		2,663		135		—		(35	)		—		2,763
Industrial		1,242		76		—		(10	)		—		1,308
Capital goods		2,193		216		—		(24	)		—		2,385
Consumer—cyclical		1,481		82		—		(21	)		—		1,542
Transportation		1,174		99		—		(17	)		—		1,256
Other		351		20		—		(1	)		—		370

Total U.S. corporate		26,230		2,054		—		(286	)		—		27,998

Non-U.S. corporate:
Utilities		989		28		—		(14	)		—		1,003
Energy		1,341		124		—		(11	)		—		1,454
Finance and insurance		2,583		128		—		(23	)		—		2,688
Consumer—non-cyclical		674		15		—		(11	)		—		678
Technology and communications		945		47		—		(8	)		—		984
Industrial		946		61		—		(7	)		—		1,000
Capital goods		610		21		—		(5	)		—		626
Consumer—cyclical		500		4		—		(4	)		—		500
Transportation		657		54		—		(7	)		—		704
Other		2,485		148		—		(13	)		—		2,620

Total non-U.S. corporate		11,730		630		—		(103	)		—		12,257

Residential mortgage-backed		3,664		180		14		(22	)		—		3,836
Commercial mortgage-backed		3,355		57		—		(70	)		—		3,342
Other asset-backed		3,077		10		1		(14	)		—		3,074

Total available-for-sale fixed maturity securities	$	57,722	$	3,907	$	15	$	(564	)	$	—	$	61,080

As of December 31, 2017, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:


			Gross unrealized gains				Gross unrealized losses
(Amounts in millions)	Amortized cost or cost		Not other-than- temporarily impaired		Other-than- temporarily impaired		Not other-than- temporarily impaired			Other-than- temporarily impaired		Fair value
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	4,681	$	870	$	—	$	(3	)	$	—	$	5,548
State and political subdivisions		2,678		270		—		(22	)		—		2,926
Non-U.S. government		2,147		106		—		(20	)		—		2,233
U.S. corporate:
Utilities		4,396		611		—		(9	)		—		4,998
Energy		2,239		227		—		(8	)		—		2,458
Finance and insurance		5,984		556		—		(12	)		—		6,528
Consumer—non-cyclical		4,314		530		—		(13	)		—		4,831
Technology and communications		2,665		192		—		(12	)		—		2,845
Industrial		1,241		106		—		(1	)		—		1,346
Capital goods		2,087		273		—		(5	)		—		2,355
Consumer—cyclical		1,493		116		—		(4	)		—		1,605
Transportation		1,160		134		—		(3	)		—		1,291
Other		355		25		—		(1	)		—		379

Total U.S. corporate		25,934		2,770		—		(68	)		—		28,636

Non-U.S. corporate:
Utilities		979		42		—		(4	)		—		1,017
Energy		1,337		158		—		(5	)		—		1,490
Finance and insurance		2,567		174		—		(6	)		—		2,735
Consumer—non-cyclical		686		30		—		(4	)		—		712
Technology and communications		913		71		—		(2	)		—		982
Industrial		958		88		—		(2	)		—		1,044
Capital goods		614		33		—		(2	)		—		645
Consumer—cyclical		532		9		—		(1	)		—		540
Transportation		656		68		—		(3	)		—		721
Other		2,536		193		—		(4	)		—		2,725

Total non-U.S. corporate		11,778		866		—		(33	)		—		12,611

Residential mortgage-backed		3,831		223		14		(11	)		—		4,057
Commercial mortgage-backed		3,387		94		2		(37	)		—		3,446
Other asset-backed		3,056		17		1		(6	)		—		3,068

Total fixed maturity securities		57,492		5,216		17		(200	)		—		62,525
Equity securities		756		72		—		(8	)		—		820

Total available-for-sale securities	$	58,248	$	5,288	$	17	$	(208	)	$	—	$	63,345

The following table presents the gross unrealized losses and fair values of our fixed maturity securities, aggregated by investment type and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, as of March 31, 2018:


	Less than 12 months							12 months or more							Total
(Dollar amounts in millions)	Fair value		Gross unrealized losses			Number of securities		Fair value		Grossunrealizedlosses			Number of securities		Fair value		Grossunrealizedlosses			Number of securities
Description of Securities
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	278	$	(5	)		30	$	105	$	(6	)		9	$	383	$	(11	)		39
State and political subdivisions		494		(20	)		90		191		(13	)		33		685		(33	)		123
Non-U.S. government		672		(12	)		54		232		(13	)		21		904		(25	)		75
U.S. corporate		7,237		(211	)		986		1,214		(75	)		201		8,451		(286	)		1,187
Non-U.S. corporate		3,288		(74	)		457		522		(29	)		79		3,810		(103	)		536
Residential mortgage-backed		957		(18	)		129		115		(4	)		43		1,072		(22	)		172
Commercial mortgage-backed		998		(25	)		147		584		(45	)		87		1,582		(70	)		234
Other asset-backed		1,420		(12	)		261		250		(2	)		55		1,670		(14	)		316

Total for fixed maturity securities in an unrealized loss position	$	15,344	$	(377	)		2,154	$	3,213	$	(187	)		528	$	18,557	$	(564	)		2,682

% Below cost:
<20% Below cost	$	15,342	$	(377	)		2,153	$	3,195	$	(180	)		524	$	18,537	$	(557	)		2,677
20%-50% Below cost		2		—			1		18		(7	)		4		20		(7	)		5

Total for fixed maturity securities in an unrealized loss position	$	15,344	$	(377	)		2,154	$	3,213	$	(187	)		528	$	18,557	$	(564	)		2,682

Investment grade	$	14,458	$	(349	)		2,033	$	3,054	$	(175	)		495	$	17,512	$	(524	)		2,528
Below investment grade		886		(28	)		121		159		(12	)		33		1,045		(40	)		154

Total for fixed maturity securities in an unrealized loss position	$	15,344	$	(377	)		2,154	$	3,213	$	(187	)		528	$	18,557	$	(564	)		2,682

The following table presents the gross unrealized losses and fair values of our corporate securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, based on industry, as of March 31, 2018:


	Less than 12 months							12 months or more							Total
(Dollar amounts in millions)	Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			Number of securities
Description of Securities
U.S. corporate:
Utilities	$	805	$	(29	)		124	$	191	$	(13	)		32	$	996	$	(42	)		156
Energy		581		(14	)		85		121		(9	)		18		702		(23	)		103
Finance and insurance		2,090		(57	)		282		240		(10	)		40		2,330		(67	)		322
Consumer—non-cyclical		1,254		(35	)		144		168		(11	)		28		1,422		(46	)		172
Technology and communications		774		(20	)		108		182		(15	)		29		956		(35	)		137
Industrial		295		(7	)		45		53		(3	)		8		348		(10	)		53
Capital goods		509		(20	)		70		74		(4	)		12		583		(24	)		82
Consumer—cyclical		544		(15	)		77		109		(6	)		19		653		(21	)		96
Transportation		363		(13	)		48		76		(4	)		15		439		(17	)		63
Other		22		(1	)		3		—		—			—		22		(1	)		3

Subtotal, U.S. corporate securities		7,237		(211	)		986		1,214		(75	)		201		8,451		(286	)		1,187

Non-U.S. corporate:
Utilities		335		(9	)		45		64		(5	)		5		399		(14	)		50
Energy		333		(8	)		43		57		(3	)		11		390		(11	)		54
Finance and insurance		845		(18	)		116		116		(5	)		17		961		(23	)		133
Consumer—non-cyclical		252		(7	)		25		53		(4	)		7		305		(11	)		32
Technology and
communications		280		(7	)		45		26		(1	)		7		306		(8	)		52
Industrial		176		(4	)		26		40		(3	)		6		216		(7	)		32
Capital goods		156		(3	)		20		46		(2	)		4		202		(5	)		24
Consumer—cyclical		226		(4	)		37		—		—			—		226		(4	)		37
Transportation		149		(4	)		19		40		(3	)		6		189		(7	)		25
Other		536		(10	)		81		80		(3	)		16		616		(13	)		97

Subtotal, non-U.S. corporate securities		3,288		(74	)		457		522		(29	)		79		3,810		(103	)		536

Total for corporate securities in an unrealized loss position	$	10,525	$	(285	)		1,443	$	1,736	$	(104	)		280	$	12,261	$	(389	)		1,723

For all securities in an unrealized loss position, we expect to recover the amortized cost based on our estimate of the amount and timing of cash flows to be collected. We do not intend to sell nor do we expect that we will be required to sell these securities prior to recovering our amortized cost.

The following table presents the gross unrealized losses and fair values of our investment securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, as of December 31, 2017:


	Less than 12 months							12 months or more							Total
(Dollar amounts in millions)	Fair value		Gross unrealized losses			Number of securities		Fair value		Grossunrealizedlosses			Number of securities		Fair value		Grossunrealizedlosses			Number of securities
Description of Securities
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	78	$	(1	)		21	$	94	$	(2	)		7	$	172	$	(3	)		28
State and political subdivisions		125		(1	)		35		327		(21	)		42		452		(22	)		77
Non-U.S. government		583		(7	)		26		239		(13	)		20		822		(20	)		46
U.S. corporate		1,871		(26	)		296		1,347		(42	)		190		3,218		(68	)		486
Non-U.S. corporate		1,323		(12	)		217		548		(21	)		77		1,871		(33	)		294
Residential mortgage-backed		707		(7	)		81		130		(4	)		46		837		(11	)		127
Commercial mortgage-backed		476		(4	)		69		646		(33	)		90		1,122		(37	)		159
Other asset-backed		853		(4	)		160		230		(2	)		57		1,083		(6	)		217

Subtotal, fixed maturity securities		6,016		(62	)		905		3,561		(138	)		529		9,577		(200	)		1,434
Equity securities		74		(3	)		134		100		(5	)		58		174		(8	)		192

Total for securities in an unrealized loss position	$	6,090	$	(65	)		1,039	$	3,661	$	(143	)		587	$	9,751	$	(208	)		1,626

% Below cost—fixed maturity securities:
<20% Below cost	$	6,016	$	(62	)		905	$	3,555	$	(136	)		526	$	9,571	$	(198	)		1,431
20%-50% Below cost		—		—			—		6		(2	)		3		6		(2	)		3

Total fixed maturity securities		6,016		(62	)		905		3,561		(138	)		529		9,577		(200	)		1,434

% Below cost—equity securities:
<20% Below cost		74		(3	)		134		100		(5	)		58		174		(8	)		192

Total equity securities		74		(3	)		134		100		(5	)		58		174		(8	)		192

Total for securities in an unrealized loss position		$6,090		$(65)			1,039		$3,661		$(143)			587		$9,751		$(208)			1,626

Investment grade	$	5,867	$	(55	)		898	$	3,488	$	(135	)		528	$	9,355	$	(190	)		1,426
Below investment grade		223		(10	)		141		173		(8	)		59		396		(18	)		200

Total for securities in an unrealized loss position		$6,090		$(65)			1,039		$3,661		$(143)			587		$9,751		$(208)			1,626

The following table presents the gross unrealized losses and fair values of our corporate securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, based on industry, as of December 31, 2017:


	Less than 12 months							12 months or more							Total
(Dollar amounts in millions)	Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			Number of securities
Description of Securities
U.S. corporate:
Utilities	$	181	$	(2	)		33	$	219	$	(7	)		36	$	400	$	(9	)		69
Energy		106		(1	)		22		140		(7	)		15		246		(8	)		37
Finance and insurance		626		(6	)		91		222		(6	)		30		848		(12	)		121
Consumer—non-cyclical		299		(7	)		46		221		(6	)		31		520		(13	)		77
Technology and
communications		217		(4	)		32		210		(8	)		29		427		(12	)		61
Industrial		—		—			—		62		(1	)		9		62		(1	)		9
Capital goods		176		(2	)		25		81		(3	)		14		257		(5	)		39
Consumer—cyclical		137		(2	)		24		95		(2	)		13		232		(4	)		37
Transportation		117		(1	)		21		97		(2	)		13		214		(3	)		34
Other		12		(1	)		2		—		—			—		12		(1	)		2

Subtotal, U.S. corporate securities		1,871		(26	)		296		1,347		(42	)		190		3,218		(68	)		486

Non-U.S. corporate:
Utilities		113		(1	)		23		72		(3	)		8		185		(4	)		31
Energy		118		(2	)		19		74		(3	)		12		192		(5	)		31
Finance and insurance		347		(3	)		56		117		(3	)		19		464		(6	)		75
Consumer—non-cyclical		69		(1	)		11		60		(3	)		6		129		(4	)		17
Technology and
communications		107		(1	)		18		30		(1	)		6		137		(2	)		24
Industrial		52		—			9		38		(2	)		5		90		(2	)		14
Capital goods		54		—			11		46		(2	)		3		100		(2	)		14
Consumer—cyclical		131		(1	)		21		—		—			—		131		(1	)		21
Transportation		47		(1	)		7		64		(2	)		8		111		(3	)		15
Other		285		(2	)		42		47		(2	)		10		332		(4	)		52

Subtotal, non-U.S. corporate securities		1,323		(12	)		217		548		(21	)		77		1,871		(33	)		294

Total for corporate securities in an unrealized loss position	$	3,194	$	(38	)		513	$	1,895	$	(63	)		267	$	5,089	$	(101	)		780

The scheduled maturity distribution of fixed maturity securities as of March 31, 2018 is set forth below. Actual maturities may differ from contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.


(Amounts in millions)	Amortized cost or cost		Fair value
Due one year or less	$	1,666	$	1,677
Due after one year through five years		10,943		11,146
Due after five years through ten years		12,618		12,876
Due after ten years		22,399		25,129

Subtotal		47,626		50,828
Residential mortgage-backed		3,664		3,836
Commercial mortgage-backed		3,355		3,342
Other asset-backed		3,077		3,074

Total	$	57,722	$	61,080

As of March 31, 2018, securities issued by finance and insurance, utilities and consumer—non-cyclical industry groups represented approximately 23%, 15% and 13%, respectively, of our domestic and foreign corporate fixed maturity securities portfolio. No other industry group comprised more than 10% of our investment portfolio.

As of March 31, 2018, we did not hold any fixed maturity securities in any single issuer, other than securities issued or guaranteed by the U.S. government, which exceeded 10% of stockholders’ equity.

(e) Commercial Mortgage Loans

Our mortgage loans are collateralized by commercial properties, including multi-family residential buildings. The carrying value of commercial mortgage loans is stated at original cost net of principal payments, amortization and allowance for loan losses.

We diversify our commercial mortgage loans by both property type and geographic region. The following tables set forth the distribution across property type and geographic region for commercial mortgage loans as of the dates indicated:


	March 31, 2018						December 31, 2017
(Amounts in millions)	Carrying value			% of total			Carrying value			% of total
Property type:
Retail	$	2,276			36	%	$	2,239			35	%
Industrial		1,601			25			1,628			26
Office		1,480			23			1,510			24
Apartments		483			8			478			8
Mixed use		226			4			223			3
Other		282			4			275			4

Subtotal		6,348			100	%		6,353			100	%

Unamortized balance of loan origination fees and costs		(3	)					(3	)
Allowance for losses		(9	)					(9	)

Total	$	6,336					$	6,341


	March 31, 2018						December 31, 2017
(Amounts in millions)	Carrying value			% of total			Carrying value			% of total
Geographic region:
South Atlantic	$	1,653			26	%	$	1,625			26	%
Pacific		1,627			26			1,622			26
Middle Atlantic		907			15			927			14
Mountain		576			9			556			9
West North Central		444			7			446			7
East North Central		387			6			394			6
West South Central		342			5			336			5
East South Central		212			3			208			3
New England		200			3			239			4

Subtotal		6,348			100	%		6,353			100	%

Unamortized balance of loan origination fees and costs		(3	)					(3	)
Allowance for losses		(9	)					(9	)

Total	$	6,336					$	6,341

The following tables set forth the aging of past due commercial mortgage loans by property type as of the dates indicated:


	March 31, 2018
(Amounts in millions)	31 - 60 days past due			61 - 90 days past due			Greater than 90 days past due			Total past due			Current			Total
Property type:
Retail	$	—		$	—		$	—		$	—		$	2,276		$	2,276
Industrial		—			—			—			—			1,601			1,601
Office		7			—			6			13			1,467			1,480
Apartments		—			—			—			—			483			483
Mixed use		—			—			—			—			226			226
Other		—			—			—			—			282			282

Total recorded investment	$	7		$	—		$	6		$	13		$	6,335		$	6,348

% of total commercial mortgage loans		—	%		—	%		—	%		—	%		100	%		100	%


	December 31, 2017
(Amounts in millions)	31 - 60 days past due			61 - 90 days past due			Greater than 90 days past due			Total past due			Current			Total
Property type:
Retail	$	5		$	—		$	—		$	5		$	2,234		$	2,239
Industrial		—			—			—			—			1,628			1,628
Office		—			—			6			6			1,504			1,510
Apartments		—			—			—			—			478			478
Mixed use		—			—			—			—			223			223
Other		—			—			—			—			275			275

Total recorded investment	$	5		$	—		$	6		$	11		$	6,342		$	6,353

% of total commercial mortgage loans		—	%		—	%		—	%		—	%		100	%		100	%

As of March 31, 2018 and December 31, 2017, we had no commercial mortgage loans that were past due for more than 90 days and still accruing interest. We also did not have any commercial mortgage loans that were past due for less than 90 days on non-accrual status as of March 31, 2018 and December 31, 2017.

We evaluate the impairment of commercial mortgage loans on an individual loan basis. As of March 31, 2018, our commercial mortgage loans greater than 90 days past due included loans with appraised values in excess of the recorded investment and the current recorded investment of these loans was expected to be recoverable.

During the three months ended March 31, 2018 and the year ended December 31, 2017, we modified or extended one and ten commercial mortgage loans, respectively, with a total carrying value of $5 million and $27 million, respectively. All of these modifications or extensions were based on current market interest rates and did not result in any forgiveness in the outstanding principal amount owed by the borrower.

The following table sets forth the allowance for credit losses and recorded investment in commercial mortgage loans as of or for the periods indicated:


	Three months ended March 31,
(Amounts in millions)	2018		2017
Allowance for credit losses:
Beginning balance	$	9	$	12
Charge-offs		—		—
Recoveries		—		—
Provision		—		(1	)

Ending balance	$	9	$	11

Ending allowance for individually impaired loans	$	—	$	—

Ending allowance for loans not individually impaired that were evaluated collectively for impairment	$	9	$	11

Recorded investment:
Ending balance	$	6,348	$	6,121

Ending balance of individually impaired loans	$	—	$	—

Ending balance of loans not individually impaired that were evaluated collectively for impairment	$	6,348	$	6,121

As of March 31, 2018 and 2017, we had no individually impaired commercial mortgage loans. As of December 31, 2017, we had one individually impaired loan within the office property type with a recorded investment and unpaid principal balance of $6 million.

In evaluating the credit quality of commercial mortgage loans, we assess the performance of the underlying loans using both quantitative and qualitative criteria. Certain risks associated with commercial mortgage loans can be evaluated by reviewing both the loan-to-value and debt service coverage ratio to understand both the probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the underlying property for an amount that would enable us to recover our unpaid principal balance in the event of default by the borrower. The average loan-to-value ratio is based on our most recent estimate of the fair value for the underlying property which is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A lower loan-to-value indicates that our loan value is more likely to be recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is based on “normalized” annual income of the property compared to the payments required under the terms of the loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt service coverage ratio should not be used without considering other factors associated with the borrower, such as the borrower’s liquidity or access to other resources that may result in our expectation that the borrower will continue to make the future scheduled payments.

The following tables set forth the loan-to-value of commercial mortgage loans by property type as of the dates indicated:


	March 31, 2018
(Amounts in millions)	0% - 50%			51% - 60%			61% - 75%			76% - 100%			Greater than 100%⁽¹⁾			Total
Property type:
Retail	$	851		$	496		$	929		$	—		$	—		$	2,276
Industrial		681			355			565			—			—			1,601
Office		443			462			560			13			2			1,480
Apartments		205			125			148			5			—			483
Mixed use		101			55			70			—			—			226
Other		50			43			189			—			—			282

Total recorded investment	$	2,331		$	1,536		$	2,461		$	18		$	2		$	6,348

% of total		37	%		24	%		39	%		—	%		—	%		100	%

Weighted-average debt service coverage ratio		2.41			2.17			1.74			0.58			1.04			2.08

⁽¹⁾	Included a loan with a recorded investment of $2 million in good standing, where the borrower continued to make timely payments, with a loan-to-value of 102%. We evaluated this loan on an individual basis and as it is in good standing, the current recorded investment is expected to be recoverable.


	December 31, 2017
(Amounts in millions)	0% - 50%			51% - 60%			61% - 75%			76% - 100%			Greater than 100%⁽¹⁾			Total
Property type:
Retail	$	919		$	500		$	820		$	—		$	—		$	2,239
Industrial		731			363			532			2			—			1,628
Office		575			386			534			13			2			1,510
Apartments		226			101			146			5			—			478
Mixed use		99			59			65			—			—			223
Other		68			28			179			—			—			275

Total recorded investment	$	2,618		$	1,437		$	2,276		$	20		$	2		$	6,353

% of total		41	%		23	%		36	%		—	%		—	%		100	%

Weighted-average debt service coverage ratio		2.65			1.85			1.62			0.62			1.04			2.09

⁽¹⁾	Included a loan with a recorded investment of $2 million in good standing, where the borrower continued to make timely payments, with a loan-to-value of 102%. We evaluated this loan on an individual basis and as it is in good standing, the current recorded investment is expected to be recoverable.

The following tables set forth the debt service coverage ratio for fixed rate commercial mortgage loans by property type as of the dates indicated:


	March 31, 2018
(Amounts in millions)	Less than 1.00			1.00 - 1.25			1.26 - 1.50			1.51 - 2.00			Greater than 2.00			Total
Property type:
Retail	$	42		$	230		$	302		$	1,060		$	642		$	2,276
Industrial		20			58			194			700			629			1,601
Office		49			61			165			570			635			1,480
Apartments		—			18			80			194			191			483
Mixed use		5			4			28			85			104			226
Other		1			138			23			71			49			282

Total recorded investment	$	117		$	509		$	792		$	2,680		$	2,250		$	6,348

% of total		2	%		8	%		13	%		42	%		35	%		100	%

Weighted-average loan-to-value		55	%		60	%		58	%		58	%		46	%		54	%


	December 31, 2017
(Amounts in millions)	Less than 1.00			1.00 - 1.25			1.26 - 1.50			1.51 - 2.00			Greater than 2.00			Total
Property type:
Retail	$	43		$	235		$	301		$	1,020		$	640		$	2,239
Industrial		23			61			174			700			670			1,628
Office		51			61			157			569			672			1,510
Apartments		—			17			77			191			193			478
Mixed use		2			4			26			86			105			223
Other		1			149			14			71			40			275

Total recorded investment	$	120		$	527		$	749		$	2,637		$	2,320		$	6,353

% of total		2	%		8	%		12	%		42	%		36	%		100	%

Weighted-average loan-to-value		55	%		60	%		58	%		58	%		42	%		52	%

As of March 31, 2018 and December 31, 2017, we did not have any floating rate commercial mortgage loans.

(f) Restricted Commercial Mortgage Loans Related To Securitization Entities

We have a consolidated securitization entity that holds commercial mortgage loans that are recorded as restricted commercial mortgage loans related to securitization entities.

(g) Limited Partnerships or Similar Entities

Limited partnerships are accounted for at fair value when our partnership interest is considered minor (generally less than 3% ownership in the limited partnerships) and we exercise no influence over operating and financial policies. If our ownership percentage exceeds that threshold, limited partnerships are accounted for using the equity method of accounting. In applying either method, we use financial information provided by the investee generally on a one-to-three month lag.

Investments in partnerships or similar entities are generally considered VIEs when the equity group lacks sufficient financial control. Generally, these investments are limited partner or non-managing member equity investments in a widely held fund that is sponsored and managed by a reputable asset manager. We are not the primary beneficiary of any VIE investment in a limited partnership or similar entity. As of March 31, 2018 and December 31, 2017, the total carrying value of these investments was $262 million and $222 million, respectively. Our maximum exposure to loss is equal to the outstanding carrying value and future funding commitments. We have not contributed, and do not plan to contribute, any additional financial or other support outside of what is contractually obligated.

Derivative Instruments

3 Months Ended

Mar. 31, 2018

Derivative Instruments

(5) Derivative Instruments

Our business activities routinely deal with fluctuations in interest rates, equity prices, currency exchange rates and other asset and liability prices. We use derivative instruments to mitigate or reduce certain of these risks. We have established policies for managing each of these risks, including prohibitions on derivatives market-making and other speculative derivatives activities. These policies require the use of derivative instruments in concert with other techniques to reduce or mitigate these risks. While we use derivatives to mitigate or reduce risks, certain derivatives do not meet the accounting requirements to be designated as hedging instruments and are denoted as “derivatives not designated as hedges” in the following disclosures. For derivatives that meet the accounting requirements to be designated as hedges, the following disclosures for these derivatives are denoted as “derivatives designated as hedges,” which include both cash flow and fair value hedges.

The following table sets forth our positions in derivative instruments as of the dates indicated:


	Derivative assets						Derivative liabilities
			Fair value							Fair value
(Amounts in millions)	Balance sheet classification		March 31, 2018		December 31, 2017		Balance sheet classification			March 31, 2018		December 31, 2017

Derivatives designated as hedges
Cash flow hedges:
Interest rate swaps		Other invested assets	$	54	$	74		Other liabilities		$	58	$	25
Foreign currency swaps		Other invested assets		1		1		Other liabilities			—		—


Total cash flow hedges				55		75					58		25


Total derivatives designated as hedges				55		75					58		25

Derivatives not designated as hedges
Foreign currency swaps		Other invested assets		5		11		Other liabilities			2		—
Equity index options		Other invested assets		60		80		Other liabilities			—		—
Financial futures		Other invested assets		—		—		Other liabilities			—		—
Equity return swaps		Other invested assets		1		—		Other liabilities			—		2
Other foreign currency contracts		Other invested assets		108		110		Other liabilities			24		20
GMWB embedded derivatives		Reinsurance recoverable⁽¹⁾		13		14		Policyholder account balances	⁽²⁾		242		250
Fixed index annuity embedded derivatives		Other assets		—		—		Policyholder account balances	⁽³⁾		408		419
Indexed universal life embedded derivatives		Reinsurance recoverable		—		—		Policyholder account balances	⁽⁴⁾		13		14


Total derivatives not designated as hedges				187		215					689		705

Total derivatives			$	242	$	290				$	747	$	730

⁽¹⁾	Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits (“GMWB”) liabilities.

⁽²⁾	Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

⁽³⁾	Represents the embedded derivatives associated with our fixed index annuity liabilities.

⁽⁴⁾	Represents the embedded derivatives associated with our indexed universal life liabilities.

The fair value of derivative positions presented above was not offset by the respective collateral amounts received or provided under these agreements.

The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for GMWB, fixed index annuity embedded derivatives and indexed universal life embedded derivatives, the change between periods is best illustrated by the number of policies. The following tables represent activity associated with derivative instruments as of the dates indicated:


(Notional in millions)	Measurement		December 31, 2017		Additions		Maturities/ terminations			March 31, 2018
Derivatives designated as hedges
Cash flow hedges:
Interest rate swaps		Notional	$	11,155	$	1,048	$	(1,178	)	$	11,025
Foreign currency swaps		Notional		22		—		—			22

Total cash flow hedges				11,177		1,048		(1,178	)		11,047

Total derivatives designated as hedges				11,177		1,048		(1,178	)		11,047

Derivatives not designated as hedges
Interest rate swaps		Notional		4,679		—		—			4,679
Foreign currency swaps		Notional		349		57		—			406
Credit default swaps		Notional		39		—		(19	)		20
Equity index options		Notional		2,420		585		(596	)		2,409
Financial futures		Notional		1,283		1,380		(1,389	)		1,274
Equity return swaps		Notional		96		—		(77	)		19
Other foreign currency contracts		Notional		3,264		195		(311	)		3,148

Total derivatives not designated as hedges				12,130		2,217		(2,392	)		11,955

Total derivatives			$	23,307	$	3,265	$	(3,570	)	$	23,002


(Number of policies)	Measurement		December 31, 2017		Additions		Maturities/ terminations			March 31, 2018
Derivatives not designated as hedges
GMWB embedded derivatives		Policies		30,450		—		(693	)		29,757
Fixed index annuity embedded derivatives		Policies		17,067		—		(115	)		16,952
Indexed universal life embedded derivatives		Policies		985		—		(17	)		968

Cash Flow Hedges

Certain derivative instruments are designated as cash flow hedges. The changes in fair value of these instruments are recorded as a component of OCI. We designate and account for the following as cash flow hedges when they have met the effectiveness requirements: (i) various types of interest rate swaps to convert floating rate investments to fixed rate investments; (ii) various types of interest rate swaps to convert floating rate liabilities into fixed rate liabilities; (iii) receive U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments; (iv) forward starting interest rate swaps to hedge against changes in interest rates associated with future fixed rate bond purchases and/or interest income; (v) forward bond purchase commitments to hedge against the variability in the anticipated cash flows required to purchase future fixed rate bonds; and (vi) other instruments to hedge the cash flows of various forecasted transactions.

The following table provides information about the pre-tax income effects of cash flow hedges for the three months ended March 31, 2018:


(Amounts in millions)	Gain (loss) recognized in OCI			Gain (loss) reclassified into net income from OCI		Classification of gain (loss) reclassified into net income
Interest rate swaps hedging assets	$	(173	)	$	35		Net investment income
Interest rate swaps hedging assets		—			5		Net investment gains (losses)
Interest rate swaps hedging liabilities		17			—		Interest expense
Foreign currency swaps		(1	)		—		Net investment income

Total	$	(157	)	$	40

The following table provides information about the pre-tax income effects of cash flow hedges for the three months ended March 31, 2017:


(Amounts in millions)	Gain (loss) recognized in OCI			Gain (loss) reclassified into net income from OCI		Classification of gain (loss) reclassified into net income		Gain (loss) recognized in net income ⁽¹⁾		Classification of gain (loss) recognized in net income
Interest rate swaps hedging assets	$	(49	)	$	30		Net investment income	$	—		Net investment gains (losses)
Interest rate swaps hedging assets		—			1		Net investment gains (losses)		—		Net investment gains (losses)
Interest rate swaps hedging liabilities		4			—		Interest expense		—		Net investment gains (losses)

Total	$	(45	)	$	31			$	—

⁽¹⁾	Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness.

The following table provides a reconciliation of current period changes, net of applicable income taxes, for these designated derivatives presented in the separate component of stockholders’ equity labeled “derivatives qualifying as hedges,” for the periods indicated:


	Three months ended March 31,
(Amounts in millions)	2018			2017
Derivatives qualifying as effective accounting hedges as of January 1	$	2,065		$	2,085
Cumulative effect of changes in accounting:
Stranded tax effects		12			—
Changes to the hedge accounting model, net of deferred taxes of $(1) and $—		2			—

Total cumulative effect of changes in accounting		14			—

Current period increases (decreases) in fair value, net of deferred taxes of $34 and $16		(126	)		(29	)
Reclassification to net (income), net of deferred taxes of $14 and $11		(26	)		(20	)

Derivatives qualifying as effective accounting hedges as of March 31	$	1,927		$	2,036

The total of derivatives designated as cash flow hedges of $1,927 million, net of taxes, recorded in stockholders’ equity as of March 31, 2018 is expected to be reclassified to net income in the future, concurrently with and primarily offsetting changes in interest expense and interest income on floating rate instruments and interest income on future fixed rate bond purchases. Of this amount, $100 million, net of taxes, is expected to be reclassified to net income in the next 12 months. Actual amounts may vary from this amount as a result of market conditions. All forecasted transactions associated with qualifying cash flow hedges are expected to occur by 2057. During the three months ended March 31, 2018, we reclassified $3 million to net income in connection with forecasted transactions that were no longer considered probable of occurring.

Derivatives Not Designated As Hedges

We also enter into certain non-qualifying derivative instruments such as: (i) interest rate swaps and financial futures to mitigate interest rate risk as part of managing regulatory capital positions; (ii) credit default swaps to enhance yield and reproduce characteristics of investments with similar terms and credit risk; (iii) equity index options, equity return swaps, interest rate swaps and financial futures to mitigate the risks associated with liabilities that have guaranteed minimum benefits, fixed index annuities and indexed universal life; (iv) interest rate swaps where the hedging relationship does not qualify for hedge accounting; (v) credit default swaps to mitigate loss exposure to certain credit risk; (vi) foreign currency swaps, options and forward contracts to mitigate currency risk associated with non-functional currency investments held by certain foreign subsidiaries and future dividends or other cash flows from certain foreign subsidiaries to our holding company; and (vii) equity index options to mitigate certain macroeconomic risks associated with certain foreign subsidiaries. Additionally, we provide GMWBs on certain variable annuities that are required to be bifurcated as embedded derivatives. We also offer fixed index annuity and indexed universal life products and have reinsurance agreements with certain features that are required to be bifurcated as embedded derivatives.

We also had, prior to the fourth quarter of 2017, derivatives related to securitization entities where we were required to consolidate the related securitization entity as a result of our involvement in the structure. The counterparties for these derivatives typically only had recourse to the securitization entity. The interest rate swaps used for these entities were typically used to effectively convert the interest payments on the assets of the securitization entity to the same basis as the interest rate on the borrowings issued by the securitization entity. Credit default swaps were utilized in certain securitization entities to enhance the yield payable on the borrowings issued by the securitization entity and also included a settlement feature that allows the securitization entity to provide the par value of assets in the securitization entity for the amount of any losses incurred under the credit default swap.

The following tables provide the pre-tax gain (loss) recognized in net income for the effects of derivatives not designated as hedges for the periods indicated:


	Three months ended March 31,						Classification of gain (loss) recognized in net income
(Amounts in millions)	2018			2017			Classification of gain (loss) recognized in net income
Interest rate swaps	$	(1	)	$	2		Net investment gains (losses)
Credit default swaps related to securitization entities		—			2		Net investment gains (losses)
Equity index options		(15	)		13		Net investment gains (losses)
Financial futures		(24	)		(17	)	Net investment gains (losses)
Equity return swaps		(5	)		(8	)	Net investment gains (losses)
Other foreign currency contracts		8			(5	)	Net investment gains (losses)
Foreign currency swaps		(8	)		3		Net investment gains (losses)
GMWB embedded derivatives		14			33		Net investment gains (losses)
Fixed index annuity embedded derivatives		8			(20	)	Net investment gains (losses)
Indexed universal life embedded derivatives		5			1		Net investment gains (losses)

Total derivatives not designated as hedges	$	(18	)	$	4

Derivative Counterparty Credit Risk

Most of our derivative arrangements with counterparties require the posting of collateral upon meeting certain net exposure thresholds. For derivatives related to securitization entities, there are no arrangements that require either party to provide collateral and the recourse of the derivative counterparty is typically limited to the assets held by the securitization entity and there is no recourse to any entity other than the securitization entity.

The following table presents additional information about derivative assets and liabilities subject to an enforceable master netting arrangement as of the dates indicated:


	March 31, 2018									December 31, 2017
(Amounts in millions)	Derivatives assets ⁽¹⁾			Derivatives liabilities ⁽²⁾			Net derivatives			Derivatives assets ⁽¹⁾			Derivatives liabilities ⁽²⁾			Net derivatives
Amounts presented in the balance sheet:
Gross amounts recognized	$	232		$	84		$	148		$	278		$	47		$	231
Gross amounts offset in the balance sheet		—			—			—			—			—			—

Net amounts presented in the balance sheet		232			84			148			278			47			231
Gross amounts not offset in the balance sheet:
Financial instruments ⁽³⁾		(29	)		(29	)		—			(23	)		(23	)		—
Collateral received		(151	)		—			(151	)		(170	)		—			(170	)
Collateral pledged		—			(414	)		414			—			(288	)		288
Over collateralization		6			359			(353	)		—			264			(264	)

Net amount	$	58		$	—		$	58		$	85		$	—		$	85

⁽¹⁾	Included $3 million and $2 million of accruals on derivatives classified as other assets and does not include amounts related to embedded derivatives as of March 31, 2018 and December 31, 2017, respectively.

⁽²⁾	Does not include amounts related to embedded derivatives and derivatives related to securitization entities as of March 31, 2018 and December 31, 2017.

⁽³⁾	Amounts represent derivative assets and/or liabilities that are presented gross within the balance sheet but are held with the same counterparty where we have a master netting arrangement. This adjustment results in presenting the net asset and net liability position for each counterparty.

Except for derivatives related to securitization entities, almost all of our master swap agreements contain credit downgrade provisions that allow either party to assign or terminate derivative transactions if the other party’s long-term unsecured debt rating or financial strength rating is below the limit defined in the applicable agreement. If the downgrade provisions had been triggered as of March 31, 2018 and December 31, 2017, we could have been allowed to claim $58 million and $85 million, respectively. There were no amounts that we would have been required to disburse as of March 31, 2018 and December 31, 2017. The chart above excludes embedded derivatives and derivatives related to securitization entities as those derivatives are not subject to master netting arrangements.

We actively responded to the risk in our derivatives portfolio arising from our counterparties’ right to terminate their bilateral over-the-counter derivatives transactions with us following the downgrades of our life insurance subsidiaries by Moody’s Investors Service, Inc. and A.M. Best Company, Inc. in February 2018. As of March 31, 2018, no counterparties exercised their rights to terminate or revise the terms of their transactions with us.

Credit Derivatives

We sell protection under single name credit default swaps in combination with purchasing a security to replicate characteristics of similar investments based on the credit quality and term of the credit default swap. Credit default triggers for single name reference entities follow the Credit Derivatives Physical Settlement Matrix published by the International Swaps and Derivatives Association. Under these terms, credit default triggers are defined as bankruptcy, failure to pay or restructuring, if applicable. Our maximum exposure to credit loss equals the notional value for credit default swaps. In the event of default for credit default swaps, we are typically required to pay the protection holder the full notional value less a recovery rate determined at auction.

The following table sets forth our credit default swaps where we sell protection on single name reference entities and the fair values as of the dates indicated:


	March 31, 2018						December 31, 2017
(Amounts in millions)	Notional value		Assets		Liabilities		Notional value		Assets		Liabilities
Investment grade
Matures in less than one year	$	20	$	—	$	—	$	39	$	—	$	—

Total credit default swaps on single name reference entities	$	20	$	—	$	—	$	39	$	—	$	—

Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2018

Fair Value of Financial Instruments

(6) Fair Value of Financial Instruments

Assets and liabilities that are reflected in the accompanying unaudited condensed consolidated financial statements at fair value are not included in the following disclosure of fair value. Such items include cash and cash equivalents, short-term investments, investment securities, separate accounts, securities held as collateral and derivative instruments. Apart from certain of our borrowings and certain marketable securities, few of the instruments are actively traded and their fair values must often be determined using models. The fair value estimates are made at a specific point in time, based upon available market information and judgments about the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets.

The following represents our estimated fair value of financial assets and liabilities that are not required to be carried at fair value as of the dates indicated:


	March 31, 2018
	Notionalamount			Carrying amount		Fair value
(Amounts in millions)	Notionalamount			Carrying amount		Total		Level 1		Level 2		Level 3
Assets:
Commercial mortgage loans	$		⁽¹⁾	$	6,336	$	6,407	$	—	$	—	$	6,407
Restricted commercial mortgage loans			⁽¹⁾		99		106		—		—		106
Other invested assets			⁽¹⁾		113		113		—		—		113
Liabilities:
Long-term borrowings			⁽¹⁾		4,654		4,093		—		3,936		157
Non-recourse funding obligations			⁽¹⁾		310		206		—		—		206
Borrowings related to securitizationentities			⁽¹⁾		32		33		—		33		—
Investment contracts			⁽¹⁾		14,195		14,492		—		5		14,487
Other firm commitments:
Commitments to fund limited partnerships		365			—		—		—		—		—
Commitments to fund bank loan investments		19			—		—		—		—		—
Ordinary course of business lendingcommitments		106			—		—		—		—		—


	December 31, 2017
	Notionalamount			Carrying amount		Fair value
(Amounts in millions)	Notionalamount			Carrying amount		Total		Level 1		Level 2		Level 3
Assets:
Commercial mortgage loans	$		⁽¹⁾	$	6,341	$	6,573	$	—	$	—	$	6,573
Restricted commercial mortgage loans			⁽¹⁾		107		116		—		—		116
Other invested assets			⁽¹⁾		277		299		—		—		299
Liabilities:
Long-term borrowings			⁽¹⁾		4,224		3,725		—		3,566		159
Non-recourse funding obligations			⁽¹⁾		310		201		—		—		201
Borrowings related to securitizationentities			⁽¹⁾		40		41		—		41		—
Investment contracts			⁽¹⁾		14,700		15,123		—		5		15,118
Other firm commitments:
Commitments to fund limited partnerships		317			—		—		—		—		—
Commitments to fund bank loan investments		18			—		—		—		—		—
Ordinary course of business lendingcommitments		168			—		—		—		—		—

⁽¹⁾	These financial instruments do not have notional amounts.

Recurring Fair Value Measurements

We have fixed maturity, short-term investments, equity securities, limited partnerships, derivatives, embedded derivatives, securities held as collateral, separate account assets and certain other financial instruments, which are carried at fair value. Below is a description of the valuation techniques and inputs used to determine fair value by class of instrument.

Limited partnerships

Limited partnerships are valued based on comparable market transactions, discounted future cash flows, quoted market prices and/or estimates using the most recent data available for the underlying instrument. We utilize the net asset value (“NAV”) of the underlying fund statements as a practical expedient for fair value.

Fixed maturity, short-term investments and equity securities

The fair value of fixed maturity, short-term investments and equity securities are estimated primarily based on information derived from third-party pricing services (“pricing services”), internal models and/or broker quotes, which use a market approach, income approach or a combination of the market and income approach depending on the type of instrument and availability of information. In general, a market approach is utilized if there is readily available and relevant market activity for an individual security. In certain cases where market information is not available for a specific security but is available for similar securities, a security is valued using that market information for similar securities, which is also a market approach. When market information is not available for a specific security or is available but such information is less relevant or reliable, an income approach or a combination of a market and income approach is utilized. For securities with optionality, such as call or prepayment features (including mortgage-backed or asset-backed securities), an income approach may be used. In addition, a combination of the results from market and income approaches may be used to estimate fair value. These valuation techniques may change from period to period, based on the relevance and availability of market data.

We utilize certain third-party data providers when determining fair value. We consider information obtained from pricing services as well as broker quotes in our determination of fair value. Additionally, we utilize internal models to determine the valuation of securities using an income approach where the inputs are based on third-party provided market inputs. While we consider the valuations provided by pricing services and broker quotes to be of high quality, management determines the fair value of our investment securities after considering all relevant and available information. We also use various methods to obtain an understanding of the valuation methodologies and procedures used by third-party data providers to ensure sufficient understanding to evaluate the valuation data received, including an understanding of the assumptions and inputs utilized to determine the appropriate fair value. For pricing services, we analyze the prices provided by our primary pricing services to other readily available pricing services and perform a detailed review of the assumptions and inputs from each pricing service to determine the appropriate fair value when pricing differences exceed certain thresholds. We evaluate changes in fair value that are greater than certain pre-defined thresholds each month to further aid in our review of the accuracy of fair value measurements and our understanding of changes in fair value, with more detailed reviews performed by the asset managers responsible for the related asset class associated with the security being reviewed. A pricing committee provides additional oversight and guidance in the evaluation and review of the pricing methodologies used to value our investment portfolio.

In general, we first obtain valuations from pricing services. For certain private fixed maturity securities where we do not obtain valuations from pricing services, we utilize an internal model to determine fair value since transactions for identical securities are not readily observable and these securities are not typically valued by pricing services. If prices are unavailable from public pricing services we obtain broker quotes. For all securities, excluding certain private fixed maturity securities, if neither a pricing service nor broker quotes valuation is available, we determine fair value using internal models.

For pricing services, we obtain an understanding of the pricing methodologies and procedures for each type of instrument. Additionally, on a monthly basis we review a sample of securities, examining the pricing service’s assumptions to determine if we agree with the service’s derived price. When available, we also evaluate the prices sampled as compared to other public prices. If a variance greater than a pre-defined threshold is noted, additional review of the price is executed to ensure accuracy. In general, a pricing service does not provide a price for a security if sufficient information is not readily available to determine fair value or if such security is not in the specific sector or class covered by a particular pricing service. Given our understanding of the pricing methodologies and procedures of pricing services, the securities valued by pricing services are typically classified as Level 2 unless we determine the valuation process for a security or group of securities utilizes significant unobservable inputs, which would result in the valuation being classified as Level 3.

For private fixed maturity securities, we utilize an income approach where we obtain public bond spreads and utilize those in an internal model to determine fair value. Other inputs to the model include rating and weighted-average life, as well as sector which is used to assign the spread. We then add an additional premium, which represents an unobservable input, to the public bond spread to adjust for the liquidity and other features of our private placements. We utilize the estimated market yield to discount the expected cash flows of the security to determine fair value. We utilize price caps for securities where the estimated market yield results in a valuation that may exceed the amount that would be received in a market transaction and value all private fixed maturity securities at par that have less than 12 months to maturity. When a security does not have an external rating, we assign the security an internal rating to determine the appropriate public bond spread that should be utilized in the valuation. To evaluate the reasonableness of the internal model, we review a sample of private fixed maturity securities each month. In that review we compare the modeled prices to the prices of similar public securities in conjunction with analysis on current market indicators. If a pricing variance greater than a pre-defined threshold is noted, additional review of the price is executed to ensure accuracy. At the end of each month, all internally modeled prices are compared to the prior month prices with an evaluation of all securities with a month-over-month change greater than a pre-defined threshold. While we generally consider the public bond spreads by sector and maturity to be observable inputs, we evaluate the similarities of our private placement with the public bonds, any price caps utilized, liquidity premiums applied, and whether external ratings are available for our private placements to determine whether the spreads utilized would be considered observable inputs. We classify private securities without an external rating and public bond spread as Level 3. In general, increases (decreases) in credit spreads will decrease (increase) the fair value for our fixed maturity securities.

For broker quotes, we consider the valuation methodology utilized by the third party and analyze a sample each month to assess reasonableness given then-current market conditions. Additionally, for broker quotes on certain structured securities, we validate prices received against other publicly available pricing sources. Broker quotes are typically based on an income approach given the lack of available market data. As the valuation typically includes significant unobservable inputs, we classify the securities where fair value is based on our consideration of broker quotes as Level 3 measurements.

For remaining securities priced using internal models, we determine fair value using an income approach. We analyze a sample each month to assess reasonableness given then-current market conditions. We maximize the use of observable inputs but typically utilize significant unobservable inputs to determine fair value. Accordingly, the valuations are typically classified as Level 3.

A summary of the inputs used for our fixed maturity, short-term investments and equity securities based on the level in which instruments are classified is included below. We have combined certain classes of instruments together as the nature of the inputs is similar.

Level 1 measurements

Equity securities. The primary inputs to the valuation of exchange-traded equity securities include quoted prices for the identical instrument.

Short-term investments. Short-term investments primarily include commercial paper and other highly liquid debt instruments. The fair value of short-term investments classified as Level 1 is based on quoted prices for the identical instrument.

Separate account assets. The fair value of separate account assets is based on the quoted prices of the underlying fund investments and, therefore, represents Level 1 pricing.

Level 2 measurements

Fixed maturity securities

•

Third-party pricing services: In estimating the fair value of fixed maturity securities, approximately 91% of our portfolio is priced using third-party pricing sources. These pricing services utilize industry-standard valuation techniques that include market-based approaches, income-based approaches, a combination of market-based and income-based approaches or other proprietary, internally generated models as part of the valuation processes. These third-party pricing vendors maximize the use of publicly available data inputs to generate valuations for each asset class. Priority and type of inputs used may change frequently as certain inputs may be more direct drivers of valuation at the time of pricing. Examples of significant inputs incorporated by third-party pricing services may include sector and issuer spreads, seasoning, capital structure, security optionality, collateral data, prepayment assumptions, default assumptions, delinquencies, debt covenants, benchmark yields, trade data, dealer quotes, credit ratings, maturity and weighted-average life. We conduct regular meetings with our third-party pricing services for the purpose of understanding the methodologies, techniques and inputs used by the third-party pricing providers.

The following table presents a summary of the significant inputs used by our third-party pricing services for certain fair value measurements of fixed maturity securities that are classified as Level 2 as of March 31, 2018:


(Amounts in millions)	Fair value		Primary methodologies	Significant inputs
U.S. government, agencies and government-sponsored enterprises	$	5,398	Price quotes from trading desk, broker feeds	Bid side prices, trade prices, Option Adjusted Spread (“OAS”) to swap curve, Bond Market Association OAS, Treasury Curve, Agency Bullet Curve, maturity to issuer spread

State and political subdivisions	$	2,823	Multi-dimensional attribute-based modeling systems, third-party pricing vendors	Trade prices, material event notices, Municipal Market Data benchmark yields, broker quotes

Non-U.S. government	$	2,283	Matrix pricing, spread priced to benchmark curves, price quotes from market makers	Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources

U.S. corporate	$	24,940	Multi-dimensional attribute-based modeling systems, broker quotes, price quotes from market makers, internal models, OAS-based models	Bid side prices to Treasury Curve, Issuer Curve, which includes sector, quality, duration, OAS percentage and change for spread matrix, trade prices, comparative transactions, Trade Reporting and Compliance Engine (“TRACE”) reports

Non-U.S. corporate	$	10,306	Multi-dimensional attribute-based modeling systems, OAS-based models, price quotes from market makers	Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources

Residential mortgage-backed	$	3,802	OAS-based models, To Be Announced pricing models, single factor binomial models, internally priced	Prepayment and default assumptions, aggregation of bonds with similar characteristics, including collateral type, vintage, tranche type, weighted-average life, weighted-average loan age, issuer program and delinquency ratio, pay up and pay down factors, TRACE reports

Commercial mortgage-backed	$	3,336	Multi-dimensional attribute-based modeling systems, pricing matrix, spread matrix priced to swap curves, Trepp commercial mortgage-backed securities analytics model	Credit risk, interest rate risk, prepayment speeds, new issue data, collateral performance, origination year, tranche type, original credit ratings, weighted-average life, cash flows, spreads derived from broker quotes, bid side prices, spreads to daily updated swaps curves, TRACE reports

Other asset-backed	$	2,902	Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makers, internal models	Spreads to daily updated swaps curves, spreads derived from trade prices and broker quotes, bid side prices, new issue data, collateral performance, analysis of prepayment speeds, cash flows, collateral loss analytics, historical issue analysis, trade data from market makers, TRACE reports

•

Internal models: A portion of our non-U.S. government, U.S. corporate and non-U.S. corporate securities are valued using internal models. The fair value of these fixed maturity securities were $16 million, $1,058 million and $524 million, respectively, as of March 31, 2018. Internally modeled securities are primarily private fixed maturity securities where we use market observable inputs such as an interest rate yield curve, published credit spreads for similar securities based on the external ratings of the instrument and related industry sector of the issuer. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps and liquidity premiums are established using inputs from market participants.

Equity securities. The primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active.

Securities lending collateral

The fair value of securities held as collateral is primarily based on Level 2 inputs from market information for the collateral that is held on our behalf by the custodian. We determine fair value after considering prices obtained by third-party pricing services.

Short-term investments

The fair value of short-term investments classified as Level 2 is determined after considering prices obtained by third-party pricing services.

Level 3 measurements

Fixed maturity securities

•

Internal models: A portion of our U.S. corporate, non-U.S. corporate, residential mortgage-backed and other asset-backed securities are valued using internal models. The primary inputs to the valuation of the bond population include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, duration, call provisions, issuer rating, benchmark yields and credit spreads. Certain private fixed maturity securities are valued using an internal model using market observable inputs such as interest rate yield curve, as well as published credit spreads for similar securities where there are no external ratings of the instrument and include a significant unobservable input. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps are established using inputs from market participants. For structured securities, the primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, weighted-average coupon, weighted-average maturity, issuer rating, structure of the security, expected prepayment speeds and volumes, collateral type, current and forecasted loss severity, average delinquency rates, vintage of the loans, geographic region, debt service coverage ratios, payment priority with the tranche, benchmark yields and credit spreads. The fair value of our Level 3 fixed maturity securities priced using internal models was $3,224 million as of March 31, 2018.

•

Broker quotes: A portion of our state and political subdivisions, U.S. corporate, non-U.S. corporate, residential mortgage-backed, commercial mortgage-backed and other asset-backed securities are valued using broker quotes. Broker quotes are obtained from third-party providers that have current market knowledge to provide a reasonable price for securities not routinely priced by third-party pricing services. Brokers utilized for valuation of assets are reviewed annually. The fair value of our Level 3 fixed maturity securities priced by broker quotes was $468 million as of March 31, 2018.

Equity securities. The primary inputs to the valuation include broker quotes where the underlying inputs are unobservable and for internal models, structure of the security and issuer rating.

Restricted other invested assets related to securitization entities

We previously held trading securities related to securitization entities that were classified as restricted other invested assets and were carried at fair value. The trading securities represented asset-backed securities. In 2017, these trading securities were sold as we repositioned these assets in connection with the maturity of the associated liabilities. The valuation for trading securities was determined using a market approach and/or an income approach depending on the availability of information. For certain highly rated asset-backed securities, there was observable market information for transactions of the same or similar instruments, which was provided to us by a third-party pricing service and was classified as Level 2. For certain securities that are not actively traded, we determined fair value after considering third-party broker provided prices or discounted expected cash flows using current yields for similar securities and classified these valuations as Level 3.

GMWB embedded derivatives

We are required to bifurcate an embedded derivative for certain features associated with annuity products and related reinsurance agreements where we provide a GMWB to the policyholder and are required to record the GMWB embedded derivative at fair value. The valuation of our GMWB embedded derivative is based on an income approach that incorporates inputs such as forward interest rates, equity index volatility, equity index and fund correlation, and policyholder assumptions such as utilization, lapse and mortality. In addition to these inputs, we also consider risk and expense margins when determining the projected cash flows that would be determined by another market participant. While the risk and expense margins are considered in determining fair value, these inputs do not have a significant impact on the valuation. We determine fair value using an internal model based on the various inputs noted above. The resulting fair value measurement from the model is reviewed by the product actuarial, risk and finance professionals each reporting period with changes in fair value also being compared to changes in derivatives and other instruments used to mitigate changes in fair value from certain market risks, such as equity index volatility and interest rates.

For GMWB liabilities, non-performance risk is integrated into the discount rate. Our discount rate used to determine fair value of our GMWB liabilities includes market credit spreads above U.S. Treasury rates to reflect an adjustment for the non-performance risk of the GMWB liabilities. As of March 31, 2018 and December 31, 2017, the impact of non-performance risk resulted in a lower fair value of our GMWB liabilities of $58 million and $63 million, respectively.

To determine the appropriate discount rate to reflect the non-performance risk of the GMWB liabilities, we evaluate the non-performance risk in our liabilities based on a hypothetical exit market transaction as there is no exit market for these types of liabilities. A hypothetical exit market can be viewed as a hypothetical transfer of the liability to another similarly rated insurance company which would closely resemble a reinsurance transaction. Another hypothetical exit market transaction can be viewed as a hypothetical transaction from the perspective of the GMWB policyholder. In determining the appropriate discount rate to incorporate non-performance risk of the GMWB liabilities, we also considered the impacts of state guarantees embedded in the related insurance product as a form of inseparable third-party guarantee. We believe that a hypothetical exit market participant would use a similar discount rate as described above to value the liabilities.

For equity index volatility, we determine the projected equity market volatility using both historical volatility and projected equity market volatility with more significance being placed on projected near-term volatility and recent historical data. Given the different attributes and market characteristics of GMWB liabilities compared to equity index options in the derivative market, the equity index volatility assumption for GMWB liabilities may be different from the volatility assumption for equity index options, especially for the longer dated points on the curve.

Equity index and fund correlations are determined based on historical price observations for the fund and equity index.

For policyholder assumptions, we use our expected lapse, mortality and utilization assumptions and update these assumptions for our actual experience, as necessary. For our lapse assumption, we adjust our base lapse assumption by policy based on a combination of the policyholder’s current account value and GMWB benefit.

We classify the GMWB valuation as Level 3 based on having significant unobservable inputs, with equity index volatility and non-performance risk being considered the more significant unobservable inputs. As equity index volatility increases, the fair value of the GMWB liabilities will increase. Any increase in non-performance risk would increase the discount rate and would decrease the fair value of the GMWB liability. Additionally, we consider lapse and utilization assumptions to be significant unobservable inputs. An increase in our lapse assumption would decrease the fair value of the GMWB liability, whereas an increase in our utilization rate would increase the fair value.

Fixed index annuity embedded derivatives

We have fixed indexed annuity products where interest is credited to the policyholder’s account balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and recorded at fair value. Fair value is determined using an income approach where the present value of the excess cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature. The inputs used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder behavior and expected future interest credited being considered significant unobservable inputs, we classify these instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As expected future interest credited decreases, the value of our embedded derivative liability will decrease.

Indexed universal life embedded derivatives

We have indexed universal life products where interest is credited to the policyholder’s account balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and recorded at fair value. Fair value is determined using an income approach where the present value of the excess cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature. The inputs used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder behavior and expected future interest credited being considered significant unobservable inputs, we classify these instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As expected future interest credited decreases, the value of our embedded derivative liability will decrease.

Borrowings related to securitization entities

We record certain borrowings related to securitization entities at fair value. The fair value of these borrowings is determined using either a market approach or income approach, depending on the instrument and availability of market information. Given the unique characteristics of the securitization entities that issued these borrowings as well as the lack of comparable instruments, we determine fair value considering the valuation of the underlying assets held by the securitization entities and any derivatives, as well as any unique characteristics of the borrowings that may impact the valuation. After considering all relevant inputs, we determine fair value of the borrowings using the net valuation of the underlying assets and derivatives that are backing the borrowings. Accordingly, these instruments are classified as Level 3. Increases in the valuation of the underlying assets or decreases in the derivative liabilities will result in an increase in the fair value of these borrowings.

Derivatives

We consider counterparty collateral arrangements and rights of set-off when evaluating our net credit risk exposure to our derivative counterparties. Accordingly, we are permitted to include consideration of these arrangements when determining whether any incremental adjustment should be made for both the counterparty’s and our non-performance risk in measuring fair value for our derivative instruments. As a result of these counterparty arrangements, we determined that any adjustment for credit risk would not be material and we have not recorded any incremental adjustment for our non-performance risk or the non-performance risk of the derivative counterparty for our derivative assets or liabilities. We determine fair value for our derivatives using an income approach with internal models based on relevant market inputs for each derivative instrument. We also compare the fair value determined using our internal model to the valuations provided by our derivative counterparties with any significant differences or changes in valuation being evaluated further by our derivatives professionals that are familiar with the instrument and market inputs used in the valuation.

Interest rate swaps. The valuation of interest rate swaps is determined using an income approach. The primary input into the valuation represents the forward interest rate swap curve, which is generally considered an observable input, and results in the derivative being classified as Level 2. For certain interest rate swaps, the inputs into the valuation also include the total returns of certain bonds that would primarily be considered an observable input and result in the derivative being classified as Level 2.

Interest rate swaps related to securitization entities. The valuation of interest rate swaps related to securitization entities was determined using an income approach. The primary input into the valuation represented the forward interest rate swap curve, which was generally considered an observable input, and resulted in the derivative being classified as Level 2.

Inflation indexed swaps. The valuation of inflation indexed swaps was determined using an income approach. The primary inputs into the valuation represented the forward interest rate swap curve, the current consumer price index and the forward consumer price index curve, which were generally considered observable inputs, and resulted in the derivative being classified as Level 2.

Foreign currency swaps. The valuation of foreign currency swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and foreign currency exchange rates, both of which are considered an observable input, and results in the derivative being classified as Level 2.

Credit default swaps. We have single name credit default swaps and we previously sold protection under index tranche credit default swaps. For single name credit default swaps, we utilize an income approach to determine fair value based on using current market information for the credit spreads of the reference entity, which is considered observable inputs based on the reference entities of our derivatives and results in these derivatives being classified as Level 2. For index tranche credit default swaps, we utilized an income approach that utilized current market information related to credit spreads and expected defaults and losses associated with the reference entities that comprised the respective index associated with each derivative. There were significant unobservable inputs associated with the timing and amount of losses from the reference entities as well as the timing or amount of losses, if any, that were absorbed by our tranche. Accordingly, the index tranche credit default swaps were classified as Level 3. As credit spreads widened for the underlying issuers comprising the index, the change in our valuation of these credit default swaps were unfavorable.

Credit default swaps related to securitization entities. Credit default swaps related to securitization entities represented customized index tranche credit default swaps and were valued using a similar methodology as described above for index tranche credit default swaps. We determined fair value of these credit default swaps after considering both the valuation methodology described above as well as the valuation provided by the derivative counterparty. In addition to the valuation methodology and inputs described for index tranche credit default swaps, these customized credit default swaps contained a feature that permitted the securitization entity to provide the par value of underlying assets in the securitization entity to settle any losses under the credit default swap. The valuation of this settlement feature was dependent upon the valuation of the underlying assets and the timing and amount of any expected loss on the credit default swap, which was considered a significant unobservable input. Accordingly, these customized index tranche credit default swaps related to securitization entities were classified as Level 3. As credit spreads widened for the underlying issuers comprising the customized index, the change in our valuation of these credit default swaps were unfavorable.

Equity index options. We have equity index options associated with various equity indices. The valuation of equity index options is determined using an income approach. The primary inputs into the valuation represent forward interest rates, equity index volatility, equity index and time value component associated with the optionality in the derivative, which are considered significant unobservable inputs in most instances. The equity index volatility surface is determined based on market information that is not readily observable and is developed based upon inputs received from several third-party sources. Accordingly, these options are classified as Level 3. As equity index volatility increases, our valuation of these options changes favorably.

Financial futures. The fair value of financial futures is based on the closing exchange prices. Accordingly, these financial futures are classified as Level 1. The period end valuation is zero as a result of settling the margins on these contracts on a daily basis.

Equity return swaps. The valuation of equity return swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and underlying equity index values, which are generally considered observable inputs, and results in the derivative being classified as Level 2.

Forward bond purchase commitments. The valuation of forward bond purchase commitments is determined using an income approach. The primary input into the valuation represents the current bond prices and interest rates, which are generally considered an observable input, and results in the derivative being classified as Level 2.

Other foreign currency contracts. We have certain foreign currency options classified as other foreign currency contracts. The valuation of foreign currency options is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, foreign currency exchange rates, forward interest rate, foreign currency exchange rate volatility, foreign equity index volatility and time value component associated with the optionality in the derivative. As a result of the significant unobservable inputs associated with the forward interest rate, foreign currency exchange rate volatility and foreign equity index volatility inputs, the derivative is classified as Level 3. As foreign currency exchange rate volatility and foreign equity index volatility increases, the change in our valuation of these options will be favorable for purchase options and unfavorable for options sold. We also have foreign currency forward contracts where the valuation is determined using an income approach. The primary inputs into the valuation represent the forward foreign currency exchange rates, which are generally considered observable inputs and results in the derivative being classified as Level 2.

The following tables set forth our assets by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:


	March 31, 2018
(Amounts in millions)	Total		Level 1		Level 2		Level 3		NAV⁽¹⁾
Assets
Investments:
Fixed maturity securities:
U.S. government, agencies and government-sponsoredenterprises	$	5,398	$	—	$	5,398	$	—	$	—
State and political subdivisions		2,876		—		2,823		53		—
Non-U.S. government		2,299		—		2,299		—		—
U.S. corporate:
Utilities		4,874		—		4,321		553		—
Energy		2,383		—		2,237		146		—
Finance and insurance		6,447		—		5,867		580		—
Consumer—non-cyclical		4,670		—		4,591		79		—
Technology and communications		2,763		—		2,738		25		—
Industrial		1,308		—		1,269		39		—
Capital goods		2,385		—		2,282		103		—
Consumer—cyclical		1,542		—		1,290		252		—
Transportation		1,256		—		1,199		57		—
Other		370		—		204		166		—

Total U.S. corporate		27,998		—		25,998		2,000		—

Non-U.S. corporate:
Utilities		1,003		—		667		336		—
Energy		1,454		—		1,259		195		—
Finance and insurance		2,688		—		2,535		153		—
Consumer—non-cyclical		678		—		558		120		—
Technology and communications		984		—		956		28		—
Industrial		1,000		—		892		108		—
Capital goods		626		—		440		186		—
Consumer—cyclical		500		—		448		52		—
Transportation		704		—		538		166		—
Other		2,620		—		2,537		83		—

Total non-U.S. corporate		12,257		—		10,830		1,427		—

Residential mortgage-backed		3,836		—		3,802		34		—
Commercial mortgage-backed		3,342		—		3,336		6		—
Other asset-backed		3,074		—		2,902		172		—

Total fixed maturity securities		61,080		—		57,388		3,692		—

Equity securities		799		684		70		45		—

Other invested assets:
Derivative assets:
Interest rate swaps		54		—		54		—		—
Foreign currency swaps		6		—		6		—		—
Equity index options		60		—		—		60		—
Equity return swaps		1		—		1		—		—
Other foreign currency contracts		108		—		108		—		—

Total derivative assets		229		—		169		60		—

Securities lending collateral		252		—		252		—		—
Short-term investments		762		10		752		—		—
Limited partnerships		223		—		—		—		223

Total other invested assets		1,466		10		1,173		60		223

Reinsurance recoverable⁽²⁾		13		—		—		13		—
Separate account assets		6,902		6,902		—		—		—

Total assets	$	70,260	$	7,596	$	58,631	$	3,810	$	223

⁽¹⁾	Limited partnerships that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy.

⁽²⁾	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.


	December 31, 2017
(Amounts in millions)	Total		Level 1		Level 2		Level 3
Assets
Investments:
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	5,548	$	—	$	5,547	$	1
State and political subdivisions		2,926		—		2,889		37
Non-U.S. government		2,233		—		2,233		—
U.S. corporate:
Utilities		4,998		—		4,424		574
Energy		2,458		—		2,311		147
Finance and insurance		6,528		—		5,902		626
Consumer—non-cyclical		4,831		—		4,750		81
Technology and communications		2,845		—		2,772		73
Industrial		1,346		—		1,307		39
Capital goods		2,355		—		2,234		121
Consumer—cyclical		1,605		—		1,343		262
Transportation		1,291		—		1,231		60
Other		379		—		210		169

Total U.S. corporate		28,636		—		26,484		2,152

Non-U.S. corporate:
Utilities		1,017		—		674		343
Energy		1,490		—		1,314		176
Finance and insurance		2,735		—		2,574		161
Consumer—non-cyclical		712		—		588		124
Technology and communications		982		—		953		29
Industrial		1,044		—		928		116
Capital goods		645		—		454		191
Consumer—cyclical		540		—		486		54
Transportation		721		—		551		170
Other		2,725		—		2,673		52

Total non-U.S. corporate		12,611		—		11,195		1,416

Residential mortgage-backed		4,057		—		3,980		77
Commercial mortgage-backed		3,446		—		3,416		30
Other asset-backed		3,068		—		2,831		237

Total fixed maturity securities		62,525		—		58,575		3,950

Equity securities		820		696		80		44

Other invested assets:
Derivative assets:
Interest rate swaps		74		—		74		—
Foreign currency swaps		12		—		12		—
Equity index options		80		—		—		80
Other foreign currency contracts		110		—		110		—

Total derivative assets		276		—		196		80

Securities lending collateral		268		—		268		—
Short-term investments		902		107		795		—

Total other invested assets		1,446		107		1,259		80

Reinsurance recoverable ⁽¹⁾		14		—		—		14
Separate account assets		7,230		7,230		—		—

Total assets	$	72,035	$	8,033	$	59,914	$	4,088

⁽¹⁾	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers between levels at the beginning fair value for the reporting period in which the changes occur. Given the types of assets classified as Level 1, which primarily represents mutual fund investments, we typically do not have any transfers between Level 1 and Level 2 measurement categories and did not have any such transfers during any period presented.

Our assessment of whether or not there were significant unobservable inputs related to fixed maturity securities was based on our observations obtained through the course of managing our investment portfolio, including interaction with other market participants, observations related to the availability and consistency of pricing and/or rating, and understanding of general market activity such as new issuance and the level of secondary market trading for a class of securities. Additionally, we considered data obtained from third-party pricing sources to determine whether our estimated values incorporate significant unobservable inputs that would result in the valuation being classified as Level 3.

The following tables present additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:


(Amounts in millions)	Beginning balance as of January 1, 2018		Total realized and unrealized gains (losses)						Purchases		Sales			Issuances		Settlements			TransferintoLevel 3 ⁽¹⁾		Transfer out ofLevel 3 ⁽¹⁾			Ending balance as of March 31, 2018		Total gains (losses) included in net income attributable to assets still held
(Amounts in millions)	Beginning balance as of January 1, 2018		Included in net income			Included in OCI			Purchases		Sales			Issuances		Settlements			TransferintoLevel 3 ⁽¹⁾		Transfer out ofLevel 3 ⁽¹⁾			Ending balance as of March 31, 2018
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	1	$	—		$	—		$	—	$	—		$	—	$	(1	)	$	—	$	—		$	—	$	—
State and political subdivisions		37		1			(3	)		—		—			—		—			18		—			53		1
U.S. corporate:
Utilities		574		—			(18	)		3		—			—		(2	)		—		(4	)		553		—
Energy		147		—			(5	)		22		—			—		(18	)		—		—			146		—
Finance and insurance		626		1			(26	)		26		—			—		(36	)		—		(11	)		580		1
Consumer—non-cyclical		81		—			(2	)		—		—			—		—			—		—			79		—
Technology and
communications		73		—			(6	)		—		—			—		(42	)		—		—			25		—
Industrial		39		—			—			—		—			—		—			—		—			39		—
Capital goods		121		—			(8	)		—		—			—		(10	)		—		—			103		—
Consumer—cyclical		262		—			(9	)		10		—			—		(11	)		—		—			252		—
Transportation		60		—			(1	)		—		—			—		(2	)		—		—			57		—
Other		169		—			(1	)		—		—			—		(2	)		—		—			166		—

Total U.S. corporate		2,152		1			(76	)		61		—			—		(123	)		—		(15	)		2,000		1

Non-U.S. corporate:
Utilities		343		—			(9	)		22		—			—		(20	)		—		—			336		—
Energy		176		—			(4	)		23		—			—		—			—		—			195		—
Finance and insurance		161		1			(8	)		—		—			—		(1	)		—		—			153		1
Consumer—non-cyclical		124		—			(3	)		—		—			—		(1	)		—		—			120		—
Technology and
communications		29		—			(1	)		—		—			—		—			—		—			28		—
Industrial		116		—			(3	)		—		—			—		(5	)		—		—			108		—
Capital goods		191		—			(5	)		—		—			—		—			—		—			186		—
Consumer—cyclical		54		—			(2	)		—		—			—		—			—		—			52		—
Transportation		170		—			(4	)		—		—			—		—			—		—			166		—
Other		52		—			(2	)		33		—			—		—			—		—			83		—

Total non-U.S. corporate		1,416		1			(41	)		78		—			—		(27	)		—		—			1,427		1

Residential mortgage-backed		77		—			(1	)		12		—			—		—			—		(54	)		34		—
Commercial mortgage-backed		30		—			(2	)		7		—			—		—			—		(29	)		6		—
Other asset-backed		237		—			(2	)		55		—			—		(32	)		3		(89	)		172		—

Total fixed maturity securities		3,950		3			(125	)		213		—			—		(183	)		21		(187	)		3,692		3

Equity securities		44		—			—			4		(3	)		—		—			—		—			45		—

Other invested assets:
Derivative assets:
Equity index options		80		(15	)		—			14		—			—		(19	)		—		—			60		(12	)

Total derivative assets		80		(15	)		—			14		—			—		(19	)		—		—			60		(12	)

Total other invested assets		80		(15	)		—			14		—			—		(19	)		—		—			60		(12	)

Reinsurance recoverable ⁽²⁾		14		(2	)		—			—		—			1		—			—		—			13		(2	)

Total Level 3 assets	$	4,088	$	(14	)	$	(125	)	$	231	$	(3	)	$	1	$	(202	)	$	21	$	(187	)	$	3,810	$	(11	)

⁽¹⁾

The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.

⁽²⁾	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.


	Beginning balance as of January 1, 2017		Total realized and unrealized gains (losses)						Purchases		Sales			Issuances		Settlements			Transfer into Level 3 ⁽¹⁾		Transfer out of Level 3 ⁽¹⁾			Ending balance as of March 31, 2017		Total gains (losses) included in net income attributable to assets still held
(Amounts in millions)	Beginning balance as of January 1, 2017		Included in net income			Included in OCI			Purchases		Sales			Issuances		Settlements			Transfer into Level 3 ⁽¹⁾		Transfer out of Level 3 ⁽¹⁾			Ending balance as of March 31, 2017
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	2	$	—		$	—		$	—	$	—		$	—	$	(1	)	$	—	$	—		$	1	$	—
State and political subdivisions		37		1			(1	)		—		—			—		—			—		—			37		1
U.S. corporate:
Utilities		576		—			7			14		—			—		(2	)		—		(17	)		578		—
Energy		210		(1	)		2			—		(10	)		—		(23	)		—		(16	)		162		(1	)
Finance and insurance		786		4			12			29		(10	)		—		(3	)		—		—			818		4
Consumer—non-cyclical		121		—			1			—		—			—		—			—		—			122		—
Technology and communications		54		1			1			10		—			—		—			—		(7	)		59		1
Industrial		48		—			(1	)		—		—			—		—			—		—			47		—
Capital goods		152		—			1			—		—			—		—			—		—			153		—
Consumer—cyclical		258		—			5			2		—			—		(2	)		—		—			263		—
Transportation		139		1			1			—		—			—		(2	)		—		(42	)		97		—
Other		143		—			1			—		—			—		(2	)		—		—			142		—

Total U.S. corporate		2,487		5			30			55		(20	)		—		(34	)		—		(82	)		2,441		4

Non-U.S. corporate:
Utilities		386		—			2			30		—			—		—			—		(32	)		386		—
Energy		206		—			2			—		(1	)		—		(1	)		—		—			206		—
Finance and insurance		182		2			4			—		—			—		(20	)		—		—			168		1
Consumer—non-cyclical		139		—			1			—		—			—		(11	)		—		—			129		—
Technology and communications		67		—			—			—		—			—		(19	)		—		—			48		—
Industrial		109		—			1			—		—			—		—			—		—			110		—
Capital goods		169		—			1			—		—			—		—			—		—			170		—
Consumer—cyclical		69		—			—			—		—			—		(2	)		—		—			67		—
Transportation		181		—			2			—		—			—		—			10		—			193		—
Other		25		—			(1	)		—		—			—		—			—		—			24		—

Total non-U.S. corporate		1,533		2			12			30		(1	)		—		(53	)		10		(32	)		1,501		1

Residential mortgage-backed		43		—			—			4		—			—		(1	)		—		—			46		—
Commercial mortgage-backed		54		—			4			1		—			—		—			—		—			59		—
Other asset-backed		145		—			—			54		—			—		(2	)		5		(27	)		175		—

Total fixed maturity securities		4,301		8			45			144		(21	)		—		(91	)		15		(141	)		4,260		6

Equity securities		47		—			—			—		—			—		—			—		—			47		—

Other invested assets:
Derivative assets:
Equity index options		72		13			—			12		—			—		(20	)		—		—			77		12
Other foreign currency contracts		3		(2	)		—			—		—			—		—			—		—			1		(3	)

Total derivative assets		75		11			—			12		—			—		(20	)		—		—			78		9

Total other invested assets		75		11			—			12		—			—		(20	)		—		—			78		9

Restricted other invested assets related to securitization entities		131		—			—			—		(131	)		—		—			—		—			—		—
Reinsurance recoverable ⁽²⁾		16		(2	)		—			—		—			1		—			—		—			15		(2	)

Total Level 3 assets	$	4,570	$	17		$	45		$	156	$	(152	)	$	1	$	(111	)	$	15	$	(141	)	$	4,400	$	13

⁽¹⁾

The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.

⁽²⁾	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

The following table presents the gains and losses included in net income from assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value and the related income statement line item in which these gains and losses were presented for the three months ended March 31:


(Amounts in millions)	2018			2017
Total realized and unrealized gains (losses) included in net income:
Net investment income	$	3		$	9
Net investment gains (losses)		(17	)		8

Total	$	(14	)	$	17

Net gains (losses) included in net income attributable to assets still held:
Net investment income	$	3		$	7
Net investment gains (losses)		(14	)		6

Total	$	(11	)	$	13

The amount presented for unrealized gains (losses) included in net income for available-for-sale securities represents impairments and accretion on certain fixed maturity securities.

The following table presents a summary of the significant unobservable inputs used for certain asset fair value measurements that are based on internal models and classified as Level 3 as of March 31, 2018:

(Amounts in millions)

Valuation
technique

Fair value

Unobservable
input

Range

Weighted-
average

Fixed maturity securities:

U.S. corporate:

Utilities

Internal models

$

535

Credit spreads

72bps - 309bps

122bps

Energy

Internal models

124

Credit spreads

82bps - 201bps

142bps

Finance and insurance

Internal models

559

Credit spreads

83bps - 311bps

159bps

Consumer—non-cyclical

Internal models

79

Credit spreads

94bps - 132bps

111bps

Technology and communications

Internal models

25

Credit spreads

65bps - 224bps

141bps

Industrial

Internal models

12

Credit spreads

194bps

Not applicable

Capital goods

Internal models

102

Credit spreads

97bps - 224bps

126bps

Consumer—cyclical

Internal models

209

Credit spreads

78bps - 180bps

123bps

Transportation

Internal models

51

Credit spreads

62bps - 110bps

85bps

Other

Internal models

156

Credit spreads

77bps - 110bps

85bps

Total U.S. corporate

Internal models

$

1,852

Credit spreads

62bps - 311bps

131bps

Non-U.S. corporate:

Utilities

Internal models

$

336

Credit spreads

76bps - 150bps

114bps

Energy

Internal models

164

Credit spreads

93bps - 180bps

120bps

Finance and insurance

Internal models

144

Credit spreads

78bps - 232bps

134bps

Consumer—non-cyclical

Internal models

109

Credit spreads

67bps - 194bps

117bps

Technology and communications

Internal models

28

Credit spreads

124bps - 231bps

170bps

Industrial

Internal models

108

Credit spreads

94bps - 175bps

134bps

Capital goods

Internal models

158

Credit spreads

94bps - 224bps

137bps

Consumer—cyclical

Internal models

47

Credit spreads

87bps - 159bps

106bps

Transportation

Internal models

146

Credit spreads

82bps - 194bps

112bps

Other

Internal models

83

Credit spreads

97bps - 231bps

147bps

Total non-U.S. corporate

Internal models

$

1,323

Credit spreads

67bps - 232bps

124bps

Derivative assets:

Equity index options

Discounted cash
flows

$

60

Equity index
volatility

6% - 42%

21

%

Certain classes of instruments classified as Level 3 are excluded above as a result of not being material or due to limitations in being able to obtain the underlying inputs used by certain third-party sources, such as broker quotes, used as an input in determining fair value.

The following tables set forth our liabilities by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:


	March 31, 2018
(Amounts in millions)	Total		Level 1		Level 2		Level 3
Liabilities
Policyholder account balances:
GMWB embedded derivatives ⁽¹⁾	$	242	$	—	$	—	$	242
Fixed index annuity embedded derivatives		408		—		—		408
Indexed universal life embedded derivatives		13		—		—		13

Total policyholder account balances		663		—		—		663

Derivative liabilities:
Interest rate swaps		58		—		58		—
Foreign currency swaps		2		—		2		—
Other foreign currency contracts		24		—		24		—

Total derivative liabilities		84		—		84		—

Total liabilities	$	747	$	—	$	84	$	663

⁽¹⁾	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.


	December 31, 2017
(Amounts in millions)	Total		Level 1		Level 2		Level 3
Liabilities
Policyholder account balances:
GMWB embedded derivatives ⁽¹⁾	$	250	$	—	$	—	$	250
Fixed index annuity embedded derivatives		419		—		—		419
Indexed universal life embedded derivatives		14		—		—		14

Total policyholder account balances		683		—		—		683

Derivative liabilities:
Interest rate swaps		25		—		25		—
Equity return swaps		2		—		2		—
Other foreign currency contracts		20		—		20		—

Total derivative liabilities		47		—		47		—

Total liabilities	$	730	$	—	$	47	$	683

⁽¹⁾	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

The following tables present additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:


			Total realized and unrealized (gains) losses					Purchases		Sales		Issuances		Settlements			Transfer into Level 3		Transfer out of Level 3		Ending balance as of March 31, 2018		Total (gains) losses included in net (income) attributable to liabilities still held
(Amounts in millions)	Beginning balance as of January 1, 2018		Included in net (income)			Included in OCI		Purchases		Sales		Issuances		Settlements			Transfer into Level 3		Transfer out of Level 3		Ending balance as of March 31, 2018
Policyholder account balances:
GMWB embedded derivatives ⁽¹⁾	$	250	$	(16	)	$	—	$	—	$	—	$	8	$	—		$	—	$	—	$	242	$	(12	)
Fixed index annuity embedded derivatives		419		(8	)		—		—		—		—		(3	)		—		—		408		(8	)
Indexed universal life embedded derivatives		14		(5	)		—		—		—		4		—			—		—		13		(5	)

Total policyholder account balances		683		(29	)		—		—		—		12		(3	)		—		—		663		(25	)

Total Level 3 liabilities	$	683	$	(29	)	$	—	$	—	$	—	$	12	$	(3	)	$	—	$	—	$	663	$	(25	)

⁽¹⁾	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.


			Total realized and unrealized (gains) losses					Purchases		Sales		Issuances		Settlements			Transfer into Level 3		Transfer out of Level 3		Ending balance as of March 31, 2017		Total (gains) losses included in net (income) attributable to liabilities still held
(Amounts in millions)	Beginning balance as of January 1, 2017		Included in net (income)			Included in OCI		Purchases		Sales		Issuances		Settlements			Transfer into Level 3		Transfer out of Level 3		Ending balance as of March 31, 2017
Policyholder account balances:
GMWB embedded derivatives ⁽¹⁾	$	303	$	(35	)	$	—	$	—	$	—	$	7	$	—		$	—	$	—	$	275	$	(31	)
Fixed index annuity embedded derivatives		344		20			—		—		—		—		(3	)		—		—		361		20
Indexed universal life embedded derivatives		11		(1	)		—		—		—		2		—			—		—		12		(1	)

Total policyholder account balances		658		(16	)		—		—		—		9		(3	)		—		—		648		(12	)

Borrowings related to securitization entities		12		1			—		—		—		—		—			—		—		13		1

Total Level 3 liabilities	$	670	$	(15	)	$	—	$	—	$	—	$	9	$	(3	)	$	—	$	—	$	661	$	(11	)

⁽¹⁾	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

The following table presents the gains and losses included in net (income) from liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value and the related income statement line item in which these gains and losses were presented for the three months ended March 31:


(Amounts in millions)		2018			2017
Total realized and unrealized (gains) losses included in net (income):
Net investment income	$	—		$	—
Net investment (gains) losses		(29	)		(15	)

Total	$	(29	)	$	(15	)

Total (gains) losses included in net (income) attributable to liabilities still held:
Net investment income	$	—		$	—
Net investment (gains) losses		(25	)		(11	)

Total	$	(25	)	$	(11	)

Purchases, sales, issuances and settlements represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases, sales and settlements of fixed maturity and equity securities and purchases, issuances and settlements of derivative instruments.

Issuances presented for GMWB embedded derivative liabilities are characterized as the change in fair value associated with the product fees recognized that are attributed to the embedded derivative to equal the expected future benefit costs upon issuance. Issuances for fixed index annuity and indexed universal life embedded derivative liabilities represent the amount of the premium received that is attributed to the value of the embedded derivative. Settlements of embedded derivatives are characterized as the change in fair value upon exercising the embedded derivative instrument, effectively representing a settlement of the embedded derivative instrument. We have shown these changes in fair value separately based on the classification of this activity as effectively issuing and settling the embedded derivative instrument with all remaining changes in the fair value of these embedded derivative instruments being shown separately in the category labeled “included in net (income)” in the tables presented above.

The following table presents a summary of the significant unobservable inputs used for certain liability fair value measurements that are based on internal models and classified as Level 3 as of March 31, 2018:

(Amounts in millions)

Valuation
technique

Fair
value

Unobservable input

Range

Weighted-
average

Policyholder account balances:

Withdrawal
utilization rate

42% - 85%

66%

Lapse rate

— % - 8%

4%

Non-performance
risk (credit
spreads)

30bps - 83bps

69bps

GMWB embedded derivatives ⁽¹⁾

Stochastic cash
flow model

$242

Equity index
volatility

15% - 24%

21%

Fixed index annuity embeddedderivatives

Option budget
method

$408

Expected future
interest credited

— % - 2%

1%

Indexed universal life embeddedderivatives

Option budget
method

$13

Expected future
interest credited

3% - 10%

6%

⁽¹⁾	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Liability for Policy and Contract Claims

3 Months Ended

Mar. 31, 2018

Liability for Policy and Contract Claims

(7) Liability for Policy and Contract Claims

The following table sets forth changes in our liability for policy and contract claims as of the dates indicated:


	As of or for the three months endedMarch 31,
(Amounts in millions)	2018			2017
Beginning balance	$	9,594		$	9,256
Less reinsurance recoverables		(2,419	)		(2,409	)

Net beginning balance		7,175			6,847

Incurred related to insured events of:
Current year		998			937
Prior years		(108	)		(106	)

Total incurred		890			831

Paid related to insured events of:
Current year		(175	)		(178	)
Prior years		(692	)		(656	)

Total paid		(867	)		(834	)

Interest on liability for policy and contract claims		81			73
Foreign currency translation		(5	)		14

Net ending balance		7,274			6,931
Add reinsurance recoverables		2,377			2,364

Ending balance	$	9,651		$	9,295

The liability for policy and contract claims represents our current best estimate; however, there may be future adjustments to this estimate and related assumptions. Such adjustments, reflecting any variety of new and adverse trends, could possibly be significant, and result in increases in reserves by an amount that could be material to our results of operations and financial condition and liquidity.

For the three months ended March 31, 2018 and 2017, the favorable development of $108 million and $106 million, respectively, related to insured events of prior years was primarily attributable to favorable claim terminations in our long-term care insurance business.

Borrowings

3 Months Ended

Mar. 31, 2018

Borrowings

(8) Borrowings

(a) Long-Term Borrowings

The following table sets forth total long-term borrowings as of the dates indicated:


(Amounts in millions)	March 31, 2018			December 31, 2017
Genworth Holdings ⁽¹⁾
Floating Rate Senior Secured Term Loan Facility, due 2023	$	448		$	—
6.52% Senior Notes, due 2018		597			597
7.70% Senior Notes, due 2020		397			397
7.20% Senior Notes, due 2021		381			381
7.625% Senior Notes, due 2021		704			704
4.90% Senior Notes, due 2023		399			399
4.80% Senior Notes, due 2024		400			400
6.50% Senior Notes, due 2034		297			297
6.15% Fixed-to-Floating Rate Junior Subordinated Notes, due 2066		598			598

Subtotal		4,221			3,773
Bond consent fees		(31	)		(33	)
Deferred borrowing charges		(24	)		(16	)

Total Genworth Holdings		4,166			3,724

Canada⁽²⁾
5.68% Senior Notes, due 2020		213			219
4.24% Senior Notes, due 2024		124			128

Subtotal		337			347
Deferred borrowing charges		(1	)		(1	)

Total Canada		336			346

Australia⁽³⁾
Floating Rate Junior Notes, due 2025		154			156
Deferred borrowing charges		(2	)		(2	)

Total Australia		152			154

Total	$	4,654		$	4,224

⁽¹⁾

We have the option to redeem all or a portion of the senior notes at any time with notice to the noteholders at a price equal to the greater of 100% of principal or the sum of the present value of the remaining scheduled payments of principal and interest discounted at the then-current treasury rate plus an applicable spread.

⁽²⁾	Senior notes issued by Genworth MI Canada Inc. (“Genworth Canada”), our majority-owned subsidiary.

⁽³⁾	Subordinated floating rate notes issued by Genworth Financial Mortgage Insurance Pty Limited, our indirect wholly-owned subsidiary.

Genworth Holdings

On March 7, 2018, Genworth Holdings entered into a $450 million senior secured term loan facility (“Term Loan”), which matures in March 2023 and was issued at a 0.5% discount. Principal payments under the agreement are due quarterly, commencing on June 30, 2018, and are payable in equal amounts of 0.25% per quarter of the original principal amount with the remaining balance due at maturity. At our option, the Term Loan will bear interest at either an adjusted London Interbank Offered Rate (“LIBOR”) no lower than 1.0% plus a margin of 4.5% per annum or an alternate base rate plus a margin of 3.5% per annum. The interest rate on the Term Loan as of March 31, 2018 was 6.2%. We incurred $7 million of borrowing costs that were deferred. The Term Loan is unconditionally guaranteed by Genworth Financial, and Genworth Financial International Holdings, LLC (“GFIH”) has provided a limited recourse guarantee to the lenders of Genworth Holdings’ outstanding Term Loan, which is secured by GFIH’s ownership interest in Genworth Canada’s outstanding common shares. GFIH is our indirect wholly-owned subsidiary and owns approximately 40.5% of the outstanding common stock of Genworth Canada. The Term Loan is subject to other terms and conditions, including but not limited to: voluntary prepayments subject to prepayment penalties, mandatory prepayments in the event of certain asset sales or the incurrence of further indebtedness by Genworth Financial and various financial covenants.

Income Taxes

3 Months Ended

Mar. 31, 2018

Income Taxes

(9) Income Taxes

The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows for the periods indicated:


	Three months ended March 31,
(Amounts in millions)	2018			2017
Statutory U.S. federal income tax rate		21.0	%		35.0	%
Increase (reduction) in rate resulting from:
Effect of foreign operations		2.9			—
Swaps terminated prior to the TCJA		2.3			—
Other, net		1.4			(0.1	)

Effective rate		27.6	%		34.9	%

The decrease in the effective tax rate was primarily attributable to the enactment of the TCJA, which includes a change in the U.S. corporate federal income tax rate from 35% to 21%. This decrease was partially offset by the effect of foreign operations, which had an overall increase on the effective tax rate as our primary foreign subsidiaries are now in jurisdictions with higher statutory tax rates than the United States. The decrease was also partially offset by tax expense in our long-term care insurance business related to gains on forward starting swaps settled prior to the enactment of the TCJA, which are tax effected at 35% as they are amortized into net investment income.

As of December 31, 2017, as prescribed by the SEC’s Staff Accounting Bulletin (“SAB”) 118, we recorded provisional estimates of the tax impact of certain changes in tax law under the TCJA and recorded no amount on items for which a reasonable estimate could not be made.

As of March 31, 2018, we are still in the process of completing the accounting for these provisional estimates and refining our computations, as follows:

Deferred tax assets and liabilities

We recorded a provisional tax benefit of $154 million in 2017 related to remeasurement of certain deferred tax assets and liabilities as a result of the newly enacted tax rate. The Internal Revenue Service has indicated that additional guidance will be forthcoming with respect to several technical areas within the TCJA, which could affect the measurement of these balances or potentially give rise to new deferred tax amounts. During the three months ended March 31, 2018, there were no changes to the provisional estimates made in 2017 and no additional measurement period adjustments were recorded.

Foreign tax effects

We recorded a provisional tax expense of $63 million in 2017 related to the one-time transition tax on mandatory deemed repatriation of earnings and profits (“E&P”). We have not yet completed our calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition tax is based, in part, on the amount of those earnings held in cash and other specified assets. This amount may change when we finalize the calculation of our post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets. During the three months ended March 31, 2018, there were no changes to the provisional estimates made in 2017 and no additional measurement period adjustments were recorded.

Insurance reserve transition adjustment

We recorded a provisional reclassification in deferred tax assets and liabilities in the amount of $134 million in 2017 related to the transition adjustment required under the TCJA with respect to life insurance policyholder reserves. We continue to refine our insurance reserve calculations and apply the new reserving rules under the TCJA on a product level basis. During the three months ended March 31, 2018, we updated our provisional estimate and identified a measurement period increase to this reclassification of $19 million. This measurement period adjustment had no impact on net income, and we will continue to refine this estimate throughout the measurement period.

As of March 31, 2018, we are still in the process of completing the accounting for the following areas for which a reasonable estimate could not be made.

Foreign Tax Effects

We are still in the process of analyzing the impact of the Global Intangible Low Taxed Income (“GILTI”) and Base Erosion Anti-Abuse Tax (“BEAT”), including accounting policy elections. During the three months ended March 31, 2018, we have included the current tax effects of GILTI and BEAT taxes in current year earnings, but we have not yet made a policy election with respect to the accounting for the potential deferred tax effects of the GILTI tax and no measurement period adjustment has been recorded.

State tax effects

We have not analyzed certain areas of state income taxes, including the treatment of the one-time transition tax. Accordingly, no reasonable estimate can be made, and no measurement period adjustment has been recorded.

Further regulatory guidance related to the TCJA is expected to be issued in 2018 which may result in changes to our current estimates. Any revisions to the estimated impacts of the TCJA will be recorded quarterly until the computations are complete which is expected no later than the fourth quarter of 2018.

Segment Information

3 Months Ended

Mar. 31, 2018

Segment Information

(10) Segment Information

We have the following five operating business segments: U.S. Mortgage Insurance; Canada Mortgage Insurance; Australia Mortgage Insurance; U.S Life Insurance (which includes our long-term care insurance, life insurance and fixed annuities businesses); and Runoff (which includes the results of non-strategic products which have not been actively sold). In addition to our five operating business segments, we also have Corporate and Other activities which include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are managed outside of our operating segments, including certain smaller international mortgage insurance businesses and discontinued operations.

On December 22, 2017, the TCJA was signed into law. The TCJA reduced the U.S. corporate federal income tax rate to 21% effective for taxable years beginning on January 1, 2018 and migrated the worldwide tax system to a territorial international tax system. Therefore, beginning on January 1, 2018 we taxed our international businesses at their local statutory tax rates and our domestic businesses at the new enacted tax rate of 21%. We allocate our consolidated provision for income taxes to our operating segments. Our allocation methodology applies a specific tax rate to the pre-tax income (loss) of each segment, which is then adjusted in each segment to reflect the tax attributes of items unique to that segment such as foreign income. The difference between the consolidated provision for income taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other activities.

The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year.

We use the same accounting policies and procedures to measure segment income (loss) and assets as our consolidated net income and assets. Our chief operating decision maker evaluates segment performance and allocates resources on the basis of “adjusted operating income available to Genworth Financial, Inc.’s common stockholders.” We define adjusted operating income available to Genworth Financial, Inc.’s common stockholders as income from continuing operations excluding the after-tax effects of income attributable to noncontrolling interests, net investment gains (losses), goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. Gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse funding obligations, early termination fees for other financing restructuring and/or resulting gains (losses) on reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result of impairments, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating income available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not indicative of overall operating trends.

While some of these items may be significant components of net income available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that adjusted operating income available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from or incorporate adjusted operating income available to Genworth Financial, Inc.’s common stockholders, are appropriate measures that are useful to investors because they identify the income attributable to the ongoing operations of the business. Management also uses adjusted operating income available to Genworth Financial, Inc.’s common stockholders as a basis for determining awards and compensation for senior management and to evaluate performance on a basis comparable to that used by analysts. However, the items excluded from adjusted operating income available to Genworth Financial, Inc.’s common stockholders have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income available to Genworth Financial, Inc.’s common stockholders is not a substitute for net income available to Genworth Financial, Inc.’s common stockholders determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies.

In the first quarter of 2018, we assumed a tax rate of 21% on certain adjustments to reconcile net income available to Genworth Financial, Inc.’s common stockholders and adjusted operating income available to Genworth Financial, Inc.’s common stockholders (unless otherwise indicated). In the prior year, we assumed a tax rate of 35%, the previous U.S. corporate federal income tax rate prior to the enactment of the TCJA, on certain adjustments to reconcile net income available to Genworth Financial, Inc.’s common stockholders and adjusted operating income available to Genworth Financial, Inc.’s common stockholders. These adjustments are also net of the portion attributable to noncontrolling interests and net investment gains (losses) are adjusted for DAC and other intangible amortization and certain benefit reserves.

We recorded a pre-tax expense of $1 million in the first quarter of 2017 related to restructuring costs as the company continued to evaluate and appropriately size its organizational needs and expenses. There were no infrequent or unusual items excluded from adjusted operating income during the periods presented.

The following is a summary of revenues for our segments and Corporate and Other activities for the periods indicated:


	Three months ended March 31,
(Amounts in millions)	2018		2017
Revenues:
U.S. Mortgage Insurance segment	$	200	$	187

Canada Mortgage Insurance segment		158		169

Australia Mortgage Insurance segment		107		122

U.S. Life Insurance segment:
Long-term care insurance		1,020		994
Life insurance		379		417
Fixed annuities		182		205

U.S. Life Insurance segment		1,581		1,616

Runoff segment		68		87

Corporate and Other activities		1		(10	)

Total revenues	$	2,115	$	2,171

The following tables present the reconciliation of net income available to Genworth Financial, Inc.’s common stockholders to adjusted operating income available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and Other activities and a summary of adjusted operating income available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and Other activities for the periods indicated:


	Three months ended March 31,
(Amounts in millions)	2018			2017
Net income available to Genworth Financial, Inc.’s common stockholders	$	112		$	155
Add: net income attributable to noncontrolling interests		53			61

Net income		165			216
Loss from discontinued operations, net of taxes		—			—

Income from continuing operations		165			216
Less: income from continuing operations attributable to noncontrolling interests		53			61

Income from continuing operations available to Genworth Financial, Inc.’s common stockholders		112			155
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net ⁽¹⁾		17			(20	)
Expenses related to restructuring		—			1
Taxes on adjustments		(4	)		7

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders	$	125		$	143

⁽¹⁾

For the three months ended March 31, 2018, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(3) million. For the three months ended March 31, 2018 and 2017, net investment (gains) losses were also adjusted for net investment gains (losses) attributable to noncontrolling interests of $(11) million and $14 million, respectively.


	Three months ended March 31,
(Amounts in millions)	2018			2017
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders:
U.S. Mortgage Insurance segment	$	111		$	73

Canada Mortgage Insurance segment		49			36

Australia Mortgage Insurance segment		19			13

U.S. Life Insurance segment:
Long-term care insurance		(32	)		14
Life insurance		(1	)		16
Fixed annuities		28			23

U.S. Life Insurance segment		(5	)		53

Runoff segment		10			14
Corporate and Other activities		(59	)		(46	)

Adjusted operating income available to Genworth Financial, Inc.’s common stockholders	$	125		$	143

The following is a summary of total assets for our segments and Corporate and Other activities as of the dates indicated:


(Amounts in millions)	March 31, 2018		December 31, 2017
Assets:
U.S. Mortgage Insurance segment	$	3,316	$	3,273
Canada Mortgage Insurance segment		5,307		5,534
Australia Mortgage Insurance segment		2,829		2,973
U.S. Life Insurance segment		79,933		81,295
Runoff segment		10,683		10,907
Corporate and Other activities		1,705		1,315

Total assets	$	103,773	$	105,297

Commitments and Contingencies

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies

(11) Commitments and Contingencies

(a) Litigation and Regulatory Matters

We face the risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In our insurance operations, we are, have been, or may become subject to class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, increases to in-force long-term care insurance premiums, payment of contingent or other sales commissions, claims payments and procedures, product design, product disclosure, product administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on products, recommending unsuitable products to customers, our pricing structures and business practices in our mortgage insurance businesses, such as captive reinsurance arrangements with lenders and contract underwriting services, violations of the Real Estate Settlement and Procedures Act of 1974 or related state anti-inducement laws, and mortgage insurance policy rescissions and curtailments, and breaching fiduciary or other duties to customers, including but not limited to breach of customer information. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts which may remain unknown for substantial periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes with counterparties. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships, post-closing obligations associated with previous dispositions and securities lawsuits. In addition, we are also subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations from state, federal and international regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business, financial condition or results of operations.

In January 2016, Genworth Financial, Inc., its current chief executive officer, its former chief executive officer, its former chief financial officer and current and former members of its board of directors were named in a shareholder derivative suit filed by International Union of Operating Engineers Local No. 478 Pension Fund, Richard L. Salberg and David Pinkoski in the Court of Chancery of the State of Delaware. The case was captioned Int’l Union of Operating Engineers Local No. 478 Pension Fund, et al v. McInerney, et al. In February 2016, Genworth Financial, Inc., its current chief executive officer, its former chief executive officer, its former chief financial officer and current and former members of its board of directors were named in a second shareholder derivative suit filed by Martin Cohen in the Court of Chancery of the State of Delaware. The case was captioned Cohen v. McInerney, et al. On February 23, 2016, the Court of Chancery of the State of Delaware consolidated these derivative suits under the caption Genworth Financial, Inc. Consolidated Derivative Litigation. On March 28, 2016, plaintiffs in the consolidated action filed an amended complaint. The amended complaint alleges breaches of fiduciary duties concerning Genworth’s long-term care insurance reserves and concerning Genworth’s Australian mortgage insurance business, including our plans for an IPO of the business and seeks unspecified damages, costs, attorneys’ fees and such equitable relief as the court may deem proper. The amended consolidated complaint also adds Genworth’s current chief financial officer as a defendant, based on the current chief financial officer’s alleged conduct in her former capacity as Genworth’s controller and principal accounting officer. We moved to dismiss the consolidated action on May 27, 2016. Thereafter, plaintiffs filed a substantially similar second amended complaint which we moved to dismiss on September 16, 2016. The motion is fully briefed and awaiting disposition by the court. The action is stayed pending the completion of the proposed China Oceanwide transaction.

In October 2016, Genworth Financial, Inc., its current chief executive officer, its former chief executive officer, its current chief financial officer, its former chief financial officer and current and former members of its board of directors were named in a shareholder derivative suit filed by Esther Chopp in the Court of Chancery of the State of Delaware. The case is captioned Chopp v. McInerney, et al. The complaint alleges that Genworth’s board of directors wrongfully refused plaintiff’s demand to commence litigation on behalf of Genworth and asserts claims for breaches of fiduciary duties, waste, contribution and indemnification, and unjust enrichment concerning Genworth’s long-term care insurance reserves and concerning Genworth’s Australian mortgage insurance business, including our plans for an IPO of the business, and seeks unspecified damages, costs, attorneys’ fees and such equitable relief as the court may deem proper. We filed a motion to dismiss on November 14, 2016. The action is stayed pending the completion of the proposed China Oceanwide transaction.

In January 2017, two putative stockholder class action lawsuits, captioned Rice v. Genworth Financial Incorporated, et al, and James v. Genworth Financial, Inc. et al, were filed in the United States District Court for the Eastern District of Virginia, Richmond Division, against Genworth and its board of directors. A third putative stockholder class action lawsuit captioned Rosenfeld Family Trust v. Genworth Financial, Inc. et al, was filed in the United States District Court for the District of Delaware against Genworth and its board of directors. In February 2017, a fourth putative class action lawsuit captioned Chopp v. Genworth Financial, Inc. et al, was filed in the United States District Court for the District of Delaware against Genworth and its board of directors and a fifth putative class action lawsuit captioned Ratliff v. Genworth Financial, Inc. et al, was filed in the United States District Court for the Eastern District of Virginia, Richmond Division, against Genworth and its board of directors. The complaints in all five actions allege, among other things, that the preliminary proxy statement filed by Genworth with the SEC on December 21, 2016 contains false and/or materially misleading statements and/or omits material information. The complaints assert claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, and seek equitable relief, including declaratory and injunctive relief, and an award of attorneys’ fees and expenses. On February 2, 2017, the plaintiff in Rice filed a motion for a preliminary injunction to enjoin the transaction described in the preliminary proxy. On February 10, 2017, defendants filed an opposition to the preliminary injunction motion in the Rice action. Also on February 10, 2017, the plaintiff in Rosenfeld Family Trust filed a motion for a preliminary injunction to enjoin the transaction described in the preliminary proxy. On February 14, 2017, defendants filed a motion to transfer the Rosenfeld Family Trust action to the Eastern District of Virginia. On February 15, 2017, defendants filed a motion to transfer the Chopp action to the Eastern District of Virginia. On February 21, 2017, the parties to the Eastern District of Virginia actions (Rice, James and Ratliff) reached an agreement in principle to resolve the pending preliminary injunction motion in the Eastern District of Virginia through additional disclosure prior to the March 7, 2017 stockholder vote on the proposed merger transaction. On February 22, 2017, the plaintiffs in the Eastern District of Virginia withdrew their preliminary injunction motion in consideration of the agreed disclosures to be filed in a Form 8-K by February 24, 2017. Also on February 22, 2017, the court in the District of Delaware suspended briefing on the motion for preliminary injunction in the Rosenfeld Family Trust action and entered an order transferring the Rosenfeld Family Trust and Chopp actions to the Eastern District of Virginia. On February 23, 2017, the court in the Eastern District of Virginia set the Rosenfeld Family Trust preliminary injunction motion for a hearing on March 1, 2017. On February 26, 2017, defendants filed an opposition to the preliminary injunction motion in the Rosenfeld Family Trust action. On February 27, 2017, the parties in the Rosenfeld Family Trust action reached an agreement in principle to resolve the pending preliminary injunction motion in the Rosenfeld Family Trust action through additional disclosure prior to the March 7, 2017 stockholder vote on the proposed merger transaction, and the plaintiff in the Rosenfeld Family Trust action withdrew its preliminary injunction motion in consideration of the agreed disclosures as filed in a Form 8-K on February 28, 2017. On March 6, 2017, the court in the Eastern District of Virginia entered an order setting a schedule for proceedings to appoint a lead plaintiff and lead counsel for the purported class action. On March 7, 2017, the court in the Eastern District of Virginia consolidated the Rice, James, Ratliff, Rosenfeld Family Trust, and Chopp actions. On July 5, 2017, the court in the Eastern District of Virginia heard oral argument on the motion to appoint a lead plaintiff and lead counsel. On August 25, 2017, the court in the Eastern District of Virginia entered an order appointing the plaintiffs Alexander Rice and Brian James as lead plaintiffs and their counsel as lead counsel. In November, 2017, the parties reached an agreement in principle to settle the action based upon the previously provided additional disclosures, subject to confirmatory discovery and court approval. On April 4, 2018, the parties entered into a stipulation of settlement. On April 24, 2018, the court in the Eastern District of Virginia entered an order preliminarily approving the settlement and setting a final approval hearing in connection with the settlement for July 3, 2018.

In December 2017, Genworth Holdings and Genworth Financial were named as defendants in an action captioned AXA S.A. v. Genworth Financial International Holdings, Inc., et al., in the High Court of Justice, Business and Property Courts of England and Wales. In the action, AXA seeks in excess of £28 million on an indemnity provided for in the 2015 agreement pursuant to which Genworth sold to AXA two insurance companies, Financial Insurance Company Limited and Financial Assurance Company Limited, relating to alleged remediation it has paid to customers who purchased payment protection insurance. In February 2018, Genworth served a Particulars of Defence and counterclaim against AXA, and also served other counterclaims against various parties, including Santander Cards UK Limited (“Santander”), alleging that Santander is responsible for any remediation paid to payment protection insurance customers. AXA and Santander have applied to the court for orders dismissing or staying the counterclaims. We intend to vigorously defend this action.

At this time, other than as noted above, we cannot determine or predict the ultimate outcome of any of the pending legal and regulatory matters specifically identified above or the likelihood of potential future legal and regulatory matters against us. Except as disclosed above, we also are not able to provide an estimate or range of reasonably possible losses related to these matters. Therefore, we cannot ensure that the current investigations and proceedings will not have a material adverse effect on our business, financial condition or results of operations. In addition, it is possible that related investigations and proceedings may be commenced in the future, and we could become subject to additional unrelated investigations and lawsuits. Increased regulatory scrutiny and any resulting investigations or proceedings could result in new legal precedents and industry-wide regulations or practices that could adversely affect our business, financial condition and results of operations.

(b) Commitments

As of March 31, 2018, we were committed to fund $365 million in limited partnership investments, $76 million in U.S. commercial mortgage loan investments and $30 million in private placement investments. As of March 31, 2018, we were committed to fund $19 million of bank loan investments which had not yet been drawn.

Changes in Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2018

Changes in Accumulated Other Comprehensive Income

(12) Changes in Accumulated Other Comprehensive Income

The following tables show the changes in accumulated other comprehensive income (loss), net of taxes, by component as of and for the periods indicated:


(Amounts in millions)	Netunrealizedinvestmentgains(losses) ⁽¹⁾			Derivativesqualifying ashedges⁽²⁾			Foreign currency translation and other adjustments			Total
Balances as of January 1, 2018	$	1,085		$	2,065		$	(123	)	$	3,027
Cumulative effect of changes in accounting		164			14			(47	)		131
OCI before reclassifications		(348	)		(126	)		(87	)		(561	)
Amounts reclassified from (to) OCI		7			(26	)		—			(19	)

Current period OCI		(341	)		(152	)		(87	)		(580	)

Balances as of March 31, 2018 before noncontrolling interests		908			1,927			(257	)		2,578

Less: change in OCI attributable to noncontrolling interests		(9	)		—			(40	)		(49	)

Balances as of March 31, 2018	$	917		$	1,927		$	(217	)	$	2,627

⁽¹⁾	Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.

⁽²⁾	See note 5 for additional information.


(Amounts in millions)	Netunrealizedinvestmentgains(losses) ⁽¹⁾			Derivativesqualifying ashedges⁽²⁾			Foreign currency translation and other adjustments			Total
Balances as of January 1, 2017	$	1,262		$	2,085		$	(253	)	$	3,094
OCI before reclassifications		7			(29	)		119			97
Amounts reclassified from (to) OCI		(18	)		(20	)		—			(38	)

Current period OCI		(11	)		(49	)		119			59

Balances as of March 31, 2017 before noncontrolling interests		1,251			2,036			(134	)		3,153

Less: change in OCI attributable to noncontrolling interests		8			—			49			57

Balances as of March 31, 2017	$	1,243		$	2,036		$	(183	)	$	3,096

⁽¹⁾	Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.

⁽²⁾	See note 5 for additional information.

The foreign currency translation and other adjustments balance included $(14) million and $(11) million, respectively, net of taxes of $5 million related to a net unrecognized postretirement benefit obligation as of March 31, 2018 and 2017. The amount also includes taxes of $(46) million and $31 million, respectively, related to foreign currency translation adjustments as of March 31, 2018 and 2017. These balances include the impact of adopting new accounting guidance related to stranded tax effects.

The following table shows reclassifications in (out) of accumulated other comprehensive income (loss), net of taxes, for the periods presented:


	Amount reclassified from accumulated other comprehensive income						Affected line item in the consolidated statements of income
	Three months ended March 31,
(Amounts in millions)	2018			2017
Net unrealized investment (gains) losses:
Unrealized (gains) losses on investments ⁽¹⁾	$	8		$	(28	)	Net investment (gains) losses
(Provision) benefit for income taxes		(1	)		10		(Provision) benefit for income taxes

Total	$	7		$	(18	)

Derivatives qualifying as hedges:
Interest rate swaps hedging assets	$	(35	)	$	(30	)	Net investment income
Interest rate swaps hedging assets		(5	)		(1	)	Net investment (gains) losses
Inflation indexed swaps		—			—		Net investment income
Benefit for income taxes		14			11		Benefit for income taxes

Total	$	(26	)	$	(20	)

⁽¹⁾	Amounts exclude adjustments to DAC, present value of future profits, sales inducements and benefit reserves.

Condensed Consolidating Financial Information

3 Months Ended

Mar. 31, 2018

Condensed Consolidating Financial Information

(13) Condensed Consolidating Financial Information

Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’ outstanding senior and subordinated notes and the holders of the senior and subordinated notes, on an unsecured unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of, premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes and outstanding subordinated notes, and the full and punctual payment of all other amounts payable by Genworth Holdings under the senior and subordinated notes indentures in respect of such senior and subordinated notes. Genworth Holdings is a direct, 100% owned subsidiary of Genworth Financial.

The following condensed consolidating financial information of Genworth Financial and its direct and indirect subsidiaries has been prepared pursuant to rules regarding the preparation of consolidating financial information of Regulation S-X.

The condensed consolidating financial information presents the condensed consolidating balance sheet information as of March 31, 2018 and December 31, 2017, the condensed consolidating income statement information, the condensed consolidating comprehensive income statement information and the condensed consolidating cash flow statement information for the three months ended March 31, 2018 and 2017.

The condensed consolidating financial information reflects Genworth Financial (“Parent Guarantor”), Genworth Holdings (“Issuer”) and each of Genworth Financial’s other direct and indirect subsidiaries (the “All Other Subsidiaries”) on a combined basis, none of which guarantee the senior notes or subordinated notes, as well as the eliminations necessary to present Genworth Financial’s financial information on a consolidated basis and total consolidated amounts.

The accompanying condensed consolidating financial information is presented based on the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the subsidiaries’ cumulative results of operations, capital contributions and distributions, and other changes in equity. Elimination entries include consolidating and eliminating entries for investments in subsidiaries and intercompany activity.

The following table presents the condensed consolidating balance sheet information as of March 31, 2018:


(Amounts in millions)	Parent Guarantor			Issuer			All Other Subsidiaries			Eliminations			Consolidated
Assets
Investments:
Fixed maturity securities available-for-sale, at fair value	$	—		$	—		$	61,280		$	(200	)	$	61,080
Equity securities, at fair value		—			—			799			—			799
Commercial mortgage loans		—			—			6,336			—			6,336
Restricted commercial mortgage loans related to securitization entities		—			—			99			—			99
Policy loans		—			—			1,789			—			1,789
Other invested assets		—			76			1,600			(2	)		1,674
Investments in subsidiaries		13,172			12,358			—			(25,530	)		—

Total investments		13,172			12,434			71,903			(25,732	)		71,777
Cash, cash equivalents and restricted cash		—			1,130			1,713			—			2,843
Accrued investment income		—			—			698			—			698
Deferred acquisition costs		—			—			2,699			—			2,699
Intangible assets and goodwill		—			—			339			—			339
Reinsurance recoverable		—			—			17,482			—			17,482
Other assets		(2	)		53			381			(1	)		431
Intercompany notes receivable		—			211			—			(211	)		—
Deferred tax assets		18			849			(265	)		—			602
Separate account assets		—			—			6,902			—			6,902

Total assets	$	13,188		$	14,677		$	101,852		$	(25,944	)	$	103,773

Liabilities and equity
Liabilities:
Future policy benefits	$	—		$	—		$	37,946		$	—		$	37,946
Policyholder account balances		—			—			23,751			—			23,751
Liability for policy and contract claims		—			—			9,651			—			9,651
Unearned premiums		—			—			3,797			—			3,797
Other liabilities		7			124			1,714			(4	)		1,841
Intercompany notes payable		163			200			48			(411	)		—
Borrowings related to securitization entities		—			—			32			—			32
Non-recourse funding obligations		—			—			310			—			310
Long-term borrowings		—			4,166			488			—			4,654
Deferred tax liability		—			—			27			—			27
Separate account liabilities		—			—			6,902			—			6,902

Total liabilities		170			4,490			84,666			(415	)		88,911

Equity:
Common stock		1			—			3			(3	)		1
Additional paid-in capital		11,979			9,096			18,420			(27,516	)		11,979
Accumulated other comprehensive income (loss)		2,627			2,692			2,641			(5,333	)		2,627
Retained earnings		1,111			(1,601	)		(6,022	)		7,623			1,111
Treasury stock, at cost		(2,700	)		—			—			—			(2,700	)

Total Genworth Financial, Inc.’s stockholders’ equity		13,018			10,187			15,042			(25,229	)		13,018
Noncontrolling interests		—			—			2,144			(300	)		1,844

Total equity		13,018			10,187			17,186			(25,529	)		14,862

Total liabilities and equity	$	13,188		$	14,677		$	101,852		$	(25,944	)	$	103,773

The following table presents the condensed consolidating balance sheet information as of December 31, 2017:


(Amounts in millions)	Parent Guarantor			Issuer			All Other Subsidiaries			Eliminations			Consolidated
Assets
Investments:
Fixed maturity securities available-for-sale, at fair value	$	—		$	—		$	62,725		$	(200	)	$	62,525
Equity securities, at fair value		—			—			820			—			820
Commercial mortgage loans		—			—			6,341			—			6,341
Restricted commercial mortgage loans related to securitization entities		—			—			107			—			107
Policy loans		—			—			1,786			—			1,786
Other invested assets		—			75			1,742			(4	)		1,813
Investments in subsidiaries		13,561			12,867			—			(26,428	)		—

Total investments		13,561			12,942			73,521			(26,632	)		73,392
Cash, cash equivalents and restricted cash		—			795			2,080			—			2,875
Accrued investment income		—			—			647			(3	)		644
Deferred acquisition costs		—			—			2,329			—			2,329
Intangible assets and goodwill		—			—			301			—			301
Reinsurance recoverable		—			—			17,569			—			17,569
Other assets		3			54			397			(1	)		453
Intercompany notes receivable		—			155			59			(214	)		—
Deferred tax assets		27			—			477			—			504
Separate account assets		—			—			7,230			—			7,230

Total assets	$	13,591		$	13,946		$	104,610		$	(26,850	)	$	105,297

Liabilities and equity
Liabilities:
Future policy benefits	$	—		$	—		$	38,472		$	—		$	38,472
Policyholder account balances		—			—			24,195			—			24,195
Liability for policy and contract claims		—			—			9,594			—			9,594
Unearned premiums		—			—			3,967			—			3,967
Other liabilities		41			119			1,759			(9	)		1,910
Intercompany notes payable		132			259			23			(414	)		—
Borrowings related to securitization entities		—			—			40			—			40
Non-recourse funding obligations		—			—			310			—			310
Long-term borrowings		—			3,724			500			—			4,224
Deferred tax liability		—			(807	)		834			—			27
Separate account liabilities		—			—			7,230			—			7,230

Total liabilities		173			3,295			86,924			(423	)		89,969

Equity:
Common stock		1			—			3			(3	)		1
Additional paid-in capital		11,977			9,096			18,420			(27,516	)		11,977
Accumulated other comprehensive income (loss)		3,027			3,037			3,051			(6,088	)		3,027
Retained earnings		1,113			(1,482	)		(5,998	)		7,480			1,113
Treasury stock, at cost		(2,700	)		—			—			—			(2,700	)

Total Genworth Financial, Inc.’s stockholders’ equity		13,418			10,651			15,476			(26,127	)		13,418
Noncontrolling interests		—			—			2,210			(300	)		1,910

Total equity		13,418			10,651			17,686			(26,427	)		15,328

Total liabilities and equity	$	13,591		$	13,946		$	104,610		$	(26,850	)	$	105,297

The following table presents the condensed consolidating income statement information for the three months ended March 31, 2018:


(Amounts in millions)	Parent Guarantor			Issuer			All Other Subsidiaries			Eliminations			Consolidated
Revenues:
Premiums	$	—		$	—		$	1,140		$	—		$	1,140
Net investment income		(1	)		3			805			(3	)		804
Net investment gains (losses)		—			6			(37	)		—			(31	)
Policy fees and other income		—			—			203			(1	)		202

Total revenues		(1	)		9			2,111			(4	)		2,115

Benefits and expenses:
Benefits and other changes in policy reserves		—			—			1,311			—			1,311
Interest credited		—			—			156			—			156
Acquisition and operating expenses, net of deferrals		7			—			233			—			240
Amortization of deferred acquisition costs and intangibles		—			—			104			—			104
Interest expense		—			68			12			(4	)		76

Total benefits and expenses		7			68			1,816			(4	)		1,887

Income (loss) from continuing operations before income taxes and equity in income of subsidiaries		(8	)		(59	)		295			—			228
Provision (benefit) for income taxes		6			(17	)		74			—			63
Equity in income of subsidiaries		126			45			—			(171	)		—

Income from continuing operations		112			3			221			(171	)		165
Loss from discontinued operations, net of taxes		—			—			—			—			—

Net income		112			3			221			(171	)		165
Less: net income attributable to noncontrolling interests		—			—			53			—			53

Net income available to Genworth Financial, Inc.’s common stockholders	$	112		$	3		$	168		$	(171	)	$	112

The following table presents the condensed consolidating income statement information for the three months ended March 31, 2017:


(Amounts in millions)	Parent Guarantor			Issuer			All Other Subsidiaries		Eliminations			Consolidated
Revenues:
Premiums	$	—		$	—		$	1,136	$	—		$	1,136
Net investment income		(1	)		1			794		(4	)		790
Net investment gains (losses)		—			(3	)		37		—			34
Policy fees and other income		—			—			211		—			211

Total revenues		(1	)		(2	)		2,178		(4	)		2,171

Benefits and expenses:
Benefits and other changes in policy reserves		—			—			1,246		—			1,246
Interest credited		—			—			167		—			167
Acquisition and operating expenses, net of deferrals		13			—			257		—			270
Amortization of deferred acquisition costs and intangibles		—			—			94		—			94
Interest expense		—			55			11		(4	)		62

Total benefits and expenses		13			55			1,775		(4	)		1,839

Income (loss) from continuing operations before income taxes and equity in income of subsidiaries		(14	)		(57	)		403		—			332
Provision (benefit) for income taxes		3			(20	)		133		—			116
Equity in income of subsidiaries		172			123			—		(295	)		—

Income from continuing operations		155			86			270		(295	)		216
Loss from discontinued operations, net of taxes		—			—			—		—			—

Net income		155			86			270		(295	)		216
Less: net income attributable to noncontrolling interests		—			—			61		—			61

Net income available to Genworth Financial, Inc.’s common stockholders	$	155		$	86		$	209	$	(295	)	$	155

The following table presents the condensed consolidating comprehensive income statement information for the three months ended March 31, 2018:


(Amounts in millions)	Parent Guarantor			Issuer			All Other Subsidiaries			Eliminations			Consolidated
Net income	$	112		$	3		$	221		$	(171	)	$	165
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on securities not other-than-temporarily impaired		(332	)		(295	)		(341	)		627			(341	)
Derivatives qualifying as hedges		(152	)		(153	)		(165	)		318			(152	)
Foreign currency translation and other adjustments		(47	)		(36	)		(88	)		84			(87	)

Total other comprehensive income (loss)		(531	)		(484	)		(594	)		1,029			(580	)

Total comprehensive loss		(419	)		(481	)		(373	)		858			(415	)
Less: comprehensive income attributable to noncontrolling interests		—			—			4			—			4

Total comprehensive loss available to Genworth Financial, Inc.’s common stockholders	$	(419	)	$	(481	)	$	(377	)	$	858		$	(419	)

The following table presents the condensed consolidating comprehensive income statement information for the three months ended March 31, 2017:


(Amounts in millions)	Parent Guarantor			Issuer			All Other Subsidiaries			Eliminations			Consolidated
Net income	$	155		$	86		$	270		$	(295	)	$	216
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on securities not other-than-temporarily impaired		(20	)		(31	)		(13	)		52			(12	)
Net unrealized gains (losses) on other-than-temporarily impaired securities		1			1			1			(2	)		1
Derivatives qualifying as hedges		(49	)		(49	)		(52	)		101			(49	)
Foreign currency translation and other adjustments		70			68			119			(138	)		119

Total other comprehensive income (loss)		2			(11	)		55			13			59

Total comprehensive income		157			75			325			(282	)		275
Less: comprehensive income attributable to noncontrolling interests		—			—			118			—			118

Total comprehensive income available to Genworth Financial, Inc.’s common stockholders	$	157		$	75		$	207		$	(282	)	$	157

The following table presents the condensed consolidating cash flows statement information for the three months ended March 31, 2018:


(Amounts in millions)	Parent Guarantor			Issuer			All Other Subsidiaries			Eliminations			Consolidated
Cash flows from (used by) operating activities:
Net income	$	112		$	3		$	221		$	(171	)	$	165
Adjustments to reconcile net income to net cash from operating activities:
Equity in income from subsidiaries		(126	)		(45	)		—			171			—
Dividends from subsidiaries		—			63			(63	)		—			—
Amortization of fixed maturity securities discounts and premiums and limited partnerships		—			1			(26	)		—			(25	)
Net investment (gains) losses		—			(6	)		37			—			31
Charges assessed to policyholders		—			—			(178	)		—			(178	)
Acquisition costs deferred		—			—			(18	)		—			(18	)
Amortization of deferred acquisition costs and intangibles		—			—			104			—			104
Deferred income taxes		9			(47	)		64			—			26
Trading securities, held-for-sale investments and derivative instruments		—			17			(169	)		—			(152	)
Stock-based compensation expense		8			—			(1	)		—			7
Change in certain assets and liabilities:
Accrued investment income and other assets		5			16			(63	)		(3	)		(45	)
Insurance reserves		—			—			377			—			377
Current tax liabilities		(23	)		26			(42	)		—			(39	)
Other liabilities, policy and contract claims and other policy-related balances		(13	)		(19	)		(117	)		5			(144	)

Net cash from (used by) operating activities		(28	)		9			126			2			109

Cash flows used by investing activities:
Proceeds from maturities and repayments of investments:
Fixed maturity securities		—			—			934			—			934
Commercial mortgage loans		—			—			205			—			205
Restricted commercial mortgage loans related to securitization entities		—			—			8			—			8
Proceeds from sales of investments:
Fixed maturity and equity securities		—			—			792			—			792
Purchases and originations of investments:
Fixed maturity and equity securities		—			—			(2,013	)		—			(2,013	)
Commercial mortgage loans		—			—			(199	)		—			(199	)
Other invested assets, net		—			—			106			(2	)		104
Policy loans, net		—			—			2			—			2
Intercompany notes receivable		—			(56	)		59			(3	)		—

Net cash used by investing activities		—			(56	)		(106	)		(5	)		(167	)

Cash flows from (used by) financing activities:
Deposits to universal life and investment contracts		—			—			255			—			255
Withdrawals from universal life and investment contracts		—			—			(591	)		—			(591	)
Proceeds from the issuance of long-term debt		—			441			—			—			441
Repayment of borrowings related to securitization entities		—			—			(8	)		—			(8	)
Repurchase of subsidiary shares		—			—			(36	)		—			(36	)
Dividends paid to noncontrolling interests		—			—			(36	)		—			(36	)
Intercompany notes payable		31			(59	)		25			3			—
Other, net		(3	)		—			25			—			22

Net cash from (used by) financing activities		28			382			(366	)		3			47

Effect of exchange rate changes on cash, cash equivalents and restricted cash		—			—			(21	)		—			(21	)

Net change in cash, cash equivalents and restricted cash		—			335			(367	)		—			(32	)
Cash, cash equivalents and restricted cash at beginning of period		—			795			2,080			—			2,875

Cash, cash equivalents and restricted cash at end of period	$	—		$	1,130		$	1,713		$	—		$	2,843

The following table presents the condensed consolidating cash flows statement information for the three months ended March 31, 2017:


(Amounts in millions)	Parent Guarantor			Issuer			All Other Subsidiaries			Eliminations			Consolidated
Cash flows from (used by) operating activities:
Net income	$	155		$	86		$	270		$	(295	)	$	216
Adjustments to reconcile net income to net cash from operating activities:
Equity in income from subsidiaries		(172	)		(123	)		—			295			—
Dividends from subsidiaries		—			52			(52	)		—			—
Amortization of fixed maturity securities discounts and premiums and limited partnerships		—			1			(34	)		—			(33	)
Net investment (gains) losses		—			3			(37	)		—			(34	)
Charges assessed to policyholders		—			—			(183	)		—			(183	)
Acquisition costs deferred		—			—			(22	)		—			(22	)
Amortization of deferred acquisition costs and intangibles		—			—			94			—			94
Deferred income taxes		9			(14	)		98			—			93
Trading securities, held-for-sale investments and derivative instruments		—			—			365			—			365
Stock-based compensation expense		6			—			4			—			10
Change in certain assets and liabilities:
Accrued investment income and other assets		4			5			(91	)		3			(79	)
Insurance reserves		—			—			377			—			377
Current tax liabilities		(6	)		(6	)		(25	)		—			(37	)
Other liabilities, policy and contract claims and other policy-related balances		(3	)		(24	)		(83	)		(2	)		(112	)

Net cash from (used by) operating activities		(7	)		(20	)		681			1			655

Cash flows used by investing activities:
Proceeds from maturities and repayments of investments:
Fixed maturity securities		—			—			1,060			—			1,060
Commercial mortgage loans		—			—			166			—			166
Restricted commercial mortgage loans related to securitization entities		—			—			6			—			6
Proceeds from sales of investments:
Fixed maturity and equity securities		—			—			2,173			—			2,173
Purchases and originations of investments:
Fixed maturity and equity securities		—			—			(2,710	)		—			(2,710	)
Commercial mortgage loans		—			—			(161	)		—			(161	)
Other invested assets, net		—			(49	)		(626	)		(1	)		(676	)
Intercompany notes receivable		—			(18	)		62			(44	)		—

Net cash used by investing activities		—			(67	)		(30	)		(45	)		(142	)

Cash flows from (used by) financing activities:
Deposits to universal life and investment contracts		—			—			218			—			218
Withdrawals from universal life and investment contracts		—			—			(467	)		—			(467	)
Repayment of borrowings related to securitization entities		—			—			(7	)		—			(7	)
Dividends paid to noncontrolling interests		—			—			(39	)		—			(39	)
Intercompany notes payable		15			(62	)		3			44			—
Other, net		(1	)		—			(8	)		—			(9	)

Net cash from (used by) financing activities		14			(62	)		(300	)		44			(304	)

Effect of exchange rate changes on cash, cash equivalents and restricted cash		—			—			25			—			25

Net change in cash, cash equivalents and restricted cash		7			(149	)		376			—			234
Cash, cash equivalents and restricted cash at beginning of period		—			998			1,786			—			2,784

Cash, cash equivalents and restricted cash at end of period	$	7		$	849		$	2,162		$	—		$	3,018

Our insurance company subsidiaries are restricted by state and foreign laws and regulations as to the amount of dividends they may pay to their parent without regulatory approval in any year, the purpose of which is to protect affected insurance policyholders and contractholders, not stockholders. Any dividends in excess of limits are deemed “extraordinary” and require approval. Based on statutory results as of December 31, 2017, in accordance with applicable dividend restrictions, our subsidiaries could pay dividends of approximately $500 million to us in 2018 without obtaining regulatory approval, and the remaining net assets are considered restricted. While the $500 million is unrestricted, our insurance subsidiaries may not pay dividends to us in 2018 at this level if they need to retain capital for growth and to meet capital requirements and desired thresholds. As of March 31, 2018, Genworth Financial’s and Genworth Holdings’ subsidiaries had restricted net assets of $12.7 billion and $11.9 billion, respectively.

Accounting Changes (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Pronouncements Recently Adopted

Accounting Pronouncements Recently Adopted

On January 1, 2018, we early adopted new accounting guidance on the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (“TCJA”), or “stranded tax effects.” Under current U.S. GAAP, deferred tax assets and liabilities are adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the period that the changes were enacted. This also includes situations in which the related tax effects were originally recognized in other comprehensive income as opposed to income from continuing operations. The following summarizes the components for the cumulative effect adjustment recorded on January 1, 2018 related to the adoption of this new accounting guidance:


	Accumulated other comprehensive income
(Amounts in millions)	Net unrealized investment gains (losses)			Derivatives qualifying as hedges		Foreign currency translation and other adjustments			Retained earnings			Total stockholders’ equity
Deferred taxes:
Net unrealized gains on investment securities	$	192		$	—	$	—		$	(192	)	$	—
Net unrealized gains on derivatives		—			12		—			(12	)		—
Investment in foreign subsidiaries		(3	)		—		(46	)		49			—
Accrued commission and general expenses		—			—		(1	)		1			—

Cumulative effect of changes in accounting	$	189		$	12	$	(47	)	$	(154	)	$	—