ALLSTATE CORPALL
ALLSTATE CORP Fair Value Disclosure
Note 7 | Fair Value of Assets and Liabilities | ||||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on the Consolidated Statements of Financial Position at fair value are categorized in the fair value hierarchy based on the observability of inputs to the valuation techniques as follows:
Level 1: Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company can access.
Level 2: Assets and liabilities whose values are based on the following:
(a)Quoted prices for similar assets or liabilities in active markets;
(b)Quoted prices for identical or similar assets or liabilities in markets that are not active; or
(c)Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.
Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect the Company’s estimates of the assumptions
that market participants would use in valuing the assets and liabilities.
The availability of observable inputs varies by instrument. In situations where fair value is based on internally developed pricing models or inputs that are unobservable in the market, the determination of fair value requires more judgment. The degree of judgment exercised by the Company in determining fair value is typically greatest for instruments categorized in Level 3. In many instances, valuation inputs used to measure fair value fall into different levels of the fair value hierarchy. The category level in the fair value hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company uses prices and inputs that are current as of the measurement date, including during periods of market disruption. In periods of market disruption, the ability to observe prices and inputs may be reduced for many instruments.
The Company is responsible for the determination of fair value and the supporting assumptions and methodologies. The Company gains assurance that assets and liabilities are appropriately valued through the execution of various processes and controls designed to ensure the overall reasonableness and consistent application of valuation methodologies, including inputs and assumptions, and compliance with accounting standards. For fair values received from third parties or internally estimated, the Company’s processes and controls are designed to ensure that the valuation methodologies are appropriate and consistently applied, the inputs and assumptions are
reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded. For example, on a continuing basis, the Company assesses the reasonableness of individual fair values that have stale security prices or that exceed certain thresholds as compared to previous fair values received from valuation service providers or brokers or derived from internal models. The Company performs procedures to understand and assess the methodologies, processes and controls of valuation service providers. In addition, the Company may validate the reasonableness of fair values by comparing information obtained from valuation service providers or brokers to other third-party valuation sources for selected securities. The Company performs ongoing price validation procedures such as back-testing of actual sales, which corroborate the various inputs used in internal models to market observable data. When fair value determinations are expected to be more variable, the Company validates them through reviews by members of management who have relevant expertise and who are independent of those charged with executing investment transactions.
The Company has two types of situations where investments are classified as Level 3 in the fair value hierarchy:
(1)Specific inputs significant to the fair value estimation models are not market observable. This primarily occurs in the Company’s use of broker quotes to value certain securities where the inputs have not been corroborated to be market observable, and the use of valuation models that use significant non-market observable inputs.
(2)Quotes continue to be received from independent third-party valuation service providers and all significant inputs are market observable; however, there has been a significant decrease in the volume and level of activity for the asset when compared to normal market activity such that the degree of market observability has declined to a point where categorization as a Level 3 measurement is considered appropriate. The indicators considered in determining whether a significant decrease in the volume and level of activity for a specific asset has occurred include the level of new issuances in the primary market, trading volume in the secondary market, the level of credit spreads over historical levels, applicable bid-ask spreads, and price consensus among market participants and other pricing sources.
Certain assets are not carried at fair value on a recurring basis, including mortgage loans, bank loans, real estate and policy loans and are only included in the fair value hierarchy disclosure when the individual investment is reported at fair value.
In determining fair value, the Company principally uses the market approach which generally utilizes market transaction data for the same or similar instruments. To a lesser extent, the Company uses the income approach which involves determining fair values from discounted cash flow methodologies. For the majority of Level 2 and Level 3 valuations, a
combination of the market and income approaches is used.
Summary of significant inputs and valuation techniques for Level 2 and Level 3 assets and liabilities measured at fair value on a recurring basis
Level 2 measurements
•Fixed income securities:
U.S. government and agencies, municipal, corporate - public and foreign government: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields and credit spreads.
Corporate - privately placed: Privately placed securities are valued using a discounted cash flow model that is widely accepted in the financial services industry and uses market observable inputs and inputs derived principally from, or corroborated by, observable market data. The primary inputs to the discounted cash flow model include an interest rate yield curve, as well as published credit spreads for similar assets in markets that are not active that incorporate the credit quality and industry sector of the issuer.
Corporate - privately placed also includes redeemable preferred stock that are valued using quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, underlying stock prices and credit spreads.
ABS and MBS: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, collateral performance, and credit spreads. Certain ABS are valued based on non-binding broker quotes whose inputs have been corroborated to be market observable. Residential MBS include prepayment speeds as a primary input for valuation.
•Equity securities: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active.
•Short-term: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields and credit spreads.
•Other investments: Free-standing exchange listed derivatives that are not actively traded are valued based on quoted prices for identical instruments in markets that are not active.
Over-the-counter (“OTC”) derivatives, including interest rate swaps, foreign currency swaps, total return swaps, foreign exchange forward contracts, certain options and certain credit default swaps, are valued using models that rely on inputs such as interest rate yield curves, implied volatilities, index price levels, currency rates, and credit spreads that are observable for substantially the full term of the contract. The valuation techniques underlying the
models are widely accepted in the financial services industry and do not involve significant judgment.
•Assets held for sale: Comprise U.S. government and agencies, municipal, corporate, MBS fixed income securities and short-term. The significant inputs and valuation techniques are based on the respective asset type as described above.
Level 3 measurements
•Fixed income securities:
Municipal: Comprise municipal bonds that are not rated by third-party credit rating agencies. The primary inputs to the valuation of these municipal bonds include quoted prices for identical or similar assets that are not market observable, contractual cash flows, benchmark yields and credit spreads. Also included are municipal bonds valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable and municipal bonds in default valued based on the present value of expected cash flows.
Corporate - public and privately placed: Primarily valued using a discounted cash flow model that is widely accepted in the financial services industry using inputs that have not been corroborated to be market observable. In certain situations, non-binding broker quotes where the inputs have not been corroborated to be market observable are used. Other inputs for corporate fixed income securities include expected cash flows, an interest rate yield curve, as well as published credit spreads for similar assets that incorporate the credit quality and industry sector of the issuer.
ABS and MBS: The primary inputs to the valuation include expected cash flows, benchmark yields, collateral performance and credit spreads. Residential MBS include prepayment speeds as a primary input for valuation.
•Equity securities: The primary inputs to the valuation include quoted prices for identical or similar assets that are not market observable.
•Short-term: For certain short-term investments, amortized cost is used as the best estimate of fair value.
•Other investments: Certain options (including swaptions), are valued using models that are widely accepted in the financial services industry. These are categorized as Level 3 as a result of the
significance of non-market observable inputs such as volatility. Other primary inputs include interest rate yield curves and quoted prices for identical or similar assets in markets that exhibit less liquidity relative to those markets supporting Level 2 fair value measurements. Certain OTC interest rate swaps associated with real estate investments are valued using non-market observable counterparty valuations.
•Other assets: Includes the contingent consideration provision in the sale agreement for Allstate Life Insurance Company (“ALIC”) which meets the definition of a derivative. This derivative is valued internally using a model that includes stochastically determined cash flows and inputs that include spot and forward interest rates, volatility, corporate credit spreads and a liquidity discount. This derivative is categorized as Level 3 due to the significance of non-market observable inputs.
•Assets held for sale: Comprise corporate fixed income securities. The significant inputs and valuation techniques are based on the respective asset type as described above.
Assets measured at fair value on a non-recurring basis
Comprise long-lived assets to be disposed of by sale, including real estate, that is written down to fair value less costs to sell and commercial mortgages written down to fair value in connection with recognizing credit losses.
Investments excluded from the fair value hierarchy
Investments reported at net asset value (“NAV”)
Limited partnership interests and certain equity investments carried at fair value, which do not have readily determinable fair values and use NAV provided by the investees, are excluded from the fair value hierarchy.
Limited partnership interests are generally not redeemable by the investees and generally cannot be sold without approval of the general partner. The Company receives distributions of income and proceeds from the liquidation of the underlying assets of the investees, which usually takes place in years 4-9 of the typical contractual life of 10-12 years. As of December 31, 2025, the Company has commitments to invest $125 million in limited partnership interests that are reported at net asset value.
Assets and liabilities measured at fair value | ||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| ($ in millions) | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Counterparty and cash collateral netting | Total | |||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Fixed income securities: | ||||||||||||||||||||||||||||||||
| U.S. government and agencies | $ | 18,124 | $ | 9 | $ | — | $ | 18,133 | ||||||||||||||||||||||||
| Municipal | — | 5,614 | 29 | 5,643 | ||||||||||||||||||||||||||||
| Corporate - public | — | 19,907 | 12 | 19,919 | ||||||||||||||||||||||||||||
| Corporate - privately placed | — | 10,295 | 187 | 10,482 | ||||||||||||||||||||||||||||
| Foreign government | — | 1,460 | — | 1,460 | ||||||||||||||||||||||||||||
| ABS | — | 1,330 | 22 | 1,352 | ||||||||||||||||||||||||||||
MBS | — | 2,068 | 58 | 2,126 | ||||||||||||||||||||||||||||
| Total fixed income securities | 18,124 | 40,683 | 308 | 59,115 | ||||||||||||||||||||||||||||
Equity securities (1) | 7,572 | 239 | 22 | 7,833 | ||||||||||||||||||||||||||||
| Short-term investments | 1,791 | 3,090 | 6 | 4,887 | ||||||||||||||||||||||||||||
| Other investments | — | 11 | 1 | $ | (1) | 11 | ||||||||||||||||||||||||||
| Other assets | — | — | 147 | 147 | ||||||||||||||||||||||||||||
| Total recurring basis assets | 27,487 | 44,023 | 484 | (1) | 71,993 | |||||||||||||||||||||||||||
| Non-recurring basis | — | — | 32 | 32 | ||||||||||||||||||||||||||||
| Total assets at fair value | $ | 27,487 | $ | 44,023 | $ | 516 | $ | (1) | $ | 72,025 | ||||||||||||||||||||||
Investments reported at NAV (2) | 1,266 | |||||||||||||||||||||||||||||||
| Total | $ | 73,291 | ||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| Other liabilities | $ | (2) | $ | (19) | $ | (1) | $ | 19 | $ | (3) | ||||||||||||||||||||||
| Total recurring basis liabilities | (2) | (19) | (1) | 19 | (3) | |||||||||||||||||||||||||||
| Total liabilities at fair value | $ | (2) | $ | (19) | $ | (1) | $ | 19 | $ | (3) | ||||||||||||||||||||||
(1)Excludes $99 million of securities using the measurement alternative or the equity method of accounting and $466 million reported at NAV.
(2)Includes $466 million of equity securities and $800 million of limited partnerships.
Assets and liabilities measured at fair value | ||||||||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
| ($ in millions) | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Counterparty and cash collateral netting | Total | |||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Fixed income securities: | ||||||||||||||||||||||||||||||||
| U.S. government and agencies | $ | 11,099 | $ | 9 | $ | — | $ | 11,108 | ||||||||||||||||||||||||
| Municipal | — | 8,840 | 2 | 8,842 | ||||||||||||||||||||||||||||
| Corporate - public | — | 21,211 | 22 | 21,233 | ||||||||||||||||||||||||||||
| Corporate - privately placed | — | 8,849 | 110 | 8,959 | ||||||||||||||||||||||||||||
| Foreign government | — | 1,364 | — | 1,364 | ||||||||||||||||||||||||||||
| ABS | — | 1,119 | 26 | 1,145 | ||||||||||||||||||||||||||||
MBS | — | 8 | 88 | 96 | ||||||||||||||||||||||||||||
| Total fixed income securities | 11,099 | 41,400 | 248 | 52,747 | ||||||||||||||||||||||||||||
Equity securities (1) | 3,600 | 306 | 407 | 4,313 | ||||||||||||||||||||||||||||
| Short-term investments | 2,016 | 2,516 | 5 | 4,537 | ||||||||||||||||||||||||||||
| Other investments | — | 21 | 1 | $ | (19) | 3 | ||||||||||||||||||||||||||
| Other assets | — | — | 134 | 134 | ||||||||||||||||||||||||||||
| Assets held for sale | 241 | 1,536 | 7 | 1,784 | ||||||||||||||||||||||||||||
| Total recurring basis assets | 16,956 | 45,779 | 802 | (19) | 63,518 | |||||||||||||||||||||||||||
| Non-recurring basis | — | — | 3 | 3 | ||||||||||||||||||||||||||||
| Total assets at fair value | $ | 16,956 | $ | 45,779 | $ | 805 | $ | (19) | $ | 63,521 | ||||||||||||||||||||||
| Investments reported at NAV | 1,096 | |||||||||||||||||||||||||||||||
| Total | $ | 64,617 | ||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| Other liabilities | $ | (1) | $ | (1) | $ | — | $ | 1 | $ | (1) | ||||||||||||||||||||||
| Total recurring basis liabilities | (1) | (1) | — | 1 | (1) | |||||||||||||||||||||||||||
| Total liabilities at fair value | $ | (1) | $ | (1) | $ | — | $ | 1 | $ | (1) | ||||||||||||||||||||||
(1)Excludes $150 million of preferred stock measured at cost.
As of December 31, 2025 and 2024, Level 3 fair value measurements of fixed income securities totaled $308 million and $248 million, respectively, and included $146 million and $87 million, respectively, of securities valued based on third-party discounted cash flow pricing models where the inputs have not been corroborated to be market observable, $12 million and $22 million, respectively, of securities valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable and $29 million and $2 million, respectively, of municipal fixed income securities that are not rated by third-party credit rating agencies.
An increase (decrease) in credit spreads for fixed income securities valued based on third-party discounted cash flow pricing models or non-binding broker quotes would result in a lower (higher) fair value, and an increase (decrease) in the credit rating of municipal bonds that are not rated by third-party credit rating agencies would result in a higher (lower) fair value.
Rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2024 | Total gains (losses) included in: | Transfers | Balance as of December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | OCI | Into Level 3 | Out of Level 3 | Purchases | Sales | Settlements | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed income securities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Municipal | $ | 2 | $ | — | $ | — | $ | 1 | $ | — | $ | 26 | $ | — | $ | — | $ | 29 | ||||||||||||||||||||||||||||||||||||||
| Corporate - public | 22 | (1) | 1 | — | (7) | 11 | (11) | (3) | 12 | |||||||||||||||||||||||||||||||||||||||||||||||
| Corporate - privately placed | 110 | (4) | 4 | 12 | — | 83 | — | (18) | 187 | |||||||||||||||||||||||||||||||||||||||||||||||
| ABS | 26 | — | — | 26 | (41) | 15 | — | (4) | 22 | |||||||||||||||||||||||||||||||||||||||||||||||
MBS | 88 | — | — | — | — | — | — | (30) | 58 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total fixed income securities | 248 | (5) | 5 | 39 | (48) | 135 | (11) | (55) | 308 | |||||||||||||||||||||||||||||||||||||||||||||||
| Equity securities | 407 | 28 | — | — | (331) | 7 | (89) | — | 22 | |||||||||||||||||||||||||||||||||||||||||||||||
| Short-term investments | 5 | — | — | — | — | 11 | (9) | (1) | 6 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other investments | 1 | — | — | — | — | — | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other assets | 134 | 13 | — | — | — | — | — | — | 147 | |||||||||||||||||||||||||||||||||||||||||||||||
| Assets held for sale | 7 | — | 1 | — | — | — | (8) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Total recurring Level 3 assets | 802 | 36 | 6 | 39 | (379) | 153 | (117) | (56) | 484 | |||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | — | (1) | — | — | — | — | — | — | (1) | |||||||||||||||||||||||||||||||||||||||||||||||
| Total recurring Level 3 liabilities | $ | — | $ | (1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1) | ||||||||||||||||||||||||||||||||||||||
Rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2023 | Total gains (losses) included in: | Transfers | Transfers (to) from held for sale | Balance as of December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | OCI | Into Level 3 | Out of Level 3 | Purchases | Sales | Settlements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed income securities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Municipal | $ | 11 | $ | (2) | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | (5) | $ | (3) | $ | 2 | ||||||||||||||||||||||||||||||||||||||||||
| Corporate - public | 26 | 1 | — | — | — | (7) | 16 | (14) | — | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate - privately placed | 58 | (6) | (2) | — | — | — | 64 | (2) | (2) | 110 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
ABS and MBS | 58 | — | — | — | — | — | 59 | — | (3) | 114 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total fixed income securities | 153 | (7) | (1) | — | — | (7) | 139 | (21) | (8) | 248 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity securities | 402 | 8 | — | — | — | — | 25 | (28) | — | 407 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Short-term investments | 1 | — | — | — | — | — | 27 | (20) | (3) | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other investments | 2 | 6 | — | — | — | — | — | (7) | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other assets | 118 | 16 | — | — | — | — | — | — | — | 134 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets held for sale | — | — | — | — | — | 7 | — | — | — | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total recurring Level 3 assets | 676 | 23 | (1) | — | — | — | 191 | (76) | (11) | 802 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total recurring Level 3 liabilities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||
Rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | Total gains (losses) included in: | Transfers | Balance as of December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | OCI | Into Level 3 | Out of Level 3 | Purchases | Sales | Settlements | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed income securities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Municipal | $ | 21 | $ | 3 | $ | (1) | $ | — | $ | — | $ | — | $ | (10) | $ | (2) | $ | 11 | ||||||||||||||||||||||||||||||||||||||
| Corporate - public | 69 | (1) | 2 | — | — | — | (44) | — | 26 | |||||||||||||||||||||||||||||||||||||||||||||||
| Corporate - privately placed | 55 | (12) | 1 | 16 | — | 1 | (3) | — | 58 | |||||||||||||||||||||||||||||||||||||||||||||||
ABS and MBS | 28 | — | — | — | — | 31 | — | (1) | 58 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total fixed income securities | 173 | (10) | 2 | 16 | — | 32 | (57) | (3) | 153 | |||||||||||||||||||||||||||||||||||||||||||||||
| Equity securities | 333 | 36 | — | — | — | 77 | (44) | — | 402 | |||||||||||||||||||||||||||||||||||||||||||||||
| Short-term investments | 6 | — | — | — | — | 13 | — | (18) | 1 | |||||||||||||||||||||||||||||||||||||||||||||||
Other investments | 3 | (1) | — | — | — | — | — | — | 2 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other assets | 103 | 15 | — | — | — | — | — | — | 118 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total recurring Level 3 assets | 618 | 40 | 2 | 16 | — | 122 | (101) | (21) | 676 | |||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total recurring Level 3 liabilities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||||||||||
Total Level 3 gains (losses) included in net income | ||||||||||||||||||||
| For the years ended December 31, | ||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| $ | 1 | $ | (8) | $ | (1) | |||||||||||||||
| 21 | 15 | 26 | ||||||||||||||||||
| 13 | 16 | 15 | ||||||||||||||||||
Transfers into Level 3 during 2025 included situations where a quote was not provided by the Company’s independent third-party valuation service provider and as a result the price was stale or had been replaced with a broker quote where the inputs had not been corroborated to be market observable resulting in the security being classified as Level 3. There were no transfers into Level 3 during 2024. Transfers into Level 3 during 2023 included situations where securities were written down utilizing an internal price where the inputs had not been corroborated to be market observable resulting in the security being classified as Level 3.
Transfers out of Level 3 during 2025 included situations where a quote that was not provided by the Company’s independent third-party valuation service provider in the prior period became available in the current period. Any gains or losses related to the change in valuation source for individual securities were not significant. There were no transfers out of Level 3 during 2024 and 2023.
Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of December 31, | ||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Fixed income securities: | ||||||||||||||||||||
| Municipal | $ | — | $ | (2) | $ | — | ||||||||||||||
| Corporate - public | (1) | 1 | — | |||||||||||||||||
| Corporate - privately placed | (3) | (6) | (12) | |||||||||||||||||
| Total fixed income securities | (4) | (7) | (12) | |||||||||||||||||
| Equity securities | 26 | 13 | 35 | |||||||||||||||||
| Other investments | — | — | (1) | |||||||||||||||||
| Other assets | 13 | 16 | 15 | |||||||||||||||||
| Total recurring Level 3 assets | $ | 35 | $ | 22 | $ | 37 | ||||||||||||||
| Liabilities | ||||||||||||||||||||
| Other liabilities | $ | (1) | $ | — | $ | — | ||||||||||||||
| Total recurring Level 3 liabilities | (1) | — | — | |||||||||||||||||
| Total included in net income | $ | 34 | $ | 22 | $ | 37 | ||||||||||||||
| Components of net income | ||||||||||||||||||||
| $ | 1 | $ | (8) | $ | (1) | |||||||||||||||
| 20 | 14 | 23 | ||||||||||||||||||
| 13 | 16 | 15 | ||||||||||||||||||
| Total included in net income | $ | 34 | $ | 22 | $ | 37 | ||||||||||||||
| Assets | ||||||||||||||||||||
| Corporate - public | $ | 1 | $ | — | $ | 1 | ||||||||||||||
| Corporate - privately placed | 4 | (1) | 2 | |||||||||||||||||
| Changes in unrealized net capital gains and losses reported in OCI | $ | 5 | $ | (1) | $ | 3 | ||||||||||||||
Financial instruments not carried at fair value | ||||||||||||||||||||||||||||||||
| ($ in millions) | December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||
| Financial assets | Fair value level | Amortized cost, net (1) | Fair value | Amortized cost, net | Fair value | |||||||||||||||||||||||||||
| Mortgage loans | Level 3 | $ | 879 | $ | 868 | $ | 784 | $ | 746 | |||||||||||||||||||||||
| Bank loans | Level 3 | 473 | 487 | 201 | 207 | |||||||||||||||||||||||||||
| Financial liabilities | Fair value level | Carrying value (1) | Fair value | Carrying value (2) | Fair value | |||||||||||||||||||||||||||
| Debt | Level 2 | $ | 7,490 | $ | 7,367 | $ | 8,085 | $ | 7,740 | |||||||||||||||||||||||
| Liability for collateral | Level 2 | 1,934 | 1,934 | 2,041 | 2,041 | |||||||||||||||||||||||||||
Liabilities held for sale | Level 3 | — | — | 40 | 40 | |||||||||||||||||||||||||||
(1)Represents the amounts reported on the Consolidated Statements of Financial Position.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 22, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 15, 2019 | |
| 2017 | Feb 26, 2018 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.