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INSURANCE LIABILITIES AND ANNUITY BENEFITS | 9 Months Ended
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Sep. 30, 2025
Insurance [Abstract] |
INSURANCE LIABILITIES AND ANNUITY BENEFITS | INSURANCE LIABILITIES AND ANNUITY BENEFITS. Insurance liabilities and annuity benefits are comprised of obligations to annuitants and insureds in our run-off insurance operations. These insurance operations (net of eliminations) generated revenue of $875 million and $899 million, profit was $361 million and $171 million and net income was $287 million and $135 million for the three months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025 and 2024, revenues were $2,681 million and $2,649 million, profit was $714 million and $541 million and net income was $567 million and $427 million, respectively. These operations were primarily supported by investment securities, substantially all debt securities, of $37,822 million and $37,352 million, limited partnerships of $4,925 million and $4,321 million, a diversified commercial mortgage loan portfolio collateralized by first liens on U.S. commercial real estate properties of $1,841 million and $1,887 million (net of allowance for credit losses of $37 million and $46 million) and residential mortgage loans of $345 million and $251 million (net of allowance for credit losses of an insignificant amount), as of September 30, 2025 and December 31, 2024, respectively. As of September 30, 2025, the commercial mortgage loan portfolio had no delinquent or non-accrual loans and about one-fourth of the portfolio was held in the office sector, which had a weighted average loan-to-value ratio of 69%, debt service coverage of 1.9, and an insignificant amount of scheduled maturities through 2026. A summary of our insurance liabilities and annuity benefits is presented below.
September 30, 2025 | Long-term care | Structured settlement annuities | Life | Other contracts | Total
Future policy benefit reserves | $ | 25,801 |  | $ | 8,467 |  | $ | 976 |  | $ | 356 |  | $ | 35,599 |
Investment contracts | — |  | 669 |  | — |  | 502 |  | 1,171 |
Other | — |  | — |  | 113 |  | 271 |  | 384 |
Total | $ | 25,801 |  | $ | 9,136 |  | $ | 1,088 |  | $ | 1,129 |  | $ | 37,153 |
December 31, 2024 |  |  |  |  |
Future policy benefit reserves | $ | 24,675 |  | $ | 8,426 |  | $ | 1,018 |  | $ | 357 |  | $ | 34,476 |
Investment contracts | — |  | 719 |  | — |  | 621 |  | 1,340 |
Other | — |  | — |  | 116 |  | 277 |  | 394 |
Total | $ | 24,675 |  | $ | 9,145 |  | $ | 1,134 |  | $ | 1,254 |  | $ | 36,209 |
The following tables summarize balances of and changes in future policy benefit reserves.
| September 30, 2025 |  |  |  | September 30, 2024 |  |
Present value of expected net premiums | Long-term care | Structured settlement annuities | Life |  |  |  | Long-term care | Structured settlement annuities | Life |  |
Balance, beginning of year | $ | 4,144 |  | $ | — |  | $ | 4,318 |  |  |  |  | $ | 4,063 |  | $ | — |  | $ | 4,803 |  |  |
Beginning balance at locked-in discount rate | 3,991 |  | — |  | 4,415 |  |  |  |  | 3,745 |  | — |  | 4,773 |  |  |
Effect of changes in cash flow assumptions | 257 |  | — |  | 4 |  |  |  |  | 387 |  | — |  | (1) |  |  |
Effect of actual variances from expected experience(a) | (3) |  | — |  | (2,343) |  |  |  |  | (26) |  | — |  | (5) |  |  |
Adjusted beginning of year balance | 4,244 |  | — |  | 2,076 |  |  |  |  | 4,106 |  | — |  | 4,768 |  |  |
Interest accrual | 164 |  | — |  | 138 |  |  |  |  | 155 |  | — |  | 134 |  |  |
Net premiums collected | (299) |  | — |  | (223) |  |  |  |  | (298) |  | — |  | (212) |  |  |
Effect of foreign currency | — |  | — |  | 108 |  |  |  |  | — |  | — |  | (41) |  |  |
Ending balance at locked-in discount rate | 4,110 |  | — |  | 2,099 |  |  |  |  | 3,962 |  | — |  | 4,649 |  |  |
Effect of changes in discount rate assumptions | 278 |  | — |  | 87 |  |  |  |  | 355 |  | — |  | (24) |  |  |
Balance, end of period | $ | 4,388 |  | $ | — |  | $ | 2,186 |  |  |  |  | $ | 4,317 |  | $ | — |  | $ | 4,625 |  |  |
Present value of expected future policy benefits |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of year | $ | 28,820 |  | $ | 8,426 |  | $ | 5,336 |  |  |  |  | $ | 30,895 |  | $ | 9,357 |  | $ | 5,921 |  |  |
Beginning balance at locked-in discount rate | 27,448 |  | 8,301 |  | 5,411 |  |  |  |  | 27,144 |  | 8,561 |  | 5,847 |  |  |
Effect of changes in cash flow assumptions | 308 |  | (37) |  | 43 |  |  |  |  | 389 |  | — |  | 24 |  |  |
Effect of actual variances from expected experience(a) | 142 |  | 6 |  | (2,381) |  |  |  |  | 24 |  | (25) |  | (4) |  |  |
Adjusted beginning of year balance | 27,898 |  | 8,270 |  | 3,074 |  |  |  |  | 27,557 |  | 8,536 |  | 5,867 |  |  |
Interest accrual | 1,129 |  | 323 |  | 167 |  |  |  |  | 1,112 |  | 332 |  | 164 |  |  |
Benefit payments | (1,130) |  | (486) |  | (319) |  |  |  |  | (1,079) |  | (493) |  | (329) |  |  |
Effect of foreign currency | — |  | — |  | 113 |  |  |  |  | — |  | — |  | (44) |  |  |
Ending balance at locked-in discount rate | 27,897 |  | 8,107 |  | 3,035 |  |  |  |  | 27,591 |  | 8,374 |  | 5,658 |  |  |
Effect of changes in discount rate assumptions | 2,291 |  | 360 |  | 127 |  |  |  |  | 3,540 |  | 719 |  | 26 |  |  |
Balance, end of period | $ | 30,188 |  | $ | 8,467 |  | $ | 3,161 |  |  |  |  | $ | 31,131 |  | $ | 9,093 |  | $ | 5,684 |  |  |
Net future policy benefit reserves | $ | 25,801 |  | $ | 8,467 |  | $ | 976 |  |  |  |  | $ | 26,813 |  | $ | 9,093 |  | $ | 1,060 |  |  |
Less: Reinsurance recoverables, net of allowance for credit losses | (157) |  | — |  | (179) |  |  |  |  | (185) |  | — |  | (32) |  |  |
Net future policy benefit reserves, after reinsurance recoverables | $ | 25,644 |  | $ | 8,467 |  | $ | 797 |  |  |  |  | $ | 26,628 |  | $ | 9,093 |  | $ | 1,028 |  |  |
Weighted-average duration of liability (years)(b) | 11.3 | 10.2 | 6.0 |  |  |  | 12.3 | 10.9 | 5.6 |  |
Weighted-average interest accretion rate | 5.6% | 5.4% | 5.3% |  |  |  | 5.6% | 5.4% | 5.1% |  |
Current discount rate | 5.3% | 5.3% | 4.9% |  |  |  | 5.0% | 4.9% | 4.6% |  |
Gross premiums or assessments recognized during period | $ | 343 |  | $ | — |  | $ | 249 |  |  |  |  | $ | 359 |  | $ | — |  | $ | 241 |  |  |
Expected future gross premiums, undiscounted | 7,499 |  | — |  | 4,468 |  |  |  |  | 7,517 |  | — |  | 12,011 |  |  |
Expected future gross premiums, discounted(b) | 4,813 |  | — |  | 2,452 |  |  |  |  | 4,938 |  | — |  | 5,576 |  |  |
Expected future benefit payments, undiscounted | 61,497 |  | 17,961 |  | 5,091 |  |  |  |  | 62,798 |  | 18,769 |  | 10,868 |  |  |
Expected future benefit payments, discounted(b) | 30,188 |  | 8,467 |  | 3,161 |  |  |  |  | 31,131 |  | 9,093 |  | 5,684 |  |  |
(a) Substantially all of Life reflects novations executed during the three months ended September 30, 2025, in connection with the February 3, 2025, Canadian life and health insurance portfolio reinsurance transaction. (b) Determined using the current discount rate as of September 30, 2025 and 2024. As of September 30, 2025 and 2024, policyholders account balances totaled $1,407 million and $1,612 million, respectively. As our insurance operations are in run-off, changes in policyholder account balances for the nine months ended September 30, 2025 and 2024 are primarily attributed to surrenders, withdrawals and benefit payments of $367 million and $323 million, partially offset by net additions from separate accounts and interest credited of $197 million and $206 million, respectively. Interest on policyholder account balances is generally credited at minimum guaranteed rates, primarily between 3.0% and 6.0% at both September 30, 2025 and 2024. Our 2025 annual review of future policy benefit reserves cash flow assumptions resulted in an increase in net future policy benefit reserves, after reinsurance recoverables and a pre-tax charge to earnings of $126 million ($100 million, after-tax), primarily related to long-term care cost of care inflation and lower policy terminations or benefit reductions related to premium rate increases assumptions, partially offset by favorable experience, including mortality. Our 2024 annual review of future policy benefit reserves cash flow assumptions resulted in an immaterial charge to net earnings. Included in Insurance losses and annuity benefits in our Statement of Earnings (Loss) for the nine months ended September 30, 2025 and 2024 are unfavorable pre-tax adjustments of $166 million and $54 million respectively, from updating the net premium ratio (i.e., the percentage of projected gross premiums required to cover expected policy benefits and related expenses) after updating for actual historical experience each quarter and updating of future cash flow assumptions. Included in these amounts for the nine months ended September 30, 2025 and 2024, are unfavorable adjustments of $189 million and $107 million, respectively, due to insufficient gross premiums (i.e., net premium ratio exceeded 100%), related to certain cohorts in our long-term care and life insurance portfolios. These adjustments are primarily attributable to increases in the net premium ratio as a result of updating future cash flow assumptions on cohorts where the beginning of the period net premium ratio exceeded 100%. On February 3, 2025, we closed the Canadian life and health insurance portfolio reinsurance transaction that was announced in 2024. We received a ceding commission of $128 million and the gain was deferred and will be recognized over the remaining life of the policies or earlier if the underlying treaties are novated. Included in Insurance losses and annuity benefits in our Statement of Earnings (Loss) for the three and nine months ended September 30, 2025, is a benefit of $275 million, related to executed novations, resulting in a remaining deferred gain balance of approximately $60 million. See Notes 3 and 9 for further information related to our run-off insurance operations.

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