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Reserve for Future Policy Benefits and Contractholder Funds | 6 Months Ended
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Jun. 30, 2023
Reserve for Future Policy Benefits and Contractholder Funds [Abstract] |
Reserve for Future Policy Benefits and Contractholder Funds |
Note 9 | Reserve for Future Policy Benefits and Contractholder Funds
Rollforward of reserve for future policy benefits (1)
|  | Six months ended June 30,
|  | Accident and health |  | Traditional life |  | Total
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022
Present value of expected net premiums |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,464 |  |  | $ | 1,785 |  |  | $ | 238 |  |  | $ | 254 |  |  | $ | 1,702 |  |  | $ | 2,039 |
Beginning balance at original discount rate |  | 1,549 |  |  | 1,604 |  |  | 246 |  |  | 215 |  |  | 1,795 |  |  | 1,819 |
Effect of changes in cash flow assumptions |  | — |  |  | — |  |  | (12) |  |  | — |  |  | (12) |  |  | — |
Effect of actual variances from expected experience |  | (26) |  |  | (61) |  |  | 19 |  |  | 20 |  |  | (7) |  |  | (41) |
Adjusted beginning balance |  | 1,523 |  |  | 1,543 |  |  | 253 |  |  | 235 |  |  | 1,776 |  |  | 1,778 |
Issuances |  | 259 |  |  | 243 |  |  | 18 |  |  | 5 |  |  | 277 |  |  | 248 |
Interest accrual |  | 25 |  |  | 24 |  |  | 5 |  |  | 4 |  |  | 30 |  |  | 28 |
Net premiums collected |  | (186) |  |  | (199) |  |  | (25) |  |  | (21) |  |  | (211) |  |  | (220) |
Lapses and withdrawals |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Ending balance at original discount rate |  | 1,621 |  |  | 1,611 |  |  | 251 |  |  | 223 |  |  | 1,872 |  |  | 1,834 |
Effect of changes in discount rate assumptions |  | (68) |  |  | (29) |  |  | (7) |  |  | 4 |  |  | (75) |  |  | (25) |
Ending balance |  | 1,553 |  |  | 1,582 |  |  | 244 |  |  | 227 |  |  | 1,797 |  |  | 1,809 |
Present value of expected future policy benefits |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | 2,229 |  |  | 2,796 |  |  | 524 |  |  | 673 |  |  | 2,753 |  |  | 3,469 |
Beginning balance at original discount rate |  | 2,316 |  |  | 2,426 |  |  | 534 |  |  | 511 |  |  | 2,850 |  |  | 2,937 |
Effect of changes in cash flow assumptions |  | — |  |  | — |  |  | (12) |  |  | — |  |  | (12) |  |  | — |
Effect of actual variances from expected experience |  | (30) |  |  | (63) |  |  | 20 |  |  | (7) |  |  | (10) |  |  | (70) |
Adjusted beginning balance |  | 2,286 |  |  | 2,363 |  |  | 542 |  |  | 504 |  |  | 2,828 |  |  | 2,867 |
Issuances |  | 256 |  |  | 242 |  |  | 18 |  |  | 5 |  |  | 274 |  |  | 247 |
Interest accrual |  | 47 |  |  | 37 |  |  | 12 |  |  | 11 |  |  | 59 |  |  | 48 |
Benefit payments |  | (199) |  |  | (218) |  |  | (26) |  |  | 11 |  |  | (225) |  |  | (207) |
Lapses and withdrawals |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Ending balance at original discount rate |  | 2,390 |  |  | 2,424 |  |  | 546 |  |  | 531 |  |  | 2,936 |  |  | 2,955 |
Effect of changes in discount rate assumptions |  | (64) |  |  | 9 |  |  | (7) |  |  | 30 |  |  | (71) |  |  | 39 |
Ending balance |  | $ | 2,326 |  |  | $ | 2,433 |  |  | $ | 539 |  |  | $ | 561 |  |  | $ | 2,865 |  |  | $ | 2,994 |
Net reserve for future policy benefits (1) |  | $ | 773 |  |  | $ | 851 |  |  | $ | 295 |  |  | $ | 334 |  |  | $ | 1,068 |  |  | $ | 1,185 |
Less: reinsurance recoverables |  | 84 |  |  | 127 |  |  | 2 |  |  | 2 |  |  | 86 |  |  | 129 |
Net reserve for future policy benefits, after reinsurance recoverables |  | $ | 689 |  |  | $ | 724 |  |  | $ | 293 |  |  | $ | 332 |  |  | $ | 982 |  |  | $ | 1,056 |
(1)Excludes $271 million and $281 million of reserves related to short-duration and other contracts as of June 30, 2023 and 2022, respectively.
Revenue and interest recognized in the condensed consolidated statements of operations
($ in millions) |  |  |  | Six months ended June 30,
|  |  |  |  | 2023 |  | 2022
Revenues (1) |  |  |  |  |  |  |  |
Accident and health |  |  |  |  |  | $ | 446 |  |  | $ | 494 |
Traditional life |  |  |  |  |  | 50 |  |  | 44 |
Total |  |  |  |  |  | $ | 496 |  |  | $ | 538 |
Interest expense (2) |  |  |  |  |  |  |  |
Accident and health |  |  |  |  |  | $ | 22 |  |  | $ | 13 |
Traditional life |  |  |  |  |  | 7 |  |  | 7 |
Total |  |  |  |  |  | $ | 29 |  |  | $ | 20 |
(1) Total revenues reflects gross premiums used in the calculation for reserve for future policy benefits. Revenues included in Accident and health insurance premiums and contract charges on the Condensed Consolidated Statements of Operations reflect premium revenue recognized for traditional life insurance and long-duration and short-duration accident and health insurance contracts. (2) Total interest expense presented as part of Accident, health and other policy benefits on the Condensed Consolidated Statements of Operations. The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefits and expenses for nonparticipating traditional and limited-payment contracts.
|  | As of June 30, |  |  |  |
|  | 2023 |  | 2022 |  |
($ in millions) |  | Undiscounted |  | Discounted |  | Undiscounted |  | Discounted |  |  |  |
Accident and health |  |  |  |  |  |  |  |  |  |  |  |
Expected future gross premiums |  | $ | 5,020 |  |  | $ | 3,602 |  |  | $ | 5,133 |  |  | $ | 3,833 |  |  |  |  |
Expected future benefits and expenses |  | 3,350 |  |  | 2,326 |  |  | 3,416 |  |  | 2,433 |  |  |  |  |
Traditional life |  |  |  |  |  |  |  |  |  |  |  |
Expected future gross premiums |  | 696 |  |  | 489 |  |  | 636 |  |  | 457 |  |  |  |  |
Expected future benefits and expenses |  | 1,008 |  |  | 539 |  |  | 956 |  |  | 561 |  |  |  |  |
Key assumptions used in calculating the reserve for future policy benefits
|  | As of June 30,
|  | Accident and health |  | Traditional life
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Weighted-average duration (in years) |  | 3.9 |  | 4.0 |  | 14.0 |  | 13.0
Weighted-average interest rates |  |  |  |  |  |  |  |
Interest accretion rate (discount rate at contract issuance) |  | 5.08 | % |  | 5.46 | % |  | 5.46 | % |  | 5.67 | %
Current discount rate (upper-medium grade fixed income yield) |  | 4.79 |  |  | 3.66 |  |  | 5.14 |  |  | 4.55 |
Significant assumptions To determine mortality and morbidity assumptions, the Company uses a combination of Company historical experience and industry data. Mortality and morbidity are monitored throughout the year. Historical experience is obtained through annual Company experience studies in the third quarter that consider the Company’s historical claim patterns. The lapse assumption is determined based on historical lapses of the Company’s insurance contracts. The following table summarizes the ratio of actual to expected lapses used in the determination of the reserve for future policy benefits.
|  | As of June 30,
|  | Accident and health |  | Traditional life
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Actual to expected lapses |  | 102 | % |  | 104 | % |  | 93 | % |  | 91 | %
Contractholder funds
Contractholder funds activity
|  | Six months ended June 30,
($ in millions) |  | 2023 |  | 2022
Beginning balance |  | $ | 879 |  |  | $ | 890 |
Deposits |  | 66 |  |  | 69 |
Interest credited |  | 17 |  |  | 17 |
Benefits |  | (6) |  |  | (11) |
Surrenders and partial withdrawals |  | (10) |  |  | (11) |
Contract charges |  | (60) |  |  | (58) |
Other adjustments |  | (5) |  |  | (4) |
Ending balance |  | $ | 881 |  |  | $ | 892 |
Components of contractholder funds |  |  |  |
Interest-sensitive life insurance |  | $ | 833 |  |  | $ | 839 |
Fixed annuities |  | 48 |  |  | 53 |
Total |  | $ | 881 |  |  | $ | 892 |
Weighted-average crediting rate |  | 4.27 | % |  | 4.28 | %
Net amount at risk (1) |  | $ | 11,640 |  |  | $ | 11,934 |
Cash surrender value |  | $ | 725 |  |  | $ | 727 |
(1)Guaranteed benefit amounts in excess of the current account balances.
Account values: comparison of current crediting rate to guaranteed minimum crediting rate (1)
($ in millions) Range of guaranteed minimum crediting rates |  | At guaranteed minimum |  | 1-50 basis points above |  |  |  |  |  |  |  | Total
June 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
Less than 3.00% |  | $ | — |  |  | $ | — |  |  |  |  |  |  |  |  | $ | — |
3.00% - 3.49% |  | — |  |  | 23 |  |  |  |  |  |  |  |  | 23 |
3.50% - 3.99% |  | 11 |  |  | — |  |  |  |  |  |  |  |  | 11 |
4.00% - 4.49% |  | 433 |  |  | — |  |  |  |  |  |  |  |  | 433 |
4.50% - 4.99% |  | 265 |  |  | — |  |  |  |  |  |  |  |  | 265 |
5.00% or greater |  | 69 |  |  | — |  |  |  |  |  |  |  |  | 69 |
Non-account balances (2) |  |  |  |  |  |  |  |  |  |  |  | 80 |
Total |  | $ | 778 |  |  | $ | 23 |  |  |  |  |  |  |  |  | $ | 881 |
June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |
Less than 3.00% |  | $ | — |  |  | $ | — |  |  |  |  |  |  |  |  | $ | — |
3.00% - 3.49% |  | — |  |  | 10 |  |  |  |  |  |  |  |  | 10 |
3.50% - 3.99% |  | 12 |  |  | — |  |  |  |  |  |  |  |  | 12 |
4.00% - 4.49% |  | 437 |  |  | — |  |  |  |  |  |  |  |  | 437 |
4.50% - 4.99% |  | 270 |  |  | — |  |  |  |  |  |  |  |  | 270 |
5.00% or greater |  | 71 |  |  | — |  |  |  |  |  |  |  |  | 71 |
Non-account balances (2) |  |  |  |  |  |  |  |  |  |  |  | 92 |
Total |  | $ | 790 |  |  | $ | 10 |  |  |  |  |  |  |  |  | $ | 892 |
(1)Difference, in basis points, between rates being credited to contractholders and the respective guaranteed minimum crediting rates. (2)Non-account balances include unearned revenue and amounts related to policies where a claim is either in the course of settlement or incurred but not reported. A claim on a life insurance policy results in the accrual of interest at a rate and over a period of time that is specified by state insurance regulations.

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