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Recent Accounting Pronouncements | 3 Months Ended
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Mar. 31, 2023
Accounting Standards Update and Change in Accounting Principle [Abstract] |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Adoption of New Accounting Standards Financial Instruments – Credit Losses – Troubled Debt Restructurings and Vintage Disclosures In March 2022, the Financial Accounting Standards Board (“FASB”) proposed amendments to Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”). The update removes the recognition and measurement guidance for Troubled Debt Restructurings (“TDRs”) by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, and modifies the disclosure requirements for certain loan refinancing and restructuring by creditors when a borrower is experiencing financial difficulty. Rather than applying the recognition and measurement for TDRs, an entity must apply the loan refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan. The update also requires entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. The amendments are to be applied prospectively, but entities may apply a modified retrospective transition for changes to the recognition and measurement of TDRs. For entities that have adopted Topic 326, the amendments are effective for interim and annual periods beginning after December 15, 2022. The Company adopted the standard on January 1, 2023. The adoption of this update did not have a material impact on the Company’s consolidated results of operations and financial condition and modifications to disclosures are immaterial in the current period. Business Combinations – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers In October 2021, the FASB updated the accounting standards to require an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue for Contracts with Customers (“Topic 606”). At the acquisition date, an acquirer is required to account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements (if the acquiree prepared financial statements in accordance with GAAP). The amendments apply to all contract assets and contract liabilities acquired in a business combination that result from contracts accounted for under the principals of Topic 606. The standard is effective for interim and annual periods beginning after December 15, 2022. The Company adopted the standard on January 1, 2023. The adoption of this update did not have an impact on the Company’s consolidated results of operations and financial condition. Financial Services – Insurance – Targeted Improvements to the Accounting for Long-Duration Contracts In August 2018, the FASB updated the accounting standard related to long-duration insurance contracts (ASU 2018-12). The guidance changes elements of the measurement models and disclosure requirements for an insurer’s long-duration insurance contract benefits and acquisition costs by expanding the use of fair value accounting to certain contract benefits, requiring updates, if any, and at least annually, to assumptions used to measure liabilities for future policy benefits, and changing the amortization pattern of deferred acquisition costs to a constant level basis. Adoption of the accounting standard will not impact overall cash flows, insurance subsidiaries’ dividend capacity, or regulatory capital requirements. When the Company adopted the standard as of January 1, 2021 (the “transition date”), opening equity was adjusted for the adoption impacts to retained earnings and accumulated other comprehensive income (loss) (“AOCI”) and prior periods presented (i.e. 2021 and 2022) were restated. The adoption impact as of January 1, 2021 was a reduction in total equity of $1.9 billion, of which $0.9 billion and $1.0 billion were reflected in retained earnings and AOCI, respectively. The following table presents the effects of the adoption of the above new accounting standard to the Company’s previously reported Consolidated Balance Sheets:
| As Filed December 31, 2022 |  | Adjustment |  | Post adoption Post-adoption December 31, 2022 |  | As Filed December 31, 2021 |  | Adjustment |  | Post adoption Post-adoption December 31, 2021
(in millions)
Assets |  |  |  |  |  |  |  |  |  |  |
Market risk benefits | $ | — |  |  | $ | 1,015 |  |  | $ | 1,015 |  |  | $ | — |  |  | $ | 539 |  |  | $ | 539 |
Receivables (allowance for credit losses: 2022, $75; 2021, $55) | 15,779 |  |  | (184) |  |  | 15,595 |  |  | 16,205 |  |  | 927 |  |  | 17,132 |
Deferred acquisition costs | 3,160 |  |  | (383) |  |  | 2,777 |  |  | 2,782 |  |  | 62 |  |  | 2,844 |
Other assets | 9,341 |  |  | (64) |  |  | 9,277 |  |  | 11,375 |  |  | 297 |  |  | 11,672 |
Total assets | $ | 158,468 |  |  | $ | 384 |  |  | $ | 158,852 |  |  | $ | 175,910 |  |  | $ | 1,825 |  |  | $ | 177,735 |
Liabilities and Equity |  |  |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Policyholder account balances, future policy benefits and claims | $ | 36,067 |  |  | $ | (1,935) |  |  | $ | 34,132 |  |  | $ | 35,750 |  |  | $ | (727) |  |  | $ | 35,023 |
Market risk benefits | — |  |  | 2,118 |  |  | 2,118 |  |  | — |  |  | 3,440 |  |  | 3,440 |
Other liabilities | 6,305 |  |  | 11 |  |  | 6,316 |  |  | 8,641 |  |  | 216 |  |  | 8,857 |
Total liabilities | 154,855 |  |  | 194 |  |  | 155,049 |  |  | 169,969 |  |  | 2,929 |  |  | 172,898 |
Equity: |  |  |  |  |  |  |  |  |  |  |
Retained earnings | 19,531 |  |  | 387 |  |  | 19,918 |  |  | 17,525 |  |  | (203) |  |  | 17,322 |
Accumulated other comprehensive income (loss), net of tax | (2,349) |  |  | (197) |  |  | (2,546) |  |  | 259 |  |  | (901) |  |  | (642) |
Total equity | 3,613 |  |  | 190 |  |  | 3,803 |  |  | 5,941 |  |  | (1,104) |  |  | 4,837 |
Total liabilities and equity | $ | 158,468 |  |  | $ | 384 |  |  | $ | 158,852 |  |  | $ | 175,910 |  |  | $ | 1,825 |  |  | $ | 177,735 |
The following tables present the effects of the adoption of the above new accounting standard to the Company’s previously reported Consolidated Statements of Operations:
| Three Months Ended March 31,
As Filed 2022 |  | Adjustment |  | Post-adoption 2022 |  | As Filed 2021 |  | Adjustment |  | Post-adoption 2021
(in millions, except per share amounts)
Revenues |  |  |  |  |  |  |  |  |  |  |
Premiums, policy and contract charges | $ | 368 |  |  | $ | (30) |  |  | $ | 338 |  |  | $ | 347 |  |  | $ | (9) |  |  | $ | 338 |
Total revenues | 3,657 |  |  | (30) |  |  | 3,627 |  |  | 3,355 |  |  | (9) |  |  | 3,346 |
Total net revenues | 3,655 |  |  | (30) |  |  | 3,625 |  |  | 3,350 |  |  | (9) |  |  | 3,341 |
Benefits and expenses |  |  |  |  |  |  |  |  |  |  |
Distribution expenses | 1,297 |  |  | 3 |  |  | 1,300 |  |  | 1,175 |  |  | 3 |  |  | 1,178 |
Benefits, claims, losses and settlement expenses | 211 |  |  | (179) |  |  | 32 |  |  | 653 |  |  | (413) |  |  | 240 |
Remeasurement gains and losses of future policy benefit reserves | — |  |  | (6) |  |  | (6) |  |  | — |  |  | (40) |  |  | (40) |
Change in fair value of market risk benefits | — |  |  | 100 |  |  | 100 |  |  | — |  |  | (887) |  |  | (887) |
Amortization of deferred acquisition costs | 96 |  |  | (31) |  |  | 65 |  |  | 5 |  |  | 61 |  |  | 66 |
Total expenses | 2,732 |  |  | (113) |  |  | 2,619 |  |  | 2,857 |  |  | (1,276) |  |  | 1,581 |
Pretax income | 923 |  |  | 83 |  |  | 1,006 |  |  | 493 |  |  | 1,267 |  |  | 1,760 |
Income tax provision | 162 |  |  | 19 |  |  | 181 |  |  | 56 |  |  | 269 |  |  | 325 |
Net income | $ | 761 |  |  | $ | 64 |  |  | $ | 825 |  |  | $ | 437 |  |  | $ | 998 |  |  | $ | 1,435 |
Earnings per share |  |  |  |  |  |  |  |  |  |  |
Basic | $ | 6.69 |  |  | $ | 0.57 |  |  | $ | 7.26 |  |  | $ | 3.65 |  |  | $ | 8.33 |  |  | $ | 11.98 |
Diluted | $ | 6.55 |  |  | $ | 0.55 |  |  | $ | 7.10 |  |  | $ | 3.58 |  |  | $ | 8.16 |  |  | $ | 11.74 |
| Years Ended December 31,
As Filed 2022 |  | Adjustment |  | Post-adoption 2022 |  | As Filed 2021 |  | Adjustment |  | Post-adoption 2021
(in millions, except per share amounts)
Revenues |  |  |  |  |  |  |  |  |  |  |
Distribution fees | $ | 1,938 |  |  | $ | 1 |  |  | $ | 1,939 |  |  | $ | 1,830 |  |  | $ | (2) |  |  | $ | 1,828 |
Premiums, policy and contract charges | 1,411 |  |  | (14) |  |  | 1,397 |  |  | 273 |  |  | (52) |  |  | 221 |
Total revenues | 14,347 |  |  | (13) |  |  | 14,334 |  |  | 13,443 |  |  | (54) |  |  | 13,389 |
Total net revenues | 14,271 |  |  | (13) |  |  | 14,258 |  |  | 13,431 |  |  | (54) |  |  | 13,377 |
Benefits and expenses |  |  |  |  |  |  |  |  |  |  |
Distribution expenses | 4,923 |  |  | 12 |  |  | 4,935 |  |  | 5,015 |  |  | 13 |  |  | 5,028 |
Benefits, claims, losses and settlement expenses | 1,372 |  |  | (1,130) |  |  | 242 |  |  | 716 |  |  | (872) |  |  | (156) |
Remeasurement gains and losses of future policy benefit reserves | — |  |  | 1 |  |  | 1 |  |  | — |  |  | (52) |  |  | (52) |
Change in fair value of market risk benefits | — |  |  | 311 |  |  | 311 |  |  | — |  |  | (113) |  |  | (113) |
Amortization of deferred acquisition costs | 208 |  |  | 44 |  |  | 252 |  |  | 124 |  |  | 135 |  |  | 259 |
Total expenses | 11,089 |  |  | (762) |  |  | 10,327 |  |  | 10,081 |  |  | (889) |  |  | 9,192 |
Pretax income | 3,182 |  |  | 749 |  |  | 3,931 |  |  | 3,350 |  |  | 835 |  |  | 4,185 |
Income tax provision | 623 |  |  | 159 |  |  | 782 |  |  | 590 |  |  | 178 |  |  | 768 |
Net income | $ | 2,559 |  |  | $ | 590 |  |  | $ | 3,149 |  |  | $ | 2,760 |  |  | $ | 657 |  |  | $ | 3,417 |
Earnings per share |  |  |  |  |  |  |  |  |  |  |
Basic | $ | 22.99 |  |  | $ | 5.30 |  |  | $ | 28.29 |  |  | $ | 23.53 |  |  | $ | 5.60 |  |  | $ | 29.13 |
Diluted | $ | 22.51 |  |  | $ | 5.19 |  |  | $ | 27.70 |  |  | $ | 23.00 |  |  | $ | 5.48 |  |  | $ | 28.48 |
Future Adoption of New Accounting Standards Leases – Common Control Arrangements In March 2023, the FASB proposed amendments to ASU 2016-02, Leases (“Topic 842”). The update applicable to all entities provides requirements for leasehold improvements associated with common control leases to be amortized over the useful life of the leasehold improvements to the common control group as long as the lessee controls the use of the underlying asset through a lease and accounted for as a transfer between entities under common control through an adjustment to equity if, and when, the lessee no longer controls the use of the underlying asset. The amendment is to be applied either prospectively to all new leasehold improvements recognized on or after the date that the entity first applies the amendments, prospectively to all new and existing leasehold improvements recognized on or after the date that the entity first applies the amendments with any remaining unamortized balance of existing leasehold improvements amortized over their remaining useful life to the common control group determined at that date, or retrospectively to the beginning of the period in which the entity first applied Topic 842 with any leasehold improvements that otherwise would not have been amortized or impaired recognized through a cumulative-effect adjustment to the opening balance of retained earnings at the beginning of the earliest period presented in accordance with ASC 842. The amendment is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been made available for issuance. The Company is in the process of evaluating the amendment and assessing the impact on its consolidated results of operations and financial condition.

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- Definition The entire disclosure for change in accounting principle. 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