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Derivative Instruments | 3 Months Ended
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Mar. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | 5. DERIVATIVES AND HEDGING Types of Derivative and Hedging Instruments The Company utilizes various derivatives and hedging instruments to manage its risk. Commonly used derivative and non-derivative hedging instruments include, but are not necessarily limited to: •Interest rate contracts: futures, swaps, forwards, options, caps and floors •Equity contracts: futures, options and total return swaps •Foreign exchange contracts: futures, options, forwards, swaps, and foreign currency debt instruments •Credit contracts: single and index reference credit default swaps Other types of financial contracts that the Company accounts for as derivatives are: •To-be-announced (“TBA”) forward contracts, loan commitments, embedded derivatives and synthetic guaranteed investment contracts (“GICs”). For detailed information on these contracts and the related strategies, see Note 5 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Primary Risks Managed by Derivatives The table below provides a summary of the gross notional amount and fair value of derivatives contracts by the primary underlying risks, excluding embedded derivatives and associated reinsurance recoverables. Many derivative instruments contain multiple underlying risks. The fair value amounts below represent the value of derivative contracts prior to taking into account the netting effects of master netting agreements and cash collateral. This netting impact results in total derivative assets of $1,847 million and $1,906 million as of March 31, 2021 and December 31, 2020, respectively, and total derivative liabilities of $1,575 million and $792 million as of March 31, 2021 and December 31, 2020, respectively, reflected in the Unaudited Interim Consolidated Statements of Financial Position.
Primary Underlying Risk /Instrument Type | March 31, 2021 |  | December 31, 2020
|  | Fair Value |  |  |  | Fair Value
Gross Notional |  | Assets |  | Liabilities |  | Gross Notional |  | Assets |  | Liabilities
| (in millions)
Derivatives Designated as Hedge Accounting Instruments: |  |  |  |  |  |  |  |  |  |  |
Interest Rate |  |  |  |  |  |  |  |  |  |  |
Interest Rate Swaps | $ | 3,015 |  |  | $ | 601 |  |  | $ | (69) |  |  | $ | 3,065 |  |  | $ | 978 |  |  | $ | (90) |
Interest Rate Forwards | 298 |  |  | 0 |  |  | (37) |  |  | 249 |  |  | 0 |  |  | (8) |
Foreign Currency |  |  |  |  |  |  |  |  |  |  |
Foreign Currency Forwards | 2,666 |  |  | 79 |  |  | (133) |  |  | 2,577 |  |  | 68 |  |  | (116) |
Currency/Interest Rate |  |  |  |  |  |  |  |  |  |  |
Foreign Currency Swaps | 22,831 |  |  | 821 |  |  | (875) |  |  | 22,642 |  |  | 878 |  |  | (1,037) |
Total Derivatives Designated as Hedge Accounting Instruments | $ | 28,810 |  |  | $ | 1,501 |  |  | $ | (1,114) |  |  | $ | 28,533 |  |  | $ | 1,924 |  |  | $ | (1,251) |
Derivatives Not Qualifying as Hedge Accounting Instruments: |  |  |  |  |  |  |  |  |  |  |
Interest Rate |  |  |  |  |  |  |  |  |  |  |
Interest Rate Swaps | $ | 210,809 |  |  | $ | 9,956 |  |  | $ | (16,035) |  |  | $ | 178,803 |  |  | $ | 17,174 |  |  | $ | (13,172) |
Interest Rate Futures | 17,570 |  |  | 14 |  |  | (65) |  |  | 15,778 |  |  | 99 |  |  | (5) |
Interest Rate Options | 15,318 |  |  | 417 |  |  | (226) |  |  | 14,593 |  |  | 914 |  |  | (233) |
Interest Rate Forwards | 2,974 |  |  | 36 |  |  | (24) |  |  | 2,910 |  |  | 25 |  |  | 0 |
Foreign Currency |  |  |  |  |  |  |  |  |  |  |
Foreign Currency Forwards | 33,199 |  |  | 989 |  |  | (1,110) |  |  | 35,478 |  |  | 764 |  |  | (647) |
Foreign Currency Options | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Currency/Interest Rate |  |  |  |  |  |  |  |  |  |  |
Foreign Currency Swaps | 13,567 |  |  | 626 |  |  | (418) |  |  | 13,661 |  |  | 537 |  |  | (601) |
Credit |  |  |  |  |  |  |  |  |  |  |
Credit Default Swaps | 2,305 |  |  | 50 |  |  | 0 |  |  | 3,360 |  |  | 63 |  |  | (28) |
Equity |  |  |  |  |  |  |  |  |  |  |
Equity Futures | 5,195 |  |  | 24 |  |  | (3) |  |  | 5,668 |  |  | 10 |  |  | (25) |
Equity Options | 42,374 |  |  | 664 |  |  | (921) |  |  | 36,250 |  |  | 1,731 |  |  | (1,028) |
Total Return Swaps | 19,731 |  |  | 102 |  |  | (440) |  |  | 22,489 |  |  | 32 |  |  | (1,277) |
Other |  |  |  |  |  |  |  |  |  |  |
Other(1) | 1,259 |  |  | 0 |  |  | 0 |  |  | 1,262 |  |  | 0 |  |  | 0 |
Synthetic GICs | 85,273 |  |  | 0 |  |  | 0 |  |  | 86,264 |  |  | 0 |  |  | 0 |
Total Derivatives Not Qualifying as Hedge Accounting Instruments | $ | 449,574 |  |  | $ | 12,878 |  |  | $ | (19,242) |  |  | $ | 416,516 |  |  | $ | 21,349 |  |  | $ | (17,016) |
Total Derivatives(2)(3) | $ | 478,384 |  |  | $ | 14,379 |  |  | $ | (20,356) |  |  | $ | 445,049 |  |  | $ | 23,273 |  |  | $ | (18,267) |
__________ (1)“Other” primarily includes derivative contracts used to improve the balance of the Company’s tail longevity and mortality risk. Under these contracts, the Company’s gains (losses) are capped at the notional amount. (2)Excludes embedded derivatives and associated reinsurance recoverables which contain multiple underlying risks. The fair value of these embedded derivatives was a net liability of $12,907 million and $20,119 million as of March 31, 2021 and December 31, 2020, respectively, primarily included in “Future policy benefits.” (3)Recorded in “Other invested assets” and “Other liabilities” on the Unaudited Interim Consolidated Statements of Financial Position. As of March 31, 2021, the following amounts were recorded on the Unaudited Interim Consolidated Statements of Financial Position related to the carrying amount of the hedged assets (liabilities) and cumulative basis adjustments included in the carrying amount for fair value hedges.
| March 31, 2021 |  | December 31, 2020 |
Balance Sheet Line Item in which Hedged Item is Recorded | Carrying Amount of the Hedged Assets (Liabilities) |  | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)(1) |  | Carrying Amount of the Hedged Assets (Liabilities) |  | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)(1) |
| (in millions)
Fixed maturities, available-for-sale, at fair value | $ | 367 |  |  | $ | 60 |  |  | $ | 402 |  |  | $ | 79 |  |
Commercial mortgage and other loans | $ | 20 |  |  | $ | 1 |  |  | $ | 20 |  |  | $ | 2 |  |
Policyholders’ account balances | $ | (1,434) |  |  | $ | (96) |  |  | $ | (1,627) |  |  | $ | (303) |  |
Future policy benefits | $ | (1,415) |  |  | $ | (202) |  |  | $ | (1,585) |  |  | $ | (372) |  |
__________ (1)There were no material fair value hedging adjustments for hedged assets and liabilities for which hedge accounting has been discontinued. Most of the Company’s derivatives do not qualify for hedge accounting for various reasons. For example: (i) derivatives that economically hedge embedded derivatives do not qualify for hedge accounting because changes in the fair value of the embedded derivatives are already recorded in net income; (ii) derivatives that are utilized as macro hedges of the Company’s exposure to various risks typically do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedge accounting rules; and (iii) synthetic GICs, which are product standalone derivatives, do not qualify as hedging instruments under hedge accounting rules. Offsetting Assets and Liabilities The following table presents recognized derivative instruments (excluding embedded derivatives and associated reinsurance recoverables), and repurchase and reverse repurchase agreements that are offset in the Unaudited Interim Consolidated Statements of Financial Position, and/or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the Unaudited Interim Consolidated Statements of Financial Position.
| March 31, 2021
| Gross Amounts of Recognized Financial Instruments |  | Gross Amounts Offset in the Statements of Financial Position |  | Net Amounts Presented in the Statements of Financial Position |  | Financial Instruments/ Collateral(1) |  | Net Amount
| (in millions)
Offsetting of Financial Assets: |  |  |  |  |  |  |  |  |
Derivatives(1) | $ | 14,236 |  |  | $ | (12,532) |  |  | $ | 1,704 |  |  | $ | (865) |  |  | $ | 839 |
Securities purchased under agreement to resell | 442 |  |  | 0 |  |  | 442 |  |  | (442) |  |  | 0 |
Total assets | $ | 14,678 |  |  | $ | (12,532) |  |  | $ | 2,146 |  |  | $ | (1,307) |  |  | $ | 839 |
Offsetting of Financial Liabilities: |  |  |  |  |  |  |  |  |
Derivatives(1) | $ | 20,356 |  |  | $ | (18,781) |  |  | $ | 1,575 |  |  | $ | (983) |  |  | $ | 592 |
Securities sold under agreement to repurchase | 9,384 |  |  | 0 |  |  | 9,384 |  |  | (9,253) |  |  | 131 |
Total liabilities | $ | 29,740 |  |  | $ | (18,781) |  |  | $ | 10,959 |  |  | $ | (10,236) |  |  | $ | 723 |
| December 31, 2020
| Gross Amounts of Recognized Financial Instruments |  | Gross Amounts Offset in the Statements of Financial Position |  | Net Amounts Presented in the Statements of Financial Position |  | Financial Instruments/ Collateral(1) |  | Net Amount
| (in millions)
Offsetting of Financial Assets: |  |  |  |  |  |  |  |  |
Derivatives(1) | $ | 23,144 |  |  | $ | (21,367) |  |  | $ | 1,777 |  |  | $ | (806) |  |  | $ | 971 |
Securities purchased under agreement to resell | 252 |  |  | 0 |  |  | 252 |  |  | (252) |  |  | 0 |
Total assets | $ | 23,396 |  |  | $ | (21,367) |  |  | $ | 2,029 |  |  | $ | (1,058) |  |  | $ | 971 |
Offsetting of Financial Liabilities: |  |  |  |  |  |  |  |  |
Derivatives(1) | $ | 18,265 |  |  | $ | (17,475) |  |  | $ | 790 |  |  | $ | (790) |  |  | $ | 0 |
Securities sold under agreement to repurchase | 10,894 |  |  | 0 |  |  | 10,894 |  |  | (10,432) |  |  | 462 |
Total liabilities | $ | 29,159 |  |  | $ | (17,475) |  |  | $ | 11,684 |  |  | $ | (11,222) |  |  | $ | 462 |
__________ (1) Amounts exclude the excess of collateral received/pledged from/to the counterparty. For information regarding the rights of offset associated with the derivative assets and liabilities in the table above, see “—Counterparty Credit Risk” below. For securities purchased under agreements to resell and securities sold under agreements to repurchase, the Company monitors the value of the securities and maintains collateral, as appropriate, to protect against credit exposure. Where the Company has entered into repurchase and resale agreements with the same counterparty, in the event of default, the Company would generally be permitted to exercise rights of offset. For additional information on the Company’s accounting policy for securities repurchase and resale agreements, see Note 2 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2020. Cash Flow, Fair Value and Net Investment Hedges The primary derivative and non-derivative instruments used by the Company in its fair value, cash flow and net investment hedge accounting relationships are interest rate swaps, currency swaps, currency forwards, and foreign currency denominated debts. These instruments are only designated for hedge accounting in instances where the appropriate criteria are met. The Company does not use futures, options, credit, or equity derivatives in any of its fair value, cash flow or net investment hedge accounting relationships. The following table provides the financial statement classification and impact of derivatives used in qualifying and non-qualifying hedge relationships, including the offset of the hedged item in fair value hedge relationships.
| Three Months Ended March 31, 2021
| Realized Investment Gains (Losses) |  | Net Investment Income |  | Other Income (Loss) |  | Interest Expense |  | Interest Credited to Policyholders’ Account Balances |  | Policyholders’ Benefits |  | AOCI(1)
| (in millions)
Derivatives Designated as Hedge Accounting Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Gains (losses) on derivatives designated as hedge instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate | $ | 21 |  |  | $ | (2) |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | (192) |  |  | $ | (170) |  |  | $ | 0 |
Currency | (2) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 7 |  |  | 0 |
Total gains (losses) on derivatives designated as hedge instruments | 19 |  |  | (2) |  |  | 0 |  |  | 0 |  |  | (192) |  |  | (163) |  |  | 0 |
Gains (losses) on the hedged item: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate | (20) |  |  | 4 |  |  | 0 |  |  | 0 |  |  | 207 |  |  | 180 |  |  | 0 |
Currency | 1 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (7) |  |  | 0 |
Total gains (losses) on hedged item | (19) |  |  | 4 |  |  | 0 |  |  | 0 |  |  | 207 |  |  | 173 |  |  | 0 |
Amortization for gains (losses) excluded from assessment of the effectiveness |  |  |  |  |  |  |  |  |  |  |  |  |
Currency | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (2) |  |  | 2 |
Total Amortization for Gain (Loss) Excluded from Assessment of the Effectiveness | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (2) |  |  | 2 |
Total gains (losses) on fair value hedges net of hedged item | 0 |  |  | 2 |  |  | 0 |  |  | 0 |  |  | 15 |  |  | 8 |  |  | 2 |
Cash flow hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate | 5 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (47) |
Currency | (1) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (17) |
Currency/Interest Rate | 25 |  |  | 71 |  |  | 53 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 73 |
Total gains (losses) on cash flow hedges | 29 |  |  | 71 |  |  | 53 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 9 |
Net investment hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Currency | 0 |  |  | 0 |  |  | 8 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Currency/Interest Rate | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Total gains (losses) on net investment hedges | 0 |  |  | 0 |  |  | 8 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Derivatives Not Qualifying as Hedge Accounting Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate | (5,925) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Currency | (278) |  |  | 0 |  |  | 8 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Currency/Interest Rate | 282 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Credit | 4 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Equity | (989) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Other | 1 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Embedded Derivatives | 7,651 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Total gains (losses) on derivatives not qualifying as hedge accounting instruments | 746 |  |  | 0 |  |  | 8 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Total | $ | 775 |  |  | $ | 73 |  |  | $ | 69 |  |  | $ | 0 |  |  | $ | 15 |  |  | $ | 8 |  |  | $ | 11 |
| Three Months Ended March 31, 2020
| Realized Investment Gains (Losses) |  | Net Investment Income |  | Other Income (Loss) |  | Interest Expense |  | Interest Credited to Policyholders’ Account Balances |  | Policyholders’ Benefits |  | AOCI(1)
| (in millions)
Derivatives Designated as Hedge Accounting Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
Fair value hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Gains (losses) on derivatives designated as hedge instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate | $ | (30) |  |  | $ | (2) |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 324 |  |  | $ | 280 |  |  | $ | 0 |
Currency | 2 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Total gains (losses) on derivatives designated as hedge instruments | (28) |  |  | (2) |  |  | 0 |  |  | 0 |  |  | 324 |  |  | 280 |  |  | 0 |
Gains (losses) on the hedged item: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate | 30 |  |  | 5 |  |  | 0 |  |  | 0 |  |  | (322) |  |  | (278) |  |  | 0 |
Currency | (1) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Total gains (losses) on hedged item | 29 |  |  | 5 |  |  | 0 |  |  | 0 |  |  | (322) |  |  | (278) |  |  | 0 |
Total gains (losses) on fair value hedges net of hedged item | 1 |  |  | 3 |  |  | 0 |  |  | 0 |  |  | 2 |  |  | 2 |  |  | 0 |
Cash flow hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate | (1) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 52 |
Currency | 1 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 102 |
Currency/Interest Rate | 18 |  |  | 79 |  |  | 291 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 2,200 |
Total gains (losses) on cash flow hedges | 18 |  |  | 79 |  |  | 291 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 2,354 |
Net investment hedges |  |  |  |  |  |  |  |  |  |  |  |  |
Currency | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 13 |
Currency/Interest Rate | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Total gains (losses) on net investment hedges | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 13 |
Derivatives Not Qualifying as Hedge Accounting Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate | 9,224 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Currency | 333 |  |  | 0 |  |  | (7) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Currency/Interest Rate | 816 |  |  | 0 |  |  | 2 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Credit | (41) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Equity | 5,436 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Other | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Embedded Derivatives | (14,295) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Total gains (losses) on derivatives not qualifying as hedge accounting instruments | 1,473 |  |  | 0 |  |  | (5) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Total | $ | 1,492 |  |  | $ | 82 |  |  | $ | 286 |  |  | $ | 0 |  |  | $ | 2 |  |  | $ | 2 |  |  | $ | 2,367 |
_______ (1)Net change in AOCI, excluding changes related to net investment hedges using non-derivative instruments of $11 million for the three months ended March 31, 2021, and $0 million for the three months ended March 31, 2020. Presented below is a rollforward of current period cash flow hedges in AOCI before taxes:
| (in millions)
Balance, December 31, 2020 | $ | (168) |
Amount recorded in AOCI |
Interest Rate | (42) |
Currency | (18) |
Currency/Interest Rate | 221 |
Total amount recorded in AOCI | 161 |
Amount reclassified from AOCI to income |
Interest Rate | (5) |
Currency | 1 |
Currency/Interest Rate | (148) |
Total amount reclassified from AOCI to income | (152) |
Balance, March 31, 2021 | $ | (159) |
The changes in fair value of cash flow hedges are deferred in AOCI and are included in “Net unrealized investment gains (losses)” in the Unaudited Interim Consolidated Statements of Comprehensive Income; these amounts are then reclassified to earnings when the hedged item affects earnings. Using March 31, 2021 values, it is estimated that a pre-tax gain of approximately $206 million is expected to be reclassified from AOCI to earnings during the subsequent twelve months ending March 31, 2022. The exposures the Company is hedging with these qualifying cash flow hedges include the variability of future cash flows from forecasted transactions denominated in foreign currencies, the purchases of invested assets, and the receipt or payment of variable interest on existing financial instruments. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions is 10 years. There were no material amounts reclassified from AOCI into earnings relating to instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by the anticipated date or within the additional time period permitted by the authoritative guidance for the accounting for derivatives and hedging. In addition, there were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge. For net investment hedges, in addition to derivatives, the Company uses foreign currency denominated debt to hedge the risk of change in the net investment in a foreign subsidiary due to changes in exchange rates. For effective net investment hedges, the amounts, before applicable taxes, recorded in the cumulative translation adjustment within AOCI were $11 million for the three months ended March 31, 2021 and $13 million for the three months ended March 31, 2020. Credit Derivatives The following table provides a summary of the notional and fair value of written credit protection. The Company’s maximum amount at risk under these credit derivatives, assuming the value of the underlying referenced securities become worthless, is equal to the notional amounts. These credit derivatives have maturities of less than 26 years for Index Reference.
| March 31, 2021
| NAIC Rating Designation of Underlying Credit Obligation(1)
| NAIC 1 | NAIC 2 | NAIC 3 | NAIC 4 | NAIC 5 | NAIC 6 | Total
| Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value
| (in millions)
Single name reference(2) | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |
Index reference(2) | 50 |  | 1 |  | 0 |  | 0 |  | 2,154 |  | 40 |  | 0 |  | 0 |  | 0 |  | 0 |  | 100 |  | 9 |  | 2,304 |  | 50 |
Total | $ | 50 |  | $ | 1 |  | $ | 0 |  | $ | 0 |  | $ | 2,154 |  | $ | 40 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 100 |  | $ | 9 |  | $ | 2,304 |  | $ | 50 |
| December 31, 2020 |  |
| NAIC Rating Designation of Underlying Credit Obligation(1) |  |
| NAIC 1 | NAIC 2 | NAIC 3 | NAIC 4 | NAIC 5 | NAIC 6 | Total |  |
| Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value | Gross Notional | Fair Value |  |
| (in millions) |  |
Single name reference(2) | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  |  |
Index reference(2) | 50 |  | 0 |  | 0 |  | 0 |  | 3,003 |  | 63 |  | 0 |  | 0 |  | 0 |  | 0 |  | 0 |  | 0 |  | 3,053 |  | 63 |  |  |
Total | $ | 50 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 3,003 |  | $ | 63 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 0 |  | $ | 3,053 |  | $ | 63 |  |  |
_________ (1)The NAIC rating designations are based on availability and the lowest ratings among Moody's Investors Service, Inc. ("Moody's"), Standard & Poor’s Rating Services (“S&P”) and Fitch Ratings Inc. (“Fitch”). If no rating is available from a rating agency, a NAIC 6 rating is used. (2)Single name credit default swaps may reference to the credit of corporate debt, sovereign debt, and structured finance. Index references NAIC designations are based on the lowest rated single name reference included in the index. In addition to writing credit protection, the Company has purchased credit protection using credit derivatives in order to hedge specific credit exposures in the Company’s investment portfolio. As of March 31, 2021 and December 31, 2020, the Company had $1 million and $307 million of outstanding notional amounts and reported at fair value as a liability of $0 million and $28 million, respectively. Counterparty Credit Risk The Company is exposed to losses in the event of non-performance by counterparties to financial derivative transactions with a positive fair value. The Company manages credit risk by: (i) entering into derivative transactions with highly rated major international financial institutions and other creditworthy counterparties governed by master netting agreements, as applicable; (ii) trading through central clearing and over-the-counte r (“OTC”) parties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review. Substantially all of the Company’s derivative agreements have zero thresholds which require daily full collateralization by the party in a liability position. In addition, certain of the Company’s derivative agreements contain credit-risk related contingent features; if the credit rating of one of the parties to the derivative agreement is to fall below a certain level, the party with positive fair value could request termination at the then fair value or demand immediate full collateralization from the party whose credit rating fell and is in a net liability position. As of March 31, 2021, there were no net liability derivative positions with counterparties with credit risk-related contingent features. All derivatives have been appropriately collateralized by the Company or the counterparty in accordance with the terms of the derivative agreements.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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