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Closed Block | 12 Months Ended
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Dec. 31, 2023
Closed Block Disclosure [Abstract] |
Closed Block | CLOSED BLOCK On December 18, 2001, the date of demutualization, PICA established a closed block for certain in-force participating insurance policies and annuity products, along with corresponding assets used for the payment of benefits and policyholders’ dividends on these products, (collectively the “Closed Block”), and ceased offering these participating products. The recorded assets and liabilities were allocated to the Closed Block at their historical carrying amounts. The Closed Block forms the principal component of the Closed Block division. See Note 23 for financial information regarding the Closed Block. The insurance policies and annuity contracts comprising the Closed Block are managed in accordance with the Plan of Reorganization approved by the New Jersey Department of Banking and Insurance (“NJDOBI”) on December 18, 2001, and PICA is directly obligated for the insurance policies and annuity contracts in the Closed Block. The policies included in the Closed Block are specified individual life insurance policies and individual annuity contracts that were in force on the date of demutualization and for which PICA is currently paying or expects to pay experience-based policy dividends. Assets have been allocated to the Closed Block in an amount that has been determined to produce cash flows which, together with revenues from policies included in the Closed Block, are expected to be sufficient to support obligations and liabilities relating to these policies, including provision for payment of benefits, certain expenses and taxes and to provide for continuation of the policyholder dividend scales in effect in 2000, assuming experience underlying such scales continues. To the extent that, over time, cash flows from the assets allocated to the Closed Block and claims and other experience related to the Closed Block are, in the aggregate, more or less favorable than what was assumed when the Closed Block was established, total dividends paid to Closed Block policyholders may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect in 2000 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to Closed Block policyholders and will not be available to shareholders. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from PICA’s assets outside of the Closed Block. The Closed Block will continue in effect as long as any policy in the Closed Block remains in force unless, with the consent of the New Jersey insurance regulator, it is terminated earlier. The excess of Closed Block liabilities over Closed Block assets at the date of the demutualization (adjusted to eliminate the impact of related amounts in AOCI) represented the estimated maximum future earnings at that date from the Closed Block expected to result from operations attributed to the Closed Block after income taxes. In establishing the Closed Block, the Company developed an actuarial calculation of the timing of such maximum future earnings. If actual cumulative earnings of the Closed Block from inception through the end of any given period are greater than the expected cumulative earnings, only the expected earnings will be recognized in income. Any excess of actual cumulative earnings over expected cumulative earnings will represent undistributed accumulated earnings attributable to policyholders, which are recorded as a policyholder dividend obligation. The policyholder dividend obligation represents amounts to be paid to Closed Block policyholders as an additional policyholder dividend unless otherwise offset by future Closed Block performance that is less favorable than originally expected. If the actual cumulative earnings of the Closed Block from its inception through the end of any given period are less than the expected cumulative earnings of the Closed Block, the Company will recognize only the actual earnings in income. As of December 31, 2023, the Company recognized a policyholder dividend obligation of $2,873 million to Closed Block policyholders for the excess of actual cumulative earnings over expected cumulative earnings. Additionally, accumulated net unrealized investment gains (losses) were reflected as a policyholder dividend obligation of $(2,081) million at December 31, 2023 with a corresponding amount reported in AOCI. At December 31, 2022, the Company recognized a policyholder dividend obligation of $3,207 million to Closed Block policyholders for the excess of actual cumulative earnings over the expected cumulative earnings; however, due to accumulated net unrealized investment losses in excess of this amount, the policyholder dividend obligation balance as of December 31, 2022 was reduced to zero. In December of each year, PICA’s Board of Directors takes actions to either increase, continue, or decrease the dividend scale that was in effect on Closed Block policies. These actions taken resulted in a decrease of approximately $68 million for the year ended December 31, 2021, and increases of approximately $30 million and $77 million for the years ended December 31, 2022 and 2023, respectively, in the liability for policyholders’ dividends recognized. As of December 31, 2023, the Closed Block has sufficient funds to make guaranteed policy benefit payments and there is no expectation that assets outside of the Closed Block will be needed to fund future payments. The excess of Closed Block liabilities over Closed Block assets as of the end of the reporting period shown in the table below is a reasonable measure of the margin in the reported liabilities compared to best estimate liabilities assuming the current dividend scale. Closed Block liabilities and assets designated to the Closed Block, as well as maximum future earnings to be recognized from these liabilities and assets, are as follows:
|  | 2023 |  | 2022
|  | (in millions)
Closed Block liabilities |  |  |  |
Future policy benefits |  | $ | 43,587 |  |  | $ | 44,414 |
Policyholders’ dividends payable |  | 648 |  |  | 617 |
Policyholders’ dividend obligation |  | 792 |  |  | 0 |
Policyholders’ account balances |  | 4,500 |  |  | 4,607 |
Other Closed Block liabilities |  | 3,605 |  |  | 3,499 |
Total Closed Block liabilities |  | 53,132 |  |  | 53,137 |
Closed Block assets |  |  |  |
Fixed maturities, available-for-sale, at fair value |  | 30,314 |  |  | 29,898 |
Fixed maturities, trading, at fair value |  | 887 |  |  | 900 |
Equity securities, at fair value |  | 1,970 |  |  | 1,733 |
Commercial mortgage and other loans |  | 7,769 |  |  | 7,926 |
Policy loans |  | 3,479 |  |  | 3,637 |
Other invested assets |  | 4,513 |  |  | 4,254 |
Short-term investments |  | 232 |  |  | 337 |
Total investments |  | 49,164 |  |  | 48,685 |
Cash and cash equivalents |  | 993 |  |  | 1,307 |
Accrued investment income |  | 421 |  |  | 402 |
Other Closed Block assets |  | 138 |  |  | 162 |
Total Closed Block assets |  | 50,716 |  |  | 50,556 |
Excess of reported Closed Block liabilities over Closed Block assets |  | 2,416 |  |  | 2,581 |
Portion of above representing accumulated other comprehensive income (loss): |  |  |  |
Net unrealized investment gains (losses) |  | (2,241) |  |  | (3,458) |
Allocated to policyholder dividend obligation |  | 2,081 |  |  | 3,207 |
Future earnings to be recognized from Closed Block assets and Closed Block liabilities |  | $ | 2,256 |  |  | $ | 2,330 |
Information regarding the policyholder dividend obligation is as follows:
|  | 2023 |  | 2022
|  | (in millions)
Balance, January 1 |  | $ | 0 |  |  | $ | 8,027 |
Impact from earnings allocable to policyholder dividend obligation |  | (334) |  |  | (1,180) |
Change in net unrealized investment gains (losses) allocated to policyholder dividend obligation |  | 1,126 |  |  | (6,847) |
Balance, December 31 |  | $ | 792 |  |  | $ | 0 |
Closed Block revenues and benefits and expenses for the years ended December 31, are as follows:
|  | 2023 |  | 2022 |  | 2021
|  | (in millions)
Revenues |  |  |  |  |  |
Premiums |  | $ | 1,675 |  |  | $ | 1,698 |  |  | $ | 1,789 |
Net investment income |  | 1,949 |  |  | 1,980 |  |  | 2,514 |
Realized investment gains (losses), net |  | (380) |  |  | (270) |  |  | 807 |
Other income (loss) |  | 411 |  |  | (447) |  |  | 880 |
Total Closed Block revenues |  | 3,655 |  |  | 2,961 |  |  | 5,990 |
Benefits and Expenses |  |  |  |  |  |
Policyholders’ benefits |  | 2,354 |  |  | 2,428 |  |  | 2,546 |
Interest credited to policyholders’ account balances |  | 118 |  |  | 121 |  |  | 125 |
Dividends to policyholders |  | 1,008 |  |  | 115 |  |  | 2,794 |
General and administrative expenses |  | 280 |  |  | 302 |  |  | 312 |
Total Closed Block benefits and expenses |  | 3,760 |  |  | 2,966 |  |  | 5,777 |
Closed Block revenues, net of Closed Block benefits and expenses, before income taxes |  | (105) |  |  | (5) |  |  | 213 |
Income tax expense (benefit) |  | (176) |  |  | (103) |  |  | 125 |
Closed Block revenues, net of Closed Block benefits and expenses and income taxes |  | $ | 71 |  |  | $ | 98 |  |  | $ | 88 |

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- Definition The entire disclosure pertaining to the closed block. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (a) -SubTopic 805 -Topic 944 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479835/944-805-50-3 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -SubTopic 805 -Topic 944 -Publisher FASB -URI https://asc.fasb.org//944-805/tableOfContent + Details
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