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Life Policy And Investment Contract Reserves | 12 Months Ended
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Dec. 31, 2023
Liability for Future Policy Benefit, before Reinsurance [Abstract] |
Life Policy And Investment Contract Reserves | Life Policy and Investment Contract Reserves In 2023, we adopted ASU 2018-12 which resulted in changes to the life policy and investment contract reserves and the expansion of required disclosures. The below disclosures represent application of the updated guidance. See Note 1, Summary of Significant Accounting Policies, for further discussion. The following table summarizes our life policy and investment contract reserves and provides a reconciliation of the balances described in the below tables to those in the consolidated balance sheets:
(Dollars in millions) |  | At December 31,
|  | 2023 |  | 2022
Life policy reserves: |  |  |  |
Term |  | $ | 1,066 |  |  | $ | 961 |
Whole life |  | 434 |  |  | 408 |
Other |  | 97 |  |  | 94 |
Subtotal |  | 1,597 |  |  | 1,463 |
Investment contract reserves: |  |  |  |
Deferred annuities |  | 656 |  |  | 734 |
Universal life |  | 585 |  |  | 578 |
Structured settlements |  | 123 |  |  | 129 |
Other |  | 107 |  |  | 111 |
Subtotal |  | 1,471 |  |  | 1,552 |
Total life policy and investment contract reserves |  | $ | 3,068 |  |  | $ | 3,015 |
The table below shows the ASU 2018-12 adoption impacts to the life policy and investment contract reserves as of January 1, 2021, (transition date), pre-tax:
(Dollars in millions) |  |  |  | Term |  | Whole life |  | Deferred annuity |  | Universal life |  |  |  | Other |  | Total
At January 1, 2021
Balance, pre-adoption at December 31, 2020 |  |  |  | $ | 901 |  |  | $ | 363 |  |  | $ | 761 |  |  | $ | 567 |  |  |  |  | $ | 323 |  |  | $ | 2,915 |
Removal of shadow adjustments |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 13 |  |  | 13 |
Net premiums in excess of gross premiums |  |  |  | 14 |  |  | 1 |  |  | — |  |  | — |  |  |  |  | — |  |  | 15 |
Remeasurement at market value discount rates |  |  |  | 372 |  |  | 245 |  |  | — |  |  | — |  |  |  |  | — |  |  | 617 |
Balance, post-adoption at January 1, 2021 |  |  |  | $ | 1,287 |  |  | $ | 609 |  |  | $ | 761 |  |  | $ | 567 |  |  |  |  | $ | 336 |  |  | $ | 3,560 |
The table below shows the ASU 2018-12 adoption impacts to the life reinsurance recoverable asset as of January 1, 2021, pre-tax:
(Dollars in millions) |  |  |  | Term |  | Whole life |  | Deferred annuity |  | Universal life |  | Other |  | Total
At January 1, 2021 |  |  |  |  |  |  |
Balance, pre-adoption at December 31, 2020 |  |  |  | $ | 113 |  |  | $ | 26 |  |  | $ | — |  |  | $ | — |  |  | $ | 78 |  |  | $ | 217 |
Remeasurement at market value discount rates |  |  |  | 29 |  |  | 18 |  |  | — |  |  | — |  |  | — |  |  | 47 |
Other adjustments |  |  |  | 20 |  |  | 1 |  |  | — |  |  | 2 |  |  | — |  |  | 23 |
Balance, post-adoption at January 1, 2021 |  |  |  | $ | 162 |  |  | $ | 45 |  |  | $ | — |  |  | $ | 2 |  |  | $ | 78 |  |  | $ | 287 |
Other above includes structured settlements, other life policy reserves and other investment contract reserves. The removal of shadow adjustments above represents an increase to the life policy and investment contract reserve balance as it is no longer required under ASU 2018-12 for liabilities amortized in accordance with deferred acquisition costs. Shadow adjustments were historically included to present the carrying amount of the liability as if unrealized holding gains and losses had been realized. The net premiums in excess of gross premiums adjustment represents an increase to the liability due to the remeasured net premiums exceeding the present value of future gross premiums on certain cohorts. The remeasured net premiums were calculated as the present value of future benefits and related expenses using updated cash flow assumptions as of the transition date less the carrying amount of the liability prior to transition, using the discount rate assumption that was in place prior to adoption of ASU 2018-12. The remeasurement at market value discount rates adjustment represents the increase to the liability as a result of updating the discount rate assumption for our term and whole life products from the rates used prior to adoption of ASU 2018-12 to market value discount rates that existed at the transition date. As the discount rate assumption decreased significantly from the date the contracts were initially made, this adjustment represents the largest impact on the liability as a result of the initial adoption of ASU 2018-12. The life reinsurance recoverable asset is included in the remeasurement as the assumptions used in estimating the life reinsurance recoverable are consistent with those used in estimating the related liabilities. Other adjustments includes a reclassification from prepaid reinsurance premiums to reinsurance recoverable. The shadow removal and remeasurement at market value discount rates adjustments were recorded as an increase to the life policy and investment contract reserves liability and a decrease to opening AOCI as of the transition date. The net premiums in excess of gross premiums adjustment was recorded as an increase to the life policy and investment contract reserves liability and a decrease to the opening balance of retained earnings as of the transition date. The balances and changes in the term and whole life policy reserves included in life policy and investment contract reserves is as follows:
(Dollars in millions) |  | Years ended December 31,
|  | 2023 |  | 2022 |  | 2021
|  | Term |  | Whole life |  | Term |  | Whole life |  | Term |  | Whole life
Present value of expected net premiums: |  |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | $ | 1,643 |  |  | $ | 208 |  |  | $ | 1,801 |  |  | $ | 241 |  |  | $ | 1,935 |  |  | $ | 234 |
Beginning balance at original discount rate |  | 1,708 |  |  | 217 |  |  | 1,503 |  |  | 201 |  |  | 1,503 |  |  | 182 |
Effect of changes in cash flow assumptions |  | (7) |  |  | (7) |  |  | 123 |  |  | (5) |  |  | (177) |  |  | (3) |
Effect of actual variances from expected experience |  | (20) |  |  | 3 |  |  | (1) |  |  | — |  |  | 28 |  |  | 2 |
Adjusted beginning of period balance |  | 1,681 |  |  | 213 |  |  | 1,625 |  |  | 196 |  |  | 1,354 |  |  | 181 |
Issuances |  | 143 |  |  | 31 |  |  | 194 |  |  | 40 |  |  | 248 |  |  | 39 |
Interest accrual |  | 72 |  |  | 9 |  |  | 65 |  |  | 8 |  |  | 62 |  |  | 8 |
Net premiums collected |  | (184) |  |  | (28) |  |  | (176) |  |  | (27) |  |  | (161) |  |  | (27) |
Ending balance at original discount rate |  | 1,712 |  |  | 225 |  |  | 1,708 |  |  | 217 |  |  | 1,503 |  |  | 201 |
Effect of changes in discount rate assumptions |  | (12) |  |  | (2) |  |  | (65) |  |  | (9) |  |  | 298 |  |  | 40 |
Balance, end of period |  | 1,700 |  |  | 223 |  |  | 1,643 |  |  | 208 |  |  | 1,801 |  |  | 241 |
Present value of expected future policy benefits: |  |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | 2,584 |  |  | 614 |  |  | 2,993 |  |  | 826 |  |  | 3,222 |  |  | 843 |
Beginning balance at original discount rate |  | 2,692 |  |  | 607 |  |  | 2,425 |  |  | 577 |  |  | 2,418 |  |  | 545 |
Effect of changes in cash flow assumptions |  | 2 |  |  | (10) |  |  | 140 |  |  | (7) |  |  | (181) |  |  | (4) |
Effect of actual variances from expected experience |  | (24) |  |  | 3 |  |  | 8 |  |  | (1) |  |  | 31 |  |  | 2 |
Adjusted beginning of period balance |  | 2,670 |  |  | 600 |  |  | 2,573 |  |  | 569 |  |  | 2,268 |  |  | 543 |
Issuances |  | 143 |  |  | 30 |  |  | 194 |  |  | 40 |  |  | 248 |  |  | 39 |
Interest accrual |  | 121 |  |  | 31 |  |  | 112 |  |  | 29 |  |  | 109 |  |  | 29 |
Benefits paid |  | (169) |  |  | (33) |  |  | (187) |  |  | (31) |  |  | (200) |  |  | (34) |
Ending balance at original discount rate |  | 2,765 |  |  | 628 |  |  | 2,692 |  |  | 607 |  |  | 2,425 |  |  | 577 |
Effect of changes in discount rate assumptions |  | (14) |  |  | 29 |  |  | (108) |  |  | 7 |  |  | 568 |  |  | 249 |
Balance, end of period |  | 2,751 |  |  | 657 |  |  | 2,584 |  |  | 614 |  |  | 2,993 |  |  | 826 |
Net liability for future policy benefits: |  |  |  |  |  |  |  |  |  |  |  |
Present value of expected future policy benefits less expected net premiums |  | 1,051 |  |  | 434 |  |  | 941 |  |  | 406 |  |  | 1,192 |  |  | 585 |
Impact of flooring at cohort level |  | 15 |  |  | — |  |  | 20 |  |  | 2 |  |  | 14 |  |  | — |
Net life policy reserves |  | 1,066 |  |  | 434 |  |  | 961 |  |  | 408 |  |  | 1,206 |  |  | 585 |
Less reinsurance recoverable at original discount rate |  | (97) |  |  | (23) |  |  | (99) |  |  | (25) |  |  | (107) |  |  | (27) |
Less effect of discount rate assumption changes on reinsurance recoverable |  | (10) |  |  | (5) |  |  | (9) |  |  | (5) |  |  | (19) |  |  | (15) |
Net life policy reserves, after reinsurance recoverable |  | $ | 959 |  |  | $ | 406 |  |  | $ | 853 |  |  | $ | 378 |  |  | $ | 1,080 |  |  | $ | 543 |
Weighted-average duration of the net life policy reserves |  | 11 |  | 16 |  | 11 |  | 16 |  | 12 |  | 18
The total impact of flooring at cohort level in the above table includes the effect of discount rate assumption changes of $2 million, $9 million and $6 million at December 31, 2023, 2022 and 2021, respectively. The following table shows the amount of undiscounted and discounted expected future benefit payments and expected gross premiums for our term and whole life policies:
(Dollars in millions) |  | At December 31,
|  | 2023 |  | 2022
|  | Undiscounted |  | Discounted |  | Undiscounted |  | Discounted
Term |  |  |  |  |  |  |  |
Expected future benefit payments |  | $ | 4,791 |  |  | $ | 2,751 |  |  | $ | 4,655 |  |  | $ | 2,584 |
Expected future gross premiums |  | 4,374 |  |  | 2,652 |  |  | 4,436 |  |  | 2,582 |
Whole life |  |  |  |  |  |  |  |
Expected future benefit payments |  | $ | 1,648 |  |  | $ | 657 |  |  | $ | 1,562 |  |  | $ | 614 |
Expected future gross premiums |  | 659 |  |  | 409 |  |  | 606 |  |  | 368 |
The following table shows the amount of revenue and interest recognized in the consolidated statements of income related to our term and whole life policies:
(Dollars in millions) |  | Years ended December 31,
|  | 2023 |  | 2022 |  | 2021
Gross premiums |  |  |  |  |  |
Term |  | $ | 289 |  |  | $ | 280 |  |  | $ | 270 |
Whole life |  | 52 |  |  | 47 |  |  | 47 |
Total |  | $ | 341 |  |  | $ | 327 |  |  | $ | 317 |
Interest accretion |  |  |  |  |  |
Term |  | $ | 49 |  |  | $ | 47 |  |  | $ | 47 |
Whole life |  | 22 |  |  | 21 |  |  | 21 |
Total |  | $ | 71 |  |  | $ | 68 |  |  | $ | 68 |
Adverse development that resulted in an immediate charge to income due to net premiums exceeding gross premiums was immaterial for the years ended December 31, 2023, 2022 and 2021, respectively. The following table shows the weighted-average interest rate for our term and whole life products:
|  | At December 31, |  |  |  |
|  | 2023 |  | 2022 |  |  |  |
Term |  |  |  |  |  |  |  |
Interest accretion rate |  | 5.28 | % |  | 5.38 | % |  |  |  |
Current discount rate |  | 4.81 |  |  | 5.24 |  |  |  |  |
Whole life |  |  |  |  |  |  |  |
Interest accretion rate |  | 5.90 | % |  | 5.96 | % |  |  |  |
Current discount rate |  | 5.10 |  |  | 5.35 |  |  |  |  |
The discount rate assumption was developed by calculating forward rates from market yield curves of upper-medium grade fixed-income instruments. The following table shows the balances and changes in policyholders' account balances included in investment contract reserves:
(Dollars in millions) |  | Years ended December 31,
|  | 2023 |  | 2022 |  | 2021
|  | Deferred annuity |  | Universal life |  | Deferred annuity |  | Universal life |  | Deferred annuity |  | Universal life
Balance, beginning of period |  | $ | 734 |  |  | $ | 457 |  |  | $ | 763 |  |  | $ | 454 |  |  | $ | 761 |  |  | $ | 451 |
Premiums received |  | 44 |  |  | 39 |  |  | 29 |  |  | 39 |  |  | 44 |  |  | 39 |
Policy charges |  | — |  |  | (39) |  |  | — |  |  | (39) |  |  | — |  |  | (38) |
Surrenders and withdrawals |  | (130) |  |  | (13) |  |  | (62) |  |  | (11) |  |  | (47) |  |  | (10) |
Benefit payments |  | (14) |  |  | (6) |  |  | (18) |  |  | (5) |  |  | (17) |  |  | (7) |
Interest credited |  | 22 |  |  | 19 |  |  | 22 |  |  | 19 |  |  | 22 |  |  | 19 |
Balance, end of period |  | $ | 656 |  |  | $ | 457 |  |  | $ | 734 |  |  | $ | 457 |  |  | $ | 763 |  |  | $ | 454 |
Weighted average crediting rate |  | 3.51 | % |  | 4.30 | % |  | 3.36 | % |  | 4.27 | % |  | 2.88 | % |  | 4.25 | %
Net amount at risk |  | $ | — |  |  | $ | 3,949 |  |  | $ | — |  |  | $ | 4,082 |  |  | $ | — |  |  | $ | 4,198 |
Cash surrender value |  | 651 |  |  | 426 |  |  | 729 |  |  | 424 |  |  | 757 |  |  | 419 |
The net amount at risk above represents the guaranteed benefit amount in excess of the current account balances. The following table shows the balance of account values by range of guaranteed minimum crediting rates, in basis points, and the related range of the difference between rates being credited to policyholders and the respective guaranteed minimums for our deferred annuity and universal life contracts:
(Dollars in millions) |  | At guaranteed minimum |  | 1 to 50 basis points above |  | 51-150 basis points above |  | Greater than 150 basis points |  | Total
At December 31, 2023 |  |  |  |  |
Deferred annuity |  |  |  |  |  |  |  |  |  |
1.00-3.00% |  | $ | 5 |  |  | $ | 361 |  |  | $ | 16 |  |  | $ | 226 |  |  | $ | 608 |
3.01-4.00% |  | 48 |  |  | — |  |  | — |  |  | — |  |  | 48 |
Total |  | $ | 53 |  |  | $ | 361 |  |  | $ | 16 |  |  | $ | 226 |  |  | $ | 656 |
Universal life |  |  |  |  |  |  |  |  |  |
1.00-3.00% |  | $ | 55 |  |  | $ | 4 |  |  | $ | 57 |  |  | $ | 4 |  |  | $ | 120 |
3.01-4.00% |  | 49 |  |  | 5 |  |  | — |  |  | — |  |  | 54 |
Greater than 4.00% |  | 283 |  |  | — |  |  | — |  |  | — |  |  | 283 |
Total |  | $ | 387 |  |  | $ | 9 |  |  | $ | 57 |  |  | $ | 4 |  |  | $ | 457 |
At December 31, 2022 |  |  |  |  |  |  |  |  |  |
Deferred annuity |  |  |  |  |  |  |  |  |  |
1.00-3.00% |  | $ | 5 |  |  | $ | 446 |  |  | $ | 18 |  |  | $ | 214 |  |  | $ | 683 |
3.01-4.00% |  | 51 |  |  | — |  |  | — |  |  | — |  |  | 51 |
Total |  | $ | 56 |  |  | $ | 446 |  |  | $ | 18 |  |  | $ | 214 |  |  | $ | 734 |
Universal life |  |  |  |  |  |  |  |  |  |
1.00-3.00% |  | $ | 61 |  |  | $ | 46 |  |  | $ | 8 |  |  | $ | 2 |  |  | $ | 117 |
3.01-4.00% |  | 52 |  |  | — |  |  | — |  |  | — |  |  | 52 |
Greater than 4.00% |  | 288 |  |  | — |  |  | — |  |  | — |  |  | 288 |
Total |  | $ | 401 |  |  | $ | 46 |  |  | $ | 8 |  |  | $ | 2 |  |  | $ | 457 |
The following table shows the balances and changes in the other additional liability related to the no-lapse guarantees contained within our universal life contracts:
(Dollars in millions) |  | Years ended December 31,
|  | 2023 |  | 2022 |  | 2021
Balance, beginning of period |  | $ | 121 |  |  | $ | 133 |  |  | $ | 116 |
Balance, beginning of period before shadow reserve adjustments |  | 123 |  |  | 131 |  |  | 113 |
Effect of changes in cash flow assumptions |  | (6) |  |  | (1) |  |  | 4 |
Effect of actual variances from expected experience |  | — |  |  | 6 |  |  | — |
Adjusted beginning of period balance |  | 117 |  |  | 136 |  |  | 117 |
Interest accrual |  | 4 |  |  | 4 |  |  | 4 |
Excess death benefits |  | (6) |  |  | (18) |  |  | (4) |
Attributed assessments |  | 12 |  |  | 12 |  |  | 12 |
Effect of changes in interest rate assumptions |  | 2 |  |  | (11) |  |  | 2 |
Balance, end of period before shadow reserve adjustments |  | 129 |  |  | 123 |  |  | 131 |
Shadow reserve adjustments |  | (1) |  |  | (2) |  |  | 2 |
Balance, end of period |  | 128 |  |  | 121 |  |  | 133 |
Less reinsurance recoverable, end of period |  | 6 |  |  | 5 |  |  | 3 |
Net other additional liability, after reinsurance recoverable |  | $ | 134 |  |  | $ | 126 |  |  | $ | 136 |
Weighted-average duration of the other additional liability |  | 32 |  | 34 |  | 35
The following table shows balances and changes in separate account balances during the period:
(Dollars in millions) |  | Years ended December 31, |  |
|  | 2023 |  | 2022 |  | 2021 |  |
Balance, beginning of period |  | $ | 892 |  |  | $ | 959 |  |  | $ | 952 |  |  |
Interest credited before policy charges |  | 42 |  |  | 38 |  |  | 37 |  |  |
Change in unrealized gains and losses impacting separate account liabilities |  | — |  |  | (85) |  |  | (22) |  |  |
Benefit payments |  | (10) |  |  | (15) |  |  | (6) |  |  |
Other |  | 1 |  |  | (5) |  |  | (2) |  |  |
Balance, end of period |  | $ | 925 |  |  | $ | 892 |  |  | $ | 959 |  |  |
Cash surrender value |  | $ | 917 |  |  | $ | 890 |  |  | $ | 870 |  |  |

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- Definition The entire disclosure for long duration contracts. This may include the information pertinent to an understanding of the types of traditional and nontraditional insurance and investment contracts sold and serviced, including the nature and amount of estimated guaranteed obligations pertaining to such contracts and the assumptions underlying such estimated amounts, hedging strategies, and sales inducements offered. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 40 -Name Accounting Standards Codification -Section 65 -Paragraph 2 -Subparagraph (u) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480016/944-40-65-2 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//944/tableOfContent + Details
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