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Life Policy and Investment Contract Reserves
 9 Months Ended
Sep. 30, 2024
Policyholder Account Balance [Abstract]  
Life Policy and Investment Contract Reserves Life Policy and Investment Contract Reserves
We establish the reserves for traditional life policies including term, whole life and other products based on the present value of future benefits and claim expenses less the present value of future net premiums. Net premium is the portion of gross premium required to provide for all benefits and claim expenses. We estimate future benefits and claim expenses and net premium using certain cash flow assumptions including mortality, morbidity and lapse rates as well as a discount rate assumption. The cash flow assumptions are established based on our current expectations and are reviewed annually to determine any necessary updates. These assumptions are also updated on an interim basis if evidence suggests that they should be revised. We use both our own experience and industry experience, adjusted for historical trends, in arriving at our cash flow assumptions. The discount rate assumption is based on upper-medium grade fixed-income instrument yields (market value discount rates) and is updated quarterly. Certain assumptions, including the mortality, lapse and long-term interest rate reversion targets, were updated in the second quarter of 2024 as part of our annual assumption unlocking. Changes in the inputs, judgments and assumptions during the period and the related measurement impact on the liability are reflected in the below tables.
 
We establish reserves for our universal life, deferred annuity and other investment contracts equal to the cumulative account balances, which include premium deposits plus credited interest less charges and withdrawals. Some of our universal life policies contain no-lapse guarantee provisions. For these policies, we establish a reserve in addition to the account balance, based on expected no-lapse guarantee benefits and expected policy assessments.

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 condensed consolidated balance sheets:
(Dollars in millions)September 30, 2024December 31, 2023
Life policy reserves:
Term$1,108 $1,066 
Whole life441 434 
Other100 97 
Subtotal1,649 1,597 
Investment contract reserves:
Deferred annuities605 656 
Universal life590 585 
Structured settlements118 123 
Other107 107 
Subtotal1,420 1,471 
Total life policy and investment contract reserves$3,069 $3,068 
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)Three months ended September 30,
20242023
TermWhole lifeTermWhole life
Present value of expected net premiums:
Balance, beginning of period$1,620 $215 $1,664 $212 
Beginning balance at original discount rate1,701 225 1,712 219 
Effect of changes in cash flow assumptions(1)(1)— (1)
Effect of actual variances from expected experience(4)— (3)2 
Adjusted beginning of period balance1,696 224 1,709 220 
Issuances34 9 33 7 
Interest accrual20 2 18 3 
Net premiums collected(45)(8)(45)(7)
Ending balance at original discount rate1,705 227 1,715 223 
Effect of changes in discount rate assumptions3 — (133)(17)
Balance, end of period1,708 227 1,582 206 
Present value of expected future policy benefits:
Balance, beginning of period2,634 619 2,662 633 
Beginning balance at original discount rate2,772 636 2,737 615 
Effect of changes in cash flow assumptions(1)(2)— — 
Effect of actual variances from expected experience(7)(1)(6)2 
Adjusted beginning of period balance2,764 633 2,731 617 
Issuances34 8 33 7 
Interest accrual32 8 30 8 
Benefits paid(48)(8)(39)(9)
Ending balance at original discount rate2,782 641 2,755 623 
Effect of changes in discount rate assumptions12 27 (234)(37)
Balance, end of period2,794 668 2,521 586 
Net liability for future policy benefits:
Present value of expected future policy benefits less expected net premiums1,086 441 939 380 
Impact of flooring at cohort level22 — 17 1 
Net life policy reserves1,108 441 956 381 
Less reinsurance recoverable at original discount rate(92)(25)(99)(25)
Less effect of discount rate assumption changes on reinsurance recoverable(10)(5)(7)(3)
Net life policy reserves, after reinsurance recoverable$1,006 $411 $850 $353 
Weighted-average duration of the net life policy reserves in years11161116
(Dollars in millions)Nine months ended September 30,
20242023
TermWhole lifeTermWhole life
Present value of expected net premiums:
Balance, beginning of period$1,700 $223 $1,643 $208 
Beginning balance at original discount rate1,712 225 1,708 217 
Effect of changes in cash flow assumptions(13)— (5)(7)
Effect of actual variances from expected experience(23)(3)(15)3 
Adjusted beginning of period balance1,676 222 1,688 213 
Issuances110 20 111 24 
Interest accrual56 7 53 7 
Net premiums collected(137)(22)(137)(21)
Ending balance at original discount rate1,705 227 1,715 223 
Effect of changes in discount rate assumptions3 — (133)(17)
Balance, end of period1,708 227 1,582 206 
Present value of expected future policy benefits:
Balance, beginning of period2,751 657 2,584 614 
Beginning balance at original discount rate2,765 628 2,692 607 
Effect of changes in cash flow assumptions(30)— 5 (10)
Effect of actual variances from expected experience(35)(5)(19)3 
Adjusted beginning of period balance2,700 623 2,678 600 
Issuances110 20 111 24 
Interest accrual94 24 90 23 
Benefits paid(122)(26)(124)(24)
Ending balance at original discount rate2,782 641 2,755 623 
Effect of changes in discount rate assumptions12 27 (234)(37)
Balance, end of period2,794 668 2,521 586 
Net liability for future policy benefits:
Present value of expected future policy benefits less expected net premiums1,086 441 939 380 
Impact of flooring at cohort level 22 — 17 1 
Net life policy reserves1,108 441 956 381 
Less reinsurance recoverable at original discount rate(92)(25)(99)(25)
Less effect of discount rate assumption changes on reinsurance recoverable(10)(5)(7)(3)
Net life policy reserves, after reinsurance recoverable$1,006 $411 $850 $353 
Weighted-average duration of the net life policy reserves in years11161116

The total impact of flooring at cohort level in the above tables includes the effect of discount rate assumption changes of $3 million and $5 million at September 30, 2024 and 2023, 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 September 30,
20242023
UndiscountedDiscountedUndiscountedDiscounted
Term
Expected future benefit payments$4,840 $2,794 $4,768 $2,521 
Expected future gross premiums4,524 2,736 4,364 2,464 
Whole life
Expected future benefit payments$1,702 $668 $1,631 $586 
Expected future gross premiums687 428 653 379 

The following table shows the amount of revenue and interest recognized in the condensed consolidated statements of income related to our term and whole life policies:

(Dollars in millions)Three months ended September 30,Nine months ended September 30,
2024202320242023
Gross premiums
Term$72 $71 $221 $217 
Whole life15 14 41 39 
Total$87 $85 $262 $256 
Interest accretion
Term$12 $13 $38 $37 
Whole life6 5 17 16 
Total$18 $18 $55 $53 

Adverse development that resulted in an immediate charge to income due to net premiums exceeding gross premiums was immaterial for the nine months ended September 30, 2024, and 2023.

The following table shows the weighted-average interest rate for our term and whole life products:
At September 30,
20242023
Term
Interest accretion rate5.21 %5.29 %
Current discount rate4.53 5.73 
Whole life
Interest accretion rate5.89 %5.92 %
Current discount rate5.14 5.95 

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)Three months ended September 30,Nine months ended September 30,
2024202320242023
Deferred annuityUniversal lifeDeferred annuityUniversal lifeDeferred annuityUniversal lifeDeferred annuityUniversal life
Balance, beginning of period$618 $456 $696 $456 $656 $457 $734 $457 
Premiums received10 9 13 8 29 28 38 28 
Policy charges— (10)— (9)— (30)— (29)
Surrenders and withdrawals(25)(2)(32)(2)(88)(9)(100)(9)
Benefit payments(4)(1)(3)(1)(9)(4)(9)(5)
Interest credited6 4 6 4 17 14 17 14 
Balance, end of period$605 $456 $680 $456 $605 $456 $680 $456 
Weighted average crediting rate3.64 %4.36 %3.45 %4.29 %3.64 %4.36 %3.45 %4.29 %
Net amount at risk$— $3,865 $— $3,989 $— $3,865 $— $3,989 
Cash surrender value599 426 675 424 599 426 675 424 

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 minimum1 to 50 basis points above51-150 basis points aboveGreater than 150 basis pointsTotal
At September 30, 2024
Deferred annuity
1.00-3.00%$4 $309 $14 $231 $558 
3.01-4.00%47 — — — 47 
Total$51 $309 $14 $231 $605 
Universal life
1.00-3.00%$— $55 $64 $5 $124 
3.01-4.00%50 — 4 — 54 
Greater than 4.00%278 — — — 278 
Total$328 $55 $68 $5 $456 
At September 30, 2023
Deferred annuity
1.00-3.00%$5 $380 $16 $229 $630 
3.01-4.00%50 — — — 50 
Total$55 $380 $16 $229 $680 
Universal life
1.00-3.00%$60 $— $57 $3 $120 
3.01-4.00%54 — — — 54 
Greater than 4.00%282 — — — 282 
Total$396 $— $57 $3 $456 
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)Three months ended September 30,Nine months ended September 30,
2024202320242023
Balance, beginning of period$128 $122 $128 $121 
Balance, beginning of period before shadow reserve adjustments130 124 129 123 
Effect of changes in cash flow assumptions— — (2)(5)
Effect of actual variances from expected experience— 2 — 1 
Adjusted beginning of period balance130 126 127 119 
Interest accrual1 1 3 3 
Excess death benefits(2)(4)(5)(6)
Attributed assessments3 3 9 9 
Effect of changes in interest rate assumptions3 (5)1 (4)
Balance, end of period before shadow reserve adjustments135 121 135 121 
Shadow reserve adjustments(1)(2)(1)(2)
Balance, end of period134 119 134 119 
Less reinsurance recoverable, end of period6 7 6 7 
Net other additional liability, after reinsurance recoverable$140 $126 $140 $126 
Weighted-average duration of the other additional liability in years29322932

The following table shows balances and changes in separate accounts balances during the period:
(Dollars in millions)Three months ended September 30,Nine months ended September 30,
2024202320242023
Balance, beginning of period$948 $911 $925 $892 
Interest credited before policy charges10 11 31 31 
Benefit payments— (3)(3)(6)
Other(15)(1)(10)1 
Balance, end of period$943 $918 $943 $918 
Cash surrender value$941 $912 $941 $912