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Life Policy and Investment Contract Reserves | 3 Months Ended
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Mar. 31, 2025
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. 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) |  | March 31, 2025 |  | December 31, 2024
Life policy reserves: |  |  |  |
Term |  | $ | 1,064 |  |  | $ | 1,051 |
Whole life |  | 412 |  |  | 405 |
Other |  | 99 |  |  | 98 |
Subtotal |  | 1,575 |  |  | 1,554 |
Investment contract reserves: |  |  |  |
Deferred annuities |  | 582 |  |  | 595 |
Universal life |  | 587 |  |  | 586 |
Structured settlements |  | 116 |  |  | 116 |
Other |  | 108 |  |  | 109 |
Subtotal |  | 1,393 |  |  | 1,406 |
Total life policy and investment contract reserves |  | $ | 2,968 |  |  | $ | 2,960 |
The balances and changes in the term and whole life policy reserves included in life policy and investment contract reserves are as follows:
(Dollars in millions) |  | Three months ended March 31,
|  | 2025 |  | 2024
|  | Term |  | Whole life |  | Term |  | Whole life
Present value of expected net premiums: |  |  |  |  |  |  |  |
Balance, beginning of period |  | $ | 1,638 |  |  | $ | 218 |  |  | $ | 1,700 |  |  | $ | 223 |
Beginning balance at original discount rate |  | 1,719 |  |  | 228 |  |  | 1,712 |  |  | 225 |
Effect of changes in cash flow assumptions |  | — |  |  | — |  |  | — |  |  | — |
Effect of actual variances from expected experience |  | (8) |  |  | — |  |  | (9) |  |  | — |
Adjusted beginning of period balance |  | 1,711 |  |  | 228 |  |  | 1,703 |  |  | 225 |
Issuances |  | 35 |  |  | 3 |  |  | 35 |  |  | 5 |
Interest accrual |  | 19 |  |  | 3 |  |  | 18 |  |  | 2 |
Net premiums collected |  | (46) |  |  | (7) |  |  | (46) |  |  | (7) |
Ending balance at original discount rate |  | 1,719 |  |  | 227 |  |  | 1,710 |  |  | 225 |
Effect of changes in discount rate assumptions |  | (60) |  |  | (7) |  |  | (50) |  |  | (6) |
Balance, end of period |  | 1,659 |  |  | 220 |  |  | 1,660 |  |  | 219 |
Present value of expected future policy benefits: |  |  |  |  |  |  |  |
Balance, beginning of period |  | 2,668 |  |  | 623 |  |  | 2,751 |  |  | 657 |
Beginning balance at original discount rate |  | 2,812 |  |  | 646 |  |  | 2,765 |  |  | 628 |
Effect of changes in cash flow assumptions |  | — |  |  | — |  |  | — |  |  | — |
Effect of actual variances from expected experience |  | (14) |  |  | — |  |  | (14) |  |  | — |
Adjusted beginning of period balance |  | 2,798 |  |  | 646 |  |  | 2,751 |  |  | 628 |
Issuances |  | 36 |  |  | 3 |  |  | 35 |  |  | 5 |
Interest accrual |  | 32 |  |  | 9 |  |  | 31 |  |  | 8 |
Benefits paid |  | (54) |  |  | (10) |  |  | (37) |  |  | (8) |
Ending balance at original discount rate |  | 2,812 |  |  | 648 |  |  | 2,780 |  |  | 633 |
Effect of changes in discount rate assumptions |  | (109) |  |  | (17) |  |  | (82) |  |  | 4 |
Balance, end of period |  | 2,703 |  |  | 631 |  |  | 2,698 |  |  | 637 |
Net liability for future policy benefits: |  |  |  |  |  |  |  |
Present value of expected future policy benefits less expected net premiums |  | 1,044 |  |  | 411 |  |  | 1,038 |  |  | 418 |
Impact of flooring at cohort level |  | 20 |  |  | 1 |  |  | 16 |  |  | — |
Net life policy reserves |  | 1,064 |  |  | 412 |  |  | 1,054 |  |  | 418 |
Less reinsurance recoverable at original discount rate |  | (82) |  |  | (25) |  |  | (100) |  |  | (24) |
Less effect of discount rate assumption changes on reinsurance recoverable |  | (8) |  |  | (3) |  |  | (8) |  |  | (4) |
Net life policy reserves, after reinsurance recoverable |  | $ | 974 |  |  | $ | 384 |  |  | $ | 946 |  |  | $ | 390 |
Weighted-average duration of the net life policy reserves in years |  | 11 |  | 15 |  | 11 |  | 16
The total impact of flooring at cohort level in the above tables includes the effect of discount rate assumption changes of $3 million and $2 million at March 31, 2025 and 2024, 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 March 31,
|  | 2025 |  | 2024
|  | Undiscounted |  | Discounted |  | Undiscounted |  | Discounted
Term |  |  |  |  |  |  |  |
Expected future benefit payments |  | $ | 4,894 |  |  | $ | 2,703 |  |  | $ | 4,816 |  |  | $ | 2,698 |
Expected future gross premiums |  | 4,561 |  |  | 2,658 |  |  | 4,386 |  |  | 2,601 |
Whole life |  |  |  |  |  |  |  |
Expected future benefit payments |  | $ | 1,719 |  |  | $ | 631 |  |  | $ | 1,660 |  |  | $ | 637 |
Expected future gross premiums |  | 692 |  |  | 415 |  |  | 663 |  |  | 402 |
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 March 31,
|  |  |  |  |  | 2025 |  | 2024
Gross premiums |  |  |  |  |  |  |  |
Term |  |  |  |  |  | $ | 74 |  |  | $ | 74 |
Whole life |  |  |  |  |  | 13 |  |  | 13 |
Total |  |  |  |  |  | $ | 87 |  |  | $ | 87 |
Interest accretion |  |  |  |  |  |  |  |
Term |  |  |  |  |  | $ | 13 |  |  | $ | 13 |
Whole life |  |  |  |  |  | 6 |  |  | 6 |
Total |  |  |  |  |  | $ | 19 |  |  | $ | 19 |
Adverse development that resulted in an immediate charge to income due to net premiums exceeding gross premiums was immaterial for the three months ended March 31, 2025, and 2024. The following table shows the weighted-average interest rate for our term and whole life products:
|  | At March 31, |  |  |  |
|  | 2025 |  | 2024 |  |  |  |
Term |  |  |  |  |  |  |  |
Interest accretion rate |  | 5.20 | % |  | 5.26 | % |  |  |  |
Current discount rate |  | 4.96 |  |  | 5.09 |  |  |  |  |
Whole life |  |  |  |  |  |  |  |
Interest accretion rate |  | 5.87 | % |  | 5.90 | % |  |  |  |
Current discount rate |  | 5.67 |  |  | 5.40 |  |  |  |  |
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 March 31,
|  |  |  |  | 2025 |  | 2024
|  |  |  |  |  |  |  |  | Deferred annuity |  | Universal life |  | Deferred annuity |  | Universal life
Balance, beginning of period |  |  |  |  |  |  |  |  | $ | 595 |  |  | $ | 456 |  |  | $ | 656 |  |  | $ | 457 |
Premiums received |  |  |  |  |  |  |  |  | 4 |  |  | 10 |  |  | 9 |  |  | 10 |
Policy charges |  |  |  |  |  |  |  |  | — |  |  | (10) |  |  | — |  |  | (10) |
Surrenders and withdrawals |  |  |  |  |  |  |  |  | (17) |  |  | (3) |  |  | (37) |  |  | (4) |
Benefit payments |  |  |  |  |  |  |  |  | (5) |  |  | (1) |  |  | (3) |  |  | (2) |
Interest credited |  |  |  |  |  |  |  |  | 5 |  |  | 5 |  |  | 6 |  |  | 5 |
Balance, end of period |  |  |  |  |  |  |  |  | $ | 582 |  |  | $ | 457 |  |  | $ | 631 |  |  | $ | 456 |
Weighted average crediting rate |  |  |  |  |  |  |  |  | 3.68 | % |  | 4.40 | % |  | 3.55 | % |  | 4.33 | %
Net amount at risk |  |  |  |  |  |  |  |  | $ | — |  |  | $ | 3,801 |  |  | $ | — |  |  | $ | 3,908 |
Cash surrender value |  |  |  |  |  |  |  |  | 575 |  |  | 428 |  |  | 625 |  |  | 425 |
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 March 31, 2025 |  |  |  |  |
Deferred annuity |  |  |  |  |  |  |  |  |  |
1.00-3.00% |  | $ | 2 |  |  | $ | 286 |  |  | $ | 15 |  |  | $ | 233 |  |  | $ | 536 |
3.01-4.00% |  | 46 |  |  | — |  |  | — |  |  | — |  |  | 46 |
Total |  | $ | 48 |  |  | $ | 286 |  |  | $ | 15 |  |  | $ | 233 |  |  | $ | 582 |
Universal life |  |  |  |  |  |  |  |  |  |
1.00-3.00% |  | $ | — |  |  | $ | 55 |  |  | $ | 65 |  |  | $ | 6 |  |  | $ | 126 |
3.01-4.00% |  | 50 |  |  | — |  |  | 5 |  |  | — |  |  | 55 |
Greater than 4.00% |  | 276 |  |  | — |  |  | — |  |  | — |  |  | 276 |
Total |  | $ | 326 |  |  | $ | 55 |  |  | $ | 70 |  |  | $ | 6 |  |  | $ | 457 |
At March 31, 2024 |  |  |  |  |  |  |  |  |  |
Deferred annuity |  |  |  |  |  |  |  |  |  |
1.00-3.00% |  | $ | 4 |  |  | $ | 337 |  |  | $ | 15 |  |  | $ | 226 |  |  | $ | 582 |
3.01-4.00% |  | 49 |  |  | — |  |  | — |  |  | — |  |  | 49 |
Total |  | $ | 53 |  |  | $ | 337 |  |  | $ | 15 |  |  | $ | 226 |  |  | $ | 631 |
Universal life |  |  |  |  |  |  |  |  |  |
1.00-3.00% |  | $ | — |  |  | $ | 60 |  |  | $ | 58 |  |  | $ | 4 |  |  | $ | 122 |
3.01-4.00% |  | 49 |  |  | 5 |  |  | — |  |  | — |  |  | 54 |
Greater than 4.00% |  | 280 |  |  | — |  |  | — |  |  | — |  |  | 280 |
Total |  | $ | 329 |  |  | $ | 65 |  |  | $ | 58 |  |  | $ | 4 |  |  | $ | 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 March 31,
|  |  |  |  | 2025 |  | 2024
Balance, beginning of period |  |  |  |  | $ | 130 |  |  | $ | 128 |
Balance, beginning of period before shadow reserve adjustments |  |  |  |  | 131 |  |  | 129 |
Effect of changes in cash flow assumptions |  |  |  |  | — |  |  | — |
Effect of actual variances from expected experience |  |  |  |  | 2 |  |  | — |
Adjusted beginning of period balance |  |  |  |  | 133 |  |  | 129 |
Interest accrual |  |  |  |  | 1 |  |  | 1 |
Excess death benefits |  |  |  |  | (7) |  |  | (2) |
Attributed assessments |  |  |  |  | 3 |  |  | 3 |
Effect of changes in interest rate assumptions |  |  |  |  | 1 |  |  | (1) |
Balance, end of period before shadow reserve adjustments |  |  |  |  | 131 |  |  | 130 |
Shadow reserve adjustments |  |  |  |  | (1) |  |  | (1) |
Balance, end of period |  |  |  |  | 130 |  |  | 129 |
Less reinsurance recoverable, end of period |  |  |  |  | 8 |  |  | 6 |
Net other additional liability, after reinsurance recoverable |  |  |  |  | $ | 138 |  |  | $ | 135 |
Weighted-average duration of the other additional liability in years |  |  |  |  | 29 |  | 31
The following table shows balances and changes in separate accounts balances during the period:
(Dollars in millions) |  |  |  | Three months ended March 31,
|  |  |  |  |  | 2025 |  | 2024
Balance, beginning of period |  |  |  |  |  | $ | 952 |  |  | $ | 925 |
Interest credited before policy charges |  |  |  |  |  | 11 |  |  | 10 |
Benefit payments |  |  |  |  |  | (8) |  |  | — |
Other |  |  |  |  |  | 4 |  |  | (8) |
Balance, end of period |  |  |  |  |  | $ | 959 |  |  | $ | 927 |
Cash surrender value |  |  |  |  |  | $ | 949 |  |  | $ | 925 |

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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 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/944/tableOfContent Reference 2: 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 + Details
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