XML 26 R14.htm IDEA: XBRL DOCUMENT v3.25.2
Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
Refer to Note A Basis of Financial Statements, for a description of the Company’s accounting policies for derivative financial instruments and Note C Fair Value of Financial Instruments for descriptions of the fair value methodologies used for derivative financial instruments.
The notional and carrying amounts of derivative financial instruments, including derivative instruments embedded in indexed annuities and IUL contracts, and reinsurance are as follows:
June 30, 2025December 31, 2024
Gross NotionalAssetsLiabilities Gross NotionalAssetsLiabilities
(In millions)
Derivatives designated as hedging instruments
Interest rate swaps (a)$350 $12 $— $— $— $— 
Foreign currency swaps (a)21 — 3 39 2 — 
Total derivatives designated as hedging instruments371 12 3 39 2 — 
Derivatives not designated as hedging instruments
Equity options (a)$32,475 $839 $— $29,594 $773 $— 
Interest rate swaps (a)5,760 85 1 5,145 19 10 
Foreign currency swaps (a)57 — 2 — — — 
Futures contracts (a)106 1 — 152 — — 
Other derivative investments (a)95 — 1 118 1 — 
Other embedded derivatives (b)— 36 — — 32 — 
Indexed annuities/IUL embedded derivatives (c)— — 5,727 — — 5,220 
Reinsurance related embedded derivatives (d)— — (17)— — (109)
Total derivatives not designated as hedging instruments38,493 961 5,714 35,009 825 5,121 
Total derivatives $38,864 $973 $5,717 $35,048 $827 $5,121 
(a)The fair value of derivative assets is reported in Derivative investments, and the fair value of derivative liabilities is reported in Accounts payable and accrued liabilities on the unaudited Condensed Consolidated Balance Sheets.
(b)The fair value is included in Other long term investments on the unaudited Condensed Consolidated Balance Sheets.
(c)The fair value is included in Contractholder funds on the unaudited Condensed Consolidated Balance Sheets.
(d)The fair value of the embedded derivative asset is included in Funds withheld for reinsurance liabilities as a contra-liability on the unaudited Condensed Consolidated Balance Sheets.
The amounts and locations of gains (losses) recognized for derivatives and gains (losses) recognized for hedged items included in the unaudited Condensed Consolidated Statements of Earnings are as follows:
Three months ended June 30, 2025Three months ended June 30, 2024
Recognized gains (losses) for derivativesRecognized gains (losses) for hedged itemBenefits and other changes in policy reserves for derivativesBenefits and other changes in policy reserves for hedged itemRecognized gains (losses) for derivativesRecognized gains (losses) for hedged itemBenefits and other changes in policy reserves for derivativesBenefits and other changes in policy reserves for hedged item
(In millions)
Derivatives designated as hedging instruments
Interest rate swaps$— $— $3 $(3)$— $— $— $— 
Foreign currency swaps(2)2 — — — — — — 
Total derivatives designated as hedging instruments(2)2 3 (3)— — — — 
Derivatives not designated as hedging instruments
Equity options126 — — — (23)— — — 
Interest rate swaps19 — — — (21)— — — 
Foreign currency swaps(4)— — — — — — — 
Futures contracts9 — — — 5 — — — 
Other derivative investments(8)— — — 2 — — — 
Other embedded derivatives4 — — — — — — — 
Indexed annuities/IUL embedded derivatives— — 202 — — — (56)— 
Reinsurance related embedded derivatives(61)— — — 10 — — — 
Total derivatives not designated as hedging instruments85 — 202 — (27)— (56)— 
Total derivatives$83 $2 $205 $(3)$(27)$— $(56)$— 
Six months ended June 30, 2025Six months ended June 30, 2024
Recognized gains (losses) for derivativesRecognized gains (losses) for hedged itemBenefits and other changes in policy reserves for derivativesBenefits and other changes in policy reserves for hedged itemRecognized gains (losses) for derivativesRecognized gains (losses) for hedged itemBenefits and other changes in policy reserves for derivativesBenefits and other changes in policy reserves for hedged item
(In millions)
Derivatives designated as hedging instruments
Interest rate swaps$— $— $12 $(13)$— $— $— $— 
Foreign currency swaps(3)3 — — — — — — 
Total derivatives designated as hedging instruments(3)3 12 (13)— — — — 
Derivatives not designated as hedging instruments
Equity options(108)— — — 227 — — — 
Interest rate swaps69 — — — (97)— — — 
Foreign currency swaps(4)— — — — — — — 
Futures contracts14 — — — 11 — — — 
Other derivative investments(11)— — — 5 — — — 
Other embedded derivatives4 — — — 3 — — — 
Indexed annuities/IUL embedded derivatives— — 135 — — — 144 — 
Reinsurance related embedded derivatives(102)— — — (8)— — — 
Total derivatives not designated as hedging instruments(138)— 135 — 141 — 144 — 
Total derivatives $(141)$3 $147 $(13)$141 $— $144 $— 
The following amounts are recorded in the unaudited Condensed Consolidated Balance Sheets related to the carrying amount of hedged assets and (liabilities) and the cumulative basis adjustment included in the carrying amount for fair value hedges:
June 30, 2025December 31, 2024
Line Item in the unaudited Condensed Consolidated Balance Sheets that includes hedged item Carrying Amount of Hedged Assets (Liabilities)Cumulative Amount of Fair Value Hedging Adjustment included in the Carrying Amount of the Hedged Assets (Liabilities)Carrying Amount of Hedged Assets (Liabilities)Cumulative Amount of Fair Value Hedging Adjustment included in the Carrying Amount of the Hedged Assets (Liabilities)
(In millions)
Fixed maturity securities, AFS, at amortized cost$21 $— $— $— 
Contractholder funds (363)(13)— — 
For the three and six months ended June 30, 2025 and 2024, the derivative instruments’ gains (losses) excluded from the assessment of hedge effectiveness was immaterial.
There were no cumulative fair value hedging adjustments for hedged assets and liabilities for which hedge accounting was discontinued as of June 30, 2025 and December 31, 2024.
Derivatives designated as hedging instruments
We utilize interest rate swaps and foreign currency swaps that are designated and accounted for as fair value hedges to reduce interest rate risk for certain funding agreements and to reduce the risk of certain exposures to foreign currency risk for foreign AFS fixed maturity securities. For fair value hedges of funding agreements, changes in fair value are reported in Benefits and other changes in policy reserves. For fair value hedges of AFS fixed maturity securities, changes in fair value included in the assessment of effectiveness are reported in Recognized gains and losses, net in the unaudited Condensed Consolidated Statement of Earnings. The change in the fair value of components excluded from the assessment of hedge effectiveness is recorded in OCI and is recognized in net income through periodic settlements.
Derivatives not designated as hedging instruments
Indexed Annuities/IUL Embedded Derivative, Equity Options and Futures
We have indexed annuities and IUL contracts that permit the holder to elect an interest rate return or an equity index linked component, where interest credited to the contracts is linked to the performance of various equity indices, such as the S&P 500 Index. This feature represents an embedded derivative under GAAP. The indexed annuities/IUL embedded derivatives are valued at fair value and included in the liability for contractholder funds in the unaudited Condensed Consolidated Balance Sheets with changes in fair value included as a component of Benefits and other changes in policy reserves in the unaudited Condensed Consolidated Statements of Earnings.
We purchase derivatives consisting of a combination of equity options and futures contracts (specifically for indexed annuity contracts) on the applicable market indices to fund the index credits due to indexed annuity/IUL contractholders. The equity options are one, two, three, five and six year options purchased to match the funding requirements of the underlying policies. On the respective anniversary dates of the indexed policies, the index used to compute the interest credit is reset and we purchase new equity options to fund the next index credit. We manage the cost of these purchases through the terms of our indexed annuities/IUL contracts, which permit us to change caps, spreads or participation rates, subject to guaranteed minimums, on each contract’s anniversary date. The change in the fair value of the equity options and futures contracts is generally designed to offset the portion of the change in the fair value of the indexed annuities/IUL embedded derivatives related to index performance through the current credit period. The equity options and futures contracts are marked to fair value with the change in fair value included as a component of Recognized gains and losses, net, in the unaudited Condensed Consolidated Statements of Earnings. The change in fair value of the equity options and futures contracts includes the gains and losses recognized at the expiration of the instrument term or upon early termination and the changes in fair value of open positions.
Other market exposures are hedged periodically depending on market conditions and our risk tolerance. Our indexed annuities/IUL hedging strategy economically hedges the equity returns and exposes us to the risk that unhedged market exposures result in divergence between changes in the fair value of the liabilities and the hedging assets. We use a variety of techniques, including direct estimation of market sensitivities, to monitor this risk daily. We intend to continue to adjust the hedging strategy as market conditions and our risk tolerance changes.
Interest Rate Swaps
We utilize interest rate swaps to reduce market risks from interest rate changes on our earnings associated with our floating rate investments. With an interest rate swap, we agree with another party to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts tied to an agreed upon notional principal.
The interest rate swaps are marked to fair value with the change in fair value, including accrued interest and related periodic cash flows received or paid, included as a component of Recognized gains and losses, net, in the unaudited Condensed Consolidated Statements of Earnings.
Foreign Currency Swaps
We utilize foreign currency swaps to reduce market risks from fluctuations in foreign exchange rates that impact earnings associated with our foreign currency denominated investments. Through a foreign currency swap, we agree with another party to exchange, at specified intervals, principal and interest payments in one currency for principal and interest payments in another currency, based on an agreed-upon notional amount.

The foreign currency swaps are marked to fair value with the change in fair value, including accrued interest and related periodic cash flows received or paid, included as a component of Recognized gains and losses, net, in the unaudited Condensed Consolidated Statements of Earnings.
Reinsurance Related Embedded Derivatives
F&G cedes certain business on a coinsurance funds withheld basis. Investment results for the assets that support the coinsurance are segregated within the funds withheld account and are passed directly to the reinsurer pursuant to the contractual terms of the reinsurance agreement, which creates embedded derivatives considered to be total return swaps. These total return swaps are not clearly and closely related to the underlying reinsurance agreement and thus require bifurcation. The fair value of the total return swaps is based on the change in fair value of the underlying assets held in the funds withheld account. Beginning in the first quarter of 2025, these embedded derivatives are reported in Funds withheld for reinsurance liabilities, irrespective if in a net asset position or a net liability position, on the unaudited Condensed Consolidated Balance Sheets and prior periods have been reclassified to conform with the current presentation. The related gains or losses are reported in Recognized gains and losses, net, on the unaudited Condensed Consolidated Statements of Earnings.
Credit Risk
We are exposed to credit loss in the event of non-performance by our counterparties and reflect assumptions regarding this non-performance risk in the fair value of our derivatives. The non-performance risk is the net counterparty exposure based on the fair value of the open contracts less collateral held. We maintain a policy of requiring all derivative contracts to be governed by an International Swaps and Derivatives Association (“ISDA”) Master Agreement.
We manage credit risk related to non-performance by our counterparties by (i) entering into derivative transactions with creditworthy counterparties; (ii) obtaining collateral, such as cash and securities when appropriate; and (iii) establishing counterparty exposure limits, which are subject to periodic management review.
Information regarding our exposure to credit loss on the derivative instruments we hold, excluding futures contracts, is presented below:
Fair ValueCollateralNet Credit Risk
(In millions)
June 30, 2025$924 $856 $68 
December 31, 2024782 771 34 
Collateral Agreements
We are required to maintain minimum ratings as a matter of routine practice as part of our over-the-counter derivative agreements on ISDA forms. Under some ISDA agreements, we have agreed to maintain certain financial strength ratings. A downgrade below these levels provides the counterparty under the agreement the right to terminate the open derivative contracts between the parties, at which time any amounts payable by us or the counterparty would be dependent on the market value of the underlying contracts. Our current rating does not allow any counterparty the right to terminate ISDA agreements. In certain transactions, both us and the counterparty have entered into a collateral support agreement requiring either party to post collateral when the net exposures exceed pre-determined thresholds. For all counterparties, except one, the threshold is set to zero. As of June 30, 2025 and December 31, 2024 counterparties posted collateral of $856 million and $771 million, respectively, of which $774 million and $679 million, respectively, is included in Cash and cash equivalents with an associated payable for this collateral included in Accounts payable and accrued liabilities on the unaudited Condensed Consolidated Balance Sheets. Accordingly, the maximum amount of loss due to credit risk that we would incur if parties to the derivatives failed completely to perform according to the terms of the contracts was $68 million as of June 30, 2025 and $34 million at December 31, 2024.
We are required to pay our counterparties the effective federal funds interest rate each day for cash collateral posted to us. Cash collateral is reinvested in overnight investment sweep products, which are included in Cash and cash equivalents in the unaudited Condensed Consolidated Balance Sheets, to reduce the interest cost. Changes in cash collateral are included in the Change in derivative collateral liabilities in the unaudited Condensed Consolidated Statements of Cash Flow.
We held 332 and 527 futures contracts as of June 30, 2025 and December 31, 2024, respectively. The fair value of the futures contracts represents the cumulative unsettled variation margin (open trade equity, net of cash settlements). We provide cash collateral to the counterparties for the initial and variation margin on the futures contracts, which is included in Cash and cash equivalents in the unaudited Condensed Consolidated Balance Sheets. The amount of cash collateral held by the counterparties for such contracts was $6 million and $7 million as of June 30, 2025 and December 31, 2024, respectively.