See Note 2 – “Significant Accounting Policies and Pronouncements” for a detailed discussion of the accounting treatment for derivative instruments, including embedded derivatives. See Note 6 – “Fair Value of Assets and Liabilities” for additional disclosures related to the fair value hierarchy for derivative instruments, including embedded derivatives.

The Company sells protection under single name credit default swaps and credit default swap index tranches, as well as other credit derivatives, to diversify its credit risk exposure in certain portfolios and, in combination with purchasing securities, to replicate characteristics of similar investments based on the credit quality and term of the credit default swap. Credit default triggers for indexed reference entities and single name reference entities are defined in the contracts. The Company’s maximum exposure to credit loss equals the notional value for credit default swaps. In the event of default of a referencing entity, the Company is typically required to pay the protection holder the full notional value less a recovery amount determined at auction. The Company uses credit default swaps which do not qualify for hedge accounting treatment.

Exchange-traded equity futures are used primarily to economically hedge liabilities embedded in certain variable annuity products. With exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the relevant stock indices. The Company posts variation margin on a daily basis in an amount equal to the difference between the daily estimated fair values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. The Company uses exchange-traded futures which do not qualify for hedge accounting treatment.

Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products. To hedge against adverse changes in equity indices, the Company buys put options. The contracts are net settled in cash based on differentials in the indices at the time of exercise and the strike price. The Company uses equity index options which do not qualify for hedge accounting treatment.

Foreign currency swaps are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies. With a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a forward exchange rate calculated by reference to an agreed upon principal amount. The principal amount of each currency is exchanged at the termination of the currency swap by each party. The Company uses foreign currency swaps in hedges of net investments in foreign operations, cash flow hedges, fair value hedges and non-qualifying hedging relationships.

Foreign currency forwards are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies. With a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made in a different currency at the specified future date. The Company uses foreign currency forwards in hedges of net investments in foreign operations and non-qualifying hedging relationships.

Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates, to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches) and to manage the risk of cash flows of liabilities that are variable based on a benchmark rate. With an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between two rates, which can be either fixed-rate or floating-rate interest amounts, tied to an agreed-upon notional principal amount. These transactions are executed pursuant to master agreements that provide for a single net payment or individual gross payments at each due date. The Company uses interest rate swaps in cash flow and non-qualifying hedging relationships.

Interest rate options include swaptions that are used by the Company to hedge interest rate risk associated with the Company’s long-term liabilities and invested assets. A swaption is an option to enter a swap with a forward starting effective date. The Company pays a premium for purchased swaptions. The Company uses swaptions which do not qualify for hedge accounting treatment.

Total return swaps are used by the Company to exchange, at specified intervals, the difference between the economic risk and calculated rate of return of an asset or a market index and a benchmark interest rate, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. Total return swaps are used by the Company to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). The Company uses total return swaps which do not qualify for hedge accounting treatment.

Forward bond purchase commitments are used by the Company to hedge against the variability in the anticipated cash flows required to purchase securities. With forward bond purchase commitments, the forward price is agreed upon at the time of the contract and payment for such contract is made at the future specified settlement date of the securities. The Company uses forward bond purchase commitments in cash flow hedges.

Consumer price index (“CPI”) swaps are used by the Company primarily to economically hedge liabilities embedded in certain insurance products where value is directly affected by changes in a designated benchmark consumer price index. With a CPI swap transaction, the Company agrees with another party to exchange the actual amount of inflation realized over a specified period of time for a fixed amount of inflation determined at inception. These transactions are executed pursuant to master agreements that provide for a single net payment or individual gross payments to be made by the counterparty at each due date. Most of these swaps will require a single payment to be made by one counterparty at the maturity date of the swap.

The Company sells fee-based synthetic guaranteed investment contracts (“GICs”) to retirement plans that include investment-only, stable value contracts. The assets are owned by the trustees of such plans, who invest the assets under the terms of investment guidelines to which the Company agrees. The contracts contain a guarantee of a minimum rate of return on participant balances supported by the underlying assets, and a guarantee of liquidity to meet certain participant-initiated plan cash flow requirements. These contracts are reported as derivatives and recorded at fair value.

The Company has certain embedded derivatives that are required to be separated from their host contracts and reported as derivatives. Host contracts include reinsurance treaties structured on a modco or funds withheld basis. Additionally, the Company reinsures equity-indexed annuity and variable annuity contracts with benefits that are considered embedded derivatives, including guaranteed minimum withdrawal benefits, guaranteed minimum accumulation benefits, and guaranteed minimum income benefits. The changes in fair values of embedded derivatives on equity-indexed annuities described below relate to changes in the fair value associated with capital market and other related assumptions.

Derivatives, except for embedded derivatives, are included in other invested assets or other liabilities, at fair value. Embedded derivative assets and liabilities on modco or funds withheld arrangements are included on the consolidated balance sheets with the host contract in funds withheld at interest or other liabilities, at fair value. Embedded derivative liabilities on indexed annuity and variable annuity products are included on the consolidated balance sheets with the host contract in interest-sensitive contract liabilities, at fair value. The following table presents the notional amounts and gross fair value of derivative instruments prior to taking into account the netting effects of master netting agreements as of December 31, 2022 and 2021 (dollars in millions):


		December 31, 2022						December 31, 2021
	Primary Underlying Risk	Notional		Carrying Value/Fair Value				Notional		Carrying Value/Fair Value
		Amount		Assets		Liabilities		Amount		Assets		Liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps	Interest rate	$	1,271	$	2	$	2	$	1,273	$	66	$	1
Interest rate options	Interest rate	7,756		34		—		—		—		—
Total return swaps	Interest rate	500		18		—		—		—		—
Financial futures	Equity	260		—		—		240		—		—
Foreign currency swaps	Foreign currency	150		18		—		150		1		—
Foreign currency forwards	Foreign currency	766		50		—		395		2		4
CPI swaps	CPI	496		20		3		563		34		7
Credit default swaps	Credit	1,523		2		21		1,321		29		1
Equity options	Equity	358		38		—		472		29		—
Synthetic GICs	Interest rate	17,411		—		—		16,143		—		—
Embedded derivatives in:
Modco or funds withheld arrangements		—		363		371		—		227		62
Indexed annuity products		—		—		530		—		—		693
Variable annuity products		—		—		124		—		—		162
Total non-hedging derivatives		30,491		545		1,051		20,557		388		930
Derivatives designated as hedging instruments:
Interest rate swaps	Foreign currency/interest rate	1,310		3		113		941		4		33
Foreign currency swaps	Foreign currency	114		—		—		153		1		—
Foreign currency forwards	Foreign currency	1,019		38		1		1,320		14		11
Forward bond purchase commitments	Interest rate	407		—		96		545		14		1
Total hedging derivatives		2,850		41		210		2,959		33		45
Total derivatives		$	33,341	$	586	$	1,261	$	23,516	$	421	$	975

The Company designates and reports certain foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets as fair value hedges when they meet the requirements of the general accounting principles for Derivatives and Hedging. The gain or loss on the hedged item attributable to a change in foreign currency and the offsetting gain or loss on the related foreign currency swaps for the years ended December 31, 2022, 2021 and 2020 were as follows (dollars in millions):


Type of Fair Value Hedge	Hedged Item	Gains (Losses) Recognized for Derivatives		Gains (Losses) Recognized for Hedged Items
		Investment Related Gains (Losses)
For the Year Ended December 31, 2022:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	(1)	$	7
For the Year Ended December 31, 2021:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	(4)	$	6
For the Year Ended December 31, 2020:
Foreign currency swaps	Foreign-denominated fixed maturity securities	$	8	$	(10)

Certain derivative instruments are designated as cash flow hedges when they meet the requirements of the general accounting principles for Derivatives and Hedging. The Company designates and accounts for the following as cash flow hedges: (i) certain interest rate swaps, in which the cash flows of assets and liabilities are variable based on a benchmark rate; (ii) certain interest rate swaps, in which the cash flows of assets are denominated in different currencies, commonly referred to as cross-currency swaps; and (iii) forward bond purchase commitments.


	Amounts Included in AOCI
Balance December 31, 2019	$	(26)
Gains (losses), net deferred in other comprehensive income (loss)	(27)

Amounts reclassified to net investment income	—
Amounts reclassified to interest expense	4
Balance December 31, 2020	(49)
Gains (losses), net deferred in other comprehensive income (loss)	20

Amounts reclassified to net investment income	—
Amounts reclassified to interest expense	7
Balance December 31, 2021	(22)
Gains (losses), net deferred in other comprehensive income (loss)	(192)

Amounts reclassified to net investment income	8
Amounts reclassified to interest expense	1
Balance December 31, 2022	$	(205)

As of December 31, 2022, approximately $10 million of before-tax deferred net gains on derivative instruments recorded in AOCI are expected to be reclassified to interest income during the next twelve months. As of December 31, 2022, approximately $1 million of before-tax deferred net losses on derivative instruments recorded in AOCI are expected to be reclassified to interest expense during the next twelve months.


Derivative Type	Gains (Losses) Deferred in OCI		Gains (Losses) Reclassified into Income from AOCI
For the year ended December 31, 2022:			Investment Related Gains (Losses)		Investment Income		Interest Expense
Interest rate	$	(187)	$	—	$	—	$	(1)
Foreign currency/interest rate	(5)		—		(8)		—

Total	$	(192)	$	—	$	(8)	$	(1)

For the year ended December 31, 2021:
Interest rate	$	28	$	—	$	—	$	(7)
Foreign currency/interest rate	(8)		—		—		—

Total	$	20	$	—	$	—	$	(7)

For the year ended December 31, 2020:
Interest rate	$	(33)	$	—	$	—	$	(4)
Foreign currency/interest rate	6		—		—		—

Total	$	(27)	$	—	$	—	$	(4)

For the years ended December 31, 2022, 2021 and 2020, there were no material amounts reclassified into earnings relating to instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by the anticipated date or within the additional time period permitted by the authoritative guidance for the accounting for derivatives and hedging.

The Company uses foreign currency swaps and foreign currency forwards to hedge a portion of its net investment in certain foreign operations against adverse movements in exchange rates. The following table illustrates the Company’s net investments in foreign operations (“NIFO”) hedges and the gains (losses) deferred in OCI for the years ended December 31, 2022, 2021 and 2020 (dollars in millions):

The cumulative foreign currency translation gain recorded in AOCI related to these hedges was $210 million and $137 million as of December 31, 2022 and 2021, respectively. If a hedged foreign operation was sold or substantially liquidated, the amounts in AOCI would be reclassified to the consolidated statements of income. A pro rata portion would be reclassified upon partial sale of a hedged foreign operation. There were no sales or substantial liquidations of net investments in foreign operations that would have required the reclassification of gains or losses from AOCI into investment income during the periods presented.

The Company uses various other derivative instruments for risk management purposes that either do not qualify or have not been elected for hedge accounting treatment. The gain or loss related to the change in fair value for these derivative instruments is recognized in investment related gains (losses), net, except where otherwise noted.


		Gains (Losses) for the years ended December 31,
Type of Non-hedging Derivative	Income Statement Location of Gains (Losses)	2022		2021		2020
Interest rate swaps	Investment related gains (losses), net	$	(131)	$	(34)	$	76
Interest rate options	Investment related gains (losses), net	3		—		—
Total return swaps	Investment related gains (losses), net	21		—		—
Financial futures	Investment related gains (losses), net	28		(24)		(47)
Foreign currency swaps	Investment related gains (losses), net	21		20		(7)
Foreign currency forwards	Investment related gains (losses), net	(93)		(20)		5
CPI swaps	Investment related gains (losses), net	31		46		16
Credit default swaps	Investment related gains (losses), net	(66)		33		16
Equity options	Investment related gains (losses), net	14		(33)		—


Subtotal		(172)		(12)		59
Embedded derivatives in:
Modco or funds withheld arrangements	Investment related gains (losses), net	(173)		107		(62)

Indexed annuity products	Interest credited	98		10		(30)
Variable annuity products	Investment related gains (losses), net	38		(7)		8
Total non-hedging derivatives		$	(209)	$	98	$	(25)


	2022					2021
Rating Agency Designation of Referenced Credit Obligations(1)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps(2)		Weighted Average Years to Maturity(3)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps(2)		Weighted Average Years to Maturity(3)
AAA/AA+/AA/AA-/A+/A/A-
Single name credit default swaps	$	(18)	$	428	18.7	$	28	$	600	14.2


BBB+/BBB/BBB-
Single name credit default swaps	1		155		3.3	1		141		2.4
Credit default swaps referencing indices	—		915		6.2	—		565		5.1
Subtotal	1		1,070		5.8	1		706		4.6
BB+/BB/BB-
Single name credit default swaps	(2)		25		3.2	(1)		15		3.5

Total	$	(19)	$	1,523	9.4	$	28	$	1,321	9.0

The Company has elected to include all derivatives, except embedded derivatives, in the table below, irrespective of whether they are subject to an enforceable master netting arrangement or a similar agreement. See Note 4 – “Investments” for information regarding the Company’s securities borrowing, lending, and repurchase/reverse repurchase agreements. See “Embedded Derivatives” above for information regarding the Company’s bifurcated embedded derivatives.


	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet		Net Amounts Presented in the Balance Sheet		Financial Instruments/Collateral (1)		Net Amount
December 31, 2022:
Derivative assets	$	223	$	(53)	$	170	$	(170)	$	—
Derivative liabilities	236		(53)		183		(183)		$	—
December 31, 2021:
Derivative assets	$	194	$	(19)	$	175	$	(175)	$	—
Derivative liabilities	58		(19)		39		(39)		$	—

The Company may be exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments. Generally, the credit exposure of the Company’s derivative contracts is limited to the fair value and accrued interest of non-collateralized derivative contracts in an asset position at the reporting date. As of December 31, 2022, the Company had credit exposure of $14 million.

Derivatives may be exchange-traded or they may be privately negotiated contracts, which are referred to as over-the-counter (“OTC”) derivatives. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC cleared”) and others are bilateral contracts between two counterparties. The Company manages its credit risk related to OTC derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master netting agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. The Company is only exposed to the default of the central clearing counterparties for OTC cleared derivatives, and these transactions require initial and daily variation margin collateral postings. Exchange-traded derivatives are settled on a daily basis, thereby reducing the credit risk exposure in the event of non-performance by counterparties to such financial instruments.