XML 33 R22.htm IDEA: XBRL DOCUMENT
v3.24.3

Derivative Instruments | 9 Months Ended
--- | ---
Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | DERIVATIVE INSTRUMENTS See Note 2 – “Significant Accounting Policies and Pronouncements” of the Company’s 2023 Annual Report for a detailed discussion of the accounting treatment for derivative instruments, including embedded derivatives. See Note 13 – “Fair Value of Assets and Liabilities” of the Company’s 2023 Annual Report for additional disclosures related to the fair value hierarchy for derivative instruments, including embedded derivatives. Commonly used derivative instruments include, but are not necessarily limited to: interest rate swaps, interest rate options, total return swaps, interest rate futures, foreign currency swaps, foreign currency forwards, foreign currency options, equity options, equity futures, credit default swaps, consumer price index (“CPI”) swaps, forward bond purchase commitments, synthetic guaranteed investment contracts (“GICs”), other derivatives and embedded derivatives. For detailed information on these derivative instruments and the related strategies, see Note 12 – “Derivative Instruments” of the Company’s 2023 Annual Report. Summary of Derivative Positions Freestanding 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 condensed consolidated balance sheets with the host contract in funds withheld at interest or funds withheld payable, at fair value. Embedded derivative liabilities on indexed annuity products are included on the condensed 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 September 30, 2024 and December 31, 2023 (dollars in millions):
|  |  |  | September 30, 2024 |  | December 31, 2023
|  | 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 |  | $ | 1,796 |  |  | $ | 6 |  |  | $ | 4 |  |  | $ | 1,609 |  |  | $ | 4 |  |  | $ | 3 |
Interest rate options |  | Interest rate |  | 2,266 |  |  | — |  |  | — |  |  | 5,555 |  |  | 7 |  |  | — |
Total return swaps |  | Interest rate |  | 1,075 |  |  | 21 |  |  | 17 |  |  | 500 |  |  | 24 |  |  | — |
Interest rate futures |  | Interest rate |  | — |  |  | — |  |  | — |  |  | 97 |  |  | — |  |  | — |
Foreign currency swaps |  | Foreign currency |  | 150 |  |  | 35 |  |  | — |  |  | 150 |  |  | 27 |  |  | — |
Foreign currency forwards |  | Foreign currency |  | 1,142 |  |  | 55 |  |  | 1 |  |  | 809 |  |  | 36 |  |  | — |
Foreign currency options |  | Foreign currency |  | 350 |  |  | 2 |  |  | — |  |  | — |  |  | — |  |  | — |
Equity options |  | Equity |  | 141 |  |  | 2 |  |  | — |  |  | 253 |  |  | 8 |  |  | — |
Equity futures |  | Equity |  | 225 |  |  | — |  |  | — |  |  | 255 |  |  | — |  |  | — |
Credit default swaps |  | Credit |  | 2,726 |  |  | 5 |  |  | 3 |  |  | 1,475 |  |  | 5 |  |  | 1 |
CPI swaps |  | CPI |  | 445 |  |  | 7 |  |  | 3 |  |  | 468 |  |  | 11 |  |  | 3 |
Synthetic GICs |  | Interest rate |  | 15,395 |  |  | — |  |  | — |  |  | 16,135 |  |  | — |  |  | — |
Embedded derivatives in: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Modco or funds withheld arrangements |  |  |  | — |  |  | 274 |  |  | 454 |  |  | — |  |  | 356 |  |  | 527 |
Indexed annuity products |  |  |  | — |  |  | — |  |  | 385 |  |  | — |  |  | — |  |  | 415 |
Total non-designated derivatives |  |  |  | 25,711 |  |  | 407 |  |  | 867 |  |  | 27,306 |  |  | 478 |  |  | 949 |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | Interest rate |  | 3,269 |  |  | 89 |  |  | 78 |  |  | 1,770 |  |  | 9 |  |  | 86 |
Forward bond purchase commitments |  | Interest rate |  | 1,673 |  |  | 7 |  |  | 101 |  |  | 1,076 |  |  | 11 |  |  | 80 |
Foreign currency swaps |  | Foreign currency |  | 2,026 |  |  | 37 |  |  | 71 |  |  | 809 |  |  | 7 |  |  | 64 |
Foreign currency forwards |  | Foreign currency |  | 1,315 |  |  | 4 |  |  | 9 |  |  | 1,143 |  |  | 5 |  |  | 17 |
Total hedging derivatives |  |  |  | 8,283 |  |  | 137 |  |  | 259 |  |  | 4,798 |  |  | 32 |  |  | 247 |
Total derivatives |  |  |  | $ | 33,994 |  |  | $ | 544 |  |  | $ | 1,126 |  |  | $ | 32,104 |  |  | $ | 510 |  |  | $ | 1,196 |
Fair Value Hedges The Company designates and reports the following as fair value hedges when they meet the requirements of the general accounting principles for Derivatives and Hedging: (i) certain foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets; and (ii) interest rate swaps to convert fixed rate liabilities to floating rate liabilities. The gain or loss on the hedged item attributable to a change in interest rates or foreign currency and the offsetting gain or loss on the related interest rate or foreign currency swaps for the three and nine months ended September 30, 2024 and 2023 are as follows (dollars in millions):
Derivative Type |  | Hedged Item |  | Investment Related Gains (Losses), Net |  | Claims and Other Policy Benefits |  | Interest Credited
|  |  |  | Derivatives |  | Hedged Items |  | Derivatives |  | Hedged Items |  | Derivatives |  | Hedged Items
For the three months ended September 30, 2024: |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  | Foreign-denominated fixed maturity securities |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Interest rate swaps |  | Future policy benefits |  | — |  |  | — |  |  | 31 |  |  | (34) |  |  | — |  |  | — |
Interest rate swaps |  | Interest-sensitive contract liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | 42 |  |  | (45) |
For the three months ended September 30, 2023: |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  | Foreign-denominated fixed maturity securities |  | (4) |  |  | 3 |  |  | — |  |  | — |  |  | — |  |  | — |
Interest rate swaps |  | Interest-sensitive contract liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | (2) |  |  | 2 |
For the nine months ended September 30, 2024: |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  | Foreign-denominated fixed maturity securities |  | 2 |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |
Interest rate swaps |  | Future policy benefits |  | — |  |  | — |  |  | 27 |  |  | (32) |  |  | — |  |  | — |
Interest rate swaps |  | Interest-sensitive contract liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | 37 |  |  | (43) |
For the nine months ended September 30, 2023: |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency swaps |  | Foreign-denominated fixed maturity securities |  | (7) |  |  | 5 |  |  | — |  |  | — |  |  | — |  |  | — |
Interest rate swaps |  | Interest-sensitive contract liabilities |  | — |  |  | — |  |  | — |  |  | — |  |  | (2) |  |  | 2 |
The following table presents the balance sheet classification, carrying amount and cumulative fair value hedging adjustments for items designated and qualifying as hedged items in fair value hedges (dollars in millions):
Hedged Item |  | Carrying Amount of the Hedged Assets / (Liabilities) |  | Cumulative Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets / (Liabilities) |  | Discontinued Fair Value Hedge Adjustments Included in the Cumulative Adjustments
|  | September 30, 2024 |  | December 31, 2023 |  | September 30, 2024 |  | December 31, 2023 |  | September 30, 2024 |  | December 31, 2023
Foreign-denominated fixed maturity securities |  | $ | — |  |  | $ | 89 |  |  | n/a |  | n/a |  | n/a |  | n/a
Future policy benefits |  | (672) |  |  | — |  |  | (32) |  |  | — |  |  | (25) |  |  | — |
Interest-sensitive contract liabilities |  | (970) |  |  | (25) |  |  | (43) |  |  | (1) |  |  | (23) |  |  | 1 |
Cash Flow Hedges 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 floating rate assets are converted to fixed rate assets; (iii) forward bond purchase commitments; and (iv) certain foreign currency swaps, in which the cash flows of assets are denominated in different currencies, commonly referred to as cross-currency swaps. The following table presents the cash flow hedge components of AOCI, before income taxes, and where the gain or loss related to cash flow hedges is recognized on the condensed consolidated statements of income for the three and nine months ended September 30, 2024 and 2023 (dollars in millions):
|  | Three months ended September 30,
|  | 2024 |  | 2023
Balance, beginning of period |  | $ | (413) |  |  | $ | (228) |
Gains (losses), net deferred in other comprehensive income (loss) |  | 167 |  |  | (128) |
Amounts reclassified to net investment income |  | 20 |  |  | 8 |
Amounts reclassified to interest expense |  | (3) |  |  | (3) |
Balance, end of period |  | $ | (229) |  |  | $ | (351) |
|  | Nine months ended September 30,
|  | 2024 |  | 2023
Balance, beginning of period |  | $ | (218) |  |  | $ | (205) |
Gains (losses), net deferred in other comprehensive income (loss) |  | (44) |  |  | (154) |
Amounts reclassified to net investment income |  | 42 |  |  | 15 |
Amounts reclassified to interest expense |  | (9) |  |  | (7) |
Balance, end of period |  | $ | (229) |  |  | $ | (351) |
As of September 30, 2024, approximately $28 million of before-tax deferred net losses on derivative instruments recorded in AOCI are expected to be reclassified to net investment income during the next twelve months. For the same time period, approximately $6 million of before-tax deferred net gains on derivative instruments recorded in AOCI are expected to be reclassified to interest expense during the next twelve months. The following table presents the effect of derivatives in cash flow hedging relationships on the condensed consolidated statements of income for the three and nine months ended September 30, 2024 and 2023 (dollars in millions):
Derivative Type |  | Gains (Losses) Deferred in OCI |  | Gains (Losses) Reclassified into Income from AOCI
|  |  |  | Net Investment Income |  | Interest Expense
For the three months ended September 30, 2024: |  |  |  |  |  |
Interest rate |  | $ | 57 |  |  | $ | (3) |  |  | $ | 3 |
Foreign currency |  | 110 |  |  | (17) |  |  | — |
Total |  | $ | 167 |  |  | $ | (20) |  |  | $ | 3 |
For the three months ended September 30, 2023: |  |  |  |  |  |
Interest rate |  | $ | (113) |  |  | $ | (4) |  |  | $ | 3 |
Foreign currency |  | (15) |  |  | (4) |  |  | — |
Total |  | $ | (128) |  |  | $ | (8) |  |  | $ | 3 |
For the nine months ended September 30, 2024: |  |  |  |  |  |
Interest rate |  | $ | (33) |  |  | $ | (9) |  |  | $ | 9 |
Foreign currency |  | (11) |  |  | (33) |  |  | — |
Total |  | $ | (44) |  |  | $ | (42) |  |  | $ | 9 |
For the nine months ended September 30, 2023: |  |  |  |  |  |
Interest rate |  | $ | (107) |  |  | $ | (4) |  |  | $ | 7 |
Foreign currency |  | (47) |  |  | (11) |  |  | — |
Total |  | $ | (154) |  |  | $ | (15) |  |  | $ | 7 |
For the three and nine months ended September 30, 2024 and 2023, 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. Hedges of Net Investments in Foreign Operations 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 three and nine months ended September 30, 2024 and 2023 (dollars in millions):
|  | Derivative Gains (Losses) Deferred in OCI
|  | Three months ended September 30, |  | Nine months ended September 30,
Derivative Type |  | 2024 |  | 2023 |  | 2024 |  | 2023
Foreign currency swaps |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Foreign currency forwards |  | (12) |  |  | 29 |  |  | 24 |  |  | 8 |
Total |  | $ | (12) |  |  | $ | 29 |  |  | $ | 24 |  |  | $ | 8 |
The cumulative foreign currency translation gain recorded in AOCI related to these hedges was $207 million and $183 million as of September 30, 2024 and December 31, 2023, respectively. If a hedged foreign operation was sold or substantially liquidated, the amounts in AOCI would be reclassified to the condensed 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. Non-qualifying Derivatives and Derivatives for Purposes Other Than Hedging 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. A summary of the effect of non-qualifying derivatives, including embedded derivatives, on the Company’s condensed consolidated statements of income for the three and nine months ended September 30, 2024 and 2023 is as follows (dollars in millions):
|  |  |  | Gains (Losses) for the three months ended September 30,
Type of Non-qualifying Derivative |  | Income Statement Location of Gains (Losses) |  | 2024 |  | 2023
Interest rate swaps |  | Investment related gains (losses), net |  | $ | 13 |  |  | $ | (64) |
Interest rate options |  | Investment related gains (losses), net |  | (3) |  |  | 16 |
Total return swaps |  | Investment related gains (losses), net |  | 7 |  |  | (8) |
Interest rate futures |  | Investment related gains (losses), net |  | — |  |  | — |
Foreign currency swaps |  | Investment related gains (losses), net |  | (7) |  |  | 8 |
Foreign currency forwards |  | Investment related gains (losses), net |  | 77 |  |  | (37) |
Foreign currency options |  | Investment related gains (losses), net |  | 2 |  |  | — |
Equity options |  | Investment related gains (losses), net |  | 1 |  |  | 3 |
Equity futures |  | Investment related gains (losses), net |  | (12) |  |  | 11 |
Credit default swaps |  | Investment related gains (losses), net |  | 10 |  |  | (26) |
CPI swaps |  | Investment related gains (losses), net |  | (1) |  |  | — |
Subtotal |  |  |  | 87 |  |  | (97) |
Embedded derivatives in: |  |  |  |  |  |
Modco or funds withheld arrangements |  | Investment related gains (losses), net |  | (112) |  |  | 1 |
Indexed annuity products |  | Interest credited |  | (15) |  |  | 3 |
Total non-qualifying derivatives |  |  |  | $ | (40) |  |  | $ | (93) |
|  |  |  | Gains (Losses) for the nine months ended September 30,
Type of Non-qualifying Derivative |  | Income Statement Location of Gains (Losses) |  | 2024 |  | 2023
Interest rate swaps |  | Investment related gains (losses), net |  | $ | (31) |  |  | $ | (74) |
Interest rate options |  | Investment related gains (losses), net |  | (6) |  |  | (10) |
Total return swaps |  | Investment related gains (losses), net |  | — |  |  | — |
Interest rate futures |  | Investment related gains (losses), net |  | 2 |  |  | 2 |
Foreign currency swaps |  | Investment related gains (losses), net |  | 15 |  |  | 20 |
Foreign currency forwards |  | Investment related gains (losses), net |  | (85) |  |  | (130) |
Foreign currency options |  | Investment related gains (losses), net |  | (1) |  |  | — |
Equity options |  | Investment related gains (losses), net |  | (4) |  |  | (22) |
Equity futures |  | Investment related gains (losses), net |  | (31) |  |  | (8) |
Credit default swaps |  | Investment related gains (losses), net |  | 14 |  |  | (5) |
CPI swaps |  | Investment related gains (losses), net |  | (2) |  |  | 7 |
Subtotal |  |  |  | (129) |  |  | (220) |
Embedded derivatives in: |  |  |  |  |  |
Modco or funds withheld arrangements |  | Investment related gains (losses), net |  | (9) |  |  | 18 |
Indexed annuity products |  | Interest credited |  | (27) |  |  | 14 |
Total non-qualifying derivatives |  |  |  | $ | (165) |  |  | $ | (188) |
Credit Derivatives The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of credit default swaps sold by the Company at September 30, 2024 and December 31, 2023 (dollars in millions):
|  | September 30, 2024 |  | December 31, 2023
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/A |  |  |  |  |  |  |  |  |  |  |  |
Single name credit default swaps |  | $ | (1) |  |  | $ | 410 |  |  | 17.8 |  | $ | 2 |  |  | $ | 420 |  |  | 18.1
BBB |  |  |  |  |  |  |  |  |  |  |  |
Single name credit default swaps |  | 3 |  |  | 145 |  |  | 2.3 |  | 4 |  |  | 165 |  |  | 2.8
Credit default swaps referencing indices |  | — |  |  | 2,156 |  |  | 4.9 |  | (1) |  |  | 880 |  |  | 5.0
Subtotal |  | 3 |  |  | 2,301 |  |  | 4.7 |  | 3 |  |  | 1,045 |  |  | 4.7
BB |  |  |  |  |  |  |  |  |  |  |  |
Single name credit default swaps |  | — |  |  | 5 |  |  | 1.7 |  | (1) |  |  | 10 |  |  | 2.2
B |  |  |  |  |  |  |  |  |  |  |  |
Single name credit default swaps |  | — |  |  | 10 |  |  | 1.5 |  | — |  |  | — |  |  | 0.0
Total |  | $ | 2 |  |  | $ | 2,726 |  |  | 6.7 |  | $ | 4 |  |  | $ | 1,475 |  |  | 8.5
(1)The rating agency designations are based on ratings from Standard and Poor’s (“S&P”). (2)Assumes the value of the referenced credit obligations is zero. (3)The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts. Netting Arrangements and Credit Risk Certain of the Company’s freestanding derivatives are subject to enforceable master netting arrangements and reported as a net asset or liability in the condensed consolidated balance sheets. The Company nets all derivatives that are subject to such arrangements. The Company has elected to include all freestanding derivatives in the table below, irrespective of whether they are subject to an enforceable master netting arrangement or a similar agreement. See Note 10 – “Investments” for information regarding the Company’s securities borrowing, lending and repurchase/reverse repurchase agreements. The following table provides information relating to the netting of the Company’s derivative instruments as of September 30, 2024 and December 31, 2023 (dollars in millions):
|  | Gross Amounts Recognized |  | Gross Amounts Offset in the Balance Sheet |  | Net Amounts Presented in the Balance Sheet |  | Financial Instruments / Collateral (1) |  | Net Amount
September 30, 2024: |  |  |  |  |  |  |  |  |  |
Derivative assets |  | $ | 270 |  |  | $ | (71) |  |  | $ | 199 |  |  | $ | (199) |  |  | $ | — |
Derivative liabilities |  | 287 |  |  | (71) |  |  | 216 |  |  | (216) |  |  | — |
December 31, 2023: |  |  |  |  |  |  |  |  |  |
Derivative assets |  | 154 |  |  | (57) |  |  | 97 |  |  | (97) |  |  | — |
Derivative liabilities |  | 254 |  |  | (57) |  |  | 197 |  |  | (197) |  |  | — |
(1)Includes initial margin posted to a central clearing partner for financial instruments and excludes the excess of collateral received/pledged from/to the counterparty. 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 September 30, 2024, the Company had credit exposure of $16 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. Additionally, the Company is required to pledge initial margin for certain OTC-bilateral derivative transactions. 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.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration