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Derivative Financial Instruments | 6 Months Ended
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Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments The Company primarily enters into the following types of derivatives: Interest rate swaps: Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and/or liabilities. Interest rate swaps are also used to hedge the interest rate risk associated with the value of assets it owns or in an anticipation of acquiring them. Using interest rate swaps, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest payments, calculated by reference to an agreed upon notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made to/from the counterparty at each due date. The Company utilizes these contracts in qualifying hedging relationships as well as non-qualifying hedging relationships. Foreign exchange swaps: The Company uses foreign exchange or currency swaps to reduce the risk of change in the value, yield or cash flows associated with certain foreign denominated invested assets. Foreign exchange swaps represent contracts that require the exchange of foreign currency cash flows against U.S. dollar cash flows at regular periods, typically quarterly or semi-annually. The Company utilizes these contracts in qualifying hedging relationships as well as non-qualifying hedging relationships. Total return swaps: The Company uses total return swaps as a hedge of interest related risks within various Legacy Annuity and Retirement products. Total return swaps are also used as a hedge of other corporate liabilities. Using total return swaps, the Company agrees with another party to exchange, at specified intervals, the difference between the economic performance of assets or a market index and a fixed or variable funding multiplied by reference to an agreed upon notional amount. No cash is exchanged at the onset of the contracts. Cash is paid and received over the life of the contract based upon the terms of the swaps. The Company utilizes these contracts in non-qualifying hedging relationships. Futures: Futures contracts are used to hedge against a decrease in certain equity indices. The Company also uses interest rate futures contracts to hedge its exposure to market risks due to changes in interest rates. The Company enters into exchange traded futures with regulated futures commissions that are members of the exchange. The Company also posts initial and variation margins, with the exchange, on a daily basis. The Company utilizes exchange-traded futures in non-qualifying hedging relationships. Embedded derivatives: The Company also invests in certain fixed maturity instruments and has issued certain products that contain embedded derivatives for which market value is at least partially determined by, among other things, levels of or changes in domestic and/or foreign interest rates (short-term or long-term), exchange rates, prepayment rates, equity rates or credit ratings/spreads. In addition, the Company has entered into coinsurance with funds withheld arrangements, which contain embedded derivatives. The Company utilizes derivative contracts mainly to hedge exposure to variability in cash flows, interest rate risk, credit risk, foreign exchange risk and equity market risk. The majority of derivatives used by the Company are designated as product hedges, which hedge the exposure arising from insurance liabilities or guarantees embedded in the contracts the Company offers through various product lines. The Company also uses derivatives contracts to hedge its exposure to various risks associated with the investment portfolio. The Company also uses credit default swaps coupled with other investments in order to produce the investment characteristics of otherwise permissible investments. Based on the notional amounts, a substantial portion of the Company’s derivative positions was not designated or did not qualify for hedge accounting as part of a hedging relationship as outlined in ASC Topic 815 as of June 30, 2024 and December 31, 2023. The notional amounts and fair values of derivatives were as follows as of the dates indicated:
| June 30, 2024 |  | December 31, 2023
| Notional Amount |  | Asset Fair Value |  | Liability Fair Value |  | Notional Amount |  | Asset Fair Value |  | Liability Fair Value
Derivatives: Qualifying for hedge accounting(1)
Fair value hedges: |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts | $ | 200 |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Foreign exchange contracts | 100 |  |  | 1 |  |  | — |  |  | 98 |  |  | — |  |  | 4 |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts | 12 |  |  | — |  |  | — |  |  | 12 |  |  | — |  |  | — |
Foreign exchange contracts | 688 |  |  | 42 |  |  | 3 |  |  | 718 |  |  | 33 |  |  | 7 |
Derivatives: Non-qualifying for hedge accounting(1)
Interest rate contracts | 15,367 |  |  | 269 |  |  | 307 |  |  | 16,773 |  |  | 270 |  |  | 354 |
Foreign exchange contracts | 174 |  |  | — |  |  | — |  |  | 183 |  |  | 4 |  |  | 2 |
Equity contracts | 278 |  |  | 4 |  |  | 3 |  |  | 255 |  |  | 4 |  |  | 2 |
Credit contracts | 126 |  |  | — |  |  | 2 |  |  | 137 |  |  | — |  |  | 2 |
Embedded derivatives and Managed custody guarantees ("MCGs"):
Within fixed maturity investments(2) | N/A |  | — |  |  | — |  |  | N/A |  | 2 |  |  | — |
Within reinsurance agreements(4) | N/A |  | 62 |  |  | 46 |  |  | N/A |  | 61 |  |  | 49 |
MCGs(3) | N/A |  | — |  |  | 8 |  |  | N/A |  | — |  |  | 8 |
Stabilizers(3) | N/A |  | — |  |  | 2 |  |  | N/A |  | — |  |  | 1 |
Total |  |  | $ | 378 |  |  | $ | 372 |  |  |  |  | $ | 374 |  |  | $ | 429 |
(1) Open derivative contracts are reported as Derivatives assets or liabilities at fair value on the Condensed Consolidated Balance Sheets. (2) Included in Fixed maturities, available-for-sale, at fair value on the Condensed Consolidated Balance Sheets. (3) Included in Contract owner account balances on the Condensed Consolidated Balance Sheets. (4) Included in Other liabilities, Other assets and Premium receivable and reinsurance recoverable on the Condensed Consolidated Balance Sheets. N/A - Not applicable The Company does not offset any derivative assets and liabilities in the Condensed Consolidated Balance Sheets. The disclosures set out in the table below include the fair values of Over-The-Counter (“OTC”) and cleared derivatives excluding exchange traded contracts subject to master netting agreements or similar agreements as of the dates indicated:
| Gross Amount Recognized(1) |  | Counterparty Netting(2) |  | Cash Collateral Netting(2) |  | Securities Collateral Netting(2) |  | Net Receivables/ Payables
June 30, 2024
Derivative assets | $ | 316 |  |  | $ | (256) |  |  | $ | (50) |  |  | $ | (4) |  |  | $ | 6 |
Derivative liabilities | 316 |  |  | (256) |  |  | (56) |  |  | (3) |  |  | 1 |
December 31, 2023
Derivative assets | 311 |  |  | (216) |  |  | (76) |  |  | (8) |  |  | 11 |
Derivative liabilities | 370 |  |  | (216) |  |  | (150) |  |  | (3) |  |  | 1 |
(1) As of June 30, 2024, gross amounts exclude asset and liability exchange traded contracts of $0 and $0, respectively. As of December 31, 2023, gross amounts exclude asset and liability exchange traded contracts of $0 and $1, respectively. (2) Represents the netting of receivable with payable balances, net of collateral, for the same counterparty under eligible netting agreements. Collateral Under the terms of the OTC Derivative International Swaps and Derivatives Association, Inc. ("ISDA") agreements, the Company may receive from, or deliver to, counterparties collateral to assure that terms of the ISDA agreements will be met with regard to the Credit Support Annex ("CSA"). The terms of the CSA call for the Company to pay interest on any cash received equal to the Federal Funds rate. To the extent cash collateral is received and delivered, it is included in Payables under securities loan and repurchase agreements, including collateral held and Short-term investments under securities loan agreements, including collateral delivered, respectively, on the Condensed Consolidated Balance Sheets and is reinvested in short-term investments. Collateral held is used in accordance with the CSA to satisfy any obligations. Investment grade bonds owned by the Company are the source of noncash collateral posted, which is reported in Securities pledged on the Condensed Consolidated Balance Sheets. As of June 30, 2024, the Company held $49 and pledged $56 of net cash collateral related to OTC derivative contracts and cleared derivative contracts, respectively. As of December 31, 2023, the Company held $84 and pledged $147 of net cash collateral related to OTC derivative contracts and cleared derivative contracts, respectively. In addition, as of June 30, 2024, the Company delivered $171 of securities and held $5 of securities as collateral. As of December 31, 2023, the Company delivered $201 of securities and held $11 of securities as collateral. The location and effect of derivatives qualifying for hedge accounting on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income are as follows for the periods indicated:
| 2024 |  | 2023
| Interest Rate Contracts |  | Foreign Exchange Contracts |  | Interest Rate Contracts |  | Foreign Exchange Contracts
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income | Net investment income |  | Net investment income and Net gains (losses) |  | Net investment income |  | Net investment income and Net gains (losses)
Three Months Ended June 30, |  |  |  |  |  |  |
Amount of Gain (Loss) Recognized in Other Comprehensive Income | $ | — |  |  | $ | 3 |  |  | $ | — |  |  | $ | (6) |
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income | — |  |  | 3 |  |  | — |  |  | 2 |
Six Months Ended June 30, |  |  |  |  |  |  |
Amount of Gain (Loss) Recognized in Other Comprehensive Income | $ | — |  |  | $ | 11 |  |  | $ | — |  |  | $ | (18) |
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income | — |  |  | 6 |  |  | — |  |  | 5 |
The location and amount of gain (loss) recognized in the Condensed Consolidated Statements of Operations for derivatives qualifying for hedge accounting are as follows for the periods indicated:
| 2024 |  | 2023
| Net investment income |  | Net gains (losses) |  | Net investment income |  | Net gains (losses)
Three Months Ended June 30, |  |  |  |  |  |  |
Total amounts of line items presented in the statements of operations in which the effects of fair value or cash flow hedges are recorded | $ | 518 |  |  | $ | (4) |  |  | $ | 545 |  |  | $ | (56) |
Fair value hedges: |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |
Hedged items | — |  |  | 1 |  |  | — |  |  | — |
Derivatives designated as hedging instruments | — |  |  | (1) |  |  | — |  |  | — |
Foreign exchange contracts: |  |  |  |  |  |  |
Derivatives designated as hedging instruments(1) | — |  |  | 1 |  |  | — |  |  | — |
Cash flow hedges: |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |
Gain (loss) reclassified from accumulated other comprehensive income into income | 2 |  |  | 1 |  |  | 2 |  |  | — |
Six Months Ended June 30, |  |  |  |  |  |  |
Total amounts of line items presented in the statements of operations in which the effects of fair value or cash flow hedges are recorded | $ | 1,047 |  |  | $ | 39 |  |  | $ | 1,090 |  |  | $ | (72) |
Fair value hedges: |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |
Hedged items | — |  |  | 1 |  |  | — |  |  | — |
Derivatives designated as hedging instruments | — |  |  | (1) |  |  | — |  |  | — |
Foreign exchange contracts: |  |  |  |  |  |  |
Hedged items | — |  |  | (2) |  |  | — |  |  | 2 |
Derivatives designated as hedging instruments(1) | — |  |  | 4 |  |  | — |  |  | (1) |
Cash flow hedges: |  |  |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |
Gain (loss) reclassified from accumulated other comprehensive income into income | 5 |  |  | 1 |  |  | 5 |  |  | — |
(1) For the three months ended June 30, 2024, an immaterial amount of the change in derivative instruments designated and qualifying as fair value hedges was excluded from the assessment of hedge effectiveness and recognized currently in earnings. For the six months ended June 30, 2024, $1 of the change in derivative instruments designated and qualifying as fair value hedges was excluded from the assessment of hedge effectiveness and recognized currently in earnings. For the three months ended June 30, 2023, an immaterial amount of the change in derivative instruments designated and qualifying as fair value hedges was excluded from the assessment of hedge effectiveness and recognized currently in earnings. For the six months ended June 30, 2023, $1 of the change in derivative instruments designated and qualifying as fair value hedges was excluded from the assessment of hedge effectiveness and recognized currently in earnings. The location and effect of derivatives not designated as hedging instruments on the Condensed Consolidated Statements of Operations are as follows for the periods indicated:
| Location of Gain (Loss) Recognized on Derivative |  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2024 |  | 2023 |  | 2024 |  | 2023
Derivatives: Non-qualifying for hedge accounting
Interest rate contracts | Net gains (losses) |  | $ | 39 |  |  | $ | 114 |  |  | $ | 165 |  |  | $ | 58 |
Foreign exchange contracts | Net gains (losses) |  | (1) |  |  | — |  |  | (3) |  |  | 1 |
Equity contracts | Net gains (losses) |  | 1 |  |  | 5 |  |  | 11 |  |  | 8 |
Credit contracts | Net gains (losses) |  | — |  |  | — |  |  | (1) |  |  | (1) |
Embedded derivatives and Managed custody guarantees:
Within fixed maturity investments | Net gains (losses) |  | (1) |  |  | (2) |  |  | (2) |  |  | (1) |
Within reinsurance agreements(1) | Policyholder benefits |  | 4 |  |  | 8 |  |  | 4 |  |  | (18) |
MCGs | Net gains (losses) |  | (1) |  |  | — |  |  | — |  |  | 3 |
Stabilizers | Net gains (losses) |  | (1) |  |  | — |  |  | (1) |  |  | — |
Total |  |  | $ | 40 |  |  | $ | 125 |  |  | $ | 173 |  |  | $ | 50 |
(1) For the three months ended June 30, 2024, the amount excluded immaterial gains (losses) from standalone derivatives recognized in Net gains (losses). For the six months ended June 30, 2024, the amount excluded gains (losses) of $1 from standalone derivatives recognized in Net gains (losses). For the three and six months ended June 30, 2023, the amount excluded immaterial gains (losses) from standalone derivatives recognized in Net gains (losses).

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- 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
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