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LIABILITIES FOR INSURANCE PRODUCTS

9 Months Ended

Sep. 30, 2023

Insurance [Abstract]

LIABILITIES FOR INSURANCE PRODUCTS

LIABILITIES FOR INSURANCE PRODUCTS

The liability for future policy benefits is determined based on numerous assumptions. The most significant assumptions for our life and annuity business are mortality and lapse/withdrawal rates which are based on our experience and, in cases of limited experience, industry experience. Mortality and lapse/withdrawal rates also take into consideration future expectations in policyholder behavior that may vary from past experience. For our health business, mortality rates, lapse rates, morbidity assumptions and future rate increases are based on our experience and, in cases of limited experience, industry experience. Such assumptions also consider future expectations in policyholder behavior that may vary from past experience.

In the first nine months of 2023, we reviewed the actual mortality, lapse, and morbidity experience and determined that no changes to assumptions for future cash flows were necessary. This is consistent with the impact in the "Effect of actual variances from expected experience" line items in the tables below, which indicate our actual experience did not deviate significantly from our expectations.

The following tables summarize balances and changes in the liability for future policy benefits for traditional and limited-payment contracts for the nine months ended September 30, 2023 (dollars in millions):

						Nine months ended
						September 30, 2023
						Supplemental health						Medicare supplement						Long-term care						Traditional life						Other annuities
Present value of expected net premiums ("PVENP"), beginning of period						$	2,781.3					$	2,800.6					$	1,034.1					$	2,175.0					$	—
Effect of changes in discount rate assumptions, beginning of period						188.4						196.4						23.2						137.1						—
Beginning PVENP at original discount rate						2,969.7						2,997.0						1,057.3						2,312.1						—
Effect of changes in cash flow assumptions						—						—						—						—						—
Effect of actual variances from expected experience						(40.9)						(4.2)						20.7						(47.0)						—
Adjusted beginning of period PVENP						2,928.8						2,992.8						1,078.0						2,265.1						—
Issuances						205.1						238.9						56.3						300.7						4.7
Interest accrual						96.7						91.3						37.1						70.0						—
Net premiums collected						(267.0)						(324.5)						(120.6)						(301.5)						(4.7)
Ending PVENP at original discount rate						2,963.6						2,998.5						1,050.8						2,334.3						—
Effect of changes in discount rate assumptions, end of period						(295.1)						(274.1)						(53.4)						(188.6)						—
PVENP, end of period						$	2,668.5					$	2,724.4					$	997.4					$	2,145.7					$	—

Present value of expected future policy benefits ("PVEFPB"), beginning of period						$	5,886.8					$	3,033.1					$	4,158.1					$	4,417.9					$	310.9
Effect of changes in discount rate assumptions, beginning of period						483.3						212.0						28.5						336.6						15.4
Beginning PVEFPB at original discount rate						6,370.1						3,245.1						4,186.6						4,754.5						326.3
Effect of changes in cash flow assumptions						—						—						—						—						—
Effect of actual variances from expected experience						(46.9)						7.4						30.3						(59.1)						1.8
Adjusted beginning of period PVEFPB						6,323.2						3,252.5						4,216.9						4,695.4						328.1
Issuances						205.3						238.9						56.5						307.8						4.7
Interest accrual						222.6						99.3						167.3						154.3						11.1
Benefit payments						(314.2)						(362.1)						(214.0)						(325.8)						(25.8)
Ending PVEFPB at original discount rate						6,436.9						3,228.6						4,226.7						4,831.7						318.1
Effect of changes in discount rate assumptions, end of period						(801.6)						(295.5)						(252.1)						(510.9)						(30.9)
PVEFPB, end of period						$	5,635.3					$	2,933.1					$	3,974.6					$	4,320.8					$	287.2

Net liability for future policy benefits						$	2,966.8					$	208.7					$	2,977.2					$	2,175.1					$	287.2
Flooring impact						—						.2						—						—						—
Adjusted net liability for future policy benefits						2,966.8						208.9						2,977.2						2,175.1						287.2
Related reinsurance recoverable						(1.3)						—						(330.4)						(182.2)						—
Net liability for future policy benefits, net of reinsurance recoverable						$	2,965.5					$	208.9					$	2,646.8					$	1,992.9					$	287.2

The following tables summarize balances and changes in the liability for future policy benefits for traditional and limited-payment contracts for the nine months ended September 30, 2022 (dollars in millions):

						Nine months ended
						September 30, 2022
						Supplemental health						Medicare supplement						Long-term care						Traditional life						Other annuities
PVENP, beginning of period						$	3,496.8					$	3,454.0					$	1,313.4					$	2,483.7					$	—
Effect of changes in discount rate assumptions, beginning of period						(525.6)						(341.8)						(183.2)						(239.4)						—
Beginning PVENP at original discount rate						2,971.2						3,112.2						1,130.2						2,244.3						—
Effect of changes in cash flow assumptions						—						—						—						—						—
Effect of actual variances from expected experience						(24.0)						(32.7)						(14.5)						(43.6)						—
Adjusted beginning of period PVENP						2,947.2						3,079.5						1,115.7						2,200.7						—
Issuances						234.2						204.7						70.9						397.6						5.6
Interest accrual						92.4						88.3						38.4						61.6						—
Net premiums collected						(265.0)						(346.3)						(127.1)						(300.7)						(5.6)
Ending PVENP at original discount rate						3,008.8						3,026.2						1,097.9						2,359.2						—
Effect of changes in discount rate assumptions, end of period						(273.5)						(260.3)						(43.8)						(205.1)						—
PVENP, end of period						$	2,735.3					$	2,765.9					$	1,054.1					$	2,154.1					$	—

PVEFPB, beginning of period						$	7,688.0					$	3,750.5					$	5,501.6					$	5,395.7					$	431.9
Effect of changes in discount rate assumptions, beginning of period						(1,414.8)						(373.8)						(1,291.2)						(767.3)						(88.4)
Beginning PVEFPB at original discount rate						6,273.2						3,376.7						4,210.4						4,628.4						343.5
Effect of changes in cash flow assumptions						—						—						—						—						—
Effect of actual variances from expected experience						(25.9)						(35.1)						(23.7)						(48.8)						(4.1)
Adjusted beginning of period PVEFPB						6,247.3						3,341.6						4,186.7						4,579.6						339.4
Issuances						234.7						204.0						70.9						407.6						6.4
Interest accrual						216.3						96.7						167.6						144.4						11.4
Benefit payments						(312.4)						(362.9)						(198.1)						(363.2)						(27.4)
Ending PVEFPB at original discount rate						6,385.9						3,279.4						4,227.1						4,768.4						329.8
Effect of changes in discount rate assumptions, end of period						(699.7)						(280.6)						(157.7)						(496.7)						(25.3)
PVEFPB, end of period						$	5,686.2					$	2,998.8					$	4,069.4					$	4,271.7					$	304.5

Net liability for future policy benefits						$	2,950.9					$	232.9					$	3,015.3					$	2,117.6					$	304.5
Flooring impact						37.6						.3						16.3						9.3						—
Adjusted net liability for future policy benefits						2,988.5						233.2						3,031.6						2,126.9						304.5
Related reinsurance recoverable						(3.0)						—						(318.0)						(196.1)						—
Net liability for future policy benefits, net of reinsurance recoverable						$	2,985.5					$	233.2					$	2,713.6					$	1,930.8					$	304.5

The following table reconciles the net liability for future policy benefits to the amount presented in the consolidated balance sheet (dollars in millions):

						September 30, 2023						September 30, 2022
Balances included in the future policy benefits rollforwards:
Supplemental health						$	2,966.8					$	2,988.5
Medicare supplement						208.9						233.2
Long-term care						2,977.2						3,031.6
Traditional life						2,175.1						2,126.9
Other annuities						287.2						304.5
Reserves excluded from rollforward (1)						2,574.0						2,616.1
Deferred profit liability						60.8						50.4
Amount of reserves above (below) policyholder account balances (2)						(454.7)						(569.8)
Future loss reserves (3)						34.6						34.1
Future policy benefits						$	10,829.9					$	10,815.5

_______________

(1) Primarily comprised of blocks of business that are 100% ceded.

(2) Such amount represents the difference between: (i) the total insurance liabilities for our fixed indexed annuities (including the host contract and the related embedded derivative); and (ii) the policyholder account balances for these products. The accounting requirement to bifurcate the embedded derivative and value it at the current estimated fair value results in this amount.

(3) In certain instances, the total insurance liabilities for a particular line of business may not be deficient in the aggregate to trigger loss recognition, but the pattern of earnings may be such that profits are expected to be recognized in earlier years followed by losses in later years. In these situations, accounting standards require that an additional liability (the "future loss reserve") be recognized by an amount necessary to sufficiently offset the losses that would be recognized in later years.

Many of our fixed indexed annuity products include a GLWB that is considered a MRB. The calculation of MRBs includes market assumptions (interest rate, equity returns, volatility and dividend yields) and nonmarket assumptions (mortality rates, surrender and withdrawal rates, GLWB utilization and spreads). Market assumptions are updated quarterly to reflect current market conditions. During the first nine months of 2023, we reviewed the nonmarket assumptions used to calculate MRBs and determined that such assumptions were appropriate.

The following table presents the balance of and changes in MRBs associated with our fixed indexed annuities (dollars in millions):

						Nine months ended
						September 30,
						2023						2022
Net liability (asset), beginning of period						$	(54.0)					$	86.2
Effect of changes in the instrument-specific credit risk, beginning of period						12.2						12.1
Balance, beginning of period, before effect of changes in the instrument-specific credit risk						(41.8)						98.3
Issuances						(.4)						(1.5)
Interest accrual						15.8						11.6
Attributed fees collected						—						—
Benefit payments						—						—
Effect of changes in interest rates						(36.2)						(140.3)
Effect of changes in equity markets						4.1						(7.9)
Effect of changes in equity index volatility						(17.5)						20.6
Actual policyholder behavior different from expected behavior						2.5						.1
Effect of changes in future expected policyholder behavior - other						—						—
Effect of changes in future expected policyholder behavior - risk margin						—						—
Effect of changes in assumptions						(4.9)						(.4)
Net liability (asset), end of period, before effect of changes in the instrument-specific credit risk						(78.4)						(19.5)
Effect of changes in the instrument-specific credit risk, end of period						(7.8)						(23.1)
Net asset, end of period						(86.2)						(42.6)
Reinsurance recoverable, end of period						—						—
Net asset, end of period, net of reinsurance						$	(86.2)					$	(42.6)
Balance reported as an asset						$	89.3					$	56.3
Balance reported as a liability						3.1						13.7
Net asset						$	(86.2)					$	(42.6)
Net amount at risk						$	51.0					$	51.7
Weighted average attained age of contract holders						69						68

The following table summarizes the amount of revenue and interest related to traditional and limited-payment contracts recognized in the consolidated statement of operations (dollars in millions):

						Gross premiums (a)												Interest accretion (b)
						Nine months ended												Nine months ended
						September 30,												September 30,
						2023						2022						2023						2022
Other annuities						$	5.7					$	6.8					$	11.1					$	11.4
Supplemental health						530.3						519.8						125.9						123.9
Medicare supplement						453.4						487.7						8.0						8.4
Long-term care						243.1						245.6						130.2						129.2
Traditional life						534.6						518.9						84.3						82.8
Total						$	1,767.1					$	1,778.8					$	359.5					$	355.7

_____________________

(a) Such amounts are included in insurance policy income in the consolidated statement of operations.

(b) Such amounts are included in insurance policy benefits in the consolidated statement of operations.

The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefits and expenses for traditional and limited-payment contracts (dollars in millions):

						September 30, 2023												September 30, 2022
						Undiscounted						Discounted (a)						Undiscounted						Discounted (a)
Other annuities
Expected future gross premiums						$	—					$	—					$	—					$	—
Expected future benefits and expenses						385.9						287.2						409.3						304.5
Supplemental health
Expected future gross premiums						9,031.2						5,287.4						8,866.2						5,310.3
Expected future benefits and expenses						10,163.1						5,635.3						10,948.7						5,686.2
Medicare supplement
Expected future gross premiums						5,589.1						3,756.3						5,521.0						3,857.2
Expected future benefits and expenses						4,387.4						2,933.1						4,318.6						2,998.8
Long-term care
Expected future gross premiums						2,967.0						2,054.0						2,974.1						2,097.9
Expected future benefits and expenses						7,483.6						3,974.6						7,546.5						4,069.4
Traditional life
Expected future gross premiums						5,542.6						3,840.1						5,448.2						3,835.7
Expected future benefits and expenses						7,478.6						4,320.8						7,250.8						4,271.7

_____________________

(a) Calculated at the discount rates at period end.

Loss expense as a result of net premium ratio capping was not material in both the nine months ended September 30, 2023 and 2022.

The following table provides the weighted average durations (under locked-in rates) of the liability for future policy benefits in years:

						September 30, 2023						September 30, 2022
Other annuities						9.7						9.7
Supplemental health						11.7						12.0
Medicare supplement						6.0						6.1
Long-term care						10.3						10.7
Traditional life						10.4						10.8

The following table provides the weighted average interest rates for the liability for future policy benefits:

						September 30, 2023						September 30, 2022
Other annuities
Interest accretion rate						4.79		%				4.71		%
Current discount rate						6.10		%				5.76		%
Supplemental health
Interest accretion rate						5.02		%				5.06		%
Current discount rate						6.09		%				5.72		%
Medicare supplement
Interest accretion rate						4.28		%				4.21		%
Current discount rate						5.88		%				5.50		%
Long-term care
Interest accretion rate						5.66		%				5.69		%
Current discount rate						6.13		%				5.83		%
Traditional life
Interest accretion rate						4.77		%				4.76		%
Current discount rate						6.11		%				5.77		%

The following tables present the balances of and changes in the liability for policyholder account balances (dollars in millions):

						Nine months ended
						September 30, 2023
						Fixed indexed annuities						Fixed interest annuities						Other annuities						Interest-sensitive life						Funding agreements						Other (a)
Balance, beginning of period excluding contracts 100% ceded						$	9,490.4					$	1,663.1					$	127.1					$	1,209.6					$	1,410.8					$	395.5
Issuances (funds collected from new business)						996.6						139.5						—						30.0						—						—
Premiums received (premiums collected from inforce business)						.3						2.1						21.5						152.4						—						201.0
Policy charges						(14.4)						(.7)						—						(140.4)						—						—
Surrenders and withdrawals						(538.4)						(124.7)						(30.3)						(24.3)						(24.2)						(216.6)
Benefit payments						(185.0)						(80.8)						(4.6)						(19.6)						—						(.1)
Interest credited						52.7						34.2						1.8						30.5						21.6						2.0
Other						17.0						(.2)						(.3)						(.4)						—						—
Balance, end of period excluding contracts 100% ceded						9,819.2						1,632.5						115.2						1,237.8						1,408.2						381.8
Balance, end of period for contracts 100% ceded						141.4						602.2						26.2						107.0						—						10.3
Balance, end of period						$	9,960.6					$	2,234.7					$	141.4					$	1,344.8					$	1,408.2					$	392.1
Balance, end of period, reinsurance ceded						(141.4)						(602.2)						(26.2)						(125.2)						—						(24.3)
Balance, end of period, net of reinsurance						$	9,819.2					$	1,632.5					$	115.2					$	1,219.6					$	1,408.2					$	367.8

Weighted average crediting rate						1.7		%				2.8		%				2.4		%				4.0		%				2.0		%				0.8		%
Net amount at risk (b)						$	—					$	—					$	—					$	27,851.0					$	—					$	—
Cash surrender value, net of reinsurance						$	9,152.8					$	1,609.4					$	115.2					$	997.8					$	—					$	367.8

_______________

(a) Predominantly consists of retained asset accounts associated with our traditional life and supplemental health blocks.

(b) Represents the amount of insurance policy benefit expense that we would incur if death claims were filed on all annuity and interest-sensitive life contracts at the balance sheet date.

						Nine months ended
						September 30, 2022
						Fixed indexed annuities						Fixed interest annuities						Other annuities						Interest-sensitive life						Funding agreements						Other (a)
Balance, beginning of period excluding contracts 100% ceded						$	8,681.0					$	1,806.1					$	131.2					$	1,163.9					$	502.0					$	368.0
Issuances (funds collected from new business)						1,111.9						52.2						—						31.4						899.0						—
Premiums received (premiums collected from inforce business)						.2						2.9						25.9						143.5						—						196.2
Policy charges						(10.4)						(.6)						—						(135.4)						—						—
Surrenders and withdrawals						(388.6)						(113.0)						(26.0)						(20.3)						(14.3)						(175.4)
Benefit payments						(192.5)						(102.9)						(4.3)						(19.1)						—						—
Interest credited						102.8						34.3						1.8						34.9						21.3						1.9
Other						15.5						.3						—						—						—						—
Balance, end of period excluding contracts 100% ceded						9,319.9						1,679.3						128.6						1,198.9						1,408.0						390.7
Balance, end of period for contracts 100% ceded						158.7						644.4						26.5						114.0						—						10.7
Balance, end of period						$	9,478.6					$	2,323.7					$	155.1					$	1,312.9					$	1,408.0					$	401.4
Balance, end of period, reinsurance ceded						(158.7)						(644.4)						(26.5)						(134.9)						—						(25.2)
Balance, end of period, net of reinsurance						$	9,319.9					$	1,679.3					$	128.6					$	1,178.0					$	1,408.0					$	376.2

Weighted average crediting rate						1.4		%				2.6		%				2.2		%				4.3		%				2.0		%				0.8		%
Net amount at risk (b)						$	—					$	—					$	—					$	26,029.5					$	—					$	—
Cash surrender value, net of reinsurance						$	8,684.3					$	1,669.3					$	128.6					$	954.7					$	—					$	376.2

_________________

(a) Predominantly consists of retained asset accounts associated with our traditional life and supplemental health blocks.

(b) Represents the amount of insurance policy benefit expense that we would incur if death claims were filed on all annuity and interest-sensitive life contracts at the balance sheet date.

The following table reconciles the liability for policyholder account balances to the amount presented in the consolidated balance sheet (dollars in millions):

						September 30, 2023						September 30, 2022
Amounts included in the liability for policyholder account balances rollforwards:
Fixed indexed annuities						$	9,960.6					$	9,478.6
Fixed interest annuities						2,234.7						2,323.7
Other annuities						141.4						155.1
Interest-sensitive life						1,344.8						1,312.9
Funding agreements						1,408.2						1,408.0
Other						392.1						401.4
Total						$	15,481.8					$	15,079.7

The following tables present the account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums (dollars in millions):

						September 30, 2023
Range of guaranteed minimum crediting rates (a)						At guaranteed minimum						1-50 basis points above						51-150 basis points above						Greater than 150 basis points above						Total
Fixed interest annuities
0.00%-2.99%						$	122.3					$	257.4					$	183.4					$	79.1					$	642.2
3.00%-4.99%						1,475.8						27.1						—						—						1,502.9
5.00% and greater						89.6						—						—						—						89.6
Subtotal						1,687.7						284.5						183.4						79.1						2,234.7
Other annuities
0.00%-2.99%						36.4						25.3						—						—						61.7
3.00%-4.99%						46.4						—						—						—						46.4
5.00% and greater						33.3						—						—						—						33.3
Subtotal						116.1						25.3						—						—						141.4
Interest-sensitive life
0.00%-2.99%						22.0						37.2						298.5						305.1						662.8
3.00%-4.99%						451.2						50.5						157.5						.5						659.7
5.00% and greater						21.8						.5						—						—						22.3
Subtotal						495.0						88.2						456.0						305.6						1,344.8
Funding agreements
0.00%-2.99%						1,408.2						—						—						—						1,408.2
3.00%-4.99%						—						—						—						—						—
5.00% and greater						—						—						—						—						—
Subtotal						1,408.2						—						—						—						1,408.2
Other
0.00%-2.99%						17.5						351.2						—						—						368.7
3.00%-4.99%						23.2						—						—						—						23.2
5.00% and greater						.2						—						—						—						.2
Subtotal						40.9						351.2						—						—						392.1
Total
0.00%-2.99%						1,606.4						671.1						481.9						384.2						3,143.6
3.00%-4.99%						1,996.6						77.6						157.5						.5						2,232.2
5.00% and greater						144.9						.5						—						—						145.4
Total policyholder account balances, excluding fixed indexed annuities						$	3,747.9					$	749.2					$	639.4					$	384.7					5,521.2
Fixed indexed annuity account balances																														9,960.6
Total policyholder account balances																														$	15,481.8

____________________

(a)     Excludes the account balances related to our fixed indexed annuity contracts which do not have a minimum crediting rate since returns are based on an index.

						September 30, 2022
Range of guaranteed minimum crediting rates (a)						At guaranteed minimum						1-50 basis points above						51-150 basis points above						Greater than 150 basis points above						Total
Fixed interest annuities
0.00%-2.99%						$	163.8					$	319.6					$	29.9					$	44.1					$	557.4
3.00%-4.99%						1,651.7						22.4						.1						—						1,674.2
5.00% and greater						92.1						—						—						—						92.1
Subtotal						1,907.6						342.0						30.0						44.1						2,323.7
Other annuities
0.00%-2.99%						49.2						30.2						—						—						79.4
3.00%-4.99%						39.8						—						—						—						39.8
5.00% and greater						35.9						—						—						—						35.9
Subtotal						124.9						30.2						—						—						155.1
Interest-sensitive life
0.00%-2.99%						8.1						—						.6						619.2						627.9
3.00%-4.99%						404.1						103.0						154.8						.2						662.1
5.00% and greater						22.4						.5						—						—						22.9
Subtotal						434.6						103.5						155.4						619.4						1,312.9
Funding agreements
0.00%-2.99%						1,408.0						—						—						—						1,408.0
3.00%-4.99%						—						—						—						—						—
5.00% and greater						—						—						—						—						—
Subtotal						1,408.0						—						—						—						1,408.0
Other
0.00%-2.99%						18.2						358.7						—						—						376.9
3.00%-4.99%						24.1						—						—						—						24.1
5.00% and greater						.4						—						—						—						.4
Subtotal						42.7						358.7						—						—						401.4
Total
0.00%-2.99%						1,647.3						708.5						30.5						663.3						3,049.6
3.00%-4.99%						2,119.7						125.4						154.9						.2						2,400.2
5.00% and greater						150.8						.5						—						—						151.3
Total policyholder account balances, excluding fixed indexed annuities						$	3,917.8					$	834.4					$	185.4					$	663.5					5,601.1
Fixed indexed annuity account balances																														9,478.6
Total policyholder account balances																														$	15,079.7

____________________

(a)     Excludes the account balances related to our fixed indexed annuity contracts which do not have a minimum crediting rate since returns are based on an index

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- References

No definition available.

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- Definition

The entire disclosure for liabilities related to future policy benefits and unpaid claims and claim adjustments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 944
-SubTopic 40
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//944-40/tableOfContent

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