Future Policy Benefits

6 Months Ended

Jun. 30, 2024

Liability for Future Policy Benefit, after Reinsurance [Abstract]

(8) Future Policy Benefits

The following table sets forth our liability for future policy benefits as of the dates indicated:


(Amounts in millions)	June 30, 2024		December 31, 2023
Long-term care insurance	$	41,024	$	43,929
Life insurance		1,585		1,698
Fixed annuities		10,972		11,829

Total long-duration insurance contracts		53,581		57,456

Deferred profit liability		132		128
Cost of reinsurance		61		71

Total future policy benefits	$	53,774	$	57,655

The following tables present the balances of and changes in the liability for future policy benefits as of and for the periods indicated:


	June 30, 2024
(Dollar amounts in millions)	Long-term care insurance			Life insurance			Fixed annuities
Present value of expected net premiums:
Beginning balance as of January 1	$	18,650		$	4,180		$	—
Beginning balance, at original discount rate	$	18,346		$	3,918		$	—
Effect of changes in cash flow assumptions		31			—			—
Effect of actual variances from expected experience		(251	)		(15	)		—

Adjusted beginning balance		18,126			3,903			—
Issuances		—			—			20
Interest accretion		463			108			—
Net premiums collected (1)		(916	)		(226	)		(20	)
Derecognition (lapses and withdrawals)		—			—			—
Other		—			1			—

Ending balance, at original discount rate		17,673			3,786			—
Effect of changes in discount rate assumptions		(280	)		74			—

Ending balance as of June 30	$	17,393		$	3,860		$	—

Present value of expected future policy benefits:
Beginning balance as of January 1	$	62,579		$	5,412		$	11,829
Beginning balance, at original discount rate	$	60,513		$	5,146		$	9,920
Effect of changes in cash flow assumptions		(55	)		—			—
Effect of actual variances from expected experience		(203	)		(3	)		(42	)

Adjusted beginning balance		60,255			5,143			9,878
Issuances		—			—			16
Interest accretion		1,641			137			322
Benefit payments		(1,984	)		(409	)		(490	)
Derecognition (lapses and withdrawals)		—			—			—
Other		—			—			5

Ending balance, at original discount rate		59,912			4,871			9,731
Effect of changes in discount rate assumptions		(1,495	)		104			1,241

Ending balance as of June 30	$	58,417		$	4,975		$	10,972

Net liability for future policy benefits, before flooring adjustments	$	41,024		$	1,115		$	10,972
Flooring adjustments (2)		—			470			—

Net liability for future policy benefits		41,024			1,585			10,972
Less: reinsurance recoverable		6,994			818			8,365

Net liability for future policy benefits, net of reinsurance recoverable	$	34,030		$	767		$	2,607

Weighted-average liability duration (years)		13.0			5.7			10.3

(1)	Represents the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.

(2)

Flooring adjustments are necessary when a cohort’s present value of future net premiums exceeds the present value of future benefits. The flooring adjustment ensures that the liability for future policy benefits for each cohort is not less than zero. This adjustment is most prevalent in our term life insurance products due to their product design of a level premium period followed by annual premium rate increases.


	December 31, 2023
(Dollar amounts in millions)	Long-term care insurance			Life insurance			Fixed annuities
Present value of expected net premiums:
Beginning balance as of January 1	$	19,895		$	4,083		$	—
Beginning balance, at original discount rate	$	19,959		$	3,922		$	—
Effect of changes in cash flow assumptions		(276	)		180			—
Effect of actual variances from expected experience		(365	)		38			—

Adjusted beginning balance		19,318			4,140			—
Issuances		2			—			42
Interest accretion		994			217			—
Net premiums collected (1)		(1,968	)		(439	)		(42	)
Derecognition (lapses and withdrawals)		—			—			—
Other		—			—			—

Ending balance, at original discount rate		18,346			3,918			—
Effect of changes in discount rate assumptions		304			262			—

Ending balance as of December 31	$	18,650		$	4,180		$	—

Present value of expected future policy benefits:
Beginning balance as of January 1	$	61,352		$	5,556		$	11,923
Beginning balance, at original discount rate	$	61,148		$	5,374		$	10,300
Effect of changes in cash flow assumptions		(292	)		261			(33	)
Effect of actual variances from expected experience		(50	)		61			(30	)

Adjusted beginning balance		60,806			5,696			10,237
Issuances		2			—			35
Interest accretion		3,327			281			663
Benefit payments		(3,621	)		(823	)		(1,016	)
Derecognition (lapses and withdrawals)		—			—			—
Other		(1	)		(8	)		1

Ending balance, at original discount rate		60,513			5,146			9,920
Effect of changes in discount rate assumptions		2,066			266			1,909

Ending balance as of December 31	$	62,579		$	5,412		$	11,829

Net liability for future policy benefits, before flooring adjustments	$	43,929		$	1,232		$	11,829
Flooring adjustments (2)		—			466			—

Net liability for future policy benefits		43,929			1,698			11,829
Less: reinsurance recoverable		7,572			852			9,008

Net liability for future policy benefits, net of reinsurance recoverable	$	36,357		$	846		$	2,821

Weighted-average liability duration (years)		13.7			5.9			11.1

(1)	Represents the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.

(2)

Long-term care insurance

For the six months ended June 30, 2024, the impact of updates to cash flow assumptions resulted in a decrease of $86 million in the liability for future policy benefits primarily due to favorable updates to implementation timing and approval amounts of in-force rate actions. This decrease in the liability for future policy benefits was largely offset in our reinsurance recoverable as the cash flow assumption updates were primarily related to fully reinsured blocks of business. The impact of actual versus expected experience for the six months ended June 30, 2024 resulted in an increase of $48 million in the liability for future policy benefits and included higher benefit utilization.

In the fourth quarter of 2023, we completed our annual review of cash flow assumptions including expected claim incidence and terminations, expenses, interest rates, benefit utilization trend and

in-force

rate actions, among other assumptions. The impact of changes in cash flow assumptions during the year ended December 31, 2023 resulted in a decrease of $

million in the liability for future policy benefits primarily as a result of a favorable update to our disabled life mortality assumptions to reflect an expectation that mortality will continue at elevated levels in the near term post the coronavirus pandemic

(“COVID-19”).

This was partially offset by unfavorable updates to our healthy life assumptions to better reflect near-term experience for cost of care, mortality, incidence and lapse rates. We also evaluated our assumptions regarding expectations of future premium rate increase approvals and benefit reductions and did not make significant changes to our multi-year

in-force

rate action plan. However, we did increase our assumption for future approvals and benefit reductions given our current plans for rate increase filings and our historical experience regarding approvals and regulatory support, as well as benefit reductions and legal settlement results. The impact of actual versus expected experience during the year ended December 31, 2023 resulted in an increase of $

315

million in the liability for future policy benefits primarily driven by higher claims and unfavorable timing impacts related to a legal settlement.

Life insurance

For the six months ended June 30, 2024, the impact of actual versus expected experience resulted in an increase of $12

million in the liability for future policy benefits primarily due to unfavorable mortality impacts.

In the fourth quarter of 2023, we completed our annual review of cash flow assumptions and increased our liability for future policy benefits by $81 million primarily as a result of unfavorable updates to our mortality assumptions to better reflect emerging experience related to more modest mortality improvement and to include an expectation that mortality will continue at elevated levels in the near term

post-COVID-19.

The impact of actual versus expected experience during the year ended December 31, 2023 resulted in an increase of $23 million in the liability for future policy benefits primarily driven by unfavorable mortality experience.

Fixed annuities

For the six months ended June 30, 2024, the impact of actual versus expected experience resulted in a decrease of $42 million in the liability for future policy benefits primarily due to favorable mortality.

The impact of changes in cash flow assumptions and actual versus expected experience during the year ended December 31, 2023 resulted in decreases of $33 million and $30 million, respectively, in the liability for future policy benefits primarily from favorable

mortality.

The following table provides the weighted-average interest rates for the liability for future policy benefits as of the dates indicated:


	June 30, 2024			December 31, 2023
Long-term care insurance
Interest accretion (locked-in) rate		5.7	%		5.8	%
Current discount rate		5.6	%		5.1	%
Life insurance
Interest accretion (locked-in) rate		5.8	%		5.8	%
Current discount rate		5.3	%		4.8	%
Fixed annuities
Interest accretion (locked-in) rate		6.8	%		6.7	%
Current discount rate		5.6	%		5.0	%

See Note 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 2023 Annual Report on Form

10-K

for additional information related to the discount rate used to measure the liability for future policy benefits.

The following table sets forth the amount of undiscounted and discounted expected future gross premiums and expected future benefit payments as of the dates indicated:


	June 30, 2024				December 31, 2023
(Amounts in millions)	Undiscounted		Discounted		Undiscounted		Discounted
Long-term care insurance
Expected future gross premiums	$	36,523	$	24,512	$	38,279	$	26,341
Expected future benefit payments	$	122,000	$	58,417	$	124,594	$	62,579
Life insurance
Expected future gross premiums	$	10,292	$	5,788	$	10,693	$	6,278
Expected future benefit payments	$	7,107	$	4,975	$	7,524	$	5,412
Fixed annuities
Expected future gross premiums	$	—	$	—	$	—	$	—
Expected future benefit payments	$	23,385	$	10,972	$	23,903	$	11,829

During the six months ended June 30, 2024, we recorded a charge of $5 million to net income due to net premiums exceeding gross premiums, resulting in net premium ratios capped at 100% for certain cohorts in our life insurance products primarily due to higher claim severity.

The following table sets forth the amount of revenue and interest accretion (expense) recognized in net income related to our liability for future policy benefits for the periods indicated:


	Three months ended June 30,								Six months ended June 30,								Year ended
	2024				2023				2024				2023				December 31, 2023
(Amounts in millions	Gross premiums		Interest accretion (1)		Gross premiums		Interest accretion (1)		Gross premiums		Interest accretion (1)		Gross premiums		Interest accretion (1)		Gross premiums		Interest accretion (1)
Long-term care insurance	$	613	$	589	$	671	$	582	$	1,243	$	1,178	$	1,346	$	1,160	$	2,713	$	2,333
Life insurance		165		14		174		16		334		29		353		33		688		64
Fixed annuities		—		160		—		166		—		322		—		334		—		663

Total	$	778	$	763	$	845	$	764	$	1,577	$	1,529	$	1,699	$	1,527	$	3,401	$	3,060

(1)	Amounts for interest accretion are included in benefits and other changes in policy reserves in the condensed consolidated statements of income.