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Long-duration Contracts

6 Months Ended

Jun. 30, 2023

Insurance [Abstract]

Long-duration Contracts

9. Long-duration Contracts

Interest sensitive contract liabilities – Interest sensitive contract liabilities primarily include:

▪traditional deferred annuities,

▪indexed annuities consisting of fixed indexed and index-linked variable annuities,

▪funding agreements, and

▪other investment-type contracts comprising of immediate annuities without significant mortality risk (which includes pension group annuities without life contingencies) and assumed endowments without significant mortality risks.

The following represents a rollforward of the policyholder account balance by product within interest sensitive contract liabilities. Where explicit policyholder account balances do not exist, the disaggregated rollforward represents the recorded reserve.

			Six months ended June 30, 2023
(In millions, except percentages)			Traditional deferred annuities						Indexed annuities												Funding agreements						Other investment-type						Total
Balance at December 31, 2022			$	43,518					$	92,660											$	27,439					$	4,722					$	168,339
Deposits			12,174						5,808												1,648						2,607						22,237
Policy charges			(1)						(318)												—						—						(319)
Surrenders and withdrawals			(4,986)						(5,563)												(110)						(11)						(10,670)
Benefit payments			(505)						(826)												(1,910)						(167)						(3,408)
Interest credited			802						364												401						71						1,638
Foreign exchange			(31)						—												161						(218)						(88)
Other			(54)						—												(11)						(37)						(102)
Balance at June 30, 2023			$	50,917					$	92,125											$	27,618					$	6,967					$	177,627
			June 30, 2023
Weighted average crediting rate			3.5		%				2.3		%										2.7		%				2.9		%				2.7		%
Net amount at risk			$	424					$	14,158											$	—					$	104					$	14,686
Cash surrender value			48,135						84,200												—						4,442						136,777

			Six months ended June 30, 2022
(In millions, except percentages)			Traditional deferred annuities						Indexed annuities												Funding agreements						Other investment-type						Total
Balance at January 1, 2022			$	35,599					$	89,755											$	23,623					$	2,413					$	151,390
Deposits			2,476						5,186												5,820						1,286						14,768
Policy charges			(1)						(287)												—						—						(288)
Surrenders and withdrawals			(2,115)						(3,610)												(50)						(2)						(5,777)
Benefit payments			(480)						(847)												(969)						(166)						(2,462)
Interest credited			465						1,245												299						38						2,047
Foreign exchange			—						—												(449)						(58)						(507)
Other			—						—												(334)						(8)						(342)
Balance at June 30, 2022			$	35,944					$	91,442											$	27,940					$	3,503					$	158,829
			June 30, 2022
Weighted average crediting rate			2.7		%				2.0		%										2.0		%				2.9		%				2.2		%
Net amount at risk			$	419					$	12,788											$	—					$	25					$	13,232
Cash surrender value			34,402						83,837												—						1,206						119,445

The following is a reconciliation of interest sensitive contract liabilities to the condensed consolidated balance sheets:

			June 30,
(In millions)			2023						2022
Traditional deferred annuities			$	50,917					$	35,944
Indexed annuities			92,125						91,442
Funding agreements			27,618						27,940
Other investment-type			6,967						3,503
Reconciling items1			6,732						5,658
Interest sensitive contract liabilities			$	184,359					$	164,487
1 Reconciling items primarily include embedded derivatives in indexed annuities, unaccreted host contract adjustments on indexed annuities, negative VOBA, sales inducement liabilities, and wholly ceded universal life insurance contracts.

The following represents policyholder account balances by range of guaranteed minimum crediting rates, as well as the related range of the difference between rates being credited to policyholders and the respective guaranteed minimums:

			June 30, 2023
(In millions)			At guaranteed minimum						1 basis point – 100 basis points above guaranteed minimum						Greater than 100 basis points above guaranteed minimum						Total
< 2.0%			$	27,210					$	19,740					$	86,622					$	133,572
2.0% – < 4.0%			29,994						2,285						408						32,687
4.0% – < 6.0%			10,141						9						1						10,151
6.0% and greater			1,217						—						—						1,217
Total			$	68,562					$	22,034					$	87,031					$	177,627

			June 30, 2022
(In millions)			At guaranteed minimum						1 basis point – 100 basis points above guaranteed minimum						Greater than 100 basis points above guaranteed minimum						Total
< 2.0%			$	26,768					$	28,238					$	61,001					$	116,007
2.0% – < 4.0%			37,017						955						69						38,041
4.0% – < 6.0%			4,625						11						6						4,642
6.0% and greater			139						—						—						139
Total			$	68,549					$	29,204					$	61,076					$	158,829

Future policy benefits – Future policy benefits consist primarily of payout annuities, including single premium immediate annuities with life contingencies (which include pension group annuities with life contingencies).

The following is a rollforward of the expected value of future policy benefits:

			Payout annuities with life contingencies
			Six months ended June 30,
(In millions)			2023						2022
Present value of expected future policy benefits
Beginning balance			$	36,422					$	35,278
Effect of changes in discount rate assumptions			8,425						—
Beginning balance at original discount rate			44,847						35,278
Effect of actual experience compared to expected experience			(60)						(91)
Adjusted beginning balance			44,787						35,187
Issuances			9,097						7,624
Interest accrual			751						483
Benefit payments			(1,748)						(1,480)
Foreign exchange			18						(58)
Ending balance at original discount rate			52,905						41,756
Effect of changes in discount rate assumptions			(8,436)						(6,459)
Ending balance			$	44,469					$	35,297

The following is a reconciliation of future policy benefits to the condensed consolidated balance sheets:

			June 30,
(In millions)			2023						2022
Payout annuities with life contingencies			$	44,469					$	35,297
Reconciling items1			5,815						5,902
Future policy benefits			$	50,284					$	41,199
1 Reconciling items primarily include the deferred profit liability and negative VOBA associated with our liability for future policy benefits. Additionally, it includes reserves for our immaterial lines of business including term and whole life, accident and health and disability, as well as other insurance benefit reserves for our no-lapse guarantees with universal life contracts, all of which are fully ceded.

The following is a reconciliation of premiums to the condensed consolidated statements of income (loss):

			Six months ended June 30,
(In millions)			2023						2022
Payout annuities with life contingencies			$	9,123					$	7,708
Reconciling items1			14						16
Premiums			$	9,137					$	7,724
1 Reconciling items premiums related to our immaterial lines of business including term and whole life, and accident and health and disability.

Gross premiums are recorded within premiums on the condensed consolidated statements of income (loss). Interest expense (accretion) related to future policy benefits was $751 million and $483 million during the six months ended June 30, 2023 and 2022, respectively, and is recorded as a component of policy and other operating expenses on the condensed consolidated statements of income (loss).

Significant assumptions and inputs to the calculation of future policy benefits for payout annuities with life contingencies include policyholder demographic data, assumptions for policyholder longevity and policyholder utilization for contracts with deferred lives, and discount rates. We base certain key assumptions related to policyholder behavior on industry standard data adjusted to align with actual company experience, if necessary. At least annually, we review all significant cash flow assumptions and update as necessary, unless emerging experience indicates a more frequent review is necessary. The discount rate reflects market observable inputs from upper-medium grade fixed income instrument yields and is interpolated, where necessary, to conform to the duration of our liabilities.

During the six months ended June 30, 2023, future policy benefits for payout annuities with life contingencies increased by $8,047 million, which was primarily driven by $9,097 million of pension group annuity issuances and $751 million of interest accrual, partially offset by $1,748 million of benefit payments.

During the six months ended June 30, 2022, future policy benefits for payout annuities with life contingencies increased by $19 million, which was primarily driven by $7,624 million of pension group annuity issuances and $483 million of interest accrual, partially offset by a $6,459 million change in discount rate assumptions related to an increase in rates and $1,480 million of benefit payments.

The following represents the undiscounted and discounted expected future benefit payments for the liability for future policy benefits. As these relate to payout annuities for single premium immediate annuities with life contingencies, there are no expected future gross premiums.

			June 30, 2023												June 30, 2022
(In millions)			Undiscounted						Discounted						Undiscounted						Discounted
Expected future benefit payments			$	77,248					$	52,905					$	60,043					$	41,756

The following represents the weighted-average durations and the weighted-average interest rates of future policy benefits:

			June 30,
			2023						2022
Weighted-average liability duration (in years)			9.6						10.4
Weighted-average interest accretion rate			3.5		%				3.0		%
Weighted-average current discount rate			5.5		%				4.8		%

The following is a summary of remeasurement gains (losses) included within future policy and other policy benefits on the condensed consolidated statements of income (loss):

			Six months ended June 30,
(In millions)			2023						2022
Reserves			$	60					$	90
Deferred profit liability			(44)						(85)
Negative VOBA			(10)						5
Total remeasurement gains (losses)			$	6					$	10

During the six months ended June 30, 2023 and 2022, we recorded reserve increases of $111 million and $29 million, respectively, to the condensed consolidated statements of income (loss) as a result of the present value of benefits and expenses exceeding the present value of gross premiums.

Market risk benefits – We issue and reinsure traditional deferred and indexed annuity products that contain GLWB and GMDB riders that meet the criteria to be classified as market risk benefits.

The following is a rollfoward of net market risk benefit liabilities by product:

			Six months ended June 30, 2023
(In millions)			Traditional deferred annuities						Indexed annuities												Total
Balance at December 31, 2022			$	170					$	2,319											$	2,489
Effect of changes in instrument-specific credit risk			13						353												366
Balance, beginning of period, before changes in instrument-specific credit risk			183						2,672												2,855
Issuances			—						31												31
Interest accrual			5						70												75
Attributed fees collected			1						165												166
Benefit payments			(1)						(15)												(16)
Effect of changes in interest rates			3						71												74
Effect of changes in equity			—						(61)												(61)
Effect of actual behavior compared to expected behavior			3						35												38
Balance, end of period, before changes in instrument-specific credit risk			194						2,968												3,162
Effect of changes in instrument-specific credit risk			(15)						(385)												(400)
Balance at June 30, 2023			$	179					$	2,583											$	2,762
			June 30, 2023
Net amount at risk			$	424					$	14,158											$	14,582
Weighted-average attained age of contract holders (in years)			75						69												69

			Six months ended June 30, 2022
(In millions)			Traditional deferred annuities						Indexed annuities												Total
Balance at January 1, 2022			$	253					$	4,194											$	4,447
Issuances			—						31												31
Interest accrual			—						4												4
Attributed fees collected			1						161												162
Benefit payments			(1)						(27)												(28)
Effect of changes in interest rates			(56)						(1,502)												(1,558)
Effect of changes in equity			1						164												165
Effect of actual behavior compared to expected behavior			3						24												27
Balance, end of period, before changes in instrument-specific credit risk			201						3,049												3,250
Effect of changes in instrument-specific credit risk			(20)						(556)												(576)
Balance at June 30, 2022			$	181					$	2,493											$	2,674
			June 30, 2022
Net amount at risk			$	419					$	12,788											$	13,207
Weighted-average attained age of contract holders (in years)			75						69												69

The following is a reconciliation of market risk benefits to the condensed consolidated balance sheets. Market risk benefit assets are included in other assets on the condensed consolidated balance sheets.

			June 30, 2023																		June 30, 2022
(In millions)			Asset						Liability						Net liability						Asset						Liability						Net liability
Traditional deferred annuities			$	—					$	179					$	179					$	—					$	181					$	181
Indexed annuities			433						3,016						2,583						489						2,982						2,493
Total			$	433					$	3,195					$	2,762					$	489					$	3,163					$	2,674

During the six months ended June 30, 2023, net market risk benefit liabilities increased by $273 million, which was primarily driven by $166 million in fees collected from policyholders and $74 million related to a decrease in discount rates across the curve.

During the six months ended June 30, 2022, net market risk benefit liabilities decreased by $1,773 million, which was primarily driven by $1,558 million related to an increase in discount rates across the curve and a $576 million change in instrument-specific credit risk related to widening of credit spreads, partially offset by $165 million of changes related to equity market performance and $162 million of fees collected from policyholders.

The determination of the fair value of market risk benefits requires the use of inputs related to fees and assessments and assumptions in determining the projected benefits in excess of the projected account balance. Judgment is required for both economic and actuarial assumptions, which can be either observable or unobservable, that impact future policyholder account growth.

Economic assumptions include interest rates and implied volatilities throughout the duration of the liability. For indexed annuities, assumptions also include projected equity returns which impact cash flows attributable to indexed strategies, implied equity volatilities, expected index credits on the next policy anniversary date and future equity option costs. Assumptions related to the level of option budgets used for determining the future equity option costs and the impact on future policyholder account value growth are considered unobservable inputs.

Policyholder behavior assumptions are unobservable inputs and are established using accepted actuarial valuation methods to estimate withdrawals (surrender rate) and income rider utilization. Assumptions are generally based on industry data and pricing assumptions which are updated for actual experience, if necessary. Actual experience may be limited for recently issued products.

All inputs are used to project excess benefits and fees over a range of risk-neutral, stochastic interest rate scenarios. For indexed annuities, stochastic equity return scenarios are also included within the range. A risk margin is incorporated within the discount rate to reflect uncertainty in the projected cash flows such as variations in policyholder behavior, as well as a credit spread to reflect our nonperformance risk, which is considered an unobservable input. We use the credit spread, relative to the US Treasury curve based on our public credit rating as of the valuation date, as the credit spread to reflect our nonperformance risk in the estimate of the fair value of market risk benefits.

The following summarizes the unobservable inputs for market risk benefits:

						June 30, 2023
(In millions, except for percentages)						Fair value						Valuation technique						Unobservable inputs						Minimum						Maximum						Weighted average									Impact of an increase in the input on fair value
Market risk benefits, net						$	2,762					Discounted cash flow						Nonperformance risk						0.4		%				1.8		%				1.5		%	1						Decrease
																		Option budget						0.5		%				5.7		%				1.8		%	2						Decrease
																		Surrender rate						3.3		%				6.9		%				4.5		%	2						Decrease
																		Utilization rate						28.6		%				95.0		%				83.1		%	3						Increase
						June 30, 2022
(In millions, except for percentages)						Fair value						Valuation technique						Unobservable inputs						Minimum						Maximum						Weighted average									Impact of an increase in the input on fair value
Market risk benefits, net						$	2,674					Discounted cash flow						Nonperformance risk						0.5		%				2.0		%				1.6		%	1						Decrease
																		Option budget						0.5		%				4.0		%				1.6		%	2						Decrease
																		Surrender rate						3.3		%				6.8		%				4.5		%	2						Decrease
																		Utilization rate						28.6		%				95.0		%				81.6		%	3						Increase
1 The nonperformance risk weighted average is based on the cash flows underlying the market risk benefit reserve.
2 The option budget and surrender rate weighted averages are calculated based on projected account values.
3 The utilization of GLWB withdrawals represents the estimated percentage of policyholders that are expected to use their income rider over the duration of the contract, with the weighted average based on current account values.

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- References

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- Definition

The entire disclosure for long duration contracts. This may include the information pertinent to an understanding of the types of traditional and nontraditional insurance and investment contracts sold and serviced, including the nature and amount of estimated guaranteed obligations pertaining to such contracts and the assumptions underlying such estimated amounts, hedging strategies, and sales inducements offered.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 944
-SubTopic 40
-Name Accounting Standards Codification
-Section 65
-Paragraph 2
-Subparagraph (u)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480016/944-40-65-2

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 944
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//944/tableOfContent

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