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Derivative Instruments
 6 Months Ended
Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments Derivative Instruments
We use derivative instruments to manage risks. We have derivatives that are designated as hedging instruments and others that are not designated as hedging instruments. Any change in the fair value of the derivatives is recognized immediately in the Consolidated Statements of Operations.
The notional and fair values of our derivative instruments, including derivative instruments embedded in fixed index annuity contracts, presented in the Consolidated Balance Sheets are as follows:
June 30, 2023December 31, 2022
Notional Fair ValueNotionalFair Value
(Dollars in thousands)
Derivatives designated as hedging instruments
Assets
Derivative instruments
Interest rate swaps$— $— $408,369 $32,769 
Derivatives not designated as hedging instruments
Assets
Derivative instruments
Call options$39,783,069 $1,131,597 $38,927,534 $397,789 
Warrants— — 2,020 1,169 
$39,783,069 $1,131,597 $38,929,554 $398,958 
Liabilities
Policy benefit reserves - annuity products
Fixed index annuities - embedded derivatives, net$5,014,697 $4,820,845 
Funds withheld for reinsurance liabilities
Reinsurance related embedded derivative(397,234)(441,864)
$4,617,463 $4,378,981 
Derivatives Designated as Hedging Instruments
We used interest rate swaps designated and accounted for as fair value hedges to protect a portfolio of fixed-rate fixed maturity securities against changes in fair value due to changes in interest rates. Our interest rate swap contracts allowed us to pay a fixed rate and receive a floating rate utilizing the Secured Overnight Financing Rate at specified intervals based on a notional amount. Interest rate swaps were carried at fair value and presented as Derivative instruments on the Consolidated Balance Sheets.
For derivative instruments that were designated and qualified as a fair value hedge, the gain or loss on the portion of the derivative instrument included in the assessment of hedge effectiveness and the offsetting gain or loss on the hedged item attributable to the hedged risk were recognized in the same line item in the Consolidated Statements of Operations. The change in unrealized gain or loss attributable to interest rate changes on the fixed maturity securities that were designated as part of the hedge were reclassified out of Accumulated other comprehensive income (loss) into Change in fair value of derivatives in the Consolidated Statements of Operations. The remaining change in unrealized gain or loss on the hedged item not associated with the risk being hedged was recognized as a component of Other comprehensive income.
The following represents the amortized cost and cumulative fair value hedging adjustments included in the hedged assets:
Line Item in the Consolidated Balance Sheets in Which Hedged Item is IncludedAmortized Cost
of Hedged Item		Cumulative Amount of Fair Value Basis Adjustment Gain (Loss)
June 30, 2023December 31, 2022June 30, 2023December 31, 2022
(Dollars in thousands)
Fixed maturities, available for sale:
Current hedging relationships$— $389,060 $— $(39,128)
Discontinued hedging relationships1,372,336 1,594,736 (80,946)(94,681)
The following represents a summary of the gains (losses) related to the derivatives and hedged items that qualify for fair value hedge accounting:
DerivativeHedged ItemNetAmount Excluded:
Recognized in Income Immediately
(Dollars in thousands)
For the three months ended June 30, 2023
Interest rate swaps$18,847 $(10,876)$7,971 $— 
For the three months ended June 30, 2022
Interest rate swaps$26,771 $(33,093)$(6,322)$2,656 
For the six months ended June 30, 2023
Interest rate swaps$5,856 $3,240 $9,096 $— 
For the six months ended June 30, 2022
Interest rate swaps$26,771 $(33,093)$(6,322)$2,656 
Derivatives Not Designated as Hedging Instruments
We have fixed index annuity products that guarantee the return of principal to the policyholder and credit interest based on a percentage of the gain in a specified market index. When fixed index annuity deposits are received, a portion of the deposit is used to purchase derivatives consisting of call options on the applicable market indices to fund the index credits due to fixed index annuity policyholders. Substantially all such call options are one year options purchased to match the funding requirements of the underlying policies. The call options are marked to fair value with the change in fair value included as a component of revenues. The change in fair value of derivatives includes the gains or losses recognized at the expiration of the option term and the changes in fair value for open positions. On the respective anniversary dates of the index policies, the index used to compute the index credit is reset and we purchase new call options to fund the next index credit. We manage the cost of these purchases through the terms of our fixed index annuities, which permit us to change caps, participation rates, and/or asset fees, subject to guaranteed minimums on each policy's anniversary date. By adjusting caps, participation rates, or asset fees, we can generally manage option costs except in cases where the contractual features would prevent further modifications.
The changes in fair value of derivatives not designated as hedging instruments included in the Consolidated Statements of Operations are as follows:
Three Months Ended 
 June 30,		Six Months Ended 
 June 30,
2023202220232022
(Dollars in thousands)
Change in fair value of derivatives:
Call options$234,883 $(501,765)$278,327 $(980,213)
Warrants(115)(750)1,206 179 
Interest rate swaps— 2,656 — 2,656 
$234,768 $(499,859)$279,533 $(977,378)
Change in fair value of embedded derivatives:
Fixed index annuities - embedded derivatives$233,514 $(686,562)$573,574 $(1,877,767)
Reinsurance related embedded derivative(19,750)(199,422)44,630 (401,866)
$213,764 $(885,984)$618,204 $(2,279,633)
Derivative Exposure
We attempt to mitigate potential risk of loss due to the nonperformance of the counterparties through a regular monitoring process which evaluates the program's effectiveness. We do not purchase derivative instruments that would require payment or collateral to another institution and our derivative instruments do not contain counterparty credit-risk-related contingent features. We are exposed to risk of loss in the event of nonperformance by the counterparties and, accordingly, we purchase our derivative instruments from multiple counterparties and evaluate the creditworthiness of all counterparties prior to purchase of the contracts. All non-exchange traded derivative instruments have been purchased from nationally recognized financial institutions with a Standard and Poor's credit rating of A- or higher at the time of purchase and the maximum credit exposure to any single counterparty is subject to concentration limits. Both our call options and interest rate swaps fall under the same credit support agreements with each counterparty that allow us to request the counterparty to provide collateral to us when the fair value of our exposure to the counterparty exceeds specified amounts.
The notional amount and fair value of our call options and interest rate swaps by counterparty and each counterparty's current credit rating are as follows:
June 30, 2023December 31, 2022
CounterpartyCredit Rating
(S&P)		Credit Rating (Moody's)Notional
Amount		Fair ValueNotional
Amount		Fair Value
(Dollars in thousands)
Bank of AmericaA+Aa1$4,124,812 $81,590 $3,574,125 $26,080 
BarclaysA+A12,567,616 82,180 3,686,896 39,657 
Canadian Imperial Bank of CommerceA+Aa21,602,801 58,359 2,707,734 34,218 
Citibank, N.A.A+Aa34,171,072 102,691 3,748,162 29,873 
Credit SuisseAA31,955,159 49,252 2,086,470 20,691 
J.P. MorganA+Aa25,404,600 120,638 6,501,103 69,006 
MizuhoAA14,030,827 145,197 — — 
Morgan StanleyA+Aa31,967,830 45,622 2,957,389 38,470 
Royal Bank of CanadaAA-A14,479,656 146,476 4,378,132 58,026 
Societe GeneraleAA12,806,536 69,333 2,099,081 17,157 
TruistAA22,004,578 65,032 1,960,787 32,885 
UBS AGA+Aa3300,708 8,676 — — 
Wells FargoA+Aa24,283,753 154,506 5,436,824 61,840 
Exchange traded83,121 2,045 199,200 2,655 
$39,783,069 $1,131,597 $39,335,903 $430,558 
As of June 30, 2023 and December 31, 2022, we held $1.1 billion and $0.4 billion, respectively, of cash and cash equivalents and other investments from counterparties for derivative collateral, which is included in Other liabilities on our Consolidated Balance Sheets. This derivative collateral limits the maximum amount of economic loss due to credit risk that we would incur if the counterparties failed completely to perform according to the terms of the contracts to $68.5 million and $3.3 million at June 30, 2023 and December 31, 2022, respectively.
The future index credits on our fixed index annuities are treated as a "series of embedded derivatives" over the expected life of the applicable contract. We do not purchase call options to fund the index liabilities which may arise after the next policy anniversary date. We must value both the call options and the related forward embedded options in the policies at fair value.
We cede certain fixed index annuity product liabilities to third party reinsurers on a modified coinsurance basis which results in an embedded derivative. The obligation to pay the total return on the assets supporting liabilities associated with this reinsurance agreement represents a total return swap. The fair value of the total return swap is based on the unrealized gains and losses of the underlying assets held in the modified coinsurance portfolio. The reinsurance related embedded derivative is reported in Funds withheld for reinsurance liabilities on the Consolidated Balance Sheets and the change in the fair value of the embedded derivative is reported in Change in fair value of embedded derivatives on the Consolidated Statements of Operations.