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Derivative Instruments
 6 Months Ended
Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
9. Derivative Instruments
The Company manages risks associated with certain assets and liabilities by using derivative financial instruments. Derivative financial instruments are financial contracts whose value is derived from underlying interest rates, exchange rates or other financial instruments. The Company does not invest in derivatives for speculative purposes.
Equity-indexed options are over-the-counter contractual agreements negotiated between counterparties. The Company purchases equity-indexed options as economic hedges against fluctuations in the equity markets to which equity-indexed products are exposed. Equity-indexed contracts include a fixed host universal-life insurance or annuity contract and an equity-indexed embedded derivative.
The notional principal represents the amount to which a rate or price is applied to determine the cash flows to be exchanged periodically and does not represent credit exposure. Maximum credit risk is the estimated cost of replacing derivative financial instruments which have a positive value, should the counterparty default.
Derivatives, except for embedded derivatives, are included in “Other invested assets”, at fair value in the Consolidated Statements of Financial Position. Embedded derivative liabilities on funds withheld and modified coinsurance (“Modco”) arrangements and embedded derivative liabilities on indexed annuity and variable annuity products are included in the Consolidated Statements of Financial Position within the “Reinsurance funds withheld” and “Policyholders’ account balances” lines respectively, at fair value.
The notional and fair values of derivative instruments, presented in the Consolidated Statements of Financial Position, are shown below:
Primary
Underlying
Risk		Location in the Consolidated
Statements of Financial Position		June 30, 2024December 31, 2023
Notional
Amount
Carrying Value / Fair Value
Notional
Amount
Carrying Value / Fair Value
AssetsLiabilitiesAssetsLiabilities
(Dollars in millions)
Derivatives Not Designated as Hedging Instruments:
Equity-indexed options
Equity
Other invested assets, Other liabilities
$45,871 $1,610 $— $4,084 $227 $— 
Embedded Derivatives:
Indexed annuity and variable annuity product
Interest rate
Policyholders’ account balances
— — 1,196 — — 873 
Funds withheld and Modco arrangements
Interest rate
Funds withheld for reinsurance liabilities
— — 79 — — — 
$45,871 $1,610 $1,275 $4,084 $227 $873 
Derivatives Not Designated as Hedging Instruments
The following represents the financial statement location and amount of gains (losses) related to the derivatives not designated as hedging instruments:
Derivative Gains (Losses) Recognized in Income
Three Months Ended
June 30,		Six Months Ended
June 30,
Location in the Consolidated Statements of Operations
2024202320242023
(Dollars in millions)
Equity-indexed optionsChange in fair value of insurance-related derivatives and embedded derivatives$308 $46 $365 $71 
Embedded derivatives:
Indexed annuity and variable annuity productChange in fair value of insurance-related derivatives and embedded derivatives(250)(20)(288)(71)
Funds withheld and Modco arrangements
Change in fair value of insurance-related derivatives and embedded derivatives
(79)— (79)— 
$(21)$26 $(2)$— 
Derivative Exposure
The Company’s use of derivative instruments exposes it to credit risk in the event of non-performance by counterparties. The Company has a policy of only dealing with counterparties it believes are creditworthy and obtaining sufficient collateral where appropriate, as a means to mitigating the financial loss from defaults. The Company holds collateral in cash and notes secured by U.S. government-backed assets. The non-performance risk is the net counterparty exposure based on fair value of open contracts less fair value of collateral held. The Company maintains master netting agreements with its current active trading partners. A right of offset has been applied to collateral that supports credit risk and has been recorded in the Consolidated Statements of Financial Position as an offset to “Other invested assets” with an associated payable to “Other liabilities” for excess collateral. A right of offset has also been applied to derivative assets and liabilities with the same counterparty under the same master netting agreement, and such derivative instruments are presented on a net basis in the Consolidated Statements of Financial Position.
The fair value of our call options by counterparty and each counterparty's current credit rating are as follows:
June 30, 2024December 31, 2023
CounterpartyCredit Rating
(S&P)		Credit Rating (Moody's)Fair ValueFair Value
(Dollars in millions)
Bank of America
A+
Aa1
$162 $24 
Barclays
A+
A1
76 24 
Canadian Imperial Bank of Commerce
A+
Aa261 — 
Citibank, N.A.
A+
Aa346 — 
Credit Suisse
A+
Aa2
6 16 
Goldman Sachs
A+
A117 — 
INGA-Baa16 10 
J.P. Morgan
A+
Aa2
149 12 
MizuhoAA1393 — 
Morgan Stanley
A+
Aa3114 43 
NATIXIS
A+
A2
2 4 
Royal Bank of CanadaAA-A1132 — 
Societe GeneraleAA182 — 
Truist
A
A3119 59 
UBS AGA+Aa350 — 
Wells FargoA+
Aa2
195 35 
$1,610 $227 
Information regarding the Company’s exposure to credit loss on the derivatives it holds, including the effect of rights of offset, is presented below:
Gross Amount
of Derivative
Instruments
(1)
Gross Amount
Offset in the
Consolidated
Statements of
Financial Position
Net Amount
Presented in the
Consolidated
Statements of
Financial Position
Collateral
(Received)
Pledged
in Cash
(2)
Collateral
(Received)
Pledged in
Invested Assets
(2)
Exposure
of Net
Collateral
(Dollars in millions)
As of June 30, 2024
Derivative assets
Equity-indexed options$1,618 $(8)$1,610 $(1,587)$(21)$2 
Total derivative assets
$1,618 $(8)$1,610 $(1,587)$(21)$2 
Derivative liabilities
Equity-indexed options$(8)$8 $— $— $— $— 
Total derivative liabilities
$(8)$8 $— $— $— $— 
As of December 31, 2023
Derivative assets
Equity-indexed options$227 $— $227 $(205)$(21)$1 
Total derivative assets
$227 $— $227 $(205)$(21)$1 
Derivative liabilities
Equity-indexed options$— $— $— $— $— $— 
Total derivative liabilities
$— $— $— $— $— $— 
(1)Represents derivative assets and liabilities on a gross basis, which are not offset under enforceable master netting agreements that meet all offsetting criteria.
(2)Excludes a portion of collateral held in cash and invested assets that are excess collateral. As of June 30, 2024 and December 31, 2023, the Company held excess collateral of $52 million and $4 million, respectively.