XML 30 R17.htm IDEA: XBRL DOCUMENT v3.25.1
Derivative Instruments
 12 Months Ended
Dec. 31, 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.
Foreign exchange forwards and 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:
December 31,
Primary
Underlying
Risk		Location in the Consolidated
Statements of Financial Position		20242023
Notional
Amount		Carrying Value / Fair ValueNotional
Amount		Carrying Value / Fair Value
AssetsLiabilitiesAssetsLiabilities
(Dollars in millions)
Derivatives Designated as Hedging Instruments:
Foreign exchange forwardsForeign currencyOther invested assets, Other liabilities$897 $20 $— $— $— $— 
Derivatives Not Designated as Hedging Instruments:
Equity-indexed optionsEquityOther invested assets, Other liabilities46,374 1,303 5 4,084 227 — 
Foreign exchange forwardsForeign currencyOther invested assets, Other liabilities1,066 23 — — — — 
Embedded Derivatives:
Indexed annuity and variable annuity productInterest ratePolicyholders’ account balances— — 1,123 — — 873 
Funds withheld and Modco arrangementsInterest rateFunds withheld for reinsurance liabilities— — 37 — — — 
$48,337 $1,346 $1,165 $4,084 $227 $873 
Derivatives Designated as Hedging Instruments
The Company has designated and accounted for certain foreign exchange forwards as fair value hedges to protect a portion of the available-for-sale fixed maturity securities against changes in fair value due to changes in exchange rates.
For derivative financial instruments that were designated and qualified as fair value hedges, the gain or loss on the portion of the derivative instrument included in the assessment of hedge effectiveness and the offsetting gain or loss on the hedged item attributable to the hedged risk were recognized in the same line item in the Consolidated Statements of Operations. The unrealized gain or loss attributable to changes in exchange rates on the available-for-sale fixed maturity securities that were designated as part of the hedge were reclassified out of OCI into “Investment related gains (losses)” in the Consolidated Statements of Operations. The remaining change in unrealized gain or loss on the hedged item not associated with the risk being hedged remained as a component of OCI.
The following represents the amount of gains (losses) related to the derivatives and hedged items that qualify for fair value hedge accounting:
Successor
Predecessor
Year Ended December 31,Period From
May 25 to
December 31,		Period From
January 1 to
May 24,
2024202320222022
(Dollars in millions)
Hedged items$(22)$— $— $— 
Derivatives designated as hedging instruments21 — — — 
Investment related gains (losses)$(1)$— $— $— 
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
Successor
Predecessor
Location in the Consolidated Statements of OperationsYear Ended December 31,Period From
May 25 to
December 31,		Period From
January 1 to
May 24,
2024202320222022
(Dollars in millions)
Equity-indexed optionsChange in fair value of insurance-related derivatives and embedded derivatives$489 $112 $(38)$(128)
Foreign exchange forwardsInvestment related gains (losses)27 — — — 
Embedded derivatives:
Indexed annuity and variable annuity productChange in fair value of insurance-related derivatives and embedded derivatives(233)(148)61 97 
Funds withheld and Modco arrangementsChange in fair value of insurance-related derivatives and embedded derivatives(162)— — — 
$121 $(36)$23 $(31)
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 derivatives by counterparty and each counterparty's current credit rating are as follows:
December 31,
20242023
CounterpartyCredit Rating
(S&P)		Credit Rating (Moody's)Fair ValueFair Value
(Dollars in millions)
Bank of AmericaA+Aa1$99 $24 
BarclaysA+A179 24 
BNP ParibasA+A13 — 
Canadian Imperial Bank of CommerceA+Aa242 — 
Citibank, N.A.A+Aa335 — 
Credit SuisseA-A3— 16 
Goldman SachsA+A120 — 
INGA-Baa16 10 
J.P. MorganAA-Aa2128 12 
MizuhoAA1266 — 
Morgan StanleyA+Aa384 43 
NATIXISA+A12 4 
Royal Bank of CanadaAA-A1115 — 
Societe GeneraleAA186 — 
TruistAA3104 59 
UBS AGA-A334 — 
Wells FargoA+Aa2238 35 
$1,341 $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 (2)		Net Amount
Presented in the
Consolidated
Statements of
Financial Position		Collateral
(Received)
Pledged
in Cash
(3)		Collateral
(Received)
Pledged in
Invested Assets
(3)		Exposure
of Net
Collateral
(Dollars in millions)
As of December 31, 2024
Derivative assets
Equity-indexed options$1,303 $(5)$1,298 $(1,298)$— $— 
Foreign exchange forwards43 — 43 — — 43 
Total derivative assets$1,346 $(5)$1,341 $(1,298)$— $43 
Derivative liabilities
Equity-indexed options$(5)$5 $— $— $— $— 
Foreign exchange forwards— — — — — — 
Total derivative liabilities$(5)$5 $— $— $— $— 
As of December 31, 2023
Derivative assets
Equity-indexed options$227 $— $227 $(205)$(21)$1 
Foreign exchange forwards— — — — — — 
Total derivative assets$227 $— $227 $(205)$(21)$1 
Derivative liabilities
Equity-indexed options$— $— $— $— $— $— 
Foreign exchange forwards— — — — — — 
Total derivative liabilities$— $— $— $— $— $— 
(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)Represents netting of derivative exposures covered by qualifying master netting agreements.
(3)Excludes a portion of collateral held in cash and invested assets that are excess collateral. As of December 31, 2024 and 2023, the Company held excess collateral of $76 million and $4 million, respectively.