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Derivative Instruments | 6 Months Ended
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Jun. 30, 2025
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 instruments. Derivative 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 instruments which have a positive value, should the counterparty default. Derivatives, except for embedded derivatives, are included in “Other invested assets” or “Other liabilities”, 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, 2025 |  | December 31, 2024
| Notional Amount |  | Carrying Value / Fair Value |  | Notional Amount |  | Carrying Value / Fair Value
|  | Assets |  | Liabilities |  |  | Assets |  | Liabilities
|  |  |  | (Dollars in millions)
Derivatives Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange forwards | Foreign Currency | Other invested assets, Other liabilities |  | $ | 642 |  |  | $ | — |  |  | $ | 53 |  |  | $ | 897 |  |  | $ | 20 |  |  | $ | — |
Cross currency swaps | Foreign Currency | Other invested assets, Other liabilities |  | 358 |  |  | 31 |  |  | — |  |  | — |  |  | — |  |  | — |
Interest rate swaps | Interest rate | Other invested assets, Other liabilities |  | 900 |  |  | 18 |  |  | — |  |  | — |  |  | — |  |  | — |
Derivatives Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
Equity-indexed options | Equity | Other invested assets, Other liabilities |  | 46,394 |  |  | 1,118 |  |  | 3 |  |  | 46,374 |  |  | 1,303 |  |  | 5 |
Foreign exchange forwards | Foreign Currency | Other invested assets, Other liabilities |  | 1,705 |  |  | 4 |  |  | 97 |  |  | 1,066 |  |  | 23 |  |  | — |
Cross currency swaps | Foreign Currency | Other invested assets, Other liabilities |  | 384 |  |  | — |  |  | 17 |  |  | — |  |  | — |  |  | — |
Embedded Derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Indexed annuity and variable annuity product | Interest rate | Policyholders’ account balances |  | — |  |  | — |  |  | 6,257 |  |  | — |  |  | — |  |  | 1,123 |
Funds withheld and Modco arrangements | Interest rate | Funds withheld for reinsurance liabilities |  | — |  |  | — |  |  | 63 |  |  | — |  |  | — |  |  | 37 |
|  |  |  | $ | 50,383 |  |  | $ | 1,171 |  |  | $ | 6,490 |  |  | $ | 48,337 |  |  | $ | 1,346 |  |  | $ | 1,165 |
Derivatives Designated as Hedging Instruments The Company has designated and accounted for certain foreign exchange forwards (“foreign currency derivatives”) 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. The Company has also designated and accounted for certain interest rate swaps (“interest rate derivatives”) as fair value hedges to convert a portion of PAB from a fixed rate liability to a floating rate liability. 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 are 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 are reclassified out of other comprehensive income (“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 remains as a component of OCI. The gains (losses) on interest rate derivatives designated as hedging instruments for certain PAB are included in “Interest sensitive contract benefits” in the Consolidated Statements of Operations. The following represents the amount of gains (losses) related to the derivatives and hedged items that qualify for fair value hedges:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
| (Dollars in millions)
Foreign currency derivatives: |  |  |  |  |  |  |
Hedged items | $ | 45 |  |  | $ | — |  |  | $ | 73 |  |  | $ | — |
Derivatives designated as hedging instruments | (45) |  |  | — |  |  | (73) |  |  | — |
Interest rate derivatives: |  |  |  |  |  |  |
Hedged items | 8 |  |  | — |  |  | 18 |  |  | — |
Derivatives designated as hedging instruments | (8) |  |  | — |  |  | (18) |  |  | — |
Gains (losses) on fair value hedges | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
The following table presents the carrying amount and cumulative fair value hedging adjustments for a portion of PAB designated and qualifying as hedged items in fair value hedges:
| Carrying Amount of the Hedged Assets (Liabilities) |  | Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedge Assets (Liabilities)
| June 30, 2025 |  | December 31, 2024 |  | June 30, 2025 |  | December 31, 2024
| (Dollars in millions)
Location in the Consolidated Statements of Financial Position: |  |  |  |  |  |  |
Policyholders’ account balances | $ | (912) |  |  | $ | — |  |  | $ | (18) |  |  | $ | — |
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 |  | 2025 |  | 2024 |  | 2025 |  | 2024
|  |  | (Dollars in millions)
Equity-indexed options | Change in fair value of insurance-related derivatives and embedded derivatives |  | $ | 232 |  |  | $ | 308 |  |  | $ | (102) |  |  | $ | 365 |
Foreign exchange forwards | Investment related gains (losses) |  | (138) |  |  | — |  |  | (204) |  |  | — |
Cross currency swaps | Investment related gains (losses) |  | 15 |  |  | — |  |  | 15 |  |  | — |
Embedded derivatives: |  |  |  |  |  |  |  |  |
Indexed annuity and variable annuity product | Change in fair value of insurance-related derivatives and embedded derivatives |  | (354) |  |  | (250) |  |  | (199) |  |  | (288) |
Funds withheld and Modco arrangements | Change in fair value of insurance-related derivatives and embedded derivatives |  | (9) |  |  | (79) |  |  | (29) |  |  | (79) |
|  |  | $ | (254) |  |  | $ | (21) |  |  | $ | (519) |  |  | $ | (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 of mitigating the financial loss from defaults. The minimum credit rating of our counterparties is BBB+ as of June 30, 2025 and BBB+ as of December 31, 2024, and all derivatives have been appropriately collateralized by the Company and the counterparties in accordance with the terms of the derivative agreements. 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 cash 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 non-cash and 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. 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 June 30, 2025 |  |  |  |  |  |  |  |  |  |  |
Derivative assets |  |  |  |  |  |  |  |  |  |  |
Equity-indexed options | $ | 1,118 |  |  | $ | (65) |  |  | $ | 1,053 |  |  | $ | (987) |  |  | $ | (21) |  |  | $ | 45 |
Foreign exchange forwards | 4 |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |
Cross currency swaps | 31 |  |  | — |  |  | 31 |  |  | — |  |  | — |  |  | 31 |
Interest rate swaps | 18 |  |  | — |  |  | 18 |  |  | — |  |  | — |  |  | 18 |
Total derivative assets | $ | 1,171 |  |  | $ | (69) |  |  | $ | 1,102 |  |  | $ | (987) |  |  | $ | (21) |  |  | $ | 94 |
Derivative liabilities |  |  |  |  |  |  |  |  |  |  |
Equity-indexed options | $ | (3) |  |  | $ | 3 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Foreign exchange forwards | (150) |  |  | 66 |  |  | (84) |  |  | — |  |  | — |  |  | (84) |
Cross currency swaps | (17) |  |  | — |  |  | (17) |  |  | — |  |  | — |  |  | (17) |
Total derivative liabilities | $ | (170) |  |  | $ | 69 |  |  | $ | (101) |  |  | $ | — |  |  | $ | — |  |  | $ | (101) |
As of December 31, 2024 |  |  |  |  |  |  |  |  |  |  |
Derivative assets |  |  |  |  |  |  |  |  |  |  |
Equity-indexed options | $ | 1,303 |  |  | $ | (5) |  |  | $ | 1,298 |  |  | $ | (1,298) |  |  | $ | — |  |  | $ | — |
Foreign exchange forwards | 43 |  |  | — |  |  | 43 |  |  | — |  |  | — |  |  | 43 |
Total derivative assets | $ | 1,346 |  |  | $ | (5) |  |  | $ | 1,341 |  |  | $ | (1,298) |  |  | $ | — |  |  | $ | 43 |
Derivative liabilities |  |  |  |  |  |  |  |  |  |  |
Equity-indexed options | $ | (5) |  |  | $ | 5 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Total derivative liabilities | $ | (5) |  |  | $ | 5 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
(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 June 30, 2025 and December 31, 2024, the Company held excess collateral of $59 million and $76 million, respectively.

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