Long-duration insurance contracts

6 Months Ended

Jun. 30, 2023

Note 16. Long-duration insurance contracts

We write periodic payment annuity and life and health insurance contracts, which are considered long-duration insurance contracts under GAAP. A summary of our life, annuity and health insurance benefits liabilities as of June 30, 2023 and 2022, disaggregated for our two primary product categories, periodic payment annuities and life and health insurance, follows (in millions). Other liabilities primarily consist of incurred-but-not-reported claims and claims in the course of settlement.


	June 30,
	2023		2022
Periodic payment annuities	$	10,820	$	11,826
Life and health		5,523		5,810
Other liabilities		3,292		3,316
	$	19,635	$	20,952

Notes to Consolidated Financial Statements (Continued)

Note 16. Long-duration insurance contracts (Continued)

Reconciliations of our periodic payment annuity and life and health insurance benefits liabilities for the first six months of 2023 and 2022 follow (in millions). The information reflects the changes in discounted present values of expected future policy benefits and expected future net premiums. In this context, net premiums represent the portion of expected gross premiums that are required to provide for future policy benefits and variable expenses.


	Periodic payment annuities						Life and health
	2023			2022			2023			2022
Expected future policy benefits:
Balance at beginning of period	$	10,640		$	16,153		$	52,008		$	63,648
Balance at beginning of period at original discount rate		11,549			11,261			63,584			60,133
Impact of cash flow assumption changes		—			—			10			318
Effect of actual from expected results		2			3			(411	)		248
Change in benefits, net		(230	)		85			(1,346	)		(1,285	)
Interest accrual		266			268			852			807
Foreign currency effect		83			(109	)		100			(1,645	)
Ending balance at original discount rate		11,670			11,508			62,789			58,576
Effect of changes in discount rate assumptions		(850	)		318			(12,741	)		(8,191	)
Expected future policy benefits at June 30	$	10,820		$	11,826		$	50,048		$	50,385

Expected future net premiums:
Balance at beginning of period							$	46,129		$	55,960
Balance at beginning of period at original discount rate								56,535			53,277
Impact of cash flow assumption changes								18			324
Effect of actual from expected results								(251	)		90
Change in premiums, net								(1,222	)		(988	)
Interest accrual								745			701
Foreign currency effect								83			(1,550	)
Ending balance at original discount rate								55,908			51,854
Effect of changes in discount rate assumptions								(11,383	)		(7,279	)
Expected future net premiums at June 30							$	44,525		$	44,575

Liability for future policy benefits at June 30	$	10,820		$	11,826		$	5,523		$	5,810
Reinsurance recoverables		—			—			(1,549	)		(1,650	)
Liability for future policy benefits at June 30, net of reinsurance recoverables	$	10,820		$	11,826		$	3,974		$	4,160

The undiscounted and discounted expected future gross premiums to be collected and undiscounted expected future benefits for periodic payment annuities and life and health insurance as of June 30, 2023 and 2022 are summarized below (in millions).


	Undiscounted expected future gross premiums				Discounted expected future gross premiums				Undiscounted expected future benefits
	2023		2022		2023		2022		2023		2022
Periodic payment annuities	$	—	$	—	$	—	$	—	$	31,232	$	31,084
Life and health		108,089		107,647		65,599		64,832		103,012		102,305

Gross premiums earned on long-duration contracts are included in insurance premiums earned and interest expense associated with long-duration insurance contracts is included as a component of life, annuity and health benefits expenses in our Consolidated Statements of Earnings. Gross premiums earned and interest expense for the first six months of 2023 and 2022 were as follows (in millions).


	Gross Premiums				Interest Expense
	2023		2022		2023		2022
Periodic payment annuities	$	—	$	337	$	266	$	268
Life and health		1,644		1,793		107		106

Notes to Consolidated Financial Statements (Continued)

Note 16. Long-duration insurance contracts (Continued)

The weighted average discount rates, interest accretion rates and the average contract durations as of June 30, 2023 and 2022 for periodic payment annuities and life and health insurance are summarized below.


	June 30,
	2023			2022
Periodic payment annuities
Weighted average discount rate		5.3	%		4.7	%
Weighted average accretion rate		4.8	%		4.9	%
Weighted average duration	18 years			18 years
Life and health
Weighted average discount rate		5.0	%		4.5	%
Weighted average accretion rate		3.3	%		3.3	%
Weighted average duration	14 years			14 years

We also reinsure closed blocks of guaranteed minimum death and living benefits associated with variable annuity products, referred to as market risk benefits. These liabilities are included in other policyholder liabilities and are measured at estimated fair value under ASU 2018-12. Such liabilities were approximately $1.0 billion as of June 30, 2023 and $1.25 billion as of December 31, 2022. During the first six months of 2023, we reduced liability estimates by $194 million, for the effects of changes in securities markets, interest rates and other inputs used to estimate liabilities. Cash settlements during the first six months of 2023 were relatively insignificant.