Insurance

3 Months Ended

Mar. 31, 2017

3. Insurance

Guarantees

As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report, the Company issues directly and assumes through reinsurance variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”) and the portions of both non-life-contingent guaranteed minimum withdrawal benefits (“GMWBs”) and the GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 6.

The Company also issues other annuity contracts that apply a lower rate on funds deposited if the contractholder elects to surrender the contract for cash and a higher rate if the contractholder elects to annuitize. These guarantees include benefits that are payable in the event of death, maturity or at annuitization. Certain other annuity contracts contain guaranteed annuitization benefits that may be above what would be provided by the current account value of the contract. Additionally, the Company issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee or a guaranteed paid-up benefit.

Information regarding the Company’s guarantee exposure, which includes direct and assumed business, but excludes offsets from hedging or ceded reinsurance, if any, was as follows at:



	March 31, 2017								December 31, 2016
	In the Event of Death				At Annuitization				In the Event of Death				At Annuitization
	(Dollars in millions)
Annuity Contracts (1):
Variable Annuity Guarantees:
Total account value (2), (3)	$	181,504			$	91,461			$	177,895			$	89,839
Separate account value	$	153,699			$	88,067			$	150,118			$	86,355
Net amount at risk (2)	$	7,740	(4	)	$	3,647	(5	)	$	8,679	(4	)	$	3,834	(5	)
Average attained age of contractholders	67 years				66 years				66 years				66 years
Other Annuity Guarantees:
Total account value (3)	N/A				$	1,382			N/A				$	1,393
Net amount at risk	N/A				$	486	(6	)	N/A				$	490	(6	)
Average attained age of contractholders	N/A				51 years				N/A				50 years



	March 31, 2017				December 31, 2016
	Secondary Guarantees		Paid-Up Guarantees		Secondary Guarantees		Paid-Up Guarantees
	(Dollars in millions)
Universal and Variable Life Contracts (1):
Total account value (3)	$	17,923	$	3,302	$	17,689	$	3,337
Net amount at risk (7)	$	171,785	$	17,476	$	172,860	$	17,785
Average attained age of policyholders	58 years		63 years		58 years		62 years

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(1)	The Company’s annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.


(2)	Includes amounts, which are not reported on the consolidated balance sheets, from assumed reinsurance of certain variable annuity products from the Company’s former operating joint venture in Japan.


(3)	Includes the contractholder’s investments in the general account and separate account, if applicable.


(4)	Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.

(5)

Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contractholders have achieved.

(6)

Defined as either the excess of the upper tier, adjusted for a profit margin, less the lower tier, as of the balance sheet date or the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. These amounts represent the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date.


(7)	Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.

Liabilities for Unpaid Claims and Claim Expenses

Rollforward of Claims and Claim Adjustment Expenses

Information regarding the liabilities for unpaid claims and claim adjustment expenses was as follows:



	Three Months Ended March 31,
	2017			2016
	(In millions)
Balance at December 31 of prior period	$	18,159		$	11,388
Less: Reinsurance recoverables	3,058			2,042
Net Balance at December 31 of prior period	15,101			9,346
Cumulative adjustment (1)	—			4,988
Net balance, beginning of period	15,101			14,334
Incurred related to:
Current period	6,874			6,977
Prior periods (2)	(42		)	(139		)
Total incurred	6,832			6,838
Paid related to:
Current period	(3,777		)	(3,710		)
Prior periods	(2,698		)	(2,473		)
Total paid	(6,475		)	(6,183		)
Net balance, end of period	15,458			14,989
Add: Reinsurance recoverables	3,058			2,843
Balance, end of period (included in future policy benefits and other policy-related balances)	$	18,516		$	17,832

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(1)	Reflects the accumulated adjustment, net of reinsurance, upon implementation of the new short-duration contracts guidance which clarified the requirement to include claim information for long-duration contracts. The accumulated adjustment primarily reflects unpaid claim liabilities, net of reinsurance, for long-duration contracts as of the beginning of the period presented.


(2)	During the three months ended March 31, 2017 and 2016, as a result of changes in estimates of insured events in the respective prior periods, the claims and claim adjustment expenses associated with prior periods decreased due to favorable claims experience.