XML 48 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Derivatives (Tables)
 9 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location
The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, excluding embedded derivatives, held at:
 
 
 
 
September 30, 2018
 
December 31, 2017
 
 
Primary Underlying Risk Exposure
 
Gross
Notional
Amount
 
Estimated Fair Value
 
Gross
Notional
Amount
 
Estimated Fair Value
 
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
 
 
(In millions)
Derivatives Designated as Hedging Instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Fair value hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
$
2,450

 
$
1,997

 
$
1

 
$
3,843

 
$
2,289

 
$
3

Foreign currency swaps
 
Foreign currency exchange rate
 
1,010

 
34

 
5

 
1,116

 
50

 
18

Foreign currency forwards
 
Foreign currency exchange rate
 
2,496

 
—

 
70

 
3,253

 
2

 
37

Subtotal
 
 
 
5,956

 
2,031

 
76

 
8,212

 
2,341

 
58

Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
3,456

 
113

 
12

 
3,584

 
235

 
4

Interest rate forwards
 
Interest rate
 
3,022

 
—

 
302

 
3,332

 
—

 
128

Foreign currency swaps
 
Foreign currency exchange rate
 
34,866

 
1,249

 
1,796

 
32,152

 
1,142

 
1,665

Subtotal
 
 
 
41,344

 
1,362

 
2,110

 
39,068

 
1,377

 
1,797

Foreign operations hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forwards
 
Foreign currency exchange rate
 
1,242

 
20

 
46

 
332

 
2

 
5

Currency options
 
Foreign currency exchange rate
 
7,578

 
27

 
200

 
9,408

 
44

 
163

Subtotal
 
 
 
8,820

 
47

 
246

 
9,740

 
46

 
168

Total qualifying hedges
 
56,120

 
3,440

 
2,432

 
57,020

 
3,764

 
2,023

Derivatives Not Designated or Not Qualifying as Hedging Instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest rate
 
54,458

 
1,368

 
271

 
60,485

 
2,203

 
576

Interest rate floors
 
Interest rate
 
12,701

 
53

 
—

 
7,201

 
92

 
—

Interest rate caps
 
Interest rate
 
63,044

 
258

 
1

 
53,079

 
78

 
2

Interest rate futures
 
Interest rate
 
2,274

 
1

 
4

 
4,366

 
2

 
4

Interest rate options
 
Interest rate
 
23,125

 
257

 
1

 
12,009

 
656

 
11

Interest rate forwards
 
Interest rate
 
175

 
—

 
30

 
217

 
—

 
42

Interest rate total return swaps
 
Interest rate
 
1,048

 
—

 
25

 
1,048

 
8

 
2

Synthetic GICs
 
Interest rate
 
24,244

 
—

 
—

 
11,318

 
—

 
—

Foreign currency swaps
 
Foreign currency exchange rate
 
12,196

 
914

 
403

 
9,902

 
693

 
506

Foreign currency forwards
 
Foreign currency exchange rate
 
13,637

 
52

 
322

 
12,238

 
79

 
190

Currency futures
 
Foreign currency exchange rate
 
860

 
—

 
5

 
846

 
2

 
—

Currency options
 
Foreign currency exchange rate
 
2,268

 
16

 
13

 
3,123

 
55

 
6

Credit default swaps — purchased
 
Credit
 
1,986

 
27

 
42

 
2,020

 
7

 
43

Credit default swaps — written
 
Credit
 
11,507

 
222

 
1

 
11,375

 
271

 
—

Equity futures
 
Equity market
 
3,142

 
8

 
5

 
4,005

 
18

 
4

Equity index options
 
Equity market
 
22,963

 
613

 
729

 
19,886

 
569

 
690

Equity variance swaps
 
Equity market
 
4,661

 
58

 
206

 
4,661

 
54

 
199

Equity total return swaps
 
Equity market
 
1,075

 
1

 
27

 
1,117

 
—

 
41

Total non-designated or nonqualifying derivatives
 
255,364

 
3,848

 
2,085

 
218,896

 
4,787

 
2,316

Total
 
 
 
$
311,484

 
$
7,288

 
$
4,517

 
$
275,916

 
$
8,551

 
$
4,339

The following table presents earned income on derivatives:
 
Three Months
Ended
September 30,
 
Nine Months
Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
(In millions)
Qualifying hedges:
 
 
 
 
 
 
 
Net investment income
$
85

 
$
72

 
$
259

 
$
217

Interest credited to policyholder account balances
(28
)
 
(19
)
 
(79
)
 
(40
)
Other expenses
(2
)
 
(2
)
 
(8
)
 
(7
)
Nonqualifying hedges:
 
 
 
 
 
 
 
Net derivative gains (losses)
141

 
126

 
407

 
440

Policyholder benefits and claims
3

 
2

 
8

 
6

Total
$
199

 
$
179

 
$
587

 
$
616
Components of Net Derivatives Gains (Losses)
The components of net derivative gains (losses) were as follows:
 
Three Months
Ended
September 30,
 
Nine Months
Ended
September 30,
 
2018
 
2017
 
2018
 
2017
 
(In millions)
Freestanding derivative and hedging gains (losses) (1)
$
(545
)
 
$
(424
)
 
$
(443
)
 
$
(1,084
)
Embedded derivative gains (losses)
167

 
301

 
355

 
549

Total net derivative gains (losses)
$
(378
)
 
$
(123
)
 
$
(88
)
 
$
(535
)
__________________
(1)
Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying hedging relationships, which are not presented elsewhere in this note.
Amount and location of gains (losses) recognized in income for derivatives that are not designated or qualifying as hedging instruments
The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or not qualifying as hedging instruments:
 
 
Net
Derivative
Gains (Losses)
 
Net
Investment
Income (1)
 
Policyholder
Benefits and
Claims (2)
 
 
(In millions)
Three Months Ended September 30, 2018
 
 
 
 
 
 
Interest rate derivatives
 
$
(364
)
 
$
—

 
$
(9
)
Foreign currency exchange rate derivatives
 
(115
)
 
—

 
(1
)
Credit derivatives — purchased
 
(9
)
 
—

 
—

Credit derivatives — written
 
70

 
—

 
—

Equity derivatives
 
(254
)
 
—

 
(31
)
Total
 
$
(672
)
 
$
—

 
$
(41
)
 
 
 
 
 
 
 
Three Months Ended September 30, 2017
 
 
 
 
 
 
Interest rate derivatives
 
$
(148
)
 
$
(2
)
 
$
(3
)
Foreign currency exchange rate derivatives
 
(346
)
 
—

 
2

Credit derivatives — purchased
 
(2
)
 
—

 
—

Credit derivatives — written

35

 
—

 
—

Equity derivatives
 
(238
)
 
(3
)
 
(61
)
Total
 
$
(699
)
 
$
(5
)
 
$
(62
)
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
 
 
 
 
Interest rate derivatives
 
$
(674
)
 
$
4

 
$
(21
)
Foreign currency exchange rate derivatives
 
271

 
—

 
(4
)
Credit derivatives — purchased
 
2

 
—

 
—

Credit derivatives — written
 
(9
)
 
—

 
—

Equity derivatives
 
(330
)
 
1

 
(52
)
Total
 
$
(740
)
 
$
5

 
$
(77
)
 
 
 
 
 
 
 
Nine Months Ended September 30, 2017
 
 
 
 
 
 
Interest rate derivatives
 
$
(466
)
 
$
(2
)
 
$
(16
)
Foreign currency exchange rate derivatives
 
(527
)
 
—

 
4

Credit derivatives — purchased
 
(17
)
 
—

 
—

Credit derivatives — written
 
111

 
—

 
—

Equity derivatives
 
(824
)
 
(7
)
 
(176
)
Total
 
$
(1,723
)
 
$
(9
)
 
$
(188
)
__________________
(1)
Changes in estimated fair value related to economic hedges of equity method investments in joint ventures and derivatives held within Unit-linked investments.
(2)
Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.
Net derivatives gains (losses) recognized on fair value derivatives and the related hedged items
The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):
Derivatives in Fair Value
Hedging Relationships
 
Hedged Items in Fair Value
Hedging Relationships
 
Net Derivative
Gains (Losses)
Recognized
for Derivatives
 
Net Derivative
Gains (Losses)
Recognized for
Hedged Items
 
Ineffectiveness
Recognized in
Net Derivative
Gains (Losses)
 
 
 
 
(In millions)
Three Months Ended September 30, 2018
 
 
Interest rate swaps:
 
Fixed maturity securities AFS
 
$
1

 
$
(2
)
 
$
(1
)
 
 
Policyholder liabilities (1)
 
(108
)
 
110

 
2

Foreign currency swaps:
 
Foreign-denominated fixed maturity securities AFS and mortgage loans
 
4

 
(7
)
 
(3
)
 
 
Foreign-denominated policyholder account balances (2)
 
—

 
—

 
—

Foreign currency forwards:
 
Foreign-denominated fixed maturity securities AFS
 
(60
)
 
55

 
(5
)
Total
 
$
(163
)
 
$
156

 
$
(7
)
 
 
 
 
 
 
 
Three Months Ended September 30, 2017
 
 
Interest rate swaps:
 
Fixed maturity securities AFS
 
$
1

 
$
—

 
$
1

 
 
Policyholder liabilities (1)
 
(14
)
 
13

 
(1
)
Foreign currency swaps:
 
Foreign-denominated fixed maturity securities AFS
 
(10
)
 
10

 
—

 
 
Foreign-denominated policyholder account balances (2)
 
15

 
(16
)
 
(1
)
Foreign currency forwards:
 
Foreign-denominated fixed maturity securities AFS
 
(4
)
 
4

 
—

Total
 
$
(12
)
 
$
11

 
$
(1
)
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
Interest rate swaps:
 
Fixed maturity securities AFS
 
$
4

 
$
(4
)
 
$
—

 
 
Policyholder liabilities (1)
 
(389
)
 
392

 
3

Foreign currency swaps:
 
Foreign-denominated fixed maturity securities AFS and mortgage loans
 
29

 
(33
)
 
(4
)
 
 
Foreign-denominated policyholder account balances (2)
 
23

 
(23
)
 
—

Foreign currency forwards:
 
Foreign-denominated fixed maturity securities AFS
 
5

 
(4
)
 
1

Total
 
$
(328
)
 
$
328

 
$
—

 
 
 
 
 
 
 
Nine Months Ended September 30, 2017
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities AFS
 
$
2

 
$
(2
)
 
$
—

 
 
Policyholder liabilities (1)
 
(16
)
 
84

 
68

Foreign currency swaps:
 
Foreign-denominated fixed maturity securities AFS
 
(15
)
 
16

 
1

 
 
Foreign-denominated policyholder account balances (2)
 
61

 
(40
)
 
21

Foreign currency forwards:
 
Foreign-denominated fixed maturity securities AFS
 
20

 
(18
)
 
2

Total
 
$
52

 
$
40

 
$
92

__________________
(1)
Fixed rate liabilities reported in policyholder account balances or future policy benefits.
(2)
Fixed rate or floating rate liabilities.
Derivatives and Non-Derivative Hedging Instruments in Net Investment Hedging Relationships
The following table presents the effects of derivatives in net investment hedging relationships on the interim condensed consolidated statements of operations and comprehensive income (loss) and the interim condensed consolidated statements of equity:
Derivatives in Net Investment Hedging Relationships (1)
 
Amount of Gains (Losses) Deferred in AOCI
(Effective Portion)
 
 
(In millions)
Three Months Ended September 30, 2018
 
 
Foreign currency forwards
 
$
(32
)
Currency options
 
36

Total
 
$
4

Three Months Ended September 30, 2017
 
 
Foreign currency forwards
 
$
(35
)
Currency options
 
(1
)
Total
 
$
(36
)
Nine Months Ended September 30, 2018
 
 
Foreign currency forwards
 
$
3

Currency options
 
(75
)
Total
 
$
(72
)
Nine Months Ended September 30, 2017
 
 
Foreign currency forwards
 
$
(161
)
Currency options
 
(234
)
Total
 
$
(395
)

__________________
(1)
There was no ineffectiveness recognized for the Company’s hedges of net investments in foreign operations. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Schedule of estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps
The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
 
 
September 30, 2018
 
December 31, 2017
Rating Agency Designation of Referenced
Credit Obligations (1)
 
Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps
 
Weighted
Average
Years to
Maturity (2)
 
Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps
 
Weighted
Average
Years to
Maturity (2)
 
 
(Dollars in millions)
Aaa/Aa/A
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (3)
 
$
6

 
$
383

 
1.9

 
$
7

 
$
375

 
2.6

Credit default swaps referencing indices
 
39

 
2,459

 
2.1

 
44

 
2,268

 
2.7

Subtotal
 
45

 
2,842

 
2.1

 
51

 
2,643

 
2.7

Baa
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (3)
 
4

 
463

 
1.8

 
7

 
605

 
1.8

Credit default swaps referencing indices
 
137

 
7,733

 
5.2

 
183

 
7,662

 
5.0

Subtotal
 
141

 
8,196

 
5.0

 
190

 
8,267

 
4.8

Ba
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (3)
 
—

 
10

 
1.7

 
1

 
115

 
3.4

Credit default swaps referencing indices
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
—

 
10

 
1.7

 
1

 
115

 
3.4

B
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (3)
 
—

 
—

 
—

 
2

 
20

 
3.5

Credit default swaps referencing indices
 
35

 
459

 
4.7

 
27

 
330

 
5.0

Subtotal
 
35

 
459

 
4.7

 
29

 
350

 
4.9

Total
 
$
221

 
$
11,507

 
4.3

 
$
271

 
$
11,375

 
4.3

__________________
(1)
The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)
The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
(3)
Single name credit default swaps may be referenced to the credit of corporations, foreign governments, or state and political subdivisions.
Estimated Fair Value of Derivative Assets and Liabilities after Master Netting Agreements and Cash Collateral
Credit Risk on Freestanding Derivatives
The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements.
The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company’s OTC-bilateral derivative transactions are governed by ISDA Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions. Substantially all of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives.
The Company’s OTC-cleared derivatives are effected through central clearing counterparties and its exchange-traded derivatives are effected through regulated exchanges. Such positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivatives.
See Note 8 for a description of the impact of credit risk on the valuation of derivatives.
The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
 
 
September 30, 2018
 
December 31, 2017
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement 
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
(In millions)
Gross estimated fair value of derivatives:
 
 
 
 
 
 
 
 
OTC-bilateral (1)
 
$
7,175

 
$
4,387

 
$
7,955

 
$
4,059

OTC-cleared (1), (6)
 
190

 
78

 
649

 
223

Exchange-traded
 
9

 
14

 
22

 
8

Total gross estimated fair value of derivatives (1)
 
7,374

 
4,479

 
8,626

 
4,290

Amounts offset on the interim condensed consolidated balance sheets
 
—

 
—

 
—

 
—

Estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1), (6)
 
7,374

 
4,479

 
8,626

 
4,290

Gross amounts not offset on the interim condensed consolidated balance sheets:
 
 
 
 
 
 
 
 
Gross estimated fair value of derivatives: (2)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(2,809
)
 
(2,809
)
 
(2,528
)
 
(2,528
)
OTC-cleared
 
(7
)
 
(7
)
 
(35
)
 
(35
)
Exchange-traded
 
(1
)
 
(1
)
 
(1
)
 
(1
)
Cash collateral: (3), (4)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(3,189
)
 
(149
)
 
(4,169
)
 
—

OTC-cleared
 
(172
)
 
(50
)
 
(584
)
 
(179
)
Exchange-traded
 
—

 
(8
)
 
—

 
(5
)
Securities collateral: (5)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(1,072
)
 
(1,368
)
 
(1,004
)
 
(1,474
)
OTC-cleared
 
—

 
(27
)
 
—

 
(9
)
Exchange-traded
 
—

 
(5
)
 
—

 
(2
)
Net amount after application of master netting agreements and collateral
 
$
124

 
$
55

 
$
305

 
$
57

__________________
(1)
At September 30, 2018 and December 31, 2017, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $86 million and $75 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of ($38) million and ($49) million, respectively.
(2)
Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.
(3)
Cash collateral received by the Company for OTC-bilateral and OTC-cleared derivatives is included in cash and cash equivalents, short-term investments or in fixed maturity securities AFS, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet.
(4)
The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At September 30, 2018 and December 31, 2017, the Company received excess cash collateral of $165 million and $253 million, respectively, and provided excess cash collateral of $252 million and $272 million, respectively, which is not included in the table above due to the foregoing limitation.
(5)
Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at September 30, 2018, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities AFS on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At September 30, 2018 and December 31, 2017, the Company received excess securities collateral with an estimated fair value of $154 million and $108 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At September 30, 2018 and December 31, 2017, the Company provided excess securities collateral with an estimated fair value of $254 million and $305 million, respectively, for its OTC-bilateral derivatives, and $524 million and $522 million, respectively, for its OTC-cleared derivatives, and $84 million and $89 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
(6)
Effective January 16, 2018, the LCH amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. See Note 1 for further information on the LCH amendments.
Estimated Fair Value of Derivative Assets and Liabilities after Master Netting Agreements and Cash Collateral
The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
 
 
September 30, 2018
 
December 31, 2017
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement 
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
(In millions)
Gross estimated fair value of derivatives:
 
 
 
 
 
 
 
 
OTC-bilateral (1)
 
$
7,175

 
$
4,387

 
$
7,955

 
$
4,059

OTC-cleared (1), (6)
 
190

 
78

 
649

 
223

Exchange-traded
 
9

 
14

 
22

 
8

Total gross estimated fair value of derivatives (1)
 
7,374

 
4,479

 
8,626

 
4,290

Amounts offset on the interim condensed consolidated balance sheets
 
—

 
—

 
—

 
—

Estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1), (6)
 
7,374

 
4,479

 
8,626

 
4,290

Gross amounts not offset on the interim condensed consolidated balance sheets:
 
 
 
 
 
 
 
 
Gross estimated fair value of derivatives: (2)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(2,809
)
 
(2,809
)
 
(2,528
)
 
(2,528
)
OTC-cleared
 
(7
)
 
(7
)
 
(35
)
 
(35
)
Exchange-traded
 
(1
)
 
(1
)
 
(1
)
 
(1
)
Cash collateral: (3), (4)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(3,189
)
 
(149
)
 
(4,169
)
 
—

OTC-cleared
 
(172
)
 
(50
)
 
(584
)
 
(179
)
Exchange-traded
 
—

 
(8
)
 
—

 
(5
)
Securities collateral: (5)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(1,072
)
 
(1,368
)
 
(1,004
)
 
(1,474
)
OTC-cleared
 
—

 
(27
)
 
—

 
(9
)
Exchange-traded
 
—

 
(5
)
 
—

 
(2
)
Net amount after application of master netting agreements and collateral
 
$
124

 
$
55

 
$
305

 
$
57

__________________
(1)
At September 30, 2018 and December 31, 2017, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $86 million and $75 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of ($38) million and ($49) million, respectively.
(2)
Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.
(3)
Cash collateral received by the Company for OTC-bilateral and OTC-cleared derivatives is included in cash and cash equivalents, short-term investments or in fixed maturity securities AFS, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet.
(4)
The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At September 30, 2018 and December 31, 2017, the Company received excess cash collateral of $165 million and $253 million, respectively, and provided excess cash collateral of $252 million and $272 million, respectively, which is not included in the table above due to the foregoing limitation.
(5)
Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at September 30, 2018, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities AFS on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At September 30, 2018 and December 31, 2017, the Company received excess securities collateral with an estimated fair value of $154 million and $108 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At September 30, 2018 and December 31, 2017, the Company provided excess securities collateral with an estimated fair value of $254 million and $305 million, respectively, for its OTC-bilateral derivatives, and $524 million and $522 million, respectively, for its OTC-cleared derivatives, and $84 million and $89 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
(6)
Effective January 16, 2018, the LCH amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. See Note 1 for further information on the LCH amendments.
Derivative Instruments, Gain (Loss) [Line Items]  
Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location
The following table presents the effects of derivatives in cash flow hedging relationships on the interim condensed consolidated statements of operations and comprehensive income (loss) and the interim condensed consolidated statements of equity. The table excludes the effects of Brighthouse derivatives prior to the Separation.
Derivatives in Cash Flow
Hedging Relationships
 
Amount of Gains
(Losses) Deferred in
AOCI on Derivatives
 
Amount and Location
of Gains (Losses)
Reclassified from
AOCI into Income (Loss)
 
Amount and Location
of Gains (Losses)
Recognized in Income
(Loss) on Derivatives
 
 
(Effective Portion)
 
(Effective Portion)
 
(Ineffective Portion)
 
 
 
 
Net Derivative
Gains (Losses)
 
Net Investment
Income
 
Other
Expenses
 
Net Derivative
Gains (Losses)
 
 
(In millions)
Three Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(90
)
 
$
1

 
$
4

 
$
—

 
$
3

Interest rate forwards
 
(87
)
 
(3
)
 
1

 
—

 
1

Foreign currency swaps
 
(118
)
 
(6
)
 
(1
)
 
—

 
(2
)
Credit forwards
 
—

 
—

 
—

 
—

 
—

Total
 
$
(295
)
 
$
(8
)
 
$
4

 
$
—

 
$
2

Three Months Ended September 30, 2017
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
14

 
$
9

 
$
5

 
$
—

 
$
(2
)
Interest rate forwards
 
1

 
(1
)
 
—

 
—

 
—

Foreign currency swaps
 
(140
)
 
294

 
—

 
—

 
(3
)
Credit forwards
 
—

 
—

 
—

 
—

 
—

Total
 
$
(125
)
 
$
302

 
$
5

 
$
—

 
$
(5
)
Nine Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(311
)

$
18


$
13

 
$
—

 
$
5

Interest rate forwards
 
(200
)

—


2

 
1

 
—

Foreign currency swaps
 
5


(342
)

(2
)
 
1

 
5

Credit forwards
 
—


—


—

 
—

 
—

Total
 
$
(506
)
 
$
(324
)
 
$
13

 
$
2

 
$
10

Nine Months Ended September 30, 2017
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
91

 
$
23

 
$
12

 
$
—

 
$
5

Interest rate forwards
 
138

 
(5
)
 
2

 
1

 
(1
)
Foreign currency swaps
 
(99
)
 
915

 
(1
)
 
1

 
(2
)
Credit forwards
 
—

 
1

 
—

 
—

 
—

Total
 
$
130

 
$
934

 
$
13

 
$
2

 
$
2
Schedule of Derivative Instruments
The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that were in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. The table also presents the incremental collateral that MetLife, Inc. would be required to provide if there was a one-notch downgrade in MetLife, Inc.’s senior unsecured debt rating at the reporting date or if the Company’s credit or financial strength rating, as applicable, at the reporting date sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.
 
 
September 30, 2018
 
December 31, 2017
 
 
Derivatives
Subject to
Credit-
Contingent
Provisions
 
Derivatives
Not Subject
to Credit-
Contingent
Provisions
 
Total
 
Derivatives
Subject to
Credit-
Contingent
Provisions
 
Derivatives
Not Subject
to Credit-
Contingent
Provisions
 
Total
 
 
(In millions)
Estimated Fair Value of Derivatives in a Net Liability Position (1)
 
$
1,546

 
$
32

 
$
1,578

 
$
1,508

 
$
24

 
$
1,532

Estimated Fair Value of Collateral Provided:
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities AFS
 
$
1,514

 
$
22

 
$
1,536

 
$
1,675

 
$
26

 
$
1,701

Cash
 
$
161

 
$
—

 
$
161

 
$
—

 
$
—

 
$
—

Estimated Fair Value of Incremental Collateral Provided Upon:
 
 
 
 
 

 
 
 
 
 

One-notch downgrade in the Company’s credit or financial strength rating, as applicable
 
$
5

 
$
—

 
$
5

 
$
15

 
$
—

 
$
15

Downgrade in the Company’s credit or financial strength rating, as applicable, to a level that triggers full overnight collateralization or termination of the derivative position
 
$
5

 
$
—

 
$
5

 
$
20

 
$
—

 
$
20

__________________
(1)
After taking into consideration the existence of netting agreements.
Embedded Derivative Financial Instruments [Member]  
Derivative Instruments, Gain (Loss) [Line Items]  
Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location
The following table presents changes in estimated fair value related to embedded derivatives:
 
 
Three Months
Ended
September 30,
 
Nine Months
Ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
(In millions)
Net derivative gains (losses) (1)
 
$
167

 
$
301

 
$
355

 
$
549

__________________
(1)
The valuation of guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were ($20) million and ($25) million for the three months and nine months ended September 30, 2018, respectively, and ($21) million and ($162) million for the three months and nine months ended September 30, 2017, respectively.
Schedule of Derivative Instruments
The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
 
 
Balance Sheet Location
 
September 30, 2018
 
December 31, 2017
 
 
 
 
(In millions)
Embedded derivatives within asset host contracts:
 
 
 
 
 
 
Ceded guaranteed minimum benefits
 
Premiums, reinsurance and other receivables
 
$
57

 
$
144

Options embedded in debt or equity securities (1)
 
Investments
 
—

 
(132
)
Embedded derivatives within asset host contracts
 
$
57

 
$
12

Embedded derivatives within liability host contracts:
 
 
 
 
 
 
Direct guaranteed minimum benefits
 
Policyholder account balances
 
$
(157
)
 
$
32

Assumed guaranteed minimum benefits
 
Policyholder account balances
 
262

 
291

Funds withheld on ceded reinsurance
 
Other liabilities
 
(11
)
 
25

Fixed annuities with equity indexed returns
 
Policyholder account balances
 
102

 
70

Embedded derivatives within liability host contracts
 
$
196

 
$
418


__________________
(1)
In connection with the adoption of new guidance related to the recognition and measurement of financial instruments (see Note 1), effective January 1, 2018, the Company is no longer required to bifurcate and account separately for derivatives embedded in equity securities. Beginning January 1, 2018, the entire change in fair value of equity securities is recognized as a component of net investment gains and losses.