Derivatives (Tables)

3 Months Ended

Mar. 31, 2019

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:



		March 31, 2019						December 31, 2018
	Primary Underlying Risk Exposure	Gross Notional Amount		Estimated Fair Value				Gross Notional Amount		Estimated Fair Value
	Primary Underlying Risk Exposure	Gross Notional Amount		Assets		Liabilities		Gross Notional Amount		Assets		Liabilities
		(In millions)
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate swaps	Interest rate	$	2,421	$	2,355	$	2	$	2,446	$	2,197	$	2
Foreign currency swaps	Foreign currency exchange rate	1,380		34		9		1,233		54		—
Foreign currency forwards	Foreign currency exchange rate	2,007		1		30		2,140		28		18
Subtotal		5,808		2,390		41		5,819		2,279		20
Cash flow hedges:
Interest rate swaps	Interest rate	3,882		164		6		3,515		143		1
Interest rate forwards	Interest rate	2,935		—		117		3,022		—		216
Foreign currency swaps	Foreign currency exchange rate	34,976		1,520		1,598		35,931		1,796		1,831
Subtotal		41,793		1,684		1,721		42,468		1,939		2,048
NIFO hedges:
Foreign currency forwards	Foreign currency exchange rate	782		9		35		960		4		27
Currency options	Foreign currency exchange rate	3,180		12		97		5,137		3		202
Subtotal		3,962		21		132		6,097		7		229
Total qualifying hedges		51,563		4,095		1,894		54,384		4,225		2,297
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	54,331		2,144		145		54,891		1,796		175
Interest rate floors	Interest rate	12,701		106		—		12,701		102		—
Interest rate caps	Interest rate	51,138		82		—		54,575		154		1
Interest rate futures	Interest rate	2,099		—		4		2,353		1		3
Interest rate options	Interest rate	26,689		532		—		26,690		416		—
Interest rate forwards	Interest rate	235		2		11		234		1		15
Interest rate total return swaps	Interest rate	1,048		44		—		1,048		33		2
Synthetic GICs	Interest rate	26,501		—		—		25,700		—		—
Foreign currency swaps	Foreign currency exchange rate	13,109		830		618		11,388		884		458
Foreign currency forwards	Foreign currency exchange rate	13,064		58		264		13,417		198		213
Currency futures	Foreign currency exchange rate	860		—		3		847		4		—
Currency options	Foreign currency exchange rate	1,980		4		—		2,040		7		—
Credit default swaps — purchased	Credit	2,248		17		63		1,903		25		39
Credit default swaps — written	Credit	11,409		198		3		11,391		95		13
Equity futures	Equity market	3,687		3		18		2,992		13		77
Equity index options	Equity market	27,880		663		649		27,707		884		550
Equity variance swaps	Equity market	2,269		43		92		2,269		40		87
Equity total return swaps	Equity market	767		1		52		929		91		—
Total non-designated or nonqualifying derivatives		252,015		4,727		1,922		253,075		4,744		1,633
Total		$	303,578	$	8,822	$	3,816	$	307,459	$	8,969	$	3,930

Components of Net Derivatives Gains (Losses)

The following table presents the consolidated financial statement location and amount of gain (loss) recognized on fair value, cash flow, NIFO, nonqualifying hedging relationships and embedded derivatives:



	Three Months Ended March 31, 2019
	Net Investment Income			Net Investment Gains (Losses)			Net Derivative Gains (Losses)			Policyholder Benefits and Claims			Interest Credited to Policyholder Account Balances			Other Expenses		OCI
	(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)	$	(3	)	$	—		$	—		$	127		$	—		$	—	N/A
Hedged items	3			—			—			(128		)	—			—		N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)	(30		)	(14		)	—			—			—			—		N/A
Hedged items	29			12			—			—			—			—		N/A
Amount excluded from the assessment of hedge effectiveness	—			(16		)	—			—			—			—		N/A
Subtotal	(1		)	(18		)	—			(1		)	—			—		N/A
Gain (Loss) on Cash Flow Hedges:
Interest rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A			N/A			N/A			N/A			N/A			N/A		$	252
Amount of gains (losses) reclassified from AOCI into income	5			(6		)	—			—			—			1		—
Foreign currency exchange rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A			N/A			N/A			N/A			N/A			N/A		(241		)
Amount of gains (losses) reclassified from AOCI into income	(2		)	25			—			—			—			—		(23		)
Foreign currency transaction gains (losses) on hedged items	—			(35		)	—			—			—			—		—
Credit derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A			N/A			N/A			N/A			N/A			N/A		—
Amount of gains (losses) reclassified from AOCI into income	—			1			—			—			—			—		(1		)
Subtotal	3			(15		)	—			—			—			1		(13		)
Gain (Loss) on NIFO Hedges:
Foreign currency exchange rate derivatives (1)	N/A			N/A			N/A			N/A			N/A			N/A		(6		)
Subtotal	N/A			N/A			N/A			N/A			N/A			N/A		(6		)
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)	(1		)	—			409			19			—			—		N/A
Foreign currency exchange rate derivatives (1)	—			—			(142		)	3			—			—		N/A
Credit derivatives — purchased (1)	—			—			(15		)	—			—			—		N/A
Credit derivatives — written (1)	—			—			136			—			—			—		N/A
Equity derivatives (1)	—			—			(667		)	(96		)	—			—		N/A
Foreign currency transaction gains (losses) on hedged items	—			—			82			—			—			—		N/A
Subtotal	(1		)	—			(197		)	(74		)	—			—		N/A
Earned income on derivatives	56			—			119			32			(32		)	—		—
Embedded derivatives (2)	N/A			N/A			193			—			N/A			N/A		N/A
Total	$	57		$	(33	)	$	115		$	(43	)	$	(32	)	$	1	$	(19	)



	Three Months Ended March 31, 2018
	Net Investment Income		Net Investment Gains (Losses)		Net Derivative Gains (Losses)			Policyholder Benefits and Claims			Interest Credited to Policyholder Account Balances			Other Expenses			OCI
	(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)	$	—	$	—	$	(210	)	$	—		$	—		$	—		N/A
Hedged items	—		—		210			—			—			—			N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)	—		—		170			—			—			—			N/A
Hedged items	—		—		(159		)	—			—			—			N/A
Amount excluded from the assessment of hedge effectiveness	—		—		(8		)	—			—			—			N/A
Subtotal	—		—		3			—			—			—			N/A
Gain (Loss) on Cash Flow Hedges:
Interest rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A			N/A			N/A			N/A			$	(277	)
Amount of gains (losses) reclassified from AOCI into income	4		—		21			—			—			—			(25		)
Foreign currency exchange rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A			N/A			N/A			N/A			(75		)
Amount of gains (losses) reclassified from AOCI into income	—		—		139			—			—			1			(140		)
Foreign currency transaction gains (losses) on hedged items	—		—		(138		)	—			—			—			—
Credit derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A			N/A			N/A			N/A			—
Amount of gains (losses) reclassified from AOCI into income	—		—		—			—			—			—			—
Subtotal	4		—		22			—			—			1			(517		)
Gain (Loss) on NIFO Hedges:
Foreign currency exchange rate derivatives (1)	N/A		N/A		N/A			N/A			N/A			N/A			(157		)
Subtotal	N/A		N/A		N/A			N/A			N/A			N/A			(157		)
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)	4		—		(235		)	(7		)	—			—			N/A
Foreign currency exchange rate derivatives (1)	—		—		387			2			—			—			N/A
Credit derivatives — purchased (1)	—		—		(3		)	—			—			—			N/A
Credit derivatives — written (1)	—		—		(44		)	—			—			—			N/A
Equity derivatives (1)	1		—		98			12			—			—			N/A
Foreign currency transaction gains (losses) on hedged items	—		—		(49		)	—			—			—			N/A
Subtotal	5		—		154			7			—			—			N/A
Earned income on derivatives	81		—		133			2			(23		)	(2		)	—
Embedded derivatives (2)	N/A		N/A		37			—			N/A			N/A			N/A
Total	$	90	$	—	$	349		$	9		$	(23	)	$	(1	)	$	(674	)

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(1)	Excludes earned income on derivatives.


(2)	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 ($62) million and $20 million for the three months ended March 31, 2019 and 2018, respectively.

Net derivatives gains (losses) recognized on fair value derivatives and the related hedged items

The following table presents the balance sheet classification, carrying amount and cumulative fair value hedging adjustments for items designated and qualifying as hedged items in fair value hedges:



	March 31, 2019
Balance Sheet Line Item	Carrying Amount of the Hedged Assets/(Liabilities)			Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets/(Liabilities) (1)
	(In millions)
Fixed maturity securities AFS	$	2,227		$	(1	)
Mortgage loans	$	1,245		$	(1	)
Future policy benefits	$	(5,399	)	$	(667	)
Policyholder account balances	$	(81	)	$	—

__________________


(1)	Includes ($1) million of hedging adjustments on discontinued hedging relationships.

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:



	March 31, 2019					December 31, 2018
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)	$	5	$	391	1.5	$	4	$	354	1.7
Credit default swaps referencing indices	33		2,317		2.4	28		2,154		2.5
Subtotal	38		2,708		2.3	32		2,508		2.4
Baa
Single name credit default swaps (3)	3		404		1.4	3		482		1.5
Credit default swaps referencing indices	133		7,957		5.3	40		8,056		5.0
Subtotal	136		8,361		5.1	43		8,538		4.8
Ba
Single name credit default swaps (3)	—		10		1.2	—		15		2.0
Credit default swaps referencing indices	—		—		—	—		—		—
Subtotal	—		10		1.2	—		15		2.0
B
Single name credit default swaps (3)	—		—		—	—		—		—
Credit default swaps referencing indices	21		330		5.2	7		330		5.0
Subtotal	21		330		5.2	7		330		5.0
Total	$	195	$	11,409	4.4	$	82	$	11,391	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 7 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:



	March 31, 2019						December 31, 2018
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)	$	8,485		$	3,747		$	8,805		$	3,758
OTC-cleared (1)	435			37			245			33
Exchange-traded	3			25			18			80
Total gross estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1)	8,923			3,809			9,068			3,871
Gross amounts not offset on the interim condensed consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral	(2,590		)	(2,590		)	(2,570		)	(2,570		)
OTC-cleared	(22		)	(22		)	(25		)	(25		)
Exchange-traded	—			—			(1		)	(1		)
Cash collateral: (3), (4)
OTC-bilateral	(3,613		)	—			(4,709		)	—
OTC-cleared	(390		)	(6		)	(145		)	—
Exchange-traded	—			(12		)	—			(57		)
Securities collateral: (5)
OTC-bilateral	(2,080		)	(1,126		)	(1,266		)	(1,134		)
OTC-cleared	—			(7		)	—			(8		)
Exchange-traded	—			(12		)	—			(7		)
Net amount after application of master netting agreements and collateral	$	228		$	34		$	352		$	69

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(1)	At March 31, 2019 and December 31, 2018, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $101 million and $99 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of ($7) million and ($59) 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 March 31, 2019 and December 31, 2018, the Company received excess cash collateral of $139 million and $135 million, respectively, and provided excess cash collateral of $275 million and $226 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 March 31, 2019, 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 March 31, 2019 and December 31, 2018, the Company received excess securities collateral with an estimated fair value of $74 million and $70 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At March 31, 2019 and December 31, 2018, the Company provided excess securities collateral with an estimated fair value of $173 million and $212 million, respectively, for its OTC-bilateral derivatives, and $639 million and $601 million, respectively, for its OTC-cleared derivatives, and $115 million and $90 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.

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:



	March 31, 2019						December 31, 2018
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)	$	8,485		$	3,747		$	8,805		$	3,758
OTC-cleared (1)	435			37			245			33
Exchange-traded	3			25			18			80
Total gross estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1)	8,923			3,809			9,068			3,871
Gross amounts not offset on the interim condensed consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral	(2,590		)	(2,590		)	(2,570		)	(2,570		)
OTC-cleared	(22		)	(22		)	(25		)	(25		)
Exchange-traded	—			—			(1		)	(1		)
Cash collateral: (3), (4)
OTC-bilateral	(3,613		)	—			(4,709		)	—
OTC-cleared	(390		)	(6		)	(145		)	—
Exchange-traded	—			(12		)	—			(57		)
Securities collateral: (5)
OTC-bilateral	(2,080		)	(1,126		)	(1,266		)	(1,134		)
OTC-cleared	—			(7		)	—			(8		)
Exchange-traded	—			(12		)	—			(7		)
Net amount after application of master netting agreements and collateral	$	228		$	34		$	352		$	69

__________________


(1)	At March 31, 2019 and December 31, 2018, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $101 million and $99 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of ($7) million and ($59) 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)

(5)

Derivative Instruments, Gain (Loss) [Line Items]

Schedule of Derivative Instruments



	March 31, 2019						December 31, 2018
	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)	$	1,135	$	21	$	1,156	$	1,148	$	40	$	1,188
Estimated Fair Value of Collateral Provided:
Fixed maturity securities AFS	$	1,223	$	9	$	1,232	$	1,218	$	9	$	1,227
Cash	$	—	$	—	$	—	$	6	$	—	$	6

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(1)	After taking into consideration the existence of netting agreements.

Embedded Derivative Financial Instruments [Member]

Derivative Instruments, Gain (Loss) [Line Items]

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	March 31, 2019		December 31, 2018
		(In millions)
Embedded derivatives within asset host contracts:
Ceded guaranteed minimum benefits	Premiums, reinsurance and other receivables	$	69	$	71
Embedded derivatives within liability host contracts:
Direct guaranteed minimum benefits	Policyholder account balances	$	182	$	298
Assumed guaranteed minimum benefits	Policyholder account balances	393		495
Funds withheld on ceded reinsurance	Other liabilities	4		(41		)
Fixed annuities with equity indexed returns	Policyholder account balances	95		58
Embedded derivatives within liability host contracts		$	674	$	810