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Derivatives (Tables)

3 Months Ended

Mar. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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, 2024						December 31, 2023
	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	$	4,878	$	1,112	$	610	$	4,550	$	1,257	$	535
Foreign currency swaps	Foreign currency exchange rate	1,400		40		6		1,475		55		—
Foreign currency forwards	Foreign currency exchange rate	450		—		87		450		—		65
Subtotal		6,728		1,152		703		6,475		1,312		600
Cash flow hedges:
Interest rate swaps	Interest rate	4,655		—		304		4,156		1		265
Interest rate forwards	Interest rate	5,815		27		897		6,115		51		938
Foreign currency swaps	Foreign currency exchange rate	46,297		2,489		1,686		43,906		2,457		1,509
Subtotal		56,767		2,516		2,887		54,177		2,509		2,712
Net investment in a foreign operation hedges:
Foreign currency forwards	Foreign currency exchange rate	414		24		—		503		—		8
Currency options	Foreign currency exchange rate	3,000		513		—		3,000		394		—
Subtotal		3,414		537		—		3,503		394		8
Total qualifying hedges		66,909		4,205		3,590		64,155		4,215		3,320
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	30,308		1,525		1,127		29,801		1,497		1,102
Interest rate floors	Interest rate	13,171		34		—		15,321		41		—
Interest rate caps	Interest rate	30,322		313		—		30,016		373		—
Interest rate futures	Interest rate	1,696		1		1		1,243		1		5
Interest rate options	Interest rate	42,262		225		150		43,926		385		103
Interest rate forwards	Interest rate	2,671		25		75		2,383		69		36

Synthetic GICs	Interest rate	48,100		—		—		49,066		—		—
Foreign currency swaps	Foreign currency exchange rate	12,072		1,321		393		11,891		1,200		356
Foreign currency forwards	Foreign currency exchange rate	14,526		40		1,163		14,128		310		806
Currency futures	Foreign currency exchange rate	309		—		—		314		2		—
Currency options	Foreign currency exchange rate	95		—		—		50		—		—
Credit default swaps — purchased	Credit	2,837		—		83		2,877		3		79
Credit default swaps — written	Credit	13,901		271		7		12,468		233		5
Equity futures	Equity market	1,988		5		6		2,163		8		11
Equity index options	Equity market	13,738		326		249		19,421		399		255
Equity variance swaps	Equity market	116		—		3		99		—		2
Equity total return swaps	Equity market	2,020		—		138		1,912		1		218
Total non-designated or nonqualifying derivatives		230,132		4,086		3,395		237,079		4,522		2,978
Total		$	297,041	$	8,291	$	6,985	$	301,234	$	8,737	$	6,298

Included in the table above, the Company uses various over-the-counter (“OTC”) and exchange traded derivatives to hedge variable annuity guarantees. The table below presents the gross notional amount, estimated fair value and primary underlying risk exposure of the derivatives hedging variable annuity guarantees accounted for as MRBs:


	March 31, 2024						December 31, 2023
Primary Underlying Risk Exposure	Gross Notional Amount		Estimated Fair Value				Gross Notional Amount		Estimated Fair Value
			Assets		Liabilities				Assets		Liabilities
	(In millions)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	$	9,106	$	6	$	724	$	9,096	$	13	$	663
Foreign currency exchange rate	747		3		15		716		22		2
Equity market	4,987		139		255		5,189		77		373
	$	14,840	$	148	$	994	$	15,001	$	112	$	1,038

The change in estimated fair values and earned income of derivatives hedging variable annuity guarantees, recorded in net derivative gains (losses), were ($295) million and $153 million for the three months ended March 31, 2024 and 2023, respectively.

The Effects of Derivatives on the Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

The following table presents the interim condensed consolidated financial statement location and amount of gain (loss) recognized on fair value, cash flow, net investment in a foreign operation (“NIFO”), nonqualifying hedging relationships and embedded derivatives:


	Three Months Ended March 31, 2024
	Net Investment Income		Net Investment Gains (Losses)		Net Derivative Gains (Losses)		Policyholder Benefits and Claims		Interest Credited to Policyholder Account Balances		Other Expenses		Other Comprehensive Income (Loss)
	(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)	$	—	$	—	N/A		$	(109)	$	(43)	$	—	N/A
Hedged items	—		—		N/A		103		42		—		N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)	4		(31)		N/A		—		(24)		—		N/A
Hedged items	(2)		23		N/A		—		28		—		N/A
Amount excluded from the assessment of hedge effectiveness	—		4		N/A		—		—		—		N/A
Subtotal	2		(4)		N/A		(6)		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		$	(218)
Amount of gains (losses) reclassified from AOCI into income	8		2		—		—		—		—		(10)
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		(123)
Amount of gains (losses) reclassified from AOCI into income	1		(368)		—		—		—		—		367
Foreign currency transaction gains (losses) on hedged items	—		351		—		—		—		—		—
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	9		(15)		—		—		—		—		16
Gain (Loss) on NIFO Hedges:
Foreign currency exchange rate derivatives (1)	N/A		—		N/A		N/A		N/A		N/A		160
Non-derivative hedging instruments	N/A		N/A		N/A		N/A		N/A		N/A		20
Subtotal	N/A		—		N/A		N/A		N/A		N/A		180
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)	—		N/A		(353)		N/A		N/A		N/A		N/A
Foreign currency exchange rate derivatives (1)	—		N/A		(706)		N/A		N/A		N/A		N/A
Credit derivatives — purchased (1)	—		N/A		(7)		N/A		N/A		N/A		N/A
Credit derivatives — written (1)	—		N/A		34		N/A		N/A		N/A		N/A
Equity derivatives (1)	(25)		N/A		(342)		N/A		N/A		N/A		N/A
Foreign currency transaction gains (losses) on hedged items	—		N/A		163		N/A		N/A		N/A		N/A
Subtotal	(25)		N/A		(1,211)		N/A		N/A		N/A		N/A
Earned income on derivatives	30		—		181		(4)		(49)		—		—
Synthetic GICs	N/A		N/A		19		N/A		N/A		N/A		N/A
Embedded derivatives	N/A		N/A		32		N/A		N/A		N/A		N/A
Total	$	16	$	(19)	$	(979)	$	(10)	$	(46)	$	—	$	196


	Three Months Ended March 31, 2023
	Net Investment Income		Net Investment Gains (Losses)		Net Derivative Gains (Losses)		Policyholder Benefits and Claims		Interest Credited to Policyholder Account Balances		Other Expenses		Other Comprehensive Income (Loss)
	(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)	$	(1)	$	—	N/A		$	126	$	36	$	—	N/A
Hedged items	1		—		N/A		(126)		(36)		—		N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)	(17)		(3)		N/A		—		—		—		N/A
Hedged items	17		3		N/A		—		—		—		N/A
Amount excluded from the assessment of hedge effectiveness	—		(10)		N/A		—		—		—		N/A
Subtotal	—		(10)		N/A		—		—		—		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		$	547
Amount of gains (losses) reclassified from AOCI into income	14		5		—		—		—		—		(19)
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		(160)
Amount of gains (losses) reclassified from AOCI into income	1		111		—		—		—		1		(113)
Foreign currency transaction gains (losses) on hedged items	—		(114)		—		—		—		—		—
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	15		2		—		—		—		1		255
Gain (Loss) on NIFO Hedges:
Foreign currency exchange rate derivatives (1)	N/A		N/A		N/A		N/A		N/A		N/A		46
Non-derivative hedging instruments	N/A		N/A		N/A		N/A		N/A		N/A		2
Subtotal	N/A		N/A		N/A		N/A		N/A		N/A		48
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)	—		N/A		158		N/A		N/A		N/A		N/A
Foreign currency exchange rate derivatives (1)	—		N/A		(162)		N/A		N/A		N/A		N/A
Credit derivatives — purchased (1)	—		N/A		(13)		N/A		N/A		N/A		N/A
Credit derivatives — written (1)	—		N/A		3		N/A		N/A		N/A		N/A
Equity derivatives (1)	(6)		N/A		(512)		N/A		N/A		N/A		N/A
Foreign currency transaction gains (losses) on hedged items	—		N/A		123		N/A		N/A		N/A		N/A
Subtotal	(6)		N/A		(403)		N/A		N/A		N/A		N/A
Earned income on derivatives	43		—		312		5		(33)		—		—
Synthetic GICs	N/A		N/A		18		N/A		N/A		N/A		N/A
Embedded derivatives	N/A		N/A		(17)		—		N/A		N/A		N/A
Total	$	52	$	(8)	$	(90)	$	5	$	(33)	$	1	$	303

__________________

(1)Excludes earned income on derivatives.

Fair Value Hedges

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:


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)
	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
	(In millions)
Fixed maturity securities AFS	$	445	$	454	$	3	$	3
Mortgage loans	$	285	$	359	$	(8)	$	(11)
FPBs	$	(2,656)	$	(2,863)	$	298	$	191
PABs	$	(1,720)	$	(1,911)	$	148	$	25

__________________

(1)Includes ($105) million and ($111) million of hedging adjustments on discontinued hedging relationships at March 31, 2024 and December 31, 2023, respectively.

For the Company’s foreign currency forwards, the change in the estimated fair value of the derivative related to the changes in the difference between the spot price and the forward price is excluded from the assessment of hedge effectiveness. The Company has elected to record changes in estimated fair value of excluded components in earnings. For all other derivatives, 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:


	March 31, 2024					December 31, 2023
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)	$	1	$	140	1.4	$	2	$	150	1.6
Credit default swaps referencing indices	91		4,286		2.7	80		3,830		2.7
Subtotal	92		4,426		2.6	82		3,980		2.6
Baa
Single name credit default swaps (3)	1		99		1.8	1		99		2.1
Credit default swaps referencing indices	169		9,175		4.7	145		8,188		5.4
Subtotal	170		9,274		4.7	146		8,287		5.3
Ba
Single name credit default swaps (3)	—		17		1.9	—		17		2.1
Credit default swaps referencing indices	2		25		2.7	2		25		3.0
Subtotal	2		42		2.4	2		42		2.6
B

Credit default swaps referencing indices	2		129		4.7	2		129		5.0
Subtotal	2		129		4.7	2		129		5.0
Caa

Credit default swaps referencing indices	(2)		30		2.2	(4)		30		2.5
Subtotal	(2)		30		2.2	(4)		30		2.5
Total	$	264	$	13,901	4.0	$	228	$	12,468	4.5

_________________

(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 municipals.

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, 2024				December 31, 2023
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)	$	8,347	$	6,834	$	8,749	$	6,014
OTC-cleared (1)	181		230		158		277
Exchange-traded	6		7		11		16
Total gross estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1)	8,534		7,071		8,918		6,307
Gross amounts not offset on the interim condensed consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral	(3,661)		(3,661)		(3,568)		(3,568)
OTC-cleared	(1)		(1)		(5)		(5)
Exchange-traded	(1)		(1)		(1)		(1)
Cash collateral: (3), (4)
OTC-bilateral	(3,195)		—		(3,448)		—
OTC-cleared	(176)		(213)		(150)		(239)
Exchange-traded	—		(6)		—		(5)
Securities collateral: (5)
OTC-bilateral	(1,416)		(3,160)		(1,563)		(2,427)
OTC-cleared	—		(15)		—		(33)
Exchange-traded	—		—		—		(10)
Net amount after application of master netting agreements and collateral	$	84	$	14	$	183	$	19

__________________

(1)At March 31, 2024 and December 31, 2023, derivative assets included income (expense) accruals reported in accrued investment income or in other liabilities of $243 million and $181 million, respectively, and derivative liabilities included (income) expense accruals reported in accrued investment income or in other liabilities of $86 million and $9 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, where the central clearinghouse treats variation margin as collateral, 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. For certain collateral agreements, cash collateral is pledged to the Company as initial margin on its OTC-bilateral derivatives.

(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, 2024 and December 31, 2023, the Company received excess cash collateral of $35 million and $163 million, respectively, and provided excess cash collateral of $99 million and $98 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, 2024, 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, 2024 and December 31, 2023, the Company received excess securities collateral with an estimated fair value of $324 million and $298 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At March 31, 2024 and December 31, 2023, the Company provided excess securities collateral with an estimated fair value of $1.4 billion and $1.5 billion, respectively, for its OTC-bilateral derivatives, $901 million and $945 million, respectively, for its OTC-cleared derivatives, and $154 million and $137 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, 2024				December 31, 2023
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)	$	8,347	$	6,834	$	8,749	$	6,014
OTC-cleared (1)	181		230		158		277
Exchange-traded	6		7		11		16
Total gross estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1)	8,534		7,071		8,918		6,307
Gross amounts not offset on the interim condensed consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral	(3,661)		(3,661)		(3,568)		(3,568)
OTC-cleared	(1)		(1)		(5)		(5)
Exchange-traded	(1)		(1)		(1)		(1)
Cash collateral: (3), (4)
OTC-bilateral	(3,195)		—		(3,448)		—
OTC-cleared	(176)		(213)		(150)		(239)
Exchange-traded	—		(6)		—		(5)
Securities collateral: (5)
OTC-bilateral	(1,416)		(3,160)		(1,563)		(2,427)
OTC-cleared	—		(15)		—		(33)
Exchange-traded	—		—		—		(10)
Net amount after application of master netting agreements and collateral	$	84	$	14	$	183	$	19

__________________

(2)Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.

Estimated Fair Value of OTC-bilateral derivatives after considering effect of netting agreements

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.


	March 31, 2024						December 31, 2023
	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)	$	3,079	$	93	$	3,172	$	2,443	$	4	$	2,447
Estimated fair value of collateral provided:
Fixed maturity securities AFS	$	3,774	$	96	$	3,870	$	3,011	$	6	$	3,017

__________________

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

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, 2024		December 31, 2023
		(In millions)


Embedded derivatives within liability host contracts:


Funds withheld and guarantees on reinsurance	Other liabilities	$	(105)	$	(70)
Fixed annuities with equity indexed returns	Policyholder account balances	167		163

Total		$	62	$	93

Embedded Derivatives


	March 31, 2024						December 31, 2023
	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)	$	3,079	$	93	$	3,172	$	2,443	$	4	$	2,447
Estimated fair value of collateral provided:
Fixed maturity securities AFS	$	3,774	$	96	$	3,870	$	3,011	$	6	$	3,017

__________________

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

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, 2024		December 31, 2023
		(In millions)


Embedded derivatives within liability host contracts:


Funds withheld and guarantees on reinsurance	Other liabilities	$	(105)	$	(70)
Fixed annuities with equity indexed returns	Policyholder account balances	167		163

Total		$	62	$	93

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

+ References + Details

- Definition

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

+ References + Details