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Derivative Instruments (Tables)

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The table below provides a summary of the gross notional amount and fair value of derivatives contracts by the primary underlying risks, excluding embedded derivatives and associated reinsurance recoverables. Many derivative instruments contain multiple underlying risks. The fair value amounts below represent the value of derivative contracts prior to taking into account the netting effects of master netting agreements and cash collateral. This netting impact results in total derivative assets of $3,184 million and $867 million as of March 31, 2020 and December 31, 2019, respectively, and total derivative liabilities of $904 million and $831 million as of March 31, 2020 and December 31, 2019, respectively, reflected in the Unaudited Interim Consolidated Statements of Financial Position.



Primary Underlying Risk /Instrument Type	March 31, 2020							December 31, 2019
			Fair Value							Fair Value
	Gross Notional		Assets		Liabilities			Gross Notional		Assets		Liabilities
	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps	$	3,232	$	1,239	$	(106	)	$	3,257	$	628	$	(73	)
Interest Rate Forwards	205		51		0			205		4		(1		)
Foreign Currency
Foreign Currency Forwards	1,442		79		(3		)	1,461		22		(57		)
Currency/Interest Rate
Foreign Currency Swaps	23,188		3,795		(60		)	22,746		1,467		(302		)
Total Derivatives Designated as Hedge Accounting Instruments	$	28,067	$	5,164	$	(169	)	$	27,669	$	2,121	$	(433	)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps	$	152,646	$	22,455	$	(11,144	)	$	141,162	$	10,249	$	(4,861	)
Interest Rate Futures	18,595		42		(132		)	17,095		4		(38		)
Interest Rate Options	16,343		2,102		(328		)	16,496		339		(238		)
Interest Rate Forwards	2,821		82		0			2,218		18		(3		)
Foreign Currency
Foreign Currency Forwards	27,940		458		(163		)	26,604		208		(214		)
Foreign Currency Options	0		0		0			0		0		0
Currency/Interest Rate
Foreign Currency Swaps	13,107		1,409		(397		)	13,874		740		(345		)
Credit
Credit Default Swaps	1,659		2		(29		)	798		21		0
Equity
Equity Futures	4,804		18		(1		)	1,802		0		(3		)
Equity Options	28,769		428		(546		)	32,657		679		(765		)
Total Return Swaps	23,241		2,903		(376		)	18,218		6		(636		)
Other
Other(1)	1,257		0		0			1,258		0		0
Synthetic GICs	80,984		1		0			80,009		1		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments	$	372,166	$	29,900	$	(13,116	)	$	352,191	$	12,265	$	(7,103	)
Total Derivatives(2)(3)	$	400,233	$	35,064	$	(13,285	)	$	379,860	$	14,386	$	(7,536	)

__________


(1)	“Other” primarily includes derivative contracts used to improve the balance of the Company’s tail longevity and mortality risk. Under these contracts, the Company’s gains (losses) are capped at the notional amount.


(2)	Excludes embedded derivatives and associated reinsurance recoverables which contain multiple underlying risks. The fair value of these embedded derivatives was a net liability of $28,769 million and $14,035 million as of March 31, 2020 and December 31, 2019, respectively, primarily included in “Future policy benefits.”


(3)	Recorded in “Other invested assets” and “Other liabilities” on the Unaudited Interim Consolidated Statements of Financial Position.

Schedule of Derivative instruments (hedged item in fair value hedge accounting relationship)

As of March 31, 2020, the following amounts were recorded on the Unaudited Interim Consolidated Statements of Financial Position related to the carrying amount of the hedged assets (liabilities) and cumulative basis adjustments included in the carrying amount for fair value hedges.



	March 31, 2020						December 31, 2019
Balance Sheet Line Item in which Hedged Item is Recorded	Carrying Amount of the Hedged Assets (Liabilities)			Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)(1)			Carrying Amount of the Hedged Assets (Liabilities)			Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)(1)
	(in millions)
Fixed maturities, available-for-sale, at fair value	$	371		$	92		$	389		$	64
Commercial mortgage and other loans	$	23		$	2		$	23		$	2
Policyholders’ account balances	$	(1,712	)	$	(430	)	$	(1,376	)	$	(107	)
Future policy benefits	$	(961	)	$	(450	)	$	(676	)	$	(172	)

__________


(1)	There were no material fair value hedging adjustments for hedged assets and liabilities for which hedge accounting has been discontinued.

Offsetting of Financial Assets

The following table presents recognized derivative instruments (excluding embedded derivatives and associated reinsurance recoverables), and repurchase and reverse repurchase agreements that are offset in the Unaudited Interim Consolidated Statements of Financial Position, and/or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the Unaudited Interim Consolidated Statements of Financial Position.



	March 31, 2020
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position			Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)			Net Amount
	(in millions)
Offsetting of Financial Assets:
Derivatives(1)	$	34,905	$	(31,880	)	$	3,025	$	(2,109	)	$	916
Securities purchased under agreement to resell	325		0			325		(325		)	0
Total assets	$	35,230	$	(31,880	)	$	3,350	$	(2,434	)	$	916
Offsetting of Financial Liabilities:
Derivatives(1)	$	13,259	$	(12,381	)	$	878	$	(9	)	$	869
Securities sold under agreement to repurchase	10,557		0			10,557		(10,557		)	0
Total liabilities	$	23,816	$	(12,381	)	$	11,435	$	(10,566	)	$	869



	December 31, 2019
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position			Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)			Net Amount
	(in millions)
Offsetting of Financial Assets:
Derivatives(1)	$	14,303	$	(13,519	)	$	784	$	(607	)	$	177
Securities purchased under agreement to resell	1,012		0			1,012		(1,012		)	0
Total assets	$	15,315	$	(13,519	)	$	1,796	$	(1,619	)	$	177
Offsetting of Financial Liabilities:
Derivatives(1)	$	7,528	$	(6,705	)	$	823	$	(244	)	$	579
Securities sold under agreement to repurchase	9,681		0			9,681		(9,681		)	0
Total liabilities	$	17,209	$	(6,705	)	$	10,504	$	(9,925	)	$	579

__________

(1)

Amounts exclude the excess of collateral received/pledged from/to the counterparty.

Offsetting of Financial Liabilities



	March 31, 2020
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position			Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)			Net Amount
	(in millions)
Offsetting of Financial Assets:
Derivatives(1)	$	34,905	$	(31,880	)	$	3,025	$	(2,109	)	$	916
Securities purchased under agreement to resell	325		0			325		(325		)	0
Total assets	$	35,230	$	(31,880	)	$	3,350	$	(2,434	)	$	916
Offsetting of Financial Liabilities:
Derivatives(1)	$	13,259	$	(12,381	)	$	878	$	(9	)	$	869
Securities sold under agreement to repurchase	10,557		0			10,557		(10,557		)	0
Total liabilities	$	23,816	$	(12,381	)	$	11,435	$	(10,566	)	$	869



	December 31, 2019
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statements of Financial Position			Net Amounts Presented in the Statements of Financial Position		Financial Instruments/ Collateral(1)			Net Amount
	(in millions)
Offsetting of Financial Assets:
Derivatives(1)	$	14,303	$	(13,519	)	$	784	$	(607	)	$	177
Securities purchased under agreement to resell	1,012		0			1,012		(1,012		)	0
Total assets	$	15,315	$	(13,519	)	$	1,796	$	(1,619	)	$	177
Offsetting of Financial Liabilities:
Derivatives(1)	$	7,528	$	(6,705	)	$	823	$	(244	)	$	579
Securities sold under agreement to repurchase	9,681		0			9,681		(9,681		)	0
Total liabilities	$	17,209	$	(6,705	)	$	10,504	$	(9,925	)	$	579

__________

(1)

Amounts exclude the excess of collateral received/pledged from/to the counterparty.

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

The following table provides the financial statement classification and impact of derivatives used in qualifying and non-qualifying hedge relationships, including the offset of the hedged item in fair value hedge relationships.



	Three Months Ended March 31, 2020
	Realized Investment Gains (Losses)			Net Investment Income			Other Income (Loss)			Interest Expense		Interest Credited to Policyholders’ Account Balances			Policyholders’ Benefits			AOCI(1)
	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate	$	(30	)	$	(2	)	$	0		$	0	$	324		$	280		$	0
Currency	2			0			0			0		0			0			0
Total gains (losses) on derivatives designated as hedge instruments	(28		)	(2		)	0			0		324			280			0
Gains (losses) on the hedged item:
Interest Rate	30			5			0			0		(322		)	(278		)	0
Currency	(1		)	0			0			0		0			0			0
Total gains (losses) on hedged item	29			5			0			0		(322		)	(278		)	0
Total gains (losses) on fair value hedges net of hedged item	1			3			0			0		2			2			0
Cash flow hedges
Interest Rate	(1		)	0			0			0		0			0			52
Currency	1			0			0			0		0			0			102
Currency/Interest Rate	18			79			291			0		0			0			2,200
Total gains (losses) on cash flow hedges	18			79			291			0		0			0			2,354
Net investment hedges
Currency	0			0			0			0		0			0			13
Currency/Interest Rate	0			0			0			0		0			0			0
Total gains (losses) on net investment hedges	0			0			0			0		0			0			13
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	9,224			0			0			0		0			0			0
Currency	333			0			(7		)	0		0			0			0
Currency/Interest Rate	816			0			2			0		0			0			0
Credit	(41		)	0			0			0		0			0			0
Equity	5,436			0			0			0		0			0			0
Other	0			0			0			0		0			0			0
Embedded Derivatives	(14,295		)	0			0			0		0			0			0
Total gains (losses) on derivatives not qualifying as hedge accounting instruments	1,473			0			(5		)	0		0			0			0
Total	$	1,492		$	82		$	286		$	0	$	2		$	2		$	2,367



	Three Months Ended March 31, 2019
	Realized Investment Gains (Losses)			Net Investment Income			Other Income (Loss)			Interest Expense		Interest Credited to Policyholders’ Account Balances			Policyholders’ Benefits			AOCI(1)
	(in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate	$	(5	)	$	(2	)	$	0		$	0	$	68		$	51		$	0
Currency	(1		)	0			0			0		0			0			0
Total gains (losses) on derivatives designated as hedge instruments	(6		)	(2		)	0			0		68			51			0
Gains (losses) on the hedged item:
Interest Rate	2			5			0			0		(66		)	(46		)	0
Currency	1			1			0			0		0			0			0
Total gains (losses) on hedged item	3			6			0			0		(66		)	(46		)	0
Total gains (losses) on fair value hedges net of hedged item	(3		)	4			0			0		2			5			0
Cash flow hedges
Interest Rate	(1		)	0			0			0		0			0			23
Currency	1			0			0			0		0			0			(9		)
Currency/Interest Rate	(8		)	68			(45		)	0		0			0			(58		)
Total gains (losses) on cash flow hedges	(8		)	68			(45		)	0		0			0			(44		)
Net investment hedges
Currency	0			0			0			0		0			0			1
Currency/Interest Rate	0			0			0			0		0			0			0
Total gains (losses) on net investment hedges	0			0			0			0		0			0			1
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	1,389			0			0			0		0			0			0
Currency	(39		)	0			4			0		0			0			0
Currency/Interest Rate	184			0			0			0		0			0			0
Credit	69			0			0			0		0			0			0
Equity	(1,811		)	0			0			0		0			0			0
Other	0			0			0			0		0			0			0
Embedded Derivatives	(812		)	0			0			0		0			0			0
Total gains (losses) on derivatives not qualifying as hedge accounting instruments	(1,020		)	0			4			0		0			0			0
Total	$	(1,031	)	$	72		$	(41	)	$	0	$	2		$	5		$	(43	)

_________

(1)

Net change in AOCI.

Schedule of Derivative Instruments Recognized in Accumulated Other Comprehensive Income (Loss) Before Taxes

Presented below is a rollforward of current period cash flow hedges in AOCI before taxes:



	(in millions)
Balance, December 31, 2019	$	832
Amount recorded in AOCI
Interest Rate	51
Currency	103
Currency/Interest Rate	2,588
Total amount recorded in AOCI	2,742
Amount reclassified from AOCI to income
Interest Rate	1
Currency	(1		)
Currency/Interest Rate	(388		)
Total amount reclassified from AOCI to income	(388		)
Balance, March 31, 2020	$	3,186

Credit Derivatives

The following table provides a summary of the notional and fair value of written credit protection. The Company’s maximum amount at risk under these credit derivatives, assuming the value of the underlying referenced securities become worthless, is equal to the notional amounts. These credit derivatives have maturities of less than 1 year and less than 27 years for single name and index references, respectively.



	March 31, 2020
	NAIC Rating Designation of Underlying Credit Obligation(1)
	NAIC 1				NAIC 2				NAIC 3					NAIC 4				NAIC 5				NAIC 6					Total
	Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value			Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value			Gross Notional		Fair Value
	(in millions)
Single name reference(2)	$	48	$	0	$	48	$	0	$	4	$	0		$	0	$	0	$	0	$	0	$	0	$	0		$	100	$	0
Index reference(2)	49		0		0		0		790		(8		)	0		0		0		0		483		(20		)	1,322		(28		)
Total	$	97	$	0	$	48	$	0	$	794	$	(8	)	$	0	$	0	$	0	$	0	$	483	$	(20	)	$	1,422	$	(28	)



	December 31, 2019
	NAIC Rating Designation of Underlying Credit Obligation(1)
	NAIC 1				NAIC 2				NAIC 3				NAIC 4				NAIC 5				NAIC 6				Total
	Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value		Gross Notional		Fair Value
	(in millions)
Single name reference(2)	$	36	$	0	$	60	$	1	$	4	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	100	$	1
Index reference(2)	50		0		0		0		570		13		0		0		0		0		72		7		692		20
Total	$	86	$	0	$	60	$	1	$	574	$	13	$	0	$	0	$	0	$	0	$	72	$	7	$	792	$	21

_________


(1)	The NAIC rating designations are based on availability and the lowest ratings among Moody's Investors Service, Inc. ("Moody's"), Standard & Poor’s Rating Services (“S&P”) and Fitch Ratings Inc. (“Fitch”). If no rating is available from a rating agency, a NAIC 6 rating is used.

(2)

Single name CDS may reference to the credit of corporate debt, sovereign debt, and structured finance. Index references NAIC designations are based on the lowest rated single name reference included in the index.

- 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

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+ Details