XML 22 R15.htm IDEA: XBRL DOCUMENT v3.20.1
INSURANCE LIABILITIES
 3 Months Ended
Mar. 31, 2020
Insurance [Abstract]  
INSURANCE LIABILITIES INSURANCE LIABILITIES
Variable Annuity Contracts – GMDB, GMIB, GIB and GWBL and Other Features
The Company has certain variable annuity contracts with GMDB, GMIB, GIB and GWBL and other features in-force that guarantee one of the following:
•
Return of Premium: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals);
•
Ratchet: the benefit is the greatest of current account value, premiums paid (adjusted for withdrawals), or the highest account value on any anniversary up to contractually specified ages (adjusted for withdrawals);
•
Roll-Up: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals) accumulated at contractually specified interest rates up to specified ages;
•
Combo: the benefit is the greater of the ratchet benefit or the roll-up benefit, which may include either a five year or an annual reset; or
•
Withdrawal: the withdrawal is guaranteed up to a maximum amount per year for life.
Liabilities for Variable Annuity Contracts with GMDB and GMIB Features without No-Lapse Guarantee Rider (“NLG”) Feature
The change in the liabilities for variable annuity contracts with GMDB and GMIB features and without a NLG guarantee rider feature are summarized in the tables below. The amounts for the direct contracts (before reinsurance ceded) and assumed contracts are reflected in the consolidated balance sheets in Future policy benefits and other policyholders’ liabilities. The amounts for the ceded contracts are reflected in the consolidated balance sheets in Amounts due from reinsurers.
Change in Liability for Variable Annuity Contracts with GMDB and GMIB Features and No NLG Feature
For the Three Months Ended March 31, 2020 and 2019
 
GMDB
 
GMIB
 
Direct
 
Assumed
 
Ceded
 
Direct
 
Assumed
 
Ceded
 
(in millions)
Balance at January 1, 2020
4,784

 
76

 
(105
)
 
4,691

 
187

 
(2,139
)
Paid guarantee benefits
(111
)
 
(6
)
 
5

 
(74
)
 
(1
)
 
20

Other changes in reserve
379

 
2

 
(11
)
 
1,682

 
33

 
(704
)
Balance at March 31, 2020
$
5,052

 
$
72

 
$
(111
)
 
$
6,299

 
$
219

 
$
(2,823
)
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2019
4,659

 
82

 
(113
)
 
3,743

 
184

 
(1,732
)
Paid guarantee benefits
(118
)
 
(6
)
 
4

 
(56
)
 
(1
)
 
21

Other changes in reserve
129

 
1

 
—

 
55

 
(1
)
 
(29
)
Balance at March 31, 2019
$
4,670

 
$
77

 
$
(109
)
 
$
3,742

 
$
182

 
$
(1,740
)

Liabilities for Embedded and Freestanding Insurance Related Derivatives
The liability for the GMxB derivative features, the liability for SCS, SIO, MSO and IUL indexed features and the asset and liability for the GMIB reinsurance contracts are considered embedded or freestanding insurance derivatives and are reported at fair value. For the fair value of the assets and liabilities associated with these embedded or freestanding insurance derivatives, see Note 8.
Account Values and Net Amount at Risk
Account Values and Net Amount at Risk (“NAR”) for direct and assumed variable annuity contracts in force with GMDB and GMIB features as of March 31, 2020 are presented in the following tables by guarantee type. For contracts with the GMDB feature, the NAR in the event of death is the amount by which the GMDB feature exceeds the related Account Values. For contracts with the GMIB feature, the NAR in the event of annuitization is the amount by which the present value of the GMIB benefits exceed the related Account Values, taking into account the relationship between current annuity purchase rates and the GMIB guaranteed annuity purchase rates. Since variable annuity contracts with GMDB features may also offer GMIB guarantees in the same contract, the GMDB and GMIB amounts listed are not mutually exclusive.
Direct Variable Annuity Contracts with GMDB and GMIB Features
at March 31, 2020
 
Guarantee Type
 
Return of Premium
 
Ratchet
 
Roll-Up
 
Combo
 
Total
 
(in millions, except age and interest rate)
Variable annuity contracts with GMDB features
 
 
 
 
 
 
 
 
 
Account Values invested in:
 
 
 
 
 
 
 
 
 
General Account
$
14,662

 
$
92

 
$
58

 
$
176

 
$
14,988

Separate Accounts
40,733

 
7,887

 
2,607

 
27,713

 
78,940

Total Account Values
$
55,395

 
$
7,979

 
$
2,665

 
$
27,889

 
$
93,928

 
 
 
 
 
 
 
 
 
 
Net Amount at Risk, gross
$
715

 
$
877

 
$
2,296

 
$
22,881

 
$
26,769

Net Amount at Risk, net of amounts reinsured
$
715

 
$
857

 
$
1,647

 
$
22,881

 
$
26,100

 
 
 
 
 
 
 
 
 
 
Average attained age of policyholders (in years)
51.1

 
67.8

 
74.4

 
69.6

 
55.1

Percentage of policyholders over age 70
10.7
%
 
46.4
%
 
68.7
%
 
51.6
%
 
19.5
%
Range of contractually specified interest rates
N/A
 
N/A
 
3% - 6%

 
3% - 6.5%
 
3% - 6.5%
 
 
 
 
 
 
 
 
 
 

 
Guarantee Type
 
Return of Premium
 
Ratchet
 
Roll-Up
 
Combo
 
Total
 
(in millions, except age and interest rate)
Variable annuity contracts with GMIB features
 
 
 
 
 
 
 
 
 
Account Values invested in:
 
 
 
 
 
 
 
 
 
General Account
$
—

 
$
—

 
$
18

 
$
228

 
$
246

Separate Accounts
—

 
—

 
20,724

 
29,476

 
50,200

Total Account Values
$
—

 
$
—

 
$
20,742

 
$
29,704

 
$
50,446

 
 
 
 
 
 
 
 
 
 
Net Amount at Risk, gross
$
—

 
$
—

 
$
1,360

 
$
17,568

 
$
18,928

Net Amount at Risk, net of amounts reinsured
$
—

 
$
—

 
$
425

 
$
15,774

 
$
16,199

 
 
 
 
 
 
 
 
 
 
Average attained age of policyholders (in years)
N/A
 
N/A
 
68.9

 
69.7

 
69.6

Weighted average years remaining until annuitization
N/A
 
N/A
 
1.6

 
0.3

 
0.4

Range of contractually specified interest rates
N/A
 
N/A
 
3% - 6%

 
3% - 6.5%

 
3% - 6.5%



Assumed Variable Annuity Contracts with GMDB and GMIB Features
at March 31, 2020
 
Guarantee Type
 
Return of Premium
 
Ratchet
 
Roll-Up
 
Combo
 
Total
 
(in millions, except age and interest rates)
Variable annuity contracts with GMDB features
 
 
 
 
 
 
 
 
 
Reinsured Account Values
$
776

 
$
4,352

 
$
225

 
$
946

 
$
6,299

Net Amount at Risk assumed
$
13

 
$
627

 
$
22

 
$
263

 
$
925

 
 
 
 
 
 
 
 
 
 
Average attained age of policyholders (in years)
68

 
73

 
78

 
76

 
73

Percentage of policyholders over age 70
46.3
%
 
65.2
%
 
80.7
%
 
75.8
%
 
65.0
%
Range of contractually specified interest rates (1)
N/A
 
N/A
 
3%-10%

 
5%-10%

 
3%-10%

 
 
 
 
 
 
 
 
 
 
Variable annuity contracts with GMIB features
 
 
 
 
 
 
 
 
 
Reinsured Account Values
$
744

 
$
37

 
$
190

 
$
956

 
$
1,927

Net Amount at Risk assumed
$
2

 
$
3

 
$
46

 
$
445

 
$
496

 
 
 
 
 
 
 
 
 
 
Average attained age of policyholders (in years)
72

 
74

 
72

 
69

 
71

Percentage of policyholders over age 70
65.1
%
 
62.8
%
 
61.5
%
 
53.8
%
 
59.1
%
Range of contractually specified interest rates
   N/A
 
   N/A
 
3.3%-6.5%

 
6%-6%

 
3.3%-6.5%

______________
(1)
In general, for policies with the highest contractual interest rate shown (10%), the rate applied only for the first 10 years after issue, which has now elapsed.
For more information about the reinsurance programs of the Company’s GMDB and GMIB exposure, see “Reinsurance” in Note 11 to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2019.
Separate Accounts Investments by Investment Category Underlying Variable Annuity Contracts with GMDB and GMIB Features
The total Account Values of variable annuity contracts with GMDB and GMIB features include amounts allocated to the guaranteed interest option, which is part of the General Account and variable investment options that invest through Separate Accounts in variable insurance trusts. The following table presents the aggregate fair value of assets, by major investment category, held by Separate Accounts that support variable annuity contracts with GMDB and
GMIB features. The investment performance of the assets impacts the related Account Values and, consequently, the NAR associated with the GMDB and GMIB benefits and guarantees. Because the Company’s variable annuity contracts offer both GMDB and GMIB features, GMDB and GMIB amounts are not mutually exclusive.
Investment in Variable Insurance Trust Mutual Funds
 
March 31, 2020
 
December 31, 2019
Mutual Fund Type
GMDB
 
GMIB
 
GMDB
 
GMIB
 
(in millions)
Equity
$
32,913

 
$
13,765

 
$
42,489

 
$
17,941

Fixed income
5,151

 
2,680

 
5,263

 
2,699

Balanced
39,965

 
33,483

 
45,871

 
38,445

Other
911

 
272

 
865

 
263

Total
$
78,940

 
$
50,200

 
$
94,488

 
$
59,348


Hedging Programs for GMDB, GMIB, GIB and Other Features
The Company has a program intended to hedge certain risks associated first with the GMDB feature and with the GMIB feature of the Accumulator series of variable annuity products. The program has also been extended to cover other guaranteed benefits as they have been made available. This program utilizes derivative contracts, such as exchange-traded equity, currency and interest rate futures contracts, total return and/or equity swaps, interest rate swap and floor contracts, swaptions, variance swaps as well as equity options, that collectively are managed in an effort to reduce the economic impact of unfavorable changes in guaranteed benefits’ exposures attributable to movements in the capital markets. At the present time, this program hedges certain economic risks on products sold from 2001 forward, to the extent such risks are not externally reinsured.
These programs do not qualify for hedge accounting treatment. Therefore, gains (losses) on the derivatives contracts used in these programs, including current period changes in fair value, are recognized in Net derivative gains (losses) in the period in which they occur, and may contribute to income (loss) volatility.
Variable and Interest-Sensitive Life Insurance Policies – NLG
The NLG feature contained in variable and interest-sensitive life insurance policies keeps them in force in situations where the policy value is not sufficient to cover monthly charges then due. The NLG remains in effect so long as the policy meets a contractually specified premium funding test and certain other requirements.
The change in the fair value of the NLG feature, reflected in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets, is summarized in the table below.
 
Direct Liability (1)
 
Three Months Ended March 31,
 
2020
 
2019
 
(in millions)
Balance at January 1, (2)
897

 
812

Paid guarantee benefits
(13
)
 
(7
)
Other changes in reserves
41

 
20

Balance at March 31,
$
925

 
$
825


______________
(1)
There were no amounts of reinsurance ceded in any period presented.
(2)
The beginning balance for March 31, 2020 was reduced by $22 million to reflect the balance transferred to Assets held-for-sale at December 31, 2019.