Guaranteed Benefit Features

12 Months Ended

Dec. 31, 2019

The Company issued UL and VUL contracts where the Company contractually guaranteed to the contract owner a death benefit even when there is insufficient value to cover monthly mortality and expense charges, whereas otherwise the contract would typically lapse ("no lapse guarantee"), and other provisions that would produce expected gains from the insurance benefit function followed by losses from that function in later years.

In addition, the Company’s Stabilizer and MCG products have guaranteed credited rates. Credited rates are set either quarterly or annually. Most contracts have a zero percent minimum credited rate guarantee, although some contracts have minimum credited rate guarantees up to 3% and allow the contract holder to select either the market value of the account or the book value of the account at termination. The book value of the account is equal to deposits plus interest, less any withdrawals. The fair value is estimated using the income approach.

We have a small number of variable annuity policies that contain living benefit riders such as GMWB/GMWBL and GMIB and death benefit riders such as GMDB. These products include separate account options and guarantee the contract owner a return or withdrawal amount payable in conjunction with a specified event (ex. death, annuitization).

The Company’s major source of income from guaranteed benefit features is the base contract mortality, expense and guaranteed death and living benefit rider fees charged to the contract owner, less the costs of administering the product and providing for the guaranteed death and living benefits.

The liabilities for UL contracts are recorded in the general account. The liabilities for VUL contracts are recorded in separate account liabilities. The separate account liabilities may include more than one type of guarantee. These liabilities are subject to the requirements for additional reserve liabilities under ASC Topic 944, which are recorded on the Consolidated Balance Sheets in Future policy benefits and Contract owner account balances. The paid and incurred amounts were as follows for the years ended December 31, 2019, 2018 and 2017:



	Continuing Operations ⁽⁶⁾									Business Held for Sale
	UL and VUL⁽¹⁾			Stabilizer and MCGs⁽³⁾			Other⁽⁴⁾			UL and VUL⁽²⁾			Other⁽⁵⁾
Separate account liability at December 31, 2019	$	295		$	39,235		$	1,486		$	203		$	10
Separate account liability at December 31, 2018	$	261		$	37,155		$	1,854		$	174		$	8
Additional liability balance:
Balance at January 1, 2017	$	467		$	150		73			848			3,365
Incurred guaranteed benefits	(34		)	(53		)	(28		)	135			(998		)
Paid guaranteed benefits	(121		)	—			(1		)	(114		)	(190		)
Balance at December 31, 2017	312			97			44			869			2,177
Incurred guaranteed benefits	193			(92		)	2			259			—
Paid guaranteed benefits	(157		)	—			(2		)	(137		)	—
Adjustment for the close of The 2018 Transaction	—			—			—			—			(2,177		)
Balance at December 31, 2018	348			5			44			991			—
Incurred guaranteed benefits	209			17			(9		)	177			—
Paid guaranteed benefits	(163		)	—			—			(155		)	—
Balance at December 31, 2019	$	394		$	22		$	35		$	1,013		$	—

⁽¹⁾The additional liability balances as of December 31, 2019, 2018, 2017 and as of January 1, 2017 are presented net of reinsurance of $1,005, $899, $906 and 671, respectively.

⁽²⁾The additional liability balances as of December 31, 2019, 2018, 2017 and as of January 1, 2017 are presented net of reinsurance of 569, 552, 603 and 521, respectively.

⁽³⁾The Separate account liability at December 31, 2019 and 2018 includes $31.9 billion and $29.0 billion, respectively, of externally managed assets, which are not reported on the Company's Consolidated Balance Sheets.

⁽⁴⁾ Includes GMDB/GMWBL/GMIB.

⁽⁵⁾ Separate Account liability relates to the Individual Life Transaction. Additional liability balance relates to the 2018 Transaction.

⁽⁶⁾Includes amounts related to businesses to be exited via reinsurance associated with the Individual Life Transaction.

The net amount at risk for the secondary guarantees is equal to the current death benefit in excess of the account values. The general and separate account values, net amount at risk, net of reinsurance and the weighted average attained age of contract owners by type of minimum guaranteed benefit for UL and VUL contracts were as follows as of December 31, 2019 and 2018:



	December 31, 2019				December 31, 2018
Continuing Operations:⁽¹⁾	Secondary Guarantees		Paid-up Guarantees		Secondary Guarantees		Paid-up Guarantees
UL and VUL Contracts:
Account value (general and separate account)	$	1,397	$	—	$	1,432	$	—
Net amount at risk, net of reinsurance	3,978		—		4,144		—
Weighted average attained age	72		—		72		—

⁽¹⁾ Includes amounts related to businesses to be exited via reinsurance associated with the Individual Life Transaction.



	December 31, 2019				December 31, 2018
Business held for sale:	Secondary Guarantees		Paid-up Guarantees		Secondary Guarantees		Paid-up Guarantees
UL and VUL Contracts:
Account value (general and separate account)	$	1,697	$	—	$	1,701	$	—
Net amount at risk, net of reinsurance	11,018		—		11,317		—
Weighted average attained age	63		—		63		—

Account balances of contracts with guarantees invested in variable separate accounts were as follows as of December 31, 2019 and 2018:



	Continuing Operations ⁽¹⁾				Business Held for Sale
	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Equity securities (including mutual funds):
Equity funds	$	1,904	$	1,723	$	150	$	127
Bond funds	184		185		18		16
Balanced funds	329		302		37		31
Money market funds	46		49		5		4
Other	10		9		3		3
Total	$	2,473	$	2,268	$	213	$	181

⁽¹⁾Includes amounts related to businesses to be exited via reinsurance associated with the Individual Life Transaction.

In addition, the aggregate fair value of fixed income securities supporting separate accounts with Stabilizer benefits as of December 31, 2019 and 2018 was $7.4 billion and $8.0 billion, respectively.