XML 57 R29.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Segments
 12 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Segments Segments

On December 18, 2019, the Company entered into the Resolution MTA with Resolution Life US to sell several of its subsidiaries and the related Individual Life and fixed and variable annuities businesses within these subsidiaries. Additionally, on June 1, 2018, the Company consummated a series of transactions pursuant to a MTA (the "2018 MTA") to sell substantially all of its fixed and fixed indexed annuities businesses. See the Business Held for Sale and Discontinued Operations Note to these Consolidated Financial Statements. As such, the Company will no longer report its Life Insurance business as a segment. The Company revised prior period information to conform to current period presentation.

The Company provides its principal products and services through three segments: Retirement, Investment Management and Employee Benefits. These segments reflect the manner by which the Company’s chief operating decision maker views and manages the business. A brief description of these segments follows.

The Retirement segment provides tax-deferred, employer-sponsored retirement savings plans and administrative services to corporate, education, healthcare, other non-profit and government entities, and stable value products to institutional clients where the Company may or may not be providing defined contribution products and services, as well as individual retirement accounts ("IRAs"), other retail financial products and comprehensive financial services to individual customers.

The Investment Management segment provides investment products and retirement solutions across a broad range of geographies, market sectors, investment styles and capitalization spectrums. Products and services are offered to institutional clients, including public, corporate and union retirement plans, endowments and foundations and insurance companies, as well as individual investors and general accounts of the Company's insurance subsidiaries and are distributed through the Company's direct sales force, consultant channel and intermediary partners (such as banks, broker-dealers and independent financial advisers).

The Employee Benefits segment provides stop loss, group life, voluntary employee-paid and disability products to mid-sized and large businesses.

The Company includes in Corporate the following corporate and business activities:

•
corporate operations, corporate level assets and financial obligations; financing and interest expenses; dividend payments made to preferred shareholders; stranded costs and other items not allocated or directly related to the Company's segments, including items such as expenses of its Organizational Restructuring and 2016 Restructuring programs described in the Restructuring Note of these Consolidated Financial Statements, certain expenses and liabilities of employee benefit plans, certain adjustments to short-term and long-term incentive accruals and intercompany eliminations;

•
investment income on assets backing surplus in excess of amounts held at the segment level;

•
revenues and expenses related to a run-off block of guaranteed investment contracts ("GICs") and funding agreements as well as Residual Runoff Business.

Measurement

Adjusted operating earnings before income taxes. The Company believes that Adjusted operating earnings before income taxes provides a meaningful measure of its business and segment performance and enhances the understanding of the Company’s financial results by focusing on the operating performance and trends of the underlying business segments and excluding items that tend to be highly variable from period to period based on capital market conditions or other factors. The Company uses the same accounting policies and procedures to measure segment Adjusted operating earnings before income taxes as it does for the directly comparable U.S. GAAP measure, which is Income (loss) from continuing operations before income taxes. Adjusted operating earnings before income taxes does not replace Income (loss) from continuing operations before income taxes as a measure of the Company’s consolidated results of operations. Therefore, the Company believes that it is useful to evaluate both Income (loss) from continuing operations before income taxes and Adjusted operating earnings before income taxes when reviewing the Company’s financial and operating performance. Each segment’s Adjusted operating earnings before income taxes is calculated by adjusting Income (loss) from continuing operations before income taxes for the following items:

•
Net investment gains (losses), net of related amortization of DAC, VOBA, sales inducements and unearned revenue, which are significantly influenced by economic and market conditions, including interest rates and credit spreads, and are not indicative of normal operations. Net investment gains (losses) include gains (losses) on the sale of securities, impairments, changes in the fair value of investments using the FVO unrelated to the implied loan-backed security income recognition for certain mortgage-backed obligations and changes in the fair value of derivative instruments, excluding realized gains (losses) associated with swap settlements and accrued interest;

•
Net guaranteed benefit hedging gains (losses), which are significantly influenced by economic and market conditions and are not indicative of normal operations, include changes in the fair value of derivatives related to guaranteed benefits, net of related reserve increases (decreases) and net of related amortization of DAC, VOBA and sales inducements, less the estimated cost of these benefits. The estimated cost, which is reflected in adjusted operating earnings, reflects the expected cost of these benefits if markets perform in line with the Company's long-term expectations and includes the cost of hedging. Other derivative and reserve changes related to guaranteed benefits are excluded from adjusted operating earnings, including the impacts related to changes in the Company's nonperformance spread;

•
Income (loss) related to businesses exited or to be exited through reinsurance or divestment, which includes gains and (losses) associated with transactions to exit blocks of business within continuing operations (including net investment gains (losses) on securities sold and expenses directly related to these transactions) and residual run-off activity (including an insignificant number of Individual Life, Annuities and CBVA policies that were not part of the Individual Life and 2018 Transactions). Excluding this activity, which also includes amortization of intangible assets related to businesses exited or to be exited, better reveals trends in the Company's core business and more closely aligns Adjusted operating earnings before income taxes with how the Company manages its segments;

•
Income (loss) attributable to noncontrolling interest represents the interest of shareholders, other than those of the Company, in consolidated entities. Income (loss) attributable to noncontrolling interest represents such shareholders' interests in the gains and (losses) of those entities, or the attribution of results from consolidated VIEs or VOEs to which the Company is not economically entitled;

•
Dividend payments made to preferred shareholders are included as reductions to reflect the Adjusted operating earnings
that is available to common shareholders;

•
Income (loss) related to early extinguishment of debt, which includes losses incurred as a result of transactions where the Company repurchases outstanding principal amounts of debt; these losses are excluded from Adjusted operating earnings before income taxes since the outcome of decisions to restructure debt are not indicative of normal operations;

•
Impairment of goodwill, value of management contract rights and value of customer relationships acquired, which includes losses as a result of impairment analysis; these represent losses related to infrequent events and do not reflect normal, cash-settled expenses;

•
Immediate recognition of net actuarial gains (losses) related to the Company's pension and other postretirement benefit obligations and gains (losses) from plan amendments and curtailments, which includes actuarial gains and losses as a result of differences between actual and expected experience on pension plan assets or projected benefit obligation during a given period. The Company immediately recognizes actuarial gains and (losses) related to pension and other postretirement benefit obligations and gains and losses from plan adjustments and curtailments. These amounts do not reflect normal, cash-settled expenses and are not indicative of current Operating expense fundamentals; and

•
Other items not indicative of normal operations or performance of the Company's segments or related to events such as capital or organizational restructurings undertaken to achieve long-term economic benefits, including certain costs related to debt and equity offerings, acquisition / merger integration expenses, severance and other expenses associated with such activities. These items vary widely in timing, scope and frequency between periods as well as between companies to which the Company is compared. Accordingly, the Company adjusts for these items as management believes that these items distort the ability to make a meaningful evaluation of the current and future performance of the Company's segments.

The summary below reconciles Adjusted operating earnings before income taxes for the segments to Income (loss) from continuing operations before income taxes for the periods indicated:
 
Year Ended December 31,
 
2019
 
2018
 
2017
Income (loss) from continuing operations before income taxes
$
560

 
$
528

 
$
385

Less Adjustments:
 
 
 
 
 
Net investment gains (losses) and related charges and adjustments
25

 
(124
)
 
(112
)
Net guaranteed benefit hedging gains (losses) and related charges and adjustments
(14
)
 
62

 
46

Income (loss) related to businesses exited or to be exited through reinsurance or divestment
98

 
(40
)
 
59

Income (loss) attributable to noncontrolling interest
50

 
145

 
217

Income (loss) related to early extinguishment of debt
(12
)
 
(40
)
 
(4
)
Immediate recognition of net actuarial gains (losses) related to pension and other postretirement benefit obligations and gains (losses) from plan amendments and curtailments
3

 
(47
)
 
(16
)
Dividend payments made to preferred shareholders
28

 
—

 
—

Other adjustments
(209
)
 
(79
)
 
(97
)
Total adjustments to income (loss) from continuing operations
(31
)
 
(123
)
 
93

 
 
 
 
 
 
Adjusted operating earnings before income taxes by segment:
 
 
 
 
 
Retirement
$
588

 
$
701

 
$
456

Investment Management
180

 
205

 
248

Employee Benefits
199

 
160

 
127

Corporate
(376
)
 
(415
)
 
(539
)
Total
$
591

 
$
651

 
$
292


 
Adjusted operating revenues is a measure of the Company's segment revenues. Each segment's Adjusted operating revenues are calculated by adjusting Total revenues to exclude the following items:

•
Net investment gains (losses) and related charges and adjustments, which are significantly influenced by economic and market conditions, including interest rates and credit spreads, and are not indicative of normal operations. Net investment gains (losses) include gains (losses) on the sale of securities, impairments, changes in the fair value of investments using the FVO unrelated to the implied loan-backed security income recognition for certain mortgage-backed obligations and changes in the fair value of derivative instruments, excluding realized gains (losses) associated with swap settlements and accrued interest. These are net of related amortization of unearned revenue;

•
Gain (loss) on change in fair value of derivatives related to guaranteed benefits, which is significantly influenced by economic and market conditions and not indicative of normal operations, includes changes in the fair value of derivatives related to guaranteed benefits, less the estimated cost of these benefits. The estimated cost, which is reflected in Adjusted operating revenues, reflects the expected cost of these benefits if markets perform in line with the Company's long-term expectations and includes the cost of hedging. Other derivative and reserve changes related to guaranteed benefits are excluded from Adjusted operating revenues, including the impacts related to changes in the Company's nonperformance spread;

•
Revenues related to businesses exited or to be exited through reinsurance or divestment, which includes revenues associated with transactions to exit blocks of business within continuing operations (including net investment gains (losses) on securities sold related to these transactions) and residual run-off activity (including an insignificant number of Individual Life, Annuities and CBVA policies that were not part of the Individual Life and 2018 Transactions). Excluding this activity better reveals trends in the Company's core business and more closely aligns Adjusted operating revenues with how the Company manages its segments;

•
Revenues attributable to noncontrolling interest represents the interests of shareholders, other than those of the Company, in consolidated entities. Revenues attributable to noncontrolling interest represents such shareholders' interests in the revenues of those entities, or the attribution of results from consolidated VIEs or VOEs to which the Company is not economically entitled; and

•
Other adjustments to Total revenues primarily reflect fee income earned by the Company's broker-dealers for sales of non-proprietary products, which are reflected net of commission expense in the Company's segments’ operating revenues, other items where the income is passed on to third parties and the elimination of intercompany investment expenses included in operating revenues.

The summary below reconciles Adjusted operating revenues for the segments to Total revenues for the periods indicated:
 
Year Ended December 31,
 
2019
 
2018
 
2017
Total revenues
$
7,476

 
$
7,163

 
$
7,229

 
 
 
 
 
 
Adjustments:
 
 
 
 
 
Net realized investment gains (losses) and related charges and adjustments
18

 
(148
)
 
(132
)
Gain (loss) on change in fair value of derivatives related to guaranteed benefits
(13
)
 
63

 
46

Revenues related to businesses exited or to be exited through reinsurance or divestment
1,531

 
1,446

 
1,618

Revenues attributable to noncontrolling interest
109

 
214

 
321

Other adjustments
321

 
238

 
193

Total adjustments to revenues
1,966

 
1,813

 
2,046

 
 
 
 
 
 
Adjusted operating revenues by segment:
 
 
 
 
 
Retirement
$
2,712

 
$
2,727

 
$
2,538

Investment Management
675

 
683

 
731

Employee Benefits
2,026

 
1,849

 
1,767

Corporate
97

 
91

 
147

Total
$
5,510

 
$
5,350

 
$
5,183

 
Other Segment Information

The Investment Management segment revenues include the following intersegment revenues, primarily consisting of asset-based management and administration fees for the periods indicated:
 
Year Ended December 31,
 
2019
 
2018
 
2017
Investment management intersegment revenues
$
104

 
$
101

 
$
103



The summary below presents Total assets for the Company’s segments as of the dates indicated:
 
December 31, 2019
 
December 31, 2018
Retirement
$
118,024

 
$
104,995

Investment Management
745

 
690

Employee Benefits
3,117

 
2,560

Corporate
25,206

 
25,185

Total assets, before consolidation(1)
147,092

 
133,430

Consolidation of investment entities
1,890

 
1,955

Total assets, excluding assets held for sale
148,982

 
135,385

Assets held for sale
20,069

 
20,045

Total assets
$
169,051

 
$
155,430


(1) Total assets, before consolidation includes the Company's direct investments in CIEs prior to consolidation, which are accounted for using the equity method or fair value option.