The Company utilizes a variety of OTC, OTC-cleared and exchange traded derivative instruments as a part of its overall risk management strategy as well as to enter into replication transactions. Derivative instruments are used to manage risk associated with interest rate, equity market, credit spread, issuer default, price and currency exchange rate risk or volatility. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that are permissible investments under the Company’s investment policies. The Company also may enter into and has previously issued financial instruments and products that either are accounted for as free-standing derivatives, such as certain reinsurance contracts, or as embedded derivative instruments, such as certain GMWB riders included with certain variable annuity products.

Strategies that Qualify for Hedge Accounting

The Company's derivatives may satisfy hedge accounting requirements as outlined in Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements included in the Company's 2017 Form 10-K Annual Report (Predecessor Company). Typically, these hedging instruments include interest rate swaps and, to a lesser extent, foreign currency swaps where the terms or expected cash flows of the hedged item closely match the terms of the swap. The interest rate swaps are typically used to manage interest rate duration of certain fixed maturity securities or liability contracts. As a result of pushdown accounting, derivative instruments that qualified for hedge accounting were recorded at fair value through adjustments to additional paid in capital at the acquisition date. As of June 30, 2018 (Successor Company), the Company has no derivative instruments that qualify for hedge accounting. The hedge strategies by hedge accounting designation have previously included:

Cash Flow Hedges

Interest rate swaps have been predominantly used to manage portfolio duration and better match cash receipts from assets with cash disbursements required to fund liabilities. These derivatives primarily converted interest receipts on floating-rate fixed maturity securities to fixed rates. The Company also previously entered into forward starting swap agreements to hedge the interest rate exposure related to the future purchase of fixed-rate securities, primarily to hedge interest rate risk inherent in the assumptions used to price certain product liabilities.

Foreign currency swaps have been used to convert foreign currency-denominated cash flows related to certain investment receipts and liability payments to U.S. dollars in order to reduce cash flow fluctuations due to changes in currency rates.

Non-qualifying Strategies

Derivative relationships that do not qualify for hedge accounting (“non-qualifying strategies”) primarily include the hedge program for the Company's variable annuity products as well as the hedging and replication strategies that utilize credit default swaps. In addition, hedges of interest rate, foreign currency and equity risk of certain fixed maturities, equities and liabilities do not qualify for hedge accounting.

The non-qualifying strategies include:

Interest Rate Swaps and Futures

The Company uses interest rate swaps, swaptions, and futures to manage interest rate duration between assets and liabilities in certain investment portfolios. In addition, the Company enters into interest rate swaps to terminate existing swaps, thereby offsetting the changes in value of the original swap. As of June 30, 2018 (Successor Company) and December 31, 2017 (Predecessor Company), the notional amount of interest rate swaps in offsetting relationships was $2.7 billion.

Foreign Currency Swaps and Forwards

The Company enters into foreign currency swaps to convert the foreign currency exposures of certain foreign currency-denominated fixed maturity investments to U.S. dollars. The Company also enters into foreign currency forwards to hedge non-U.S. dollar denominated cash and, previously, to hedge equity securities.

Fixed Payout Annuity Hedge

The Company has obligations for certain yen denominated fixed payout annuities under an assumed reinsurance contract. The Company invests in U.S. dollar denominated assets to support the assumed reinsurance liability. The Company has in place pay U.S. dollar, receive yen swap contracts to hedge the currency and yen interest rate exposure between the U.S. dollar denominated assets and the yen denominated fixed liability reinsurance payments.

Credit Contracts

Credit default swaps are used to purchase credit protection on an individual entity or referenced index to economically hedge against default risk and credit-related changes in the value of fixed maturity securities. Credit default swaps are also used to assume credit risk related to an individual entity or referenced index as a part of replication transactions. These contracts require the Company to pay or receive a periodic fee in exchange for compensation from the counterparty should the referenced security issuers experience a credit event, as defined in the contract. In addition, the Company enters into credit default swaps to terminate existing credit default swaps, thereby offsetting the changes in value of the original swap going forward.

Equity Index Swaps and Options

The Company enters into equity index options to hedge the impact of a decline in the equity markets on the investment portfolio. The Company previously entered into total return swaps to hedge equity risk of specific common stock investments which were accounted for using fair value option in order to align the accounting treatment within net realized capital gains (losses). In addition, the Company formerly offered certain equity indexed products that remain in force, a portion of which contained embedded derivatives that require changes in value to be bifurcated from the host contract. The Company uses equity index swaps to economically hedge the equity volatility risk associated with the equity indexed products.

GMWB Derivatives, net

The Company formerly offered certain variable annuity products with GMWB riders. The GMWB product is a bifurcated embedded derivative (“GMWB product derivatives”) that has a notional value equal to the GRB. The Company uses reinsurance contracts to transfer a portion of its risk of loss due to GMWB. The reinsurance contracts covering GMWB (“GMWB reinsurance contracts”) are accounted for as free-standing derivatives with a notional amount equal to the GRB reinsured.

The Company utilizes derivatives (“GMWB hedging instruments”) as part of a dynamic hedging program designed to hedge a portion of the capital market risk exposures of the non-reinsured GMWB riders. The GMWB hedging instruments hedge changes in interest rates, equity market levels, and equity volatility. These derivatives include customized swaps, interest rate swaps and futures, and equity swaps, options and futures, on certain indices including the S&P 500 index, EAFE index and NASDAQ index. The Company retains the risk for differences between assumed and actual policyholder behavior and between the performance of the actively managed funds underlying the separate accounts and their respective indices.



GMWB Hedging Instruments
	Notional Amount				Fair Value
	Successor Company		Predecessor Company		Successor Company			Predecessor Company
	June 30, 2018		December 31, 2017		June 30, 2018			December 31, 2017
Customized swaps	$	4,617	$	5,023	$	44		$	59
Equity swaps, options, and futures	751		1,407		(30		)	(31		)
Interest rate swaps and futures	3,066		3,022		26			39
Total	$	8,434	$	9,452	$	40		$	67

Macro Hedge Program

The Company utilizes equity swaps, options, and futures to provide protection against the statutory tail scenario risk arising from GMWB and the guaranteed minimum death benefits ("GMDB") liabilities on the Company's statutory surplus as well as to protect a portion of the expected fee revenue to be received on variable annuity contracts. These derivatives cover some of the residual risks not otherwise covered by the dynamic hedging program.

Modified Coinsurance Reinsurance Contracts

As of June 30, 2018 (Successor Company), and December 31, 2017 (Predecessor Company), the Company had approximately $809 and $861, respectively, of invested assets supporting other policyholder funds and benefits payable reinsured under a modified coinsurance arrangement in connection with the sale of the Individual Life business, which was structured as a reinsurance transaction. The assets are primarily held in a trust established by the Company. The Company pays or receives cash quarterly to settle the operating results of the reinsured business, including the investment results. As a result of this modified coinsurance arrangement, the Company has an embedded derivative that transfers to the reinsurer certain unrealized changes in fair value of investments subject to interest rate and credit risk. The notional amount of the embedded derivative reinsurance contracts are the invested assets which are carried at fair value and support the reinsured reserves.

Derivative Balance Sheet Classification

For reporting purposes, the Company has elected to offset within assets or liabilities based upon the net of the fair value amounts, income accruals, and related cash collateral receivables and payables of OTC derivative instruments executed in a legal entity and with the same counterparty under a master netting agreement, which provides the Company with the legal right of offset. The following fair value amounts do not include income accruals or related cash collateral receivables and payables, which are netted with derivative fair value amounts to determine balance sheet presentation. Derivatives in the Company’s separate accounts, where the associated gains and losses accrue directly to policyholders, are not included in the table below. The Company’s derivative instruments are held for risk management purposes, unless otherwise noted in the following table. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and is presented in the table to quantify the volume of the Company’s derivative activity. Notional amounts are not necessarily reflective of credit risk. The following tables exclude investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section of Note 2 - Fair Value Measurements of Notes to the Condensed Consolidated Financial Statements.



Derivative Balance Sheet Presentation
	Net Derivatives										Asset Derivatives [1]				Liability Derivatives [1]
	Notional Amount				Fair Value						Fair Value				Fair Value
	Successor Company		Predecessor Company		Successor Company			Predecessor Company			Successor Company		Predecessor Company		Successor Company			Predecessor Company
	Jun 30, 2018		Dec 31, 2017		Jun 30, 2018			Dec 31, 2017			Jun 30, 2018		Dec 31, 2017		Jun 30, 2018			Dec 31, 2017
Cash flow hedges
Interest rate swaps	$	—	$	1,486	$	—		$	—		$	—	$	1	$	—		$	(1	)
Foreign currency swaps	—		182		—			(12		)	—		5		—			(17		)
Total cash flow hedges	—		1,668		—			(12		)	—		6		—			(18		)
Non-qualifying strategies
Interest rate contracts
Interest rate swaps and futures	4,618		3,219		(320		)	(356		)	149		203		(469		)	(559		)
Foreign exchange contracts
Foreign currency swaps and forwards	222		342		(12		)	(6		)	5		—		(17		)	(6		)
Fixed payout annuity hedge	540		540		(167		)	(170		)	—		—		(167		)	(170		)
Credit contracts
Credit derivatives that purchase credit protection	45		80		(1		)	(3		)	—		—		(1		)	(3		)
Credit derivatives that assume credit risk [2]	380		380		6			3			6		3		—			—
Credit derivatives in offsetting positions	56		200		—			1			6		7		(6		)	(6		)
Variable annuity hedge program
GMWB product derivatives [3]	10,663		11,390		(18		)	(75		)	—		—		(18		)	(75		)
GMWB reinsurance contracts	2,239		2,372		22			35			22		35		—			—
GMWB hedging instruments	8,434		9,452		40			67			99		116		(59		)	(49		)
Macro hedge program	8,479		7,252		3			23			42		45		(39		)	(22		)
Other
Modified coinsurance reinsurance contracts	809		861		7			55			7		55		—			—
Total non-qualifying strategies	36,485		36,088		(440		)	(426		)	336		464		(776		)	(890		)
Total cash flow hedges and non-qualifying strategies	$	36,485	$	37,756	$	(440	)	$	(438	)	$	336	$	470	$	(776	)	$	(908	)
Balance Sheet Location
Fixed maturities, available-for-sale	$	39	$	39	$	—		$	—		$	—	$	—	$	—		$	—
Other investments	4,346		10,340		40			135			44		149		(4		)	(14		)
Other liabilities	18,389		12,754		(491		)	(588		)	263		231		(754		)	(819		)
Reinsurance recoverables	3,048		3,233		29			90			29		90		—			—
Other policyholder funds and benefits payable	10,663		11,390		(18		)	(75		)	—		—		(18		)	(75		)
Total derivatives	$	36,485	$	37,756	$	(440	)	$	(438	)	$	336	$	470	$	(776	)	$	(908	)


[1]	Certain prior year amounts have been restated to conform to the current year presentation for OTC-cleared derivatives.


[2]	The derivative instruments related to this strategy are held for other investment purposes.


[3]	These derivatives are embedded within liabilities and are not held for risk management purposes.

Offsetting of Derivative Assets/Liabilities

The following tables present the gross fair value amounts, the amounts offset, and net position of derivative instruments eligible for offset in the Company's Condensed Consolidated Balance Sheets. Amounts offset include fair value amounts, income accruals and related cash collateral receivables and payables associated with derivative instruments that are traded under a common master netting agreement, as described in the preceding discussion. Also included in the tables are financial collateral receivables and payables, which are contractually permitted to be offset upon an event of default, although are disallowed for offsetting under U.S. GAAP.



Offsetting Derivative Assets and Liabilities
	(i)			(ii)			(iii) = (i) - (ii)						(iv)				(v) = (iii) - (iv)
							Net Amounts Presented in the Statement of Financial Position							Collateral Disallowed for Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets (Liabilities) [1]			Gross Amounts Offset in the Statement of Financial Position			Derivative Assets [2] (Liabilities) [3]			Accrued Interest and Cash Collateral Received [4] Pledged [3]				Financial Collateral Received [5]			Net Amount
Successor Company
As of June 30, 2018
Other investments	$	307		$	270		$	40		$	(3	)		$	3		$	34
Other liabilities	$	(758	)	$	(119	)	$	(491	)	$	(148	)		$	(638	)	$	(1	)
Predecessor Company
As of December 31, 2017
Other investments	$	380		$	338		$	135		$	(93	)		$	—		$	42
Other liabilities	$	(833	)	$	(154	)	$	(588	)	$	(91	)		$	(674	)	$	(5	)


[1]	Certain prior year amounts have been restated to conform to the current year presentation for OTC-cleared derivatives.


[2]	Included in other invested assets in the Company's Condensed Consolidated Balance Sheets.


[3]	Included in other liabilities in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative receivable associated with each counterparty.


[4]	Included in other investments in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty.


[5]	Excludes collateral associated with exchange-traded derivative instruments.

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current period earnings. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.



Derivatives in Cash Flow Hedging Relationships
	Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
	Successor Company		Predecessor Company
	June 1, 2018 to June 30, 2018		April 1, 2018 to May 31, 2018			For the three months ended June 30, 2017		January 1, 2018 to May 31, 2018			For the six months ended June 30, 2017
Interest rate swaps	$	—	$	(1	)	$	4	$	(17	)	$	—
Foreign currency swaps	—		—			3		—			4
Total	$	—	$	(1	)	$	7	$	(17	)	$	4



Derivatives in Cash Flow Hedging Relationships
		Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
		Successor Company		Predecessor Company
		June 1, 2018 to June 30, 2018		April 1, 2018 to May 31, 2018			For the three months ended June 30, 2017			January 1, 2018 to May 31, 2018			For the six months ended June 30, 2017
Interest rate swaps	Net realized capital gains (losses)	$	—	$	—		$	(1	)	$	—		$	(1	)
Interest rate swaps	Net investment income	—		3			6			8			13
Foreign currency swaps	Net realized capital gains (losses)	—		(4		)	5			(2		)	6
Total		$	—	$	(1	)	$	10		$	6		$	18

For all periods presented, the Successor and Predecessor Company had no ineffectiveness recognized in income within net realized capital gains (losses).

For all periods presented, the Successor and Predecessor Company had no net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring.

Non-qualifying Strategies

For non-qualifying strategies, including embedded derivatives that are required to be bifurcated from their host contracts and accounted for as derivatives, the gain or loss on the derivative is recognized currently in earnings within net realized capital gains (losses).



Non-Qualifying Strategies Recognized within Net Realized Capital Gains (Losses)
	Successor Company			Predecessor Company
	June 1, 2018 to June 30, 2018			April 1, 2018 to May 31, 2018			For the three months ended June 30, 2017			January 1, 2018 to May 31, 2018			For the six months ended June 30, 2017
Variable annuity hedge program
GMWB product derivatives	$	8		$	43		$	39		$	82		$	140
GMWB reinsurance contracts	(1		)	(12		)	(6		)	(25		)	(24		)
GMWB hedging instruments	—			(23		)	(13		)	(45		)	(78		)
Macro hedge program	—			(54		)	(38		)	(36		)	(124		)
Total variable annuity hedge program	7			(46		)	(18		)	(24		)	(86		)
Foreign exchange contracts
Foreign currency swaps and forwards	—			—			1			(3		)	(3		)
Fixed payout annuity hedge	(8		)	(10		)	(10		)	10			11
Total foreign exchange contracts	(8		)	(10		)	(9		)	7			8
Other non-qualifying derivatives
Interest rate contracts
Interest rate swaps and futures	(9		)	(10		)	6			(40		)	8
Credit contracts
Credit derivatives that purchase credit protection	—			1			18			1			12
Credit derivatives that assume credit risk	—			(2		)	(16		)	(3		)	(9		)
Equity contracts
Equity index swaps and options	—			—			(5		)	—			(4		)
Other
Modified coinsurance reinsurance contracts	8			6			(8		)	32			(10		)
Total other non-qualifying derivatives	(1		)	(5		)	(5		)	(10		)	(3		)
Total [1]	$	(2	)	$	(61	)	$	(32	)	$	(27	)	$	(81	)


[1]	Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 2 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements.

Credit Risk Assumed through Credit Derivatives

The Company enters into credit default swaps that assume credit risk of a single entity or referenced index in order to synthetically replicate investment transactions that are permissible under the Company's investment policies. The Company will receive periodic payments based on an agreed upon rate and notional amount and will only make a payment if there is a credit event. A credit event payment will typically be equal to the notional value of the swap contract less the value of the referenced security issuer’s debt obligation after the occurrence of the credit event. A credit event is generally defined as a default on contractually obligated interest or principal payments or bankruptcy of the referenced entity. The credit default swaps in which the Company assumes credit risk primarily reference investment grade single corporate issuers and baskets, which include standard diversified portfolios of corporate and CMBS issuers. The diversified portfolios of corporate issuers are established within sector concentration limits and may be divided into tranches that possess different credit ratings.



Credit Derivatives by Type
As of June 30, 2018
Successor Company
							Underlying Referenced Credit Obligation(s) [1]
Credit Derivative type by derivative risk exposure	Notional Amount [2]		Fair Value			Weighted Average Years to Maturity	Type	Average Credit Rating	Offsetting Notional Amount [3]		Offsetting Fair Value [3]
Single name credit default swaps
Investment grade risk exposure	$	120	$	2		5 years	Corporate Credit/ Foreign Gov.	A-	$	—	$	—
Basket credit default swaps [4]
Investment grade risk exposure	250		4			5 years	Corporate Credit	BBB+	—		—
Investment grade risk exposure	13		(1		)	5 years	CMBS Credit	A-	3		1
Below investment grade risk exposure	25		(5		)	Less than 1 Year	CMBS Credit	CCC+	25		5
Total [5]	$	408	$	—					$	28	$	6



As of December 31, 2017
Predecessor Company
							Underlying Referenced Credit Obligation(s) [1]
Credit Derivative type by derivative risk exposure	Notional Amount [2]		Fair Value			Weighted Average Years to Maturity	Type	Average Credit Rating	Offsetting Notional Amount [3]		Offsetting Fair Value [3]
Single name credit default swaps
Investment grade risk exposure	$	120	$	3		5 years	Corporate Credit/ Foreign Gov.	A-	$	—	$	—
Below investment grade risk exposure	43		—			Less than 1 Year	Corporate Credit	B	43		—
Basket credit default swaps [4]
Investment grade risk exposure	250		—			5 years	Corporate Credit	BBB+	—		—
Below investment grade risk exposure	22		2			3 years	Corporate Credit	B+	22		—
Investment grade risk exposure	15		(1		)	4 years	CMBS Credit	A	5		—
Below investment grade risk exposure	30		(5		)	Less than 1 Year	CMBS Credit	CCC	30		5
Total [5]	$	480	$	(1	)				$	100	$	5


[1]	The average credit ratings are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P, Fitch, and Morningstar. If no rating is available from a rating agency, then an internally developed rating is used.


[2]	Notional amount is equal to the maximum potential future loss amount. These derivatives are governed by agreements and applicable law, which include collateral posting requirements. There is no additional specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.


[3]	The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap.


[4]	Comprised of swaps of standard market indices of diversified portfolios of corporate and CMBS issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index.


[5]	Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 2 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements.

Derivative Collateral Arrangements

The Company enters into various collateral arrangements in connection with its derivative instruments, which require both the pledging and accepting of collateral. As of June 30, 2018 (Successor Company) and December 31, 2017 (Predecessor Company), the Company pledged cash collateral associated with derivative instruments with a fair value of $4 and $6, respectively, for which the collateral receivable has been recorded in other assets or other liabilities on the Company's Condensed Consolidated Balance Sheets as determined by the Company's election to offset on the balance sheet. The Company also pledged securities collateral associated with derivative instruments with a fair value of $686 and $729, respectively, as of June 30, 2018 (Successor Company) and December 31, 2017 (Predecessor Company), which have been included in fixed maturities on the Condensed Consolidated Balance Sheets. The counterparties have the right to sell or re-pledge these securities. In addition, as of June 30, 2018 (Successor Company) and December 31, 2017 (Predecessor Company), the Company has pledged initial margin of cash and securities to clearinghouses and exchanges related to OTC-cleared and exchange traded derivatives of $121 and $136, respectively.

As of June 30, 2018 (Successor Company) and December 31, 2017 (Predecessor Company), the Company accepted cash collateral associated with derivative instruments of $277 and $310, respectively, which was invested and recorded in the Company's Condensed Consolidated Balance Sheets in fixed maturities and short-term investments with corresponding amounts recorded in other investments or other liabilities as determined by the Company's election to offset on the balance sheet. The Company also accepted securities collateral as of June 30, 2018 (Successor Company), with a fair value of $4 all of which the Company has the ability to sell or repledge. As of June 30, 2018 (Successor Company), the Company had not repledged securities and did not sell any securities. The non-cash collateral accepted was held in separate custodial accounts and was not included in the Company’s Condensed Consolidated Balance Sheets. As of December 31, 2017 (Predecessor Company), the Company did not hold any securities collateral.