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.

Some of the Company's derivatives satisfy hedge accounting requirements as outlined in Note 1 of these financial statements. 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 previously qualified for hedge accounting were de-designated and recorded at fair value through adjustments to additional paid in capital at the acquisition date. The hedge strategies by hedge accounting designation include:

Interest rate swaps are predominantly used to manage portfolio duration and better match cash receipts from assets with cash disbursements required to fund liabilities. These derivatives primarily convert interest receipts on floating-rate fixed maturity securities to fixed rates. Foreign currency swaps are 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.

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 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 December 31, 2020 and 2019 (Successor Company), the notional amount of interest rate swaps in offsetting relationships was $1.3 billion for both years.

The Company previously had obligations for certain yen denominated fixed payout annuities under an assumed reinsurance contract. The Company had in place 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. The last swap matured on October 31, 2019.

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 or the Company should the referenced security issuers experience a credit event, as defined in the contract. In addition, the

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.

During 2020, the Company closed the dynamic hedging program as the targeted risk exposure was no longer significant. Any risks covered previously under the dynamic hedging program are now covered by the macro hedge program. The Company previously utilized 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 hedged changes in interest rates, equity market levels, and equity volatility. These derivatives included 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 retained 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.

As of December 31, 2020 and 2019 (Successor Company), the Company had approximately $843 and $819, 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.

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.


Successor Company
	Net Derivatives								Asset Derivatives				Liability Derivatives
	Notional Amount				Fair Value				Fair Value				Fair Value
Hedge Designation/ Derivative Type	Dec 31, 2020		Dec 31, 2019		Dec 31, 2020		Dec 31, 2019		Dec 31, 2020		Dec 31, 2019		Dec 31, 2020		Dec 31, 2019
Cash flow hedges

Foreign currency swaps	$	25	$	10	$	(2)	$	—	$	—	$	—	$	(2)	$	—
Total cash flow hedges	25		10		(2)		—		—		—		(2)		—



Non-qualifying strategies
Interest rate contracts
Interest rate swaps and futures	3,419		3,082		(13)		(39)		28		11		(41)		(50)
Foreign exchange contracts
Foreign currency swaps and forwards	222		225		—		(7)		8		9		(8)		(16)

Credit contracts
Credit derivatives that purchase credit protection	40		40		—		(1)		—		—		—		(1)


Equity contracts
Equity index swaps and options	2,000		2,000		—		—		—		—		—		—
Variable annuity hedge program
GMWB product derivatives [1]	7,803		8,717		21		5		33		23		(12)		(18)
GMWB reinsurance contracts	1,688		1,869		7		17		7		17		—		—
GMWB hedging instruments	—		6,982		—		73		—		89		—		(16)
Macro hedge program	24,188		19,879		(453)		(114)		268		98		(721)		(212)
Other
Modified coinsurance reinsurance contracts	843		819		(93)		(43)		—		—		(93)		(43)
Total non-qualifying strategies	40,203		43,613		(531)		(109)		344		247		(875)		(356)
Total cash flow hedges and non-qualifying strategies	$	40,228	$	43,623	$	(533)	$	(109)	$	344	$	247	$	(877)	$	(356)
Balance Sheet Location
Fixed maturities, available-for-sale	$	49	$	43	$	—	$	—	$	—	$	—	$	—	$	—
Other investments	5,791		5,779		12		72		13		83		(1)		(11)
Other liabilities	24,054		26,396		(480)		(160)		291		124		(771)		(284)
Reinsurance recoverables	2,531		2,688		(86)		(26)		7		17		(93)		(43)
Other policyholder funds and benefits payable	7,803		8,717		21		5		33		23		(12)		(18)
Total derivatives	$	40,228	$	43,623	$	(533)	$	(109)	$	344	$	247	$	(877)	$	(356)

The following tables present the gross fair value amounts, the amounts offset, and net position of derivative instruments eligible for offset on the Company's 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 (Successor Company)
	(i)		(ii)		(iii) = (i) - (ii)						(v) = (iii) - (iv)
					Net Amounts Presented on the Statement of Financial Position				Collateral Disallowed for Offset on the Statement of Financial Position
	Gross Amounts of Recognized Assets (Liabilities)		Gross Amounts Offset on the Statement of Financial Position		Derivative Assets [1] (Liabilities) [2]		Accrued Interest and Cash Collateral (Received) [3] Pledged [2]		Financial Collateral (Received) Pledged [4]		Net Amount
As of December 31, 2020
Other investments	$	304	$	295	$	12	$	(3)	$	—	$	9
Other liabilities	(772)		(279)		(480)		(13)		(488)		(5)
As of December 31, 2019
Other investments	$	207	$	187	$	72	$	(52)	$	8	$	12
Other liabilities	(295)		(91)		(160)		(44)		(204)		—

For derivative instruments that are designated and qualify as cash flow hedges, 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. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.


Derivatives in Cash Flow Hedging Relationships (Successor Company)
Gain or (Loss) Reclassified from AOCI into Income
	For the Years Ended December 31,								June 1, 2018 to December 31, 2018
	2020				2019
	Net Capital Gain (Loss)		Net Investment Income		Net Capital Gain (Loss)		Net Investment Income		Net Capital Gain (Loss)		Net Investment Income
Interest rate swaps	—		—		—		—		—		—
Foreign currency swaps	—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—
Total Amounts Presented on the Consolidated Statements of Operations	$	(74)	$	816	$	(275)	$	924	$	142	$	509

As of December 31, 2020, the before tax deferred net gains on derivative instruments recorded in AOCI that are expected to be reclassified to earnings during the next twelve months is less than $1. This expectation is based on the anticipated interest payments on hedged investments in fixed maturity securities that will occur over the next twelve months, at which time the Company will recognize the deferred net gains (losses) as an adjustment to net investment income over the term of the investment cash flows.


Non-qualifying Strategies Gain (Loss) Recognized within Net Realized Capital Gains (Losses)
	Successor Company						Predecessor Company
	For the Years Ended December 31,				June 1, 2018 to December 31, 2018		January 1, 2018 to May 31, 2018
	2020		2019
Variable annuity hedge program
GMWB product derivatives	$	67	$	134	$	(25)	$	82
GMWB reinsurance contracts	(27)		(13)		1		(25)
GMWB hedging instruments	42		(68)		36		(45)
Macro hedge program	(414)		(418)		153		(36)
Total variable annuity hedge program	(332)		(365)		165		(24)
Foreign exchange contracts
Foreign currency swaps and forwards	(4)		—		2		(3)
Fixed payout annuity hedge	—		(4)		(15)		10
Total foreign exchange contracts	(4)		(4)		(13)		7
Other non-qualifying derivatives
Interest rate contracts
Interest rate swaps, swaptions, and futures	180		103		23		(40)
Credit contracts
Credit derivatives that purchase credit protection	19		—		—		1
Credit derivatives that assume credit risk	—		7		(1)		(3)
Equity contracts
Equity index swaps and options	—		(1)		—		—


Other

Modified coinsurance reinsurance contracts	(50)		(55)		13		32
Total other non-qualifying derivatives	149		54		35		(10)
Total [1]	$	(187)	$	(315)	$	187	$	(27)

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. As of December 31, 2020 and 2019 (Successor Company), the Company did not hold any credit derivatives that assume credit risk.

The Company enters into various collateral arrangements in connection with its derivative instruments, which require both the pledging and accepting of collateral. As of December 31, 2020 and 2019 (Successor Company), the Company pledged cash collateral with a fair value of $48 and $10, respectively, associated with derivative instruments. The collateral receivable has been recorded in other assets or other liabilities on the Company's Consolidated Balance Sheets, as determined by the Company's election to offset on the balance sheet. As of December 31, 2020 and 2019 (Successor Company), the Company also pledged securities collateral associated with derivative instruments with a fair value of $526 and $214, respectively, which have been included in fixed maturities on the Consolidated Balance Sheets. The counterparties generally have the right to sell or re-pledge these securities. In addition, as of December 31, 2020 and 2019 (Successor Company), the Company has pledged initial margin of securities related to OTC-cleared and exchange traded derivatives with a fair value of $215 and $165, respectively.

As of December 31, 2020 and 2019 (Successor Company), the Company accepted cash collateral associated with derivative instruments of $65 and $188, respectively, which was invested and recorded on the 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 December 31, 2020 and 2019 (Successor Company) with a fair value of $0 and $9, respectively, all of which the Company has the right to sell or repledge. As of December 31, 2020 (Successor Company), the Company has not repledged securities and did not sell any securities. The non-cash collateral accepted was held in separate custodial accounts and was not included on the Company's Consolidated Balance Sheets.