Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2022

Accounting policies and error corrections [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles

Accounting Updates Adopted in 2022:

Standard	Description	Date of Adoption	Effect on Financial Statements
ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity	The amendments in this update simplified the accounting for convertible instruments by removing certain separation models in the guidance related to convertible instruments and expanded related disclosure requirements. The amendments also revised the requirements for a contract or embedded derivative that is potentially settled in an entity's own stock to be classified as equity and also amended certain guidance related to the computations of earnings per share for convertible instruments and contracts in an entity's own stock. This guidance was applied in the period of adoption.	January 1, 2022	The adoption of this update did not have an effect on our financial position or results of operations, and did not expand our disclosures.

Accounting Updates Adopted in 2021:

Standard	Description	Date of Adoption	Effect on Financial Statements
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	The amendments in this update simplified the accounting for income taxes by removing certain exceptions in the guidance related to the following: 1. losses in continuing operations when there is income in other items, 2. foreign subsidiaries becoming equity method investments and vice versa, and 3. year-to-date interim period losses exceeding anticipated loss for the year. The amendments also simplified the accounting for income taxes related to the following: 1. franchise taxes partially based on income, 2. step up in the tax basis of goodwill, 3. allocation of tax expense to entities not subject to tax, 4. enacted changes in tax law or rates in interim periods, and 5. employee stock ownership programs and investments in qualified affordable housing projects accounted for using the equity method.	January 1, 2021	The adoption of this update did not have a material effect on our financial position or results of operations.

Accounting Updates Adopted in 2020:

Standard	Description	Date of Adoption	Effect on Financial Statements
ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	This update eliminated the requirement to calculate the implied fair value of goodwill (the second step in the former two-step test) to measure a goodwill impairment charge. Instead, entities should perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the excess of the carrying amount over the fair value, with the loss not to exceed the total amount of goodwill allocated to that reporting unit. This guidance was applied in the period of adoption.	January 1, 2020	The adoption of this update did not have an effect on our financial position or results of operations.
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement	This update amended the fair value measurement guidance by removing or clarifying certain existing disclosure requirements, while also adding new disclosure requirements. Specifically, this update removed certain disclosures related to Level 1 and Level 2 transfers and removed the discussion regarding valuation processes of Level 3 fair value measurements. The update modified guidance related to investments in certain entities that calculate net asset value to explicitly require disclosure regarding timing of liquidation of the investee's assets and timing of redemption restrictions. The update added disclosures around the changes in unrealized gains and losses in other comprehensive income for recurring Level 3 investments held at the end of the reporting period and adds disclosures regarding certain unobservable inputs on Level 3 fair value measurements. The guidance was applied both retrospectively and prospectively, depending on the specific requirement of the update.	December 31, 2018 for the removal and modification of certain disclosures and January 1, 2020 for the addition of certain disclosures.	The adoption of this update modified our disclosures but did not have an impact on our financial position or results of operations.

Standard	Description	Date of Adoption	Effect on Financial Statements
ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans	This update amends the defined benefit pension and other postretirement benefit guidance by removing or clarifying certain existing disclosure requirements, while also adding new disclosure requirements. Specifically, this update removes the requirement to disclose the effects of a one-percentage point change in the assumed healthcare cost trend and the requirement to disclose amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost of the next year. This update adds a requirement to describe the reasons for significant gains and losses related to changes in the benefit obligation for the period. The update also clarifies that the projected benefit obligation (PBO) and accumulated benefit obligation (ABO) and fair value of plan assets are to be disclosed for plans with PBOs or ABOs in excess of plan assets. The guidance was applied retrospectively.	December 31, 2020	The adoption of this update modified our disclosures but did not have an impact on our financial position or results of operations.
ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses	This update amended the guidance on the impairment of financial instruments. The update added an impairment model known as the current expected credit loss model that is based on expected losses rather than incurred losses and will generally result in earlier recognition of allowances for losses. The current expected credit loss model applies to financial instruments such as mortgage loans, fixed maturity securities classified as held-to-maturity, and certain receivables. The update also modified the other-than-temporary impairment model used for available-for-sale fixed maturity securities such that credit losses are recognized as an allowance rather than as a reduction in the amortized cost of the security. The reversal of previously recognized credit losses on available-for-sale fixed maturity securities is allowed under specified circumstances. Additional disclosures are also required, including information used to develop the allowance for losses. The guidance was applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. For available-for-sale fixed maturity securities, the update was applied prospectively. Other-than-temporary impairment losses recognized on available-for-sale fixed maturity securities prior to adoption of the update cannot be reversed. This guidance was applied in the period of adoption.	January 1, 2020	The adoption of this update resulted in a cumulative-effect reduction to retained earnings of $18.9 million with a corresponding decrease to mortgage loans of $8.3 million, a decrease to accounts and premiums receivable of $13.5 million and a decrease to deferred income tax of $5.0 million. There were also immaterial impacts to reinsurance recoverable and other liabilities.

Accounting Updates Outstanding:

ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and related amendments

The amendments in this update provide optional guidance, for a limited period of time, to ease the potential burden in accounting for and recognizing the effects of reference rate reform on financial reporting. The guidance allows for various practical expedients and exceptions when applying GAAP to contracts, hedging relationships, and other transactions affected either by discontinued rates as a direct result of reference rate reform or a market-wide change in interest rates used for discounting, margining or contract price alignment, if certain criteria are met. Specifically, the guidance provides certain practical expedients for contract modifications, fair value hedges, and cash flow hedges, and also provides certain exceptions related to changes in the critical terms of a hedging relationship. The guidance also allows for a one-time election to sell or transfer debt securities that were both classified as held-to-maturity prior to January 1, 2020 and reference a rate affected by the reform.

The adoption of this update is permitted as of the beginning of the interim period that includes March 12, 2020 (the issuance date of the update), or any date thereafter, through December 31, 2024, at which point the guidance will sunset. We do not anticipate needing to adopt this guidance, but we will continue to monitor our contracts and hedging relationships throughout the adoption period.

ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts and related amendments

This update significantly amends the accounting and disclosure requirements for long-duration insurance contracts. These changes include a requirement to review, and if necessary, update cash flow assumptions used to measure the liability for future policy benefits for traditional and limited-payment contracts at least annually, with changes recognized in earnings. In addition, an entity will be required to update the discount rate assumption at each reporting date using a yield that is reflective of an upper-medium grade fixed-income instrument, with changes recognized in other comprehensive income (loss) (OCI). These changes result in the elimination of the provision for risk of adverse deviation and premium deficiency (or loss recognition) testing. The update also requires that an entity measure all market risk benefits associated with deposit contracts at fair value, with changes recognized in earnings except for the portion attributable to a change in the instrument-specific credit risk, which is to be recognized in OCI. This update also simplifies the amortization of deferred acquisition costs by requiring amortization on a constant level basis over the expected term of the related contracts. Deferred acquisition costs are required to be written off for unexpected contract terminations but are no longer subject to an impairment test. Significant additional disclosures will also be required, which include disaggregated rollforwards of certain liability balances and the disclosure of qualitative and quantitative information about expected cash flows, estimates, and assumptions. The application of this guidance will vary based upon the specific requirements of the update but will generally result in either a modified retrospective or full retrospective approach with changes applied as of the beginning of the earliest period presented. Early adoption is permitted. The update is effective for periods beginning January 1, 2023.

We will adopt this update effective January 1, 2023 using the modified retrospective approach with changes applied as of the beginning of the earliest period presented or January 1, 2021, also referred to as the transition date. We are continuing to evaluate the effects of implementing this update. The most significant impact at the transition date will be the requirement to update the discount rate assumption to reflect an upper-medium grade fixed-income instrument, which will be generally equivalent to a single-A interest rate matched to the duration of our insurance liabilities and will result in a decrease to accumulated other comprehensive income (loss) (AOCI) within our total stockholders’ equity balance. After the transition date, we will be required to update the discount rate each subsequent reporting period with changes recorded in OCI and expect that this could have a material impact on OCI.

Our modified retrospective adoption of this update during the first quarter of 2023 will result in a decrease to AOCI as of the transition date, January 1, 2021, of approximately $6.7 billion. We expect a decrease to AOCI at December 31, 2021 in a range from approximately $5.4 billion to $5.6 billion. We expect a decrease to AOCI at December 31, 2022 in a range from approximately $0.6 billion to $0.8 billion.

The decrease in AOCI in our recast of 2021 and 2022 is driven primarily by the difference between the discount rate applied under current GAAP, which is based on an expected investment yield from our current investment strategy, and the single-A discount rate that will be required as a part of the update. The most significant impact relates to our longest duration products. Our investment strategy reflects the illiquid nature of the majority of our liability cash flows and, as a result, the yields in our investment portfolios supporting the cash outflows required for these products are generally higher than a single-A yield. In addition, the discount rates currently applied to reserves for our longest duration products, such as long-term care, include an assumption for long-term yields rising to more historical levels.

Our modified retrospective adoption is expected to result in an increase to net income during 2021 and 2022. We expect the increase in 2021 net income to be between approximately $145 million and $175 million, or between $0.70 and $0.85 per diluted per common share. We expect the increase in 2022 net income to be between approximately $80 million and $110 million, or $0.40 and $0.55 per diluted common share.

The net favorable impact of the recast of our net income for 2021 and 2022 shown above is due primarily to the following changes:

•Updating the lifetime cohort net premium ratios (lifetime loss ratio) for actual experience each reporting period will generally cause earnings patterns to be more consistent from period to period, with variances in experience reflected in earnings over the cohort lifetime. This will result in an unfavorable impact to income for 2021 and 2022.

•Alignment of amortization of deferred acquisition costs to a constant level basis and modification of amortization periods to reflect the expected term of the related contracts could result in either higher or lower income for the affected product lines. This will result in a net favorable impact to income for 2021 and 2022.

•Accelerated recognition of the provision for adverse deviation or other differences from current best estimate values for policies issued prior to the transition date and due to not establishing the provision for policies issued on or after the transition date will generally result in higher income most notably in the initial years after the transition date. This will result in a favorable impact to income for 2021 and 2022.

•Establishing reserves for claims incurred on or after the transition date at interest rates prescribed by the update could result in either higher or lower income for the affected product lines depending on the policy issue date and the interest rate environment at that time. This will result in an unfavorable impact to income for 2021 and a favorable impact to income for 2022.

•Updating cash flow assumptions could result in either higher or lower income. This will result in a favorable impact to income for 2021 and 2022.

•Applying non-contemporaneous reinsurance accounting to the second phase of our Closed Block individual disability reinsurance transaction which was completed in the first quarter of 2021. The primary impacts of this change are:

◦Reversing the increase in benefits and change in reserves for future benefits resulting from the realization of previously unrealized investment gains and losses previously recorded in AOCI that will be removed as of the transition date which will have a favorable impact on income for 2021.

◦Remeasuring the ceded reserves as a separate cohort of reserves at interest rates prescribed by the update and the resulting change to the cost of reinsurance. The differential in the discount rate applied to the direct and ceded cohorts of business will result in an unfavorable impact to income for 2021 and 2022 partially offset by a decrease in the amortization of the cost of reinsurance as a result of a lower cost of reinsurance.

We do not have products with market risk benefits. This update will also significantly expand our disclosures.

ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

The amendments in this update eliminate the troubled debt restructuring recognition and measurement guidance and instead require that an entity evaluate whether the modification represents a new loan or the continuation of an existing loan. The amendments also enhance the disclosure requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. In addition, the amendments in this update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases. The amendments in this update should be applied prospectively, except for the transition method related to the recognition and measurement of troubled debt restructurings, for which an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.

This update is effective for periods beginning January 1, 2023, and we do not anticipate that the adoption of this update will have an effect on our financial position or results of operations but will expand our disclosures.