Adoption of ASU 2018-12 (Tables)

9 Months Ended

Sep. 30, 2023

Cumulative Effect Adjustments to Components of Stockholders’ Equity



							Total
	Retained						Stockholder’s
	Earnings			AOCI			Equity
Shadow impacts:
DAC, VOBA, DSI and DFEL	$	-		$	2,271		$	2,271
Additional liabilities for other
insurance benefits		-			1,197			1,197
LFPB and other ⁽¹⁾		(121	)		(1,520	)		(1,641	)
MRBs ⁽²⁾		(1,699	)		2,874			1,175
Total	$	(1,820	)	$	4,822		$	3,002

⁽¹⁾Includes impacts to reserves and ceded reserves reported within future contract benefits and reinsurance recoverables, respectively on the Consolidated Balance Sheets, excluding shadow impacts on additional liabilities for other insurance benefits.

⁽²⁾Includes impacts related to MRB assets and MRB liabilities reported on the Consolidated Balance Sheets, and ceded MRBs reported within other assets on the Consolidated Balance Sheets.

Effect of Accounting Adoption to Consolidated Balance Sheets



							Total
	Retained						Stockholder’s
	Earnings			AOCI			Equity
DAC, VOBA and DSI	$	-		$	6,079		$	6,079
Reinsurance recoverables		607			2,556			3,163
Other assets ⁽¹⁾		5,795			-			5,795
Future contract benefits		(760	)		(2,966	)		(3,726	)
MRBs, net		(7,956	)		3,656			(4,300	)
DFEL		-			(3,190	)		(3,190	)
Other liabilities ⁽²⁾		494			(1,313	)		(819	)
Total	$	(1,820	)	$	4,822		$	3,002

⁽¹⁾Consists primarily of ceded MRB adjustments.

⁽²⁾Consists of state and federal tax adjustments.

Summary of Changes in DAC, VOBA and DSI



			Impact from
	Balance		Removal of		Balance
	Pre-Adoption		Shadow		Post-Adoption
	December 31,		Balances		January 1,
	2020		from AOCI		2021
DAC
Variable Annuities	$	3,675	$	52	$	3,727
Fixed Annuities		264		215		479
Traditional Life		1,041		-		1,041
UL and Other		297		5,031		5,328
Group Protection		187		-		187
Retirement Plan Services		126		112		238
Total DAC		5,590		5,410		11,000

VOBA
Fixed Annuities		-		23		23
Traditional Life		67		-		67
UL and Other		167		630		797
Total VOBA		234		653		887

DSI ⁽¹⁾
Variable Annuities		194		2		196
Fixed Annuities		17		13		30
UL and Other		35		-		35
Retirement Plan Services		13		1		14
Total DSI		259		16		275
Total DAC, VOBA and DSI	$	6,083	$	6,079	$	12,162

⁽¹⁾Pre-adoption DSI balance was previously reported in other assets on the Consolidated Balance Sheets.

Summary of Changes in DFEL



			Impact from
	Balance		Removal of		Balance
	Pre-Adoption		Shadow		Post-Adoption
	December 31,		Balances		January 1,
	2020		from AOCI		2021
DFEL ⁽¹⁾
Variable Annuities	$	319	$	5	$	324
UL and Other		77		3,185		3,262
Total DFEL	$	396	$	3,190	$	3,586

⁽¹⁾Pre-adoption DFEL balance was previously reported in other contract holder funds on the Consolidated Balance Sheets.

Summary of Changes in Future Contract Benefits



			Impact from			Single-A
	Balance		Removal of			Discount		Cumulative			Balance
	Pre-Adoption		Shadow			Rate		Effect to			Post-Adoption
	December 31,		Balances			Measurement		Retained			January 1,
	2020 ⁽¹⁾		from AOCI			in AOCI		Earnings			2021
LFPB
Payout Annuities	$	2,313	$	(105	)	$	415	$	44		$	2,667
Traditional Life		3,062		-			852		(2	)		3,912
Liability for Future Claims
Group Protection		5,422		-			517		-			5,939
Additional Liabilities for Other
Insurance Benefits
UL and Other		13,687		(1,515	)		-		92			12,264
Other Operations ⁽²⁾		10,309		(80	)		2,882		626			13,737
Other ⁽³⁾		3,525		-			-		-			3,525
Total future contract benefits	$	38,318	$	(1,700	)	$	4,666	$	760		$	42,044

⁽¹⁾Balance pre-adoption excludes features that meet the definition of an MRB upon transition, including features that were previously accounted for as an additional liability. Also, balance pre-adoption reflects certain reclassifications of non-life contingent account balances from future contract benefits to policyholder account balances within the Consolidated Balance Sheets.

⁽²⁾Represents future contract benefits reported in Other Operations primarily attributable to the indemnity reinsurance agreements with Protective ($6.3 billion and $7.4 billion as of December 31, 2020, and January 1, 2021, respectively) and Swiss Re ($1.8 billion and $3.3 billion as of December 31, 2020, and January 1, 2021, respectively). Includes LFPB and additional liabilities balances.

⁽³⁾Represents other miscellaneous reserves outside the scope of ASU 2018-12.

Summary of Changes in Reinsurance Recoverables



			Single-A
	Balance		Discount		Cumulative			Balance
	Pre-Adoption		Rate		Effect to			Post-Adoption
	December 31,		Measurement		Retained			January 1,
	2020 ⁽¹⁾		in AOCI		Earnings			2021
Reinsured LFPB
Payout Annuities	$	5	$	-	$	-		$	5
Traditional Life		372		88		-			460
Reinsured Liability for Future
Claims
Group Protection		148		14		-			162
Reinsured Additional Liabilities
for Other Insurance Benefits
UL and Other		922		-		(3	)		919
Reinsured Other Operations ⁽²⁾		14,757		2,454		610			17,821
Reinsured Other ⁽³⁾		1,346		-		-			1,346
Total reinsurance recoverables	$	17,550	$	2,556	$	607		$	20,713

⁽¹⁾Balance pre-adoption excludes features that meet the definition of a ceded MRB upon transition, including features that were previously accounted for as reinsured additional liabilities.

⁽²⁾Represents reinsurance recoverables reported in Other Operations primarily attributable to the indemnity reinsurance agreements with Protective ($12.0 billion and $13.2 billion as of December 31, 2020, and January 1, 2021, respectively) and Swiss Re ($1.7 billion and $3.2 billion as of December 31, 2020, and January 1, 2021, respectively). Includes reinsured LFPB and reinsured additional liabilities balances.

⁽³⁾Represents other miscellaneous reinsurance recoverables outside the scope of ASU 2018-12.

Summary of Changes in Net Liability Position of MRBs




	Balance		Cumulative			Cumulative			Balance
	Pre-Adoption		Effect of			Effect to			Post-Adoption
	December 31,		Credit Risk			Retained			January 1,
	2020⁽¹⁾		to AOCI			Earnings			2021
MRBs, Net
Variable Annuities	$	831	$	(3,592	)	$	7,968		$	5,207
Fixed Annuities		192		(52	)		(22	)		118
Retirement Plan Services		11		(12	)		10			9
Total MRBs, net	$	1,034	$	(3,656	)	$	7,956		$	5,334

⁽¹⁾Balance pre-adoption includes all features that meet the definition of an MRB upon transition, including features that were previously accounted for as additional liabilities or embedded derivatives.

Summary of Changes in Net Asset Position of Ceded MRBs




	Balance		Cumulative		Balance
	Pre-Adoption		Effect to		Post-Adoption
	December 31,		Retained		January 1,
	2020⁽¹⁾		Earnings		2021
Ceded MRBs, Net
Variable Annuities	$	828	$	5,700	$	6,528
Retirement Plan Services		1		10		11
Total ceded MRBs, net	$	829	$	5,710	$	6,539

⁽¹⁾Balance pre-adoption includes all features that meet the definition of a ceded MRB upon transition, including features that were previously accounted for as reinsured additional liabilities or embedded derivatives.

Adoption of New Accounting Standard Effect on Financial Statements

The following summarizes the effect of the adoption of ASU 2018-12 (in millions) on certain financial statement line items within the previously reported Consolidated Balance Sheets:



	As of December 31, 2022
				Adoption
	As			of New
	Previously			Accounting			As
	Reported ⁽¹⁾			Standard			Adjusted
Deferred acquisition costs, value of business acquired and
deferred sales inducements ⁽²⁾	$	13,873		$	(1,610	)	$	12,263
Reinsurance recoverables, net of allowance for credit losses		23,910			(2,646	)		21,264
Market risk benefit assets		-			2,807			2,807
Other assets ⁽²⁾		21,080			(1,154	)		19,926
Total assets		338,266			(2,603	)		335,663
Future contract benefits ⁽²⁾		41,203			(2,901	)		38,302
Market risk benefit liabilities		-			2,078			2,078
Deferred front-end loads ⁽²⁾		5,695			(650	)		5,045
Other liabilities ⁽²⁾		16,125			(1,468	)		14,657
Total liabilities		330,000			(2,941	)		327,059
Retained earnings		2,436			(1,022	)		1,414
Accumulated other comprehensive income (loss)		(7,073	)		1,360			(5,713	)
Total stockholder’s equity		8,266			338			8,604

⁽¹⁾The amounts as previously reported were derived from Note 1 in our 2022 Form 10-K, as updated by the May 2023 Form 8-K.

⁽²⁾Certain amounts have been reclassified to conform to the presentation adopted in the current period.

‎

The following summarizes the effect of the adoption of ASU 2018-12 (in millions) on certain financial statement line items within the previously reported Consolidated Statements of Comprehensive Income (Loss):



	For the Three Months Ended September 30, 2022
				Adoption
	As			of New
	Previously			Accounting			As
	Reported ⁽¹⁾			Standard			Adjusted
Fee income	$	1,438		$	(114	)	$	1,324
Realized gain (loss)		11			22			33
Total revenues		4,357			(92	)		4,265
Benefits		4,498			(2,404	)		2,094
Interest credited		717			5			722
Market risk benefit (gain) loss		-			(74	)		(74	)
Policyholder liability remeasurement (gain) loss		-			2,370			2,370
Commissions and other expenses		1,205			14			1,219
Total expenses		7,134			(89	)		7,045
Income (loss) before taxes		(2,777	)		(3	)		(2,780	)
Net income (loss)		(2,289	)		(3	)		(2,292	)
Unrealized investment gain (loss)		(4,140	)		(769	)		(4,909	)
Market risk benefit non-performance risk gain (loss)		-			(150	)		(150	)
Policyholder liability discount rate remeasurement gain (loss)		-			517			517
Total other comprehensive income (loss), net of tax		(4,140	)		(402	)		(4,542	)
Comprehensive income (loss)		(6,429	)		(405	)		(6,834	)



	For the Nine Months Ended September 30, 2022
				Adoption
	As			of New
	Previously			Accounting			As
	Reported ⁽¹⁾			Standard			Adjusted
Fee income	$	4,384		$	(319	)	$	4,065
Realized gain (loss)		338			203			541
Total revenues		13,471			(116	)		13,355
Benefits		8,748			(2,630	)		6,118
Interest credited		2,109			12			2,121
Market risk benefit (gain) loss		-			755			755
Policyholder liability remeasurement (gain) loss		-			2,496			2,496
Commissions and other expenses		3,473			118			3,591
Total expenses		15,179			750			15,929
Income (loss) before taxes		(1,708	)		(866	)		(2,574	)
Federal income tax expense (benefit)		(320	)		(180	)		(500	)
Net income (loss)		(1,388	)		(686	)		(2,074	)
Unrealized investment gain (loss)		(14,577	)		(4,150	)		(18,727	)
Market risk benefit non-performance risk gain (loss)		-			224			224
Policyholder liability discount rate remeasurement gain (loss)		-			1,943			1,943
Total other comprehensive income (loss), net of tax		(14,577	)		(1,983	)		(16,560	)
Comprehensive income (loss)		(15,965	)		(2,669	)		(18,634	)

⁽¹⁾The amounts as previously reported were derived from Note 24 in our 2022 Form 10-K.

‎



	For the Three Months Ended September 30, 2022
				Adoption
	As			of New
	Previously			Accounting			As
	Reported ⁽¹⁾			Standard			Adjusted
Retained earnings balance as of beginning-of-period	$	4,962		$	(1,315	)	$	3,647
Net income (loss)		(2,289	)		(3	)		(2,292	)
Retained earnings balance as of end-of-period		2,398			(1,318	)		1,080
Accumulated other comprehensive income (loss) balance
as of beginning-of-period		(3,893	)		2,125			(1,768	)
Other comprehensive income (loss), net of tax		(4,140	)		(402	)		(4,542	)
Accumulated other comprehensive income (loss) balance
as of end-of-period		(8,033	)		1,723			(6,310	)
Total stockholder’s equity as of end-of-period		6,479			405			6,884



	For the Nine Months Ended September 30, 2022
				Adoption
	As			of New
	Previously			Accounting			As
	Reported ⁽¹⁾			Standard			Adjusted
Retained earnings balance as of beginning-of-year	$	4,366		$	(632	)	$	3,734
Net income (loss)		(1,388	)		(686	)		(2,074	)
Retained earnings balance as of end-of-period		2,398			(1,318	)		1,080
Accumulated other comprehensive income (loss) balance
as of beginning-of-year		6,544			3,706			10,250
Other comprehensive income (loss), net of tax		(14,577	)		(1,983	)		(16,560	)
Accumulated other comprehensive income (loss) balance
as of end-of-period		(8,033	)		1,723			(6,310	)
Total stockholder’s equity as of end-of-period		6,479			405			6,884

⁽¹⁾The amounts as previously reported were derived from Note 24 in our 2022 Form 10-K.

The following summarizes the effect of the adoption of ASU 2018-12 (in millions) on certain financial statement line items within the previously reported Consolidated Statements of Cash Flows:



	For the Nine Months Ended September 30, 2022
				Adoption
	As			of New
	Previously			Accounting			As
	Reported ⁽¹⁾			Standard			Adjusted
Net income (loss)	$	(1,388	)	$	(686	)	$	(2,074	)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Realized (gain) loss		(338	)		(203	)		(541	)
Market risk benefit (gain) loss		-			755			755
Change in:
Deferred acquisition costs, value of business acquired, deferred sales
inducements and deferred front-end loads		3			367			370
Insurance liabilities and reinsurance-related balances ⁽²⁾		2,016			(72	)		1,944
Accrued expenses		(375	)		(4	)		(379	)
Federal income tax accruals		(308	)		(181	)		(489	)
Other ⁽²⁾		395			24			419

⁽¹⁾The amounts as previously reported were derived from Note 24 in our 2022 Form 10-K.

⁽²⁾Certain amounts have been reclassified to conform to the presentation adopted in the current period.