INSURANCE LIABILITIES

A) Variable Annuity Contracts – GMDB, GMIB, GIB and GWBL and Other Features

The Company has certain variable annuity contracts with GMDB, GMIB, GIB and GWBL and other features in-force that guarantee one of the following:


•	Return of Premium: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals);


•	Ratchet: the benefit is the greatest of current account value, premiums paid (adjusted for withdrawals), or the highest account value on any anniversary up to contractually specified ages (adjusted for withdrawals);


•	Roll-Up: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals) accumulated at contractually specified interest rates up to specified ages;


•	Combo: the benefit is the greater of the ratchet benefit or the roll-up benefit, which may include either a five year or an annual reset; or


•	Withdrawal: the withdrawal is guaranteed up to a maximum amount per year for life.

The following table summarizes the direct GMDB and GMIB with no no-lapse guarantee rider ("NLG") features liabilities, before reinsurance ceded, reflected in the consolidated balance sheets in Future policy benefits and other policyholders’ liabilities:



	GMDB			GMIB			Total
	(in millions)
Balance at January 1, 2018	$	4,080		$	4,802		$	8,882
Paid guarantee benefits	(101		)	(32		)	(133		)
Other changes in reserve	96			(139		)	(43		)
Balance at March 31, 2018	$	4,075		$	4,631		$	8,706
Balance at January 1, 2017	$	3,165		$	3,870		$	7,035
Paid guarantee benefits	(89		)	(34		)	(123		)
Other changes in reserve	187			1,917			2,104
Balance at March 31, 2017	$	3,263		$	5,753		$	9,016

The following table summarizes the ceded GMDB liabilities, reflected in the consolidated balance sheets in Amounts due from reinsurers:



	Three Months Ended March 31,
	2018			2017
	(in millions)
Balance, beginning of year	$	2,030		$	1,558
Paid guarantee benefits	(54		)	(43		)
Other changes in reserve	62			69
Balance, End of Period	$	2,038		$	1,584

The liability for the GMxB derivative features liability, the liability for SCS, SIO, MSO and IUL indexed features and the GMIB reinsurance contracts are considered embedded or freestanding insurance derivatives and are reported at fair value. Summarized in the table below is a summary of the fair value of these liabilities at March 31, 2018 and December 31, 2017:



	March 31, 2018			December 31, 2017
	(in millions)

GMIBNLG⁽¹⁾	$	3,715		$	4,056
SCS, MSO, IUL features⁽²⁾	1,609			1,698
GWBL/GMWB⁽¹⁾	121			130
GIB⁽¹⁾	(36		)	(27		)
GMAB⁽¹⁾	4			5
Total Embedded derivatives liability⁽¹⁾	$	5,413		$	5,862

GMIB reinsurance contract asset⁽³⁾	$	9,673		$	10,488


(1)	Reported in future policyholders' benefits and other policyholders' liabilities in the consolidated balance sheets.


(2)	Reported in Policyholders' account balances in the consolidated balance sheets.


(3)	Reported in GMIB reinsurance contract asset, at fair value in the consolidated balance sheets.

The March 31, 2018 values for direct variable annuity contracts in-force on such date with GMDB and GMIB features are presented in the following table. For contracts with the GMDB feature, the net amount at risk in the event of death is the amount by which the GMDB exceed related account values. For contracts with the GMIB feature, the net amount at risk in the event of utilization is the amount by which the present value of the GMIB benefits exceeds related account values, taking into account the relationship between current annuity purchase rates and the GMIB guaranteed annuity purchase rates. Since variable annuity contracts with GMDB guarantees may also offer GMIB guarantees in the same contract, the GMDB and GMIB amounts listed are not mutually exclusive:



	Return of Premium			Ratchet			Roll-Up			Combo			Total
	(Dollars in millions)
GMDB:
Account values invested in:
General Account	$	13,848		$	107		$	64		$	195		$	14,214
Separate Accounts	$	45,136		$	9,319		$	3,381		$	34,668		$	92,504
Net amount at risk, gross	$	186		$	117		$	2,016		$	16,388		$	18,707
Net amount at risk, net of amounts reinsured	$	186		$	87		$	1,378		$	6,911		$	8,562
Average attained age of contract holders	52			67			73			68			55.2
Percentage of contract holders over age 70	9.7		%	40.9		%	63.7		%	47.4		%	18.3		%
Range of contractually specified interest rates	N/A			N/A			3%-6%			3%-6.5%			3%-6.5%
GMIB:
Account values invested in:
General Account	N/A			N/A			$	24		$	285		$	309
Separate Accounts	N/A			N/A			$	20,855		$	39,604		$	60,459
Net amount at risk, gross	N/A			N/A			$	883		$	6,322		$	7,205
Net amount at risk, net of amounts reinsured	N/A			N/A			$	268		$	1,560		$	1,828
Weighted average years remaining until annuitization	N/A			N/A			1.7			0.7			0.8
Range of contractually specified interest rates	N/A			N/A			3%-6%			3%-6.5%			3%-6.5%

At March 31, 2018, the Company had reinsured with non-affiliates and affiliates in the aggregate approximately 3.4% and 50.8%, respectively, of its current exposure to the GMDB obligation on annuity contracts in-force and, subject to certain maximum amounts or caps in any one period, approximately 16.6% and 58.0%, respectively, of its current liability exposure resulting from the GMIB feature.

B) Separate Account Investments by Investment Category Underlying GMDB and GMIB Features

The total account values of variable annuity contracts with GMDB and GMIB features include amounts allocated to the guaranteed interest option, which is part of the General Account and variable investment options that invest through Separate Accounts in variable insurance trusts. The following table presents the aggregate fair value of assets, by major investment category, held by Separate Accounts that support variable annuity contracts with GMDB and GMIB guarantees. The investment performance of the assets impacts the related account values and, consequently, the net amount of risk associated with the GMDB and GMIB benefits and guarantees. Because variable annuity contracts offer both GMDB and GMIB features, GMDB and GMIB amounts are not mutually exclusive:

Investment in Variable Insurance Trust Mutual Funds



	March 31, 2018		December 31, 2017
	(in millions)
GMDB:
Equity	$	76,532	$	78,069
Fixed income	2,165		2,234
Balanced	13,525		14,084
Other	282		285
Total	$	92,504	$	94,672
GMIB:
Equity	$	49,042	$	50,429
Fixed income	1,528		1,568
Balanced	9,762		10,165
Other	127		124
Total	$	60,459	$	62,286

C) Hedging Programs for GMDB, GMIB, GIB and Other Features

Beginning in 2003, the Company established a program intended to hedge certain risks associated first with the GMDB feature and, beginning in 2004, with the GMIB feature of the Accumulator series of variable annuity products. The program has also been extended to cover other guaranteed benefits as they have been made available. This program utilizes derivative contracts, such as exchange-traded equity, currency and interest rate futures contracts, total return and/or equity swaps, interest rate swap and floor contracts, swaptions, variance swaps as well as equity options, that collectively are managed in an effort to reduce the economic impact of unfavorable changes in guaranteed benefits’ exposures attributable to movements in the capital markets. At the present time, this program hedges certain economic risks on products sold from 2001 forward, to the extent such risks are not externally reinsured. At March 31, 2018, the total account value and net amount at risk of the hedged variable annuity contracts were $54,391 million and $7,600 million, respectively, with the GMDB feature and $41,189 million and $3,057 million, respectively, with the GMIB and GIB feature.

These programs do not qualify for hedge accounting treatment. Therefore, gains (losses) on the derivatives contracts used in these programs, including current period changes in fair value, are recognized in net derivative gains (loss) in the period in which they occur, and may contribute to income (loss) volatility.

D) Variable and Interest-Sensitive Life Insurance Policies - NLG

The NLG feature contained in variable and interest-sensitive life insurance policies keeps them in force in situations where the policy value is not sufficient to cover monthly charges then due. The NLG remains in effect so long as the policy meets a contractually specified premium funding test and certain other requirements.

The following table summarizes the NLG liabilities reflected in the General Account in Future policy benefits and other policyholders’ liabilities, the related reinsurance reserve ceded, reflected in Amounts due from reinsurers and deferred cost of reinsurance, reflected in Other assets in the Consolidated balance sheets:



	Direct Liability			Reinsurance Ceded			Net
	(in millions)
Balance at January 1, 2018	$	686		$	(664	)	$	22
Paid Guaranteed Benefits	(8		)	—			(8		)
Other changes in reserves	18			(11		)	7
Balance at March 31, 2018	$	696		$	(675	)	$	21
Balance at January 1, 2017	$	1,197		$	(609	)	$	588
Other changes in reserves	93			—			93
Balance at March 31, 2017	$	1,290		$	(609	)	$	681