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Segment Information
 12 Months Ended
Dec. 31, 2017
Segment Reporting [Abstract]  
Segment Information
2. Segment Information
The Company is organized into three segments: Annuities; Life; and Run-off. In addition, the Company reports certain of its results of operations in Corporate & Other.
Annuities
The Annuities segment consists of a variety of variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security.
Life
The Life segment consists of insurance products and services, including term, whole, universal and variable life products designed to address policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis.
Run-off
The Run-off segment consists of products no longer actively sold and which are separately managed, including structured settlements, pension risk transfer contracts, certain company-owned life insurance policies, funding agreements and universal life with secondary guarantees (“ULSG”).
Corporate & Other
Corporate & Other contains the excess capital not allocated to the segments and interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes the elimination of intersegment amounts, long-term care and workers compensation business reinsured through 100% quota share reinsurance agreements and term life insurance sold direct to consumers, which is no longer being offered for new sales.
Financial Measures and Segment Accounting Policies
Adjusted earnings is a financial measure used by management to evaluate performance, allocate resources and facilitate comparisons to industry results. Consistent with GAAP guidance for segment reporting, adjusted earnings is also used to measure segment performance. The Company believes the presentation of adjusted earnings, as the Company measures it for management purposes, enhances the understanding of its performance by highlighting the results of operations and the underlying profitability drivers of the business. Adjusted earnings should not be viewed as a substitute for net income (loss).
Adjusted earnings, which may be positive or negative, focuses on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends, as well as businesses that have been or will be sold or exited by the Company, referred to as divested businesses.
The following are the significant items excluded from total revenues in calculating adjusted earnings:
•
Net investment gains (losses);
•
Net derivative gains (losses) except earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment; and
•
Amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”).
The following are the significant items excluded from total expenses in calculating adjusted earnings:
•
Amounts associated with benefits and hedging costs related to GMIBs (“GMIB Costs”);
•
Amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”); and
•
Amortization of DAC and VOBA related to: (i) net investment gains (losses), (ii) net derivative gains (losses), (iii) GMIB Fees and GMIB Costs and (iv) Market Value Adjustments.
The tax impact of the adjustments mentioned above are calculated net of the U.S statutory tax rate, which could differ from the Company’s effective tax rate.
Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for the years ended December 31, 2017, 2016 and 2015 and at December 31, 2017 and 2016. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for the adjustments to calculate adjusted earnings described above. In addition, segment accounting policies include the method of capital allocation described below.
The internal capital model is a risk capital model that reflects management’s judgment and view of required capital to represent the measurement of the risk profile of the business, to meet the Company’s long term promises to clients, to service long-term obligations and to support the credit ratings of the Company. It accounts for the unique and specific nature of the risks inherent in the Company’s business. Management is responsible for the ongoing production and enhancement of the internal capital model and reviewed its approach periodically to ensure that it remained consistent with emerging industry practice standards.
Beginning in 2018, the Company will allocate equity to the segments based on its new statutory capital oriented internal capital allocation model, which considers capital requirements and aligns with emerging standards and consistent risk principles.
In 2017 and prior years, segment net investment income was credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company’s consolidated net investment income or net income (loss). Going forward, investment portfolios will be funded to support both liabilities and allocated surplus of each segment, requiring no allocated equity adjustments to net investment income. The impact to segment results is not expected to be material. Net investment income is based upon the actual results of each segment’s specifically identifiable investment portfolios adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee time incurred by each segment; and (iii) cost estimates included in the Company’s product pricing.
 
 
Operating Results
Year Ended December 31, 2017
 
Annuities
 
Life
 
Run-off
 
Corporate
& Other
 
Total
 
 
(In millions)
Pre-tax adjusted earnings
 
$
1,230

 
$
(68
)
 
$
(466
)
 
$
(114
)
 
$
582

Provision for income tax expense (benefit)
 
323

 
(30
)
 
(172
)
 
338

 
459

Adjusted earnings
 
$
907

 
$
(38
)
 
$
(294
)
 
$
(452
)
 
123

Adjustments for:
 
 
 
 
 
 
 
 
 
 
Net investment gains (losses)
 
 
 
 
 
 
 
 
 
(27
)
Net derivative gains (losses)
 
 
 
 
 
 
 
 
 
(1,468
)
Other adjustments to net income
 
 
 
 
 
 
 
 
 
(708
)
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
 
 
1,197

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(883
)
 
 
 
 
 
 
 
 
 
 
 
Interest revenue
 
$
1,263

 
$
300

 
$
1,399

 
$
142

 
 
Interest expense
 
$
—

 
$
(4
)
 
$
23

 
$
39

 
 
Balance at December 31, 2017

Annuities

Life

Run-off
 
Corporate & Other

Total


(In millions)
Total assets

$
149,920

 
$
13,044

 
$
36,719

 
$
12,362


$
212,045

Separate account assets

$
105,140

 
$
1,915

 
$
3,101

 
$
—


$
110,156

Separate account liabilities

$
105,140

 
$
1,915

 
$
3,101

 
$
—


$
110,156

 
 
Operating Results
Year Ended December 31, 2016
 
Annuities
 
Life
 
Run-off
 
Corporate
& Other
 
Total
 
 
(In millions)
Pre-tax adjusted earnings
 
$
1,494

 
$
6

 
$
(249
)
 
$
23

 
$
1,274

Provision for income tax expense (benefit)
 
441

 
—

 
(90
)
 
(10
)
 
341

Adjusted earnings
 
$
1,053

 
$
6

 
$
(159
)
 
$
33

 
933

Adjustments for:
 
 
 
 
 
 
 
 
 
 
Net investment gains (losses)
 
 
 
 
 
 
 
 
 
(67
)
Net derivative gains (losses)
 
 
 
 
 
 
 
 
 
(5,770
)
Other adjustments to net income
 
 
 
 
 
 
 
 
 
98

Provision for income tax (expense) benefit
 
 
 
 
 
 
 
 
 
2,031

Net income (loss)
 
 
 
 
 
 
 
 
 
$
(2,775
)

 
 
 
 
 
 
 
 
 
 
Interest revenue
 
$
1,446

 
$
351

 
$
1,411

 
$
197

 
 
Interest expense
 
$
—

 
$
—

 
$
60

 
$
67

 
 
Balance at December 31, 2016

Annuities

Life

Run-off
 
Corporate & Other

Total
 
 
(In millions)
Total assets
 
$
146,224

 
$
12,296

 
$
40,575

 
$
12,330

 
$
211,425

Separate account assets
 
$
100,209

 
$
1,671

 
$
3,466

 
$
—

 
$
105,346

Separate account liabilities
 
$
100,209

 
$
1,671

 
$
3,466

 
$
—

 
$
105,346

 
 
Operating Results
Year Ended December 31, 2015
 
Annuities
 
Life
 
Run-off
 
Corporate
& Other
 
Total
 
 
(In millions)
Pre-tax adjusted earnings
 
$
1,339

 
$
(56
)
 
$
713

 
$
(77
)
 
$
1,919

Provision for income tax expense (benefit)
 
329

 
(21
)
 
247

 
(43
)
 
512

Adjusted earnings
 
$
1,010

 
$
(35
)
 
$
466

 
$
(34
)
 
1,407

Adjustments for:
 
 
 
 
 
 
 
 
 
 
Net investment gains (losses)
 
 
 
 
 
 
 
 
 
5

Net derivative gains (losses)
 
 
 
 
 
 
 
 
 
(497
)
Other adjustments to net income
 
 
 
 
 
 
 
 
 
(262
)
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
 
 
265

Net income (loss)
 
 
 
 
 
 
 
 
 
$
918

 
 
 
 
 
 
 
 
 
 
 
Interest revenue
 
$
1,266

 
$
313

 
$
1,551

 
$
97

 
 
Interest expense
 
$
—

 
$
—

 
$
60

 
$
69

 
 
 
 
Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In millions)
Annuities
 
$
3,721

 
$
4,423

 
$
4,665

Life
 
1,036

 
1,036

 
881

Run-off
 
2,148

 
2,313

 
2,366

Corporate & Other
 
250

 
338

 
398

Adjustments
 
(1,357
)
 
(5,850
)
 
(438
)
Total
 
$
5,798

 
$
2,260

 
$
7,872


The following table presents total premiums, universal life and investment-type product policy fees and other revenues by major product groups of the Company’s segments, as well as Corporate & Other:
 
Years Ended December 31,
 
2017
 
2016
 
2015
 
(In millions)
Annuity products
$
2,729

 
$
3,411

 
$
3,701

Life insurance products
1,587

 
1,552

 
1,529

Other products
4

 
23

 
133

Total
$
4,320

 
$
4,986

 
$
5,363

Substantially all of the Company’s consolidated premiums, universal life and investment-type product policy fees and other revenues originated in the U.S.
Revenues derived from any customer did not exceed 10% of consolidated premiums, universal life and investment-type product policy fees and other revenues for the years ended December 31, 2017, 2016 and 2015.