Derivatives (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location

The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, held at:

		September 30, 2019						December 31, 2018
	Primary Underlying Risk Exposure	Gross Notional Amount		Estimated Fair Value				Gross Notional Amount		Estimated Fair Value
				Assets		Liabilities				Assets		Liabilities
		(In millions)
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate forwards	Interest rate	$	460	$	51	$	—	$	—	$	—	$	—
Foreign currency swaps	Foreign currency exchange rate	2,674		304		16		2,461		200		30
Total qualifying hedges		3,134		355		16		2,461		200		30
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	8,730		1,049		32		10,747		528		558
Interest rate caps	Interest rate	3,350		2		—		3,350		21		—
Interest rate futures	Interest rate	—		—		—		53		—		—
Interest rate options	Interest rate	27,250		1,771		375		17,168		168		61
Interest rate forwards	Interest rate	4,143		241		15		—		—		—
Foreign currency swaps	Foreign currency exchange rate	1,066		143		13		1,398		99		18
Foreign currency forwards	Foreign currency exchange rate	118		2		—		125		—		—
Credit default swaps — purchased	Credit	12		—		—		98		3		—
Credit default swaps — written	Credit	1,712		30		—		1,798		14		3
Equity futures	Equity market	—		—		—		169		—		—
Equity index options	Equity market	46,098		766		1,503		45,815		1,372		1,207
Equity variance swaps	Equity market	5,574		95		249		5,574		80		232
Equity total return swaps	Equity market	5,037		41		33		3,920		280		3
Total non-designated or nonqualifying derivatives		103,090		4,140		2,220		90,215		2,565		2,082
Embedded derivatives:
Ceded guaranteed minimum income benefits	Other	N/A		303		—		N/A		228		—
Direct guaranteed minimum benefits	Other	N/A		—		2,250		N/A		—		1,546
Direct index-linked annuities	Other	N/A		—		1,566		N/A		—		488
Assumed guaranteed minimum benefits	Other	N/A		—		541		N/A		—		386
Assumed index-linked annuities	Other	N/A		—		316		N/A		—		96
Total embedded derivatives		N/A		303		4,673		N/A		228		2,516
Total		$	106,224	$	4,798	$	6,909	$	92,676	$	2,993	$	4,628

Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)

The following tables present the amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses):

	Net Derivative Gains (Losses) Recognized for Derivatives			Net Derivative Gains (Losses) Recognized for Hedged Items			Net Investment Income		Policyholder Benefits and Claims			Amount of Gains (Losses) deferred in AOCI
	(In millions)
Three Months Ended September 30, 2019
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives	$	—		$	—		$	1	$	—		$	51
Foreign currency exchange rate derivatives	—			—			9		—			106
Total cash flow hedges	—			—			10		—			157
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives	1,656			—			—		—			—
Foreign currency exchange rate derivatives	49			(2		)	—		—			—
Credit derivatives	2			—			—		—			—
Equity derivatives	(18		)	—			—		—			—
Embedded derivatives	(703		)	—			—		—			—
Total non-qualifying hedges	986			(2		)	—		—			—
Total	$	986		$	(2	)	$	10	$	—		$	157
Three Months Ended September 30, 2018
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate derivatives	$	(2	)	$	2		$	—	$	—		$	—
Total fair value hedges	(2		)	2			—		—			—
Cash flow hedges:
Interest rate derivatives	45			—			1		—			(3		)
Foreign currency exchange rate derivatives				—			6		—			(4		)
Total cash flow hedges	45			—			7		—			(7		)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives	(266		)	—			—		—			—
Foreign currency exchange rate derivatives	6			(2		)	—		—			—
Credit derivatives	11			—			—		—			—
Equity derivatives	(446		)	—			—		—			—
Embedded derivatives	(13		)	—			—		(2		)	—
Total non-qualifying hedges	(708		)	(2		)	—		(2		)	—
Total	$	(665	)	$	—		$	7	$	(2	)	$	(7	)

	Net Derivative Gains (Losses) Recognized for Derivatives			Net Derivative Gains (Losses) Recognized for Hedged Items			Net Investment Income		Policyholder Benefits and Claims			Amount of Gains (Losses) deferred in AOCI
	(In millions)
Nine Months Ended September 30, 2019
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives	$	28		$	—		$	2	$	—		$	51
Foreign currency exchange rate derivatives	20			(23		)	25		—			145
Total cash flow hedges	48			(23		)	27		—			196
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives	2,905			—			—		—			—
Foreign currency exchange rate derivatives	71			(6		)	—		—			—
Credit derivatives	31			—			—		—			—
Equity derivatives	(1,808		)	—			—		—			—
Embedded derivatives	(1,436		)	—			—		—			—
Total non-qualifying hedges	(237		)	(6		)	—		—			—
Total	$	(189	)	$	(29	)	$	27	$	—		$	196
Nine Months Ended September 30, 2018
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate derivatives	$	(12	)	$	12		$	1	$	—		$	—
Total fair value hedges	(12		)	12			1		—			—
Cash flow hedges:
Interest rate derivatives	62			—			4		—			(5		)
Foreign currency exchange rate derivatives	(1		)	—			17		—			33
Total cash flow hedges	61			—			21		—			28
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives	(1,190		)	—			—		—			—
Foreign currency exchange rate derivatives	29			(4		)	—		—			—
Credit derivatives	7			—			—		—			—
Equity derivatives	(904		)	—			—		—			—
Embedded derivatives	771			—			—		(4		)	—
Total non-qualifying hedges	(1,287		)	(4		)	—		(4		)	—
Total	$	(1,238	)	$	8		$	22	$	(4	)	$	28

Components of Net Derivatives Gains (Losses)

The following tables present the amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items presented in net derivative gains (losses):

	Net Derivative Gains (Losses) Recognized for Derivatives			Net Derivative Gains (Losses) Recognized for Hedged Items			Net Investment Income		Policyholder Benefits and Claims			Amount of Gains (Losses) deferred in AOCI
	(In millions)
Three Months Ended September 30, 2019
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives	$	—		$	—		$	1	$	—		$	51
Foreign currency exchange rate derivatives	—			—			9		—			106
Total cash flow hedges	—			—			10		—			157
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives	1,656			—			—		—			—
Foreign currency exchange rate derivatives	49			(2		)	—		—			—
Credit derivatives	2			—			—		—			—
Equity derivatives	(18		)	—			—		—			—
Embedded derivatives	(703		)	—			—		—			—
Total non-qualifying hedges	986			(2		)	—		—			—
Total	$	986		$	(2	)	$	10	$	—		$	157
Three Months Ended September 30, 2018
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate derivatives	$	(2	)	$	2		$	—	$	—		$	—
Total fair value hedges	(2		)	2			—		—			—
Cash flow hedges:
Interest rate derivatives	45			—			1		—			(3		)
Foreign currency exchange rate derivatives				—			6		—			(4		)
Total cash flow hedges	45			—			7		—			(7		)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives	(266		)	—			—		—			—
Foreign currency exchange rate derivatives	6			(2		)	—		—			—
Credit derivatives	11			—			—		—			—
Equity derivatives	(446		)	—			—		—			—
Embedded derivatives	(13		)	—			—		(2		)	—
Total non-qualifying hedges	(708		)	(2		)	—		(2		)	—
Total	$	(665	)	$	—		$	7	$	(2	)	$	(7	)

	Net Derivative Gains (Losses) Recognized for Derivatives			Net Derivative Gains (Losses) Recognized for Hedged Items			Net Investment Income		Policyholder Benefits and Claims			Amount of Gains (Losses) deferred in AOCI
	(In millions)
Nine Months Ended September 30, 2019
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate derivatives	$	28		$	—		$	2	$	—		$	51
Foreign currency exchange rate derivatives	20			(23		)	25		—			145
Total cash flow hedges	48			(23		)	27		—			196
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives	2,905			—			—		—			—
Foreign currency exchange rate derivatives	71			(6		)	—		—			—
Credit derivatives	31			—			—		—			—
Equity derivatives	(1,808		)	—			—		—			—
Embedded derivatives	(1,436		)	—			—		—			—
Total non-qualifying hedges	(237		)	(6		)	—		—			—
Total	$	(189	)	$	(29	)	$	27	$	—		$	196
Nine Months Ended September 30, 2018
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate derivatives	$	(12	)	$	12		$	1	$	—		$	—
Total fair value hedges	(12		)	12			1		—			—
Cash flow hedges:
Interest rate derivatives	62			—			4		—			(5		)
Foreign currency exchange rate derivatives	(1		)	—			17		—			33
Total cash flow hedges	61			—			21		—			28
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives	(1,190		)	—			—		—			—
Foreign currency exchange rate derivatives	29			(4		)	—		—			—
Credit derivatives	7			—			—		—			—
Equity derivatives	(904		)	—			—		—			—
Embedded derivatives	771			—			—		(4		)	—
Total non-qualifying hedges	(1,287		)	(4		)	—		(4		)	—
Total	$	(1,238	)	$	8		$	22	$	(4	)	$	28

Schedule of estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps

The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at: 

	September 30, 2019					December 31, 2018
Rating Agency Designation of Referenced Credit Obligations (1)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)
	(Dollars in millions)
Aaa/Aa/A	$	9	$	615	2.4	$	8	$	689	2.0
Baa	21		1,097		5.3	3		1,109		5.0
Total	$	30	$	1,712	4.3	$	11	$	1,798	3.9

__________________

(1) The Company has written credit protection on both single name and index references. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service, Standard & Poor’s Global Ratings and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.

(2)

The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.

Estimated Fair Value of Derivative Assets and Liabilities after Master Netting Agreements and Cash Collateral

The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:

			Gross Amounts Not Offset on the Consolidated Balance Sheets
	Gross Amount Recognized		Financial Instruments (1)			Collateral Received/Pledged (2)			Net Amount		Off-balance Sheet Securities Collateral (3)			Net Amount After Securities Collateral
	(In millions)
September 30, 2019
Derivative assets	$	4,555	$	(1,599	)	$	(1,831	)	$	1,125	$	(1,088	)	$	37
Derivative liabilities	$	2,232	$	(1,599	)	$	—		$	633	$	(633	)	$	—
December 31, 2018
Derivative assets	$	2,820	$	(1,671	)	$	(1,053	)	$	96	$	(83	)	$	13
Derivative liabilities	$	2,104	$	(1,671	)	$	—		$	433	$	(433	)	$	—

__________________

(1) Represents amounts subject to an enforceable master netting agreement or similar agreement.

(2) The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreement.

(3) Securities collateral received by the Company is not recorded on the balance sheet. Amounts do not include excess of collateral pledged or received.

Estimated Fair Value of Derivative Assets and Liabilities after Master Netting Agreements and Cash Collateral

he estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:

			Gross Amounts Not Offset on the Consolidated Balance Sheets
	Gross Amount Recognized		Financial Instruments (1)			Collateral Received/Pledged (2)			Net Amount		Off-balance Sheet Securities Collateral (3)			Net Amount After Securities Collateral
	(In millions)
September 30, 2019
Derivative assets	$	4,555	$	(1,599	)	$	(1,831	)	$	1,125	$	(1,088	)	$	37
Derivative liabilities	$	2,232	$	(1,599	)	$	—		$	633	$	(633	)	$	—
December 31, 2018
Derivative assets	$	2,820	$	(1,671	)	$	(1,053	)	$	96	$	(83	)	$	13
Derivative liabilities	$	2,104	$	(1,671	)	$	—		$	433	$	(433	)	$	—

__________________

(1) Represents amounts subject to an enforceable master netting agreement or similar agreement.

(2) The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreement.

(3) Securities collateral received by the Company is not recorded on the balance sheet. Amounts do not include excess of collateral pledged or received.

Schedule of Derivative Instruments

The following table presents the aggregate estimated fair value of derivatives in a net liability position containing such credit contingent provisions and the aggregate estimated fair value of assets posted as collateral for such instruments.

	September 30, 2019		December 31, 2018
	(In millions)
Estimated fair value of derivatives in a net liability position (1)	$	633	$	433
Estimated Fair Value of Collateral Provided (2):
Fixed maturity securities	$	1,250	$	797

__________________

(1) After taking into consideration the existence of netting agreements.

(2)

Substantially all of the Company’s collateral arrangements provide for daily posting of collateral for the full value of the derivative contract. As a result, if the credit contingent provisions of derivative contracts in a net liability position were triggered, minimal additional assets would be required to be posted as collateral or needed to settle the instruments immediately.