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Derivatives (Tables)

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position

The primary underlying risk exposure, gross notional amount and estimated fair value of derivatives held were as follows at:


		September 30, 2022						December 31, 2021
	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	$	90	$	—	$	17	$	180	$	30	$	—
Foreign currency swaps	Foreign currency exchange rate	4,004		870		8		3,237		220		22

Total qualifying hedges		4,094		870		25		3,417		250		22
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	3,900		156		54		2,595		325		17
Interest rate floors	Interest rate	2,250		7		2		—		—		—
Interest rate caps	Interest rate	5,350		182		5		5,100		29		4

Interest rate options	Interest rate	20,438		41		189		8,050		83		—

Interest rate forwards	Interest rate	15,969		33		2,550		9,808		627		109
Foreign currency swaps	Foreign currency exchange rate	825		207		—		956		94		21
Foreign currency forwards	Foreign currency exchange rate	423		—		6		288		—		4

Credit default swaps — written	Credit	1,869		7		11		1,724		39		1
Credit default swaptions	Credit	—		—		—		150		—		—

Equity index options	Equity market	17,053		696		350		24,692		1,155		877
Equity variance swaps	Equity market	281		9		1		281		9		1
Equity total return swaps	Equity market	33,069		1,515		1,519		32,719		493		588
Hybrid options	Equity market	—		—		—		900		8		—
Total non-designated or non-qualifying derivatives		101,427		2,853		4,687		87,263		2,862		1,622
Embedded derivatives:
Ceded guaranteed minimum income benefits	Other	N/A		129		—		N/A		186		—
Direct index-linked annuities	Other	N/A		—		2,034		N/A		—		6,211
Direct guaranteed minimum benefits	Other	N/A		—		1,622		N/A		—		1,725
Assumed guaranteed minimum benefits	Other	N/A		—		313		N/A		—		427
Assumed index-linked annuities	Other	N/A		—		308		N/A		—		437
Total embedded derivatives		N/A		129		4,277		N/A		186		8,800
Total		$	105,521	$	3,852	$	8,989	$	90,680	$	3,298	$	10,444

Derivative Instruments, Gain (Loss)

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) were as follows:


	Net Derivative Gains (Losses) Recognized for Derivatives		Net Derivative Gains (Losses) Recognized for Hedged Items		Net Investment Income		Amount of Gains (Losses) Deferred in AOCI
	(In millions)
Three Months Ended September 30, 2022
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	—	$	—	$	1	$	(8)
Foreign currency exchange rate	8		(7)		17		339
Total cash flow hedges	8		(7)		18		331
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,233)		—		—		—
Foreign currency exchange rate	91		(12)		—		—
Credit	5		—		—		—
Equity market	40		—		—		—
Embedded	700		—		—		—
Total non-qualifying hedges	(397)		(12)		—		—
Total	$	(389)	$	(19)	$	18	$	331
Three Months Ended September 30, 2021
Derivatives Designated as Hedging Instruments:



Cash flow hedges:
Interest rate	$	—	$	—	$	1	$	3
Foreign currency exchange rate	(1)		1		10		99
Total cash flow hedges	(1)		1		11		102
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(6)		—		—		—
Foreign currency exchange rate	32		(2)		—		—
Credit	2		—		—		—
Equity market	(48)		—		—		—
Embedded	78		—		—		—
Total non-qualifying hedges	58		(2)		—		—
Total	$	57	$	(1)	$	11	$	102


	Net Derivative Gains (Losses) Recognized for Derivatives		Net Derivative Gains (Losses) Recognized for Hedged Items		Net Investment Income		Amount of Gains (Losses) Deferred in AOCI
	(In millions)
Nine Months Ended September 30, 2022
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	4	$	—	$	3	$	(49)
Foreign currency exchange rate	9		(8)		41		662
Total cash flow hedges	13		(8)		44		613
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(3,671)		—		—		—
Foreign currency exchange rate	173		(25)		—		—
Credit	(27)		—		—		—
Equity market	768		—		—		—
Embedded	4,686		—		—		—
Total non-qualifying hedges	1,929		(25)		—		—
Total	$	1,942	$	(33)	$	44	$	613
Nine Months Ended September 30, 2021
Derivatives Designated as Hedging Instruments:



Cash flow hedges:
Interest rate	$	1	$	—	$	3	$	(30)
Foreign currency exchange rate	5		(2)		25		179
Total cash flow hedges	6		(2)		28		149
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,196)		—		—		—
Foreign currency exchange rate	43		1		—		—
Credit	13		—		—		—
Equity market	(496)		—		—		—
Embedded	(418)		—		—		—
Total non-qualifying hedges	(2,054)		1		—		—
Total	$	(2,048)	$	(1)	$	28	$	149

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


	Net Derivative Gains (Losses) Recognized for Derivatives		Net Derivative Gains (Losses) Recognized for Hedged Items		Net Investment Income		Amount of Gains (Losses) Deferred in AOCI
	(In millions)
Three Months Ended September 30, 2022
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	—	$	—	$	1	$	(8)
Foreign currency exchange rate	8		(7)		17		339
Total cash flow hedges	8		(7)		18		331
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,233)		—		—		—
Foreign currency exchange rate	91		(12)		—		—
Credit	5		—		—		—
Equity market	40		—		—		—
Embedded	700		—		—		—
Total non-qualifying hedges	(397)		(12)		—		—
Total	$	(389)	$	(19)	$	18	$	331
Three Months Ended September 30, 2021
Derivatives Designated as Hedging Instruments:



Cash flow hedges:
Interest rate	$	—	$	—	$	1	$	3
Foreign currency exchange rate	(1)		1		10		99
Total cash flow hedges	(1)		1		11		102
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(6)		—		—		—
Foreign currency exchange rate	32		(2)		—		—
Credit	2		—		—		—
Equity market	(48)		—		—		—
Embedded	78		—		—		—
Total non-qualifying hedges	58		(2)		—		—
Total	$	57	$	(1)	$	11	$	102


	Net Derivative Gains (Losses) Recognized for Derivatives		Net Derivative Gains (Losses) Recognized for Hedged Items		Net Investment Income		Amount of Gains (Losses) Deferred in AOCI
	(In millions)
Nine Months Ended September 30, 2022
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	4	$	—	$	3	$	(49)
Foreign currency exchange rate	9		(8)		41		662
Total cash flow hedges	13		(8)		44		613
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(3,671)		—		—		—
Foreign currency exchange rate	173		(25)		—		—
Credit	(27)		—		—		—
Equity market	768		—		—		—
Embedded	4,686		—		—		—
Total non-qualifying hedges	1,929		(25)		—		—
Total	$	1,942	$	(33)	$	44	$	613
Nine Months Ended September 30, 2021
Derivatives Designated as Hedging Instruments:



Cash flow hedges:
Interest rate	$	1	$	—	$	3	$	(30)
Foreign currency exchange rate	5		(2)		25		179
Total cash flow hedges	6		(2)		28		149
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,196)		—		—		—
Foreign currency exchange rate	43		1		—		—
Credit	13		—		—		—
Equity market	(496)		—		—		—
Embedded	(418)		—		—		—
Total non-qualifying hedges	(2,054)		1		—		—
Total	$	(2,048)	$	(1)	$	28	$	149

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

The estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps were as follows at:


	September 30, 2022					December 31, 2021
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	$	5	$	664	2.1	$	12	$	589	2.4
Baa	(8)		1,177		5.2	27		1,131		5.0
Ba	1		24		4.2	—		—		0.0
Caa and Lower	(2)		4		3.2	(1)		4		4.0
Total	$	(4)	$	1,869	4.1	$	38	$	1,724	4.1

_______________

(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, S&P and Fitch. 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 after Master Netting Agreements and Cash Collateral

The estimated fair values of 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		Securities Collateral Received/Pledged (3)		Net Amount After Securities Collateral
	(In millions)
September 30, 2022
Derivative assets	$	3,803	$	(2,172)	$	(1,521)	$	110	$	(28)	$	82
Derivative liabilities	$	4,744	$	(2,172)	$	(4)	$	2,568	$	(2,566)	$	2
December 31, 2021
Derivative assets	$	3,113	$	(1,155)	$	(1,480)	$	478	$	(413)	$	65
Derivative liabilities	$	1,632	$	(1,155)	$	—	$	477	$	(477)	$	—

_______________

(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 from counterparties is not reported on the consolidated balance sheets and may not be sold or re-pledged unless the counterparty is in default. Amounts do not include excess of collateral pledged or received.

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

The estimated fair values of 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		Securities Collateral Received/Pledged (3)		Net Amount After Securities Collateral
	(In millions)
September 30, 2022
Derivative assets	$	3,803	$	(2,172)	$	(1,521)	$	110	$	(28)	$	82
Derivative liabilities	$	4,744	$	(2,172)	$	(4)	$	2,568	$	(2,566)	$	2
December 31, 2021
Derivative assets	$	3,113	$	(1,155)	$	(1,480)	$	478	$	(413)	$	65
Derivative liabilities	$	1,632	$	(1,155)	$	—	$	477	$	(477)	$	—

_______________

(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.

Schedule of Derivative Instruments

The aggregate estimated fair values 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 were as follows at:


	September 30, 2022		December 31, 2021
	(In millions)
Estimated fair value of derivatives in a net liability position (1)	$	2,572	$	477
Estimated Fair Value of Collateral Provided (2):
Fixed maturity securities	$	4,583	$	839

_______________

(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. Additionally, the Company is required to pledge initial margin for certain new over-the-counter (“OTC”) bilateral contracts between two counterparties (“OTC-bilateral”) derivative transactions to third party custodians.

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

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- Definition

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

+ References

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