Insurance

9 Months Ended

Sep. 30, 2023

4. Insurance

Liability for Future Policy Benefits

Information regarding LFPBs for non-participating traditional and limited-payment contracts was as follows:


	Nine Months Ended September 30,
	2023									2022
	Term and Whole Life Insurance			Income Annuities			Structured Settlement and Pension Risk Transfer Annuities			Term and Whole Life Insurance			Income Annuities			Structured Settlement and Pension Risk Transfer Annuities
	(Dollars in millions)
Present value of expected net premiums:
Balance, beginning of period	$	2,804		$	—		$	—		$	3,212		$	—		$	—
Beginning balance at original discount rate	3,146			—			—			2,964			—			—
Effect of model refinements	—			—			—			121			—			—
Effect of changes in cash flow assumptions	206			—			—			160			—			—
Effect of actual variances from expected experience	(36)			—			—			88			—			—
Adjusted beginning of period balance	3,316			—			—			3,333			—			—
Issuances	71			—			—			71			—			—
Interest accrual	80			—			—			85			—			—
Net premiums collected	(275)			—			—			(318)			—			—
Ending balance at original discount rate	3,192			—			—			3,171			—			—
Effect of changes in discount rate assumptions	(428)			—			—			(372)			—			—
Balance, end of period	$	2,764		$	—		$	—		$	2,799		$	—		$	—
Present value of expected future policy benefits:
Balance, beginning of period	$	5,172		$	3,469		$	6,793		$	6,253		$	4,283		$	10,171
Beginning balance at original discount rate	5,816			3,848			7,410			5,682			3,817			8,165
Effect of model refinements	—			—			—			134			—			—
Effect of changes in cash flow assumptions	296			—			—			181			—			—
Effect of actual variances from expected experience	(39)			18			(49)			117			(23)			(39)
Adjusted beginning of period balance	6,073			3,866			7,361			6,114			3,794			8,126
Issuances	74			277			—			78			165			—
Interest accrual	157			106			236			163			107			259
Benefit payments	(369)			(292)			(449)			(498)			(263)			(477)
Ending balance at original discount rate	5,935			3,957			7,148			5,857			3,803			7,908
Effect of changes in discount rate assumptions	(864)			(508)			(956)			(712)			(410)			(859)
Balance, end of period	$	5,071		$	3,449		$	6,192		$	5,145		$	3,393		$	7,049
Net liability for future policy benefits, end of period	$	2,307		$	3,449		$	6,192		$	2,346		$	3,393		$	7,049
Less: Reinsurance recoverable, end of period	26			30			—			33			24			69
Net liability for future policy benefits, after reinsurance recoverable	$	2,281		$	3,419		$	6,192		$	2,313		$	3,369		$	6,980
Weighted-average duration of liability	8.9 years			8.3 years			11.6 years			8.6 years			8.4 years			12.7 years
Weighted-average interest accretion rate	3.92		%	3.96		%	4.45		%	3.95		%	3.91		%	4.44		%
Current discount rate	5.87		%	5.87		%	5.91		%	5.46		%	5.45		%	5.46		%
Gross premiums or assessments recognized during period	$	439		$	339		$	—		$	473		$	186		$	—
Expected future gross premiums, undiscounted	$	6,079		$	—		$	—		$	6,641		$	—		$	—
Expected future gross premiums, discounted	$	4,598		$	—		$	—		$	4,948		$	—		$	—
Expected future benefit payments, undiscounted	$	8,194		$	5,570		$	13,909		$	8,093		$	5,365		$	16,721
Expected future benefit payments, discounted	$	5,935		$	3,957		$	7,148		$	5,857		$	3,803		$	7,908

The measurement of LFPBs can be significantly impacted by changes in assumptions for policyholder behavior. As part of the 2023 and 2022 annual actuarial review (“AAR”), the Company updated assumptions regarding mortality and lapses for term and non-participating whole life insurance. The impact from changes in assumptions is presented in effect of changes in cash flow assumptions in the table above.

Information regarding the additional insurance liabilities for universal life-type contracts with secondary guarantees was as follows:


	Nine Months Ended September 30,
	2023			2022
	(Dollars in millions)
Balance, beginning of period	$	6,935		$	7,168
Beginning balance before the effect of unrealized gains and losses	7,175			6,731
Effect of changes in cash flow assumptions	52			(37)
Effect of actual variances from expected experience	75			157
Adjusted beginning of period balance	7,302			6,851
Interest accrual	265			248
Net assessments collected	309			324
Benefit payments	(289)			(369)
Effect of realized capital gains (losses)	—			—
Ending balance before the effect of unrealized gains and losses	7,587			7,054
Effect of unrealized gains and losses	(347)			(83)
Balance, end of period	7,240			6,971
Less: Reinsurance recoverable, end of period	1,409			1,393
Net additional liability, after reinsurance recoverable	$	5,831		$	5,578
Weighted-average duration of liability	6.7 years			6.7 years
Weighted-average interest accretion rate	4.92		%	4.90		%
Gross assessments recognized during period	$	798		$	834

The measurement of liabilities for secondary guarantees can be significantly impacted by changes in the expected general account rate of return, which is driven by the Company’s assumption for long-term treasury yields. The Company’s practice of projecting treasury yields uses a mean reversion approach that assumes that long-term interest rates are less influenced by short-term fluctuations and are only changed when sustained interim deviations are expected. As part of the 2023 AAR, the Company increased the long-term general account earned rate, driven by an increase in the mean reversion rate from 3.50% to 3.75%. The Company also updated assumptions regarding policyholder behavior, including mortality, premium persistency, lapses, withdrawals and maintenance expenses. As part of the 2022 AAR, the Company increased the long-term general account earned rate, driven by an increase in the mean reversion rate from 3.00% to 3.50%. Both period assumption updates are reflected in the table above.

A reconciliation of the net LFPBs for nonparticipating traditional and limited-payment contracts and the additional insurance liabilities for universal life-type contracts with secondary guarantees reported in the preceding rollforward tables to LFPBs on the consolidated balance sheets was as follows at:


	September 30,
	2023		2022
	(In millions)
Liabilities reported in the preceding rollforward tables	$	19,188	$	19,759
Long-term care insurance (1)	5,276		5,632
ULSG liabilities, including liability for profits followed by losses	1,966		2,866
Participating whole life insurance (2)	2,802		2,639
Deferred profit liabilities	455		375
Other	237		309
Total liability for future policy benefits	$	29,924	$	31,580

_______________

(1)Includes liabilities related to fully reinsured individual long-term care insurance. See Note 3.

(2)Participating whole life insurance uses an interest assumption based on the non-forfeiture interest rate, ranging from 3.5% to 4.0%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts, and also includes a liability for terminal dividends. Participating whole life insurance represented 3% of the Company’s life insurance in-force at both September 30, 2023 and 2022, and 40% and 41% of gross traditional life insurance premiums for the nine months ended September 30, 2023 and 2022, respectively.

Information regarding LFPBs for non-participating traditional and limited-payment contracts was as follows:


	Years Ended December 31,
	2022						2021
	Term and Whole Life Insurance		Income Annuities		Structured Settlement and Pension Risk Transfer Annuities		Term and Whole Life Insurance		Income Annuities		Structured Settlement and Pension Risk Transfer Annuities
	(Dollars in millions)
Present value of expected net premiums:
Balance, beginning of year	$	3,212	$	—	$	—	$	3,274	$	—	$	—
Beginning balance at original discount rate	2,964		—		—		2,868		—		—
Effect of model refinements	121		—		—		—		—		—
Effect of changes in cash flow assumptions	159		—		—		100		—		—
Effect of actual variances from expected experience	114		—		—		158		—		—
Adjusted beginning of year balance	3,358		—		—		3,126		—		—
Issuances	93		—		—		112		—		—
Interest accrual	112		—		—		107		—		—
Net premiums collected	(417)		—		—		(381)		—		—
Ending balance at original discount rate	3,146		—		—		2,964		—		—
Effect of changes in discount rate assumptions	(342)		—		—		248		—		—
Balance, end of year	$	2,804	$	—	$	—	$	3,212	$	—	$	—
Present value of expected future policy benefits:
Balance, beginning of year	$	6,253	$	4,283	$	10,171	$	6,606	$	4,636	$	11,301
Beginning balance at original discount rate	5,682		3,817		8,165		5,678		3,889		8,531
Effect of model refinements	134		—		(278)		—		—		—
Effect of changes in cash flow assumptions	179		55		(157)		100		(40)		(41)
Effect of actual variances from expected experience	150		(21)		(23)		158		(6)		(16)
Adjusted beginning of year balance	6,145		3,851		7,707		5,936		3,843		8,474
Issuances	101		220		—		128		193		—
Interest accrual	216		144		327		214		149		359
Benefit payments	(646)		(367)		(624)		(596)		(368)		(668)
Ending balance at original discount rate	5,816		3,848		7,410		5,682		3,817		8,165
Effect of changes in discount rate assumptions	(644)		(379)		(617)		571		466		2,006
Balance, end of year	$	5,172	$	3,469	$	6,793	$	6,253	$	4,283	$	10,171
Net liability for future policy benefits, end of year	$	2,368	$	3,469	$	6,793	$	3,041	$	4,283	$	10,171
Less: Reinsurance recoverable, end of year	32		25		68		42		28		93
Net liability for future policy benefits, after reinsurance recoverable	$	2,336	$	3,444	$	6,725	$	2,999	$	4,255	$	10,078

Policyholder Account Balances

Information regarding policyholder account balances was as follows:


	Universal Life Insurance			Variable Annuities (1)			Index-linked Annuities			Fixed Rate Annuities			ULSG			Company-Owned Life Insurance (1)
	(Dollars in millions)
Nine Months Ended September 30, 2023
Balance, beginning of period	$	2,100		$	4,664		$	33,897		$	14,274		$	5,307		$	641
Premiums and deposits	154			63			5,314			1,983			501			—
Surrenders and withdrawals	(114)			(455)			(2,588)			(1,518)			(17)			—
Benefit payments	(48)			(79)			(177)			(285)			(67)			(6)
Net transfers from (to) separate account	13			6			—			—			—			—
Interest credited	17			94			299			357			165			22
Policy charges	(150)			(18)			(6)			—			(764)			(7)
Changes related to embedded derivatives	—			—			1,880			—			—			—

Balance, end of period	$	1,972		$	4,275		$	38,619		$	14,811		$	5,125		$	650

Weighted-average crediting rate (2)	0.84		%	2.10		%	1.02		%	2.43		%	3.17		%	3.41		%
Nine Months Ended September 30, 2022
Balance, beginning of period	$	2,134		$	4,475		$	32,000		$	11,849		$	5,569		$	646
Premiums and deposits	149			126			5,081			2,181			529			—
Surrenders and withdrawals	(36)			(302)			(1,578)			(439)			(26)			—
Benefit payments	(45)			(81)			(123)			(255)			(58)			(5)
Net transfers from (to) separate account	18			155			—			—			—			(13)
Interest credited	37			115			301			243			152			16
Policy charges	(152)			(19)			(5)			—			(786)			(5)
Changes related to embedded derivatives	—			—			(4,086)			—			—			—

Balance, end of period	$	2,105		$	4,469		$	31,590		$	13,579		$	5,380		$	639

Weighted-average crediting rate (2)	1.75		%	2.57		%	0.84		%	1.98		%	2.77		%	2.47		%

_______________

(1)Includes liabilities related to separate account products where the contract holder elected a general account investment option.

(2)Excludes the effects of embedded derivatives related to index-linked crediting rates.

A reconciliation of policyholder account balances reported in the preceding rollforward table to the liability for policyholder account balances on the consolidated balance sheets was as follows at:


	September 30,
	2023		2022
	(In millions)
Policyholder account balances reported in the preceding rollforward table	$	65,452	$	57,762
Funding agreements classified as investment contracts	11,052		9,959
Other investment contract liabilities	970		1,089
Total policyholder account balances	$	77,474	$	68,810

The balance of account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums was as follows at:


Range of Guaranteed Minimum Crediting Rate	At Guaranteed Minimum		1 to 50 Basis Points Above		51 to 150 Basis Points Above		Greater than 150 Basis Points Above		Total
	(In millions)
September 30, 2023
Annuities (1):
Less than 2.00%	$	668	$	236	$	468	$	7,164	$	8,536
2.00% to 3.99%	8,937		113		200		59		9,309
Greater than 3.99%	901		—		—		—		901
Total	$	10,506	$	349	$	668	$	7,223	$	18,746
Life insurance (2) (3):
Less than 2.00%	$	—	$	—	$	—	$	216	$	216
2.00% to 3.99%	—		438		49		132		619
Greater than 3.99%	1,092		—		—		—		1,092
Total	$	1,092	$	438	$	49	$	348	$	1,927
ULSG (3):
Less than 2.00%	$	—	$	—	$	—	$	—	$	—
2.00% to 3.99%	1,159		1,506		1,680		257		4,602
Greater than 3.99%	513		—		—		—		513
Total	$	1,672	$	1,506	$	1,680	$	257	$	5,115
December 31, 2022
Annuities (1):
Less than 2.00%	$	805	$	293	$	356	$	5,805	$	7,259
2.00% to 3.99%	5,224		4,871		594		8		10,697
Greater than 3.99%	470		—		—		—		470
Total	$	6,499	$	5,164	$	950	$	5,813	$	18,426
Life insurance (2) (3):
Less than 2.00%	$	—	$	—	$	—	$	172	$	172
2.00% to 3.99%	—		462		87		150		699
Greater than 3.99%	1,148		—		—		—		1,148
Total	$	1,148	$	462	$	87	$	322	$	2,019
ULSG (3):
Less than 2.00%	$	—	$	—	$	—	$	—	$	—
2.00% to 3.99%	1,224		1,581		1,729		266		4,800
Greater than 3.99%	527		—		—		—		527
Total	$	1,751	$	1,581	$	1,729	$	266	$	5,327

_______________

(1)Includes policyholder account balances for fixed rate annuities and the fixed account portion of variable annuities.

(2)Includes policyholder account balances for retained asset accounts, universal life policies and the fixed account portion of universal variable life insurance policies.

(3)Amounts are gross of policy loans.

Market Risk Benefits

Information regarding MRB assets and liabilities associated with variable annuities was as follows:


	Nine Months Ended September 30,				Years Ended December 31,
	2023		2022		2022		2021
	(Dollars in millions)
Balance, beginning of period	$	9,997	$	15,726	$	15,726	$	18,421
Balance, beginning of period, before effect of changes in nonperformance risk	8,253		11,639		11,639		14,969
Decrements	(114)		20		16		(70)
Effect of changes in future expected assumptions	259		212		212		41
Effect of actual different from expected experience	178		(333)		(48)		(86)
Effect of changes in interest rates	(2,360)		(8,396)		(8,397)		(1,831)
Effect of changes in fund returns	(669)		5,605		3,806		(2,578)

Issuances	(9)		(29)		(47)		(96)
Effect of changes in risk margin	(52)		(120)		(152)		(128)
Aging of the block and other	1,022		945		1,224		1,418
Balance, end of period, before effect of changes in nonperformance risk	6,508		9,543		8,253		11,639
Effect of changes in nonperformance risk	1,690		1,578		1,744		4,087
Balance, end of period	8,198		11,121		9,997		15,726
Less: Reinsurance recoverable, end of period	35		76		71		118
Balance, end of period, net of reinsurance (1)	$	8,163	$	11,045	$	9,926	$	15,608
Weighted-average attained age of contract holder	72.7 years		71.6 years		71.8 years		71.1 years

_______________

(1)Amounts represent the sum of MRB assets and MRB liabilities presented on the consolidated balance sheets at September 30, 2023 and 2022, with the exception of ($7) million and $2 million, respectively, of index-linked annuities not included in this table, and at December 31, 2022 and 2021, with the exception of $2 million and $5 million, respectively, of index-linked annuities not included in this table.

Market conditions, including, but not limited to, changes in interest rates, equity indices, market volatility and variations in actuarial assumptions, including policyholder behavior, mortality and risk margins related to non-capital markets inputs, as well as changes in nonperformance risk, may result in significant fluctuations in the estimated fair value of the guarantees. As part of the AAR in 2023 and 2022, the Company updated assumptions regarding policyholder behavior, mortality, separate account fund allocations and volatility, which are reflected in the table above.

Separate Accounts

Information regarding separate account liabilities was as follows:


	Nine Months Ended September 30,
	2023						2022
	Variable Annuities		Universal Life Insurance		Company-Owned Life Insurance		Variable Annuities		Universal Life Insurance		Company-Owned Life Insurance
	(In millions)
Balance, beginning of period	$	74,845	$	1,970	$	1,919	$	101,108	$	2,576	$	2,367
Premiums and deposits	596		63		—		1,016		69		—
Surrenders and withdrawals	(4,398)		(53)		(11)		(4,450)		(46)		(12)
Benefit payments	(1,068)		(13)		(21)		(1,014)		(19)		(25)
Investment performance	3,981		174		175		(22,607)		(646)		(456)
Policy charges	(1,592)		(58)		(45)		(1,707)		(58)		(50)
Net transfers from (to) general account	(6)		(13)		—		(155)		(18)		13
Other	(2)		—		6		42		—		3
Balance, end of period	$	72,356	$	2,070	$	2,023	$	72,233	$	1,858	$	1,840

A reconciliation of separate account liabilities reported in the preceding rollforward table to the separate account liabilities balance on the consolidated balance sheets was as follows at:


	September 30,
	2023		2022
	(In millions)
Separate account liabilities reported in the preceding rollforward table	$	76,449	$	75,931
Variable income annuities	134		123
Pension risk transfer annuities	19		15
Total separate account liabilities	$	76,602	$	76,069

The aggregate estimated fair value of assets, by major investment asset category, supporting separate accounts was as follows at:



	September 30, 2023		December 31, 2022
	(In millions)
Equity securities	$	76,346	$	78,583

Fixed maturity securities	244		277
Cash and cash equivalents	6		9
Other assets	6		11
Total aggregate estimated fair value of assets	$	76,602	$	78,880

Net Amount at Risk and Cash Surrender Values

Information regarding the net amount at risk and cash surrender value for insurance products was as follows at:


	Universal Life Insurance		Variable Annuities		Index-linked Annuities		Fixed Rate Annuities		ULSG		Company-Owned Life Insurance
	(In millions)
September 30, 2023
Account balances reported in the preceding rollforward tables:
Policyholder account balances	$	1,972	$	4,275	$	38,619	$	14,811	$	5,125	$	650
Separate account liabilities	2,070		72,356		—		—		—		2,023
Total account balances	$	4,042	$	76,631	$	38,619	$	14,811	$	5,125	$	2,673
Net amount at risk	$	22,618	$	15,989	N/A		N/A		$	69,277	$	2,611
Cash surrender value	$	3,826	$	76,355	$	36,164	$	14,189	$	6,121	$	2,456
September 30, 2022
Account balances reported in the preceding rollforward tables:
Policyholder account balances	$	2,105	$	4,469	$	31,590	$	13,579	$	5,380	$	639
Separate account liabilities	1,858		72,233		—		—		—		1,840
Total account balances	$	3,963	$	76,702	$	31,590	$	13,579	$	5,380	$	2,479
Net amount at risk	$	24,250	$	18,251	N/A		N/A		$	71,142	$	3,399
Cash surrender value	$	3,677	$	76,739	$	27,976	$	12,748	$	6,315	$	2,269

Products may contain both separate account and general account fund options; accordingly, net amount at risk and cash surrender value reported in the table above relate to the total account balance for each respective product grouping.