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Derivatives (Tables)

9 Months Ended

Sep. 30, 2023

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, excluding embedded derivatives, held were as follows at:


		September 30, 2023						December 31, 2022
	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	$	—	$	—	$	—	$	60	$	—	$	12
Foreign currency swaps	Foreign currency exchange rate	3,898		462		14		3,981		584		8

Total qualifying hedges		3,898		462		14		4,041		584		20
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	30,527		168		280		3,145		98		46
Interest rate floors	Interest rate	3,000		2		1		3,250		12		3
Interest rate caps	Interest rate	5,800		80		27		6,350		137		43

Interest rate options	Interest rate	31,080		19		303		28,688		22		232

Interest rate forwards	Interest rate	16,441		178		2,867		18,168		35		2,466
Foreign currency swaps	Foreign currency exchange rate	759		124		—		810		147		—
Foreign currency forwards	Foreign currency exchange rate	312		—		1		295		1		1

Credit default swaps — written	Credit	1,530		21		1		1,757		18		2
Credit default swaptions	Credit	—		—		—		100		—		—

Equity index options	Equity market	16,215		508		436		17,229		697		351

Equity total return swaps	Equity market	56,332		931		1,061		32,909		520		747
Hybrid options	Equity market	630		7		—		—		—		—
Total non-designated or non-qualifying derivatives		162,626		2,038		4,977		112,701		1,687		3,891
Total		$	166,524	$	2,500	$	4,991	$	116,742	$	2,271	$	3,911

Derivative Instruments, Gain (Loss)

The amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items reported 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, 2023
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	—	$	—	$	1	$	(2)
Foreign currency exchange rate	1		(1)		13		(30)
Total cash flow hedges	1		(1)		14		(32)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,481)		—		—		—
Foreign currency exchange rate	14		(6)		—		—
Credit	3		—		—		—
Equity market	(280)		—		—		—
Embedded	912		—		—		—
Total non-qualifying hedges	(832)		(6)		—		—
Total	$	(831)	$	(7)	$	14	$	(32)
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	518		—		—		—
Total non-qualifying hedges	(579)		(12)		—		—
Total	$	(571)	$	(19)	$	18	$	331


	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, 2023
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	(2)	$	—	$	3	$	(2)
Foreign currency exchange rate	5		(6)		39		(119)
Total cash flow hedges	3		(6)		42		(121)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,422)		—		—		—
Foreign currency exchange rate	(5)		(2)		—		—
Credit	22		—		—		—
Equity market	44		—		—		—
Embedded	(1,885)		—		—		—
Total non-qualifying hedges	(3,246)		(2)		—		—
Total	$	(3,243)	$	(8)	$	42	$	(121)
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	4,106		—		—		—
Total non-qualifying hedges	1,349		(25)		—		—
Total	$	1,362	$	(33)	$	44	$	613

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

The amount and location of gains (losses), including earned income, recognized for derivatives and gains (losses) pertaining to hedged items reported 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, 2023
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	—	$	—	$	1	$	(2)
Foreign currency exchange rate	1		(1)		13		(30)
Total cash flow hedges	1		(1)		14		(32)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,481)		—		—		—
Foreign currency exchange rate	14		(6)		—		—
Credit	3		—		—		—
Equity market	(280)		—		—		—
Embedded	912		—		—		—
Total non-qualifying hedges	(832)		(6)		—		—
Total	$	(831)	$	(7)	$	14	$	(32)
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	518		—		—		—
Total non-qualifying hedges	(579)		(12)		—		—
Total	$	(571)	$	(19)	$	18	$	331


	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, 2023
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate	$	(2)	$	—	$	3	$	(2)
Foreign currency exchange rate	5		(6)		39		(119)
Total cash flow hedges	3		(6)		42		(121)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate	(1,422)		—		—		—
Foreign currency exchange rate	(5)		(2)		—		—
Credit	22		—		—		—
Equity market	44		—		—		—
Embedded	(1,885)		—		—		—
Total non-qualifying hedges	(3,246)		(2)		—		—
Total	$	(3,243)	$	(8)	$	42	$	(121)
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	4,106		—		—		—
Total non-qualifying hedges	1,349		(25)		—		—
Total	$	1,362	$	(33)	$	44	$	613

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, 2023					December 31, 2022
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	$	7	$	544	1.5	$	7	$	544	2.2
Baa	12		958		5.2	8		1,185		5.0
Ba	2		24		3.2	2		24		4.0
Caa and Lower	(1)		4		2.2	(1)		4		3.0
Total	$	20	$	1,530	3.8	$	16	$	1,757	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, 2023
Derivative assets	$	2,719	$	(2,028)	$	(672)	$	19	$	(6)	$	13
Derivative liabilities	$	5,214	$	(2,028)	$	—	$	3,186	$	(3,186)	$	—
December 31, 2022
Derivative assets	$	2,295	$	(1,659)	$	(629)	$	7	$	(5)	$	2
Derivative liabilities	$	3,910	$	(1,659)	$	—	$	2,251	$	(2,251)	$	—

_______________

(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, 2023
Derivative assets	$	2,719	$	(2,028)	$	(672)	$	19	$	(6)	$	13
Derivative liabilities	$	5,214	$	(2,028)	$	—	$	3,186	$	(3,186)	$	—
December 31, 2022
Derivative assets	$	2,295	$	(1,659)	$	(629)	$	7	$	(5)	$	2
Derivative liabilities	$	3,910	$	(1,659)	$	—	$	2,251	$	(2,251)	$	—

_______________

(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, 2023		December 31, 2022
	(In millions)
Estimated fair value of derivatives in a net liability position (1)	$	3,186	$	2,251
Estimated fair value of collateral provided (2):
Fixed maturity securities	$	5,567	$	4,894

_______________

(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).

+ References + Details

- 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 + Details