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Derivatives
 3 Months Ended
Mar. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
8. Derivatives
Accounting for Derivatives
See Notes 1 and 10 of the Notes to the Consolidated Financial Statements included in the 2024 Annual Report for a description of the Company’s accounting policies for derivatives and the fair value hierarchy for derivatives.
Types of Derivative Instruments and Derivative Strategies
The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize its exposure to various market risks. Commonly used derivative instruments include, but are not necessarily limited to:
•Interest rate derivatives: swaps, floors, caps, futures, swaptions and forwards;
•Foreign currency exchange rate derivatives: forwards and swaps;
•Equity market derivatives: futures, options, total return swaps and hybrid options; and
•Credit derivatives: index reference credit default swaps.
For detailed information on these contracts and the related strategies, see Note 9 of the Notes to the Consolidated Financial Statements included in the 2024 Annual Report.
Primary Risks Managed by Derivatives
The primary underlying risk exposure, gross notional amount and estimated fair value of derivatives, excluding embedded derivatives, held were as follows at:
March 31, 2025December 31, 2024
Primary Underlying Risk ExposureGross Notional AmountEstimated Fair ValueGross Notional AmountEstimated Fair Value
AssetsLiabilitiesAssetsLiabilities
(In millions)
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate swaps
Interest rate$500 $2 $— $500 $9 $— 
Foreign currency swapsForeign currency exchange rate3,746 419 27 3,778 430 25 
Total qualifying hedges4,246 421 27 4,278 439 25 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swapsInterest rate43,020 169 267 69,303 131 444 
Interest rate floorsInterest rate8,500 4 12 8,000 1 30 
Interest rate capsInterest rate7,850 4 8 7,850 14 14 
Interest rate futuresInterest rate— — — 171 — — 
Interest rate optionsInterest rate 28,300 29 359 23,060 11 371 
Interest rate forwardsInterest rate 13,499 52 1,423 16,352 121 1,876 
Foreign currency swapsForeign currency exchange rate665 103 1 674 111 — 
Foreign currency forwardsForeign currency exchange rate305 2 — 304 6 — 
Credit default swaps — writtenCredit780 16 — 780 19 — 
Equity futuresEquity market172 1 — 316 — 1 
Equity index optionsEquity market60,308 1,660 1,201 39,897 1,722 1,041 
Equity total return swapsEquity market103,601 1,685 1,988 106,301 1,543 1,446 
Total non-designated or non-qualifying derivatives267,000 3,725 5,259 273,008 3,679 5,223 
Total$271,246 $4,146 $5,286 $277,286 $4,118 $5,248 
Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both March 31, 2025 and December 31, 2024. The Company’s use of derivatives includes (i) derivatives that serve as hedges of the Company’s exposure to various risks and generally do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities and generally do not qualify for hedge accounting because they do not meet the criteria of being “highly effective” as outlined in Accounting Standards Codification 815 — Derivatives and Hedging; (iii) derivatives that economically hedge MRBs that do not qualify for hedge accounting because the changes in estimated fair value of the MRBs are already recorded in net income; and (iv) written credit default swaps that are used to create synthetic credit investments and that do not qualify for hedge accounting because they do not involve a hedging relationship.
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 DerivativesNet Derivative Gains (Losses) Recognized for Hedged ItemsNet Investment IncomePolicyholder Benefits and ClaimsAmount of Gains (Losses) Deferred in AOCI
(In millions)
Three Months Ended March 31, 2025
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate$3 $— $1 $1 $(7)
Foreign currency exchange rate3 (3)13 — (9)
Total cash flow hedges6 (3)14 1 (16)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate388 — — — — 
Foreign currency exchange rate(12)5 — — — 
Credit(1)— — — — 
Equity market(1,242)— — — — 
Embedded1,177 — — — — 
Total non-qualifying hedges310 5 — — — 
Total$316 $2 $14 $1 $(16)
Three Months Ended March 31, 2024
Derivatives Designated as Hedging Instruments:
Cash flow hedges:
Interest rate$3 $— $— $2 $9 
Foreign currency exchange rate— (1)13 — 43 
Total cash flow hedges3 (1)13 2 52 
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate(782)— — — — 
Foreign currency exchange rate19 (2)— — — 
Credit6 — — — — 
Equity market711 — — — — 
Embedded(1,887)— — — — 
Total non-qualifying hedges(1,933)(2)— — — 
Total$(1,930)$(3)$13 $2 $52 
At March 31, 2025 and December 31, 2024, the Company held no qualified derivatives hedging exposure to future cash flows for forecasted asset purchases.
At March 31, 2025 and December 31, 2024, the balance in AOCI associated with cash flow hedges was $437 million and $460 million, respectively.
Credit Derivatives
In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation.
The estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps were as follows at:
March 31, 2025December 31, 2024
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$2 $100 2.5$2 $100 2.7
Baa12 652 5.07 300 4.5
Ba2 24 1.710 376 4.8
Caa and Lower— 4 0.7— 4 1.0
Total$16 $780 4.5$19 $780 4.4
_______________
(1)The Company has written credit protection on 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.
Counterparty Credit Risk
The Company may be exposed to credit-related losses in the event of counterparty nonperformance on derivative instruments. Generally, the credit exposure is the fair value at the reporting date less any collateral received from the counterparty.
The Company manages its credit risk by: (i) entering into derivative transactions with creditworthy counterparties governed by master netting agreements; (ii) trading through regulated exchanges and central clearing counterparties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single party credit exposures which are subject to periodic management review.
See Note 9 for a description of the impact of credit risk on the valuation of derivatives.
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 RecognizedFinancial Instruments (1)Collateral Received/Pledged (2)Net AmountSecurities Collateral Received/Pledged (3)Net Amount After Securities Collateral
(In millions)
March 31, 2025
Derivative assets$4,323 $(3,506)$(608)$209 $(190)$19 
Derivative liabilities $5,571 $(3,506)$— $2,065 $(2,042)$23 
December 31, 2024
Derivative assets$4,122 $(3,039)$(524)$559 $(558)$1 
Derivative liabilities $5,353 $(3,039)$— $2,314 $(2,306)$8 
_______________
(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.
The Company’s collateral arrangements generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that counterparty reaches a minimum transfer amount. Certain of these arrangements also include credit-contingent provisions which permit the party with positive fair value to terminate the derivative at the current fair value or demand immediate full collateralization from the party in a net liability position, in the event that the financial strength or credit rating of the party in a net liability position falls below a certain level.
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:
March 31, 2025December 31, 2024
(In millions)
Estimated fair value of derivatives in a net liability position (1)$2,065 $2,314 
Estimated fair value of collateral provided (2):
Fixed maturity securities$4,940 $4,883 
_______________
(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.