Future Policy Benefits

9 Months Ended

Sep. 30, 2023

Insurance [Abstract]

Liability for Future Policy Benefits and Unpaid Claims Disclosure

FUTURE POLICY BENEFITS

Liability for Future Policy Benefits

The Company reviews actual and anticipated experience compared to the assumptions used to establish policy benefits on a quarterly basis and will update those assumptions if evidence suggests that they should be revised. It is the Company’s policy to complete its annual assumption review during the third quarter of each year. Updates may occur in other quarters if information becomes available during the quarter that indicates an assumption update is necessary.

During the third quarter of 2023, the Company completed its annual assumption review resulting in a decrease in its total liability for future policy benefits. The decrease was primarily the result of updated mortality assumptions, which had a favorable impact on the liability for future policy benefits for the Company’s Financial Solutions business and an unfavorable impact on the Company’s Traditional business.

During the third quarter of 2022, the Company completed its annual assumption review resulting in an increase in its total liability for future policy benefits. The increase was primarily the result of updated mortality assumptions, which had an unfavorable impact on the liability for future policy benefits for the Company’s Traditional business. There were no significant changes in the assumptions used to measure the liability for future policy benefits for the Company’s Financial Solutions business.

Traditional Business

The following tables provide the balances of and changes in the Company’s liability for future policy benefits for long-duration reinsurance contracts for its Traditional business, which primarily consists of individual life, group life and critical illness reinsurance for the nine months ended September 30, 2023 and 2022 (dollars in millions):

Nine months ended September 30, 2023:	U.S. and Latin America – Traditional			Canada – Traditional			Europe, Middle East and Africa – Traditional			Asia Pacific – Traditional
Present Value of Expected Net Premiums
Beginning of year balance at original discount rate	$	74,207		$	21,330		$	14,244		$	40,506
Effect of changes in cash flow assumptions	905			96			199			(180)
Effect of actual variances from expected experience	68			408			75			9
Adjusted balance, beginning of year	75,180			21,834			14,518			40,335
Issuances (1)	3,186			369			884			2,839
Interest accrual (2)	2,619			562			373			794
Net premiums collected (3)	(4,491)			(700)			(1,067)			(1,493)
Derecognition (4)	(35)			—			—			—
Foreign currency translation	5			(54)			(77)			(1,517)
Ending balance at original discount rate	76,464			22,011			14,631			40,958
Effect of changes in discount rate assumptions	(10,563)			(5,879)			(3,145)			(13,178)
Balance, end of period	$	65,901		$	16,132		$	11,486		$	27,780
Present Value of Expected Future Policy Benefits
Beginning of year balance at original discount rate	$	85,285		$	24,655		$	15,454		$	44,785
Effect of changes in cash flow assumptions	922			108			246			(171)
Effect of actual variances from expected experience	73			413			84			(40)
Adjusted balance, beginning of year	86,280			25,176			15,784			44,574
Issuances (1)	3,186			369			884			2,839
Interest accrual (2)	3,023			720			402			907
Benefit payments (5)	(4,097)			(752)			(1,033)			(1,287)
Derecognition (4)	(54)			—			—			—
Foreign currency translation	5			(60)			(77)			(1,559)
Ending balance at original discount rate	88,343			25,453			15,960			45,474
Effect of changes in discount rate assumptions	(13,185)			(5,520)			(3,402)			(15,342)
Balance, end of period	$	75,158		$	19,933		$	12,558		$	30,132
Liability for future policy benefits	$	9,257		$	3,801		$	1,072		$	2,352
Less: reinsurance recoverable	(658)			(259)			(33)			(115)
Net liability for future policy benefits	$	8,599		$	3,542		$	1,039		$	2,237
Weighted-average duration of the liability (in years)	11			14			8			15
Weighted-average interest accretion rate	4.7		%	3.7		%	3.5		%	2.7		%
Weighted-average current discount rate	5.9		%	5.4		%	6.0		%	4.9		%

(1)Issuances: The present value, using the original discount rate, of the expected net premiums or the expected future policy benefits related to new reinsurance contracts that became effective during the current period and new policies assumed on existing contracts.

(2)Interest accrual: The interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(3)Net premiums collected: The portion of gross premiums collected from the ceding company that is used to fund expected benefit payments.

(4)Derecognition: Includes the effects of treaty recaptures and treaty amendments that resulted in the termination of an existing treaty and the issuance of a new treaty under the internal replacement model.

(5)Benefit payments: The release of the present value, using the original discount rate, of the expected future policy benefits due to death, lapse/withdrawal, and other benefit payments based on current assumptions.

Nine months ended September 30, 2022:	U.S. and Latin America – Traditional			Canada – Traditional			Europe, Middle East and Africa – Traditional			Asia Pacific – Traditional
Present Value of Expected Net Premiums
Beginning of year balance at original discount rate	$	73,447		$	21,989		$	14,440		$	37,943
Effect of changes in cash flow assumptions	(805)			115			128			1,595
Effect of actual variances from expected experience	43			(21)			423			(52)
Adjusted balance, beginning of year	72,685			22,083			14,991			39,486
Issuances (1)	2,419			546			786			2,383
Interest accrual (2)	2,541			571			370			740
Net premiums collected (3)	(3,770)			(715)			(1,005)			(1,459)
Derecognition (4)	—			—			—			—
Foreign currency translation	(1)			(1,914)			(2,412)			(3,495)
Ending balance at original discount rate	73,874			20,571			12,730			37,655
Effect of changes in discount rate assumptions	(7,148)			(4,729)			(3,006)			(11,212)
Balance, end of period	$	66,726		$	15,842		$	9,724		$	26,443
Present Value of Expected Future Policy Benefits
Beginning of year balance at original discount rate	$	84,075		$	25,440		$	15,664		$	41,971
Effect of changes in cash flow assumptions	(675)			121			141			1,715
Effect of actual variances from expected experience	135			6			412			(79)
Adjusted balance, beginning of year	83,535			25,567			16,217			43,607
Issuances (1)	2,423			546			786			2,393
Interest accrual (2)	2,924			735			393			843
Benefit payments (5)	(4,026)			(826)			(969)			(1,322)
Derecognition (4)	—			—			—			—
Foreign currency translation	—			(2,215)			(2,598)			(3,763)
Ending balance at original discount rate	84,856			23,807			13,829			41,758
Effect of changes in discount rate assumptions	(8,940)			(4,139)			(3,186)			(13,132)
Balance, end of period	$	75,916		$	19,668		$	10,643		$	28,626
Liability for future policy benefits	$	9,190		$	3,826		$	919		$	2,183
Less: reinsurance recoverable	(413)			(256)			(26)			(96)
Net liability for future policy benefits	$	8,777		$	3,570		$	893		$	2,087
Weighted-average duration of the liability (in years)	12			15			8			16
Weighted-average interest accretion rate	4.7		%	3.8		%	3.6		%	2.7		%
Weighted-average current discount rate	5.3		%	4.9		%	6.3		%	4.6		%

(1)Issuances: The present value, using the original discount rate, of the expected net premiums or the expected future policy benefits related to new reinsurance contracts that became effective during the current period and new policies assumed on existing contracts.

(2)Interest accrual: The interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(3)Net premiums collected: The portion of gross premiums collected from the ceding company that is used to fund expected benefit payments.

(4)Derecognition: Includes the effects of treaty recaptures and treaty amendments that resulted in the termination of an existing treaty and the issuance of a new treaty under the internal replacement model.

(5)Benefit payments: The release of the present value, using the original discount rate, of the expected future policy benefits due to death, lapse/withdrawal, and other benefit payments based on current assumptions.

Significant assumptions used to compute the liability for future policy benefits for the Traditional business include mortality, morbidity, lapse rates and discount rates (both accretion and current). During the third quarter of 2023 and 2022, the Company completed its annual assumption review resulting in a $85 million and $269 million increase, excluding the effects of reinsurance, in the Company’s liability for future policy benefits for its Traditional business during 2023 and 2022, respectively. Including the effects of reinsurance, a future policy benefits remeasurement gain (loss) of $(75) million was recognized during the three and nine months ending September 30, 2023, and a future policy benefits remeasurement gain (loss) of $(329) million and $(306) million was recognized during the three and nine months ending September 30, 2022, as a result of changes in cash flow assumptions. The increase in the liability in 2023 and 2022 was primarily the result of updating the mortality assumptions used to measure the liability for future policy benefits. The Company also updated the underlying market data used to determine the current discount rate resulting in changes to the discount rate assumption used to measure the net liability for future policy benefits.

The Company’s Traditional business actual-to-expected variances, the effects of changes in cash flow assumptions and the effects of changes in discount rate assumption for the nine months ended September 30, 2023 and 2022, are summarized in the tables below:

Nine months ended September 30, 2023:
Segment	Net liability for future policy benefits at original discount rate	Changes in cash flow assumptions	Actual-to-expected variance	Impact of updating discount rate recognized in OCI
U.S. and Latin America – Traditional	$12 billion	$17 million	$5 million	$(1) billion
	7.2% increase	0.2% increase	—%	9.2% decrease
Canada – Traditional	$3.4 billion	$12 million	$5 million	$(267) million
	3.5% increase	0.4% increase	0.2% increase	8.0% decrease
Europe, Middle East and Africa – Traditional	$1.3 billion	$47 million	$9 million	$(88) million
	9.8% increase	3.9% increase	0.7% increase	7.3% decrease
Asia Pacific – Traditional	$4.5 billion	$9 million	$(49) million	$(233) million
	5.5% increase	0.2% increase	1.1% decrease	5.4% decrease

Nine months ended September 30, 2022:
Segment	Net liability for future policy benefits at original discount rate	Changes in cash flow assumptions	Actual-to-expected variance	Impact of updating discount rate recognized in OCI
U.S. and Latin America – Traditional	$11 billion	$130 million	$92 million	$(5.2) billion
	3.3% increase	1.2% increase	0.9% increase	49 % decrease
Canada – Traditional	$3.2 billion	$6 million	$27 million	$(1.5) billion
	6.2% decrease	0.2% increase	0.8% increase	43.9% decrease
Europe, Middle East and Africa – Traditional	$1.1 billion	$13 million	$(11) million	$(345) million
	10.2% decrease	1.1% increase	0.9% decrease	28.2% decrease
Asia Pacific – Traditional	$4.1 billion	$120 million	$(27) million	$(903) million
	1.9% increase	3% increase	0.7% decrease	22.4% decrease

Financial Solutions Business

The following tables provide the balances of and changes in the Company’s liability for future policy benefits, including the deferred profit liability related to the longevity business, for its Financial Solutions business, which primarily consists of longevity reinsurance, asset-intensive products, primarily annuities and financial reinsurance for the nine months ended September 30, 2023 and 2022 (dollars in millions):

Nine months ended September 30, 2023:	U.S. and Latin America – Financial Solutions			Canada – Financial Solutions			Europe, Middle East and Africa – Financial Solutions			Asia Pacific – Financial Solutions
Present Value of Expected Net Premiums
Beginning of year balance at original discount rate	$	1,671		$	3,394		$	38,782		$	1,605
Effect of changes in cash flow assumptions	(69)			(54)			(561)			—
Effect of actual variances from expected experience	(20)			(5)			387			(10)
Adjusted balance, beginning of year	1,582			3,335			38,608			1,595
Issuances (1)	923			—			6,278			2,131
Interest accrual (2)	37			80			678			19
Net premiums collected (3)	(1,064)			(249)			(3,045)			(1,573)
Derecognition (4)	—			—			—			—
Foreign currency translation	2			(6)			15			(236)
Ending balance at original discount rate	1,480			3,160			42,534			1,936
Effect of changes in discount rate assumptions	(336)			(482)			(9,571)			(178)
Balance, end of period	$	1,144		$	2,678		$	32,963		$	1,758
Present Value of Expected Future Policy Benefits
Beginning of year balance at original discount rate	$	5,823		$	3,447		$	44,330		$	6,561
Effect of changes in cash flow assumptions	(91)			(76)			(595)			—
Effect of actual variances from expected experience	(28)			(13)			374			(12)
Adjusted balance, beginning of year	5,704			3,358			44,109			6,549
Issuances (1)	931			—			6,278			2,141
Interest accrual (2)	173			81			807			65
Benefit payments (5)	(405)			(248)			(2,748)			(199)
Derecognition (4)	(16)			—			—			—
Foreign currency translation	1			(5)			37			(948)
Ending balance at original discount rate	6,388			3,186			48,483			7,608
Effect of changes in discount rate assumptions	(788)			(480)			(10,552)			(997)
Balance, end of period	$	5,600		$	2,706		$	37,931		$	6,611
Liability for future policy benefits	$	4,456		$	28		$	4,968		$	4,853
Less: reinsurance recoverable	—			—			—			—
Net liability for future policy benefits	$	4,456		$	28		$	4,968		$	4,853
Weighted-average duration of the liability (in years)	8			7			9			15
Weighted-average interest accretion rate	3.5		%	3.3		%	2.3		%	1.3		%
Weighted-average current discount rate	5.9		%	5.5		%	5.3		%	2.4		%

(1)Issuances: The present value, using the original discount rate, of the expected net premiums or the expected future policy benefits related to new reinsurance contracts that became effective during the current period and new policies assumed on existing contracts.

(2)Interest accrual: The interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(3)Net premiums collected: The portion of gross premiums collected from the ceding company that is used to fund expected benefit payments.

(4)Derecognition: Includes the effects of treaty recaptures and treaty amendments that resulted in the termination of an existing treaty and the issuance of a new treaty under the internal replacement model.

(5)Benefit payments: The release of the present value, using the original discount rate, of the expected future policy benefits due to death, lapse/withdrawal, and other benefit payments based on current assumptions.

Nine months ended September 30, 2022:	U.S. and Latin America – Financial Solutions			Canada – Financial Solutions			Europe, Middle East and Africa – Financial Solutions			Asia Pacific – Financial Solutions
Present Value of Expected Net Premiums
Beginning of year balance at original discount rate	$	228		$	3,329		$	31,973		$	1,051
Effect of changes in cash flow assumptions	(31)			—			(74)			—
Effect of actual variances from expected experience	(17)			(7)			401			125
Adjusted balance, beginning of year	180			3,322			32,300			1,176
Issuances (1)	—			581			11,256			1,325
Interest accrual (2)	1			85			513			20
Net premiums collected (3)	(18)			(269)			(2,228)			(729)
Derecognition (4)	—			—			—			—
Foreign currency translation	—			(323)			(6,761)			(359)
Ending balance at original discount rate	163			3,396			35,080			1,433
Effect of changes in discount rate assumptions	(117)			(418)			(9,639)			69
Balance, end of period	$	46		$	2,978		$	25,441		$	1,502
Present Value of Expected Future Policy Benefits
Beginning of year balance at original discount rate	$	4,628		$	3,393		$	38,196		$	6,062
Effect of changes in cash flow assumptions	(34)			—			(74)			—
Effect of actual variances from expected experience	(40)			(16)			392			125
Adjusted balance, beginning of year	4,554			3,377			38,514			6,187
Issuances (1)	—			581			11,256			1,325
Interest accrual (2)	136			87			632			53
Benefit payments (5)	(319)			(267)			(2,503)			(192)
Derecognition (4)	—			—			—			—
Foreign currency translation	—			(329)			(7,817)			(1,446)
Ending balance at original discount rate	4,371			3,449			40,082			5,927
Effect of changes in discount rate assumptions	(498)			(416)			(10,736)			(239)
Balance, end of period	$	3,873		$	3,033		$	29,346		$	5,688
Liability for future policy benefits	$	3,827		$	55		$	3,905		$	4,186
Less: reinsurance recoverable	—			—			—			—
Net liability for future policy benefits	$	3,827		$	55		$	3,905		$	4,186
Weighted-average duration of the liability (in years)	8			7			8			15
Weighted-average interest accretion rate	2.4		%	3.4		%	2.1		%	1.7		%
Weighted-average current discount rate	5.5		%	5.0		%	5.4		%	1.6		%

(1)Issuances: The present value, using the original discount rate, of the expected net premiums or the expected future policy benefits related to new reinsurance contracts that became effective during the current period and new policies assumed on existing contracts.

(2)Interest accrual: The interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(3)Net premiums collected: The portion of gross premiums collected from the ceding company that is used to fund expected benefit payments.

(4)Derecognition: Includes the effects of treaty recaptures and treaty amendments that resulted in the termination of an existing treaty and the issuance of a new treaty under the internal replacement model.

(5)Benefit payments: The release of the present value, using the original discount rate, of the expected future policy benefits due to death, lapse/withdrawal, and other benefit payments based on current assumptions.

Significant assumptions used to compute the liability for future policy benefits for the Financial Solutions business include mortality, morbidity, lapse rates and discount rates (both accretion and current). During the third quarter of 2023 and 2022, the Company completed its annual assumption review resulting in a $78 million and $3 million decrease, excluding the effects of reinsurance, in the Company’s liability for future policy benefits for its Financial Solutions business during 2023 and 2022, respectively. Including the effects of reinsurance, a future policy benefits remeasurement gain (loss) of $78 million was recognized during the three and nine months ending September 30, 2023, and a future policy benefits remeasurement gain (loss) of $3 million was recognized during the three and nine months ending September 30, 2022, as a result of changes in cash flow assumptions. The decrease in the liability in 2023 and 2022 was primarily the result of updating the mortality assumptions used to measure the liability for future policy benefits. The Company also updated the underlying market data used to determine the current discount rate resulting in changes to the discount rate assumption used to measure the net liability for future policy benefits.

The Company’s Financial Solutions business actual-to-expected variances, the effects of changes in cash flow assumptions and the effects of changes in discount rate assumptions for the nine months ended September 30, 2023 and 2022, are summarized in the tables below:

Nine months ended September 30, 2023:
Segment	Net liability for future policy benefits at original discount rate	Changes in cash flow assumptions	Actual-to-expected variance	Impact of updating discount rate recognized in OCI
U.S. and Latin America – Financial Solutions	$4.9 billion	$(22) million	$(8) million	$(119) million
	18.2% increase	0.5% decrease	0.2% decrease	2.9% decrease
Canada – Financial Solutions	$26 million	$(22) million	$(8) million	$1 million
	50.9% decrease	41.5% decrease	15.1% decrease	1.9% increase
Europe, Middle East and Africa – Financial Solutions	$5.9 billion	$(34) million	$(13) million	$(67) million
	7.2% increase	0.6% decrease	0.2% decrease	1.2% decrease
Asia Pacific – Financial Solutions	$5.7 billion	None	$(2) million	$(359) million
	14.4% increase	—%	—%	7.2% decrease

Nine months ended September 30, 2022:
Segment	Net liability for future policy benefits at original discount rate	Changes in cash flow assumptions	Actual-to-expected variance	Impact of updating discount rate recognized in OCI
U.S. and Latin America – Financial Solutions	$4.2 billion	$(3) million	$(23) million	$(928) million
	4.4% decrease	0.1% decrease	0.5% decrease	21.1% decrease
Canada – Financial Solutions	$53 million	None	$(9) million	$(15) million
	17.2% decrease	—%	14.1% decrease	23.4% decrease
Europe, Middle East and Africa – Financial Solutions	$5 billion	None	$(9) million	$(1.6) billion
	19.6% decrease	—%	0.1% decrease	29.2% decrease
Asia Pacific – Financial Solutions	$4.5 billion	None	$1 million	$(311) million
	10.4% decrease	—%	—%	6.5% decrease

Reconciliation and Other Disclosures

The reconciliation of the rollforward of the liability for future policy benefits to the condensed consolidated balance sheets as of September 30, 2023 and 2022 is as follows (dollars in millions):

	September 30,
	2023		2022
Liability for future policy benefits included in the rollforwards:
Traditional:
U.S. and Latin America	$	9,257	$	9,190
Canada	3,801		3,826
Europe, Middle East and Africa	1,072		919
Asia Pacific	2,352		2,183
Financial Solutions:
U.S. and Latin America	4,456		3,827
Canada	28		55
Europe, Middle East and Africa	4,968		3,905
Asia Pacific	4,853		4,186
Other long-duration contracts	126		185
Claims liability and incurred but not reported claims	5,062		4,899
Unearned revenue liability	499		549
Total liability for future policy benefits	$	36,474	$	33,724

The amount of undiscounted and discounted expected future gross premiums and expected future benefit payments for the liability for future policy benefits included in the rollforwards as of September 30, 2023 and 2022 is as follows (dollars in millions):

	September 30,
	2023				2022
	Undiscounted		Discounted		Undiscounted		Discounted
Expected future gross premiums
Traditional:
U.S. and Latin America	$	177,307	$	77,008	$	169,526	$	77,507
Canada	54,378		19,902		50,727		19,543
Europe, Middle East and Africa	24,778		13,131		22,139		11,267
Asia Pacific	90,652		35,372		85,465		33,712
Financial Solutions:
U.S. and Latin America	3,012		1,794		940		581
Canada	4,545		2,856		4,803		3,102
Europe, Middle East and Africa	68,410		36,603		48,987		28,141
Asia Pacific	3,797		2,828		2,718		2,278
Expected future benefit payments
Traditional:
U.S. and Latin America	$	188,177	$	75,158	$	179,693	$	75,916
Canada	56,423		19,933		54,039		19,668
Europe, Middle East and Africa	24,509		12,558		21,758		10,643
Asia Pacific	87,120		30,132		82,458		28,626
Financial Solutions:
U.S. and Latin America	10,233		5,600		7,041		3,873
Canada	4,285		2,706		4,697		3,033
Europe, Middle East and Africa	71,027		37,931		51,232		29,346
Asia Pacific	10,522		6,611		7,765		5,688

The amount of gross premiums and interest expense recognized in the consolidated statements of income for the liability for future policy benefits included in the rollforwards for the nine months ended September 30, 2023 and 2022 is as follows (dollars in millions):

	Gross Premiums				Interest Expense
	September 30,				September 30,
	2023		2022		2023		2022
Traditional:
U.S. and Latin America	$	4,435	$	4,363	$	404	$	383
Canada	808		817		158		164
Europe, Middle East and Africa	1,058		1,033		29		23
Asia Pacific	1,959		1,880		113		103
Financial Solutions:
U.S. and Latin America	979		21		136		135
Canada	68		72		1		2
Europe, Middle East and Africa	515		468		129		119
Asia Pacific	171		172		46		33
Total	$	9,993	$	8,826	$	1,016	$	962

During the nine months ended September 30, 2023 and 2022, no material charges were incurred resulting from net premiums exceeding gross premiums