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Derivative Instruments
 6 Months Ended
Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
5. DERIVATIVES AND HEDGING
 
Types of Derivative and Hedging Instruments

The Company utilizes various derivatives and hedging instruments to manage certain of its risks. Commonly used derivative and non-derivative hedging instruments include, but are not necessarily limited to:
•Interest rate contracts: futures, swaps, forwards, options, caps and floors
•Equity contracts: futures, options and total return swaps
•Foreign exchange contracts: futures, options, forwards, swaps, and foreign currency debt instruments
•Credit contracts: single and index reference credit default swaps

Other types of financial contracts that the Company accounts for as derivatives are:
•To-be-announced (“TBA”) forward contracts, loan commitments, embedded derivatives and synthetic guaranteed investment contracts (“GICs”).

For detailed information regarding these contracts and the related strategies, see Note 5 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Primary Risks Managed by Derivatives
 
The table below provides a summary of the gross notional amount and fair value of derivative contracts by the primary underlying risks they are utilized to manage, excluding embedded derivatives. Many derivative instruments contain multiple underlying risks. The fair value amounts below represent the value of derivative contracts prior to taking into account the netting effects of master netting agreements and cash collateral. These netting impacts resulted in total derivative assets of $1,248 million and $1,455 million as of June 30, 2023 and December 31, 2022, respectively, and total derivative liabilities of $3,065 million and $3,055 million as of June 30, 2023 and December 31, 2022, respectively, reflected in the Unaudited Interim Consolidated Statements of Financial Position.
Primary Underlying Risk /Instrument TypeJune 30, 2023December 31, 2022
 Fair Value Fair Value
Gross NotionalAssetsLiabilitiesGross NotionalAssetsLiabilities
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps$3,742 $60 $(249)$3,627 $66 $(245)
Interest Rate Forwards150 0 (29)398 0 (85)
Foreign Currency
Foreign Currency Forwards4,767 129 (239)4,830 155 (262)
Currency/Interest Rate
Foreign Currency Swaps26,294 2,855 (386)25,636 3,469 (333)
Total Derivatives Designated as Hedge Accounting Instruments$34,953 $3,044 $(903)$34,491 $3,690 $(925)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate
Interest Rate Swaps$306,146 $8,517 $(21,132)$212,934 $9,097 $(21,154)
Interest Rate Futures9,535 66 (9)18,080 13 (24)
Interest Rate Options26,428 221 (814)9,778 224 (280)
Interest Rate Forwards3,067 14 (18)2,354 21 (42)
Foreign Currency
Foreign Currency Forwards30,713 2,212 (2,430)31,317 1,556 (1,924)
Foreign Currency Options0 0 0 0 0 0 
Currency/Interest Rate
Foreign Currency Swaps8,377 707 (155)8,410 813 (170)
Credit
Credit Default Swaps5,133 35 (21)6,351 27 (57)
Equity
Equity Futures996 7 (1)1,372 1 (2)
Equity Options45,804 1,325 (1,469)38,323 708 (1,590)
Total Return Swaps10,149 38 (290)11,806 106 (184)
Other
Other(1)1,250 0 0 1,250 0 0 
Synthetic GICs82,181 1 (1)84,338 1 (1)
Total Derivatives Not Qualifying as Hedge Accounting Instruments$529,779 $13,143 $(26,340)$426,313 $12,567 $(25,428)
Total Derivatives(2)(3)$564,732 $16,187 $(27,243)$460,804 $16,257 $(26,353)
__________
(1)“Other” primarily includes derivative contracts used to improve the balance of the Company’s tail longevity and mortality risk. Under these contracts, the Company’s gains (losses) are capped at the notional amount.
(2)Excludes embedded derivatives which contain multiple underlying risks. The fair value of these embedded derivatives was a net liability of $5,004 million and $2,997 million as of June 30, 2023 and December 31, 2022, respectively, primarily included in "Policyholder account balances."
(3)Recorded in “Other invested assets” and “Other liabilities” on the Unaudited Interim Consolidated Statements of Financial Position.
As of June 30, 2023, the following amounts were recorded on the Unaudited Interim Consolidated Statements of Financial Position related to the carrying amount of the hedged assets (liabilities) and cumulative basis adjustments included in the carrying amount for fair value hedges.

June 30, 2023December 31, 2022
Balance Sheet Line Item in which Hedged Item is RecordedCarrying Amount of the Hedged Assets (Liabilities)Cumulative Amount of
Fair Value Hedging Adjustment Included in the
Carrying Amount of the Hedged
Assets (Liabilities)(1)		Carrying Amount of the Hedged Assets (Liabilities)Cumulative Amount of
Fair Value Hedging Adjustment Included in the
Carrying Amount of the Hedged
Assets (Liabilities)(1)
(in millions)
Fixed maturities, available-for-sale, at fair value$229 $19 $297 $27 
Commercial mortgage and other loans$0 $0 $0 $0 
Policyholders’ account balances$(793)$217 $(966)$217 
Future policy benefits$(2,455)$289 $(2,354)$391 
__________
(1)There were no material fair value hedging adjustments for hedged assets and liabilities for which hedge accounting has been discontinued.

Most of the Company’s derivatives do not qualify for hedge accounting for various reasons. For example: (i) derivatives that economically hedge embedded derivatives do not qualify for hedge accounting because changes in the fair value of the embedded derivatives are already recorded in net income; (ii) derivatives that are utilized as macro hedges of the Company’s exposure to various risks typically do not qualify for hedge accounting because they do not meet the criteria required under portfolio hedge accounting rules; and (iii) synthetic GICs, which are product standalone derivatives, do not qualify as hedging instruments under hedge accounting rules.
Offsetting Assets and Liabilities
 
The following tables present recognized derivative instruments (excluding embedded derivatives), and repurchase and reverse repurchase agreements that are offset in the Unaudited Interim Consolidated Statements of Financial Position, and/or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the Unaudited Interim Consolidated Statements of Financial Position.
 
 June 30, 2023
 Gross
Amounts of
Recognized
Financial
Instruments		Gross
Amounts
Offset in the
Statements
of Financial
Position		Net
Amounts
Presented in
the Statements
of Financial
Position		Financial
Instruments/
Collateral(1)		Net
Amount
 (in millions)
Offsetting of Financial Assets:
Derivatives$16,083 $(14,939)$1,144 $(249)$895 
Securities purchased under agreement to resell22 0 22 (22)0 
Total assets$16,105 $(14,939)$1,166 $(271)$895 
Offsetting of Financial Liabilities:
Derivatives$27,244 $(24,178)$3,066 $(3,051)$15 
Securities sold under agreement to repurchase6,097 0 6,097 (5,977)120 
Total liabilities$33,341 $(24,178)$9,163 $(9,028)$135 
 
 December 31, 2022
 Gross
Amounts of
Recognized
Financial
Instruments		Gross
Amounts
Offset in the
Statements
of Financial
Position		Net
Amounts
Presented in
the Statements
of Financial
Position		Financial
Instruments/
Collateral(1)		Net
Amount
 (in millions)
Offsetting of Financial Assets:
Derivatives$16,178 $(14,802)$1,376 $(702)$674 
Securities purchased under agreement to resell385 0 385 (385)0 
Total assets$16,563 $(14,802)$1,761 $(1,087)$674 
Offsetting of Financial Liabilities:
Derivatives$26,352 $(23,298)$3,054 $(3,054)$0 
Securities sold under agreement to repurchase6,589 0 6,589 (6,589)0 
Total liabilities$32,941 $(23,298)$9,643 $(9,643)$0 
__________
(1)Amounts exclude the excess of collateral received/pledged from/to the counterparty.
For information regarding the rights of offset associated with the derivative assets and liabilities in the table above, see “—Counterparty Credit Risk” below. For securities purchased under agreements to resell and securities sold under agreements to repurchase, the Company monitors the value of the securities and maintains collateral, as appropriate, to protect against credit exposure. Where the Company has entered into repurchase and resale agreements with the same counterparty, in the event of default, the Company would generally be permitted to exercise rights of offset. For additional information regarding the Company’s accounting policy for securities repurchase and resale agreements, see Note 2 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2022.
 
Cash Flow, Fair Value and Net Investment Hedges
 
The primary derivative and non-derivative instruments used by the Company in its fair value, cash flow and net investment hedge accounting relationships are interest rate swaps, currency swaps, currency forwards, and foreign currency denominated debts. These instruments are only designated for hedge accounting in instances where the appropriate criteria are met. The Company does not use futures, options, credit, or equity derivatives in any of its fair value, cash flow or net investment hedge accounting relationships.
The following tables provide the financial statement classification and impact of derivatives used in qualifying and non-qualifying hedge relationships, including the offset of the hedged item in fair value hedge relationships.

 Three Months Ended June 30, 2023
 Realized
Investment
Gains
(Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)Net
Investment
Income		Other
Income (Loss)		Interest
Expense		Interest
Credited to
Policyholders’
Account
Balances		Policyholders’ BenefitsChange in AOCI(1)
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate$5 $0 $0 $0 $0 $(53)$(58)$0 
Currency(1)0 0 0 0 0 50 0 
Total gains (losses) on derivatives designated as hedge instruments4 0 0 0 0 (53)(8)0 
Gains (losses) on the hedged item:
Interest Rate(5)0 3 0 0 38 44 0 
Currency1 0 1 0 0 0 (50)0 
Total gains (losses) on hedged item(4)0 4 0 0 38 (6)0 
Amortization for gains (losses) excluded from assessment of the effectiveness
Currency0 0 0 0 0 0 (2)(75)
Total Amortization for gain (loss) excluded from assessment of the effectiveness0 0 0 0 0 0 (2)(75)
Total gains (losses) on fair value hedges net of hedged item0 0 4 0 0 (15)(16)(75)
Cash flow hedges
Interest Rate0 0 (6)0 0 0 0 (12)
Currency3 0 0 0 0 0 0 (1)
Currency/Interest Rate13 0 80 (66)0 0 0 (233)
Total gains (losses) on cash flow hedges16 0 74 (66)0 0 0 (246)
Net investment hedges
Currency0 0 0 0 0 0 0 17 
Currency/Interest Rate0 0 0 0 0 0 0 0 
Total gains (losses) on net investment hedges0 0 0 0 0 0 0 17 
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate(322)(1,022)0 0 0 0 0 0 
Currency(349)0 0 4 0 0 0 0 
Currency/Interest Rate(35)0 0 (1)0 0 0 0 
Credit38 0 0 0 0 0 0 0 
Equity961 (440)0 0 0 0 0 0 
Other0 0 0 0 0 0 0 0 
Embedded Derivatives(970)0 0 0 0 0 0 0 
Total gains (losses) on derivatives not qualifying as hedge accounting instruments(677)(1,462)0 3 0 0 0 0 
Total$(661)$(1,462)$78 $(63)$0 $(15)$(16)$(304)
 Six Months Ended June 30, 2023
 Realized
Investment
Gains
(Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)Net
Investment
Income		Other
Income (Loss)		Interest
Expense		Interest
Credited to
Policyholders’
Account
Balances		Policyholders’ BenefitsChange in AOCI(1)
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate$1 $0 $0 $0 $0 $(16)$(14)$0 
Currency(1)0 (1)0 0 0 99 0 
Total gains (losses) on derivatives designated as hedge instruments0 0 (1)0 0 (16)85 0 
Gains (losses) on the hedged item:
Interest Rate(1)0 6 0 0 1 (4)0 
Currency1 0 1 0 0 0 (97)0 
Total gains (losses) on hedged item0 0 7 0 0 1 (101)0 
Amortization for gains (losses) excluded from assessment of the effectiveness
Currency0 0 0 0 0 0 (4)(95)
Total Amortization for gain (loss) excluded from assessment of the effectiveness0 0 0 0 0 0 (4)(95)
Total gains (losses) on fair value hedges net of hedged item0 0 6 0 0 (15)(20)(95)
Cash flow hedges
Interest Rate(22)0 (7)0 0 0 0 32 
Currency8 0 0 0 0 0 0 (40)
Currency/Interest Rate48 0 163 (146)0 0 0 (511)
Total gains (losses) on cash flow hedges34 0 156 (146)0 0 0 (519)
Net investment hedges
Currency0 0 0 0 0 0 0 16 
Currency/Interest Rate0 0 0 0 0 0 0 0 
Total gains (losses) on net investment hedges0 0 0 0 0 0 0 16 
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate225 (755)0 0 0 0 0 0 
Currency(510)0 0 5 0 0 0 0 
Currency/Interest Rate(63)0 0 (3)0 0 0 0 
Credit85 0 0 0 0 0 0 0 
Equity1,150 (678)0 0 0 0 0 0 
Other0 0 0 0 0 0 0 0 
Embedded Derivatives(1,215)0 0 0 0 0 0 0 
Total gains (losses) on derivatives not qualifying as hedge accounting instruments(328)(1,433)0 2 0 0 0 0 
Total$(294)$(1,433)$162 $(144)$0 $(15)$(20)$(598)
 Three Months Ended June 30, 2022(2)
 Realized
Investment
Gains
(Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)Net
Investment
Income		Other
Income (Loss)		Interest
Expense		Interest
Credited to
Policyholders’
Account
Balances		Policyholders’ BenefitsChange in AOCI(1)
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate$13 $0 $(1)$0 $0 $(126)$(159)$0 
Currency(5)0 0 0 0 0 (151)0 
Total gains (losses) on derivatives designated as hedge instruments8 0 (1)0 0 (126)(310)0 
Gains (losses) on the hedged item:
Interest Rate(13)0 3 0 0 138 173 0 
Currency7 0 3 0 0 0 151 0 
Total gains (losses) on hedged item(6)0 6 0 0 138 324 0 
Amortization for gains (losses) excluded from assessment of the effectiveness
Currency0 0 0 0 0 0 0 52 
Total amortization for gain (loss) excluded from assessment of the effectiveness0 0 0 0 0 0 0 52 
Total gains (losses) on fair value hedges net of hedged item2 0 5 0 0 12 14 52 
Cash flow hedges
Interest Rate0 0 (1)0 0 0 0 (76)
Currency4 0 0 0 0 0 0 114 
Currency/Interest Rate44 0 68 391 0 0 0 1,253 
Total gains (losses) on cash flow hedges48 0 67 391 0 0 0 1,291 
Net investment hedges
Currency0 0 0 0 0 0 0 22 
Currency/Interest Rate0 0 0 0 0 0 0 0 
Total gains (losses) on net investment hedges0 0 0 0 0 0 0 22 
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate(1,481)(2,159)0 0 0 0 0 0 
Currency(162)0 0 0 0 0 0 0 
Currency/Interest Rate646 0 0 3 0 0 0 0 
Credit(126)0 0 0 0 0 0 0 
Equity22 1,156 0 0 0 0 0 0 
Other1 0 0 0 0 0 0 0 
Embedded Derivatives48 0 0 0 0 0 0 0 
Total gains (losses) on derivatives not qualifying as hedge accounting instruments(1,052)(1,003)0 3 0 0 0 0 
Total$(1,002)$(1,003)$72 $394 $0 $12 $14 $1,365 
 Six Months Ended June 30, 2022(2)
 Realized
Investment
Gains
(Losses)		Change in Value of Market Risk Benefits, Net of Related Hedging Gain (Loss)Net
Investment
Income		Other
Income (Loss)		Interest
Expense		Interest
Credited to
Policyholders’
Account
Balances		Policyholders’ BenefitsChange in AOCI(1)
 (in millions)
Derivatives Designated as Hedge Accounting Instruments:
Fair value hedges
Gains (losses) on derivatives designated as hedge instruments:
Interest Rate$27 $0 $(3)$0 $0 $(267)$(317)$0 
Currency(30)0 (1)0 0 0 (207)0 
Total gains (losses) on derivatives designated as hedge instruments(3)0 (4)0 0 (267)(524)0 
Gains (losses) on the hedged item:
Interest Rate(27)0 7 0 0 285 332 0 
Currency32 0 3 0 0 0 204 0 
Total gains (losses) on hedged item5 0 10 0 0 285 536 0 
Amortization for gains (losses) excluded from assessment of the effectiveness
Currency0 0 0 0 0 0 (2)63 
Total amortization for gain (loss) excluded from assessment of the effectiveness0 0 0 0 0 0 (2)63 
Total gains (losses) on fair value hedges net of hedged item2 0 6 0 0 18 10 63 
Cash flow hedges
Interest Rate(5)0 0 0 0 0 0 (134)
Currency4 0 0 0 0 0 0 144 
Currency/Interest Rate49 0 137 471 0 0 0 1,417 
Total gains (losses) on cash flow hedges48 0 137 471 0 0 0 1,427 
Net investment hedges
Currency0 0 0 0 0 0 0 10 
Currency/Interest Rate0 0 0 0 0 0 0 0 
Total gains (losses) on net investment hedges0 0 0 0 0 0 0 10 
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate(2,387)(4,859)0 0 0 0 0 0 
Currency(371)0 0 (1)0 0 0 0 
Currency/Interest Rate786 0 0 4 0 0 0 0 
Credit(163)0 0 0 0 0 0 0 
Equity133 1,521 0 0 0 0 0 0 
Other2 0 0 0 0 0 0 0 
Embedded Derivatives311 0 0 0 0 0 0 0 
Total gains (losses) on derivatives not qualifying as hedge accounting instruments(1,689)(3,338)0 3 0 0 0 0 
Total$(1,639)$(3,338)$143 $474 $0 $18 $10 $1,500 
_______
(1)Excluding changes related to net investment hedges using non-derivative instruments of $46 million and $45 million for the three months ended and six months ended June 30, 2023, and $102 million and $131 million for three months ended and six months ended June 30, 2022, respectively
(2)Prior period amounts have been updated to conform to current period presentation.
Presented below is a rollforward of current period cash flow hedges in AOCI before taxes:
 (in millions)
Balance, December 31, 2022$2,616 
Amount recorded in AOCI:
Interest Rate3 
Currency(32)
Currency/Interest Rate(446)
Total amount recorded in AOCI(475)
Amount reclassified from AOCI to income:
Interest Rate29 
Currency(8)
Currency/Interest Rate(65)
Total amount reclassified from AOCI to income(44)
Balance, June 30, 2023$2,097 

The changes in fair value of cash flow hedges are deferred in AOCI and are included in “Net unrealized investment gains (losses)” in the Unaudited Interim Consolidated Statements of Comprehensive Income; these amounts are then reclassified to earnings when the hedged item affects earnings. Using June 30, 2023 values, it is estimated that a pre-tax gain of approximately $274 million is expected to be reclassified from AOCI to earnings during the subsequent twelve months ending June 30, 2024.

The exposures the Company is hedging with these qualifying cash flow hedges include the variability of future cash flows from forecasted transactions denominated in foreign currencies, the purchases of invested assets, and the receipt or payment of variable interest on existing financial instruments. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions is 28 years.

There were no material amounts reclassified from AOCI into earnings relating to instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by the anticipated date or within the additional time period permitted by the authoritative guidance for the accounting for derivatives and hedging. In addition, there were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge.

For net investment hedges, in addition to derivatives, the Company uses foreign currency denominated debt to hedge the risk of change in the net investment in a foreign subsidiary due to changes in exchange rates. For effective net investment hedges, the amounts, before applicable taxes, recorded in the cumulative translation adjustment within AOCI were $63 million and $61 million for the three and six months ended June 30, 2023, respectively, and $123 million and $141 million for the three and six months ended June 30, 2022, respectively.
Credit Derivatives
 
The following tables provide a summary of the notional and fair value of written credit protection, presented as assets (liabilities). The Company’s maximum amount at risk under these credit derivatives, assuming the value of the underlying referenced securities become worthless, is equal to the notional amounts. These credit derivatives have maturities of less than 24 years for index reference.
June 30, 2023
NAIC Rating Designation of Underlying Credit Obligation(1)
NAIC 1NAIC 2NAIC 3NAIC 4NAIC 5NAIC 6Total
Gross NotionalFair ValueGross NotionalFair ValueGross NotionalFair ValueGross NotionalFair ValueGross NotionalFair ValueGross NotionalFair ValueGross NotionalFair Value
(in millions)
Single name reference(2)$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 
Index reference(2)28 0 0 0 4,330 5 0 0 0 0 457 15 4,815 20 
Total$28 $0 $0 $0 $4,330 $5 $0 $0 $0 $0 $457 $15 $4,815 $20 
December 31, 2022
NAIC Rating Designation of Underlying Credit Obligation(1)
NAIC 1NAIC 2NAIC 3NAIC 4NAIC 5NAIC 6Total
Gross NotionalFair ValueGross NotionalFair ValueGross NotionalFair ValueGross NotionalFair ValueGross NotionalFair ValueGross NotionalFair ValueGross NotionalFair Value
(in millions)
Single name reference(2)$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 
Index reference(2)48 0 0 0 5,197 (46)0 0 0 0 782 15 6,027 (31)
Total$48 $0 $0 $0 $5,197 $(46)$0 $0 $0 $0 $782 $15 $6,027 $(31)
_________
(1)The NAIC rating designations are based on availability and the lowest ratings among Moody's Investors Service, Inc. ("Moody's"), Standard & Poor’s Rating Services (“S&P”) and Fitch Ratings Inc. (“Fitch”). If no rating is available from a rating agency, a NAIC 6 rating is used.
(2)Single name credit default swaps may make reference to the credit of corporate debt, sovereign debt, and structured finance. Index references NAIC designations are based on the lowest rated single name reference included in the index.

In addition to writing credit protection, the Company has purchased credit protection using credit derivatives in order to hedge specific credit exposures in the Company’s investment portfolio. As of June 30, 2023 and December 31, 2022, the Company had $318 million and $324 million of outstanding notional amounts and reported at fair value as a liability of $6 million and an asset of $1 million, respectively.
Counterparty Credit Risk

The Company is exposed to losses in the event of non-performance by counterparties to financial derivative transactions with a positive fair value. The Company manages credit risk by: (i) entering into derivative transactions with highly rated major financial institutions and other creditworthy counterparties governed by master netting agreements, as applicable; (ii) trading through central clearing and over-the-counter (“OTC”) parties; (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.

Substantially all of the Company’s derivative agreements have zero thresholds which require daily full collateralization by the party in a liability position. In addition, certain of the Company’s derivative agreements contain credit-risk related contingent features; if the credit rating of one of the parties to the derivative agreement is to fall below a certain level, the party with positive fair value could request termination at the then fair value or demand immediate full collateralization from the party whose credit rating fell and is in a net liability position.

As of June 30, 2023, there were no net liability derivative positions with counterparties with credit risk-related contingent features. All derivatives have been appropriately collateralized by the Company or the counterparty in accordance with the terms of the derivative agreements.