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Reserves for Future Policy Benefits and Claims Payable
 6 Months Ended
Jun. 30, 2024
Insurance [Abstract]  
Reserves for Future Policy Benefits and Claims Payable Reserves for Future Policy Benefits and Claims Payable
Reserves for Future Policy Benefits

For non-participating traditional and limited-payment insurance contracts, the reserve for future policy benefits represents the present value of estimated future policy benefits to be paid to or on behalf of policyholders in future periods and certain related expenses less the present value of estimated future net premiums.

Reserves for future policy benefits for non-participating traditional and limited-payment insurance contracts are measured using the net premium ratio ("NPR") measurement model. The NPR measurement model accrues for future policy benefits in proportion to the premium revenue recognized. The reserve for future policy benefits is derived from the Company's best estimate of future net premium and future benefits and expenses, which is based on best estimate assumptions including mortality, persistency, claims expense, and discount rate. On an annual basis, or as circumstances warrant, we conduct a comprehensive review of our current best estimate assumptions based on our experience, industry benchmarking, and other factors, as applicable. Expense assumptions are updated based on estimates of expected non-level costs, such as termination or settlement costs, and costs after the premium-paying period and exclude acquisition costs or any costs that are required to be charged to expenses as incurred. Updates to assumptions are applied on a retrospective basis, and the change in the reserve for future policy benefits resulting from updates to assumptions is reported separately on the Condensed Consolidated Income Statements within the (Gain) loss from updating future policy benefits cash flow assumptions, net. Each reporting period the reserve for future policy benefits is updated to reflect actual experience to date.

The Company establishes cohorts, which are groupings used to measure reserves for future policy benefits. In determining cohorts, the Company considered both qualitative and quantitative factors, including the issue year, type of product, product features, and legal entity.

The discount rate used to estimate reserves for future policy benefits is consistent with an upper-medium grade (low-credit risk) fixed-income corporate instrument yield, which has been interpreted to represent a single-A corporate instrument yield. This discount rate curve is determined by fitting a parametric function to yields to maturity and related times to maturity of market observable single-A rated corporate instruments. The discount rate used to recognize interest accretion on the reserves for future policy benefits is locked at the initial measurement of the cohort. Each reporting period, the reserve for future policy benefits is remeasured using the current discount rate. The difference between the reserve calculated using the current discount rate and the reserve calculated using the locked-in discount rate is recorded in OCI.
For limited-payment insurance contracts, premiums are paid over a period shorter than the period over which benefits are provided. Gross premiums received in excess of the net premium are deferred and recognized as a deferred profit liability ("DPL"). The DPL is included within the reserve for future policy benefits and profits are recognized in income as a component of benefit expenses on a constant relationship with the amount of expected future benefit payments. Interest is accreted on the balance of the DPL using the discount rate locked in at the initial measurement of the cohort. Measurement of the DPL uses best estimate assumptions for mortality. These assumptions are similarly subject to the annual review process discussed above.

Additional Liabilities – Universal Life-type

For universal life-type insurance contracts, a liability is recognized for the policyholder’s account value as discussed further in Note 10 of the Notes to Condensed Consolidated Financial Statements. Where these contracts provide additional benefits beyond the account balance or base insurance coverage that are not market risk benefits or embedded derivatives, liabilities in addition to the policyholder’s account value are recognized. These additional liabilities for annuitization, death and other insurance benefits are reported within reserves for future policy benefits and claims payable. The methodology uses a benefit ratio defined as a constant percentage of the assessment base. This ratio is multiplied by current period assessments to determine the reserve accrual for the period. The assumptions used in the measurement of the additional liabilities for annuitization, death and other insurance benefits are based on best estimate assumptions including mortality, persistency, investment returns, and discount rates. These assumptions are similarly subject to the annual review process discussed above. As available-for-sale debt securities are carried at fair value, an adjustment is made to these additional liabilities equal to the change in liability that would have occurred if such securities had been sold at their stated fair value and the proceeds reinvested at current yields. This adjustment, along with the change in net unrealized gains (losses) on available-for-sale debt securities, net of applicable tax, is credited or charged directly to equity as a component of OCI.

See Note 10 - Other Contract Holder Funds of the Notes to Condensed Consolidated Financial Statements for more information regarding other contract holder funds.

Other Future Policy Benefits and Claims Payable

In conjunction with a prior acquisition, the Company recorded a fair value adjustment at acquisition related to certain annuity and interest-sensitive liability blocks of business to reflect the cost of the interest guarantees within the in-force liabilities, based on the difference between the guaranteed interest rate and an assumed new money guaranteed interest rate at acquisition. This adjustment is included in other future policy benefits and claims payable as disclosed in the table below. This liability is remeasured at the end of each period, taking into account changes in the in-force block. Any resulting change in the liability is recorded as a Gain (loss) from updating future policy benefits cash flow assumptions, net through the Condensed Consolidated Income Statements.

In addition, annuity and life claims liabilities in course of settlement are included in other future policy benefits and claims payable as disclosed in the table below.
The following table summarizes the Company’s reserves for future policy benefits and claims payable balances (in millions):

June 30,December 31,
20242023
Reserves for future policy benefits
Payout Annuities$1,088 $1,090 
Closed Block Life3,740 3,994 
Closed Block Annuity3,978 4,215 
Reserves for future policy benefits8,806 9,299 
Additional liabilities
Closed Block Life1,113 1,153 
Other future policy benefits and claims payable1,451 1,446 
Reserves for future policy benefits and claims payable$11,370 $11,898 

The following tables present the roll-forward of components of reserves for future policy benefits (in millions):

Present Value of Expected Net Premiums
Six Months Ended June 30,Year Ended December 31,
20242023
PayoutClosed BlockClosed BlockPayoutClosed BlockClosed Block
AnnuitiesLifeAnnuityAnnuitiesLifeAnnuity
Balance, beginning of period$— $1,140 $— $— $1,287 $— 
Beginning of period cumulative effect of changes in discount rate assumptions— 113 — — 161 — 
Beginning balance at original discount rate— 1,253 — — 1,448 — 
Effect of changes in cash flow assumptions— — — — 22 — 
Effect of actual variances from expected experience— (7)— — (95)— 
Balance adjusted for variances from expectation— 1,246 — — 1,375 — 
Issuances— 2 — — 6 — 
Interest accrual— 22 — — 38 — 
Net premiums collected— (66)— — (166)— 
Ending balance at original discount rate— 1,204 — — 1,253 — 
End of period cumulative effect of changes in discount rate assumptions— (135)— — (113)— 
Balance, end of period$— $1,069 $— $— $1,140 $— 
Present Value of Expected Future Policy Benefits
Six Months Ended June 30,Year Ended December 31,
20242023
PayoutClosed BlockClosed BlockPayoutClosed BlockClosed Block
AnnuitiesLifeAnnuityAnnuitiesLifeAnnuity
Balance, beginning of period$1,090 $5,134 $4,215 $1,042 $5,448 $4,434 
Beginning of period cumulative effect of changes in discount rate assumptions99 767 185 132 958 275 
Beginning balance at original discount rate (including DPL of $42, $0 and $626 in June 30, 2024, and $40, $0 and $671 in December 31, 2023 for payout annuities, closed block life and closed block annuity, respectively)
1,189 5,901 4,400 1,174 6,406 4,709 
Effect of changes in cash flow assumptions— — — — 65 (3)
Effect of actual variances from expected experience(18)8 (1)(16)(95)(8)
Balance adjusted for variances from expectation1,171 5,909 4,399 1,158 6,376 4,698 
Issuances84 6 — 117 15 1 
Interest accrual22 85 93 43 195 194 
Benefits payments(67)(323)(240)(129)(685)(493)
Ending balance of original discount rate (including DPL of $52, $0 and $602 in June 30, 2024, and $42, $0 and $626 in December 31, 2023 for payout annuities, closed block life and closed block annuity, respectively)
1,210 5,677 4,252 1,189 5,901 4,400 
End of period cumulative effect of changes in discount rate assumptions(122)(868)(274)(99)(767)(185)
Balance, end of period$1,088 $4,809 $3,978 $1,090 $5,134 $4,215 
Reserves for future policy benefits1,088 3,740 3,978 1,090 3,994 4,215 
Less: Reinsurance recoverable103 2,083 4 94 2,200 4 
Reserves for future policy benefits, after reinsurance recoverable$985 $1,657 $3,974 $996 $1,794 $4,211 

The following table presents the weighted average duration of the reserves for future policy benefits. The weighted average duration represents average cohort-level duration weighted by the benefit reserves amount:

PayoutClosed BlockClosed Block
AnnuitiesLifeAnnuity
June 30, 2024
Weighted average duration (years)6.97.06.8
December 31, 2023
Weighted average duration (years)7.07.27.0

The discount rate assumption was updated based on current market data. Discount rates were higher in the second quarter of 2024 compared to the fourth quarter of 2023. Discount rates increased primarily due to increases in risk-free rates, which resulted in a decrease in the liability for future policy benefits. Refer to the roll-forward above for further details.
The following table presents the amount of undiscounted and discounted expected future gross premiums and expected future benefit payments for future policy benefits for non-participating traditional and limited-payment insurance contracts (in millions). The discounted premiums are calculated using the current discount rate, while the undiscounted cash flows represent the gross cash flows before any discounting is applied:

June 30, 2024December 31, 2023
UndiscountedDiscountedUndiscountedDiscounted
Payout Annuities
Expected future benefit payments$1,624 $1,035 $1,579 $1,043 
Expected future gross premiums— — — — 
Closed Block Life
Expected future benefit payments7,411 4,924 7,729 5,251 
Expected future gross premiums4,818 2,881 5,056 3,119 
Closed Block Annuity
Expected future benefit payments5,225 3,353 5,421 3,565 
Expected future gross premiums$— $— $— $— 

The following table presents the amount of revenue and interest related to non-participating traditional and limited-pay insurance contracts recognized in the Condensed Consolidated Income Statements (in millions):

Gross PremiumsInterest Expense
Six Months Ended June 30, 2024Year Ended December 31, 2023Six Months Ended June 30, 2024Year Ended December 31, 2023
Payout Annuities$23 $22 $22 $43 
Closed Block Life158 340 63 157 
Closed Block Annuity— 1 93 194 
Total$181 $363 $178 $394 

The following table presents the weighted average interest rate for the reserves for future policy benefits at the cohort's level for the locked-in discount rate (interest accretion rate), and current discount rate, weighted by the cohort's benefit reserve amount:

June 30, 2024December 31, 2023
Payout Annuities
Interest accretion rate3.96 %3.86 %
Current discount rate5.55 %5.12 %
Closed Block Life
Interest accretion rate3.06 %3.07 %
Current discount rate5.54 %5.06 %
Closed Block Annuity
Interest accretion rate4.40 %4.40 %
Current discount rate5.55 %5.12 %
The following table presents a roll-forward of Closed Block Life additional liabilities for annuitization, death and other insurance benefits (in millions):

Six Months Ended June 30, 2024Year Ended December 31, 2023
Balance, beginning of period$1,153 $1,131 
Beginning of period cumulative effect of changes in shadow adjustments17 41 
Beginning balance excluding shadow1,170 1,172 
Effect of changes in cash flow assumptions— 44 
Effect of actual variances from expected experience3 46 
Interest accrual28 56 
Net assessments collected(66)(148)
Ending balance excluding shadow1,135 1,170 
End of period cumulative effect of changes in shadow adjustments(22)(17)
Balance, end of period$1,113 $1,153 

The following table presents the weighted average duration of Closed Block Life additional liabilities for annuitization, death and other insurance benefits. The weighted average duration represents average cohort-level duration weighted by the benefit reserves amount:

June 30, 2024December 31, 2023
Weighted average duration (years)9.69.7

The following table presents assessments and interest expense of Closed Block Life additional liabilities for annuitization, death and other insurance benefits recognized in the Condensed Consolidated Income Statements (in millions):

AssessmentsInterest Expense
Six Months Ended June 30, 2024Year Ended December 31, 2023Six Months Ended June 30, 2024Year Ended December 31, 2023
Additional liability for annuitization, death and other insurance benefits$(66)$(148)$28 $56 

The following table presents the weighted average current discount rate of Closed Block Life additional liabilities for annuitization, death and other insurance benefits, applied at the cohort level weighted by reserve benefit amount:

June 30, 2024December 31, 2023
Weighted average current discount rate4.98 %4.97 %