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Derivatives and Hedge Accounting
 12 Months Ended
Dec. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedge Accounting
11. Derivatives and Hedge Accounting
We use derivatives and other financial instruments as part of our financial risk management programs and as part of our investment operations. Interest rate derivatives (such as interest rate swaps) are used to manage interest rate risk associated with embedded derivatives contained in insurance contract liabilities, fixed maturity securities, outstanding medium- and long-term notes as well as other interest rate sensitive assets and liabilities. Foreign exchange derivatives (principally foreign exchange forwards and swaps) are used to economically mitigate risk associated with non-U.S. dollar denominated debt, net capital exposures, foreign currency transactions, and foreign denominated investments. Equity derivatives are used to economically mitigate financial risk associated with embedded derivatives and MRBs in certain insurance liabilities. We use credit derivatives to manage our credit exposures. Commodity derivatives are used to hedge exposures within reinsurance contracts. The derivatives are effective economic hedges of the exposures that they are meant to offset. In addition to hedging activities, we also enter into derivative contracts with respect to investment operations, which may include, among other things, CDSs, total return swaps and purchases of investments with embedded derivatives, such as equity-linked notes and convertible bonds.
Interest rate, currency, equity and commodity swaps, credit contracts, swaptions, options and forward transactions are accounted for as derivatives, recorded on a trade-date basis and carried at fair value. Unrealized gains and losses are reflected in income, when appropriate. Aggregate asset or liability positions are netted on the Consolidated Balance Sheets only to the extent permitted by qualifying master netting arrangements in place with each respective counterparty. Cash collateral posted with counterparties in conjunction with transactions supported by qualifying master netting arrangements is reported as a reduction of the corresponding net derivative liability, while cash collateral received in conjunction with transactions supported by qualifying master netting arrangements is reported as a reduction of the corresponding net derivative asset.
Derivatives, with the exception of embedded derivatives, are reported at fair value in the Consolidated Balance Sheets in Other assets and Other liabilities. Embedded derivatives are generally presented with the host contract in the Consolidated Balance Sheets. A bifurcated embedded derivative is measured at fair value and accounted for in the same manner as a free standing derivative contract. The corresponding host contract is accounted for according to the accounting guidance applicable for that instrument.
For additional information on embedded derivatives, see Notes 5, 13 and 14.
The following table presents the notional amounts of our derivatives and the fair value of derivative assets and liabilities in the Consolidated Balance Sheets:
December 31, 2023December 31, 2022
Gross Derivative AssetsGross Derivative LiabilitiesGross Derivative AssetsGross Derivative Liabilities
(in millions)Notional
Amount		Fair
Value		Notional
Amount		Fair
Value		Notional
Amount		Fair
Value		Notional
Amount		Fair
Value
Derivatives designated as hedging instruments:(a)
Interest rate contracts$1,863 $230 $752 $17 $251 $355 $1,688 $66 
Foreign exchange contracts3,847 416 6,402 336 4,543 642 4,899 317 
Derivatives not designated as hedging instruments:(a)
Interest rate contracts42,549 3,056 42,466 3,614 39,833 3,367 34,128 4,772 
Foreign exchange contracts8,803 820 9,900 558 8,626 1,202 10,397 821 
Equity contracts81,110 2,019 9,595 745 31,264 428 4,740 26 
Commodity contracts— — — — 212 9 20 — 
Credit contracts(b)
2,109 41 509 37 1,808 32 933 41 
Other contracts(c)
44,640 13 48 2 47,184 14 — — 
Total derivatives, gross$184,921 $6,595 $69,672 $5,309 $133,721 $6,049 $56,805 $6,043 
Counterparty netting(d)
(3,864)(3,864)(3,895)(3,895)
Cash collateral(e)
(2,220)(1,050)(1,640)(1,917)
Total derivatives on Consolidated Balance Sheets(f)
$511 $395 $514 $231 
(a)Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.
(b)As of December 31, 2023 and 2022, included CDSs on super senior multi-sector CLO with a net notional amount of $50 million and $79 million (fair value liability of $32 million and $32 million, respectively). The net notional amount represents the maximum exposure to loss on the portfolio.
(c)Consists primarily of stable value wraps and contracts with multiple underlying exposures.
(d)Represents netting of derivative exposures covered by a qualifying master netting agreement.
(e)Represents cash collateral posted and received that is eligible for netting.
(f)Freestanding derivatives only, excludes embedded derivatives. Derivative instrument assets and liabilities are recorded in Other assets and Other liabilities, respectively. Fair value of assets related to bifurcated embedded derivatives was $1.2 billion at December 31, 2023 and $2.2 billion at December 31, 2022. Fair value of liabilities related to bifurcated embedded derivatives was $8.0 billion and $5.4 billion, respectively, at December 31, 2023 and 2022. A bifurcated embedded derivative is generally presented with the host contract in the Consolidated Balance Sheets. Embedded derivatives are primarily related to guarantee features in fixed index annuities and index universal life products, which include equity and interest rate components, and the funds withheld arrangement with Fortitude Re. For additional information, see Note 8.
COLLATERAL
We engage in derivative transactions that are not subject to a clearing requirement directly with unaffiliated third parties, in most cases, under International Swaps and Derivatives Association, Inc. (ISDA) Master Agreements. Many of the ISDA Master Agreements also include Credit Support Annex provisions, which provide for collateral postings that may vary at various ratings and threshold levels. We attempt to reduce our risk with certain counterparties by entering into agreements that enable collateral to be obtained from a counterparty on an upfront or contingent basis. We minimize the risk that counterparties might be unable to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value and generally requiring additional collateral to be posted upon the occurrence of certain events or circumstances. In addition, certain derivative transactions have provisions that require collateral to be posted by us upon a downgrade of our long-term debt ratings or give the counterparty the right to terminate the transaction. In the case of some of the derivative transactions, upon a downgrade of our long-term debt ratings, as an alternative to posting collateral and subject to certain conditions, we may assign the transaction to an obligor with higher debt ratings or arrange for a substitute guarantee of our obligations by an obligor with higher debt ratings or take other similar action. The actual amount of collateral required to be posted to counterparties in the event of such downgrades, or the aggregate amount of payments that we could be required to make, depends on market conditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of the downgrade.
Collateral posted by us to third parties for derivative transactions was $1.9 billion and $2.9 billion at December 31, 2023 and 2022, respectively. In the case of collateral posted under derivative transactions that are not subject to clearing, this collateral can generally be repledged or resold by the counterparties. Collateral provided to us from third parties for derivative transactions was $2.8 billion and $2.0 billion at December 31, 2023 and 2022, respectively. In the case of collateral provided to us under derivative transactions that are not subject to clearing, we generally can repledge or resell collateral.
OFFSETTING
We have elected to present all derivative receivables and derivative payables, and the related cash collateral received and paid, on a net basis on our Consolidated Balance Sheets when a legally enforceable ISDA Master Agreement exists between us and our derivative counterparty. An ISDA Master Agreement is an agreement governing multiple derivative transactions between two counterparties. The ISDA Master Agreement generally provides for the net settlement of all, or a specified group, of these derivative transactions, as well as transferred collateral, through a single payment, and in a single currency, as applicable. The net settlement provisions apply in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions governed by the ISDA Master Agreement.
HEDGE ACCOUNTING
We designated certain derivatives entered into with third parties as fair value hedges of available for sale investment securities held by our insurance subsidiaries. The fair value hedges include foreign currency forwards and cross currency swaps designated as hedges of the change in fair value of foreign currency denominated available for sale securities attributable to changes in foreign exchange rates. We also designated certain interest rate swaps entered into with third parties as fair value hedges of fixed rate GICs attributable to changes in benchmark interest rates.
We use foreign currency denominated debt and cross-currency swaps as hedging instruments in net investment hedge relationships to mitigate the foreign exchange risk associated with our non-U.S. dollar functional currency foreign subsidiaries. For net investment hedge relationships where issued debt is used as a hedging instrument, we assess the hedge effectiveness and measure the amount of ineffectiveness based on changes in spot rates. For net investment hedge relationships that use derivatives as hedging instruments, we assess hedge effectiveness and measure hedge ineffectiveness using changes in forward rates. For the years ended December 31, 2023, 2022 and 2021, we recognized gains (losses) of $(44) million, $312 million and $201 million, respectively, included in Change in foreign currency translation adjustments in Other comprehensive income (loss) related to the net investment hedge relationships.
A qualitative methodology is utilized to assess hedge effectiveness for net investment hedges, while regression analysis is employed for all other hedges.
The following table presents the gain (loss) recognized in income on our derivative instruments in fair value hedging relationships in the Consolidated Statements of Income (Loss):
Gains/(Losses) Recognized in Income for:
(in millions)
Hedging
Derivatives(a)
Excluded
Components(b)
Hedged
Items		Net Impact
Year Ended December 31, 2023
Interest rate contracts:
Interest credited to policyholder account balances$79 $— $(99)$(20)
Foreign exchange contracts:
Net realized gains/(losses)(422)(11)422 (11)
Year Ended December 31, 2022
Interest rate contracts:
Interest credited to policyholder account balances$(81)$— $83 $2 
Net investment income11 — (12)(1)
Foreign exchange contracts:
Net realized gains/(losses)382 244 (382)244 
Year Ended December 31, 2021
Interest rate contracts:
Interest credited to policyholder account balances$(19)$— $17 $(2)
Net investment income9 — (11)(2)
Foreign exchange contracts:
Net realized gains/(losses)210 139 (210)139 
(a)Gains and losses on derivative instruments designated and qualifying in fair value hedges that are included in the assessment of hedge effectiveness.
(b)Gains and losses on derivative instruments designated and qualifying in fair value hedges that are excluded from the assessment of hedge effectiveness and recognized in income on a mark-to-market basis.
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
The following table presents the effect of derivative instruments not designated as hedging instruments in the Consolidated Statements of Income (Loss):
Years Ended December 31,Gains (Losses) Recognized in Income
(in millions)202320222021
By Derivative Type:
Interest rate contracts$(404)$(2,190)$(573)
Foreign exchange contracts(384)1,149 278 
Equity contracts(142)(497)(736)
Commodity contracts9 (13)(9)
Credit contracts(2)(4)(12)
Other contracts64 100 64 
Embedded derivatives(3,485)8,566 (1,079)
Total$(4,344)$7,111 $(2,067)
By Classification:
Policy fees$64 $63 $61 
Net investment income - excluding Fortitude Re funds withheld assets— 2 5 
Net investment income - Fortitude Re funds withheld assets(11)(10)— 
Net realized gains (losses) - excluding Fortitude Re funds withheld assets(a)
(1,158)1,111 263 
Net realized gains (losses) on Fortitude Re funds withheld assets(b)
(2,112)7,347 (575)
Policyholder benefits and claims incurred— (19)(4)
Change in the fair value of market risk benefits, net(c)
(1,127)(1,383)(1,817)
Total$(4,344)$7,111 $(2,067)
(a)Includes $13 million gain related to the sale of Laya and AIG Life. For further details on these transactions, see Notes 1 and 4.
(b)Includes over-the-counter derivatives supporting the funds withheld arrangements with Fortitude Re and the embedded derivative contained within the funds withheld payable with Fortitude Re.
(c)This represents activity related to derivatives that economically hedged changes in the fair value of certain market risk benefits.
CREDIT RISK-RELATED CONTINGENT FEATURES
We estimate that at December 31, 2023, based on our outstanding financial derivative transactions, a downgrade of our long-term senior debt ratings to BBB or BBB– by Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc., and/or a downgrade to Baa2 or Baa3 by Moody’s Investors’ Service, Inc. would permit counterparties to make additional collateral calls and permit certain counterparties to elect early termination of contracts, resulting in corresponding collateral postings and termination payments in the total amount of up to approximately $6 million. The aggregate fair value of our derivatives that were in a net liability position and that contain such credit risk-related contingencies which can be triggered below our long-term senior debt ratings of BBB+ or Baa1 was approximately $32 million and $32 million at December 31, 2023 and 2022, respectively. The aggregate fair value of assets posted as collateral under these contracts at December 31, 2023 and 2022, was approximately $34 million and $34 million, respectively.
HYBRID SECURITIES WITH EMBEDDED CREDIT DERIVATIVES
We invest in hybrid securities (such as credit-linked notes) with the intent of generating income and not specifically to acquire exposure to embedded derivative risk. As is the case with our other investments in RMBS, CMBS, CLO and ABS, our investments in these hybrid securities are exposed to losses only up to the amount of our initial investment in the hybrid security. Other than our initial investment in the hybrid securities, we have no further obligation to make payments on the embedded credit derivatives in the related hybrid securities.
We elect to account for our investments in these hybrid securities with embedded written credit derivatives at fair value, with changes in fair value recognized in Net investment income. Our investments in these hybrid securities are reported as Other bond securities in the Consolidated Balance Sheets. The fair value of these hybrid securities was under $1 million at both December 31, 2023 and 2022, respectively. These securities have par amounts of $42 million and $42 million at December 31, 2023 and 2022, respectively, and have remaining stated maturity dates that extend to 2052.